Third Quarter Fiscal 2020
Highlights:
- Third quarter revenue and gross margin both reflect as-expected
holiday impact and impact from COVID-19
- Revenue of $168.1 million, down 6.4% from prior year quarter,
impacted by extra holidays and COVID-19 in Asia Pacific
- Gross margin percentage of 36.5%, a decrease of 130 basis
points from prior year quarter
- YTD gross margin percentage of 38.7%, an increase of 40 basis
points from prior year
- Incremental U.S. tax benefit of $6.6 million related to ceased
operations in Europe
- Net income of $6.9 million, compared to $5.8 million in prior
year quarter; includes $6.6 million of U.S. tax benefit
- Diluted earnings per common share of $0.21 compared to $0.18 in
prior year quarter
- Adjusted EBITDA margin of 4.0% compared to 7.8% in the prior
year quarter
- Cash dividends declared of $0.14 per share
Resources Connection, Inc. (Nasdaq: RGP), a multinational
business consulting firm, operating as Resources Global
Professionals (the “Company” or “RGP”), today announced its
financial results for the third quarter ended February 22,
2020.
Restructuring Initiative
This quarter we embarked on the latest phase of our
transformation journey, performing a deep and strategic review of
our global business, focused initially on North America and Asia
Pacific. Based on our findings, we formulated an action plan to
streamline our organizational structure, improve operating
efficiency and more effectively align resources to business
priorities. At the beginning of the fourth quarter, our management
team and board of directors committed to a restructuring plan to
reduce approximately 7.5% of our management and administrative
workforce and consolidate our geographic presence to certain key
markets, while shifting to a virtual operating model in most other
markets.
We carried out a reduction in force in early March, whereby we
eliminated 73 positions in North America and Asia Pacific. This
process allowed us to remove leadership layers and nonessential
positions to simplify our organizational structure and streamline
operations. We believe these efforts will make our teams more
efficient and improve the employee experience. Our review of the
European business is still underway. We will report further on the
European review and actions when the work is complete in fiscal
2021. We expect to take a restructuring charge of $4 million to $5
million, of which approximately $3 million will be taken in the
fourth quarter of 2020. Upon completion of the reduction in force,
the Company expects annual pre-tax savings of $13 million to $15
million with respect to personnel costs. In fiscal 2021, after the
impact of COVID-19 is clearer, we may reinvest a limited amount of
those personnel savings in the business to drive forward certain
growth initiatives in core markets and digital capabilities.
As a second element of our restructuring plan, we determined
that our current physical footprint is not well aligned with our
evolving go-to-market strategy or with strong business and industry
trends favoring virtual operating models. Our new real estate
strategy focuses our real estate investment in a set of core high
growth markets where we also host client events and trainings and
provides for a shift to virtual operations in most other markets.
The transition to virtual is supported by a robust array of
enhanced technical tools which enable and accelerate virtual work.
While the exact timing of these changes depends on a number of
variables, we currently expect to terminate or sublet 26% of our
existing real estate leases by the end of the 2020 calendar year.
We expect to incur approximately $1 million of lease termination
costs and other costs associated with exiting the facilities in the
fourth quarter of fiscal 2020. Additional restructuring charges are
expected through fiscal 2021 as management continues to execute the
plan to exit the real estate leases. Upon completion of the exit
plan, the Company expects annual pre-tax savings of $3 million to
$4 million with respect to occupancy costs.
We believe the actions we are taking to strengthen the business
will enable us to operate with greater agility as we seek to ensure
our organizational health and resilience in this volatile
macro-economic climate.
Management Commentary
“We are operating now in a new normal. Our utmost concern is for
our people – our employees and our clients. We have pivoted rapidly
to a virtual operating model and are doing everything we can to
stay productive, while continuing to serve all of our people with
empathy, speed and creativity,” said Kate Duchene, chief executive
officer. “COVID-19 impacted RGP in Q3 in our Asia Pac region. That,
plus the tough holiday dynamics created a challenging backdrop
these past three months. I am proud we were able to deliver revenue
results close to the high-end of our expectations in the third
quarter despite these conditions – and we saw continued
strengthening in both closed revenue and pipeline in January and
February. In the past few weeks, COVID-19 has become a truly global
pandemic and we are relieved to have taken significant action in
early March to improve our operating model and cost structure.
