Fourth Quarter Fiscal 2019 Highlights:
- Revenue $182.1 million, down 0.9% from prior year quarter, up
0.4% constant currency
- Gross margin $73.0 million, up 3.6% from prior year
quarter
- Gross margin percentage of 40.1%, an improvement of 180 basis
points from prior year quarter
- SG&A as a percent of revenue of 31.2%, an improvement of 80
basis points from prior year quarter
- Diluted earnings per common share increased to $0.29 compared
$0.12 in prior year quarter, an improvement of 142%
- Pretax income increased to $13.4 million from $8.9 million in
prior year quarter
- Net income increased to $9.4 million from $4.0 million in prior
year quarter
- Adjusted EBITDA increased to $17.5 million from $13.1 million
in prior year quarter
- Cash dividends declared of $0.13 per share
Full Fiscal Year 2019 Highlights:
- Revenue $729.0 million, up 11.4% from prior year and up 12.4%
constant currency
- Gross margin $282.4 million, up 14.8% from prior year
- Gross margin percentage of 38.7%, an improvement of 110 basis
points from prior year
- SG&A as a percent of revenue of 30.7%, an improvement of
130 basis points from prior year
- Diluted earnings per common share increased to $0.98 compared
to $0.60 in prior year, an improvement of 63%
- Pretax income increased to $48.0 million from $28.9 million in
prior year
- Net income increased to $31.5 million from $18.8 million in
prior year
- Adjusted EBITDA increased to $64.6 million from $43.0 million
in prior year
- Cash dividends declared of $0.52 per share
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 25,
2019.
Management Commentary
“We are very pleased by the results we delivered in fiscal year
2019,” said Kate W. Duchene, chief executive officer of RGP. “We
returned the company to real growth, we improved profitability
substantially and we implemented a new organizational structure
allowing us to better respond to our global clients.” Ms. Duchene
added: “With this progress, we also believe there is greater
opportunity ahead. As we have set forth previously, we are working
to shift our mix of business to deliver high value project
solutions that our clients are requesting from us. We will continue
to leverage richer data to enhance decision making and prioritize
deployment of resources towards high-potential opportunities
including digital innovation.”
RESOURCES CONNECTION,
INC.
SUMMARY OF CONSOLIDATED
FINANCIAL RESULTS
(Amounts in thousands, except
percentages and per share amounts)
Three Months Ended
For the Years Ended
May 25,
February 23,
May 26,
May 25,
May 26,
2019
2019
2018
2019
2018
As reported
(GAAP)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Revenue
North America
$
146,988
$
146,817
$
148,524
$
593,799
$
524,872
Asia Pacific
13,559
11,770
11,821
48,845
44,552
Europe
21,597
20,911
23,446
86,355
84,705
Total revenue
$
182,144
$
179,498
$
183,791
$
728,999
$
654,129
Gross margin
$
72,956
$
67,911
$
70,428
$
282,439
$
246,055
Selling, general and administrative
expenses
$
56,890
$
55,587
$
58,861
$
223,802
$
209,042
Income before provision for income
taxes
$
13,411
$
9,618
$
8,927
$
47,969
$
28,889
Net Income
$
9,369
$
5,796
$
3,981
$
31,470
$
18,826
Effective tax rate
30%
40%
55%
34%
35%
Diluted EPS
$
0.29
$
0.18
$
0.12
$
0.98
$
0.60
Cash dividends:
Per common share
$
0.13
$
0.13
$
0.12
$
0.52
$
0.48
Total cash dividends paid
$
4,147
$
4,124
$
3,760
$
16,158
$
14,269
Three Months Ended
For the Years Ended
May 25,
May 26,
May 25,
May 26,
2019 (1)
2018 (1)
2019 (1)
2018 (1)
As adjusted
(non-GAAP)
(Unaudited)
(Unaudited)
Constant currency revenue
North America
$
147,092
148,524
$
594,601
524,872
Asia Pacific
14,160
11,821
50,202
44,552
Europe
23,301
23,446
90,140
84,705
Total constant currency revenue
$
184,553
$
183,791
$
734,943
$
654,129
Cash tax rate
28%
41%
31%
39%
Adjusted net income
$
9,621
$
5,261
$
33,209
$
17,527
Adjusted diluted EPS
$
0.29
$
0.16
$
1.03
$
0.56
Adjusted EBITDA
$
17,461
$
13,101
$
64,617
$
43,046
________ (1) Revenue for the three months and year ended May 25,
2019 are measured on a constant currency basis while the comparable
revenue for the three months and year ended May 26, 2018 are
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.
