Q2 2025 Resources Connection Inc Earnings Call
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, sidecar 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.
We'll 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 <unk> 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 the <unk> report on Form 10-K for the year ended May 25, 2024 for a discussion of risks uncertainties and other factors that may cause the company's business results of operations and financial condition.
To differ materially from what is expressed or implied by forward looking statements made during this call.
Kate Mcshane: Now I'll turn the call over to <unk> CEO Kate Mcshane.
Kate Mcshane: 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 topline revenue essentially.
Kate Mcshane: 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 six 6% up from $2 3 million in Q1.
Kate Mcshane: While overall results were still off year over year as expected all measures exceeded our outlook.
Kate Mcshane: Turning to performance highlights first Europe improved topline sequentially by 18%, while Asia also grew steadily at 4% delivering overall segment improvement of 10%.
Kate Mcshane: The on demand segment revenue was up slightly from Q1 and continuing to stabilize our consulting segment <unk> grew 10% in Q2 with improved bill rates and utilization metrics.
Kate Mcshane: Outsourced services business County was essentially flat sequentially and grew 4% year over year, adding 25, new logos during the quarter.
Kate Mcshane: These positive results reinforce the soundness of our long term strategy and demonstrate steady progress in our business against the 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.
Kate Mcshane: 75% of our business is now run on a modern state of the art technology platform, enabling increased use of artificial intelligence and automation and the delivery of our services as well as back office operations.
Kate Mcshane: We expect these new tools will drive greater efficiency in our processes and accelerate speed to market across the enterprise.
Kate Mcshane: The significant technology modernization is also highly beneficial as we increase the use of global team to deliver services, especially in the finance and accounting risk and compliance and digital transformation practices.
Kate Mcshane: Want to applaud our entire project team, especially our management employees and our GP consultants for the excellent implementation plan and hard work to deliver this major initiative.
Kate Mcshane: We will continue to execute our plan to rollout the technology to our international regions.
Kate Mcshane: As we embark on the second half of our fiscal year, we're going to drive continued progress against our strategy to deliver diversified service offerings through our exceptional clients, our rich portfolio of diversified offerings encompassing professional staffing support consulting and outsource services.
<unk> creates a strategic powerhouse that we believe will drive value for our investors over the long term.
Kate Mcshane: Let's review a few of the advantages.
Kate Mcshane: First our model is designed to meet clients, where they are and serve them in a truly tailored fashion.
Kate Mcshane: In todays interconnected and fast paced economy businesses face multifaceted challenges that require customized solutions offering professional staffing consulting and outsourcing allows us to address clients' challenges, both flexibly and holistically depending.
Kate Mcshane: On whether they need to fill immediate talent gaps review and refine strategy or design lead and execute a project all the way through.
Kate Mcshane: This constructive collaboration ensures that clients can choose how and when to engage and also receive end to end solutions under one roof saving time and reducing complexity.
Kate Mcshane: Second diversified offering better positions, our GP to be a preferred partner in both good times and bad in the years ahead.
Kate Mcshane: Market dynamics are constantly shifting and businesses must remain agile to succeed diversified service offerings enable our clients to pivot based on immediate needs and market conditions. For example, during periods of rapid growth on demand services can ramp up workforce capacity without the.
Kate Mcshane: Risks associated with permanent hires.
Kate Mcshane: During downturns consulting helped to optimize operations with process redesign and cost containment initiatives and outsourcing ensures critical functions are maintained.
Kate Mcshane: We believe this adaptability will strengthen <unk> market position throughout economic cycles moving forward as it is intended to build inherent resilience and shield the business from cyclical impact.
Kate Mcshane: <unk> diversification also deepens client relationships by enabling our GP to function as a trusted advisor rather than a one off vendor by serving our client holistically, we gain a comprehensive understanding of their business challenges and goals.
Kate Mcshane: This knowledge foster stronger partnerships increased trust and long term collaborations our clients are more likely to rely on us since we evolved with their needs and offer a seamless client experience rather than fragmented solutions, we can create economies of scale that translate into cost savings for <unk>.
Speaker Change: Clients, but rush will share specific examples of this cross sell dynamic in contracts. We have recently won as well as our pipeline.
Speaker Change: Finally, our diversified services portfolio also attracts a wide array of talent from consultants, who excel at strategy to specialists, who thrive in execution there.
Speaker Change: This diverse talent pool fosters innovation as professionals with different skill sets collaborate to solve problems creatively. Additionally, the integration of services promotes cross functional expertise offering clients insights and solutions informed by a broader perspective veracity for example.
Speaker Change: It's growing in partnership with our on demand business building scalable consulting teams that bring together strategists and execution specialists.
Speaker Change: References point, our financial services strategy group and on demand also collaborated to close multiple contracts during the quarter that each would not have successfully pursued alone.
Speaker Change: <unk> flexible talent model continues to be a key differentiator and growth driver for the business, even as we are deepening our consulting capabilities and serving clients in new ways.
Speaker Change: The time is now to bring our diversified offerings to market as the global professional services industry is poised for growth and transformation in the next five years. According to research published by statistic.
Speaker Change: The industry is expected to grow to 95 billion worldwide by 2029 or a CAGR of 6%.
In addition, the finance accounting risk and compliance sectors within professional services are poised for significant changes in 2025 and beyond as a result, the global finance and accounting professional services market is expected to grow at a compound annual growth rate of over 9% from 2022.
27 as reported by Grand view research, our Gp's core buyer has traditionally been the CFO and or his or her direct reports and now we have more to offer that buyer than ever before.
Speaker Change: As such we are successfully engaging our long standing CFO relationships to introduce us to additional buyers and our client environment.
Speaker Change: This is particularly true for consulting services focused on transformation spanning finance human resources supply chain customer and employee experience with almost every client spending on technology data and digital transformation initiatives, we now have a rich <unk>.
Speaker Change: Services portfolio that is aligned with market demand.
Speaker Change: Veracity for example, uniquely brings together domain technical and UX expertise to lead and deliver such projects with differentiated value and flexibility.
Speaker Change: In closing, we beat expectations this quarter as we continue to transform our GP as a global partner to our clients for services critical to the future of their businesses. The changes we have undertaken to strengthen the business and our position in the marketplace are not easy but necessary to enhance.
Speaker Change: Long term value for our stakeholders, we are heads down and the execution of our strategy and are making steady progress. We are excited and optimistic on the long term outlook is reinforced by the board's recent authorization to increase our stock buyback program I'll now turn the call to progress to provide more color.
