# Resources Connection, Inc.: Form 10-Q for the period ended Feb 24, 2024

- Company: [Resources Connection, Inc.](/companies/rgp.md) (CIK 1084765)
- Form: 10-Q
- Filed: 2024-04-04
- Accepted by EDGAR: Apr 4, 2024, 17:17 ET
- Period: 2024-02-24
- Accession: 0001084765-24-000052
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1084765/000108476524000052/rgp-20240224x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1084765/000108476524000052/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-02-24.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-11-26 to 2024-02-24 | $151.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-05-28 to 2024-02-24 | $484.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-11-26 to 2024-02-24 | $95.3m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-05-28 to 2024-02-24 | $298.1m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-11-26 to 2024-02-24 | $56.0m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-05-28 to 2024-02-24 | $186.5m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-11-26 to 2024-02-24 | $49.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-05-28 to 2024-02-24 | $162.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-11-26 to 2024-02-24 | $4.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-05-28 to 2024-02-24 | $17.5m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-11-26 to 2024-02-24 | $1.9m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-05-28 to 2024-02-24 | $7.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-11-26 to 2024-02-24 | $2.5m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-05-28 to 2024-02-24 | $10.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-11-26 to 2024-02-24 | $0.08 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-05-28 to 2024-02-24 | $0.31 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-11-26 to 2024-02-24 | $0.08 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-05-28 to 2024-02-24 | $0.32 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-11-26 to 2024-02-24 | 33,759,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-05-28 to 2024-02-24 | 33,906,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-05-28 to 2024-02-24 | $18.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-05-28 to 2024-02-24 | $1.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2023-05-28 to 2024-02-24 | $14.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2023-05-28 to 2024-02-24 | $5.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-02-24 | $113.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-02-24 | $251.3m | us-gaap:AssetsCurrent |
| Total assets | at 2024-02-24 | $523.2m | us-gaap:Assets |
| Current liabilities | at 2024-02-24 | $84.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-02-24 | $108.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-02-24 | $414.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 69,859 characters.

The following discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the three and nine months ended February 24, 2024 should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes and with our Annual Report on Form 10-K for the year ended May 27, 2023 filed with the Securities and Exchange Commission (“SEC”). This discussion and analysis contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to expectations concerning matters that are not historical facts. For example, statements discussing, among other things, expected costs and liabilities, business strategies, growth strategies and initiatives, acquisition strategies, future revenues and future performance, are forward-looking statements. Such forward-looking statements may be identified by words such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “remain,” “should” or “will” or the negative of these terms or other comparable terminology. In this Quarterly Report on Form 10-Q, such statements include statements regarding our growth, operational and strategic plans.

These statements and all phases of our operations are subject to known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievements and those of our industry to differ materially from those expressed or implied by these forward-looking statements. Risks and uncertainties include, but are not limited to, the following: risks related to an economic downturn or deterioration of general macroeconomic conditions, the highly competitive nature of the market for professional services, risks related to the loss of a significant number of our consultants, or an inability to attract and retain new consultants, the possible impact on our business from the loss of the services of one or more key members of our senior management, risks related to potential significant increases in wages or payroll-related costs, our ability to secure new projects from clients, our ability to achieve or maintain a suitable pay/bill ratio, our ability to compete effectively in the competitive bidding process, risks related to unfavorable provisions in our contracts which may permit our clients to, among other things, terminate the contracts partially or completely at any time prior to completion, potential adverse effects to our and our clients’ liquidity and financial performances from bank failures or other events affecting financial institutions, risks arising from epidemic diseases or pandemics, our ability to realize the level of benefit that we expect from our restructuring initiatives, risks that our recent digital expansion and technology transformation efforts may not be successful, our ability to build an efficient support structure as our business continues to grow and transform, our ability to grow our business, manage our growth or sustain our current business, our ability to serve clients internationally, additional operational challenges from our international activities including due to social, political, regulatory, legal and economic risks in the countries and regions in which we operate, possible disruption of our business from our past and future acquisitions, the possibility that our recent rebranding efforts may not be successful, our potential inability to adequately protect our intellectual property rights, risks that our computer hardware and software and telecommunications systems are damaged, breached or interrupted, risks related to the failure to comply with data privacy laws and regulations and the adverse effect it may have on our reputation, results of operations or financial condition, our ability to comply with governmental, regulatory and legal requirements and company policies, the possible legal liability for damages resulting from the performance of projects by our consultants or for our clients’ mistreatment of our personnel, risks arising from changes in applicable tax laws or adverse results in tax audits or interpretations, the possible adverse effect on our business model from the reclassification of our independent contractors by foreign tax and regulatory authorities, the possible difficulty for a third party to acquire us and resulting depression of our stock price, the operating and financial restrictions from our credit facility, risks related to the variable rate of interest in our credit facility, the possibility that we are unable to or elect not to pay our quarterly dividend payment, and other factors and uncertainties as are identified in our most recent Annual Report on Form 10-K for the year ended May 27, 2023 and our other public filings made with the SEC (File No. 0-32113). Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business or operating results. Readers are cautioned not to place undue reliance on the forward-looking statements included herein, which speak only as of the date of this filing. We do not intend, and undertake no obligation, to update the forward-looking statements in this filing to reflect events or circumstances after the date of this filing or to reflect the occurrence of unanticipated events, unless required by law to do so. References in this filing to “Resources Global Professionals,” the “Company,” “we,” “us,” and “our” refer to Resources Connection, Inc. and its subsidiaries.

### Overview

Resources Global Professionals (“RGP”) is a global consulting firm based in Irvine, CA (with offices worldwide) focused on project execution services that power clients’ operational needs and change initiatives utilizing on-demand, expert and diverse talent. As a next-generation human capital partner for our clients, we specialize in co-delivery of enterprise initiatives typically precipitated by business transformation, strategic transactions or regulatory change. Our engagements are designed to leverage human connection and collaboration to deliver practical solutions and more impactful results that power our clients’, consultants’ and partners’ success.

We attract top-caliber professionals with in-demand skill sets who seek a workplace environment characterized by choice and control, collaboration and human connection. The trends in today’s marketplace favor flexibility and agility as businesses confront transformation pressures and skilled labor shortages even in the face of macroeconomic contraction. Our client engagement and talent delivery model offers speed and agility, strongly positioning us to help our clients transform their businesses and workplaces, especially at a time where cost reduction initiatives drive an enhanced reliance on a flexible workforce to execute transformational projects.

We are laser-focused on driving long-term growth in our business by seizing favorable macro shifts in workforce strategies and preferences, building an efficient and scalable operating model, and maintaining a distinctive culture and approach to professional services. Our enterprise initiatives in recent years include refining the operating model for sales, talent and delivery to be more client-centric, cultivating a more robust performance culture by aligning incentives to business performance, building and commercializing our digital engagement platform, enhancing our consulting capabilities in digital transformation to align with market demand, improving operating leverage through pricing, operating efficiency and cost reduction, and driving growth through strategic acquisitions. We believe our focus and execution on these initiatives will serve as the foundation for growth ahead. See Part 1, Item 1 “Business” of our Fiscal Year 2023 Form 10-K for further discussions about our business and operations.

### Fiscal 2024 Strategic Focus Areas

Building upon the foundation we established through fiscal 2023, we will continue to execute the following enterprise growth drivers in fiscal 2024:

Transform digitally;

Amplify brand voice and clarify solution offerings;

Evolve operating model;

Migrate to value-based pricing; and

Pursue targeted mergers and acquisitions.

***Transform digitally –*** Our first area of focus remains embracing continued digital transformation to improve operational efficiency, scale business growth, transform stakeholder experience and create long-term sustainability and stockholder value.

