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View All NewsResources Connection revenue falls 6.2% in fiscal Q3; Covid-19 impacts Asia-Pacific operations
Resources Connection Inc. (NASDAQ: RGP) reported revenue fell 6.2% on a constant currency basis in its fiscal third quarter ended Feb. 22. It reported operations in Asia Pacific were affected by the Covid-19 crisis during the quarter. The Irvine, California-headquartered company provides professional staffing and operates as Resources Global Professionals.
“Covid-19 impacted RGP in Q3 in our Asia Pac region,” CEO Kate Duchene said. “That, plus the tough holiday dynamics, created a challenging backdrop these past three months.”
Duchene said it isn’t possible to predict Covid-19’s impact on business; however, the company is expecting an adverse impact.
| (US$ thousands) | Q3 2020 | Q3 2019 | % change | % constant currency |
| Revenue | $168,052 | $179,498 | -6.4% | -6.2% |
| Gross margin | $61,420 | $67,911 | -9.6% | |
| Gross margin percentage | 36.5% | 37.8% | ||
| Net income | $6,942 | $5,796 | 19.8% |
Third-quarter revenue included $5.4 million from RGP’s acquisition of Veracity in Europe. Revenue fell 8.1% excluding Veracity and the exit of activities in Europe. RGP also noted the third quarter of 2020 included more holidays in the US and an extended Lunar New Year holiday as well as the adverse impact of Covid-19 in Asia Pacific.
Revenue by geography
| (US$ thousands) | Q3 2020 | Q3 2019 | % change | % constant currency |
| North America | $138,819 | $146,817 | -5.4% | -5.5% |
| Asia Pacific | $11,202 | $11,770 | -4.8% | -4.6% |
| Europe | $18,031 | $20,911 | -13.8% | -12.4% |
RGP also reported it eliminated 73 positions in North America and Asia Pacific as part of a restructuring, and it is now reviewing its Asia Pacific operations. It expects to take a restructuring charges of between $4 million and $5 million, of which approximately $3 million will be taken in its fiscal fourth quarter. RGP expects pre-tax savings of between $13 million and $15 million in personnel costs in fiscal 2021.
The company also plans to focus on a physical presence in certain markets and virtual presence in others. It expects to terminate or sublet 26% of its existing real estate leases by the end of the 2020 calendar year. It expects $1 million in lease termination and other costs in its fiscal fourth quarter and further costs in fiscal 2021. However, it expects annual pre-tax savings of between $3 million and $4 million.
Share price and market cap
Shares in Resources Connection were down 3.3% to $9.86 as of 11:47 a.m. Eastern time today; the company had a market cap of $327.8 million, according to FT.com.