While we cannot predict with certainty how the pandemic will impact
our business in the coming months, I believe our timely initiative
to reduce cost and streamline operations will serve us well.”
RESOURCES CONNECTION,
INC.
SUMMARY OF CONSOLIDATED
FINANCIAL RESULTS
(Amounts in thousands, except
percentages and per share amounts)
Three Months Ended
Nine Months Ended
February 22,
November 23,
February 23,
February 22,
February 23,
2020
2019
2019
2020
2019
As reported
(GAAP)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Revenue
North America
$
138,819
$
152,422
$
146,817
$
431,617
$
446,811
Asia Pacific
11,202
12,716
11,770
37,004
35,286
Europe
18,031
19,369
20,911
56,163
64,758
Total revenue
$
168,052
$
184,507
$
179,498
$
524,784
$
546,855
Gross margin
$
61,420
$
74,377
$
67,911
$
203,300
$
209,483
Selling, general and administrative
expenses
$
55,299
$
53,755
$
55,587
$
166,032
$
166,912
Income before income tax (benefit)
expense
$
2,959
$
17,674
$
9,618
$
28,213
$
34,558
Net income
$
6,942
$
12,337
$
5,796
$
24,218
$
22,101
Effective tax rate
-135%
30%
40%
14%
36%
Diluted EPS
$
0.21
$
0.38
$
0.18
$
0.75
$
0.68
Cash dividends:
Per common share declared
$
0.14
$
0.14
$
0.13
$
0.42
$
0.39
Total cash dividends paid
$
4,499
$
4,475
$
4,124
$
13,080
$
12,011
Three Months Ended
Nine Months Ended
February 22,
February 23,
February 22,
February 23,
2020
2019
2020
2019
As adjusted
(non-GAAP)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Constant currency revenue (1)(4)
North America
$
138,746
$
146,817
$
431,571
$
446,811
Asia Pacific
11,225
11,770
37,104
35,286
Europe
18,310
20,911
57,977
64,758
Total constant currency revenue
$
168,281
$
179,498
$
526,652
$
546,855
Organic revenue (4)
North America (2)
$
133,409
$
146,817
$
419,024
$
446,811
Asia Pacific
11,202
11,770
37,004
35,286
Europe (2)(3)
17,814
18,297
53,729
55,036
Consolidated (2)(3)
$
162,425
$
176,884
$
509,757
$
537,133
Constant currency organic revenue
(1)(4)
North America
$
133,336
$
146,817
$
418,977
$
446,811
Asia Pacific
11,225
11,770
37,104
35,286
Europe
18,082
18,297
55,387
55,036
Consolidated
$
162,643
$
176,884
$
511,468
$
537,133
Cash tax rate (4)
-194%
37%
6%
32%
Adjusted net income (4)
$
8,713
$
6,091
$
26,521
$
23,499
Adjusted diluted EPS (4)
$
0.27
$
0.19
$
0.82
$
0.72
Adjusted EBITDA (4)
$
6,754
$
13,929
$
41,334
$
47,156
(1)
Constant currency revenue and constant
currency organic revenue, for the three and nine months ended
February 22, 2020 is measured on a constant currency basis while
the comparable revenue for the three and nine months ended February
23, 2019 is measured under GAAP. Constant currency revenue amounts
represent the outcome that would have resulted had exchange rates
in the reported period been the same as those in effect in the
comparable prior year period.
(2)
Veracity was acquired on July 31, 2019.
Both the three month and nine month periods ended February 22, 2020
are shown without revenue from Veracity to provide comparability to
the same periods in fiscal 2019. See Reconciliation of GAAP to
Non-GAAP financial measure below.