In fiscal 2022, we launched a multi-year global technology transformation project which includes replacing our core financial and talent software systems and optimizing our existing systems including Salesforce and Workday Human Capital Management. We have made significant progress to date and launched a new talent management system in North America in February 2024. We believe our investment in this important modernization initiative will enhance the experience for all of our core constituents and drive improved finance metrics through automation, better data analytics and faster global collaboration. Seamless global execution capability will enhance our competitive advantage as a preferred partner for global transformation projects.

We believe the use of technology platforms to match clients and talent is the future of professional staffing. HUGO by RGPTM (“HUGO”), our digital engagement platform, allows clients and talent in the professional staffing space to connect, engage and even transact directly. We completed our pilot in three primary markets – New York/New Jersey, Southern California and Texas – and received positive and encouraging feedback from clients and talent alike. We are now ready to pursue a more aggressive digital marketing plan to accelerate commercialization and achieve broader adoption. With the accounting profession losing talent in unprecedented numbers, we believe HUGO offers these professionals a viable alternative to the traditional accounting firm career path – one founded on flexibility, choice and career-control. Over time, we expect to be able to drive volume through the HUGO platform by attracting more small- and medium-sized businesses looking for interim support and by serving a larger percentage of our current interim business, which we believe will not only drive top-line growth but also enhance profitability.

***Amplify brand voice and clarify solution offerings –*** Our second focus area for this fiscal year is a sustained effort to enhance and amplify our brand in the marketplace. We will be driving toward a refreshed view of our business, serving clients in three areas: (1) the core is our white-glove on-demand talent platform of deep functional experts that execute mission-critical projects for our clients. We empower expert, diverse professionals with ultimate career control and offer them access to opportunities to work with top enterprise brands. Our on-demand talent business also includes HUGO, which focuses on offering clients direct access to earlier career Accounting and Finance professionals through a digital self-service model; (2) our consulting business today consists largely of Veracity, our end-to-end digital transformation firm, and Sitrick and Company, a top strategic communications firm. We are actively working to grow our capabilities in the consulting arena both organically and through targeted M&A, with a special focus on digital transformation, financial advisory and operational excellence; (3) Countsy is our managed services business, offering finance, accounting, and HR solutions to venture-backed start-up clients through a unique combination of on-demand fractional leadership and a streamlined technology platform.

Our investment in the RGP brand notably includes development of fresh thought leadership content based on RGP’s own market research studies. Companies today are in a constant state of transformation – serving as a driving force for dynamic innovation and rethinking of business models. Foundationally, this includes a shift in the composition of the workforce. This year, we conducted an in-depth global research study which established that companies are increasing by double-digits their engagement with interim, on-demand and agile professional talent to deliver better outcomes with greater efficiency. This fall, we released a new research study that closely examined this paradigm shift in workforce strategy. What we are seeing is organizations increasingly and intentionally embracing a hybrid approach that includes a mix of internal and external talent – what we are terming “The Dynamic Workforce.” In January, we conducted a pulse survey of 200+ decision makers to better understand their current investment priorities, organizational skill gaps and outlook for the year ahead. We learned that more than 80% of the respondents said they plan to increase investment in workforce development in 2024. Over half said their organization would increase workforce investment in balancing full-time headcount with outside talent should a lower interest rate environment unlock new capital in 2024. This research has informed our thought leadership content and helped drive awareness of the RGP brand through media coverage in national outlets and key industry trade publications in the second half of our fiscal year.

***Evolve operating model –*** The third area of focus for fiscal 2024 is to evolve our operating model to optimally organize the company in view of the operational efficiencies we are gaining through our global technology transformation initiative and with a view to align resources in the right way to support our strategic vision. Operating model evolution will also include better definition and structure of our offerings to clearly articulate our value proposition, differentiators versus competition, and client segment focus.

***Migrate to value-based pricing –*** Fourth, we will continue to evolve and enhance our pricing strategy by adopting a value-based approach. As we deepen our client relationships and enhance our clients’ understanding of our ability to add value through our services, we anticipate further increasing bill rates for our services to capture appropriately the value of the talent and solutions delivered. Key focus areas include: creating more centralized pricing governance, strategy and approach; conducting a deep pricing analysis to identify and confront areas that need improvement; and instituting new pricing training for all sales and go-to-market team members. We believe there is ample opportunity to drive further growth in both our topline revenue and profitability through pricing.

***Pursue targeted mergers and acquisitions –*** Lastly, we will seek to accelerate growth through strategic mergers and acquisitions (“M&A”) that drive additional scale or expand and complement our existing core capabilities, as demonstrated through our acquisition of CloudGo Pte Ltd. and its subsidiaries (collectively, “CloudGo”) and pending acquisition of Reference Point LLC (“Reference Point”). Our M&A strategy is focused on expanding our consulting capabilities, with a special interest in financial advisory firms as well as digital transformation firms that serve to add scale and/or accelerate growth for our Veracity business. We believe that we are well positioned to grow and scale a boutique consulting firm through access to both our robust enterprise client base and our expansive agile talent pool.

In November 2023, we acquired CloudGo. Headquartered in Singapore, CloudGo is a digital transformation firm and a fast growing Elite ServiceNow Partner. We believe that CloudGo’s strategic capabilities and regional positioning will play a key role in our growth plans for our digital consulting business. CloudGo has been integrated with Veracity’s digital business and we believe that it will continue to accelerate the expansion of our digital presence across the Asia Pacific region. See Note 4 – *Acquisitions and Dispositions* in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.

In March 2024, we entered into a Membership Interest Purchase Agreement (the “Reference Point MIPA”) with Reference Point to acquire 100% of the membership interests of Reference Point. Reference Point is a strategy, management, and technology consulting firm serving the financial services sector and is headquartered in New York. The acquisition is expected to close prior to the end of RGP’s current fiscal year and is subject to customary closing conditions. See Note 15 – *Subsequent Event* in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.

### Market Trends and Uncertainties

On a macro level, uncertain macroeconomic conditions (including inflation, volatility in energy and commodity prices, the impact of the conflicts in both Eastern Europe and the Middle East, increasing diplomatic and trade friction between the United States (“U.S.”) and China, supply chain issues, and labor shortages) as well as increases in interest rates and fluctuations in currency exchange rates have created significant uncertainty in the global economy, volatility in the capital markets and recessionary pressures. We expect these conditions will continue through the rest of fiscal 2024 and beyond. While we are not able to fully predict the potential impact, we continue to see more caution in spending within our client base. If these conditions persist and a prolonged economic downturn or recession develops, it could result in further decline in billable hours and negatively impact our bill rates which would adversely affect our financial results and operating cash flows.

### Critical Accounting Policies and Estimates

The following discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are discussed in Note 2 – *Summary of Significant Accounting Policies* in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K (“Fiscal Year 2023 Form 10-K”) filed with the SEC on July 25, 2023 (File No. 0-32113), and in Note 2 – *Summary of Significant Accounting Policies* in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

There have been no material changes in our critical accounting policies, or in the estimates and assumptions underlying those policies, from those described under the heading “Critical Accounting Policies and Estimates” in Item 7 of Part II of our Fiscal Year 2023 Form 10-K.

### Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures to assess our financial and operating performance that are not defined by or calculated in accordance with GAAP. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the Consolidated Statements of Operations; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable GAAP measure so calculated and presented.

Our primary non-GAAP financial measures are listed below and reflect how we evaluate our operating results.

