Good afternoon, ladies and gentlemen, and welcome to the Resources Connection, Inc. Conference Call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. At this time, I would like to remind everyone that management will be commenting on results for the second quarter ended November 23rd, 2024. They will also refer to certain non-GAAP financial measures. An explanation and reconciliation of these measures to the most comparable GAAP financial measures are included in the press release issued today. Today's press release can be viewed in the Investor Relations section of RGP's website and filed today with the SEC. Also, during this call, management may make forward-looking statements regarding plans, initiatives, and strategies and the anticipated financial performance of the company. Such statements are predictions and actual events or results may differ materially. Please see the risk factors section in RGP's report on Form 10-K for the year ended May 25th, 2024 for discussion of risk, uncertainties and other factors that may cause the company's business results of operations and financial conditions to differ materially from what is expressed or implied by forward-looking statements made during this call. I'll now turn the call over to RGP's CEO, Kate Duchene.

Thank you, operator. Welcome to our second quarter call, and happy new year, everyone. Thank you for joining us today. I'm pleased to report that we delivered sequential improvement in revenue, gross margin, run rate SG&A, and adjusted EBITDA in Q2. Specifically, we grew top-line revenue sequentially by over 6%. We delivered gross margin of 38.5%, an improvement of 200 basis points and adjusted EBITDA of $9.7 million or a margin of 6.6%, up from $2.3 million in Q1. While overall results were still off year-over-year as expected, all measures exceeded our outlook. Turning to performance highlights. First, Europe improved top line sequentially by 18%, while Asia also grew steadily at 4%, delivering overall segment improvement of 10%. The on-demand segment revenue was up slightly from Q1 and is continuing to stabilize. Our consulting segment, Veracity, grew 10% in Q2 with improved bill rates and utilization metrics. The Outsourced Services business Countsy was essentially flat sequentially and grew 4% year-over-year, adding 25 new logos during the quarter. These positive results reinforce the soundness of our long-term strategy and demonstrate steady progress in our business against a macro backdrop that remains choppy. Since the close of Q2, we also accomplished a major milestone with the implementation of our new technology platform in North America. We successfully went live on Workday Financials and Workday Professional Services Automation Module, and optimized Workday HCM and our Salesforce platform. 75% of our business is now run on a modern state of the art technology platform enabling increased use of artificial intelligence and automation in the delivery of our services as well as back office operations. We expect these new tools will drive greater efficiency in our processes and accelerate speed to market across the enterprise. The significant technology modernization is also highly beneficial as we…

Thank you, Kate, and Happy New Year. I'm pleased to share our quarterly update and walk you through the progress we've made in executing our strategy, along with our continued focus on growth. RGP is a challenger brand, uniquely empowering our clients to select how they prefer to engage with us throughout their transformation and operational journeys, while eliminating the internal barriers that can hinder progress. This quarter, we made significant strides in cross-selling, optimizing our pricing approach, and improving operational efficiency. As a result, we achieved sequential growth for the first time in nine quarters at 6.3%, along with a 4% improvement in average weekly run rate and an increase in hourly bill rates compared to our previous quarter. Our pipeline remains stable with a steady flow of opportunities with existing clients and new logos, particularly in finance transformation, focusing on ERP consolidation, migration, and upgrades, along with supply chain modernization and change management. Additionally, HR transformation with an emphasis on employee experience and digital transformation powered by automation and AI-driven operational processes are also gaining momentum, all core to our capabilities and cross-sell strategy. While we remain cautiously optimistic about the state of the macro environment, especially as it drives our on-demand segment, the stability of our overall business gives us confidence in our established baseline moving forward. Additionally, we're seeing positive results from our pricing initiative. On new contracts have achieved notable rate increases, highlighting the growing demand for our service offerings and the recognition of the value we provide to our clients. Now I'll provide an update on our quarterly performance by segment. Our consulting segment achieved 6.8% sequential organic growth, underscoring the soundness of our strategy to segment the business. This growth was driven by our expansion into new buying centers within existing clients and…