(3)
We exited the Nordics and Belgium markets
beginning in the second quarter of fiscal 2020. Results from the
Nordics and Belgium are excluded from all periods presented to
provide comparability. See Reconciliation of GAAP to Non-GAAP
financial measure below.
(4)
See definitions of Non-GAAP measures and
Reconciliation of GAAP to Non-GAAP financial measures below.
Third Quarter Fiscal 2020
Revenue for the third quarter of fiscal 2020 decreased 6.4%
compared to the third quarter of fiscal 2019 and decreased 8.9% as
compared to the second quarter of fiscal 2020. On a constant
currency basis, revenue decreased 6.2% from the third quarter of
fiscal 2019 and decreased 9.1% from the second quarter of fiscal
2020. Revenue in the third quarter of fiscal 2020 included $5.4
million of revenue attributable to Veracity. Excluding the impact
of the Veracity acquisition and the exit activities in Europe in
fiscal 2020, revenue decreased $14.5 million, or 8.2% compared to
the prior year quarter (8.1% on a constant currency basis). On a
comparable basis, the decrease in revenue compared to the third
quarter of fiscal 2019 reflected the impact of additional holidays
in the U.S. (third quarter of fiscal 2020 included the Thanksgiving
holidays and was impacted by the mid-week timing of Christmas and
New Year’s Day) and the adverse impact from an extended Lunar New
year’s holiday and COVID 19 in Asia Pacific.
Revenue decreased sequentially primarily reflecting the impact
of three additional holidays in the U.S. (third quarter of fiscal
2020 included the Thanksgiving, Christmas and New Year’s Day
holidays while the second quarter of fiscal 2020 included only
Labor Day) as well as the mid-week timing of Christmas and New
Year’s Day and Europe (Christmas and New Year’s Day in third
quarter of fiscal 2020), as well as the extended Lunar New Year’s
holiday and the adverse impact of COVID 19 in Asia Pacific.
In January 2020, an outbreak of a novel coronavirus (COVID-19)
surfaced in Wuhan, China. In an effort to contain the spread, the
Chinese government mandated immediate business closures and
restricted certain travel within the country. As a result of these
restrictions, many businesses in China extended their Chinese New
Year holiday shut down by one to two weeks. Our practices based in
China and other parts of Asia adopted virtual methods of working in
order to ensure business continuity for both our clients and the
Company. Nevertheless, the events relating to COVID-19 had an
adverse impact on our revenue in Asia Pacific during the quarter
ended February 22, 2020. As events relating to COVID-19 continue to
develop globally, including in the U.S., there is significant
uncertainty as to the likely effects of this pandemic which may,
among other things, reduce demand for or delay client decisions to
procure our services. While not yet quantifiable, management
expects the COVID-19 pandemic to have an adverse impact on our
operating results in the fourth quarter of fiscal 2020 and
continues to assess the financial impact for the upcoming fiscal
year.
Gross margin for the third quarter was 36.5%, decreasing 130
basis points from the third quarter of fiscal 2019, and 380 basis
points sequentially. The year-over-year and sequential decreases
are related primarily to an increase in holiday pay for consultants
in the U.S. (third quarter of fiscal 2020 included the
Thanksgiving, Christmas and New Year’s Day holidays while the third
quarter of fiscal 2019 included only the Christmas and New Year’s
Day holidays and second quarter of fiscal 2020 included only Labor
Day) and a lower bill to pay ratio. The sequential decrease in
gross margin reflects a similar trend and is further impacted by
higher payroll taxes at the beginning of the calendar year.
SG&A was $55.3 million, or 32.9% of revenue for the third
quarter of fiscal 2020 and $55.6 million, or 31.0% of revenue for
the third quarter of fiscal 2019. The year-over-year dollar
decrease in SG&A is primarily attributable to: (1) a $0.8
million decrease in incentive compensation as a result of the lower
revenue in the third quarter of fiscal 2020, (2) a $0.5 million
decrease in stock compensation, (3) a $0.5 decrease in expenses
relating to contingent consideration, and (4) a $0.8 million
decrease related to occupancy and office related expenses,
partially offset by $2.2 million in additional payroll and benefit
costs due to additional headcount related to project delivery and
digital transformation efforts, including Veracity
Sequentially, SG&A as a percentage of revenue increased by
380 basis points from 29.1% in the second quarter of fiscal 2020.
