Good day, ladies and gentlemen. And welcome to the Resources Global Professionals’ First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Later we will conduct a question-and-answer session, and instruction will follow at that time. As a reminder, today’s conference is being recorded. I’d now like to introduce your host for today’s conference, Ms. Alice Washington, General Counsel. Ma’am, please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for participating today. Joining me on this call are Kate Duchene, our Chief Executive Officer; and Herb Mueller, our Chief Financial Officer. During this call we will be communicating on our results for the first quarter of fiscal 2018. By now you should have a copy of today’s press release. If you need a copy and are unable to access the copy on our website, please call Patricia Marquez at 714-430-6314, and she will assist you. Before introducing Kate, I would like to remind you that we may make forward-looking statements during this call. Such statements regarding future events or future financial performance of the company are just predictions and actual events or results may differ materially. Please see our Form 10-K report for the year ended [ph] May 22, 2017 for a discussion of some of the risks, uncertainties, and other factors such as seasonal and economic conditions that may cause our business, results of operations, and financial condition to differ materially from results of operations and financial conditions expressed or implied by forward-looking statements made during this call. I’ll now turn the call over to Kate Duchene.

Thank you, Alice. Good afternoon. And welcome to Resources’ 2018 first quarter conference call. I will start with the brief review of our first quarter operating results. Next, I will report on progress against our transformation initiatives, sales and talent improvements, solution support development and cost containment. Third, I will update you on our progress to drive economic recovery in our Tri-State, Chicago and Houston markets. Fourth, I will comment on our European business, including our recent acquisition of Taskforce - Management on Demand in Germany. And finally, I will share few remarks about the recent tragic events that have impacted our business and our people in Texas, Florida, Mexico City and Las Vegas. Starting with operating results, our total revenue for the first quarter of fiscal 2018 were $141.2 million, which represents a decline of 1.5%, compared to the first quarter a year ago. The decline was 1.4% on a constant currency basis year-over-year. On a sequential basis, first quarter revenue decreased by about 5%, compared to $148.6 million in the fourth quarter of fiscal 2017. The decrease is normal as we move into the vacation season in the first quarter of each fiscal year and the decrease is also a result of the Memorial Day and 4th of July holidays in the U.S. We had no paid holidays in the U.S. in Q4. Herb will discuss the revenue uplift we are seeing in Q2, which paints a brighter picture as we begin to see investments we have made in the business start to bear fruit. Net earnings were $2.1 million or $0.07 per diluted share, compared to $5.6 million or $0.15 per diluted share a year ago. As we previewed on our last earnings call, our first quarter results were impacted by $0.03 per diluted share for severance…

Thank you, Kate, and good afternoon, everyone. I will start by giving detail on our fiscal first quarter financial results and we’ll then discuss the trends we are seeing in the second quarter. I will also give further detail on the financial impact of the taskforce - Management on Demand acquisition and other strategic growth initiatives that Kate discussed a little earlier. Starting with an overview of our first quarter results, total revenue for the first quarter fiscal 2018 was $141.2 million, a 1.5% decrease from the comparable quarter a year ago. Sequentially, revenue was down 5%. On a constant currency basis revenue increased 1.4% year-over-year and 5.6%, sequentially. Our first quarter gross margin was 38%, the same as the prior year first quarter. SG&A expenses were $47.4 million, compared to $43.6 million in the fiscal quarter a year ago. Our net income was $2.1 million or $0.07 per diluted share. In Q1 adjusted EBITDA was $7.9 million or 5.6% of revenue compared to $12.2 million or 8.5% of revenue in the year ago quarter. Now let me discuss some of the highlights of our revenues geographically. As Kate mentioned, we have seen improving trends across our international business, with revenues in Europe showing improvement for the seven straight quarter. Europe is benefiting from our increase focus on large accounts across countries, as well as leveraging our U.S. connections. Our U.S. performance continues to be below our long-term expectations with gains in the majority of the U.S. being offset by the year-over-year decline in the Tri-State area, which was down 16% from a year ago. However, as mentioned, Tri-State has leveled off and is showing signs of sequential growth. We believe that the worst is behind us in the Tri-State region, while we’re still seeing weakness in the area, we…

Thank you, Herb. We are excited by and focused on our strategic initiative. We have already made tangible progress since we outlined our plans last year and look forward to continued improvement in our performance. Before turning to questions, I will review our client continuity statistics for the first quarter of fiscal 2018. Client continuity remained strong. During the first quarter we served all of our top 50 clients from fiscal 2017 and 2016. In the quarter, we have 264 clients to whom we provide services at a run rate exceeding $500,000 in fee, the same as the price in fiscal 2017. In addition, our top 50 clients represented 39% of total revenues, while 50% of our revenues came from 88th client. Our largest client for the quarter was approximately 2.8% of revenues. As of the end of the first quarter 92% of our top 50 clients have used more than one practice area and 72% of those top 50 clients have used three or more. This practice area penetration reflects the diversity of relationships we have within our client’s organizations and supports the opportunity for growth, especially powered by our new SalesForce tool. That concludes our prepared remarks and we are now happy to answer any questions.

[Operator Instructions] Our first question comes from the line of Michael Chow with J.P. Morgan. Your line is now open.

