Resources Connection, Inc. (RECN)

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Resources Connection, Inc. (RECN)

March 12, 2013 11:30 am ET


Nathan W. Franke - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Anthony Cherbak - President, Chief Operating Officer and Director


Kelly A. Flynn - Crédit Suisse AG, Research Division


Kelly A. Flynn - Crédit Suisse AG, Research Division

So we're pleased to have the guys from Resources Connection here. Can you tell me, Resources Connection is the legal name, but the what name? What is this then?

Nathan W. Franke

[indiscernible] Go-to-market.

Kelly A. Flynn - Crédit Suisse AG, Research Division

So this is the go-to-market name. So I guess you can call it both. But presenting for the company, we have Nate Franke, the CFO, joined by Tony Cherbak, the COO. Thanks.

Anthony Cherbak

Thanks, Kelly. Just a legal disclaimer before we start. Relative to this presentation, we may make forward-looking statements. We refer you to our annual report on Form 10-K for the year ended May 26, 2012, for a discussion of the risks, uncertainties and other factors that may cause our business results of operations and financial condition to differ materially from the results of operations and financial conditions expressed or implied by forward-looking statements made during this presentation.

Resources was formed as a division of Deloitte in 1996, spun off on a management-led buyout in 1999 and we went public in 2000. We're a client service focused professional services firm. We work collaboratively with our clients to provide either project consulting, project support or operational support. We help companies solve problems that keep them awake at night by executing internal initiatives that they would struggle to do so on their own, given the lack of capacity or subject matter expertise.

And if I would state our business as simply as I can, we basically help clients get things done. We partner with our clients to execute internal initiatives by dedicating a core group of consultants to do their project's duration. That way, the client retains control over the project and there's a clear ongoing knowledge transfer throughout the engagement. A lot of time with big consulting, one of the complaints is that they, from a client's perspective, as they go through this big project, they spend a lot of money. But at the end of the project, they don't really know what to do with the system that was created or whatever the project tried to intend to do.

Our 6 primary process areas give us the ability to penetrate multiple functional areas within a client: Finance and accounting, information management, human resources, supply chain management, legal and regulatory and risk management, internal audit give us many points of contact within a client's organization. Having many points of contact gives us the ability to get introductions from one department to another as well as one country to another. And once we do work for a client, they use us over and over again. Although accounting and finance is by far our biggest service offering, accounting for just over 55% of our revenues, information management, supply chain management and legal are where we see the most growth potential going forward.

Key differentiators between Resources and our competitors. We're team oriented and exceptionally collaborative in our approach. Our efforts are focused on what's right for the client. We work with our clients every step of the way to be sure that they achieve their desired outcome. We're client service focused but relationship-driven. We work with our clients on knowledge transfer, so that when the project is over, the clients get the intended benefit.

Although we have global reach, we believe that it is important to have local execution. In all of our international offices, we tend to use foreign nationals of their respective geographies that we operate in to lead the delivery of our services, people that know the low local language, the local customs and the local business etiquette.

Our business imperative is to always do the right thing for the client. Whenever conflicted with proprietary products or services, but we listen, determine a desired client outcome and then custom tailor a solution for our clients. Our brand is to build one client at a time.

Our business model provides value to our people, our clients and our investors. To our clients, we provide intellectual capital on demand for them to use as long as needed to get the job done. Our consultants have on average 18 to 20 years of experience and come at bill rates that are a fraction of the Big Four and they create tremendous value for the clients from day 1 on.

To our employees, they get the ability to influence their own career, to control their own destiny. They get to work on interesting assignments within a diverse client base and stay technically relevant while adding new skills to their resume.

To our investors, you get a variable cost operating platform. Approximately 67% of our cash costs are variable. We have an exceptionally strong balance sheet, with over $100 million in cash and no debt. Because our business generates significant cash flow, we're able to return approximately $54 million last year through our stock repurchase plan and our dividend program. In fiscal 2013, we raised our cash dividend by 20% to $0.05 per share per quarter to $0.06 per share per quarter and we've continued to buy shares on the open market.

From our inception, we knew that we needed a global footprint to service our multinational clients anywhere we did business in the world. Today, for the most part, our geographical footprint gives us that. Worldwide, we have 77 offices, with 13 in Europe and 12 in Asia Pacific. Our expansion plans call for a greater presence in China and Germany and someday, an office in Brazil or Poland when the economic climate improves enough for us to make further investments. We have always let our clients to be our guide as to where we need to be and we will continue that plan into the future.

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