The primary reasons for the increase were: (1) a $1.1 million
increase in payroll taxes as we transition into a new calendar year
in the third quarter, (2) a $0.4 million increase in bad debt
expense, (3) a $0.3 million increase in self medical insurance, and
(4) a $0.4 million increase in software expense, partially offset
by $0.7 million increase in a benefit relating to contingent
consideration in connection with Veracity.
Our income tax provision primarily includes tax expense
(benefit) on operating results of our U.S. and foreign entities,
all taxed at different statutory rates applicable in the various
tax jurisdictions, changes in valuation allowances related to tax
benefits of certain foreign locations and tax expense (benefit)
related to stock-based compensation for nonqualified stock options
and for disqualifying dispositions under our Employee Stock
Purchase Plan. We record income tax expense (benefit) based upon
actual results versus a forecasted tax rate because of the
volatility in its international operations that span numerous tax
jurisdictions.
The third quarter of fiscal 2020 had an income tax benefit of
$4.0 million (an effective tax benefit rate of (135%)) as compared
to an income tax expense of $3.8 million (an effective tax rate of
40%) for the third quarter of fiscal 2019. The income tax benefit
in the third quarter of fiscal 2020 was primarily the result of a
deduction related to a worthless stock loss in the Company’s
investment in its wholly owned subsidiaries, partially offset by
taxes on operating income. The Company, after analyzing the facts
and circumstances, determined to no longer invest in the Belgium,
Luxembourg and the Nordics markets which includes Sweden and
Norway. During the third quarter of fiscal 2020, the Company filed
a U.S. tax election to liquidate, thus disregarding the
aforementioned entities, enabling the Company to claim $6.6 million
of benefit in our U.S. tax return for the tax basis of the
investments.
First Nine Months of Fiscal 2020
Revenue for the first nine months of fiscal 2020 decreased 4.0%
compared to the prior year period. On a constant currency basis,
revenue decreased 3.7%. Revenue in the first nine months of fiscal
2020 included $12.6 million of revenue in North America
attributable to Veracity as well as lost revenue of $7.3 million as
a result of our exiting of the Nordics and Belgium markets.
Excluding the impact of the Veracity acquisition and the impact of
exiting the Nordics and Belgium markets, revenue decreased $27.4
million, or 5.1% (4.8% constant currency), compared to the prior
year period. The decrease in revenue on a comparable basis
reflected the impact of the wind-down of lease accounting
implementation projects, the completion of other large projects as
well as the impact of COVID-19 in China and political protests in
Hong Kong.
Gross margin for the first nine months of fiscal 2020 was 38.7%,
increasing 40 basis points from the first nine months of fiscal
2019. The year-over-year improvement is related primarily to an
improved bill/pay ratio.
SG&A was $166.0 million, or 31.6% of revenue for the first
nine months of fiscal 2020 and $166.9 million, or 30.5% of revenue
for the first nine months of fiscal 2019. The year-over-year dollar
decrease in SG&A is primarily attributable to: (1) a decrease
of $4.1 million in incentive compensation expense as a result of
the decrease in revenue during the first nine months of fiscal
2020, (2) a decrease of $1.6 million in transformation and system
implementation costs, (3) a decrease of $1.4 million in business
expenses as management continues to closely manage discretionary
spend, and (4) a decrease of $1.1 million in rent expense,
partially offset by an increase of $6.5 million in payroll and
benefits due to additional headcount related to project delivery
and digital transformation efforts, including Veracity and $0.6
million of acquisition costs in the first half of fiscal 2020.
Income tax expense was $4.0 million (an effective tax rate of
14%) and $12.5 million (an effective tax rate of 36%), for the nine
months ended February 22, 2020 and February 23, 2019, respectively.