Same-day constant currency revenue is adjusted for the following items:

- Currency impact. In order to remove the impact of fluctuations in foreign currency exchange rates, we calculate same-day constant currency revenue, which represents the outcome that would have resulted had exchange rates in the current period been the same as those in effect in the comparable prior period.
- Business days impact. In order to remove the fluctuations caused by comparable periods having a different number of business days, we calculate same-day revenue as current period revenue (adjusted for currency impact) divided by the number of business days in the current period, multiplied by the number of business days in the comparable prior period. The number of business days in each respective period is provided in the “Number of Business Days” section in the table below.

EBITDA is calculated as net income before amortization expense, depreciation expense, interest and income taxes.

Adjusted EBITDA is calculated as EBITDA plus or minus stock-based compensation expense, technology transformation costs, goodwill impairment, one-time acquisition costs and restructuring costs. Adjusted EBITDA at the segment level excludes certain shared corporate administrative costs that are not practical to allocate.

Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by revenue.

### Same-Day Constant Currency Revenue

Same-day constant currency revenue assists management in evaluating revenue trends on a more comparable and consistent basis. We believe this measure also provides more clarity to our investors in evaluating our core operating performance and facilitates a comparison of such performance from period to period. The following table presents a reconciliation of same-day constant currency revenue, a non-GAAP financial measure, to revenue as reported in the Consolidated Statements of Operations, the most directly comparable GAAP financial measure, by geography (in thousands, except number of business days).

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| Revenue by Geography North America | Three Months Ended February 24, 2024 | February 25, 2023 | Nine Months Ended February 24, 2024 | February 25, 2023 |
| --- | ---: | ---: | ---: | ---: |
| As reported (GAAP) | $129,749 | $163,790 | $417,372 | $519,994 |
| Currency impact | (538) |  | (1,794) |  |
| Business days impact | - |  | - |  |
| Same-day constant currency revenue | $129,211 |  | $415,578 |  |
| **Europe** |  |  |  |  |
| As reported (GAAP) | $8,668 | $10,176 | $29,865 | $31,752 |
| Currency impact | (301) |  | (1,581) |  |
| Business days impact | (481) |  | (535) |  |
| Same-day constant currency revenue | $7,886 |  | $27,749 |  |
| **Asia Pacific** |  |  |  |  |
| As reported (GAAP) | $12,890 | $12,811 | $37,366 | $39,448 |
| Currency impact | 533 |  | 1,181 |  |
| Business days impact | (383) |  | (571) |  |
| Same-day constant currency revenue | $13,040 |  | $37,976 |  |
| **Total Consolidated** |  |  |  |  |
| As reported (GAAP) | $151,307 | $186,777 | $484,603 | $591,194 |
| Currency impact | (306) |  | (2,194) |  |
| Business days impact | (864) |  | (1,106) |  |
| Same-day constant currency revenue | $150,137 |  | $481,303 |  |
| **Number of Business Days** |  |  |  |  |
| North America (1) | 61 | 61 | 186 | 186 |
| Europe (2) | 62 | 59 | 191 | 187 |
| Asia Pacific (2) | 61 | 59 | 186 | 183 |

#### (1) This represents the number of business days in the U.S.

*(2) The business days in international regions represents the weighted average number of business days.*

### EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin assist management in assessing our core operating performance. We also believe these measures provide investors with a useful perspective on underlying business results and trends and facilitate a comparison of our performance from period to period. The following table presents EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated and includes a reconciliation of such measures to net income and net income margin, the most directly comparable GAAP financial measures (in thousands, except percentages):

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|  | Three Months Ended February 24, 2024 | % of Revenue | February 25, 2023 | % of Revenue | Nine Months Ended February 24, 2024 | % of Revenue | February 25, 2023 | % of Revenue |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net income | $2,550 | 1.7% | $7,019 | 3.8% | $10,562 | 2.2% | $42,591 | 7.2% |
| Adjustments: |  |  |  |  |  |  |  |  |
| Amortization expense | 1,413 | 0.9 | 1,275 | 0.7 | 4,048 | 0.8 | 3,743 | 0.6 |
| Depreciation expense | 745 | 0.5 | 885 | 0.4 | 2,432 | 0.5 | 2,652 | 0.4 |
| Interest (income) expense, net | (225) | (0.2) | 147 | 0.1 | (830) | (0.2) | 662 | 0.1 |
| Income tax expense (benefit) | 1,937 | 1.3 | (2) | - | 7,765 | 1.6 | 12,867 | 2.3 |
| EBITDA | 6,420 | 4.2 | 9,324 | 5.0 | 23,977 | 4.9 | 62,515 | 10.6 |
| Stock-based compensation expense | 1,181 | 0.8 | 2,609 | 1.4 | 4,249 | 0.9 | 7,375 | 1.2 |
| Technology transformation costs (1) | 1,386 | 0.9 | 1,737 | 0.9 | 4,987 | 1.0 | 4,476 | 0.8 |
| Goodwill impairment (2) | - | - | 2,955 | 1.6 | - | - | 2,955 | 0.5 |
| Acquisition costs (3) | 156 | 0.1 | - | - | 1,282 | 0.3 | - | - |
| Restructuring costs (4) | 1,643 | 1.1 | (9) | - | 3,898 | 0.8 | (364) | (0.1) |
| Adjusted EBITDA | $10,786 | 7.1% | $16,616 | 8.9% | $38,393 | 7.9% | $76,957 | 13.0% |

*(1) Technology transformation costs represent costs included in net income related to the Company’s initiative to upgrade its technology platform globally, including a cloud-based enterprise resource planning system and talent acquisition and management systems. Such costs primarily include hosting and certain other software licensing costs, third-party consulting fees and costs associated with dedicated internal resources that are not capitalized.*

*(2) The effect of the goodwill impairment charge recognized during the three and nine months ended February 25, 2023 was related to the Sitrick operating segment.*

*(3) Acquisition costs primarily represent one-time costs included in net income related to the Company’s acquisitions, which include fees paid to the Company’s brokers and other professional services firms. See Note 4 – Acquisitions and Dispositions in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.*

*(4) The Company initiated the cost reduction plan (the “U.S. Restructuring Plan”) in October 2023 and substantially completed the U.S. Restructuring Plan during the third quarter of fiscal 2024. In addition, the Company substantially completed the Global Restructuring Plans (defined below) in fiscal 2021 and the remaining accrued restructuring liability was released in fiscal 2023.*

Our non-GAAP financial measures are not measurements of financial performance or liquidity under GAAP and should not be considered in isolation or construed as substitutes for revenue, net income or other measures of financial performance or financial condition prepared in accordance with GAAP for purposes of analyzing our revenue, profitability or liquidity. Further, a limitation of our non-GAAP financial measures is that they exclude items detailed above that have an impact on our GAAP reported results. Other companies in our industry may calculate these non-GAAP financial measures differently than we do, limiting their usefulness as a comparative measure. Because of these limitations, these non-GAAP financial measures should not be considered a substitute but rather considered in addition to performance measures calculated in accordance with GAAP.

### Results of Operations

The following table sets forth our Consolidated Statements of Operations data for the three and nine months ended February 24, 2024 and February 25, 2023, respectively. These historical results are not necessarily indicative of future results. Our operating results for the periods indicated are expressed as a percentage of revenue (in thousands, except percentages).

