RECN

Resources Connection, Inc. (RECN)

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Resources Connection (RECN)

Q2 2014 Earnings Call

January 02, 2014 5:00 pm ET

Executives

Kate W. Duchene - Chief Legal Officer, Executive Vice President of Human Resources and Secretary

Anthony Cherbak - Chief Executive Officer, President and Director

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

Donald B. Murray - Co-Founder and Executive Chairman

Analysts

Jeffrey M. Silber - BMO Capital Markets U.S.

Kevin D. McVeigh - Macquarie Research

Molly R. McGarrett - JP Morgan Chase & Co, Research Division

Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to Resources Global Professionals Second Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Kate Duchene, Chief Legal Officer. Ma'am, you may begin.

Kate W. Duchene

Thank you, operator. Good afternoon, everyone, and thank you for participating today. Joining me on this call are Don Murray, Executive Chairman; Tony Cherbak, Chief Executive Officer; Tracy Stephens, Chief Operating Officer; and Nate Franke, our Chief Financial Officer.

During this call, we will be providing you with comments on our results for the second quarter of fiscal year 2014. By now, you should have a copy of today's press release. If you need a copy and are unable to access via our website, please call Patricia Marquez at (714) 430-6314 and she'll be happy to fax a copy to you.

Before introducing Tony, I would like to read an important announcement about certain statements that we may make during this call. Specifically, we may make forward-looking statements, in other words, statements regarding future events or future financial performance of the company. We wish to caution you that such statements are just predictions, and actual events or results may differ materially. We refer you to our Form 10-K report from year ended May 25, 2013, for a discussion of some of the risks, uncertainties and other factors, such as seasonal and economic conditions that may cause our business results of operations and financial condition to differ materially from results of operations and financial conditions expressed or implied by forward-looking statements made during this call.

I'll now turn the call over to Tony Cherbak.

Anthony Cherbak

Thanks, Kate. Good afternoon, and welcome to the Resources' second quarter conference call. I'm going to start by giving you a brief overview of our second quarter operating results.

Total revenue for the second quarter of fiscal 2014 was $146 million, our highest quarterly revenue since the third quarter of fiscal 2009. Our second quarter revenue represents a 10.9% increase sequentially and a 3.4% increase from the second quarter a year ago. It is important to remember that quarter-over-quarter comparisons are impacted by the fact that the Thanksgiving holiday fell in our third quarter this year, but was included in the second quarter a year ago.

Second quarter gross margin was 39.3%, representing an increase of 160 basis points sequentially and 20 basis points from the comparable quarter a year ago.

During the second quarter, our SG&A costs were $43.1 million, an $800,000 increase from the comparable quarter a year ago and $1.5 million higher than last quarter.

In Q2, we generated adjusted EBITDA and cash flow from operations of $15.9 million and $3.1 million, respectively.

For the quarter, our pretax income was $13 million. Our GAAP net income was $7.1 million or $0.18 a share.

Our GAAP net income reflects an effective tax rate of 45.4% while our cash tax rate remains at approximately 42%, an impact of $0.01 per share.

During the second quarter, we returned $12.9 million to shareholders as we repurchased approximately 807,000 shares of our common stock at an aggregate cost of $10.1 million and paid our quarterly dividend totaling $2.8 million or $0.07 per share.

Now let's talk about revenue trends. As we reported in October, weekly revenues during the first 4 weeks of the second quarter totaled $42.4 million. During this period, non-holiday weekly revenues averaged approximately $10.9 million. During the following 9 weeks of the quarter, average weekly revenues increased to $11.5 million per week. We were pleased to see the momentum we experienced early in the weeks of the second quarter continue and accelerate during the balance of the quarter. As we discussed in our Q1 earnings call, we commenced work on a handful of larger scale initiatives during the second quarter. We expect some of these initiatives to continue throughout much of calendar 2014.

Additionally, as you're probably all aware, in late 2013, U.S. regulatory agencies passed the Volcker rule and issued a number of interpretations from earlier Dodd-Frank regulations. While we have been working with several financial institutions during 2013 to help them with their compliance efforts, we believe the level of assistance that they will require in 2014 will increase. While our third quarter will be impacted by the Thanksgiving and winter holidays, we're optimistic about the opportunities in front of us as we enter the 2014 calendar year.

With that, I'll now turn the call over to Nate for a detailed review our financial results.

Nathan W. Franke

Thanks, Tony. As mentioned, revenues for the quarter were $146 million, representing a sequential increase of 10.9% and a quarter-over-quarter increase of 3.4% from revenue of $141.2 million in the second quarter of fiscal 2013.

Read the rest of this transcript for free on seekingalpha.com