Resources Connection (NASDAQ:RGP) executives told investors they are focused on aligning the company’s cost structure with current revenue levels, refining the on-demand talent business to match evolving client needs, and scaling consulting capabilities, as the professional services provider continues to work through a challenging demand environment.
Management discussed results for the second quarter ended Nov. 29, 2025, highlighted by revenue that came in near the midpoint of guidance and improved cost control that helped the company exceed its expectations for adjusted EBITDA, according to Chief Financial Officer Jen. The quarter also included significant one-time charges tied to a CEO transition and workforce reduction.
Leadership transition and strategic priorities
Carlisle said the company’s strategy going forward centers on three themes:
- Better aligning the cost structure with current revenue levels
- Refocusing the on-demand offering to meet evolving client needs
- Scaling the consulting business to deliver higher-value solutions
He also emphasized that artificial intelligence and automation are changing client needs and the services clients procure. Carlisle said the company is working to understand how clients’ AI strategies are affecting demand and is implementing additional AI and automation tools internally to improve delivery and support functions.
Quarterly results: revenue, profitability, and one-time charges
Jen reported consolidated second-quarter revenue of $117.7 million. Gross margin was 37.1%, below the company’s outlook, but run-rate SG&A expense of $39.7 million was “significantly more favorable,” helping produce adjusted EBITDA of $4.0 million, or a 3.4% margin.
The company incurred $11.9 million of one-time expenses related to the CEO transition and a reduction in force, which contributed to a GAAP net loss of $12.7 million.
On a constant-currency basis, consolidated revenue declined 18.4% year over year. Jen said on-demand and consulting revenues remained soft, while Europe and Asia Pacific and outsourced services posted year-over-year growth.
Gross margin declined from 38.5% a year ago to 37.1%. Jen cited a 97-basis-point improvement in pay-bill ratio, but said leverage on indirect cost of service was unfavorable, with impacts from healthcare costs and paid time off, including higher holiday pay tied to Thanksgiving falling in the second quarter this year.
Enterprise-wide average bill rate was $121 on a constant-currency basis versus $123 a year ago, which Jen attributed mainly to revenue mix shifting toward the Asia-Pacific region. Segment bill rates improved, including a 6.4% increase in consulting and 2.4% increases in on-demand and Europe/Asia Pacific.
Segment performance and operational updates
Chief Operating Officer Bhadresh Patel said North America pipeline activity improved due to expanded go-to-market initiatives and stronger cross-practice collaboration. He also noted that Europe and Asia Pacific delivered both sequential and year-over-year growth, and outsourced services posted improved gross margins even as revenue remained steady year over year.
Jen provided segment-level results:
- On-demand: Revenue of $43.0 million, down 18.4% year over year; segment-adjusted EBITDA of $4.1 million (margin 9.5%) versus $5.6 million (10.5%) a year ago.
- Consulting: Revenue of $42.6 million, down 28.8%; segment-adjusted EBITDA of $4.5 million (margin 10.4%) versus $9.7 million (16.0%) a year ago. Patel said sequential revenue was essentially flat, with growth in select areas of CFO advisory and digital transformation.
- Europe and Asia Pac: Revenue of $20.1 million, up 0.6%; segment-adjusted EBITDA of $1.5 million in both years (margin 7.4% vs. 7.5%). Performance was led by Europe, Japan, India, and the Philippines, Patel said.
- Outsourced services: Revenue of $9.4 million, up 0.8%; segment-adjusted EBITDA of $1.7 million (margin 18.4%) versus $1.5 million (16.4%).
Patel also said the company expects to complete the integration of Reference Point by the end of the fiscal year, combining its capabilities with the company’s consulting platform with a focus on CFO Advisory and Digital Transformation. He also announced that Scott Rothman, who joined in August, will succeed John Bowman—who is retiring—as president of consulting services.
Cost actions, balance sheet, and third-quarter outlook
Jen said the company is conducting a deeper assessment to streamline structure, simplify processes, and adopt automation and AI, with cost actions expected to be implemented over a 12-month period. In October, the company executed a reduction in force impacting 5% of management and administrative headcount, expected to produce $6 million to $8 million in annual savings.
The company ended the quarter with $89.8 million of cash and cash equivalents and zero outstanding debt. Quarterly dividend distributions totaled $2.3 million. Jen said the company plans a balanced capital allocation approach, including investment for growth and returning cash through dividends and opportunistic share buybacks. The company had $79 million remaining under its repurchase program at quarter end.
For the third quarter, management guided to revenue of $105 million to $110 million, citing seasonality from the timing of Christmas and New Year’s Day and softer revenue during those holiday weeks. The company expects gross margin of 35% to 36% due to utilization impacts, holiday pay for agile consultants, and the employer payroll tax reset at the start of the calendar year. Run-rate SG&A is expected to be $40 million to $42 million, exclusive of $6 million to $7 million in non-run-rate and non-cash expenses consisting of stock compensation and restructuring costs.
Client demand and AI: early impacts and skill shifts
During the Q&A, Carlisle and Patel discussed how AI and automation are affecting client staffing needs, particularly in finance and accounting. Carlisle said the company is seeing early impacts in operational accounting roles that are “easiest to replicate and replace” through automation, but characterized client adoption as still developing, with “a lot of activity” and spending but benefits not yet fully realized.
Patel said transactional and repeatable roles are being replaced, but he also noted that AI is accelerating access to data and analytics, which can require additional work to act on insights. He said the company is not seeing the “big windfall” of job replacement some expect, and instead sees AI as driving transformation initiatives that may increase demand for higher-skilled professionals who understand AI’s impact on processes and cross-functional operations.
Patel added that clients are navigating choices between AI features embedded in enterprise systems such as ERPs and “spot technologies” that may require integration. Both executives said the company is shifting its on-demand skill base toward client needs, including ERP and broader technology skills, and that higher-level roles are evolving toward requiring AI knowledge rather than being eliminated.
Carlisle told investors he expects progress to be incremental rather than sudden, and said the company’s main focus over the next 12 months remains improving cost alignment, strengthening execution in on-demand, and expanding consulting scale in areas such as financial transformation, technology, data analytics, and risk.
About Resources Connection (NASDAQ:RGP)
Resources Connection, Inc (NASDAQ: RGP) is a publicly traded professional services firm that specializes in providing independent consulting and project-based teams to help organizations manage critical business challenges. Operating under the RGP brand, the company connects highly skilled consultants with clients seeking support in areas such as finance and accounting, legal and risk management, supply chain optimization, technology implementation, and digital transformation.
RGP’s consultants bring specific industry and functional expertise to engagements, working on a flexible basis that allows clients to scale resources up or down as needed.
