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Resources Connection, Inc. Reports First Quarter Results For Fiscal 2016

The following excerpt is from the company's SEC filing.

Company reports revenues of $148.3 million, up 3.4% over prior year quarter (6.3% constant currency)

Earnings per share increases to $0.19, up 35.7% from $0.14 in prior year quarter

Adjusted EBITDA* improves 16.3% to $15.7 million (10.6% of revenue)

Company returns $9.2 million in capital to shareholders

* Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization and stock-based compensation

IRVINE, Calif.--(BUSINESS WIRE)--October 7, 2015--Resources Connection, Inc. (NASDAQ: R ECN) today announced financial results for its first fiscal quarter ended August 29, 2015. Resources Connection, Inc. (the “Company”) is a multinational professional services firm that provides to clients – through its operating subsidiary, Resources Global Professionals (“RGP”) – consulting and business support services in the areas of accounting; finance; corporate governance, risk and compliance; corporate advisory, strategic communications and restructuring; information management; human capital; supply chain management; healthcare solutions; and legal and regulatory.

Revenue for the first quarter of fiscal 2016 increased 3.4% to $148.3 million compared to the prior year’s first quarter of $143.4 million. On a sequential basis, first quarter revenue was down 0.3% compared to $148.8 million in the fourth quarter of fiscal 2015.

Using the comparable first quarter fiscal 2015 conversion rates to adjust for the impact of currency fluctuations, fiscal 2016’s first quarter revenue would have been $152.4 million, up 6.3% quarter-over-quarter.

Revenue in the U.S. increased 4.6% quarter-over-quarter and 0.4% sequentially. International revenue decreased 1.4% on a quarter-over-quarter basis and 3.5% sequentially. Adjusting for the impact of currency fluctuations, international revenue increased 13.4% quarter-over-quarter using the comparable first quarter fiscal 2015 conversion rates and declined sequentially 3.2% using the comparable fourth quarter fiscal 2015 conversion rates.

The Company’s net income in the first quarter of fiscal 2016 improved 31.5% to $7.1 million, or $0.19 per diluted share, compared to the prior year’s first quarter net income of $5.4 million, or $0.14 per diluted share. Net income in the first quarter of fiscal 2016 includes a $0.01 per share charge for stock-based compensation expense of approximately $900,000 related to the accelerated vesting of options held by Donald Murray related to his transition from Executive Chairman to non-employee Chairman during the quarter. Net income in the first quarter of fiscal 2015 included a $0.02 per share charge for severance related to the Company’s European operations.

“Our first quarter results reflect solid improvement in our financial metrics such as revenues and adjusted EBITDA, driven by our United States operations,” said Tony Cherbak, president and chief executive officer of RGP. “In addition, our practices in Asia Pacific grew 17.0% quarter-over-quarter (27.7% constant currency), with particular strength in Shanghai, Hong Kong and Singapore; and Europe showed continued signs of stability, growing 1.9% on a constant currency basis.”

Gross margin was 38.7% in the first quarter of fiscal 2016 compared to 39.2% in the prior year quarter. The 50 basis point decrease results from higher costs in the Company’s self-insured medical plan and an increase in zero margin reimbursable expenses, partially offset by improved bill/pay rate spreads. Sequentially, gross margin decreased 20 basis points from 38.9%, due to a slight reduction in bill rate/pay rate spreads and higher medical costs, partially offset by lower zero margin reimbursable expenses.

Selling, general and administrative expenses (“SG&A”) for the first quarter of fiscal 2016 were $44.0 million (29.7% of revenue) compared to the prior year first quarter amount of $44.3 million (30.9% of revenue) and the preceding quarter amount of $42.5 million (28.5% of revenue). The first quarter of fiscal 2016 amount includes approximately $900,000 of stock-based compensation expense related to the accelerated vesting of options held by Donald Murray; the prior year quarter included approximately $700,000 of severance charges related to the Company’s European operations. Excluding these charges, SG&A was $43.1 million (29.1% of revenue) in the first quarter of fiscal 2016 and $43.6 million (30.4% of revenue) in the first quarter of fiscal 2015. The quarter-over-quarter decrease is primarily attributable to lower marketing related costs.

Cash used in operations and Adjusted EBITDA were $4.6 million and $15.7 million (10.6% of revenue), respectively, for the...


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