Resources Connection (RGP) Q1 2025 earnings summary

Executive summary

• Revenue declined 19.5% year-over-year to $136.9 million, reflecting reduced client spending and a challenging macroeconomic environment.

• Net loss of $5.7 million, including a $3.9 million goodwill impairment in Europe and Asia Pacific, compared to net income of $3.1 million last year.

• Launched a new operating model and brand architecture to enhance transparency, cross-sell, and growth opportunities across service brands.

• Completed acquisition of Reference Point LLC, contributing $2.7 million in revenue and $0.5 million in operating income.

• Built global delivery centers in India and the Philippines to provide scalable, cost-effective talent solutions.

Financial highlights

• Gross margin was 36.5%, down from 39.4% year-over-year; adjusted EBITDA was $2.3 million (1.7% margin), down from $11.5 million (6.8%).

• SG&A expense improved to $47.7 million, aided by cost reductions and a $3.4 million gain on the sale of the Irvine office building.

• Cash and cash equivalents totaled $90 million, with no debt outstanding.

• $23 million free cash flow generated in the last twelve months.

• No debt outstanding under the $175 million credit facility; $173.5 million in available capacity.

Outlook and guidance

• Q2 revenue projected at $135–$140 million; gross margin expected at 36–37%.

• SG&A expense for Q2 expected at $48–$50 million.

• Management expects continued macroeconomic uncertainty, with cautious client spending and potential for further declines in billable hours and rates.

• Strategic focus areas include executing the new segment model, launching a refreshed brand, and enhancing digital and AI capabilities.

• Ongoing investments in technology transformation, with $11–16 million in remaining capital outlays for the technology platform initiative.