Sign in
RC

RESOURCES CONNECTION, INC. (RGP)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered revenue of $120.2M, gross margin of 39.5%, and SG&A of $47.9M, all better than management’s outlook ranges; adjusted EPS was $0.03 and adjusted EBITDA margin 2.5% as mix and cost actions improved profitability despite softer volumes .
  • Revenue and EPS both beat S&P Global consensus: revenue $120.229M vs $119.971M*, and Primary EPS $0.03 vs -$0.165*; gross margin expanded 300bps YoY to 39.5% on higher bill rates, pay/bill spread and lower benefits costs .
  • Guidance for Q2 FY26: revenue $115–$120M, gross margin 38–39%, run-rate SG&A $43–$45M, with ~$5M non-run-rate/non-cash expenses (incl. ~$2M restructuring); dividend maintained at $0.07 per share .
  • Europe & APAC and Outsourced Services grew YoY; Consulting bill rates rose 11% YoY to $160 as value-based pricing gained traction, while elongated sales cycles keep near-term revenue uneven .

What Went Well and What Went Wrong

What Went Well

  • Gross margin improved to 39.5% (from 36.5% YoY) driven by pay/bill spread, utilization, and lower healthcare/holiday costs; average bill rates increased 2.2% YoY .
  • Management: “First quarter results exceeded our outlook ranges on all fronts… we are engaging with clients on more consulting opportunities which have higher bill rates, larger deal size… we remain confident in our strategy” .
  • Segment positives: Europe & Asia Pacific +10.6% YoY to $19.9M; Outsourced Services +5.3% YoY to $10.0M; consulting average bill rate up 11% YoY to $160 .

What Went Wrong

  • Revenue down 12.2% YoY to $120.2M; billable hours -14.3% YoY as clients delayed projects amid macro uncertainty; on-demand -$8.1M YoY and consulting -$11.4M YoY .
  • GAAP net loss of $2.4M; U.S. and consulting demand remained choppy; elongated sales cycles in higher-value consulting work temper near-term conversion .
  • U.S. macro headwinds and potential government shutdown risk flagged; management characterized client appetite as still cautious, with stability likely to take more time .

Financial Results

Sequential Trend (Q3 FY25 → Q4 FY25 → Q1 FY26)

MetricQ3 FY25Q4 FY25Q1 FY26
Revenue ($USD Millions)$129.438 $139.340 $120.229
Gross Margin %35.1% 40.2% 39.5%
GAAP Diluted EPS ($)$(1.34) $(2.23) $(0.07)
Adjusted Diluted EPS ($)$(0.08) $0.16 $0.03
Net Income Margin %(34.0%) (52.6%) (2.0%)
Adjusted EBITDA ($USD Millions)$1.651 $9.830 $3.065
Adjusted EBITDA Margin %1.3% 7.1% 2.5%

YoY (Q1 FY25 → Q1 FY26)

MetricQ1 FY25Q1 FY26
Revenue ($USD Millions)$136.935 $120.229
Gross Margin %36.5% 39.5%
GAAP Diluted EPS ($)$(0.17) $(0.07)
Adjusted Diluted EPS ($)$0.00 $0.03
Net Income Margin %(4.2%) (2.0%)
Adjusted EBITDA ($USD Millions)$2.320 $3.065
Adjusted EBITDA Margin %1.7% 2.5%

Vs. Estimates (Q1 FY26)

MetricConsensus*Actual
Revenue ($USD Millions)$119.971*$120.229
Primary EPS ($)$(0.165)*$0.03

Values retrieved from S&P Global.*

Segment Revenue Breakdown

SegmentQ1 FY25Q4 FY25Q1 FY26
On-Demand Talent ($M)$52.473 $52.962 $44.442
Consulting ($M)$55.025 $50.950 $43.641
Europe & Asia Pacific ($M)$17.983 $21.342 $19.888
Outsourced Services ($M)$9.491 $11.333 $9.994
All Other ($M)$1.963 $2.753 $2.264
Total ($M)$136.935 $139.340 $120.229

KPIs and Operating Metrics

KPIQ3 FY25Q4 FY25Q1 FY26
Consolidated Avg. Bill Rate ($)$123 $125 $121
Consulting Avg. Bill Rate ($)$159 $158 $160
On-Demand Avg. Bill Rate ($)$140 $143 $140
Europe & APAC Avg. Bill Rate ($)$59 $64 $60
Outsourced Services Avg. Bill Rate ($)$137 $140 $136
Agile Consultants on Assignment (during period)N/AN/A2,231
Salaried Consultant Headcount (avg)N/AN/A418
Average Pay Rate ($)$58 $59 $57
Cash & Cash Equivalents ($M)$72.5 $86.1 $77.5
Common Shares Outstanding (end)33,069 33,075 33,391

