Resources Connection Inc., known for providing companies with talent in the fields of HR, finance and technology, is shifting its operational model to combat an industry slowdown.
The restructuring is designed to better showcase its different business segments and drive growth in a tougher economic landscape, according to Chief Executive Kate Duchene.
“Our new organizational structure and intentional brand architecture create a unified ecosystem that better showcases the full value that RGP brings to our stakeholders,” Duchene said in a statement. “By organizing ourselves with greater focus and clarity, our clients and prospects have an improved understanding of when to call us and for what capabilities.”
The reorganization comes as the Irvine-based company, often known by its ticker RGP, has seen many of its clients put projects on hold over the past year. Fiscal first quarter sales fell 20% to $137 million for the period ended Aug. 24, continuing a trend that saw revenue decline 18% to $632.8 million in fiscal year 2024.
Shares have fallen by about two thirds in the past two years to $8.48 each and a $284 million market cap at press time (Nasdaq: RGP). After the results were announced, shares reached their lowest level since 2002.
Duchene, who has been CEO since 2016, said businesses have been tightening their budgets in fear of a recession this past year.
“There have been less transactions happening in the marketplace,” Duchene told the Business Journal. “People have remained in their jobs.
“I’m cautiously optimistic that we’re going to see a pickup in activity. We’re hoping for a soft landing.”
Pulling Different Levers
The firm was spun out from Deloitte & Touche in 1996. Chairman Donald Murray, who founded the company, resigned from the board in July.
Its employees, referred to internally as professional consultants, work with Fortune 100 and 500 companies who need to fill positions in a range of positions including finance, HR, technology and supply chain. The company has more than 1,700 clients across North America, Europe, Asia Pacific and Latin America.
The firm has evolved from its start nearly 30 years ago.
Duchene said RGP’s first-ever employees were mostly women having difficulty finding a way back into their workplaces.
Nowadays, the current talent pool has shifted their preferences.
“Fast forward to today, people are opting to work in a different way and bring their skillsets to market with a lot more transparency and choice,” Duchene said. “The younger demographic is more honest about the relationship between work and life.”
Duchene said the newly defined segments “is a way to clarify what we bring to the market.”
Fiscal First Quarter Performance
The company is trying to convince Wall Street about its value, saying the consulting industry is “undergoing a significant shift” due to digital transformation and it could grow 10-fold from a $944 billion market in 2023 to $9.15 trillion by 2033.
RGP on Oct. 1 revealed what it said was “a new brand identity and brand architecture.”
RGP has three principal business segments: On-Demand, Veracity for next-gen consulting and Countsy for outsourced services. The first quarter ended Aug. 24 also marked RGP’s first time reporting segment revenues.
The on-demand business recorded revenue of $52 million, dropping 33% from a year ago. Revenue in its consulting segment decreased 3.2% to $55 million and outsourcing services reported revenue of $9.5 million, remaining flat compared to last year.
“These declines reflected a persistently choppy demand environment driven by broader economic trends. Clients continue to be in a holding pattern, restrained in their decision to move forward with transformation projects,” Duchene said in a statement about the quarter.
The outsourcing unit had the highest profit margin, 15%, followed by consulting, 14%, and on-demand, 5%.
On-demand is considered RGP’s core segment. Here, the firm places its people within companies to step into specific projects under an executive leading the venture, whether
it’s employee changes or technology transitions.
“We often come in and fill in a role until the company makes a permanent hire, for example,” Duchene said.
The consulting division is designed to help companies with “transformational initiatives” from start to finish. RGP employees will do an assessment of the problem, form a strategy then execute the project with the client.
“Over the years, because we’ve gained so much trust with our clients, they asked us to take on higher value projects, from strategy to execution, and so we founded a consulting business,” Duchene said. “We really own the deliverables.”
The smallest segment is RGP’s outsourcing business. The firm’s consultants are employed as a third-party group to build infrastructure such as HR and financial departments, or a back-office team, for companies who do not have additional staff or funds.
RGP’s outsourcing services began with start-ups that preferred to spend early funding on delivering its core products, according to Duchene. The executive said the firm is starting to field requests from larger players as well.
“It will allow us to pull different levers in the business to drive growth,” she added.
RGP’s billing figures were also impacted. Billable hours decreased by 15% and the average bill rate declined by 5% compared to the prior year. The reduced bill rate points to a more competitive pricing market, according to RGP.
The first quarter results disappointed Wall Street, as the shares fell 12% in the trading session after the results were announced.
New Headquarters on Main Street
RGP sold its 57,301-square-foot HQ facility to the city of Irvine for $13.5 million in August.
The company recently leased a new 18,178-square-foot-building in Tustin at 2080 Main St. and will be moving in November.
“We found that people are working differently now, and we didn’t need that amount of real estate,” Duchene said.
The firm reports employing 757, including about 200 locally. RGP also reported year-over-year improvement in selling, general and administrative expenses (SG&A) during its fiscal first quarter that was partially due to a $3.4 million gain on the sale of the Irvine office building.