Resources Connection Inc (RGP) is a global professional services firm that specializes in delivering consulting execution services to power its clients' operational needs and change initiatives. With a diverse portfolio of service offerings, including on-demand talent solutions, strategic consulting, and outsourced services, RGP has positioned itself as a trusted partner in navigating the complex, fast-paced business landscape.
Business Overview and History
Resources Connection, Inc. was incorporated in 1998 and is headquartered in Dallas, Texas. The company provides professional services, primarily under the name Resources Global Professionals (RGP), focused on delivering consulting execution services that power clients' operational needs and change initiatives.
In the early years, RGP established itself as a leading provider of on-demand consulting talent, leveraging a flexible workforce model to serve clients' needs. The company weathered the economic downturn in the early 2000s, maintaining profitability through cost management and continued demand for its services.
Over the next decade, RGP expanded its geographic footprint globally, opening offices across North America, Europe, and Asia Pacific. The company also diversified its service offerings, adding consulting capabilities in areas like finance, technology, and risk management. This allowed RGP to deepen client relationships and provide more comprehensive solutions.
In the 2010s, RGP faced some challenges, including increased competition and pricing pressure. The company responded by investing in technology and enhancing its operating model to drive greater efficiency. RGP also made strategic acquisitions, such as the 2023 purchase of CloudGo, to bolster its digital transformation capabilities. Through these initiatives, RGP worked to maintain its position as a leading provider of professional services.
Financial Performance and Liquidity
RGP's financial performance has demonstrated resilience despite the challenges posed by the volatile macroeconomic environment. In the company's most recent fiscal year ended May 25, 2024, it reported revenue of $632.8 million and net income of $21.0 million. The company's strong balance sheet, with $78.2 million in cash and cash equivalents as of November 23, 2024, provides ample financial flexibility to invest in growth initiatives and weather potential economic headwinds.
RGP's cash flow generation has also been a key strength, with the company reporting $21.9 million in operating cash flow and $20.8 million in free cash flow during fiscal year 2024. This robust cash position allows RGP to maintain a healthy dividend payout, which currently yields approximately 6.1% based on the company's recent stock price.
In the most recent quarter (Q2 2025), RGP experienced continued macroeconomic headwinds, with revenue declining 10.7% year-over-year to $145.6 million. The company reported a net loss of $68.7 million for the quarter, primarily due to a $79.5 million non-cash goodwill impairment charge. Despite these challenges, RGP outperformed its Q2 FY2025 outlook ranges on all fronts, including revenue, gross margin, and adjusted EBITDA.
RGP maintains a strong liquidity position with a debt-to-equity ratio of 0.032 as of Q2 2025. The company has access to $173.5 million under a $175 million revolving credit facility, providing additional financial flexibility. RGP's current ratio and quick ratio both stand at 2.74, indicating a solid ability to meet short-term obligations.
Diversified Service Offerings and Cross-Selling Opportunities
RGP's diversified service offerings have been instrumental in unlocking cross-selling opportunities and strengthening client relationships. The company operates through five main business segments:
1. On-Demand Talent: Operating under the On-Demand by RGP brand, this segment provides businesses with immediate access to specialized expertise. In Q2 2025, revenue declined 24.7% year-over-year to $53.5 million, primarily due to lower demand amid economic uncertainty.
2. Consulting: Under the Veracity by RGP brand, this segment drives transformation across areas like finance, technology, digital, risk, compliance, and supply chain. Revenue increased 2.7% year-over-year in Q2 2025 to $60.6 million, driven by a 6.2% increase in average bill rates.
3. Europe and Asia Pacific: This segment offers both on-demand and consulting services, excluding the digital consulting business. Revenue declined 9.6% year-over-year in Q2 2025 to $19.7 million, reflecting delays in decision-making and project starts amid economic uncertainty.
4. Outsourced Services: Operating under the Countsy by RGP brand, this segment offers finance, accounting, and HR services to startups, spinouts, and scale-up enterprises. Revenue increased 4.0% year-over-year in Q2 2025 to $9.4 million.
5. All Other: This segment includes Sitrick, a crisis communications and public relations firm. Revenue remained relatively flat year-over-year in Q2 2025 at $2.4 million.
This integrated approach has allowed RGP to serve its clients more holistically, providing a seamless experience and fostering long-term partnerships. The company's recent acquisition of Reference Point, a leading financial services consulting firm, has further bolstered its consulting capabilities and expanded its presence in the lucrative financial services sector.
