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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Resources Connection Inc | NASDAQ:RECN | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 10.32 | 9.00 | 10.88 | 0 | 01:00:00 |
Q4 revenue increases 23.7% YOY to $183.8 million
FY 2018 diluted earnings per common share increases to $0.60 compared to $0.56 in prior year
Strong progress integrating recent acquisitions
Resources Connection, Inc. (NASDAQ: RECN), a multinational business consulting firm, operating as Resources Global Professionals (the “Company” or “RGP”), today announced its financial results for the fourth quarter and year ended May 26, 2018.
Fourth Quarter 2018 Revenue Financial Highlights
Management Commentary
“We are pleased with the substantial revenue growth we saw across all regions in the fourth quarter,” said Kate W. Duchene, President and Chief Executive Officer of RGP. “The first quarter to date is also trending strongly compared to the first quarter of fiscal 2018 as we believe our strategic initiatives are having a positive impact on our business. In addition, our recent acquisitions have opened up significant new opportunities that we would not have won as standalone companies. As we head into the new fiscal year, we are focused on building on our strong momentum by continuing to drive organic growth across the business.”
Other Fourth Quarter 2018 Financial Highlights
Year End 2018 Financial Highlights
Update on Strategic Initiatives and Acquisitions
RGP has largely completed the implementation in North America of the strategic initiatives it laid out in fiscal 2017, and is now focused on implementation in Europe and Asia Pacific. These initiatives are already contributing meaningfully to the Company’s bottom line:
The Company has also substantially completed the integration of both the taskforce and Accretive acquisitions. The principal operations of Accretive have been fully integrated into RGP’s business model effective with the first day of fiscal 2019. Both businesses are now driving significant new opportunities for revenue growth in their respective markets, as well as in RGP’s core business and with the Company’s existing clients.
Footnotes
*In order to provide a more comprehensive view of revenue trends in our business, organic revenue is presented and defined as revenue without the revenue of taskforce and Accretive for the applicable period. A table is provided below with revenue data on an as-reported basis (GAAP) for the respective periods and revenue without the acquisitions in the same periods and the impact on revenue of exchange rate fluctuations between the United States dollar and currencies in countries in which the Company operates.
**Year over year constant currency results for international revenue are computed using the comparable fourth quarter fiscal 2017 conversion rates, and the sequential quarter constant currency international revenue is computed using the comparable third quarter fiscal 2018 conversion rates.
***Adjusted EBITDA, a non-GAAP financial measure, is defined as earnings before interest, income taxes, depreciation, amortization and stock-based compensation. Reconciliation table provided below.
Conference Call Information
RGP will hold a conference call for analysts and investors at 5:00 p.m., ET today, July 18, 2018. 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 July 25, 2018 at 855-859-2056. The conference ID number for the replay is 4753368. The call will also be archived on the RGP website for 30 days.
About RGP
RGP, the operating subsidiary of Resources Connection, Inc. (NASDAQ: RECN), is a multinational business consulting firm that helps leaders execute internal initiatives. Partnering with business leaders, we drive internal change across all parts of a global enterprise – accounting; finance; governance, risk and compliance management; corporate advisory, strategic communications and restructuring; information management; human capital; supply chain management; and legal and regulatory.
RGP was founded in 1996 within a Big Four accounting firm. Today, we are a publicly traded company with over 4,100 professionals, annually serving over 2,400 clients around the world from 74 practice offices.