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|  | Three Months Ended February 24, 2024 | % of Revenue (1) | February 25, 2023 | % of Revenue (1) | Nine Months Ended February 24, 2024 | % of Revenue (1) | February 25, 2023 | % of Revenue (1) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $151,307 | 100.0% | $186,777 | 100.0% | $484,603 | 100.0% | $591,194 | 100.0% |
| Direct cost of services | 95,299 | 63.0 | 115,170 | 61.7 | 298,118 | 61.5 | 353,770 | 59.8 |
| **Gross profit** | 56,008 | 37.0 | 71,607 | 38.3 | 186,485 | 38.5 | 237,424 | 40.2 |
| Selling, general and administrative expenses | 49,589 | 32.8 | 59,371 | 31.8 | 162,514 | 33.5 | 172,335 | 29.2 |
| Goodwill impairment | - | - | 2,955 | 1.6 | - | - | 2,955 | 0.5 |
| Amortization expense | 1,413 | 0.9 | 1,275 | 0.7 | 4,048 | 0.8 | 3,743 | 0.6 |
| Depreciation expense | 745 | 0.5 | 885 | 0.4 | 2,432 | 0.5 | 2,652 | 0.4 |
| **Income from operations** | 4,261 | 2.8 | 7,121 | 3.8 | 17,491 | 3.7 | 55,739 | 9.5 |
| Interest (income) expense, net | (225) | (0.2) | 147 | - | (830) | (0.2) | 662 | 0.1 |
| Other (income) | (1) | - | (43) | - | (6) | - | (381) | (0.1) |
| **Income before income tax expense (benefit)** | 4,487 | 3.0 | 7,017 | 3.8 | 18,327 | 3.9 | 55,458 | 9.5 |
| Income tax expense (benefit) | 1,937 | 1.3 | (2) | - | 7,765 | 1.6 | 12,867 | 2.3 |
| **Net income** | $2,550 | 1.7% | $7,019 | 3.8% | $10,562 | 2.3% | $42,591 | 7.2% |

#### (1) The percentage of revenue may not foot due to rounding.

### Consolidated Operating Results – Three Months Ended February 24, 2024 Compared to Three Months Ended February 25, 2023

***Revenue.*** Revenue decreased $35.5 million, or 19.0%, to $151.3 million in the third quarter of fiscal 2024 from $186.8 million in the third quarter of fiscal 2023. On a same-day constant currency basis, revenue decreased $36.6 million, or 19.6% reflecting the overall choppy macro environment as clients want more certainty in lower interest rates and improving economic indicators before moving ahead with many major initiatives. Billable hours decreased 12.3% and the average bill rate declined 7.8% (7.8% on a constant currency basis) from the prior year quarter due to an increasingly competitive pricing environment as well as a shift in revenue mix to the Asia Pacific region which carries lower average bill rate. The United States (U.S.) average bill rates increased by 0.9% compared to the prior year as a result of pricing actions taken to implement our value-based pricing model, while average bill rates in the Asia Pacific region declined by 10.1% (or 6.3% on a constant currency basis), also largely attributable to a shift in revenue mix across the countries within this region.

The following table represents our consolidated revenues by geography for the three months ended February 24, 2024 and February 25, 2023, respectively (in thousands, except percentages):

*(Unaudited)*

*(Unaudited)*

|  | Three Months Ended February 24, 2024 | % of Revenue | February 25, 2023 | % of Revenue |
| --- | ---: | ---: | ---: | ---: |
| North America | $129,749 | 85.8% | $163,790 | 87.7% |
| Europe | 8,668 | 5.7 | 10,176 | 5.4 |
| Asia Pacific | 12,890 | 8.5 | 12,811 | 6.9 |
| Total consolidated revenue | $151,307 | 100.0% | $186,777 | 100.0% |

28

Revenue declined in the North America and Europe regions during the third quarter of fiscal 2024 compared to the prior year quarter reflecting reduced client spending across a majority of our markets, client segments and solution offerings as a result of the continued challenging global macroeconomic environment. Gross pipeline remained relatively resilient; however, the time to close opportunities in the pipeline continued to be protracted, typical in a tougher macro environment when clients are more hesitant to spend on professional services. North America experienced a revenue decline of 20.8%, or 21.1% on a same-day constant currency basis, from the third quarter of fiscal 2023. Europe revenue decreased 14.8%, or 22.5% on a same-day constant currency basis, compared to the third quarter of fiscal 2023. Asia Pacific revenue increased 0.6%, or 1.8% on a same-day constant currency basis, compared to the third quarter of fiscal 2023. Large multinational clients continue to shift work to lower cost markets such as India and the Philippines, creating demand in our Asia Pacific region. In addition, CloudGo, our recent acquisition completed in the second fiscal quarter, contributed $1.9 million of revenue to the Asia pacific region.

***Direct Cost of Services.*** Direct cost of services decreased $19.9 million, or 17.3%, to $95.3 million for the third quarter of fiscal 2024 from $115.2 million for the third quarter of fiscal 2023. The decrease in direct cost of services was primarily attributable to a 12.3% decline in billable hours and a 6.5% decrease in average pay rate during the third quarter of fiscal 2024 compared to the prior year quarter.

Direct cost of services as a percentage of revenue was 63.0% for the third quarter of fiscal 2024 compared to 61.7% for the third quarter of fiscal 2023. The increased percentage compared to the prior year quarter was primarily attributable to a 60 basis point increase in the pay/bill ratio as a result of the shift in global revenue mix to the international regions as well as a decrease in leverage on cost of service as a result of lower topline revenue, including a 30 basis point increase related to employee health benefit. We continue to seek improvement in the overall pay/bill ratio and indirect cost leverage through strategic pricing, while offering competitive compensation and benefits to our consultants to attract and retain the best talent in the marketplace.

The number of consultants on assignment at the end of the third quarter of fiscal 2024 was 2,765 compared to 3,164 at the end of the third quarter of fiscal 2023.

***Selling, General and Administrative Expenses.*** Selling, general and administrative expenses (“SG&A”) was $49.6 million, or 32.8% of revenue, for the third quarter of fiscal 2024 compared to $59.4 million, or 31.8% of revenue, for the third quarter of fiscal 2023. The $9.8 million improvement in SG&A year-over-year was primarily attributed to a decrease in bonuses and commissions of $7.3 million primarily related to lower revenue and profitability achievement compared to incentive compensation targets in the current fiscal year, lower management compensation expense of $2.6 million partially due to the U.S. Restructuring Plan initiated in October 2023, and a decrease of $1.4 million in stock-based compensation expense as a result of forfeitures and remeasurement of achievement associated with performance-based equity awards. These reductions in costs were partially offset by one-time costs of $1.6 million of employee termination benefits in connection with further actions taken under the U.S. Restructuring Plan during the third quarter of fiscal 2024.

Management and administrative headcount was 830 at the end of the third quarter of fiscal 2024 and 924 at the end of the third quarter of fiscal 2023. Management and administrative headcount includes full time equivalent headcount for our seller-doer group, which is determined by utilization levels achieved by the seller-doers. Any unutilized time is converted to full time equivalent headcount.

***Acquisition Costs.*** Acquisition costs are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Acquisition costs were $0.2 million for the three months ended February 24, 2024, which includes fees paid to the Company’s other professional services firms.

***Restructuring Costs.*** We initiated a U.S. Restructuring Plan in October 2023 and substantially completed the U.S. Restructuring Plan during the third quarter of fiscal 2024. All restructuring costs incurred were associated with the RGP segment, and are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Restructuring costs were $1.6 million for the three months ended February 24, 2024. The restructuring liability was $1.7 million and zero as of February 24, 2024 and May 27, 2023, respectively.

***Amortization and Depreciation Expense.*** Amortization expense was $1.4 million and $1.3 million in the third quarter of fiscal 2024 and fiscal 2023, respectively. Depreciation expense was $0.7 million and $0.9 million in the third quarter of fiscal 2024 and fiscal 2023, respectively.