The decrease in income tax expense in the nine months ended
February 22, 2020 compared to the prior year comparable period was
primarily caused by the worthless stock deduction taken during the
third quarter of fiscal 2020 (see third quarter discussion above)
as well as lower operating income.
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 unexercised expiring stock
options and shares purchased through the Employee Stock Purchase
Plan has caused volatility in the Company’s effective tax rate.
Conference Call Information
RGP will hold a conference call for analysts and investors at
5:00 p.m., ET today, April 2, 2020. 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 April 9, 2020 at 855-859-2056. The conference ID
number for the replay is 1247794. The call will also be archived on
the RGP website for 30 days.
About RGP
RGP is a global consulting firm that enables rapid business
outcomes by bringing together the right people to create
transformative change. As a human capital partner for our clients,
we specialize in solving today’s most pressing business problems
across the enterprise in the areas of Business Strategy &
Transformation, Finance & Accounting, Risk & Compliance and
Technology & Digital Innovation. Our engagements are designed
to leverage human connection and collaboration to deliver practical
solutions and more impactful results that power our clients,
consultants and partners’ success.
RGP was founded in 1996 to help finance executives with
operational needs and special projects created by workforce gaps.
Our first-to-market, agile human capital model disrupted the
professional services industry at a time when traditional talent
models prevailed. Today’s new ecosystem for work embraces our
founding principle – quickly align the right resource for the work
at hand with a premium placed on value, efficiency and ease of
use.
Our pioneering approach to workforce strategy uniquely positions
us to support our clients on their transformation journeys. With
more than 4,000 professionals, we annually engage with over 2,400
clients around the world from more than 70 practice offices. We are
their partner in delivering on the future of work. Headquartered in
Irvine, California, RGP is proud to have served 89 of the Fortune
100.
The Company is listed on the Nasdaq Global Select Market, the
exchange’s highest tier by listing standards. To learn more about
RGP, visit: http://www.rgp.com. (RGP-F)
Forward-Looking Statements
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 statements regarding our expectations for
growth, the expected impact of our recent restructuring actions,
the expected impact of the COVID-19 pandemic on our business and
operating results and the expected impact of our
previously-announced operational initiatives and our new business
pipeline. 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
uncertainties regarding the impact of the COVID-19 pandemic on our
business and the economy generally; our ability to successfully
execute on our strategic initiatives, our ability to compete
effectively in the highly competitive professional services market
and to secure new projects from clients, our ability to
successfully integrate any acquired companies, seasonality, overall
economic conditions and other factors and uncertainties as are
identified in our most recent Annual Report on Form 10-K for the
year ended May 25, 2019 and our other public filings made with the
Securities and Exchange Commission (File No. 000-32113). 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.
Use of Non-GAAP Financial Measures
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.
The following are the Company’s non-GAAP measures:
- Constant currency revenue amounts represent the outcome that
would have resulted had exchange rates in the reported period been
the same as those in effect in the comparable prior year
period.
- Organic revenue is calculated as GAAP revenue less revenues
from acquired businesses and revenues related to businesses that
the Company disposed of either through sale or abandonment.
- Constant currency organic revenue amounts represent the outcome
that would have resulted had exchange rates in the reported period
been the same as those in effect and applied to the same organic
revenue in the comparable prior year period.
- Adjusted EBITDA is calculated as net income before amortization
of intangible assets, depreciation expense, interest and income
taxes plus stock-based compensation expense and plus or minus
contingent consideration adjustments.
- Adjusted EBITDA margin is calculated by dividing Adjusted
EBITDA by revenue.
- Cash tax rate excludes the non-cash tax impact of stock-based
compensation expense, non-cash tax benefits related to the Tax Cuts
and Jobs Act in the U.S., and non-cash impact of valuation
allowances on international deferred tax assets.