Thank you, Bhadresh, and happy new year to everyone. In the second quarter of fiscal 2025, we achieved significant revenue and adjusted EBITDA growth over the first fiscal quarter and narrowed the year-over-year performance gap. In addition, we outperformed our second quarter outlook ranges on all fronts. Total revenue was $145.6 million, a sequential growth of 5% over Q1 of fiscal 2025 on a same-day constant currency basis. Compared to the prior year quarter, revenue was down 13% on the same adjusted basis, which is an improvement over last quarter's 19% decline. We're pleased to see either stabilization or growth in all segments of the business, and we're especially encouraged by the notable sequential improvements in our consulting and Europe and Asia Pac segments. While the macro environment remains more or less the same with clients still hesitant to commit, we have seen more top-of-the-funnel client activities this quarter. Our cross-sell efforts are yielding early successes and contributed to a steady improvement in our weekly revenue run rate throughout the second quarter. Gross margin for the quarter was 38.5%, a 200 basis point improvement from the first fiscal quarter, driven by resilient pay-bill ratio and better bench utilization, along with more favorable seasonality. Compared to the prior year quarter, our gross margin was off just 40 basis points. Year-over-year pay-bill ratio and bench utilization were less favorable. However, the timing of the Thanksgiving holiday not being in the second quarter this year provided a boost to the gross margin. Despite the competitive pricing environment across the globe, we improved enterprise-wide average bill rate to $123 constant currency from $122 a year ago. Our US average bill rate increased to $166, which is a 4% increase from the prior year quarter and a 2% increase from Q1. As we strive to…

[Operator Instructions] Our first question comes from the line of Joe Gomes of Noble Capital. Your question please, Joe.

Thank you, good evening. So, first I wanted to start out, gross margin, as you mentioned, was significantly higher than both the guide and year-over-year, or sequentially. I just wondered if you could drill down a little bit more on the gross margin improvement?

Hi, Joe. This is Jenn. Happy new year. Yes, so gross margin improvement over Q1. We have some -- a little bit of improvement from the pay-bills ratio standpoint. We also improved our overall utilization as bench consultants. And the holiday impacts as well in -- if you're looking at Q2 compared to Q1, that's what's driving the gross margin improvement quarter-over-quarter. And then from a year-over-year standpoint, as I stated in my remarks, there's a little bit of degradation on the pay-bill ratio. Mostly, we're seeing some pay pressure, mostly across our international region in EU and APAC really due to -- some of this due to the talent shortage, so we are seeing some pressure there. Utilization is a little bit less favorable than the prior year and that -- and as we have favorable holiday impact [indiscernible] year-over-year because of Thanksgiving holiday. And so that sort of offset a little bit of the utilization and the pay bill dynamics that I just talked about. Does that help?

Yes, yes, thank you. And I could follow up on Reference Point. Just how is that -- Is that meeting your expectations, exceeding? Maybe just give us a little more color on how Reference Point has performed in the quarter and how it's set up going forward?

Yes, Joe, hi and happy new year. It's Kate. Reference Point is performing to our expectations. We've been pleased to see we're integrating it as quickly as we can so that we can continue to expand what Reference Point solution set is into our client base. Now we've started with financial services because that's been their core. But we're also seeing some opportunities outside of financial services where clients can benefit from the kind of skills and solutions that Reference Point brings.

Okay, great. And then just one more for me if I could sneak it in. Last quarter you talked about being a little more focus on stock buybacks. You did buy back another $5 million in the quarter, but that was flat with what you did in the previous quarter? Is there something that, for a reason why you didn't, be a little more aggressive on the stock buybacks, or is that just kind of a timing issue?

Yes, Joe, I can answer that. Yes, it's a little bit of timing. It's not really an issue. As you know, we just completed our digital technology transformation. We're more bullish about stock repurchasing and doing more of that. We just wanted to kind of get through the technology transformation first. Now that's behind us, I do expect that we'll pick up the activities there a little bit more.

That would be great. Thank you for answering my questions. I'll get back in queue.

Thanks, Joe.

Thank you. Our next question comes from the line of Alexander Sinatra of RW Baird. Your question please, Alexander.

Hi, I just wanted to say congratulations on the good results this quarter. First, I was just wondering a little bit on-demand domestically and in Europe. You did mention improvement in Europe and Asia, so I was just looking for a little bit more color on that.

Hi, this is Bhadresh. Happy New Year, everyone. What we're seeing is, since we have segmented the business [Technical Difficulty] offerings and kind of how we go to market, we're starting to see demand a lot more in finance, accounting, digital transformation, supply chain, and that's where we're focused. There's a lot more activity in this area across the globe. The movement of the activity is still kind of choppy, but the good news is that, our pipeline is filling up in the early stage discussions across clients a lot more than we had last quarter.

Okay. Thank you. And then I just had a quick follow-up on how we should think about, I guess, the impact of the amortization of those transformation costs. If there was anything, any kind of colors you'd give on that.

The annual amortization expense is going to be around $3 million. So, we're going to start the amortization halfway through Q3. And so Q4 will be the first quarter with the full impact of the amortization.

All right, great. Thank you.

Thank you. Our next question comes from the line of Andrew Steinerman of JPMorgan. Your line is open, Andrew.