***Income Taxes.*** Income tax expense was $1.9 million (effective tax rate of 43.2%) for the third quarter of fiscal 2024 compared to an income tax benefit of nearly zero (effective tax benefit rate of less than 0.1%) for the third quarter of fiscal 2023. We record tax expense based upon actual results versus a forecasted tax rate because of the volatility in our international operations that span numerous tax jurisdictions. The income tax benefit in the three months ended February 25, 2023 resulted largely from a one-time tax benefit recognized on the release of valuation allowance in our Europe region. The higher effective tax rate in the three months ended February 24, 2024 resulted largely from a lower pretax income base increasing the tax expense ratio.

The Company recognized a tax benefit of approximately $0.1 million and $0.2 million for the three months ended February 24, 2024 and February 25, 2023, respectively, associated with the exercise of nonqualified stock options, vesting of restricted stock awards, restricted stock units, and disqualifying dispositions by employees of shares acquired under the Employee Stock Purchase Plan (“ESPP”).

Periodically, we review the components of both book and taxable income to prepare the tax provision. There can be no assurance that our effective tax rate will remain constant in the future because of the lower benefit from the U.S. statutory rate for losses in certain foreign jurisdictions, the limitation on the benefit for losses in jurisdictions in which a valuation allowance for operating loss carryforwards has previously been established, and the unpredictability of timing and the amount of disqualifying dispositions of certain stock options.

***Comparability of Quarterly Results.*** Our quarterly results have fluctuated in the past and we believe they will continue to do so in the future. Certain factors that could affect our quarterly operating results are described in Part I, Item 1A of our Fiscal Year 2023 Form 10-K and our other public filings made with the SEC. Due to these and other factors, we believe quarter-to-quarter comparisons of our results of operations may not be meaningful indicators of future performance.

### Consolidated Operating Results – Nine Months Ended February 24, 2024 Compared to Nine Months Ended February 25, 2023

***Revenue.*** Revenue decreased $106.6 million, or 18.0%, to $484.6 million for the nine months ended February 24, 2024 from $591.2 million for the nine months ended February 25, 2023. On a same-day constant currency basis, revenue for the nine months ended February 24, 2024 decreased $109.9 million, or 18.6%, compared to the nine months ended February 25, 2023. Billable hours decreased 14.0% and the average bill rate declined 4.7% (4.7% on a constant currency basis) in the nine months ended February 24, 2024 compared to the nine months ended February 25, 2023. The decrease in billable hours is due to reduced client spending and the lower average bill rate for the nine months ended February 24, 2024 was due to an increasingly competitive pricing environment as well as the ongoing shift in revenue mix to Asia Pacific region which carries lower average bill rate, as previously discussed.

The following table represents our consolidated revenues by geography for the nine months ended February 24, 2024 and February 25, 2023, respectively (in thousands, except percentages):

*(Unaudited)*

*(Unaudited)*

|  | Nine Months Ended February 24, 2024 | % of Revenue | February 25, 2023 | % of Revenue |
| --- | ---: | ---: | ---: | ---: |
| North America | $417,372 | 86.1% | $519,994 | 88.0% |
| Europe | 29,865 | 6.2 | 31,752 | 5.3 |
| Asia Pacific | 37,366 | 7.7 | 39,448 | 6.7 |
| Total consolidated revenue | $484,603 | 100.0% | $591,194 | 100.0% |

Revenue declined in all geographic regions during the nine months ended February 24, 2024 compared to the same period in fiscal 2023. North America experienced a revenue decline of 19.7%, or 20.1% on a same-day constant currency basis, from the nine months ended February 25, 2023. Europe revenue decreased 5.9%, or 12.6% on a same-day constant currency basis, as compared to the nine months ended February 25, 2023. Asia Pacific revenue declined 5.3%, or 3.7% on a same-day constant currency basis, compared to the nine months ended February 25, 2023. We continue to focus on improving pricing during fiscal 2024. Despite the competitive pricing environment, the U.S. and Europe average bill rates increased by 1.5% and 2.8% on a constant currency basis, respectively, compared to the prior year as a result of pricing actions taken to implement our value-based pricing model, while the average bill rate in the Asia Pacific region declined by 5.3% on a constant currency basis in the nine months ended February 24, 2024 compared to the nine months ended February 25, 2023. The decline in the average bill rate in the Asia Pacific region was due to a shift in the revenue mix to countries with a historically lower bill rate.

***Direct Cost of Services.*** Direct cost of services decreased $55.7 million, or 15.7%, to $298.1 million for the nine months ended February 24, 2024 from $353.8 million for the nine months ended February 25, 2023. The decrease in direct cost of services year over year was primarily attributable to a 14.0% decrease in billable hours and a 3.8% decrease in average pay rate in the nine months ended February 24, 2024 compared to the same period in fiscal 2023.

Direct cost of services as a percentage of revenue was 61.5% for the nine months ended February 24, 2024 compared to 59.8% for the nine months ended February 25, 2023. The increased percentage compared to the prior year was partially attributable to an 80 basis point increase in employee health benefit expenses as a percentage of revenue and a 10 basis point increase in the pay/bill ratio.

***Selling, General and Administrative Expenses.*** SG&A was $162.5 million, or 33.5% of revenue, for the nine months ended February 24, 2024 compared to $172.3 million, or 29.2% of revenue, for the nine months ended February 25, 2023. The $9.8 million decrease in SG&A year-over-year was primarily attributed to a reduction in bonuses and commissions by $14.6 million primarily related to lower revenue and profitability achievement compared to incentive compensation targets in the current fiscal year, a decrease of $3.1 million in stock-based compensation expense as a result of forfeitures and remeasurement of achievement associated with performance-based equity awards, and a lower management compensation expense of $0.9 million partially due to the U.S. Restructuring Plan initiated in October 2023. These reductions in cost were partially offset by an increase of $4.3 million of employee termination benefits in connection with actions taken under the U.S. Restructuring Plan during the nine months ended February 24, 2024, a $1.6 million increase in computer software and certain professional services fees, $1.3 million of one-time costs related to the acquisition of CloudGo, an increase in employee health benefit costs of $1.0 million, and an increase of $0.5 million in technology transformation costs.

***Acquisition Costs.*** We completed the acquisition of CloudGo in the second quarter of fiscal 2024. All acquisition costs are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Acquisition costs were $1.3 million for the nine months ended February 24, 2024, which includes fees paid to the Company’s brokers and other professional services firms.

***Restructuring Costs.*** We initiated a U.S. Restructuring Plan in October 2023 and substantially completed the U.S. Restructuring Plan during the third quarter of fiscal 2024. We substantially completed our Global Restructuring Plans in fiscal 2021. All restructuring costs incurred were associated with the RGP segment, and are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Restructuring costs were $3.9 million and ($0.4) million for the nine months ended February 24, 2024 and February 25, 2023, respectively. The restructuring liability was $1.7 million and zero as of February 24, 2024 and May 27, 2023, respectively.

***Amortization and Depreciation Expense.*** Amortization expense was $4.0 million and $3.7 million in the first nine months of fiscal 2024 and fiscal 2023, respectively. Depreciation expense was $2.4 million and $2.7 million in the first nine months of fiscal 2024 and fiscal 2023, respectively.

***Income Taxes.*** Income tax expense was $7.8 million (effective tax rate of 42.4%) for the nine months ended February 24, 2024 compared to $12.9 million (effective tax rate of 23.2%) for the nine months ended February 25, 2023. We record tax expense based upon actual results versus a forecasted tax rate because of the volatility in our international operations that span numerous tax jurisdictions. The higher effective tax rate in the first nine months of fiscal 2024 was attributed primarily to a nonrecurring increase in forfeiture of stock options, coupled with the capitalization of acquisition related costs for tax purposes. The lower effective tax rate in the nine months ended February 25, 2023 resulted from a number of one-time tax benefits recognized, including the release of valuation allowance, and a larger pretax income base lowering the tax expense ratio.