- Adjusted income tax (benefit) expense, adjusted net income and
adjusted diluted earnings per common share were calculated based on
the Company's cash tax rates, which exclude the non-cash tax impact
of stock-based compensation expense, non-cash tax benefits related
to the Tax Cuts and Jobs Act, and non-cash tax impact of valuation
allowances on international deferred tax assets.
We believe that constant currency revenue, organic revenue,
constant currency organic revenue, Adjusted EBITDA, Adjusted EBITDA
margin, Adjusted income tax (benefit) expense, Adjusted net income,
and Adjusted diluted earnings per common share, which are used by
management to assess the core performance of our Company, provide
useful information to our investors because they are alternative
financial measures that investors can also use to assess the core
performance of our Company from period to period and compare it to
the Company’s peers. Constant currency revenue, organic revenue,
constant currency organic revenue, Adjusted EBITDA, Adjusted EBITDA
margin, Adjusted net income and Adjusted diluted earnings per
common share 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, as well as the Adjusted
income tax (benefit) expense and cash tax rate should be considered
in addition to, and not as a substitute for, net income, earnings
per share, cash flows or other measures of financial performance
prepared in accordance with GAAP.
RESOURCES CONNECTION,
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Amounts in thousands, except
per share amounts)
Three Months Ended
Nine Months Ended
February 22,
February 23,
February 22,
February 23,
2020
2019
2020
2019
(Unaudited)
(Unaudited)
Revenue
$
168,052
$
179,498
$
524,784
$
546,855
Direct cost of services
106,632
111,587
321,484
337,372
Gross margin
61,420
67,911
203,300
209,483
Selling, general and administrative
expenses
55,299
55,587
166,032
166,912
Operating income before amortization
and depreciation
6,121
12,324
37,268
42,571
Amortization of intangible assets
1,549
948
4,153
2,855
Depreciation expense
1,120
1,163
3,913
3,429
Operating income
3,452
10,213
29,202
36,287
Interest expense
493
595
1,526
1,729
Other (income)/expense
-
-
(537)
-
Income before income tax (benefit)
expense
2,959
9,618
28,213
34,558
Income tax (benefit) expense
(3,983)
3,822
3,995
12,457
Net income
$
6,942
$
5,796
$
24,218
$
22,101
Net income per common share:
Basic
$
0.22
$
0.18
$
0.76
$
0.70
Diluted
$
0.21
$
0.18
$
0.75
$
0.68
Weighted average common shares
outstanding:
Basic
32,159
31,890
31,954
31,784
Diluted
32,498
32,370
32,350
32,428
Cash dividends declared per common
share
$
0.14
$
0.13
$
0.42
$
0.39
RESOURCES CONNECTION,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except
per share amounts and percentages)
Three Months Ended
Nine Months Ended
Organic
Revenue
February 22,
February 23,
February 22,
February 23,
2020
2019
2020
2019
Revenue
(GAAP)
(Unaudited)
(Unaudited)
North America
$
138,819
$
146,817
$
431,617
$
446,811
Asia Pacific
11,202
11,770
37,004
35,286
Europe
18,031
20,911
56,163
64,758
Total revenue
$
168,052
$
179,498
$
524,784
$
546,855
Less: Impact of
Acquisitions and Dispositions
North America (1)
$
5,410
$
-
$
12,594
$
-
Asia Pacific
-
-
-
-
Europe (2)
217
2,614
2,435
9,722
Total revenue
$
5,627
$
2,614
$
15,029
$
9,722
Organic
Revenue
North America
$
133,409
$
146,817
$
419,023
$
446,811
Asia Pacific
11,202
11,770
37,004
35,286
Europe
17,814
18,297
53,728
55,036
Total revenue
$
162,425
$
176,884
$
509,755
$
537,133
