Resources Connection revenue falls 18.4% as client caution deepens

Resources Connection, Inc. (Nasdaq: RGP) reported first-quarter fiscal 2027 revenue of $98.1 million, a decline from $120.2 million in the prior-year period, with the drop driven by lower project volume and ongoing caution in client decision-making. The Dallas-based professional services firm posted a net loss of $8.0 million for the quarter ended August 29, 2026, compared to a net loss of $2.4 million in the first quarter of fiscal 2026.

On a same-day constant currency basis, revenue decreased by 18.4% year over year. Billable hours fell 13.2% and the average bill rate dropped 5.8% year over year, or 5.6% on a constant currency basis. The company attributed the reduction in billable hours to longer client decision-making timelines, delayed project starts, and lower project volume in its Consulting segment. Demand in the On-Demand Talent segment remained below prior-year levels but showed signs of stabilization.

Gross margin for the quarter was 37.4%, down from 39.5% in the previous year. The variance was primarily due to lower utilization of salaried consultants, while the pay-to-bill ratio declined by 70 basis points. Despite the top-line pressure, selling, general, and administrative (SG&A) expenses improved to $43.1 million from $47.9 million a year earlier. Adjusted SG&A expenses, a non-GAAP measure, decreased to $40.3 million from $44.5 million.

The $4.8 million year-over-year improvement in GAAP SG&A expenses was driven by several factors, including a $2.5 million reduction in employee compensation and benefits costs following fiscal 2026 workforce reductions and a $0.9 million decrease in stock-based compensation due to executive separations. A $1.2 million reduction in the use of external and internal consultants and a $0.5 million reduction in facilities costs from office exits also contributed to the savings. These improvements were partially offset by a $0.6 million increase in business meeting expenses and a $0.4 million rise in restructuring costs.

Adjusted EBITDA swung to a loss of $(3.6) million, or a margin of (3.7%), compared to a profit of $3.1 million in the prior-year quarter. Diluted loss per common share was $0.23, up from $0.07.

Segment performance varied significantly across the company’s business units. The On-Demand Talent segment generated $38.6 million in revenue, down 13.2% year over year, as billable hours decreased by 16.4%. This decline was partially offset by a 4.1% increase in the average bill rate, which the company attributed to continued pricing discipline. The Consulting segment saw revenue drop 25.8% to $32.4 million, driven by a 27.1% decrease in billable hours as clients remained cautious about committing to new projects.

Revenue in the Europe & Asia Pacific segment fell 13.9% to $17.1 million, primarily due to a 12.2% decrease in the average bill rate resulting from a mix shift to lower-cost markets in the Asia Pacific region. The Outsourced Services segment remained flat year over year, with billable hours increasing 4.9% and the average bill rate declining 1.0%. The All Other segment reflected the sale of Sitrick Group, LLC during the fourth quarter of fiscal 2026.

Roger Carlile, President and Chief Executive Officer of RGP, stated that first-quarter results were within the revenue and gross margin ranges communicated in July, with adjusted SG&A expense better than outlooks. He noted that while revenue and profitability remained below potential, the company is addressing these issues by strengthening sales execution, improving Consulting project staffing, and reducing its cost structure.