The Company recognized a tax benefit of approximately $1.3 million and $2.0 million for the first three quarters of fiscal 2024 and fiscal 2023, respectively, associated with the exercise of nonqualified stock options, vesting of restricted stock awards, restricted stock units, and disqualifying dispositions by employees of shares acquired under the ESPP.

### Operating Results of Segment

Effective May 31, 2022, the Company’s operating segments consist of the following:

RGP – a global consulting firm focused on project execution services that power clients’ operational needs and change initiatives utilizing on-demand, experienced and diverse talent; and

Sitrick – a crisis communications and public relations firm which operates under the Sitrick brand, providing corporate, financial, transactional and crisis communication and management services.

RGP is the Company’s only operating segment that meets the quantitative threshold of a reportable segment. Sitrick does not individually meet the quantitative thresholds to qualify as a reportable segment. Therefore, Sitrick is disclosed in Other Segments.

On November 15, 2023, the Company acquired CloudGo. CloudGo is reported as part of the RGP operating segment. See Note 4 – *Acquisitions and Dispositions* in the Notes to Consolidated Financial Statements for further information.

On May 31, 2022, the Company divested *taskforce*; refer to Note 2 – *Summary of Significant Accounting Policies* and Note 4 – *Acquisitions and Dispositions* in the Notes to Consolidated Financial Statements for further information. Since the second quarter of fiscal 2021, the business operated by *taskforce,* along with its parent company, Resources Global Professionals (Germany) GmbH, an affiliate of the Company, represented an operating segment of the Company and was reported as a part of Other Segments. Prior-period comparative segment information was not restated as a result of the divestiture of *taskforce* as the Company did not have a change in internal organization or the financial information our Chief Operating Decision Maker uses to assess performance and allocate resources.

The following table presents our current operating results by segment for the three and nine months ended February 24, 2024 and February 25, 2023, respectively (in thousands, except percentages).

*(Unaudited)*

*(Unaudited)*

*(Unaudited)*

*(Unaudited)*

| Revenue: | Three Months Ended February 24, 2024 |  | February 25, 2023 |  | Nine Months Ended February 24, 2024 |  | February 25, 2023 |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| RGP | $148,995 | 98.5% | $184,270 | 98.7% | $477,374 | 98.5% | $582,849 | 98.6% |
| Other Segments | 2,312 | 1.5 | 2,507 | 1.3 | 7,229 | 1.5 | 8,345 | 1.4 |
| Total revenue | $151,307 | 100.0% | $186,777 | 100.0% | $484,603 | 100.0% | $591,194 | 100.0% |
| **Adjusted EBITDA:** |  |  |  |  |  |  |  |  |
| RGP | $19,376 | 179.6% | $25,320 | 152.4% | $63,697 | 165.9% | $101,331 | 131.7% |
| Other Segments | (246) | (2.3) | 113 | 0.7 | (708) | (1.8) | 761 | 1.0 |
| Reconciling items (1) | (8,344) | (77.3) | (8,817) | (53.1) | (24,596) | (64.1) | (25,135) | (32.7) |
| Total Adjusted EBITDA (2) | $10,786 | 100.0% | $16,616 | 100.0% | $38,393 | 100.0% | $76,957 | 100.0% |

*(1) Reconciling items are generally comprised of unallocated corporate administrative costs, including management and board compensation, corporate support function costs and other general corporate costs that are not allocated to segments.*

#### (2) A reconciliation of the Company’s net income to Adjusted EBITDA on a consolidated basis is presented above under “Non-GAAP Financial Measures.”

#### Revenue by Segment

***RGP –*** RGP revenue decreased $35.3 million, or 19.1%, in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023, primarily as a result of a 12.3% decrease in billable hours and a 7.6% decrease in average bill rate from the prior year quarter, as discussed in the consolidated operating results discussion above. For the nine months ended February 24, 2024, RGP revenue decreased $105.5 million, or 18.1%, to $477.4 million compared to $582.8 million for the nine months ended February 25, 2023, primarily as a result of a 14.1% decrease in billable hours and a 4.7% decrease in average bill rate year over year, as discussed in the consolidated operating results discussion above. Revenue from RGP represents more than 95% of total consolidated revenue and generally reflects the overall consolidated revenue trend.

The number of consultants on assignment under the RGP segment as of February 24, 2024 was 2,752 compared to 3,149 as of February 25, 2023.

***Other Segments –*** Other Segments’ revenue for the third quarter of fiscal 2024 declined by $0.2 million, or 7.8%. to $2.3 million, compared to the third quarter of fiscal 2023. For the nine months ended February 24, 2024, revenue from Other Segments decreased $1.1 million, or 13.4%, to $7.2 million from $8.3 million for the nine months ended February 25, 2023, primarily as a result of a $0.9 million decline in Sitrick revenue. Sitrick continued to be affected by delays in court proceedings and more settlements, hindering leads for revenue generation in the business.

The number of consultants on assignment under Other Segments as of February 24, 2024 was 13 compared to 15 as of February 25, 2023.

#### Adjusted EBITDA by Segment

***RGP –*** RGP’s Adjusted EBITDA decreased $5.9 million, or 23.5%, to $19.4 million for the third quarter of fiscal 2024, compared to $25.3 million for the third quarter of fiscal 2023. Compared to the prior year quarter, revenue decreased $35.3 million for the third quarter of fiscal 2024, which was partially offset by the decrease in the related cost of services of $19.8 million. Additionally, SG&A costs attributed to RGP decreased $9.5 million for the third quarter of fiscal 2024 as compared to the third quarter of fiscal 2023 primarily due to the decrease in bonuses and commissions of $5.8 million as a result of lower revenue and profitability achievement compared to incentive compensation targets, decreases in management compensation expense of $2.3 million partially due to the U.S. Restructuring Plan, a decrease in occupancy costs of $0.2 million from real estate footprint reduction and a $1.2 million decrease in all other general and administration expenses. For the third quarter of fiscal 2024, the material costs and expenses attributable to the RGP segment that are not included in computing the segment measure of Adjusted EBITDA included depreciation and amortization expenses of $2.1 million and stock-based compensation expense of $0.9 million.

RGP’s Adjusted EBITDA decreased $37.6 million, or 37.1%, to $63.7 million for the nine months ended February 24, 2024, compared to $101.3 million in the nine months ended February 25, 2023. The decrease was primarily attributable to the $105.5 million decrease in revenue for the nine months ended February 24, 2024, which was partially offset by the decrease in the cost of services of

$55.5 million and the increase in other income of $0.4 million. Additionally, SG&A costs attributed to RGP decreased $12.7 million for the nine months ended February 24, 2024 as compared to the nine months ended February 25, 2023 primarily due to the decrease in bonuses and commissions of $11.2 million as a result of lower revenue and profitability achievement compared to incentive compensation targets, a $0.9 million decrease in bad debt expense, decreases in management compensation expense of $0.9 million partially due to the U.S. Restructuring Plan and a $0.7 million reduction in recruiting expenses. These reductions were offset by a $1.0 million increase in all other general and administration expenses to support the business. For the nine months ended February 24, 2024, the material costs and expenses attributable to the RGP segment that are not included in computing the segment measure of Adjusted EBITDA included depreciation and amortization expenses of $6.4 million and stock-based compensation expense of $3.3 million.

The trend in revenue, cost of services and other costs and expenses at RGP compared to the prior year period is generally consistent with those at the consolidated level, as discussed above, with the exception that the SG&A used to derive segment Adjusted EBITDA does not include certain unallocated corporate administrative costs.

