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RESOURCES CONNECTION, INC. (RGP)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 revenue was $139.3M, above S&P consensus*, and gross margin was 40.2%, exceeding the high end of management’s outlook; GAAP diluted loss per share was $(2.23) driven by a $69.0M goodwill impairment, while adjusted diluted EPS was $0.16 .
  • Versus prior quarter: revenue grew to $139.3M from $129.4M and gross margin expanded to 40.2% from 35.1%; adjusted EBITDA rose to $9.8M (7.1% margin) from $1.7M (1.3% margin) .
  • Versus prior year: revenue declined 6.0% YoY (to $139.3M from $148.2M), but gross margin held at 40.2%; adjusted EPS declined to $0.16 from $0.28 and adjusted EBITDA margin to 7.1% from 8.8% .
  • Q1 FY2026 guidance: revenue $115–$120M, gross margin 36–37%, run-rate SG&A $46–$48M; non-run-rate/non-cash $3–$4M (stock comp and ERP amortization). Sales cycles remain elongated, with summer seasonality impacting on-demand activity .
  • Capital and dividend: $86M cash, no debt; cash dividend of $0.07 declared for Q4 .

What Went Well and What Went Wrong

What Went Well

  • Revenue and gross margin exceeded the high end of the outlook; pricing discipline lifted enterprise average bill rate to $125 from $120 YoY, supporting margin outperformance .
  • Europe & APAC delivered the highest quarterly revenue of the year, with U.K.-led growth, 7% QoQ bill rate improvement, and high retention; outsourced services (Countsy) grew YoY and sequentially with 28% segment adjusted EBITDA margin .
  • Larger, higher-value consulting opportunities and cross-sell momentum improved pipeline quality; management emphasized value-based pricing and outcome-focused delivery to justify higher rates .

What Went Wrong

  • GAAP results were heavily impacted by a $69.0M non-cash goodwill impairment in Consulting, producing a $(2.23) diluted loss per share and a net loss margin of 52.6% .
  • U.S.-centric segments (On-Demand and Consulting) remained soft amid macro/policy uncertainty and elongated sales cycles; delayed project starts push revenue into Q2 FY2026 .
  • SG&A rose YoY due to prior-year CloudGo earnout benefit and restructuring/ERP amortization, with SG&A at $50.6M (36.3% of revenue) vs $46.4M (31.3%); consultant headcount declined to 2,368 from 2,585 YoY .

Financial Results

Quarterly Financials vs Prior Quarter and Prior Year

MetricQ4 2024Q3 2025Q4 2025
Revenue ($USD Millions)$148.2 $129.4 $139.3
GAAP Diluted EPS ($)$0.31 $(1.34) $(2.23)
Adjusted Diluted EPS ($)$0.28 $(0.08) $0.16
Gross Margin (%)40.2% 35.1% 40.2%
Adjusted EBITDA ($USD Millions)$13.1 $1.7 $9.8
Adjusted EBITDA Margin (%)8.8% 1.3% 7.1%
Net Income (Loss) ($USD Millions)$10.5 $(44.1) $(73.3)
Net Income (Loss) Margin (%)7.1% (34.0)% (52.6)%

Segment Revenue Breakdown

Segment Revenue ($USD Millions)Q2 2025Q3 2025Q4 2025
On-Demand Talent$53.5 $47.1 $53.0
Consulting$60.6 $52.6 $51.0
Europe & Asia Pacific$19.7 $18.6 $21.3
Outsourced Services$9.4 $9.4 $11.3
All Other$2.4 $1.8 $2.8
Total$145.6 $129.4 $139.3

KPIs

KPIQ2 2025Q3 2025Q4 2025
Enterprise Average Bill Rate ($)$123 $123 $125
Average Pay Rate ($)$59 $58 $59
Consultant Headcount (End of Period)2,639 2,514 2,368
Cash and Cash Equivalents ($USD Millions)$78.2 $72.5 $86.1
Dividend per Share ($)$0.14 $0.14 $0.07

Consensus vs Actual (S&P Global)

MetricQ2 2025 Estimate*Q2 2025 ActualQ3 2025 Estimate*Q3 2025 ActualQ4 2025 Estimate*Q4 2025 Actual
Revenue ($USD Millions)137.0*145.6 130.0*129.4 134.5*139.3
Primary EPS ($)(0.063)*0.18 (0.22)*(0.08) (0.030)*0.16
# of Revenue Estimates4*—2*—2*—
# of EPS Estimates3*—1*—3*—