Technology Transformation and Operational Efficiency
Recognizing the importance of technological innovation, RGP has invested significantly in upgrading its technology infrastructure, including the implementation of a cloud-based enterprise resource planning (ERP) system and talent acquisition management tools. This transformation, which was completed in the second quarter of fiscal 2025, is expected to drive greater operational efficiency, enhance delivery capabilities, and enable the increased use of artificial intelligence and automation across the organization.
The successful implementation of this technology platform has positioned RGP to better serve its clients, streamline internal processes, and improve its overall competitive advantage in the market. As the company continues to leverage these advanced capabilities, it is poised to unlock further productivity gains and cost savings, ultimately enhancing its profitability and long-term sustainability.
Navigating Macroeconomic Challenges and Market Trends
RGP has demonstrated its ability to navigate the complexities of the current macroeconomic environment, which has been characterized by rising interest rates, labor market challenges, and concerns about a potential recession. The company's diversified service offerings and flexible business model have been instrumental in mitigating the impact of these headwinds.
During periods of economic uncertainty, RGP's on-demand talent solutions allow clients to quickly scale their workforce to meet shifting demands, while the Consulting and Outsourced Services segments provide optimization and cost-containment initiatives. This adaptability has strengthened RGP's position as a trusted partner, enabling it to support its clients through various market cycles.
Additionally, the company is well-positioned to capitalize on the growing demand for professional services, particularly in the finance, accounting, risk, and compliance sectors. According to industry research, the global professional services market is expected to reach $95 billion by 2029, representing a compound annual growth rate of 6%. The finance and accounting professional services market is forecasted to grow over 9% from 2020 to 2027. RGP's established relationships with C-suite executives, including Chief Financial Officers, position the company to be a key beneficiary of this industry-wide transformation.
Geographic Performance and International Presence
RGP operates globally, with approximately 18.2% of revenue generated outside the United States in the latest fiscal year. The company's international presence, particularly in Europe and Asia Pacific, provides diversification and growth opportunities. However, the Europe and Asia Pacific segment faced challenges in Q2 2025, with revenue declining 9.6% year-over-year and the average bill rate decreasing 3.3% on a constant currency basis. This performance reflects the broader economic uncertainty affecting client decision-making and project initiations in these regions.
Future Outlook and Guidance
Looking ahead to Q3 FY2025, RGP has provided guidance that reflects both ongoing challenges and the company's efforts to improve performance. Revenue is expected to be in the range of $127 million to $132 million, with gross margin projected between 34% and 35%. The company anticipates run rate SG&A to be in the range of $46 million to $48 million, incorporating savings from a recent reduction in force.
RGP remains cautious in its Q3 FY2025 revenue expectations due to the typical global holiday impact and the timing of Christmas and New Year's Day falling in the middle of the week. The company expects non-run rate and non-cash expenses for Q3 to be approximately $6 million, primarily consisting of restructuring costs, stock compensation, and remaining technology transformation costs.
Risks and Potential Headwinds
While RGP has demonstrated resilience in the face of macroeconomic challenges, the company is not immune to potential risks and headwinds. The highly competitive nature of the professional services industry, the ability to attract and retain top-caliber talent, and the potential impact of global economic conditions on client spending remain areas of concern.
Additionally, the company's reliance on a limited number of large clients for a significant portion of its revenue, as well as the potential for unfavorable contract provisions that could allow clients to terminate engagements prematurely, pose risks to RGP's financial performance.
The successful integration of acquired businesses, such as Reference Point, and the company's ability to adapt to rapidly evolving technological advancements will also be critical factors in determining RGP's long-term success.
Conclusion
Resources Connection Inc (RGP) has established itself as a leading global professional services firm, offering a diversified portfolio of solutions that empower its clients to navigate the complexities of business transformation. By continuously adapting its service offerings, investing in technological innovation, and fostering strong client relationships, RGP has positioned itself for long-term growth and value creation.
Despite the challenges posed by the current macroeconomic environment, RGP's financial strength, operational efficiency, and market-leading capabilities position the company as a compelling investment opportunity for investors seeking exposure to the rapidly evolving professional services industry. The company's ability to outperform its own guidance in recent quarters, coupled with its strategic initiatives to enhance its operating model and digital capabilities, demonstrates RGP's resilience and potential for future growth as economic conditions improve.