***Other Segments –*** Other Segments’ Adjusted EBITDA declined $0.3 million to ($0.2) million for the third quarter of fiscal 2024 compared to $0.1 million for the third quarter of fiscal 2023 due to lower revenue performance. For the third quarter of fiscal 2024, the material costs and expenses attributable to the Other Segments that are not included in computing the segment measure of Adjusted EBITDA included depreciation and amortization expenses of less than $0.1 million and stock-based compensation expense of $0.3 million.

Other Segments’ Adjusted EBITDA declined $1.5 million to ($0.7) million in the nine months ended February 24, 2024 compared to $0.8 million for the same period in fiscal 2023 due to lower revenue performance. For the nine months ended February 24, 2024, the material costs and expenses attributable to the Other Segments that are not included in computing the segment measure of Adjusted EBITDA included depreciation and amortization expenses of $0.1 million and stock-based compensation of $1.0 million.

### Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by operating activities, our $175.0 million senior secured revolving credit facility (as discussed further below) and historically, to a lesser extent, stock option exercises and ESPP purchases. During the nine months ended February 24, 2024, we generated positive cash flow from operations and have generated positive cash flows from operations on annual basis since inception. Our ability to generate positive cash flows from operations in the future will depend, at least in part, on global economic conditions and our ability to remain resilient during periods of deteriorating macroeconomic conditions and any economic downturns. As of February 24, 2024, we had $113.8 million of cash and cash equivalents, including $54.7 million held in international operations.

On November 12, 2021, the Company and Resources Connection LLC, as borrowers, and all of the Company’s domestic subsidiaries, as guarantors, entered into a credit agreement with the lenders that are party thereto and Bank of America, N.A. as administrative agent for the lenders (the “Credit Agreement”). The Credit Agreement provides for a $175.0 million senior secured revolving loan (the “Credit Facility”), which includes a $10.0 million sublimit for the issuance of standby letters of credit and a swingline sublimit of $20.0 million. The Credit Facility also includes an option to increase the amount of the revolving loan up to an additional $75.0 million, subject to the terms of the Credit Agreement. The Credit Facility matures on November 12, 2026. The obligations under the Credit Facility are secured by substantially all assets of the Company, Resources Connection LLC and all of the Company’s domestic subsidiaries.

Future borrowings under the Credit Facility bear interest at a rate per annum of either, at the Company’s election, (i) Term SOFR (as defined in the Credit Agreement) plus a margin ranging from 1.25% to 2.00% or (ii) the Base Rate (as defined in the Credit Agreement), plus a margin of 0.25% to 1.00% with the applicable margin depending on the Company’s consolidated leverage ratio. In addition, the Company pays an unused commitment fee on the average daily unused portion of the Credit Facility, which ranges from 0.20% to 0.30% depending upon the Company’s consolidated leverage ratio. As of February 24, 2024, we had no debt outstanding under the Credit Facility and $173.6 million remaining capacity under the Credit Facility.

The Credit Facility is available for working capital and general corporate purposes, including potential acquisitions, dividend distribution and stock repurchases. Additional information regarding the Credit Facility is included in Note 8 – *Long-Term Debt* in the Notes to Consolidated Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q.

On November 2, 2022, Resources Global Enterprise Consulting (Beijing) Co., Ltd, (a wholly owned subsidiary of the Company), as borrower, and the Company, as guarantor, entered into a RMB 13.4 million ($1.8 million based on the prevailing exchange on November 2, 2022) revolving credit facility with Bank of America, N.A. (Beijing) as the lender (the “Beijing Revolver”). The Beijing Revolver bears interest at a loan prime rate plus 0.80%. Interest incurred on borrowings will be payable monthly in arrears. As of February 24, 2024, the Company had no debt outstanding under the Beijing Revolver.

In addition to cash needs for ongoing business operations, from time to time, we have strategic initiatives that could generate significant additional cash requirements. Our initiative to upgrade our technology platform, as described in “Fiscal 2024 Strategic Focus

Areas” above, requires significant investments over multiple years. Such costs primarily include software licensing fees, third-party implementation and consulting fees, incremental costs associated with additional internal resources needed on the project and other costs in areas including change management and training. The actual amount of investment and the timing will depend on a number of variables, including progress made on the implementation. As we proceed through the project, we will continue to evaluate our progress against the implementation plan and assess the impact on our investments, if any. As of February 24, 2024, we capitalized $14.1 million related to the technology platform initiative; in addition, we recorded $5.0 million of expenses relating to these investments in the nine months ended February 24, 2024. At the end of the third quarter of fiscal 2024, the remaining investments required for this multi-year initiative is estimated to be in the range of $15.0 million to $20.0 million. We expect the majority of the investment will take place in fiscal 2024 and fiscal 2025. In addition to our technology transformation initiative, we expect to continue to invest in digital pathways to enhance the experience and touchpoints with our end users, including current and prospective employees (consultants and management employees) and clients. Such efforts will require additional cash outlay and could further elevate our capital expenditures in the near term. We believe our current cash, ongoing cash flows from our operations and funding available under our Credit Facility will provide sufficient funds for these initiatives. As of February 24, 2024, we have non-cancellable purchase obligations totaling $11.3 million, which primarily consists of payments pursuant to the licensing arrangements that we have entered into in connection with this initiative: $0.1 million due in the fourth quarter of fiscal 2024; $4.9 million due during fiscal 2025; $3.2 million due during fiscal 2026; $2.1 million due during fiscal 2027; and $1.0 million due thereafter.

In addition, we pay a regular quarterly dividend to our stockholders, subject to approval each quarter by our board of directors. Most recently, on March 14, 2024 we paid a dividend of $0.14 per share of our common stock to stockholders of record at the close of business on February 15, 2024. Continuation of the quarterly dividend is at the discretion of the board of directors and depends upon our financial condition, results of operations, capital requirements, general business condition, contractual restrictions contained in the Credit Facility and other agreements, and other factors deemed relevant by our board of directors.

On November 15, 2023, the Company acquired CloudGo pursuant to the terms of a Share Purchase Agreement entered into by and between the Company, CloudGo, and the shareholders of CloudGo (the “CloudGo SPA”). The Company paid an initial cash consideration of $7.4 million (net of $0.3 million cash acquired). The CloudGo SPA also provides for contingent consideration of up to $12 million to be paid based on CloudGo’s revenue and operating profit margin performance during two one-year performance periods that begin after the acquisition date. See Note 4 – *Acquisitions and Dispositions* in the Notes to Consolidated Financial Statements for further information.

On March 27, 2024, the Company entered into a Membership Interest Purchase Agreement (the “Reference Point MIPA”) with Reference Point LLC (“Reference Point”) and the sole member of Reference Point, pursuant to which the Company agreed to acquire 100% of the membership interests of Reference Point. See Note 15 – *Subsequent Event* in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.

As described under Market Trends and Uncertainties, uncertain macroeconomic conditions and increases in interest rates have created significant uncertainty in the global economy, volatility in the capital markets and recessionary pressures, which have adversely impacted, and may continue to adversely impact, our financial results, operating cash flows and liquidity needs. If we are required to raise additional capital or incur additional indebtedness for our operations or to invest in our business, we can provide no assurances that we would be able to do so on acceptable terms or at all. Our ongoing operations and growth strategy may require us to continue to make investments in critical markets and further expand our internal technology and digital capabilities. In addition, we may consider making additional strategic acquisitions or initiating additional restructuring initiatives, which could require significant liquidity and adversely impact our financial results due to higher cost of borrowings. We believe that our current cash, ongoing cash flows from our operations and funding available under our Credit Facility will be adequate to meet our working capital and capital expenditure needs for at least the next 12 months.

