- Company reports revenues of $150.9
million compared to $151.5 million in prior year quarter
- Earnings per share increases 9.5% to
$0.23 from $0.21 in prior year quarter
- Adjusted EBITDA* at $17.1 million
(11.3% of revenue)
- Company returns $9.0 million in capital
to shareholders
*Adjusted EBITDA is defined as earnings before interest, income
taxes, depreciation, amortization and stock-based compensation
Resources Connection, Inc. (NASDAQ: RECN), today announced
financial results for its second fiscal quarter ended November 28,
2015. Resources Connection, Inc. (the “Company”) is a multinational
professional services firm that provides to clients – through its
operating subsidiary, Resources Global Professionals (“RGP”) –
consulting and business support services in the areas of
accounting; finance; corporate governance, risk and compliance;
corporate advisory, strategic communications and restructuring;
information management; human capital; supply chain management;
healthcare solutions; and legal and regulatory.
Revenue for the second quarter of fiscal 2016 decreased 0.4% to
$150.9 million compared to the prior year’s second quarter of
$151.5 million. On a sequential basis, second quarter revenue
increased 1.8% compared to $148.3 million in the first quarter of
fiscal 2016.
Using the comparable second quarter fiscal 2015 conversion rates
to adjust for the impact of currency fluctuations, fiscal 2016’s
second quarter revenue would have been $154.0 million, up 1.7%
quarter-over-quarter.
Revenue in the U.S. increased 0.2% quarter-over-quarter and 1.2%
sequentially. International revenue decreased 3.4% on a
quarter-over-quarter basis and increased 4.0% sequentially.
Adjusting for the impact of currency fluctuations, international
revenue increased 7.5% quarter-over-quarter using the comparable
second quarter fiscal 2015 conversion rates and 5.1% sequentially
using the comparable first quarter fiscal 2016 conversion
rates.
The Company’s net income in the second quarter of fiscal 2016
improved to $8.7 million, or $0.23 per diluted share, compared to
the prior year’s second quarter net income of $8.0 million, or
$0.21 per diluted share. Net income in the second quarter of fiscal
2016 includes a $0.01 per share charge for a European legal case.
Also included in net income for the second quarter of fiscal 2016
is a $0.01 per share positive impact related to the reversal of
approximately $290,000 of tax valuation allowances. Net income in
the second quarter of fiscal 2015 included a $0.01 per share charge
for severance and related charges related to the Company’s European
operations.
“I am pleased with the profitability metrics we achieved during
the second quarter and encouraged by the improvement in our
December revenue trends,” said Tony Cherbak, president and chief
executive officer of RGP. “We continue to make progress
internationally with constant currency revenue growth in Asia
Pacific and Europe quarter-over-quarter of 17.7% and 3.0%,
respectively.”
Gross margin was 39.0% in the second quarter of fiscal 2016,
compared to 39.2% in the prior year quarter. The 20 basis point
decrease results from higher costs in the Company’s self-insured
medical plan. Sequentially, gross margin increased 30 basis points
from 38.7%, due to an improvement in the cost of the Company’s
self-insured medical coverage and employer payroll taxes, offset by
one additional paid holiday in the second quarter and a slight
reduction in bill rate/pay rate spreads.
Selling, general and administrative expenses for the second
quarter of fiscal 2016 were $43.2 million (28.6% of revenue)
compared to the prior year second quarter of $43.6 million (28.8%
of revenue) and the first quarter of fiscal 2016 of $44.0 million
(29.6% of revenue). The second quarter of fiscal 2016 includes
approximately $300,000 related to a European legal case. The first
quarter of fiscal 2016 amount included approximately $900,000 of
stock-based compensation expense related to the accelerated vesting
of options held by Chairman Donald Murray. The prior year quarter
included approximately $500,000 of severance charges related to the
Company’s European operations.
Cash provided by operations and Adjusted EBITDA were $15.3
million and $17.1 million (11.3% of revenue), respectively, for the
second quarter of fiscal 2016 compared to cash provided by
operations and Adjusted EBITDA of $14.3 million and $17.4 million
(11.5% of revenue), respectively, for the second quarter of fiscal
2015.
The Company’s revenue for the six months ended November 28, 2015
was $299.2 million compared to $294.9 million for the six months
ended November 29, 2014. The Company’s net income for the six
months ended November 28, 2015 was $15.8 million or $0.42 per
diluted share. This compares to net income in the six months ended
November 29, 2014 of $13.4 million, or $0.35 per diluted share,
including $0.03 per diluted share related to European severance
charges.
In the second quarter of fiscal 2016, the Company repurchased
294,000 shares of common stock for $5.3 million and paid a
quarterly dividend totaling $3.7 million ($0.10 per diluted share)
to shareholders. The Company has a total of $155.2 million
available for share purchases when combined with the balance
remaining from the previous authorization. As of November 28, 2015,
the Company’s cash, cash equivalents and short-term investments
were $110.1 million compared to $112.2 million at fiscal year-end
May 30, 2015.
