Post Earnings Coverage as Resources Connection Revenue Dropped 2.2%

Upcoming AWS Coverage on On Assignment

LONDON, UK / ACCESSWIRE / January 9, 2017 / Active Wall St. announces its post-earnings coverage on Resources Connection, Inc. (NASDAQ: RECN). The Company reported its second quarter fiscal 2017 financial results on January 04, 2017. The consulting Company’s earnings declined on a y-o-y basis and missed market expectations. Register with us now for your free membership at: http://www.activewallst.com/register/.

One of Resources Connection’s competitors within the Staffing & Outsourcing Services space, On Assignment, Inc. (NYSE: ASGN), is estimated to report earnings on February15, 2017. AWS will be initiating a research report on On Assignment following release of its next earnings results.

Today, AWS is promoting its earnings coverage on RECN; touching on ASGN. Get our free coverage by signing up to:

http://www.activewallst.com/registration-3/?symbol=RECN

http://www.activewallst.com/registration-3/?symbol=ASGN

Earnings Reviewed

For the three months ended November 26, 2016, Resource Connection revenue dropped 2.2% (1.8% constant currency) to $147.6 million compared to revenue of $150.9 million for the year earlier same quarter. On a sequential basis, the Company’s revenue increased 2.9% (3.3% constant currency) compared to $143.4 million in Q1 FY17. The Company’s revenue figures surpassed analysts’ forecasts of $145.6 million.

For Q2 FY17, Resource Connection’s revenues from the US were $117.6 million, a decrease of 4% y-o-y and an increase of 1.7% sequentially. For the reported quarter, total revenues internationally were $29.9 million versus $28.3 million in Q2 FY16. International revenue accounted for approximately 20% of the total revenues for the reported quarter compared to 19% in Q1 FY17.

During Q2 FY17, Resource Connection’s revenue from Europe’s increased 4% q-o-q and increased 13% sequentially, while the Asia/Pacific region saw quarterly reported revenues increase 9.2% y-o-y and 2.3% sequentially.

Resource Connection’s net income declined in Q2 FY17 to $5.7 million, or $0.16 per diluted share, compared to $8.7 million, or $0.23 per diluted share, in the year earlier corresponding quarter. The reported quarter included severance and related charges of approximately $1.5 million, or $0.03 per diluted share. Net income for Q2 FY17 also consisted a $0.01 per share positive impact related to the reversal of approximately $200,000 of tax valuation allowances. On an adjusted basis, the Company earned $0.18 per share, which was below market expectations of $0.19 per share.

Operating Metrics

During Q2 FY17, Resource Connection’s gross margin was 38.3% compared to 39.0% in Q2 FY16. The y-o-y decline in gross margin was attributed to an unfavorable change in the bill rate/pay rate ratio. On a sequential basis, gross margin increased 30 basis points from 38.0% in Q1 FY17, due primarily to a reduction in employer payroll taxes near the end of the calendar year.

Selling, general, and administrative expenses for Q2 FY17 were $46.1 million (31.2% of revenue) compared to $43.2 million (28.6% of revenue) in Q2 FY16 and $43.6 million (30.4% of revenue) in Q1 FY17.

Balance Sheet

During Q2 FY17, cash provided by operations and adjusted EBITDA for Revenue Connection were $15.2 million and $12.3 million (8.3% of revenue), respectively, compared to cash provided by operations and adjusted EBITDA of $15.3 million and $17.1 million (11.3% of revenue), respectively, for Q2 FY16.

In October 2016, Resource Connection commenced a modified Dutch auction tender offer to purchase up to 6 million shares of its common stock at a price between $16.00 and $13.50 per share. In November 2016, the Company exercised its right to increase the size of the tender offer by up to 2% of its then outstanding common stock. The tender offer period expired on November 15, 2016, and on November 22, 2016, the Company purchased 6,515,264 shares of its common stock at a per share price of $16.00, excluding transaction costs, for a total cost of approximately $104.2 million.

In Q2 FY17, under the Resource Connection’s existing share repurchase program, the Company repurchased 68,600 shares of its common stock for $900,000 and paid a quarterly dividend to shareholders totaling $4.0 million ($0.11 per diluted share). Currently, the Company has a total of $132.0 million available for share purchases under its existing repurchase program. After completing the tender offer, as of November 26, 2016, the Company’s cash, cash equivalents, and short-term investments were $63.6 million compared to $116.0 million at May 28, 2016.

Stock Performance

Last Friday, January 06, 2017, the stock closed the trading session at $16.85, declining 2.03% from its previous closing price of $17.20. A total volume of 202 thousand shares have exchanged hands. Resources Connection’s stock price advanced 29.73% in the past three months, and 13.27% in the previous six months. The stock is trading at a PE ratio of 21.69 and has a dividend yield of 2.61%.

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