[ACCESSWIRE]
LONDON, UK / ACCESSWIRE / October 7, 2016 / Active Wall St. announces its post-earnings coverage on Resources Connection, Inc. (NASDAQ: RECN). The company reported its fiscal 2017 first quarter financial results on October 05th, 2016. The consulting company's earnings came in below market expectations and it also announced that its CEO is leaving effective October 7th, 2016. Register with us now for your free membership at: http://www.activewallst.com/register/.
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Earnings Reviewed
For the quarter ended on August 27th, 2016, Resource Connection reported that revenue declined 3.3% (3.1% constant currency) to $143.4 million compared to Q1 FY16 revenue of $148.3 million. The company stated that the decrease in revenue was partially attributable to fewer business opportunities in the financial services and energy sectors.
For Q1 FY17, revenues from the US were $115.6 million, a decrease of 4.5% compared to Q1 FY16; the Memorial Day holiday had an unfavorable impact on its US revenue of 1.1% on a quarter-over-quarter basis. Total revenues internationally were $27.7 million versus $27.2 million in Q1 FY16. Europe's Q1 FY17 revenues increased 6.2% on q-o-q basis, while the Asia/Pacific region saw a 2.5% increase in revenue on q-o-q basis.
The Company's net income declined in Q1 FY17 to $5.6 million, or $0.15 per diluted share, compared to $7.1 million, or $0.19 per diluted share, in the prior year's comparable quarter. Analysts expected earnings of $0.16 per share.
Operating Metrics
For Q1 FY17, Resource Connection reported that gross margin was 38.0% compared to 38.7% in the prior year's quarter. The declined in gross margin was primarily due to an unfavorable change in the bill rate/pay rate ratio. The average bill rate for Q1 FY17 was approximately $119, while the average pay rate for the reported quarter was approximately $60 compared to $59 one year ago.
For Q1 FY17, the average consultant FTE count was 2,459. This compares to 2,478 in the previous quarter and 2,504 in the year ago quarter. Quarter end consultant headcount was 2,570 versus 2,501 a year ago. The total headcount with the Company was 3,340 at quarter end.
Cash Matters
Cash used in operations and adjusted EBITDA were $7.1 million and $12.2 million (8.5% of revenue), respectively, for Q1 FY17 compared to cash used in operations and adjusted EBITDA of $4.6 million and $15.7 million (10.6% of revenue), respectively, for Q1 FY16. Cash flows in the first quarter of the fiscal year are typically used in operations as the Company pays its year-end incentive based compensation in that quarter.
In Q1 FY17, Resource Connection repurchased approximately 375,000 shares of its common stock for $5.7 million and paid a quarterly dividend totaling $3.6 million ($0.10 per diluted share) to shareholders. Currently, the Company has a total of $132.9 million available for share purchases under its existing repurchase program. As of August 27th, 2016, the Company's cash, cash equivalents, and short-term investments were $102.9 million compared to $116.0 million at May 28th, 2016.
Receivables at quarter end were approximately $96.2 million compared to $97.8 million at the end of Q4 FY16. Days of revenue outstanding were approximately 59 days, the same as in the previous quarter.
CEO Change
Resources Connection announced the unanticipated retirement of its President and Chief Executive Officer Anthony Cherbak, 62, due to health considerations, effective October 7th, 2016. Mr. Cherbak will remain a member of the Board of Directors and will become a part-time employee of the Company as a Special Advisor to the Interim CEO during a transition period. Concurrent with Mr. Cherbak's retirement as CEO, the Board of Directors has activated its formal Emergency Succession Plan and named Kate W. Duchene, 53, to the role of Interim CEO. Ms. Duchene has most recently held the role of Chief Legal Officer, Executive Vice President of Human Resources and Secretary for the Company. The Board has formed a Search Committee to determine the search strategy and to select the Company's permanent CEO. The search may extend to external candidates.
Stock Performance
Resources Connection's share price finished yesterday's trading session at $13.08, with a correction of 12.63%. A total volume of 869.69 thousand shares exchanged hands, which was higher than the 3 months average volume of 154.90 thousand shares. The stock is trading at a PE ratio of 16.11 and has a dividend yield of 3.36%.
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