Resources Connection, Inc. (RGP) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlighted declines in key segments, with significant year-over-year revenue drops in both On-Demand and Consulting segments. Despite some growth in Outsourced Services, the overall financial performance was weak. The Q&A section further revealed concerns about AI's impact on roles and unclear management responses on strategic vision. Additionally, healthcare costs impacted margins, and while SG&A expenses improved, the lack of strong positive catalysts and weak guidance suggest a negative stock price reaction in the near term.
Key Financial Performance
Consolidated Revenue $117.7 million, declined 18.4% year-over-year on a same-day constant currency basis. The decline was attributed to softness in On-Demand and Consulting segment revenues, despite steady growth in Europe, Asia Pac, and Outsourced Services segments.
Gross Margin 37.1%, down from 38.5% in the prior year quarter. The decline was due to unfavorable leverage on indirect costs of service, including healthcare costs and paid time off, despite a 97 basis point improvement in pay bill ratio.
Adjusted EBITDA $4 million, representing a 3.4% adjusted EBITDA margin. This exceeded expectations despite revenue coming in below consensus, reflecting disciplined cost management and execution.
GAAP Net Loss $12.7 million, driven by $11.9 million of onetime expenses related to the CEO transition and a reduction in force.
On-Demand Segment Revenue $43 million, declined 18.4% year-over-year. Segment adjusted EBITDA was $4.1 million or a 9.5% margin, down from $5.6 million or a 10.5% margin in the prior year quarter.
Consulting Segment Revenue $42.6 million, declined 28.8% year-over-year. Segment adjusted EBITDA was $4.5 million or a 10.4% margin, down from $9.7 million or a 16% margin in the prior year quarter.
Europe and Asia Pac Segment Revenue $20.1 million, grew 0.6% year-over-year. Segment adjusted EBITDA was $1.5 million, representing a 7.4% margin, slightly down from 7.5% in the prior year quarter.
Outsourced Services Segment Revenue $9.4 million, grew 0.8% year-over-year. Segment adjusted EBITDA was $1.7 million or an 18.4% margin, up from $1.5 million or a 16.4% margin in the prior year quarter.
Enterprise-wide Average Bill Rate $121 constant currency, down from $123 a year ago, primarily due to a revenue mix shift toward the Asia Pacific region.
Run Rate SG&A Expense $39.7 million, a 15% improvement from $46.5 million a year ago. The improvement was driven by reductions in management compensation, variable compensation, and SG&A spend, including travel, occupancy, and professional services.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
AI and automation tools: RGP is implementing additional AI and automation tools across business processes to enhance cost-effectiveness in client service delivery and internal business support functions.
International growth: Europe and Asia Pacific segments delivered year-over-year and sequential revenue growth, supported by higher weekly revenue run rates and improved bill rates. Performance was led by Europe, Japan, India, and the Philippines.
Consulting segment expansion: RGP is integrating Reference Point to enhance collaboration, streamline go-to-market execution, and strengthen CFO advisory and digital transformation offerings. This aims to deepen relationships with existing clients and expand reach to new clients.
Cost structure alignment: RGP reduced its cost structure to align with current revenue levels, including a reduction in force impacting 5% of management and administrative headcount, expected to yield annual savings of $6 million to $8 million.
SG&A expense reduction: Run rate SG&A expense improved by 15% year-over-year, driven by lower management compensation, reduced variable compensation, and decreased spending on travel, occupancy, and professional services.
Focus on competitive service offerings: RGP is focusing on providing relevant skills and solutions to clients at competitive prices to enhance value and differentiate from competitors.
AI and automation strategy: RGP is actively understanding how AI and automation impact client needs and integrating these technologies into its service offerings and internal processes.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Market Challenges: The market for services has been more challenging and uncertain, impacting the company's ability to generate positive momentum for consolidated revenue and adjusted EBITDA.
Cost Structure Alignment: There is a need to better align the cost structure with current revenue levels, requiring decisive actions to reduce costs and improve financial results.
On-Demand Segment Challenges: The On-Demand segment faces challenges in understanding and meeting clients' evolving needs, which is critical for improving financial results.
Consulting Business Scaling: Scaling the Consulting business requires hiring experienced professionals, which is a challenge in a competitive market for talent.
AI and Automation Impact: The company must adapt to how artificial intelligence and automation are impacting clients' businesses and the professional services they seek, as well as implement these technologies internally to enhance cost-effectiveness.
Revenue Decline: Consolidated revenue declined 18.4% year-over-year, with specific declines in the On-Demand and Consulting segments.
Gross Margin Pressure: Gross margin decreased to 37.1% from 38.5% in the prior year, driven by unfavorable leverage on indirect costs such as healthcare and paid time off.
SG&A Cost Management: The company is conducting a deeper assessment to streamline organizational structure and adopt automation to ensure the cost structure aligns with revenue levels.
Segment-Specific Revenue Declines: The On-Demand and Consulting segments experienced significant revenue declines, impacting overall financial performance.
Seasonality and Holiday Impact: Seasonality and midweek holidays negatively impacted revenue and gross margin in the third quarter.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Revenue Expectations: The company expects third-quarter revenues to be in the range of $105 million to $110 million, reflecting seasonality and current revenue backlog.
Gross Margin Projections: Gross margin for the third quarter is expected to be between 35% and 36%, influenced by seasonality, holiday pay, and employer payroll tax reset.
SG&A Expense Outlook: Run rate SG&A expense in the third quarter is projected to be between $40 million and $42 million, with additional non-run rate and noncash expenses of $6 million to $7 million.
Cost Reduction Initiatives: The company plans to implement cost reduction actions over a 12-month period, including a reduction in force expected to yield annual savings of $6 million to $8 million.