Speaker Change: Around our Q2 performance and the signs of inflection trends, we're closely tracking as we look ahead.
Speaker Change: Thank you Kate and happy New year, I am 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.
<unk> as a challenger brand uniquely empowering our clients to select how they prefer to engage with us throughout their transformation and operational journey, while eliminating the internal barriers that can hinder progress.
Speaker Change: This quarter, we made significant strides in cross selling optimizing our pricing approach and improving operational efficiency.
Speaker Change: As a result, we achieved sequential growth for the first time in nine quarters at six 3% along with a 4% improvement in average weekly run rate and an increase in hourly bill rate compared to our previous quarter.
Speaker Change: 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.
Speaker Change: <unk> 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.
Speaker Change: While we remain cautiously optimistic about the state of the macro environment.
Speaker Change: Especially as it drives our on demand segment, the stability of our overall business gives us confidence in our established baseline moving forward.
Speaker Change: Actually we're seeing positive results from our pricing initiatives on new contracts achieved notable rate increases highlighting the growing demand for our service offerings and the recognition of the value we provide to our clients.
Speaker Change: Now I'll provide an update on our quarterly performance by segment, our consulting segment achieved six 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 higher level conversations around client transformation initiatives.
We continue bringing our consulting capabilities together with reference point expertise in data digital and AI is adding significant depth to the value we deliver to a broader range of clients beyond financial services.
Speaker Change: Including reference point, our consulting segment revenue grew 10, 2% from the first fiscal quarter.
Speaker Change: <unk> utilization rates have also increased while we continue to balance rising pay rates with improved bill rates. This.
Speaker Change: This quarter was secured several consulting contracts valued at over $1 million and are actively pursuing multiple opportunities each with a potential value exceeding $10 billion.
Speaker Change: Each of those wins and opportunities is representative of the momentum and the differentiation, we have been working hard to build and communicate to the marketplace.
Speaker Change: On demand segment achieved growth of one 9% in topline revenue alongside an improvement in gross margin compared to the first quarter. Despite macroeconomic challenges the businesses benefiting from our cross selling efforts, which are driving incremental opportunities and strengthening client relationships. We're flexible on demand talent model is also a key driver of our consulting business.
Speaker Change: Celebrating project staffing and enabling us to scale more quickly while mitigating the financial risk of a traditional bench model.
Speaker Change: Our Europe and Asia Pacific segment achieved sequential quarterly growth as Keith mentioned earlier.
This is a positive step given the broader regional challenges in Asia Pacific Our business remained stable, while we continue to leverage existing relationships to navigate inherent geographic complexity.
Speaker Change: We're also our services segment remains on track with the majority of the wins coming from early stage clients in the technology sector, the combination of new business and expanding existing relationships lends confidence in our ability to sustain this momentum.
Speaker Change: While we relentlessly execute our growth strategy, we continue to refine our operating model to enhance the efficiency with which we deliver our services one of the key steps. We've taken this quarter is the consolidation of our talent acquisition and go to market organizations, enabling us to serve our segments more centrally streamline talent acquisition and align resources to better meet the needs.
Speaker Change: Of our clients across segments.
Speaker Change: As Kate mentioned, we are officially live with our North America technology and digital transformation efforts will soon begin our efforts to migrate our international operations onto our new platform.
Speaker Change: In summary, we're excited by the progress, we're making on all fronts, including strategy execution financial performance pipeline growth and operational efficiency. This is only our second quarter under our new operating model and we're already seeing tangible results reflected in the financial performance we reported today.
Speaker Change: While the macroeconomic environment presents uncertainty our focus on cross selling and driving efficiency across the business puts us in a strong position to continue growing and optimizing our operations in the quarters ahead, I will now hand, the call over to John.
John: Thank you address and happy new year to everyone in the second quarter of fiscal 'twenty five we achieved significant revenue and adjusted EBITDA growth over the first fiscal quarter and narrow the year over year performance gap. In addition, we outperformed our second quarter outlook ranges on all fronts.
Total revenue was $1 $45 6 million.
A sequential growth of 5% over Q1 of fiscal 25 on a same day constant currency basis.
John: 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.
John: We're pleased to see either stabilization or growth in all segments of the business and were especially encouraged by the notable sequential improvement in our consulting and Europe and Asia Pac segment.
John: While the macro environment remained more or less the same with clients still hesitant to commit we have seen more top of the funnel client activity. This quarter. Our cross sell efforts are yielding early successes and contributed to a steady improvement in our weekly revenue run rates throughout the second quarter.
John: 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.
John: Impaired to the prior year quarter, our gross margin was off just 40 basis points year over year payout ratio and bench utilization were less favorable however, the timing of the Thanksgiving holiday not being in the second quarter of this year provided a boost to the gross margin.
John: Despite the competitive pricing environment across the globe, we improved enterprise wide average bill rate to $123 constant currency from $1 22, a year ago. Our U S average bill rate increased $266, which is a 4% increase from the prior year quarter and a 2% increase from Q.
John: One as we strive to push for higher bill rates in all geographic regions revenue mix across the globe will continue to be reflected in our total company average bill rate, especially as we increasingly leverage nearshore and offshore delivery team.
John: Now onto SG&A, our enterprise run rate SG&A expense for the quarter was $46 5 million.
John: A 2% improvement from the prior year quarter, primarily driven by lower management compensation expense as a result of actions taken in the previous year to reduce fixed cost as well as our continued cost discipline.
John: In summary, with our improving enterprise top line gross margin and run rate SG&A expense, we delivered adjusted EBITDA of $9 7 million in the second quarter or six 6% adjusted EBITDA margin a significant improvement from the first quarter margin of one 7%.
John: Next I'll provide color on segment performance all year over year percentage comparisons for revenue, our adjusted for business days and currency impact.
John: Revenue for our consulting segment was $66 million up slightly from $59 1 million in the prior year quarter.
John: However, it's flat year over year after adjusting for business days and currency impact.
John: Second quarter consulting revenue includes $6 1 million from acquisitions made over the past year.
John: Segment, adjusted EBITDA was $9 $7 million or a 16% margin compared to $10 9 million or 19% margin in the prior year quarter.
John: Revenue for our on demand segment was $53 $5 million compared to $70 9 million in the prior year quarter of <unk>.
John: Decline of 27% on an adjusted basis.
John: Segment, adjusted EBITDA was $5 $6 million or a margin of 11% compared to $8 $7 million or a 12% margin in the prior year quarter.
John: Turning to our Europe, and Asia Pac segment revenue was $19 7 million compared to $21 8 million in the prior year quarter, a decline of 12%.