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q1 FY2026N/A$115–$120New
Gross Margin (%)Q1 FY2026N/A36–37New
Run-rate SG&A ($USD Millions)Q1 FY2026N/A$46–$48New
Non-run-rate / Non-cash ($USD Millions)Q1 FY2026N/A$3–$4 (stock comp + ERP amort.)New
Dividend ($ per share)Q4 FY2025Prior: $0.14$0.07Lowered earlier in FY; $0.07 confirmed for Q4

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4)Trend
AI/Technology initiativesEmphasis on digital transformation and ERP; Reference Point acquisition elevated bill rates in Consulting CFO research shows rising AI adoption; integrating AI to source/screen candidates; Countsy introducing more AI tools Increasing adoption and integration
Pricing/value-basedValue-based pricing raised bill rates; Consulting bill rate +6–13% YoY Enterprise bill rate $125; margin beat driven by higher bill rates and favorable medical claims Positive pricing power maintained
Supply chain/tariffs/macroClients cautious; elongated sales cycles; China headwinds noted Asia-PAC growth despite China disruptions related to tariffs/supply chain migration; elongated cycles persist Mixed: regional resilience, macro still choppy
Regional trendsEurope & APAC mixed; APAC rate/mix pressures Europe constant-currency growth 8% QoQ; APAC grew 3% sequentially; U.K. strong Improving internationally
Pipeline quality/sizeQ2/Q3: improved pipeline quality, larger deals but longer cycles Larger >$1M and >$5M opportunities; pipeline creation up, but tighter funnel discipline shrank total pipeline; delays push starts to Q2 Higher quality, slower timing
Cross-sellEarly cross-sell momentum in Consulting Cross-sell into on-demand clients driving deeper engagements Strengthening

Management Commentary

  • “We delivered sequential revenue growth and improved our average bill rates across multiple segments… focusing on cross sell execution… and improving cost efficiency by leveraging our newly launched systems.” — Kate W. Duchene, CEO .
  • “We achieved revenue and gross margin above the high end of our outlook… our diversified services model is allowing us to win work in the most relevant categories for the CFO.” — Kate W. Duchene .
  • “Adjusted EBITDA of $9.8M… strongest quarterly performance in fiscal 2025… enterprise average bill rate increased to $125… Consulting bill rate +13%.” — Jenn Ryu, CFO .
  • “We are optimistic in improving operating leverage by integrating AI tools to source, screen, and engage candidates.” — Kate W. Duchene .

Q&A Highlights

  • Gross margin beat drivers: Double-digit increases in bill rates on new projects and favorable medical claims supported the margin outperformance .
  • Cross-selling traction: Management highlighted uplift in existing on-demand clients by introducing consulting solutions, viewing it as a key upside lever .
  • Q1 guide clarification: Revenue $115–$120M; summer seasonality and delayed projects (won late Q4 but starting Q2) are near-term headwinds; on-demand expected stable on same-day basis .
  • Sales team attrition: Impacted Q4; stabilization underway with ramping new hires; not the primary driver of Q1 softness .
  • Segment outlook: Europe & APAC stable with normal summer impacts; softness concentrated in U.S. consulting and on-demand .

Estimates Context

  • Q4 FY2025: Revenue beat ($139.3M vs $134.5M*); adjusted EPS beat ($0.16 vs $(0.03)). Prior quarter Q3: revenue slight miss ($129.4M vs $130.0M), but adjusted EPS beat ($(0.08) vs $(0.22)). Q2: revenue beat ($145.6M vs $137.0M), adjusted EPS beat ($0.18 vs $(0.06)) .
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Pricing power and mix shift toward higher-value consulting raised bill rates and gross margin, supporting sequential recovery despite macro headwinds .
  • International momentum (Europe & APAC) and outsourced services provide diversification and steadier growth vs U.S. softness; Europe constant-currency growth +8% QoQ; Countsy margin 28% .
  • Near-term setup: Q1 FY2026 guide implies sequential revenue decline due to seasonality and project timing; watch conversion of larger pipeline opportunities into Q2 starts .
  • GAAP optics remain noisy from impairment; adjusted metrics better reflect operating trajectory; monitor further impairments and valuation allowance effects on tax rate .
  • Balance sheet strength (cash $86M, no debt) and ongoing dividend ($0.07) provide flexibility for growth investments and buybacks ($79M remaining authorization) .
  • Tactical trade: Stock may react to sustained bill rate/pricing trends and evidence of deal closures in consulting; near-term sentiment hinges on Q1 run-rate stability vs guide .
  • Medium-term thesis: Cross-sell into on-demand clients, AI-enabled recruiting, and CFO-aligned digital transformation offerings position RGP to expand margin and revenue once cycles normalize .