Resources Connection, Inc. Q4 FY2025 earnings call

• Kate welcomed everyone to the Q4 earnings call, highlighted Q4 results and momentum, shared insights from CFO research on priorities like strategic growth, operational efficiency, etc. • Bhadresh noted Q4 results, pipeline creation, and provided segment updates: Consulting segment had mixed results but positive indicators; On-Demand showed stabilization; International had revenue growth; Outsourced Services had revenue growth. • Mentioned new Board members Jeff Fox and Filip Gydé aligning with strategic priorities.

Consulting segment revenue was $51 million, a decline of 14% from prior year. Fourth quarter segment adjusted EBITDA was $8.3 million or a 16% margin compared to $10.2 million or an 18% margin in the prior year quarter. On-Demand segment revenue was $53 million, a decline of 16% versus prior year. Segment adjusted EBITDA was $6.4 million or a margin of 12% compared to $7.1 million, also a 12% margin in the prior year quarter. Europe and Asia Pac segment revenue was $21.3 million, flat to the prior year quarter. Segment adjusted EBITDA was $1.9 million or a 9% margin, both up from $0.5 million and a 3% margin in the prior year. Outsourced Services segment revenue was $11.3 million, up 4% compared to the prior year. Segment adjusted EBITDA was $3.1 million or a 28% margin, up from $2.7 million or 27% margin.

• First quarter outlook calls for revenue of $115 million to $120 million. • Gross margin expected to be in the range of 36% to 37%. • First quarter run rate SG&A expense expected to be in the range of $46 million to $48 million. • Non-run rate and noncash expenses around $3 million to $4 million.

• Macro-economic uncertainty and regional challenges persist. • Pipeline contracted during Q4 as focus on funnel discipline increased. • Sales cycle remains elongated with some deals being put on hold due to client discretion.

Q: Congrats on the quarter. Wondered about gross margin beat and what drove it.

A: Jen said main driver was improvement in average bill rate due to larger/higher value deals; Kate added management's conversations with clients about quality of people; Jen also mentioned favorable medical claims.

Q: Asked about cross-selling.

A: Bhadresh said seeing uplift in existing clients where they've served with On-Demand Talent, and focusing on cross-selling into accounts.

Q: Asked about Q1 guide, cross-selling, pipeline shrinkage.

A: Jen discussed Q1 revenue guide; Bhadresh talked about pipeline creation focus, funnel management, and abandoned deals; Bhadresh also spoke about hyperfocus on pipeline generation.

Q: Asked to bridge dollar revenue guidance for 1Q to organic constant currency growth rate.

A: Jen said Q1 guide at top end is a 14% decline from Q1 last year on same-day basis, mostly organic with no significant currency impact.