ABOUT RGP
RGP, the operating subsidiary of Resources Connection, Inc.
(NASDAQ: RECN), is a multinational professional services firm that
helps business leaders execute internal initiatives. Partnering
with business leaders, we drive internal change across all parts of
a global enterprise – accounting; finance; corporate governance,
risk and compliance; corporate advisory, strategic communications
and restructuring; information management; human capital; supply
chain management; healthcare solutions; and legal and
regulatory.
RGP was founded in 1996 within a Big Four accounting firm.
Today, we are a publicly traded company with over 3,400
professionals, annually serving over 1,700 clients around the world
from 68 practice offices.
Headquartered in Irvine, California, RGP has served 87 of the
Fortune 100 companies.
The Company is listed on the NASDAQ Global Select Market, the
exchange’s highest tier by listing standards. More information
about RGP is available at http://www.rgp.com. (RECN-F)
RGP will hold a conference call for interested analysts and
investors at 5:00 p.m., ET today, January 6, 2016. This conference
call will be available for listening via a webcast on the Company’s
website: http://www.rgp.com. An audio replay of the conference call
will be available through January 13, 2016 at 855-859-2056. The
conference ID number for the replay is 93803677. The call will also
be archived on the RGP website for 30 days.
Certain statements in this press release are “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
Such forward-looking statements may be identified by words such as
“anticipates,” “believes,” “can,” “continue,” “could,” “estimates,”
“expects,” “intends,” “may,” “plans,” “potential,” “predicts,”
“remain,” “should” or “will” or the negative of these terms or
other comparable terminology. In this press release, such
statements include the profitability metrics. Such statements and
all phases of the Company’s operations are subject to known and
unknown risks, uncertainties and other factors that could cause our
actual results, levels of activity, performance or achievements and
those of our industry to differ materially from those expressed or
implied by these forward-looking statements. Risks and
uncertainties include seasonality, overall economic conditions and
other factors and uncertainties as are identified in our most
recent Quarterly Report on Form 10-Q and our other public filings
made with the Securities and Exchange Commission (File No.
0-32113). Additional risks and uncertainties not presently known to
us or that we currently deem immaterial may also affect our
business or operating results. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company does not intend, and
undertakes no obligation, to update the forward-looking statements
in this press release to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events,
unless required by law to do so.
RESOURCES CONNECTION, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (Amounts in
thousands, except per share amounts) Three Months
Ended Six Months Ended November 28, November
29, November 28, November 29, 2015
2014 2015 2014
(Unaudited) (Unaudited) Revenue $ 150,887 $ 151,496 $
299,227 $ 294,943 Direct costs of services 92,011
92,061 182,888 179,283
Gross margin 58,876 59,435 116,339 115,660 Selling, general and
administrative expenses (1) 43,171 43,576
87,128 87,855
Operating income before amortization and
depreciation (1)
15,705 15,859 29,211 27,805 Amortization of intangible assets 30
402 60 826 Depreciation expense 881 849
1,739 1,703 Operating income (1) 14,794
14,608 27,412 25,276 Interest income (34 ) (39 )
(66 ) (77 ) Income before provision for income taxes
(1) 14,828 14,647 27,478 25,353 Provision for income taxes (2)
6,152 6,631 11,669
11,942 Net income (1), (2) $ 8,676 $ 8,016 $
15,809 $ 13,411 Net income per common share: Basic
(1), (2) $ 0.23 $ 0.21 $ 0.42 $ 0.35
Diluted (1), (2) $ 0.23 $ 0.21 $ 0.42 $ 0.35
Weighted average common shares outstanding: Basic
37,191 37,910 37,243
38,045 Diluted 37,868 38,278
37,857 38,306 Cash dividends declared
per common share $ 0.10 $ 0.08 $ 0.20 $ 0.16
EXPLANATORY
NOTES
(1) Selling, general and administrative expenses
include non-cash compensation expense for employee stock option
grants, restricted share grants and employee stock purchases of
$1.4 million and $1.6 million for the three months ended November
28, 2015 and November 29, 2014, respectively, and $3.5 million and
$3.1 million for the six months ended November 28, 2015 and
November 29, 2014, respectively. The expense for the six months
ended November 28, 2015 includes approximately $900,000, or $0.01
per share, related to the Board of Director’s approval of
accelerated vesting of 127,500 stock options related to Don
Murray’s transition from Executive Chairman to non-employee
Chairman of the Board. (2) The Company's effective tax rate
was approximately 42% and approximately 45% for the three months
ended November 28, 2015 and November 29, 2014, respectively, and
approximately 43% and approximately 47% for the six months ended
November 28, 2015 and November 29, 2014, respectively. The three
and six months ended November 28, 2015 include the reversal of
approximately $290,000 of tax valuation allowances. For all periods
presented, the Company is unable to benefit from, or has
limitations on the benefit of, tax losses in certain foreign
jurisdictions. To a lesser extent, the accounting treatment under
GAAP for the cost associated with incentive stock options and
shares purchased through the Employee Stock Purchase Plan have
caused volatility in the Company's effective tax rate.