Headquartered in Irvine, California, RGP has served 86 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)
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 expectations regarding the Accretive and taskforce acquisitions, the Company’s strategic initiatives and continued revenue and earnings growth. 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 our ability to successfully execute on our strategic initiatives, 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 STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts) Three Months Ended Years Ended May 26, May 27, May 26, May 27, 2018 2017 2018 2017 (Unaudited) (Unaudited) Revenue $ 183,791 $ 148,620 $ 654,129 $ 583,411 Direct cost of services 113,363 90,579 408,074 362,086 Gross margin 70,428 58,041 246,055 221,325 Selling, general and administrative expenses (1) 58,861 48,425 209,042 183,471
Operating income before amortization and depreciation (1)
11,567 9,616 37,013 37,854 Amortization of intangible assets 972 - 2,298 - Depreciation expense 1,115 941 4,091 3,452 Operating income (1) 9,480 8,675 30,624 34,402 Interest expense 591 358 1,867 773 Interest income (38 ) (18 ) (132 ) (144 ) Income before provision for income taxes (1) 8,927 8,335 28,889 33,773 Provision for income taxes (2) 4,946 3,898 10,063 15,122 Net income (1), (2) $ 3,981 $ 4,437 $ 18,826 $ 18,651 Net income per common share: Basic (1), (2) $ 0.13 $ 0.15 $ 0.61 $ 0.57 Diluted (1), (2) $ 0.12 $ 0.15 $ 0.60 $ 0.56 Weighted average common shares outstanding: Basic 31,545 29,654 30,741 32,851 Diluted 32,137 30,234 31,210 33,471 Cash dividends declared per common share $ 0.12 $ 0.11 $ 0.48 $ 0.44EXPLANATORY 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 $1.5 million and $1.4 million for the three months ended May 26, 2018 and May 27, 2017, respectively and $6.0 million and $6.1 million for the years ended May 26, 2018 and May 27, 2017, respectively. The expense for the year ended May 26, 2018 includes approximately $140,000 related to accelerated vesting of stock options as part of the agreement with a departing senior executive; the expense for the year ended May 27, 2017 includes approximately $400,000, or $0.01 per share, related to accelerated vesting of options as part of the agreement with a departing senior executive.
(2) The Company’s effective tax rate was approximately 55% and approximately 47% for the three months ended May 26, 2018 and May 27, 2017, respectively and approximately 35% and 45% for the years ended May 26, 2018 and May 27, 2017, respectively. On December 22, 2017, U.S. federal tax reform was enacted which lowered the US statutory federal tax rate from 35% to 21% effective January 1, 2018, resulting in a blended US statutory federal tax rate of approximately 29% for the fiscal year ended May 26, 2018.
For the year ended May 26, 2018, the Company reported amounts related to the impact of US federal tax reform, including a tax benefit of $0.8 million due to re-measurement of U.S. deferred tax assets and liabilities at the reduced rates. The year ended May 26, 2018 also includes the reversal of approximately $2.4 million of valuation allowances on the deferred tax assets of certain foreign entities and the year ended May 27, 2017 includes the reversal of approximately $0.2 million 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 unexercised expiring stock options and shares purchased through the Employee Stock Purchase Plan has caused volatility in the Company’s effective tax rate.
RESOURCES CONNECTION, INC. RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (Dollars in thousands) Three Months Ended Years Ended May 26, May 27, May 26, May 27, 2018 2017 2018 2017 (Unaudited) (Unaudited) Net income $ 3,981 $ 4,437 $ 18,826 $ 18,651 Adjustments: Amortization of intangible assets 972 - 2,298 - Depreciation expense 1,115 941 4,091 3,452 Interest expense 591 358 1,867 773 Interest income (38 ) (18 ) (132 ) (144 ) Provision for income taxes 4,946 3,898 10,063 15,122 EBITDA 11,567 9,616 37,013 37,854 Stock-based compensation expense 1,534 1,410 6,033 6,068 Adjusted EBITDA $ 13,101 $ 11,026 $ 43,046 $ 43,922 Revenue $ 183,791 $ 148,620 $ 654,129 $ 583,411 Adjusted EBITDA Margin 7.1 % 7.4 % 6.6 % 7.5 %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 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, which are used by management to assess the core performance of our Company, also 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 and compare it to the Company’s peers. 