Resources Connection (RGP) posted an adjusted loss of $0.16 per share for its fiscal first quarter. That matched the Earnings Whisper number and was two cents better than the -$0.18 consensus. Revenue of $98.09 million missed the $99.52 million consensus by 1.4% and fell 18.4% year over year. Adjusted earnings fell 300.0% from a $0.03 profit a year ago. On a GAAP basis, the net loss widened to $8.0 million, or $0.23 per share, from $2.4 million.
The in-line EPS print is not the story. The story is that the top line is still falling and management's own guidance now implies no near-term floor. Quarterly revenue has stepped down from $117.7 million to $107.9 million, then $106.1 million, and now $98.1 million. Second-quarter revenue guidance of $95-100 million is below Street estimates and below the prior quarter's $97-102 million range. That is the central tension: cost discipline is real, but it is being outrun by revenue erosion.
The quality of the quarter deserves scrutiny. Run-rate SG&A of $40.3 million came in below the $41-43 million outlook and fell 9.4% year over year. Management guided Q2 lower still, to $40-42 million, and flagged further cost actions, including applying AI to finance and accounting processes. Yet GAAP SG&A still rose to 43.9% of revenue from 39.9%. Gross margin slipped to 37.4% from 39.5% as utilization of salaried consultants weakened. Adjusted EBITDA deteriorated to -$3.6 million from -$0.6 million in Q4 and +$4.0 million two quarters earlier. The trajectory of profitability is moving the wrong way even as expenses come out.
Consulting is the weak spot:
- Revenue fell 25.8% year over year and 11.6% sequentially to $32.4 million.
- Billable hours dropped 27.1% year over year.
- The segment's adjusted EBITDA margin compressed to 5.1%, from 11.6% a year ago and 6.3% last quarter.
- Salaried consultant utilization fell to the high 50s from the low 60s.
Management pointed to rising North America pipeline creation and growth in its largest strategic accounts. However, it also acknowledged that close dollars stagnated, project starts are slipping, and contracting and onboarding are taking longer. A growing pipeline that is not converting is a weak substitute for bookings.
There are genuine bright spots, mostly on pricing. On-Demand Talent bill rates rose 4.1% to $146 in the release table, from $140; the call cited $145. Management said bill rates are rising faster than pay rates. Consulting rates edged up as well, and Outsourced Services revenue held flat at $10.0 million. But On-Demand revenue still fell 13.2% on a 16.4% drop in hours, and its segment margin fell to 5.3% from 10.0%. Outsourced Services margin dropped to 15.3% from 23.3% despite stable revenue. Europe & Asia Pacific declined 13.9% on a mix shift toward lower-rate markets. Pricing discipline is protecting rates, not volumes.
The forward-looking signals tilted negative:
- Gross margin guidance for Q2 was cut to 36-37% from the 37-38% Q1 range.
- Management did not repeat its earlier commitment to fiscal 2027 revenue growth. Its language shifted toward being "not satisfied" and stressing "urgency and accountability," with payoff from new sales hires still targeted for the second half.
- CFO Jen Ryu departed, and Chief AI Officer Jessica Block stepped in as interim CFO, adding to leadership turnover.
- Cash fell to $61.2 million from $82.4 million after an $18.9 million operating outflow. Much of that reflected the annual incentive payout and transition and restructuring costs.
With no debt and $24.1 million of revolver capacity, liquidity is not an immediate concern. Still, continued losses alongside a $0.07 quarterly dividend, roughly $2.4 million per quarter, will draw scrutiny.
Investor sentiment remained positive and firmed modestly into the report, rising from 0.31 to 0.35. That is a small move, not a vote of conviction. Price action has been less forgiving. Ahead of the report, shares sat at $3.74, about 3.6% below the open after the July release. That left them 18.9% under the August 5 inter-earnings high of $4.61 and just 3.0% above the $3.63 low. The stock has surrendered essentially all of its summer bounce. Earnings Whispers trend readings are mostly negative, with momentum neutral.
The bottom line is that RGP delivered the earnings it promised by cutting costs, but the business underneath is still contracting, and the guidance offers no evidence of a turn. Bulls can point to pricing power, a fuller pipeline and stronger strategic accounts. Bears have legitimate ammunition in falling consulting volumes, weaker utilization, a lowered margin outlook, the dropped growth commitment and another CFO change. Until pipeline growth shows up in close dollars and project starts, cost cuts alone are unlikely to change the setup.