John: Segment, adjusted EBITDA was $1 $5 million went 8% margin compared to $1 $7 million and also an 8% margin in the prior year quarter.
Finally, our outsourced services segment revenue was $9 4 million up from $9 1 million in the prior year quarter or a growth of 1%.
John: Segment, adjusted EBITDA was $1 5 million or 16% margin compared to $1 8 million or 20% margin in the prior year quarter.
John: As always segment adjusted EBITDA excludes certain shared corporate costs.
John: I also want to note, we recorded a noncash goodwill impairment charge of $79 5 million in the second quarter in response to the drop in our market capitalization and the delayed recovery in business performance in both our on demand in Europe and APAC segments.
John: $57 8 million was recorded for our on demand segment and $21 7 million was recorded for our Europe and Asia Pac segment.
John: Turning to liquidity, our balance sheet remains pristine was $78 million of cash and cash equivalents and zero outstanding debt and we generated $23 million of free cash flow for the trailing 12 month period.
John: We distributed $4 $7 million worth of dividends in the second quarter, implying a yield over 6% at our current stock price and repurchased $5 million worth of shares at an average price of $8 36 per share.
John: In connection with our technology implementation, we capitalized $20 million with an implementation costs, which we expect to amortize starting in the third quarter.
John: With the majority of the implementation effort completed we expect cash flows from operations to improve starting now in the second half of fiscal 'twenty five.
John: With total available financial liquidity of $252 million, we will continue to invest in high growth areas in the business return cash to shareholders through dividends and engage in share buybacks under our share repurchase program with $82 million remaining at the end of the quarter. Following our board's additional authorization of 50 million.
During the quarter.
John: I will now close with our third quarter outlook.
John: Early third quarter weekly revenue run rate has shown continued uptick through mid December.
John: While we are encouraged to see improving trends third quarter revenue will be impacted by the typical global holidays as well as a following idiosyncrasies in terms of timing of the holiday.
John: First given how the fiscal year calendar for the third quarter will include Thanksgiving holiday.
John: Total U S business days in the third quarter. It will be only 59 compared to 64 in the second quarter and 61 in the prior year third quarter.
John: Second the midweek timing of both Christmas day, and New year's day is expected to impact billable hours due to consulting and clients holiday schedules Pat.
John: Past experience suggest that the midweek timing of both holidays could result in an additional two business day impact to revenue.
John: As such we remain cautious in our revenue expectation in the third quarter and guide to $127 million to $1 $32 million.
John: We estimate gross margin to be in the range of 34% to 35%, reflecting the same holiday impact I just summarized on.
John: On the SG&A front, we expect our third quarter run rate SG&A to be in a range of $46 million to $48 million. This outlook range includes the savings from the reduction in force we executed in early December offset by the employer payroll tax reset in the new calendar year, as well as amortization and other costs associated.
John: With the recently launched technology platform.
John: Non run rate and noncash expenses for the third quarter will primarily consist of restructuring costs associated with the reduction enforced stock compensation expense and the remaining technology transformation costs totaling approximately $6 million.
John: In closing we are proud of the progress we've made so far to enhance execution under the new operating structure and we're encouraged by the early momentum we're seeing in the business as reflected in our second quarter results.
John: With improving economic certainty over time, we believe we are well positioned for a sustained return to growth.
John: This concludes our prepared remarks, and we will now open the call for Q&A.
John: As a reminder to ask a question you will need to press star one on your telephone to them.
Move yourself from the queue you May press Star one again.
John: Please standby, while we compile the Q&A roster.
Yeah.
John: Our first question.
Speaker Change: Comes from the line of Joe Gomes of Noble capital. Your question. Please Joe.
Joe Gomes: Thank you and good evening.
Speaker Change: Okay.
Speaker Change: So first I wanted to start out.
Speaker Change: Gross margin as you mentioned was significantly higher than both the guide and year over year.
Speaker Change: Our.
Speaker Change: Sequentially I was just wondering if you could drill down a little bit more.
Speaker Change:
Speaker Change: The gross margin improvement.
John: Hi, Joe This is John happy New year, Yes, so gross margin improvement over Q1.
Speaker Change: We have some a little bit of improvement on the pay Bill ratio standpoint, we also improved our overall utilization essentially bolted and into holiday.
Speaker Change: Impact as well in if you're looking at Q2 compared to Q1, that's what's driving the gross margin improvement quarter over quarter.
Speaker Change: And then some year over year standpoint, as I stated in my remarks, there is a little bit of degradation in the PDL ratio.
Speaker Change: Mostly what we're seeing some pressure.
Speaker Change: Mostly across our international region in EU and in APAC really due to some of this is the pilot shortage that we are seeing some pressure there utilization is a little bit less favorable than in the prior year.
Got it.
Speaker Change: We had favorable holiday impact so you can figure year over year because of the Thanksgiving holiday and so that sort of offset that offset a little bit of the utilization and the pay deal dynamics I just talked about.
Speaker Change: That helps.
Speaker Change: Yes, yes. Thank you.
Yes.
Speaker Change: Follow up on reference point.
How is that is that meeting your expectations exceeding maybe just give us a little more color.
Speaker Change: On how reference point is performed in the quarter and how it's set up going forward.
Yes, Joe Hi, and happy New year, it's Kate.
Speaker Change: Reference point is performing to our expectations.
Kate Mcshane: 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.
Kate Mcshane: 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.
Speaker Change: Okay, Great and then just one more for me if I can sneak it in.
Speaker Change: Last quarter, you talked about being a little more focus on stock buybacks.
Speaker Change: You did buy back another $5 million in the quarter, but that was flat with what you did.
Speaker Change: In the previous quarter or is there something that.
Speaker Change: For a reason why you didn't.
Speaker Change: Be a little more aggressive on the stock buybacks or is that just kind of a timing issue.
Joe Gomes: Yes, Joe I can answer that yes, it's a little bit of timing, it's not really an issue.
Joe Gomes: We've just completed our digital our technology transformation.
We're more bullish about the.
Joe Gomes: <unk> research they are doing more of that and we just wanted to kind of get through the technology transformation first now that that's behind us.
Joe Gomes: Do you expect that globe will pick up back to these are a little bit more.
Okay, great. Thank you for answering my questions I'll get back in queue.
Jeff: Thanks, Jeff.
Joe Gomes: Thank you.
Jeff: Our next question.
Speaker Change: Comes from the line of Alexander Sinatra of RW Baird. Your question. Please Alexander.