Hi, I have two questions. The first one is, I assume that the months of November and December kind of ahead against the calendar year end for your clients, the typical time for clients to finish up projects. So, I was just wondering as you look at your months of November and December, how does the pace of current project ends look versus a typical year? And my second question is for Jenn, when you look at the midpoint of the revenue range that you gave for third fiscal quarter, what would be the year-over-year change adjusted for any M&A that you mentioned, as well as on the same day basis.

Hi, Marc. This is Bhadresh. From a trend perspective of November, December and project ending, I think we're living through times where every year is pretty unique. And last year, there was a lot more pressure on clients in not making decisions and spend. So in that sense, we're seeing more of that activity. And the second piece is, a lot of our projects, we don't have the cyclicality that traditional firms used to have historically where things ended in November or December. So, we manage cliffs all day long, every day, across projects and manage refilling that. So, we're not seeing those end-of-year cliffs that you're sort of thinking to compared to last year either. It's just a matter of continuing the work and managing the work as it's ending and filling it up new or extending. And I'll let Jenn take your second question.

Yes. Andrew, at the midpoint of the guidance range for revenue, it's a [15%] (ph) year-over-year decline on an organic same day constant currency basis.

Thank you. Appreciate it.

Thank you. [Operator Instructions] Our next question comes from the line of Marc Riddick of Sidoti. Please go ahead, Marc.

Hey, good afternoon and happy new year, everyone.

Hi, Marc.

Happy New Year.

So, I wanted to talk a little bit, you mentioned in your prepared remarks a couple of times about cross-selling benefits and some of the early successes that you're seeing there. I was wondering if there's anything additional that you could share there as to maybe some of the areas that were most receptive. I think you mentioned, of course, of financial services, but were there any particular project types or service types that were more receptive initially?

Yes, this is Bhadresh. Hi. What we are finding is, in finance transformation, especially for a lot of ERP projects where clients have to get off on-prem to cloud. We're seeing a lot of activity there. We're seeing a significant amount of activity also in digital as it relates to employee experience or digitization of operational processes. And then we're seeing opportunities in supply chain modernization, especially coupled with brand and UX. That's kind of where we're seeing a lot more activity as we're focusing into our existing clients and the spend that they're looking at, which are aligned to kind of the strategy that we've laid out for how we're focused in the organization and in the market.

Excellent. And then Jenn, hey, good afternoon. I think you made mention as far as the timing of going live on some of the platforms was after the end of the second quarter, if I remember hearing that properly. Maybe just talk a little bit. It seems that was obviously a fairly short amount of time between then and now, so maybe you can share maybe a little bit of initial thoughts as to how smoothly that went, any hiccups, anything that we should be thinking about there?

Yes. So we just went live December 21st. I would say the go live went very smoothly and an implementation of this size, we expect small things here and there. It's not perfect. But we were able to work through everything. The first couple of weeks, post-go live, all the major kind of critical milestones, we were able to complete that successfully, and we have a very robust [hyper care] structure in place to triage will all issues. All-in-all, I would say this is a very, very successful go-live implementation.

That's very encouraging. And then, Kate, I still wanted to ask your thoughts on this. You might be one of the last companies that folks are asking this of, but due to the timing of when you last reported, are you getting any sense or any feedback as to any client activity or behavior or changes or shifts around our political landscape post-election? And then maybe as a reminder for folks, maybe you could talk a little bit about what differences may have been experienced during the first Trump administration that might sort of figure into the thought process of what we might see going forward.

Yeah. Hey, Marc, and again, Happy New Year. So, I would characterize the sentiment post-election as generally more positive in our dialogue with clients. It's not that they're pulling the trigger on projects rapidly, but we're certainly engaged in more meetings and starting to talk about planning for activities in this new calendar year. So, I would -- overall, I'd say it's more optimistic, but it's not a hockey stick yet. So, I will tell you that. I think the areas that I'm hearing about from talking to clients, talking to my network is, there's a strong belief that there will be more transactional work coming, which always provides opportunity for us, whether that's substantive finance and accounting or risk and regulatory work, but also the associated project management and change management work that happens with transactions and integration support. And I think more dialogue is happening about some pending activities that are starting to open up in our client base. With respect to the last administration versus now. I mean, regulatory change is a driver of opportunity. Tax change is a driver of opportunity. And again, I'd go back to a more active M&A environment.

Very helpful. Thank you very much.

Thanks, Marc.

Thank you. I would now like to turn the conference back to Kate Duchene for closing remarks. Madam?

Yes, thank you, operator, and thank you everyone for following us. We look forward to talking to you after our third quarter of our fiscal year 2025. Thanks again and best wishes for a wonderful year.

Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.