Resources Connection Inc (NASDAQ:RGP) Reports Mixed Q1 Fiscal 2026 Results with Earnings Beat and Revenue Miss

Professional services firm Resources Connection Inc (NASDAQ:RGP) reported mixed financial results for its first quarter of fiscal 2026, delivering a positive earnings surprise while revenue fell short of analyst expectations. The company's performance reflects ongoing challenges with client demand amid global economic uncertainty, though significant improvements in operational efficiency helped drive profitability metrics upward.

Earnings and Revenue Performance

Resources Connection posted a narrower-than-expected loss for the quarter ended August 30, 2025, with adjusted earnings of $0.03 per share significantly outperforming the consensus estimate of a $0.10 loss. This represents a notable improvement from the break-even adjusted earnings reported in the same quarter last year.

However, the company's revenue picture was less favorable, with total sales of $120.2 million declining 12.2% year-over-year and coming in below analyst expectations of $121.1 million. The revenue decline was primarily attributed to reduced billable hours across most segments as clients delayed transformation projects.

Key financial metrics from the quarter include:

• Revenue: $120.2 million (estimated $121.1 million)
• Adjusted EPS: $0.03 (estimated -$0.10)
• Gross margin: 39.5%, up from 36.5% in prior year quarter
• Net loss: $2.4 million, improved from $5.7 million loss
• Adjusted EBITDA: $3.1 million with margin of 2.5%, up from 1.7%

Market Reaction and Price Action

Following the earnings release, RGP shares experienced significant after-hours momentum, climbing approximately 13% as investors reacted positively to the better-than-expected profitability despite the revenue miss. This sharp move higher suggests market participants are placing greater emphasis on the company's improved operational efficiency and cost management.

The positive after-hours performance marks a reversal from recent trends, as the stock had declined roughly 4% over the past month leading up to the earnings announcement. This indicates that the results may have exceeded the market's lowered expectations for the quarter.

Segment Performance and Operational Highlights

The company's performance varied significantly across its business segments, with international operations showing strength while domestic consulting faced headwinds.

The Europe & Asia Pacific segment emerged as a bright spot, delivering revenue growth of 10.6% to $19.9 million, driven by increased billable hours in Europe and higher average bill rates. Conversely, the Consulting segment experienced the steepest decline, with revenue falling 20.7% to $43.6 million due to a significant reduction in billable hours, despite an 11.1% increase in average bill rates.

Operational improvements were evident throughout the income statement:

• Gross margin expanded 300 basis points to 39.5%
• SG&A expenses decreased by $1.0 million to $47.9 million
• Absence of goodwill impairment charges that impacted prior year results
• Continued progress on cost structure redesign initiatives

Management Commentary and Strategic Direction

Chief Executive Officer Kate W. Duchene struck an optimistic tone, noting that first quarter results "exceeded our outlook ranges on all fronts" and emphasizing the company's progress in transforming the business to be "more integrated, diversified and resilient."

Duchene highlighted the company's strategic shift toward higher-value consulting engagements with larger deal sizes and improved bill rates, particularly in focus areas of CFO Advisory and Digital Transformation. She acknowledged the "unpredictable" macro environment but expressed confidence in the company's strategy and ongoing cost structure initiatives.

Forward Outlook and Analyst Expectations

Looking ahead, analysts project continued challenges for Resources Connection, with estimates suggesting a 1% revenue decline for the second quarter of fiscal 2026 to approximately $134.8 million. For the full fiscal year 2026, analysts anticipate revenue of approximately $538 million.

The company's ability to maintain its improved pricing power and operational efficiency will be critical factors in determining whether it can meet or exceed these expectations. Management's focus on cost structure redesign and pursuit of higher-value engagements appears to be yielding positive results on the profitability front, though top-line growth remains elusive in the current economic climate.

For detailed earnings estimates and future projections, view the full earnings analysis for RGP.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. The author has no position in Resources Connection Inc. Investors should conduct their own research and consult with a financial advisor before making investment decisions.