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May 30, 2020
Resources Connection Q4 2020 Earnings Report
Resources Connection's operating model proved resilient amidst economic disruption, with revenue declining slightly but gross margin and adjusted EBITDA improving year-over-year.
Key Takeaways
Resources Connection reported a slight decline in revenue for Q4 2020, but gross margin and adjusted EBITDA showed improvements. The company is focusing on cost control, building core client relationships, and expanding digital capabilities in fiscal year 2021.
Q4 revenue was $178.6 million, a decrease of 1.4% on a constant currency basis.
Gross profit was $72.2 million, with a gross margin of 40.4%, an improvement of 30 basis points year-over-year.
Adjusted EBITDA increased to $18.6 million, or 10.4% of revenue, up from 9.6% in the prior year quarter.
The company is focused on cost control, building core client relationships, and expanding digital capabilities in fiscal year 2021.
Resources Connection
Resources Connection
Forward Guidance
The company anticipates year-over-year revenue deterioration in Q1 2021, especially if COVID-19 causes further economic shutdowns.
Positive Outlook
- Weekly average revenue for the first 5 nonholiday weeks of the quarter was $11.5 million.
- Company is buoyed by lifts in their healthcare practice.
- Company is making efforts to match talent in a more borderless fashion
- Company is focusing on deeper integration with Veracity in both our strategic client program and core business.
- Company is focused on a go-to-market productivity and controlling cost
Challenges Ahead
- Still expect year-over-year deterioration in revenue in the first quarter
- Especially if a resurgence of COVID causes the U.S. economy to shut down once again.
- Self-insured medical program could experience an increase in future costs as employees resume doctor visits and procure necessary medical treatment, which could have a material impact on gross margin and operating costs.
- No specific revenue or earnings guidance for the first quarter of fiscal '21 is given.
- There is ongoing uncertainty as it relates to the pandemic.