Speaker Change: Hi, I, just wanted to take and Greg Congratulations on the good results. This quarter first I was just wondering a little bit.
Speaker Change: Demand domestically and in Europe, you did mentioned improvement in Europe, and Asia. So I was just looking for a little bit more color on that.
John: Hi, This is John happy.
Speaker Change: Happy new year everyone.
Speaker Change: We're seeing.
Speaker Change: Yes.
Speaker Change: One of the businesses and their core 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.
Speaker Change: And that's where we're focused.
Speaker Change: There is 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.
Speaker Change: Okay. Thank you and then I just had a quick follow up.
Speaker Change: On how we should think about I guess the impact of the amortization of those tech transformation transformation costs of those anything any kind of color you can give on that.
Speaker Change: The annual amortization expense.
Speaker Change: Is going to be around $3 million.
Speaker Change: So we're going to start to amortize this.
Speaker Change: Halfway through.
Speaker Change: Through Q3, and so Q4 will be the first quarter with the full impact of the amortization.
Speaker Change: Alright, great. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Comes from the line of Andrew Steinman Jpmorgan. Your line is open to Andrew.
Andrew Steinman: Hi, I have two questions. The first one is I assume that the months of November and December.
Speaker Change: To get to calendar year end for your clients.
Speaker Change: What type of clients to finish up projects. So I was just wondering as you look at your months of November December how does the pace of current project and look versus a typical year and my second question is for Jan what do you look at the midpoint of the revenue range that you gave for third fiscal quarter.
Speaker Change: Would be the year over year.
Speaker Change: <unk> adjusted for any M&A that you mentioned as well as on a same day basis.
Speaker Change: Hi, Mark this is progress from a from a trend perspective of November December and project ending I think we're living through times, where every year is pretty unique and.
Speaker Change: Last year.
Speaker Change: There was a lot more pressure on clients and not making decisions and spend.
Speaker Change: So in that sense, we are seeing more of that activity on the second pieces.
Speaker Change: A lot of our projects, we don't have the cyclicality that traditional firms. He used to have historically, where things ended in November December so we manage all.
Speaker Change: All day long every day across projects and managing a refilling that so we're not seeing those into your cluster to your 10.
Speaker Change: In Q2 compared to last year either.
Speaker Change: Just a matter of continuing to work in managing the work is attending and filling it up you're extending.
Speaker Change: And I'll, let Jonathan good question.
Yeah.
Speaker Change: At the midpoint of the guidance range for revenue.
Speaker Change: 15% year over year decline.
Speaker Change: On an organic same day constant currency basis.
Speaker Change: Thank you I appreciate it.
Speaker Change: Yes.
Speaker Change: Thank you once again to ask a question. Please press star one on your telephone again Thats Star one one on your telephone to ask a question.
Speaker Change: Our next question comes from the line of Marc Riddick of Sidoti. Please go ahead Marc.
Marc Riddick: Hey, good afternoon, and happy new year everyone.
Speaker Change: Hi, Mark.
Speaker Change: So I wanted to talk a little bit you mentioned in your prepared remarks, a couple of times.
Speaker Change: <unk>.
The cross selling.
Speaker Change: Benefits and some of the early.
Speaker Change: Our success is that Youre seeing there I was wondering if there is.
Speaker Change: Anything additional that you could share there as to maybe some of the areas that were.
Receptive I think.
Speaker Change: And of course financial services, but were there any particular project types of service types that better or worse.
Speaker Change: Or more receptive initially yes. This is madras.
Speaker Change: Hi.
Speaker Change: We're finding is in.
Speaker Change: 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.
Speaker Change: And then we're seeing opportunities in supply chain modernization, especially coupled with brand and UX.
Speaker Change: That's kind of where we're seeing a lot more activity.
Speaker Change: We are focusing into our existing clients under spend that theyre looking at which are aligned to kind of the strategy that we've laid out for.
Speaker Change: Where we're focused in the organization and in the market.
Speaker Change: Excellent and then.
Speaker Change: Hi, Good afternoon, I think you made mentioned as far as.
Speaker Change: The timing of going live on.
Speaker Change: On some of the platforms.
Speaker Change: After the end of this.
Speaker Change: Second quarter, if I, if I remember hearing that roughly half maybe you could talk a little bit it seems like obviously a fairly shortly.
Speaker Change: And maybe you can share maybe a little bit of upward Mitchell.
Speaker Change: Thoughts as to how soon moving that way.
Speaker Change: Hiccups anything that we should be thinking about there.
Speaker Change: Yeah Yeah.
Speaker Change: Yes.
Jeff why like December 'twenty, one I would say with the go live when.
Speaker Change: Very smoothly.
Speaker Change: And implementation of this size you expect small things here and there is not perfect, but we were able to walk through everything.
Speaker Change: The first couple of weeks post go live all of the major kind of critical milestone.
Speaker Change: We were able to complete that successfully.
Speaker Change: We have a very robust hyper care structure in place to triage and resolve issues. All in all I would say that this is a very very successful go lives.
Speaker Change: And then it's a limitation.
Speaker Change: That's very encouraging and then Canada.
Speaker Change: So I wanted to ask as you thought it.
Speaker Change: It might be one of the large companies that folks are asking this up but due to the timing of when you last reported.
Speaker Change: 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 you know maybe you can talk a little bit about.
<unk>.
Speaker Change: 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.
Speaker Change: Yeah.
Speaker Change: Hey, Mark and again happy new year, So I would characterize the sentiment post election as generally more positive in our dialogue with clients.
Speaker Change: Its not that Theyre pull.
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.
Speaker Change: Overall, I'd say, it's more optimistic.
Speaker Change: 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.
Speaker Change: There is a strong belief that there will be more transactional work.
Speaker Change: Coming which always provides opportunity for us whether that subset finance and accounting or risk and regulatory work, but also the associated project management and change management work that happens with transactions.
Speaker Change: And integration support and I think more dialogue is happening about some <unk>.
Speaker Change: Pending activities that are starting to open up in our client base.
Speaker Change: With respect to the last administration versus now I mean.
Speaker Change: <unk> change as a driver of opportunity tax change is a driver of opportunity.
Speaker Change: And again I go back to a more active M&A environment.
Speaker Change: Very helpful. Thank you very much thanks Mark.
Speaker Change: Thank you I would now like to turn the conference back to Kate to Shane for closing remarks.
Speaker Change: 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 'twenty five thanks, again and best wishes for a wonderful year. Thank you.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
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Speaker Change: Good afternoon.
Speaker Change: Ladies and gentlemen, and welcome to the Resources Connection Inc. Conference call. Currently all participants are in a listen only mode.
