Resources Connection Inc. ((RGP)) has held its Q4 earnings call. Read on for the main highlights of the call.
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In a recent earnings call, Resources Connection Inc. (RGP) showcased a mixed sentiment reflecting both achievements and challenges. The company reported robust revenue and margin performance in the fourth quarter, primarily driven by growth in Europe, Asia, and the Outsourced Services segment. However, significant declines in the Consulting and On-Demand segments, coupled with a noncash impairment charge and a weaker outlook for Q1 2026, underscore ongoing challenges.
Strong Q4 Revenue and Margin Performance
RGP reported impressive financial results for the fourth quarter, achieving revenue of $139.3 million and a gross margin of 40.2%. These figures exceeded the high end of their outlook range, attributed to improved pricing strategies and cost efficiency measures.
Growth in Europe and Asia
The company experienced substantial growth in its European and Asian markets, reaching the highest revenue levels of the fiscal year. Europe, in particular, saw an 8% quarter-over-quarter constant currency growth, with a notable 7% increase in bill rates.
Outsourced Services Segment Growth
The Outsourced Services segment demonstrated resilience with a 4% year-over-year growth and a 3.5% sequential increase over the previous quarter. This growth was fueled by new engagements with AI start-ups and scale-ups.
Improved Average Bill Rates
RGP’s enterprise-wide average bill rate rose to $125 from $120 a year ago. The Consulting segment saw a 13% increase in bill rates, while Europe and Asia Pacific experienced a 7% rise.
New Board Member Appointments
The company strengthened its leadership by appointing two new board members, Jeff Fox and Filip Gydé. Their expertise in IT services is expected to align with RGP’s strategic priorities and provide valuable investor insights.
Consulting Segment Revenue Decline
Despite an increase in average bill rates, the Consulting segment faced a revenue decline of 14% from the previous year, highlighting challenges in this area.
On-Demand Segment Revenue Decline
The On-Demand segment also experienced a revenue decline of 16% compared to the prior year, attributed to macroeconomic uncertainties impacting demand.
Noncash Goodwill Impairment Charge
RGP recorded a significant noncash goodwill impairment charge of $69 million in the Consulting segment, reflecting business performance issues and a reduction in market capitalization.
Q1 2026 Revenue Outlook Decline
Looking ahead, RGP’s revenue outlook for Q1 2026 indicates a 14% decline from the same period last year, influenced by project delays and ongoing macroeconomic uncertainties.
Forward-Looking Guidance
During the earnings call, RGP outlined its strategic focus and anticipated growth despite prevailing economic challenges. The company aims to leverage AI for operational efficiency, enhance cross-selling across segments, and expand strategic accounts. For Q1 of fiscal year 2026, RGP expects revenue between $115 million and $120 million, with a gross margin ranging from 36% to 37%.
In summary, while Resources Connection Inc. reported strong fourth-quarter results, the company faces challenges in its Consulting and On-Demand segments. The forward-looking guidance suggests a cautious approach, with strategic initiatives aimed at navigating macroeconomic uncertainties and leveraging growth opportunities in Europe, Asia, and the Outsourced Services segment.