Fourth Quarter Fiscal 2019
Revenue for the fourth quarter decreased 0.9% from the fourth
quarter of fiscal year 2018 and increased 1.5% from the third
quarter of fiscal year 2019. On a constant currency basis, revenue
for the fourth quarter increased 0.4% from the fourth quarter of
fiscal year 2018. Exchange rate fluctuations did not have a
material impact on the fourth quarter revenue when compared to the
sequential quarter. The increase in revenue from the sequential
quarter was expected as the third quarter of fiscal year 2019
included the Christmas, New Year’s and Chinese New Year’s
holidays.
Gross margin for the fourth quarter was 40.1%, increasing 180
basis points from the fourth quarter of fiscal year 2018, and
increasing 230 basis points sequentially. The year-over-year
increase is related primarily to an improved bill pay ratio, driven
by internal initiatives to improve pricing, as well as lower
payroll taxes and business expenses. The sequential quarter
increase is primarily due to an improved bill pay ratio and lower
costs in the Company’s self-insured medical program.
SG&A was 31.2% of revenue for the fourth quarter of fiscal
year 2019 compared to 32.0% and 31.0% of revenue in the fourth
quarter of fiscal year 2018 and in the third quarter of fiscal year
2019, respectively. The year-over-year percentage improvement
relates to lower severance, acquisition, transformation and
integration costs, partially offset by higher payroll and benefits
due to an increase in headcount to support revenue growth,
including approximately $0.5 million of compensation benefits
related to the loan forgiveness of our recently appointed Chief
Operating Officer.
The Board of Directors approved a $0.13 per share dividend to
shareholders in the fourth quarter for $4.1 million (paid in June),
compared to a $0.12 per share dividend for $3.8 million in the
prior year fourth quarter. Company share buybacks in the fourth
quarter totaled approximately 484,000 shares for $7.6 million, with
$90.1 million remaining for future common stock purchases as of May
25, 2019.
Full Fiscal Year 2019
Revenue increased 11.4% in fiscal year 2019 compared to fiscal
year 2018. On a constant currency basis, revenue in fiscal year
2019 increased 12.4% from fiscal year 2018. The increase in revenue
is primarily attributable to the full year impact of our
acquisitions of Accretive and taskforce, which were completed
during the December and September quarters of fiscal year 2018,
respectively.
Gross margin for fiscal year 2019 was 38.7%, increasing 110
basis points from fiscal year 2018. The year-over-year increase is
related primarily to an improved bill pay ratio, driven by internal
initiatives to improve pricing, and lower costs in the Company’s
self-insured medical program.
SG&A improved as a percentage of revenue to 30.7% in fiscal
year 2019 from 32.0% in fiscal year 2018 as a result of our
continued efforts in leveraging our SG&A expenses and realizing
cost synergies in the core business with our past acquisitions.
On December 22, 2017, the Tax Cuts and Jobs Act was enacted in
the U.S., which lowered the U.S. statutory federal tax rate from
35% to 21% effective January 1, 2018. The effective tax rate of 34%
for fiscal year 2019 reflected the lower U.S. federal statutory
rate of 21% compared to fiscal year 2018 which had a blended rate
of approximately 29%. During fiscal year 2018, the Company reported
amounts related to the impact of U.S. 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.
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.
Dividends paid during fiscal year 2019 were $16.2 million
compared to $14.3 million in the prior year. Company share buybacks
during fiscal year 2019 were approximately 1.8 million shares
totaling $29.9 million.
Conference Call Information
RGP will hold a conference call for analysts and investors at
5:00 p.m., ET today, July 18, 2019. 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, 2019 at 855-859-2056. The conference ID
number for the replay is 9032939. 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 Transformation,
Governance, Risk and Compliance and Technology and 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 3,800 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 86 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.
(RECN-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
and future opportunities, financial performance and the impact of
our strategic initiatives. 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, our ability to compete effectively in the
highly competitive professional services market and to secure new
projects from clients, 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.
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.