Speaker Change: We will conduct a question and answer session and instructions will follow at that time.
Speaker Change: Reminder, the sidecar is being recorded.
Speaker Change: At this time I would like to remind everyone that management will be commenting on results for the second quarter ended November 21 2024.
Speaker Change: We 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 press release issued today.
Speaker Change: Today's press release can be viewed in the Investor Relations section of <unk> website and filed today with the SEC.
Speaker Change: Also during this call management may make forward looking statements regarding plans initiatives and strategies and the anticipated financial performance of the company.
Speaker Change: Such statements are predictions and actual events or results may differ materially.
Speaker Change: Please see the risk factors section in the <unk> report on Form 10-K for the year ended May 25, 2024 for a discussion of risks uncertainties and other factors that may cause the company's business results of operations and financial condition.
To differ materially from what is expressed or implied by forward looking statements made during this call.
Shang: I'll now turn the call over to <unk> CEO <unk> Shang.
Shang: 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 essentially by over.
Shang: 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 six 6% up from $2 3 million in Q1, while overall results were still off year over year as expected all measures exceeded our outlook.
Shang: Turning to performance highlight first Europe improved topline sequentially by 18%, while Asia also grew steadily at 4% delivering overall segment improvement of 10%.
Shang: The on demand segment revenue was up slightly from Q1, and it's continuing to stabilize our consulting segment <unk> grew 10% in Q2 with improved bill rates and utilization metrics.
Shang: Outsource services business County 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 demonstrates steady progress in our business against the macro backdrop that remains choppy.
Shang: 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 seven.
Shang: 85% 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 <unk>.
Speaker Change: Salary speed to market across the enterprise the.
The significant technology modernization is also highly beneficial as we increase the use of global team to deliver services, especially in the finance and accounting risk and compliance and digital transformation practices I want to applaud our entire project team, especially our management employee.
Speaker Change: <unk> and our GP consultants for the excellent implementation plan and hard work to deliver this major initiative.
We will continue to execute our plan to rollout the technology to our international regions.
Speaker Change: As we embark on the second half of our fiscal year, we're going to drive continued progress against our strategy to deliver diversified service offerings to our exceptional clients, our rich portfolio of diversified offerings encompassing professional staffing support consulting and outsource service.
<unk> creates a strategic powerhouse that we believe will drive value for our investors over the long term.
Speaker Change: Let's review a few of the advantages.
First our model is designed to meet clients, where they are and serve them in a truly tailored fashion.
In todays interconnected and fast paced economy businesses face multifaceted challenges that require customized solutions.
Speaker Change: Offering professional staffing consulting and outsourcing allows us to address clients' challenges, both flexibly and holistically, depending on whether they need to fill immediate talent gaps review and refined strategy or design lead and execute a project all the way through.
Speaker Change: This constructive collaboration ensures that clients can choose how and when to engage and also receive end to end solutions under one roof saving time and reducing complexity.
Second diversified offering better positions, our GP to be a preferred partner in both good times and bad in the years ahead market dynamics are constantly shifting and businesses must remain agile to succeed diversified service offerings enable our clients to pivot based on <unk>.
Speaker Change: Mediate needs and market conditions for example during periods of rapid growth on demand services can ramp up workforce capacity without the risks associated with permanent hires.
Speaker Change: During downturns consulting helped to optimize operations with process redesign and cost containment initiatives and outsourcing ensures critical functions are maintained that issue.
Speaker Change: We believe this adaptability will strengthen our GPS market position throughout economic cycles moving forward as it is intended to build inherent resilience and shield the business from cyclical impact.
Speaker Change: Next diversification also deepens client relationships by enabling our GP to function as a trusted advisor rather than a one off vendor by serving our clients Holistically, we gain a comprehensive understanding of their business challenges and goals.
Speaker Change: This knowledge foster stronger partnerships increased trust and long term collaborations our clients are more likely to rely on us since we evolved with their needs and offer a seamless client experience rather than fragmented solutions, we can create economies of scale that translate into cost savings for <unk>.
Speaker Change: Clients, but Raj will share specific examples of this cross sell dynamic in contracts. We have recently won as well as our pipeline.
Speaker Change: Finally, a diversified services portfolio also attracts a wide array of talent from consultants, who excel at strategy to specialists, who thrive in execution.
Speaker Change: This diverse talent pool fosters innovation as professionals with different skill sets collaborate to solve problems creatively. Additionally, the integration of services promotes cross functional expertise offering clients insights and solutions informed by a broader perspective veracity for example.
Speaker Change: It's growing in partnership with our on demand business building scalable consulting teams that bring together strategists and execution specialists.
Speaker Change: Reference point, our financial services strategy group and on demand also collaborated to close multiple contracts during the quarter that each would not have successfully pursued alone. Our GPS flexible talent model continues to be a key differentiator and growth driver for the business.
Speaker Change: Even as we are deepening our consulting capabilities and serving clients in new ways.
The time is now to bring our diversified offerings to market as the global professional services industry is poised for growth and transformation in the next five years. According to research published by statistic the.
The industry is expected to grow to 95 billion worldwide by 2029 or a CAGR of 6%.
Speaker Change: In addition, the finance accounting risk and compliance sectors within professional services are poised for significant changes in 2025 and beyond as a result, the global finance and accounting professional services market is expected to grow at a compound annual growth rate of over 9% from 2022.
Speaker Change: 27 as reported by Grand view Research Rvp's core buyer has traditionally been the CFO and or his or her direct reports and now we have more to offer that buyer than ever before.
Speaker Change: As such we are successfully engaging our long standing CFO relationships to introduce us to additional buyers and our client environments. This is particularly true for consulting services focused on transformation spanning finance human resources supply chain customer and employee.
Speaker Change: Your experience with.
Speaker Change: With almost every client spending on technology data and digital transformation initiatives. We now have a rich services portfolio that is aligned with market demand.
Veracity for example, uniquely brings together domain technical and UX expertise to lead and deliver such projects with differentiated value and flexibility.
In closing, we beat expectations this quarter as we continue to transform our GP as a global partner to our clients for services critical to the future of their business at the changes we have undertaken to strengthen the business and our position in the marketplace are not easy but necessary to enhance.
Speaker Change: The long term value for our stakeholders, we are heads down and the execution of our strategy and are making steady progress. We are excited and optimistic on the long term outlook is reinforced by the board's recent authorization to increase our stock buyback program I'll now turn the call to progress to provide more color.