RESOURCES CONNECTION, INC.
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (Amounts
in thousands, except Adjusted EBITDA Margin) Three
Months Ended Six Months Ended November
28,2015 November 29,2014 November
28,2015 November 29,2014 (Unaudited)
(Unaudited) Net income $ 8,676 $ 8,016 $ 15,809 $ 13,411
Adjustments: Amortization of intangible assets 30 402 60 826
Depreciation expense 881 849 1,739 1,703 Interest income (34 ) (39
) (66 ) (77 ) Provision for income taxes 6,152
6,631 11,669 11,942 EBITDA
15,705 15,859 29,211 27,805 Stock-based compensation expense
1,390 1,558 3,545 3,104
Adjusted EBITDA $ 17,095 $ 17,417 $ 32,756
$ 30,909 Revenue $ 150,887 $ 151,496 $
299,227 $ 294,943 Adjusted EBITDA Margin 11.3
% 11.5 % 10.9 % 10.5
%
EXPLANATORY NOTE
The Company utilizes certain financial measures and key
performance indicators that are not defined by, or calculated in
accordance with, GAAP to assess our financial and operating
performance. A non-GAAP financial measure is defined as a numerical
measure of a company's financial performance that (i) excludes
amounts, or is subject to adjustments that have the effect of
excluding amounts, that are included in the comparable measure
calculated and presented in accordance with GAAP in the statement
of operations; or (ii) includes amounts, or is subject to
adjustments that have the effect of including amounts, that are
excluded from the comparable measure so calculated and
presented.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP
financial measures. EBITDA is calculated as net income before
amortization of intangible assets, depreciation expense, interest
income and income taxes. Adjusted EBITDA is calculated as EBITDA
plus stock-based compensation expense. Adjusted EBITDA Margin is
calculated by dividing Adjusted EBITDA by revenue. We believe that
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin provide useful
measures to our investors because they are financial measures used
by management to assess the core performance of our Company.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not
measurements of financial performance or liquidity under GAAP and
should not be considered in isolation or construed as substitutes
for net income or other cash flow data prepared in accordance with
GAAP for purposes of analyzing our profitability or liquidity.
These measures should be considered in addition to, and not as a
substitute to, net income, earnings per share, cash flows or other
measures of financial performance prepared in accordance with
GAAP.
RESOURCES CONNECTION,
INC. CONSTANT CURRENCY REVENUE COMPARISON (Dollars in
thousands) (Unaudited)
Revenue for the Three Months
Ended
November 28, 2015
GAAP
November 29, 2014
GAAP
August 29, 2015
GAAP
% Decrease November 28, 2015 vs. November 29, 2014
GAAP % IncreaseNovember 28, 2015 vs. November 29,
2014 Constant Currency (1) % Increase November 28,
2015 vs. August 29, 2015 GAAP % Increase November 28,
2015 vs. August 29, 2015 Constant Currency (2) $ 150,887
$ 151,496 $ 148,340 -0.4 % 1.7 % 1.7 % 1.9 % (1) The
percentage change in revenue on a constant currency basis is
calculated using the average foreign exchange rates for the second
quarter of fiscal 2015 and applying those rates to
foreign-denominated revenue in the second quarter of fiscal 2016.
(2) The percentage change in revenue on a constant currency
basis is calculated using the average foreign exchange rates for
the first quarter of fiscal 2016 and applying those rates to
foreign-denominated revenue in the second quarter of fiscal 2016.
EXPLANATORY NOTE
In order to provide a more comprehensive view of trends in our
business, this table shows revenue data on an as reported basis
(GAAP) for the respective periods and relative change in the same
periods from the impact on revenue of exchange rate fluctuations
between the United States dollar and currencies in countries in
which the Company operates.
RESOURCES CONNECTION, INC. SELECTED BALANCE
SHEET, CASH FLOW AND OTHER INFORMATION (Amounts in
thousands, except consultant headcount) November
28,2015 May 30,2015 (Unaudited)
Cash, cash equivalents and short-term investments $ 110,099 $
112,238 Accounts receivable, less allowances $ 98,033 $ 96,574
Total assets $ 416,977 $ 416,981 Current liabilities $ 63,707 $
68,946 Total stockholders’ equity $ 346,000 $ 340,452 Consultant
headcount, end of period 2,645 2,516 Shares outstanding, end of
period 37,132 37,273
Six Months Ended November
28,2015 November 29,2014 (Unaudited)
Cash flow from operating activities $ 10,698 $ 5,664 Cash
flow from investing activities $ (6,518 ) $ 2,994 Cash flow from
financing activities $ (11,038 ) $ (14,370 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160106006525/en/
For Resources Connection, Inc.Media
Contact:Michael Sitrick(US+)
1-310-788-2850mike_sitrick@sitrick.comorAnalyst Contact:Nate
Franke, Chief Financial Officer(US+)
1-714-430-6500nate.franke@rgp.com
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