Good afternoon, Kate and Herb. Just want to touch on, hoping you can provide a little bit more color on the uplift you have been seeing in your business in the last few weeks. I mean, is it just the regions improving or is there type of work that’s picking up or is it these resources just winning more?

I would say, it’s a couple of things, Michael. I think, it’s really the improved focus and drive we have in the business. I didn’t talk a lot about talent and what we are doing around talent transformation. But the big reason for changing our operating model a bit is to free up our sales team to spend time with clients and spend time on client pursuit and really stand-up talent to be a true partner and take the supply and demand responsibilities away and I think that we are just starting to see that impact. In terms of the kind of work, it is the improvement in the larger markets that we talked about and we are seeing a lot of opportunity around finance department transformation, data projects are increasing and those are across the board and the offices. Herb, would you have?

Yeah. I will add point that the business development efforts that we have been doing both with our dedicated business development professionals, as well as greater focus with our client service team to really get out and get new logos is definitely driving results. I think there was excitement about -- the initiatives of the company really start driving growth and we focus on that, and I think, that’s paying off and it’s been a strong initiative that we’ve had now for the last six months and just takes a while to do it. And then the other key thing is Salesforce.com, I think, has definitely helped us in just getting us little more organized on our outreach that we’ve been doing over the last several months and I believe that’s paying off as well.

Got it. Thanks. Yeah. That’s helpful. And then just one follow-up, just a clarification, Herb, I think, I heard you mentioned, $350,000 loss revenue from the hurricane. That’s just Harvey, right? That was just Houston?

No. That’s primarily Houston, about 85% of that. We had a little bit of an impact in our South Florida and Tampa offices as well as we lost a day to two days of work there.

Got it. Okay. Thank you.

Thank you.

[Operator Instructions] Our next question comes from the line of Mark Marcon with Robert W. Baird. Your line is now open.

Good afternoon. I was wondering if you could talk just a little bit more about some of the areas of uptick, are you seeing anything from rev rec?

[Indiscernible] still continuing to trend upward. But consistent with prior quarters we are seeing -- we are still -- it’s interesting as I have talked about before people in some cases are just now getting it. So we are doing that. We are also getting the lease accounting work, but though rev rec is probably beating that by about 3 to 1. So there is still upside. It’s amazing the number of companies that haven’t really gotten on that. So we are still excited about the possibilities. But again that’s not certainly going to become $50 million, $60 million business.

Yeah. It’s kind of late for that, right?

Right.

Okay. And then, with regards to the number of offices in the U.S. that you are actually seeing an upturn in, is it the vast majority are actually seeing this year-over-year improvement?

I wouldn’t associate a vast majority but I would say the majority are seeing that. We got a handful that are off year-over-year but it’s been -- we have been pleased throughout our different geographies of the improvement.

And keep in mind we are really focused too on our larger markets that can have more of an impact. So that’s why in the call we are calling out specifically the performance of those markets, because they are important to our future trend.

Okay. Great. And then, it looks like pricing has stabilized, gross margin has stabilized, the SG&A, if I heard you correctly, it was 46.5% to 47% is what the projection is, is that correct? And of that is it roughly $1.8 million that’s still for the transformation in taskforce? And could you -- taskforce is going to be ongoing, so what would be the split up between the transformation versus taskforce?

Yeah. The overall on that, taskforce is going to be roughly in the $1 million, approaching the $800,000 to $1 million and then the other part of that still with what we are working through on the transactions.

Transformation.

Transformation, right.

Yeah.

Transformation, I am sorry. Thanks.

And with regards to the transformation is that -- do you think that will end in the second quarter or do you think there is going to be an ongoing spend throughout the year?

Yeah. It will start declining by the end of the second quarter and then really wrapping up more in the third quarter, potentially a little bit of carryover in the fourth quarter, but we really hope that will depend on where we are at, but right now the plan is to try to wrap that in our third quarter.

Okay. So would you assume that then basically we are going to end up having roughly, if we wrap that up -- should we end up -- I mean, what’s the aspiration if we can just achieve like let’s say, 4% to 5% revenue growth overall. If we could do that how -- what sort of incremental margin should we end up seeing?

Yeah. I think, if -- again it all depends on timing, because in this fiscal year, we are still working through a variety of initiatives, you could see some bumps up and down. I will say is that, long-term what -- our goal is -- our Board’s goal is we like to get this, to be a 38%, 39% gross margin business with a 27%, 28% SG&A, with 4% to 5% organic growth on an annualized basis. Again that’s long-term, now we are not going to be there at the end of this fiscal year, but that’s what we are going to be striving for over time.

Okay. Great. And then from a balance sheet perspective, how much of the cash outflow is due to the bonuses?

Do you have it handy? Let me get back to you on that, I don’t have that number right in front of me.

Okay. How would you think about cash flow for the coming quarter?

Right now -- do you have for the upcoming quarter? So roughly that bonus is in $12 million to $15 million range and there I can narrow that down and then we will go back and I will take a look at that, I don’t have that right in front of me Mark.

Okay. Great. Thank you.

Thank you.

I am not showing any further questions in queue at this time. I would like to turn the call back to Ms. Duchene for any closing remarks.

Thank you, Operator. Again, thank you for attending this call and your interest in RGP. We look forward to talking with you again on our next earnings call following our second fiscal quarter of 2018. Thanks everybody.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Everyone have a great day.