Around our Q2 performance and the signs of inflected trends, we're closely tracking as we look ahead.
Speaker Change: Thank you Kate and happy New year, I am 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.
Speaker Change: <unk> as a challenger brand uniquely empowering our clients to select how they prefer to engage with us throughout their transformation and operational journey, while eliminating the internal barriers that can hinder progress.
Speaker Change: This quarter, we made significant strides in cross selling optimizing our pricing approach and improving operational efficiency.
Speaker Change: As a result, we achieved sequential growth for the first time in nine quarters at six 3% along with a 4% improvement in average weekly run rate and an increase in hourly bill rate compared to our previous quarter.
Speaker Change: 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.
Speaker Change: <unk> 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.
Speaker Change: Especially as it drives our on demand segment, the stability of our overall business gives us confidence in our established baseline moving forward. Additionally.
Speaker Change: Additionally, we're seeing positive results from our pricing initiatives on new contracts achieved notable rate increases highlighting the growing demand for our service offerings and the recognition of the value we provide to our clients.
Speaker Change: Now I'll provide an update on our quarterly performance by segment.
Speaker Change: Consulting segment achieved six 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 higher level conversations around client transformation initiatives as.
Speaker Change: As we continue bringing our consulting capabilities together with reference point the expertise in data digital and AI is adding significant depth to the value we deliver to a broader range of clients beyond financial services, including reference point, our consulting segment revenue grew 10, 2% from the first fiscal quarter.
Speaker Change: Thanks utilization rates have also increased while we continue to balance rising pay rates with improved bill rates. This quarter was secured several consulting contracts valued at over $1 million and are actively pursuing multiple opportunities each with a potential value exceeding $10 million.
Speaker Change: Each of those wins and opportunities is representative of the momentum and the differentiation, we have been working hard to build and communicate to the marketplace.
Speaker Change: On demand segment achieved growth of one 9% in top line revenue alongside an improvement in gross margin compared to the first quarter. Despite macroeconomic challenges the businesses benefiting from our cross selling efforts, which are driving incremental opportunities and strengthening client relationships. We're flexible on demand talent model is also a key driver of our consulting business.
Speaker Change: Accelerating project staffing and enabling us to scale more quickly while mitigating the financial risk of a traditional bench model.
Speaker Change: Our Europe and Asia Pacific segment achieved sequential quarterly growth as Keith mentioned earlier.
Speaker Change: This is a positive step given the broader regional challenges in Asia Pacific Our business remained stable, while we continue to leverage existing relationships to navigate inherent geographic complexity.
Speaker Change: We're also our services segment remains on track with the majority of the wins coming from early stage clients in the technology sector, the combination of new business and expanding existing relationship Linda confidence in our ability to sustain this momentum.
Speaker Change: While we relentlessly execute our growth strategy, we continue to refine our operating model to enhance the efficiency with which we deliver our services one of the key steps. We've taken this quarter is the consolidation of our talent acquisition and go to market talent organizations, enabling us to serve our segments more centrally streamline talent acquisition and align resources to better meet the needs.
Speaker Change: Of our clients across segments.
Speaker Change: As Kate mentioned, we are officially live with our North America technology and digital transformation efforts. We will soon begin our efforts to migrate our international operations onto our new platform.
Speaker Change: In summary, we're excited by the progress, we're making on all fronts, including strategy execution financial performance pipeline growth and operational efficiency. This is only our second quarter under our new operating model and we're already seeing tangible results reflected in the financial performance we reported today.
Speaker Change: While the macroeconomic environment presents uncertainty our focus on cross selling and driving efficiency across the business puts us in a strong position to continue growing and optimizing our operations in the quarters ahead, I will now hand, the call over to John.
Speaker Change: Thank you address and happy new year to everyone in the second quarter of fiscal 'twenty five 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.
Speaker Change: Total revenue was $145 6 million.
A sequential growth of 5% over Q1 of fiscal 'twenty five on a same day constant currency basis.
Speaker Change: 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.
Speaker Change: We're pleased to see either stabilization or growth in all segments of the business and were especially encouraged by the notable sequential improvement in our consulting in Europe and Asia Pac segment.
Speaker Change: 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 rates throughout the second quarter.
Speaker Change: 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.
Speaker Change: Compared to the prior year quarter, our gross margin was off just 40 basis points year over year payable ratio in bench utilization were less favorable however, the timing of the Thanksgiving holiday not being in the second quarter of this year provided a boost to the gross margin.
Speaker Change: Despite the competitive pricing environment across the globe, we improved enterprise wide average bill rate to $123 constant currency on $1 22, a year ago. Our U S average bill rate increased $266, which is a 4% increase from the prior year quarter and a 2% increase from Q.
Speaker Change: One as we strive to push for higher bill rate in all geographic regions revenue mix across the globe will continue to be reflected in our total company average bill rate, especially as we increasingly leverage nearshore and offshore delivery team.
Speaker Change: Now onto SG&A, our enterprise run rate SG&A expense for the quarter was $46 5, million% to 2% improvement from the prior year quarter, primarily driven by lower management compensation expense as a result of actions taken in the previous year to reduce fixed costs as well as our continued cost discipline.
Speaker Change: In summary, with our improving enterprise top line gross margin and run rate SG&A expense, we delivered adjusted EBITDA of $9 $7 million in the second quarter or six 6% adjusted EBITDA margin a significant improvement from the first quarter margin of one 7%.
Speaker Change: Next I'll provide color on segment performance.
Speaker Change: Year over year percentage comparisons for revenue, our adjusted for business days and currency impact.
Speaker Change: Revenue for our consulting segment was $66 million up slightly from $59 1 million in the prior year quarter. However, it flat year over year after adjusting for business days and currency impact.
Second quarter consulting revenue includes $6 1 million from acquisitions made over the past year.
Speaker Change: Segment, adjusted EBITDA was $9 $7 million or a 16% margin compared to $10 9 million or 19% margin in the prior year quarter.
Speaker Change: Revenue for our on demand segment was $53 5 million compared to $70 9 million in the prior year quarter, a decline of 27% on an adjusted basis.
Speaker Change: Segment, adjusted EBITDA was $5 $6 million or a margin of 11% compared to $8 $7 million or a 12% margin in the prior year quarter.
Speaker Change: Turning to our Europe, and Asia Pac segment revenue was $19 7 million compared to $21 8 million in the prior year quarter, a decline of 12%.
Speaker Change: Segment, adjusted EBITDA was $1 $5 million or one 8% margin compared to $1 7 million and also an 8% margin in the prior year quarter.