- 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 provision for income taxes, 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, Adjusted EBITDA,
Adjusted EBITDA margin, Adjusted provision for income taxes,
Adjusted net income, and Adjusted diluted earnings per common
share, 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. Constant currency 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 provision for income taxes 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
For the Years Ended
May 25,
May 26,
May 25,
May 26,
2019
2018
2019
2018
(Unaudited)
(Unaudited)
Revenue
$
182,144
$
183,791
$
728,999
$
654,129
Direct cost of services
109,188
113,363
446,560
408,074
Gross margin
72,956
70,428
282,439
246,055
Selling, general and administrative
expenses
56,890
58,861
223,802
209,042
Operating income before amortization and
depreciation
16,066
11,567
58,637
37,013
Amortization of intangible assets
944
972
3,799
2,298
Depreciation expense
1,250
1,115
4,679
4,091
Operating income
13,872
9,480
50,159
30,624
Interest expense
461
553
2,190
1,735
Income before provision for income
taxes
13,411
8,927
47,969
28,889
Provision for income taxes
4,042
4,946
16,499
10,063
Net income
$
9,369
$
3,981
$
31,470
$
18,826
Net income per common share:
Basic
$
0.30
$
0.13
$
1.00
$
0.61
Diluted
$
0.29
$
0.12
$
0.98
$
0.60
Weighted average common shares
outstanding:
Basic
31,663
31,545
31,596
30,741
Diluted
32,177
32,137
32,207
31,210
Cash dividends declared per common
share
$
0.13
$
0.12
$
0.52
$
0.48
RESOURCES CONNECTION,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except
per share amounts)
Adjusted
EBITDA
Three Months Ended
For the Years Ended
May 25,
May 26,
May 25,
May 26,
2019
2018
2019
2018
(Unaudited)
(Unaudited)
Net income
$
9,369
$
3,981
$
31,470
$
18,826
Adjustments:
Amortization of intangible assets
944
972
3,799
2,298
Depreciation expense
1,250
1,115
4,679
4,091
Interest expense
461
553
2,190
1,735
Provision for income taxes
4,042
4,946
16,499
10,063
Stock-based compensation expense
1,609
1,534
6,570
6,033
Contingent consideration adjustment
(214
)
-
(590
)
-
Adjusted EBITDA
$
17,461
$
13,101
$
64,617
$
43,046
Revenue
$
182,144
$
183,791
$
728,999
$
654,129
Adjusted EBITDA Margin
9.6
%
7.1
%
8.9
%
6.6
%
Adjusted
Provision for Income Taxes, Annual Cash Tax Rate, Adjusted Net
Income and Adjusted Earnings Per Common Share
Three Months Ended
For the Years Ended
May 25,
May 26,
May 25,
May 26,
2019
2018
2019
2018
(Unaudited)
(Unaudited)
Provision for income taxes
$
4,042
$
4,946
$
16,499
$
10,063
Effect of non-cash tax items:
Stock-based compensation expense
(76
)
(904
)
(937
)
(1,122
)
Valuation allowance on international
deferred tax assets
(101
)
(350
)
(657
)
1,683
Other non-cash tax items
(75
)
(26
)
(145
)
738
Adjusted provision for income taxes
$
3,790
$
3,666
$
14,760
$
11,362
Effective tax rate
30
%
55
%
34
%
35
%
Total effect of non-cash tax items on
effective tax rate
(2
%)
(14
%)
(3
%)
4
%
Annual cash tax rate
28
%
41
%
31
%
39
%
Net income
$
9,369
$
3,981
$
31,470
$
18,826
Total effect of non-cash tax items on net
income
252
1,280
1,739
(1,299
)
Adjusted net income
$
9,621
$
5,261
$
33,209
$
17,527
Diluted earnings per common share
$
0.29
$
0.12
$
0.98
$
0.60
Effect of non-cash tax items on diluted
earnings per common share
-
0.04
0.05
(0.04
)
Adjusted diluted earnings per common
share
$
0.29
$
0.16
$
1.03
$
0.56
RESOURCES CONNECTION,
INC.
SELECTED BALANCE SHEET, CASH
FLOW AND OTHER INFORMATION
(Amounts in thousands, except
consultant headcount and average rates)
May 25,
May 26,
SELECTED BALANCE SHEET INFORMATION:
2019
2018
(Unaudited)
Cash and cash equivalents
$
43,045
$
56,470
Accounts receivable, less allowances
$
133,304
$
130,452
Total assets
$
428,370
$
432,674
Current liabilities
$
91,416
$
94,524
Total stockholders’ equity
$
282,396
$
268,825
For the Years Ended
May 25,
May 26,
SELECTED CASH FLOW INFORMATION:
2019
2018
(Unaudited)
Cash flow -- operating activities
$
43,621
$
15,370
Cash flow -- investing activities
$
(12,877
)
$
(25,666
)
Cash flow -- financing activities
$
(43,601
)
$
3,474
May 25,
May 26,
SELECTED OTHER INFORMATION:
2019
2018
Consultant headcount, end of period
2,965
3,247
Average bill rate, fourth quarter
$124
$124
Average pay rate, fourth quarter
$62
$64
Average bill rate (constant currency-Q4
18), fourth quarter
$126
--
Average pay rate (constant currency-Q4
18), fourth quarter
$63
--
Common shares outstanding, end of
period
31,588
31,614
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190718005741/en/
Media Contact: Michael Sitrick (US+) 1-310-788-2850
mike_sitrick@sitrick.com
Analyst Contact: Herb Mueller, Chief Financial Officer
(US+) 1-714-430-6500 herb.mueller@rgp.com
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