Business Context and Reporting Period
Company: Resources Connection, Inc. (RGP), a global professional services firm offering On-Demand Talent, Consulting, and Outsourced Services.
Reporting Period: Second quarter of fiscal 2026 ended November 29, 2025 (13 weeks).
Key Developments: On November 3, 2025, Roger Carlile succeeded Kate W. Duchene as President and CEO. The company initiated a "2026 Transformation Initiative" to streamline operations and reduce costs, including workforce reductions in management and administrative roles.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Revenue | $117.7 million | $145.6 million | $238.0 million | $282.6 million |
| Gross Profit | $43.7 million (37.1%) | $56.1 million (38.5%) | $91.2 million (38.3%) | $106.1 million (37.5%) |
| Net Loss | $(12.7) million | $(68.7) million | $(15.1) million | $(74.4) million |
| Adjusted EBITDA | $4.0 million (3.4%) | $9.7 million (6.6%) | $7.1 million (3.0%) | $12.0 million (4.2%) |
| Cash from Operations | N/A | N/A | $8.1 million | $1.5 million |
| Cash & Equivalents | $89.8 million | $86.1 million (May 31, 2025) | $89.8 million | $108.9 million (May 31, 2024) |
| Debt Outstanding | $0 | $0 | $0 | $0 |
Note: Q2 2025 results included a non-cash goodwill impairment charge of $79.5 million, significantly impacting net loss for that period.
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased 19.2% year-over-year in Q2 2026 and 15.8% year-over-year for the six-month period. This was driven by an 18.4% decrease in billable hours, attributed to reduced demand in traditional finance roles and a shift in client spending.
- Profitability Improvement: While GAAP net loss narrowed significantly compared to the prior year (which included massive goodwill impairments), Adjusted EBITDA declined 58.1% in Q2 and 40.6% YTD due to lower revenue volumes.
- Expense Management: Selling, General, and Administrative (SG&A) expenses increased to $54.4 million in Q2 (46.2% of revenue) from $51.3 million in Q2 2025. This increase was primarily due to $9.0 million in CEO transition costs (severance and accelerated equity) and $2.9 million in restructuring charges, partially offset by lower compensation costs from workforce reductions.
- Segment Performance:
- On-Demand Talent: Revenue down 19.5% QoQ; Adjusted EBITDA down 27.5%.
- Consulting: Revenue down 29.7% QoQ; Adjusted EBITDA down 54.2%.
- Europe & Asia Pacific: Revenue up 2.0% QoQ; Adjusted EBITDA flat.
- Outsourced Services: Revenue flat; Adjusted EBITDA up 11.2%.
Guidance, Outlook, and Risks
- Strategic Focus: Management is prioritizing cost structure reduction (targeting $6.0M–$8.0M annual run-rate reduction in SG&A), scaling high-value consulting solutions, and leveraging value-based pricing to improve bill rates.
- Transformation Initiative: The company is executing a comprehensive review of its operating model. Additional restructuring costs may be incurred through the remainder of fiscal 2026, though specific amounts cannot be estimated at this time.
- Liquidity: The company maintains $89.8 million in cash and a $50.0 million secured revolving credit facility (2025 Credit Facility) with no outstanding borrowings. Management believes current resources are sufficient for the next 12 months.
- Risks:
- Macroeconomic Conditions: Uncertainty regarding interest rates, labor markets, and trade policies continues to create caution in client spending.
- Revenue Volatility: The shift toward larger, higher-value consulting projects may result in uneven revenue recognition in the near term due to elongated sales cycles.
- Leadership Transition: Risks associated with the integration of new leadership and the execution of the transformation plan.
Investor Verification Checklist
- CEO Transition Costs: Verify the total one-time impact of the former CEO's departure ($9.0 million in Q2) and the timeline for the new CEO's strategic initiatives.
- Restructuring Run-Rate: Monitor the realization of the targeted $6.0M–$8.0M annual SG&A reduction and the timing of future restructuring charges.
- Billable Hours vs. Rates: Assess whether the decline in billable hours is stabilizing and if the value-based pricing strategy is successfully offsetting volume declines with higher rates.
- Consulting Segment Recovery: Evaluate the pipeline for the Consulting segment, which saw a 29.7% revenue drop, to determine if the shift to high-value projects is gaining traction.
- Dividend Sustainability: Confirm the Board's commitment to the quarterly dividend ($0.07/share) given the current net loss and cash burn from transformation costs.