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q2 FY26N/A$115–$120 New
Gross Margin %Q2 FY26N/A38–39 New
Run-rate SG&A ($M)Q2 FY26N/A$43–$45 New
Non-run-rate & non-cash expenses ($M)Q2 FY26N/A~$5, incl. ~$2 restructuring New
Dividend per share ($)Q2 FY26$0.07$0.07 payable Dec 12, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25, Q4 FY25)Current Period (Q1 FY26)Trend
AI/Technology initiativesFocus on transformation; pipeline quality improved despite soft volumes Emphasis on digital finance, ERP, data, automation/AI in consulting and outsourced services (Kelsey); integrating AI-enabled tools/delivery models Increasing strategic focus
Macro/client demandChoppy demand; holiday timing impacted utilization; cautious project starts Macro remains unpredictable; elongated sales cycles; cautious client appetite Unchanged/sluggish
Pricing/value-basedAvg bill rate up; shift to higher-value consulting Consulting bill rate +11% YoY; value-based pricing gaining; higher pay/bill spread Strengthening
Regional trends (Europe & APAC)APAC/Europe mixed; E&APAC down 5.4% YoY in Q3 Europe & APAC +10.6% YoY; Europe hours +21%, bill rates up Improving
Outsourced ServicesStable revenue; mid-teens margins Revenue +5%; adj EBITDA margin 23.3%; targeting AI startups, fintech Expanding
Cost structure/restructuring2025 restructuring costs; impairment charges RIF in Oct; ~$6–$8M annual savings; SG&A down 7% YoY run-rate Ongoing optimization
M&A/Reference PointReference Point contributed $4M in Q3 consulting Continued integration into consulting; higher bill rate mix Integrated execution
Dividend policy$0.14 in Q3 $0.07 declared/maintained Lower but steady

Management Commentary

  • Strategy: “We are transforming… to be more integrated, diversified and resilient… focusing on CFO Advisory & Digital Transformation, while strengthening our on-demand business” — Kate Duchene, CEO .
  • Pricing and mix: “We saw an 11% improvement in average bill rate in consulting… expect more upside in bill rate” — Jenn Ryu, CFO .
  • Consulting pipeline: “Notable wins… Fortune 500 financial services, multi‑billion food processor MDM, multinational tech employee experience; pipeline includes global program management and ERP/data stabilization” — Bhadresh Patel, COO .
  • Cost actions: “Streamlining structure, embracing automation and AI… further reduction in force expected to save ~$6–$8M annually” — Jenn Ryu, CFO .

Q&A Highlights

  • Pricing pressure vs. value-based pricing: Staffing rates steady; consulting faces pressure but value-based offerings support higher rates; pivoting away from operational accounting as AI/automation replace roles .
  • Cross-sell pipeline: Increasing $1M+ deals; integrated sales/practice motions expected to improve conversion .
  • Q2 segment cadence: E&AP expected to remain strong; consulting/on-demand similar to Q1 barring late-stage pipeline conversions .
  • Same-day constant currency vs. reported: Business days drove most of delta; FX ~⅓ of day impact; minimal acquired revenue contribution; Q2 top-end implies ~16% YoY decline same-day CC .
  • Regional U.S.: Strength in West Coast and Southeast; new CFO Advisory leader based in Northern Virginia/D.C. .

Estimates Context

  • Q1 FY26: Revenue slightly beat consensus ($120.229M vs $119.971M*), and Primary EPS notably beat ($0.03 vs $(0.165)), aided by margin expansion and cost discipline. Values retrieved from S&P Global. .
  • Q2 FY26: Consensus revenue ~$119.974M*, while guidance is $115–$120M; no EPS guidance, consensus Primary EPS at $(0.11). Values retrieved from S&P Global.
  • Implications: Street may need to raise margin assumptions in consulting (bill rate strength) and E&AP/Outsourced Services mix, while maintaining cautious revenue trajectories given elongated sales cycles .

Key Takeaways for Investors

  • Mix quality improving: Consulting bill rates and pay/bill spread are expanding; Europe & APAC and Outsourced Services provide growth ballast amid U.S. softness .
  • Cost structure reset is real: SG&A run-rate reductions and RIF savings ($6–$8M) should support incremental EBITDA even on flattish revenue .
  • Near-term revenue stable to down modestly: Q2 guide $115–$120M vs Q1 $120.2M, reflecting ongoing elongated sales cycles; watch conversion of late-stage consulting deals .
  • Non-GAAP profitability tracking up: Adjusted EPS positive ($0.03) and adj EBITDA margin 2.5%; focus on continued margin execution as volume recovers .
  • Dividend maintained at $0.07; balance sheet remains debt-free with $77.5M cash, providing flexibility for buybacks (repurchase program $79M remaining) and investment .
  • Trading setup: Potential positive revisions to margin assumptions; catalysts include consulting deal conversions, E&AP strength, and evidence of pipeline-to-revenue conversion; risks remain macro-driven demand and elongated sales cycles .
  • Watch AI-enabled offerings (Kelsey/outsourced F&A): Higher margins and expanding client base in AI/fintech could drive mix-led profitability improvements .