Resources Connection Reports 10.7% Revenue Decline and $68.7 Million Net Loss in Q2 Fiscal 2025

Resources Connection, Inc. reported a significant decline in financial performance for the second quarter of fiscal 2025, ending November 23, 2024. The company recorded revenue of $145.6 million, a decrease of 10.7% from $163.1 million in the same quarter of the previous year. For the first six months of the fiscal year, revenue fell 15.2% to $282.6 million compared to $333.3 million in the prior year. The decline in revenue was attributed to reduced client spending amid ongoing economic uncertainty, with billable hours decreasing by 11.2% in the quarter and 13.2% over the six-month period. The average bill rate saw a slight increase of 0.8% in the quarter but a decrease of 1.6% over six months, reflecting a shift in revenue mix towards regions with lower rates.

The company's profitability was severely impacted by a goodwill impairment charge of $79.5 million, primarily related to its On-Demand Talent and Europe & Asia Pacific segments. This led to a net loss of $68.7 million for the quarter, compared to a net income of $4.9 million in the same quarter last year. For the six months, the net loss totaled $74.4 million, contrasting with a net income of $8.0 million in the prior year. The company's selling, general, and administrative expenses decreased to $51.3 million from $53.0 million, largely due to reduced employee compensation and termination benefits.

In terms of strategic developments, Resources Connection completed the acquisition of Reference Point LLC on July 1, 2024, for $23 million. This acquisition is expected to enhance the company's consulting capabilities, particularly in the financial services sector. The company has also restructured its operations into five reportable segments to better align with its business model, which includes On-Demand Talent, Consulting, Europe & Asia Pacific, Outsourced Services, and Sitrick, a crisis communications firm.

Operationally, the company reported a decrease in the number of consultants on assignment, which fell to 2,639 from 3,167 year-over-year. The company’s cash and cash equivalents stood at $78.2 million as of November 23, 2024, down from $108.9 million at the end of the previous fiscal year. Resources Connection has also initiated a global reduction in its management and administrative workforce to enhance operational efficiency, which is expected to incur charges of $2.5 million to $3.0 million in the third quarter of fiscal 2025.

Looking ahead, Resources Connection anticipates continued challenges due to uncertain macroeconomic conditions, including fluctuating interest rates and softening labor markets. The company aims to focus on evolving its business segments, enhancing digital capabilities, and launching a new brand identity to better serve its clients. Despite the current difficulties, the company believes that its strategic initiatives will position it for future growth as market conditions improve.