Speaker Change: Finally, our outsource services segment revenue was $9 4 million up from $9 1 million in the prior year quarter or a growth of 1%.
Segment, adjusted EBITDA was $1 5 million or 16% margin compared to $1 8 million or 20% margin in the prior year quarter.
Speaker Change: As always segment adjusted EBITDA excludes certain shared corporate costs.
Speaker Change: I also want to note, we recorded a noncash goodwill impairment charge of $79 5 million in the second quarter in response to the drop in our market capitalization and a delayed recovery in business performance in both our on demand in Europe and APAC segments.
$57 8 million was recorded for our on demand segment and $21 7 million was recorded for our Europe and Asia Pac segment.
Speaker Change: Turning to liquidity, our balance sheet remains pristine was $78 million of cash and cash equivalents and zero outstanding debt and we generated $23 million of free cash flow for the trailing 12 month period.
Speaker Change: We distributed $4 $7 million worth of dividends in the second quarter, implying a yield over 6% at our current stock price and repurchased $5 million worth of shares at an average price of $8 36 per share.
In connection with our technology implementation, we capitalized $20 million with an implementation cost, which we expect to amortize starting in the third quarter.
Speaker Change: With the majority of the implementation effort completed we expect cash flows from operations to improve starting now in the second half of fiscal 'twenty five.
Speaker Change: With total available financial liquidity of $252 million, we will continue to invest in high growth areas of the business return cash to shareholders through dividends and engage in share buybacks under our share repurchase program with $82 million remaining at the end of the quarter. Following our board's additional authorization of 50 million.
During the quarter.
Speaker Change: I will now close with our third quarter outlook.
Early third quarter weekly revenue run rate has shown continued uptick through mid December.
Speaker Change: While we're encouraged to see improving trends third quarter revenue will be impacted by the typical global holidays as well as a following idiosyncrasies in terms of timing of the holiday.
Speaker Change: First given how the fiscal year calendar for the third quarter will include Thanksgiving holiday.
Speaker Change: Total U S business days in the third quarter. It will be only <unk> 59, compared to 64 in the second quarter and 61 in the prior year third quarter.
Speaker Change: Second the mid week timing of both Christmas day, and New year's day is expected to impact billable hours due to consultant and client holiday schedule.
Speaker Change: Experience suggests that the midweek timing of both holidays could result in an additional two business day impact to revenue as such we remain cautious in our revenue expectation in the third quarter and guide to $127 million to $1 $32 million.
Speaker Change: We estimate gross margin to be in the range of 34% to 35%, reflecting the same holiday impact I just summarized.
Speaker Change: On the SG&A front, we expect our third quarter run rate SG&A to be in a range of $46 million to $48 million. This outlook range includes the savings from the reduction in force we executed in early December offset by the employer payroll tax reset in the new calendar year, as well as amortization and other costs associated.
Speaker Change: With the recently launched technology platform.
Speaker Change: Non run rate and noncash expenses for the third quarter will primarily consist of restructuring costs associated with the reduction enforced stock compensation expense and the remaining technology transformation costs totaling approximately $6 million.
Speaker Change: In closing we are proud of the progress we've made so far to enhance execution under the new operating structure and we're encouraged by the early momentum we're seeing in the business as reflected in our second quarter results.
Speaker Change: With improving economic certainty over time, we believe we are well positioned for a sustained return to growth.
Speaker Change: This concludes our prepared remarks, and we will now open the call for Q&A.
Speaker Change: Okay.
Speaker Change: As a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May press Star one again, please standby, while we compile the Q&A roster.
Speaker Change: Okay.
Speaker Change: Our first question.
Speaker Change: Comes from the line of Joe Gomes of Noble capital. Your question. Please Joe.
Speaker Change: Thank you and good evening.
Speaker Change: Okay.
Speaker Change: So first I wanted to start out.
Speaker Change: Gross margin as you mentioned was significantly higher than both the guide and year over year.
Speaker Change: Sequentially I was just wondering if you could drill down a little bit more.
Speaker Change: On.
Speaker Change: The gross margin improvement.
John: Hi, Joe This is John happy New year, Yes, so gross margin improvement over Q1.
John: We have some a little bit of improvement on the pay Bill ratio standpoint, we also improved our overall utilization essentially bolted and Holly.
John: Holly.
John: The impact.
John: APAC as well and if youre looking at Q2 compared to Q1, that's what's driving the gross margin improvement quarter over quarter.
And then from year over year standpoint, as I stated in my remarks, there is a little bit of degradation in the PDL ratio.
John: Mostly what we're seeing on paid pressure.
John: Mostly across our international region.
John: And in APAC really due to limited due to the talent shortage that we are seeing some pressure there utilization is a little bit less favorable than the prior year.
John: You had favorable holiday impact if you compare year over year because of the Thanksgiving holiday and to that sort of offset that offset a little bit of the utilization and the pay deal dynamics I just talked about does that help.
John: Yes, yes. Thank you.
And if I could follow up on reference point just.
Speaker Change: How is that is that meeting your expectations exceeding maybe just give us a little more color.
Speaker Change: On how reference point has performed in the quarter and how it's set up going forward.
Kate Mcshane: Yes, Joe Hi, and happy New year, it's Kate <unk>.
Speaker Change: Reference point is performing to our expectations.
Speaker Change: 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.
Speaker Change: Some opportunities outside of financial services, where clients can benefit from the kind of skills and solutions that reference point brings.
Speaker Change: Okay, Great and then just one more from me if I can sneak it in.
Speaker Change: Last quarter, you talked about being a little more focus on stock buybacks.
Speaker Change: You did buy back another $5 million in the quarter, but that was flat with what you did.
Speaker Change: In the previous quarter or is there something that.
For a reason why you didn't.
Speaker Change: <unk> be a little more aggressive on the stock buybacks or is that just kind of a timing issue.
Speaker Change: Yes, Joe I can answer that yes, it's a little bit of timing, it's not really an issue.
Speaker Change: As you know, we just completed our digital our technology transformation.
Speaker Change: We're more bullish about that.
Speaker Change: Bob Research they are doing more of that and we just wanted to kind of get through the technology transformation first now that that's behind us.
Speaker Change: We expect that.
Speaker Change: Paul will pick up equity capital that more.
Okay, great. Thank you for answering my questions I'll get back in queue.
Jeff: Thanks, Jeff.
Speaker Change: Thank you.
Jeff: Our next question.
Speaker Change: Comes from the line of Alexander Sinatra of R. W. Baird. Your question. Please Alexander.