Consulting Segment Growth: The integration of Reference Point is expected to be completed by the end of the fiscal year, enhancing CFO advisory and digital transformation capabilities.
AI and Automation Implementation: RGP is actively implementing AI and automation tools to enhance cost-effectiveness in client service delivery and internal business support functions.
Market Positioning: The company aims to leverage its ability to provide finance, risk, operational performance, and technology solutions across On-Demand, Consulting, and Outsourced Services to remain competitive in the evolving market.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Quarterly dividend distributions: Totaled $2.3 million in the second quarter.
Share repurchase program: $79 million remaining at the end of the quarter for opportunistic share buybacks.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:Can you elaborate on the specific areas where AI is leading to disintermediation in finance and accounting roles?
A:AI and automation are impacting operational accounting roles, particularly transactional and repeatable roles. While AI accelerates data access and analytics, it has not yet replaced a significant number of jobs. Instead, it is transforming processes and requiring higher-skilled individuals to manage AI's impact on business operations.
Q:How widespread is the impact of AI on finance and accounting roles, and what specific roles are being affected?
A:The impact is still in early stages, similar to the early days of digital transformation. Lower-level roles like accounts receivables, payables, reconciliations, and data entry are most affected. Higher-level roles are evolving, requiring skills in AI implementation and usage, particularly in FP&A, where AI is enhancing analytics and data-driven decision-making.
Q:What areas within consulting are you focusing on for incremental hiring?
A:The focus is on high-demand areas such as financial transformation, financial technologies, data analytics, risk, and tax. These areas help clients do more with less, gain better organizational insights, and drive value.
Q:Is the $40 million to $42 million SG&A guidance inclusive of the $6 million to $7 million in stock compensation and restructuring costs?
A:No, the $40 million to $42 million SG&A guidance is exclusive of the $6 million to $7 million in stock compensation and restructuring costs.
Q:How much of an impact did higher healthcare costs have, and are there any plans to address this?
A:Higher healthcare costs had a $1 million plus impact compared to Q2, significantly affecting gross margin and SG&A. The company reviews plan design annually and considers cost-sharing adjustments. The unfavorable claims experience in October is considered an anomaly and is expected to normalize.
Q:What is the broader strategic framework and vision for the next 12 to 24 months?
A:The focus is on aligning cost structure with revenue, improving On-Demand services by understanding client needs and sourcing appropriate talent, and growing the Consulting segment. The aim is to deliver value through focused efforts and the right talent, with incremental improvements expected over time.
Q:Is AI causing clients to delay decisions, and how are they approaching AI implementation?
A:AI is not causing significant decision delays. Clients are exploring AI's potential, facing confusion over spot technologies versus enterprise applications, and debating how to integrate AI into existing systems. Some clients are experimenting aggressively, while others are cautious.
Q:What would normalized gross margins look like without the impact of healthcare costs and seasonality?
A:Without the abnormal healthcare costs, gross margins would have been around 38%. Seasonality, such as additional holidays, also impacts gross margins. The company focuses on improving average bill rates and consulting utilization to enhance margins.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about the broader strategic framework and vision for the next 12 to 24 months. While they outlined general goals, such as aligning cost structure and growing consulting services, the response lacked specific details or measurable targets, making it unclear how these objectives would be achieved or when tangible results could be expected.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI automation
Advisory Services
America market
Asia Pac
Bohlman
CFO advisory
Consulting segment
Demand Consulting
Demand Talent
North America
Outsourced Services
Pac segment
Reference Point
action
advisory transformation
client Consulting
client need
client point
client service
collaboration
commitment
cost structure
discipline
effectiveness client
enthusiasm
future
need client
price
professional
provider
segment client
service firm
solution client
structure level
success
value solution
RGP Transcript
Resources Connection, Inc. (RGP) Q3 2026 Earnings Call Transcript
Unknown4-8
The earnings call indicates several negative trends: a significant decline in consulting revenue, a 16% expected revenue drop, and no M&A revenue. While there are improvements in SG&A expenses and some positive impacts from AI, the lack of immediate growth prospects and vague guidance on share buybacks contribute to a negative sentiment. Additionally, the anticipated stability in SG&A expenses and AI's neutral impact on traditional roles do not offset the overall negative outlook.
Resources Connection, Inc. (RGP) Q2 2026 Earnings Call Transcript
Unknown1-7
The earnings call highlighted declines in key segments, with significant year-over-year revenue drops in both On-Demand and Consulting segments. Despite some growth in Outsourced Services, the overall financial performance was weak. The Q&A section further revealed concerns about AI's impact on roles and unclear management responses on strategic vision. Additionally, healthcare costs impacted margins, and while SG&A expenses improved, the lack of strong positive catalysts and weak guidance suggest a negative stock price reaction in the near term.
Resources Connection, Inc. (RGP) Q1 2026 Earnings Call Transcript
Unknown10-8
The earnings call summary presents a mixed outlook. Financial performance shows improvement in gross margin and SG&A expenses, but adjusted EBITDA is low. The Q&A reveals pricing pressures and uncertain client spending, yet highlights potential in cross-selling and regional demand. The lack of specific guidance on cross-selling and a 16% revenue decline guidance for Q2 temper optimism. Overall, the stock is likely to remain stable, with no strong catalysts for significant movement.
Resources Connection, Inc. (RGP) Q4 2025 Earnings Call Transcript
Unknown7-24
The earnings call reveals mixed signals. Revenue and gross margin exceeded expectations, yet declines in Consulting and On-Demand segments raise concerns. The Q&A section highlights management's optimism about cross-selling and pipeline rebuilding, but also points to issues like sales team attrition and project delays. Overall, the positive aspects balance out the negatives, leading to a neutral outlook for the stock price over the next two weeks.
RGP Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