Beyond the next 12 months, if we require additional capital resources to grow our business, either organically or through acquisitions, we may seek to sell additional equity securities, increase the use of our Credit Facility, expand the size of our Credit Facility or raise additional debt. In addition, if we decide to make additional share repurchases, we may fund these through existing cash balances or the use of our Credit Facility. The sale of additional equity securities or certain forms of debt financing could result in additional dilution to our stockholders. Our ability to secure additional financing in the future, if needed, will depend on several factors. These include our future profitability and the overall condition of the credit markets. Notwithstanding these considerations, we expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements.

Other than as described herein, there have been no material changes to our material cash requirements, including commitments for capital expenditures, described under the heading “Liquidity and Capital Resources” in Item 7 of Part II of our Fiscal Year 2023 Form 10-K.

### Operating Activities

Operating activities for the nine months ended February 24, 2024 provided cash of $18.8 million compared to $63.9 million of cash provided for the nine months ended February 25, 2023. In the nine months ended February 24, 2024, cash provided from operations resulted from net income of $10.6 million and non-cash adjustments of $12.9 million. Additionally, in the nine months ended February 24, 2024, net unfavorable changes in operating assets and liabilities totaled $4.8 million, primarily consisting of a $18.0 million decrease in accrued salaries and related obligations, mainly due to the timing of our pay cycle and the payout of the annual incentive compensation during the nine months ended February 24, 2024, an $8.1 million increase in other assets largely related to the investments in our technology implementation, a $3.6 million increase in prepaid income taxes, a $2.3 million increase in prepaid expenses and other assets, and a $1.3 million decrease in other liabilities. These unfavorable changes are partially offset by a $26.1 million decrease in trade accounts receivable, and a $2.5 million increase in accounts payable and other accrued expenses.

In the nine months ended February 25, 2023, cash provided by operations resulted from net income of $42.6 million and non-cash adjustments of $9.3 million. Additionally, net favorable changes in operating assets and liabilities totaled $12.0 million, primarily consisting of a $26.9 million decrease in income taxes (which includes $35.5 million in U.S federal income tax refunds including interest income), a $7.4 million decrease in trade accounts receivable and a $3.8 million increase in accounts payable and other accrued expenses. These favorable changes are partially offset by a $19.4 million decrease in accrued salaries and related obligations, mainly due to the timing of our pay cycle and the payout of the annual incentive compensation during the nine months ended February 25, 2023; a $4.3 million decrease in other liabilities and a $1.4 million increase in other assets attributed to the capitalized cost of implementing our technology transformation.

### Investing Activities

Net cash used in investing activities was $8.4 million for the nine months ended February 24, 2024 compared to net cash provided of $1.5 million for the nine months ended February 25, 2023. Net cash used in investing activities for the nine months ended February 24, 2024 was primarily related to the acquisition of CloudGo and costs incurred for the development of internal-use software and acquisition of property and equipment. Net cash provided by investing activities in the nine months ended February 25, 2023 was primarily related to the cash proceeds from the divestiture of *taskforce* partially offset by the cost incurred for the development of internal-use software and acquisition of property and equipment.

### Financing Activities

Net cash used in financing activities totaled $13.0 million in the nine months ended February 24, 2024 compared to $64.3 million in the nine months ended February 25, 2023. Net cash used in financing activities during the nine months ended February 24, 2024 consisted of cash dividend payments of $14.1 million and $5.0 million to purchase 353,858 shares of common stock on the open market; these uses were partially offset by $6.1 million in proceeds received from ESPP share purchases and employee stock option exercises. Net cash used in financing activities during the nine months ended February 25, 2023 consisted of net repayments on the Credit Facility of $54.0 million (consisting of $69.0 million of repayments and $15.0 million of proceeds), cash dividend payments of $14.1 million, and $10.5 million to purchase 618,438 shares of common stock on the open market; these uses were partially offset by $14.3 million in proceeds received from ESPP share purchases and employee stock option exercises.

## Market risk

As filed, 3,791 characters.

***Interest Rate Risk.*** We are primarily exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the market values of our cash and cash equivalents and our borrowings under the Credit Facility that bear interest at a variable market rate.

As of February 24, 2024, we had approximately $113.8 million of cash and cash equivalents. The earnings on cash and cash equivalents are subject to changes in interest rates; however, assuming a constant balance available for investment, a 10% decline in interest rates would reduce our interest income but would not have a material impact on our consolidated financial position or results of operations.

As of February 24, 2024, we had no outstanding debt under our Credit Facility. We are exposed to interest rate risk related to fluctuations in the term SOFR rate and, to a lesser extent, the loan prime rate on the Beijing Revolver. See “Sources and Uses of Liquidity” above and Note 8 – *Long-Term Debt* in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion about the interest rate on our Credit Facility and the Beijing Revolver. To the extent that there is a significant increase in the level of borrowings, a sharp rise in interest rates could have a material impact on our consolidated financial position or results of operations.

***Foreign Currency Exchange Rate Risk.*** For the nine months ended February 24, 2024, approximately 17.5% of our revenues were generated outside of the U.S. As a result, our operating results are subject to fluctuations in the exchange rates of foreign currencies in relation to the U.S. dollar. Revenues and expenses denominated in foreign currencies are translated into U.S. dollars at the monthly average exchange rates prevailing during the period. Thus, as the value of the U.S. dollar fluctuates relative to the currencies in our non-U.S.-based operations, our reported results may vary.

Assets and liabilities of our non-U.S.-based operations are translated into U.S. dollars at the exchange rate effective at the end of each monthly reporting period. Approximately 52.0% of our balances of cash and cash equivalents as of February 24, 2024 were denominated in U.S. dollars. The remaining amount of approximately 48.0% was comprised primarily of cash balances translated from Euros, British Pound Sterling, Japanese Yen, Canadian Dollar, Chinese Yuan, Indian Rupee, and Mexican Pesos. This compares to approximately 56.9% of our cash and cash equivalents balances as of May 27, 2023 that were denominated in U.S. dollars and approximately 43.1% that were comprised primarily of cash balances translated from Euros, Japanese Yen, Mexican Pesos, Chinese Yuan, Canadian Dollar, Indian Rupee and British Pound Sterling. The difference resulting from the translation in each period of assets and liabilities of our non-U.S.-based operations is recorded as a component of stockholders’ equity in accumulated other comprehensive income or loss.

Although we monitor our exposure to foreign currency fluctuations, we do not currently use financial hedges to mitigate risks associated with foreign currency fluctuations including in a limited number of circumstances when we may be asked to transact with our client in one currency but are obligated to pay our consultants in another currency. Our foreign entities typically transact with clients and consultants in their local currencies and generate enough operating cash flows to fund their own operations. We believe our economic exposure to exchange rate fluctuations has not been material. However, we cannot provide assurance that exchange rate fluctuations will not adversely affect our financial results in the future.

## Controls and procedures

As filed, 982 characters.

As required by Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) as of February 24, 2024. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of February 24, 2024. There has been no change in the Company’s internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the Exchange Act, during the fiscal quarter ended February 24, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 310 characters.

There have been no material changes in our risk factors from those disclosed in Part 1, Item 1A of our Fiscal Year 2023 Form 10-K, which was filed with the SEC on July 25, 2023. See “Risk Factors” in Item 1A of Part I of such Fiscal Year 2023 Form 10-K for a complete description of the material risks we face.

Filed Apr 4, 2024.
Source: SEC EDGAR, the filing index for accession 0001084765-24-000052. Last ingested by Listed: Nov 11, 2026, 04:44 ET. No prices; not investment advice.