Resources Connection (RGP) Q2 2025 earnings summary

Executive summary

• Q2 revenue was $145.6 million, down 10.7% year-over-year but up sequentially, with a net loss of $68.7 million driven by a $79.5 million goodwill impairment.

• Achieved sequential improvement in revenue, gross margin, run rate, SG&A, and adjusted EBITDA, exceeding outlook despite year-over-year declines.

• The company reorganized into new business segments and acquired Reference Point LLC for $23 million, contributing $4.8 million to Consulting revenue.

• Implemented a new technology platform in North America, now running 75% of business on modern systems, expected to drive efficiency.

• Board authorized an increase in the stock buyback program, reflecting confidence in long-term outlook.

Financial highlights

• Gross margin for Q2 was 38.5%, up 200 basis points sequentially but slightly down from 38.9% year-over-year; adjusted EBITDA was $9.7 million (6.6% margin), down from $16.1 million (9.8%) last year.

• SG&A expense improved to $46.5 million, a 2% improvement year-over-year, with further cost discipline and restructuring benefits.

• Cash and cash equivalents totaled $78 million, with zero outstanding debt and total available liquidity of $252 million.

• Dividend yield over 6% at current stock price; $4.7 million in dividends and $5–$10 million in share repurchases in Q2.

• Recorded a non-cash goodwill impairment charge of $79.5 million due to market cap drop and delayed recovery in On-Demand Talent and Europe & Asia Pacific segments.

Outlook and guidance

• Q3 revenue guidance is $127 million–$132 million, reflecting holiday impacts and fewer business days.

• Gross margin expected at 34%–35%; SG&A run rate expected at $46–$48 million.

• Non-cash and non-run rate expenses for Q3 estimated at $6 million, including restructuring and technology transformation costs.

• Management expects continued macroeconomic uncertainty, with cautious client spending and prolonged sales cycles likely to persist through FY2025.

• At midpoint of Q3 guidance, year-over-year revenue decline expected to be 15% on an organic same-day constant currency basis.