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 for, 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) Three Months Ended WITH ACQUISITIONS May 26, May 27, 2018 2017 % Change Consolidated Revenue -- GAAP $ 183,791 $ 148,620 23.7 % Consolidated Revenue -- Constant Currency (1) $ 181,039 21.8 % United States Revenue -- GAAP $ 144,033 $ 119,641 20.4 % Europe Revenue -- GAAP $ 23,446 $ 16,027 46.3 % Europe Revenue -- Constant Currency (1) $ 21,248 32.6 % Three Months Ended WITH ACQUISITIONS May 26, February 24, 2018 2018 % Change Revenue -- GAAP $ 183,791 $ 172,414 6.6 % Revenue -- Constant Currency (2) $ 183,644 6.5 % United States Revenue -- GAAP $ 144,033 $ 134,334 7.2 % Europe Revenue -- GAAP $ 23,446 $ 23,149 1.3 % Europe Revenue -- Constant Currency (2) $ 23,417 1.2 % Three Months Ended WITHOUT ACQUISITIONS May 26, May 27, 2018 2017 % Change Revenue -- GAAP $ 161,771 $ 148,620 8.8 % Revenue -- Constant Currency (1) $ 159,466 7.3 % United States Revenue -- GAAP $ 125,896 $ 119,641 5.2 % Europe Revenue -- GAAP $ 19,563 $ 16,027 22.1 % Europe Revenue -- Constant Currency (1) $ 17,812 11.1 % Three Months Ended WITHOUT ACQUISITIONS May 26, February 24, 2018 2018 % Change Revenue -- GAAP $ 161,771 $ 151,257 7.0 % Revenue -- Constant Currency (2) $ 161,659 6.9 % United States Revenue -- GAAP $ 125,896 $ 117,006 7.6 % Europe Revenue -- GAAP $ 19,563 $ 19,320 1.3 % Europe Revenue -- Constant Currency (2) $ 19,568 1.3 % Years Ended WITH ACQUISITIONS May 26, May 27, 2018 2017 % Change Revenue -- GAAP $ 654,129 $ 583,411 12.1 % Revenue -- Constant Currency (3) $ 647,055 10.9 % United States Revenue -- GAAP $ 510,935 $ 469,846 8.7 % Europe Revenue -- GAAP $ 84,705 $ 60,461 40.1 % Europe Revenue -- Constant Currency (3) $ 78,658 30.1 % Years Ended WITHOUT ACQUISITIONS May 26, May 27, 2018 2017 % Change Revenue -- GAAP $ 607,273 $ 583,411 4.1 % Revenue -- Constant Currency (3) $ 601,338 3.1 % United States Revenue -- GAAP $ 475,470 $ 469,846 1.2 % Europe Revenue -- GAAP $ 73,314 $ 60,461 21.3 % Europe Revenue -- Constant Currency (3) $ 68,407 13.1 %(1)
The percentage change in revenue on a constant currency basis is calculated using the average foreign exchange rates for the fourth quarter of fiscal 2017 and applying those rates to foreign-denominated revenue in the fourth quarter of fiscal 2018.
(2)
The percentage change in revenue on a constant currency basis is calculated using the average foreign exchange rates for the third quarter of fiscal 2018 and applying those rates to foreign-denominated revenue in the fourth quarter of fiscal 2018.
(3)
The percentage change in revenue on a constant currency basis is calculated using the average foreign exchange rates for each period of fiscal 2017 and applying those rates to foreign-denominated revenue in each period of fiscal 2018.
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 and average rates) May 26, May 27, SELECTED BALANCE SHEET INFORMATION: 2018 2017 (Unaudited) Cash and cash equivalents $ 56,470 $ 62,329 Accounts receivable, less allowances $ 130,452 $ 98,222 Total assets $ 432,674 $ 364,128 Current liabilities $ 94,524 $ 71,771 Total stockholders’ equity $ 268,825 $ 238,142 For the Years Ended May 26, May 27, SELECTED CASH FLOW INFORMATION: 2018 2017 (Unaudited) Cash flow -- operating activities $ 15,370 $ 28,265 Cash flow -- investing activities $ (25,666 ) $ 20,409 Cash flow -- financing activities $ 3,474 $ (76,876 ) May 26, May 27, SELECTED OTHER INFORMATION: 2018 2017 Consultant headcount, end of period 3,247 2,569 Average bill rate, fourth quarter $ 124 $ 120 Average pay rate, fourth quarter $ 64 $ 60 Average bill rate (constant currency-Q4 17), fourth quarter $ 123 -- Average pay rate (constant currency-Q4 17), fourth quarter $ 63 -- Common shares outstanding, end of period 31,614 29,662
View source version on businesswire.com: https://www.businesswire.com/news/home/20180718005862/en/
Resources Connection, Inc.Media Contact:Michael Sitrick(US+) 1-310-788-2850mike_sitrick@sitrick.comorAnalyst Contact:Herb Mueller, Chief Financial Officer(US+) 1-714-430-6500herb.mueller@rgp.com
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