Stocks Under Consideration – Resources Connection, Inc. (NASDAQ:RECN)
Resources Connection, Inc. (NASDAQ:RECN) began its trading session at $16.40 on Wednesday. During the most recent trading session the minimum price at which share price traded, recorded at $15.95 and hit to max level of $16.55. The company fall -0.25 points or -1.53%. The company finished it trading session at $16.05. It traded total volume of 252,585 shares higher than the average volume of 122,645 shares.
Resources Connection, Inc. (RECN), a multinational business consulting firm, operating as Resources Global Professionals, recently declared its financial results for the fiscal 2017 third quarter ended February 25, 2017.
Revenue for the fiscal 2017 third quarter was $143.80M, with net income per diluted share of $0.09. Revenue improved quarter-over-quarter in Europe (up 4.70%) and Asia Pacific (up 5.0%). Net income for the quarter was $2.90M (2.0% of revenue), with an adjusted EBITDA of $8.4 million (5.80% of revenue). The Company also paid a quarterly cash dividend of $0.11 per share, resulting in a total dividend payment of $3.30M and repurchased 400,100 shares of its common stock for $6.90M.
“I am happy with the improving performance that we have seen in Europe and Asia Pacific, but there is more we can do to improve results in our North American practices, where we have been adversely affected by negative trends in our financial services and oil and gas businesses,” said Kate Duchene, President and Chief Executive Officer of RGP. “As an administration team, we are working hard to identify new ways to drive our revenue generation across the business. In order to address head on the underlying factors that have limited our recent performance, we have developed three major planned programs that will form the foundation of a go-forward strategy for RGP.”
FISCAL THIRD QUARTER REVIEW:
Revenue for the third quarter of fiscal 2017 reduced by 2.0% (1.20% constant currency) to $143.80M contrast to $146.80M in the prior year third quarter. On a sequential basis, third quarter revenue reduced by 2.50% (1.80% constant currency) contrast to $147.60M in the second quarter of fiscal 2017. The third quarter of each fiscal year contains the Christmas, New Year’s and Chinese New Year’s holidays. Quarter-over-quarter constant currency revenue calculations are computed using the comparable third quarter fiscal 2016 conversion rates, and the sequential quarter constant currency is computed using the comparable second quarter fiscal 2017 conversion rates for revenue generated internationally.
Revenue in the U.S. reduced by 3.40% quarter-over-quarter and by 0.60% sequentially, mainly influenced by declines in the financial services and energy sectors. International revenue improved by 4.50% quarter-over-quarter (8.80% constant currency), reflecting RGP’s improving performance overseas, while decreasing 10.0% sequentially (6.70% constant currency), mainly because of the predictable impact of the holiday season.
Net income declined in the third quarter of fiscal 2017 to $2.90M, or $0.09 per diluted share, contrast to $6.0M, or $0.16 per diluted share, in the prior year third quarter.
Gross margin was 36.30% in the third quarter of fiscal 2017, contrast to 37.40% in the prior year third quarter, as a result of an unfavorable change in the bill rate/pay rate ratio and a boost in costs related to the Company’s self-insured medical program. Sequentially, gross margin reduced 200 basis points from 38.30% in the second quarter of fiscal 2017, mainly because of a boost in employer payroll taxes after the reset for the new calendar year and the aforementioned increase in medical coverage costs.
Selling, general and administrative expenses (“S, G & A”) for the third quarter of fiscal 2017 were $45.40M (31.50% of revenue) contrast to $43.30M (29.50% of revenue) in the prior year third quarter and $46.10M (31.20% of revenue) in the second quarter of fiscal 2017. The quarter-over-quarter increase is related to compensation and related benefit costs attributable to investments made in our client delivery Managing Consultant program to support the solutions programs underway. S, G &A in the second quarter of fiscal 2017 includes $1.50M in severance and additional stock compensation expense for acceleration of vesting of certain options related to the resignation of a senior executive. The remaining sequential increase was driven by a boost in employer payroll taxes at the starting of the new calendar year and raised medical coverage costs.
Revenue for the nine months ended February 25, 2017 was $434.80M contrast to $446.0M for the nine months ended February 27, 2016. Net income for the nine months ended February 25, 2017 was $14.20M or $0.41 per diluted share, counting $0.03 per diluted share related to severance charges. This compares to net income for the nine months ended February 27, 2016 of $21.80M or $0.58 per diluted share.
Cash offered by operations and Adjusted EBITDA were $6.90M and $32.90M (7.60% of revenue), respectively, for the nine months ended February 25, 2017, contrast to cash offered by operations and Adjusted EBITDA of $7.0M and $45.80M (10.30% of revenue), respectively, for the nine months ended February 27, 2016.
In the third quarter of fiscal 2017, the Company repurchased 400,100 shares of its common stock for $6.90M under its existing share repurchase program and paid a quarterly dividend to shareholders totaling $3.30M ($0.11 per diluted share). Presently, the Company has a total of $125.10M available for share purchases under its existing share repurchase program. As of February 25, 2017, the Company’s cash, cash equivalents and short-term investments were $44.60M contrast to $116.0M at fiscal year-end May 28, 2016. The decrease reflects the use of cash to complete the Company’s tender offer in November 2016, as outlined in the second quarter earnings declaration.
RECN has the market capitalization of $474.15M and its EPS growth ratio for the past five years was 8.70%. The return on assets ratio of the Company was 6.50% while its return on investment ratio was 8.80%. Price to sales ratio was 0.79 while 91.10% of stock was owned by Institutional investors. The Company earned $26.00 million in prior twelve months.