RGP

Market Conditions

• Global market conditions remained broadly consistent with the third quarter of fiscal 2026, with early signs of stabilization that support strategic investment execution
• North American revenue was flat quarter-over-quarter on a GAAP basis, with a modest decline after adjusting for business days and currency fluctuations, in line with management expectations
• Europe and Asia-Pacific revenue was softer than expected, driven entirely by project choppiness at large European clients (management notes this weakness is non-systemic, not tied to broader economic/geopolitical issues); Asia-Pacific performance was in line with both outlook and prior quarter results

Customer Insights

• RGP recently completed a voice-of-customer survey of 500 current and past customer decision makers to anchor strategy in data
• Early survey results show RGP outperforms smaller execution/staffing competitors head-to-head, but still lags larger traditional consultancies
• Top reasons clients choose RGP are trusted partnership, fast execution, flexible delivery, and high-quality people/services; 95% of customers intend to maintain or increase their engagement with RGP, for a strong net promoter score

Strategic Priorities & Operational Progress

• RGP maintains four core strategic priorities: (1) refocus on-demand talent segment offerings, (2) scale the consulting segment, (3) pursue AI as a client service and internal productivity tool, (4) streamline operations and align cost structure with current revenue
• RGP completed the initially planned level of investment for fiscal 2027 during the fourth quarter, including adding 7 new sales professionals and additional senior consulting staff; investments from the past two quarters are expected to drive growth as they ramp up
• AI strategy is practical and disciplined: the firm is upskilling internal teams to improve productivity and delivery, while building AI-enabled client solutions and partnerships focused on combining AI with deep functional expertise and strong governance for responsible, outcome-driven adoption
• Cost reduction work over the past fiscal year drove a 12% year-over-year improvement in run rate SG&A; additional small cost reduction initiatives are planned for fiscal 2027, with focus shifting to market and operational simplification via process and technology changes

Financial & Balance Sheet Highlights

• Consolidated fourth quarter results were in line with outlook, with gross margin beating the high end of guidance; adjusted EBITDA was negative $0.6 million
• Gross margin for the quarter was 37.6%, down from 40.2% year-over-year, driven by lower indirect cost leverage and lower consultant utilization
• Run rate SG&A was $40.5 million, with $14.1 million in non-run rate expenses primarily tied to the Citrix divestiture and COO transition costs
• The firm ended the quarter with $82.4 million in cash and no outstanding debt; a new more flexible revolving credit facility was recently secured, with $79.2 million remaining available under the existing share repurchase program and a continuing quarterly dividend program

• First quarter of fiscal 2027 revenue is expected to range between $97 million and $102 million, relatively consistent with fourth quarter levels after adjusting for normal summer seasonality and the Citrix divestiture
• Gross margin for the first quarter of fiscal 2027 is expected to be between 37% and 38%, in line with typical seasonal dynamics
• Run rate SG&A expense for the first quarter is projected to range from $41 million to $43 million, reflecting targeted reinvestments in the business
• Non-run rate and non-cash expenses for the first quarter are expected to total $2 million to $3 million, primarily consisting of non-cash stock compensation and amortization of system transformation costs
• Non-run rate one-time charges for full fiscal 2027 are expected to remain at normalized levels, consistent with the first quarter guidance range, after larger charges in fiscal 2026
• Additional incremental cost reductions for fiscal 2027 are expected to be less significant than those completed in fiscal 2026
• Management expects investments from fiscal 2026 to begin driving revenue growth in the second half of fiscal 2027

1. On-demand talent: Revenue of $40.4 million, representing an 18% year-over-year decline. Segment-adjusted EBITDA was $3.1 million, with a 7.6% margin, down from $6.4 million and a 12.1% margin in the prior year quarter. This segment contributed 38.1% of total consolidated revenue. 2. Consulting: Revenue of $36.6 million, a 23% year-over-year decline. Segment-adjusted EBITDA was $2.3 million, with a 6.3% margin, down from $8.3 million and a 16.3% margin in the prior year quarter. This segment contributed 34.5% of total consolidated revenue. 3. Europe and Asia Pacific: Revenue of $17.1 million, a 14% year-over-year decline. Segment-adjusted EBITDA was $0.4 million, with a 2.1% margin, down from $1.9 million and a 9% margin in the prior year quarter. This segment contributed 16.1% of total consolidated revenue. 4. Outsource services: Revenue of $10.3 million, a 1.6% year-over-year decline. Segment-adjusted EBITDA was $2.1 million, with a 20.2% margin, down from $3.1 million and a 27.8% margin in the prior year quarter. This segment contributed 9.7% of total consolidated revenue. Overall consolidated revenue for the quarter was $106.1 million.

• Longer sales cycles for consulting engagements relative to historical on-demand service cycles have pressured near-term revenue and utilization, pulling down segment margins
• Current consulting utilization of ~61% is well below the target 75% to 80%+ range, suppressing gross and EBITDA margins
• European revenue remains volatile due to project timing issues at a small number of large clients
• Forward-looking projections of investment payoff and market stabilization may differ materially from actual results, per standard forward-looking statement disclosures; risk factors are detailed in the company's annual Form 10-K filings

Q: The analyst asked management to share progress on RGP's four core strategic priorities, and what percentage complete each is for fiscal 2027. / A: Management stated that the initially planned investments for all four priorities for fiscal 2027 are mostly complete, with no additional large planned investments for the year. While improvement will continue ongoing, payoff from the completed investments is expected to materialize in the second half of fiscal 2027, as new hires and initiatives require a ramp-up period. Opportunistic smaller investments may still occur as needed.

Q: The analyst asked for more detail on additional planned 2027 cost reductions, including whether additional one-time charges will be required. / A: Management confirmed there will be small incremental charges for additional cost takeout, primarily related to remaining occupancy cost reductions. The total size of these charges and cost reductions will be much smaller than what was completed in fiscal 2026. Most remaining efficiency gains will come from process and AI-enabled improvements that take longer to implement, and full-year 2027 non-run rate charges will stay at normalized levels consistent with first quarter guidance.

Q: The analyst asked how long it will take for the seven newly hired sales professionals to become fully productive. / A: Management noted that new sales team members typically take six to nine months to start contributing consistently to monthly targets, and approximately 12 months to reach their full annual quota. New regional sales leadership hires in the central U.S. and northeast are ramping up quickly and already making positive impact.

Q: The analyst asked how consulting pipeline conversion timelines have changed recently, and what long-term margin can be expected once revenue normalizes. / A: Management confirmed that consulting sales cycles have lengthened over the past several quarters as RGP focuses on scaling larger consulting deals, and cycles have not gotten longer further in the most recent period. Normalized adjusted EBITDA margin of 6% to 8% is expected once annual revenue exceeds $500 million.