(1) Revenue related to Veracity
(2) Revenue related to the Nordics and
Belgium
RESOURCES CONNECTION,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except
per share amounts and percentages)
Three Months Ended
Nine Months Ended
February 22,
February 23,
February 22,
February 23,
Adjusted
EBITDA
2020
2019
2020
2019
(Unaudited)
(Unaudited)
Net income
$
6,942
$
5,796
$
24,218
$
22,101
Adjustments:
Amortization of intangible assets
1,549
948
4,153
2,855
Depreciation expense
1,120
1,163
3,913
3,429
Interest expense
493
595
1,526
1,729
Income tax (benefit) expense
(3,983)
3,822
3,995
12,457
EBITDA
6,121
12,324
37,805
42,571
Stock-based compensation expense
1,491
1,948
4,649
4,961
Contingent consideration adjustment
(858)
(343)
(1,120)
(376)
Adjusted EBITDA
$
6,754
$
13,929
$
41,334
$
47,156
Revenue
$
168,052
$
179,498
$
524,784
$
546,855
Adjusted EBITDA Margin
4.0%
7.8%
7.9%
8.6%
Adjusted Income
Tax (Benefit) Expense, Annual Cash Tax Rate, Adjusted Net Income
and Adjusted Earnings Per Diluted Common Share
Three Months Ended
Nine Months Ended
February 22,
February 23,
February 22,
February 23,
2020
2019
2020
2019
(Unaudited)
(Unaudited)
Income tax (benefit) expense
$
(3,983)
$
3,822
$
3,995
$
12,457
Effect of non-cash tax items:
Stock-based compensation expense
(991)
(66)
(1,067)
(861)
Valuation allowance on international
deferred tax assets
(221)
(251)
(669)
(556)
Net uncertain tax position adjustments
(629)
-
(629)
-
Other non-cash tax items
70
22
62
19
Adjusted income tax (benefit) expense
$
(5,754)
$
3,527
$
1,692
$
11,059
Effective tax rate
(135%)
40%
14%
36%
Total effect of non-cash tax items on
effective tax rate
(59%)
(3%)
(8%)
(4%)
Cash tax rate
(194%)
37%
6%
32%
Net income
$
6,942
$
5,796
$
24,218
$
22,101
Total effect of non-cash tax items on net
income
1,771
295
2,303
1,398
Adjusted net income
$
8,713
$
6,091
$
26,521
$
23,499
Diluted earnings per common share
$
0.21
$
0.18
$
0.75
$
0.68
Effect of non-cash tax items on diluted
earnings per common share
0.06
0.01
0.07
0.04
Adjusted diluted earnings per common
share
$
0.27
$
0.19
$
0.82
$
0.72
RESOURCES CONNECTION,
INC.
SELECTED BALANCE SHEET, CASH
FLOW AND OTHER INFORMATION
(Amounts in thousands, except
consultant headcount and average rates)
February 22,
May 25,
SELECTED BALANCE SHEET INFORMATION:
2020
2019
(Unaudited)
Cash and cash equivalents
$
35,944
$
43,045
Accounts receivable, less allowances
$
130,908
$
133,304
Total assets
$
485,974
$
428,370
Current liabilities
$
90,766
$
91,416
Total liabilities
$
183,172
$
145,974
Total stockholders’ equity
$
302,802
$
282,396
Nine Months Ended
February 22,
February 23,
SELECTED CASH FLOW INFORMATION:
2020
2019
(Unaudited)
Cash flow -- operating activities
$
21,563
$
13,496
Cash flow -- investing activities
$
(26,469)
$
(5,939)
Cash flow -- financing activities
$
(1,824)
$
(15,624)
February 22,
May 25,
SELECTED OTHER INFORMATION:
2020
2019
Consultant headcount, end of period
2,894
2,965
Average bill rate, third quarter
$123
$124
Average pay rate, third quarter
$63
$62
Average bill rate (constant currency-Q3
19), third quarter
$123
--
Average pay rate (constant currency-Q3
19), third quarter
$63
--
Common shares outstanding, end of
period
32,144
31,588
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200402005779/en/
Media Contact: Michael Sitrick (US+) 1-310-788-2850
mike_sitrick@sitrick.com
Analyst Contact: Jennifer Ryu, Chief Financial Officer
(US+) 1-714-430-6500 jennifer.ryu@rgp.com
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