Speaker Change: Hi, I, just wanted to take and Greg Congratulations on the good results. This quarter first I was just wondering a little bit.
Speaker Change: 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.
John: Hi, This is John happy new year, everyone.
Speaker Change: We're seeing it.
Speaker Change: We think we have.
Payment of the businesses, and therefore offerings and kind of how we go to market, we're starting to see demand a lot more in finance accounting and digital transformation and supply chain.
Speaker Change: And that's where we're focused.
Speaker Change: There is a lot more activity in this area across the globe.
Speaker Change: 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.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you and then I just had a quick follow up.
Speaker Change: On how we should think about I guess the impact of the amortization of those spec transformation transformation costs.
There was anything any kind of color you can give on that.
Speaker Change: Yes.
Speaker Change: The annual amortization expense.
Speaker Change: Is going to be around 3 million.
Speaker Change: Sure.
Speaker Change: So we're going to start to amortize it.
Speaker Change: We are halfway through.
Speaker Change: Through Q3, and so people will be the first quarter with the full impact of the amortization.
Speaker Change: Alright, great. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Comes from the line of Andrew <unk> of Jpmorgan. Your line is open to Andrew.
Speaker Change: Hi, I have two questions. The first one is I assume that the months of November and December kind of heading into calendar year ever for your clients as a typical typical type of clients to finish up projects. So I was just wondering as you look at your months of November December.
Speaker Change: How does the pace of current project and look versus a typical year.
Speaker Change: My second question is for Jan what do you look at the midpoint of the revenue range that you gave for third fiscal quarter, what would be the year over year.
Speaker Change: Page.
Speaker Change: Adjusted for any M&A that you mentioned as well as on a same day basis.
Speaker Change: Hi, Mark this is progress from a trend perspective.
Speaker Change: <unk> of November December and project, ending I think we're living through times, where every year is pretty unique and.
Speaker Change: Last year, there was a lot more pressure on clients and not making decisions and spend.
Speaker Change: So in that sense, we are seeing more of that activity on the second pieces.
Speaker Change: A lot of our projects, we don't have the cyclicality that traditional firms who used to have historically, where things ended in November December. So we managed all day long every day across projects and managing a refilling that so we're not seeing those into your cluster.
Speaker Change: So in Q2 compared to last year either.
Speaker Change: It's a matter of continuing the work in managing the work of the pending and filling it up you are extending.
I'll, let John Kerry's question.
Speaker Change: Yeah.
Speaker Change: At the midpoint of the guidance range for revenue.
Speaker Change: 15% year over year decline.
Speaker Change: On an organic same day constant currency basis.
Speaker Change: Thank you I appreciate it.
Speaker Change: Yeah.
Speaker Change: Thank you once again to ask a question. Please press star one on your telephone again Thats Star one one on your telephone to ask a question.
Marc Riddick: Our next question comes from the line of Marc Riddick of Sidoti. Please go ahead Marc.
Marc Riddick: Hey, good afternoon, and happy new year everyone.
Speaker Change: Hi, Mark.
Speaker Change: So I wanted to talk a little bit you mentioned in your prepared remarks, a couple of times about.
The cross selling.
Speaker Change: Benefits and some of the early.
Speaker Change: Our successes that Youre seeing there I was wondering if there is.
Speaker Change: Anything additional that you could share there as to maybe some of the areas that were.
Speaker Change: Most receptive I think.
Speaker Change: You mentioned of course financial services, but were there any particular project types of service types that better or worse.
Speaker Change: Or were more receptive initially yes. This has been addressed.
Speaker Change: We are finding is and 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.
Speaker Change: And then we're seeing opportunities in supply chain modernization, especially coupled with brand and UX.
Speaker Change: That's kind of where we're seeing a lot more activity as.
As we are focusing into our existing clients and the spend that theyre looking at which are aligned to the strategy that we've laid out for <unk>.
Speaker Change: Where we're focused in the organization and in the market.
Excellent and then.
Speaker Change: Hi, Good afternoon, I think you made mention as far as.
Speaker Change: As the timing of going live on.
Speaker Change: On some of the platforms.
Speaker Change: After the end of this second quarter, if I, if I remember hearing that roughly half maybe you could talk a little bit it seems obviously.
Speaker Change: Robert.
Speaker Change: And maybe you could share maybe a little bit of initial.
Speaker Change: Thoughts as to how smoothly that when any any.
Speaker Change: Any hiccups or anything that we should be thinking about there.
Yeah.
Speaker Change: Yes.
Speaker Change: We just went live in December 'twenty, one I would say.
Speaker Change: They know what their go live when very smoothly.
Speaker Change: Implementation of this size, we expect small things here and there is not perfect, but we were able to walk through everything.
Speaker Change: On the first couple of weeks post go live all the major from a critical milestone.
Speaker Change: We were able to complete that successfully.
Speaker Change: We have a very robust hyper care structure in place to triage and resolve issues. All in all I would say that this is a very very successful the life.
Speaker Change: And any stabilization.
Speaker Change: Yes, that's very encouraging and then Canada.
Speaker Change: I wanted to ask as you thought it might be one of the last couple of days that folks are asking this up but due to the timing of when you last reported.
Speaker Change: 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 you know maybe you can talk a little bit about.
Speaker Change: <unk>.
Speaker Change: 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.
Speaker Change: Yes.
Speaker Change: Hey, Mark and again happy new year, So I would characterize the sentiment post election as generally more positive in our dialogue with clients.
Speaker Change: It's not that they're put.
Speaker Change: 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.
Speaker Change: Overall, I'd say, it's more optimistic.
Speaker Change: 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 is a strong belief that there will be more transactional work.
Speaker Change: Coming which always provides opportunity for us whether that subset to finance and accounting or risk and regulatory work, but also the associated project management and change management work that happens with transactions.
Speaker Change: And integration support and I think more dialogue is happening about.
Speaker Change: Pending activities that are starting to open up in our client base.
Speaker Change: With respect to the last administration versus now I mean, you know regulatory changes are driver of opportunity tax change is a driver of opportunity and.
Speaker Change: And again I go back to a more active M&A environment.
Speaker Change: Very helpful. Thank you very much.
Speaker Change: Thanks Mark.
Speaker Change: Okay.
Speaker Change: Thank you I would now like to turn the conference back to Kate Mcshane for closing remarks, yes.
Yes. Thank you operator, and thank you everyone for following US we look forward to talking to you after our third quarter of <unk>.
Speaker Change: Our fiscal year 'twenty five thanks, again, and best wishes for a wonderful year.
Speaker Change: Yes.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.