RESOURCES CONNECTION INC

Previous wording

The following discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the three and six months ended November 25, 2023 should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes and with our Annual Report on Form 10-K for the year ended May 27, 2023 filed with the Securities and Exchange Commission (“SEC”). This discussion and analysis contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to expectations concerning matters that are not historical facts. For example, statements discussing, among other things, expected costs and liabilities, business strategies, growth strategies and initiatives, acquisition strategies, future revenues and future performance, are forward-looking statements. Such forward-looking statements may be identified by words such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “remain,” “should” or “will” or the negative of these terms or other comparable terminology. In this Quarterly Report on Form 10-Q, such statements include statements regarding our growth, operational and strategic plans.

Current wording

The following discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the three and nine months ended February 24, 2024 should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes and with our Annual Report on Form 10-K for the year ended May 27, 2023 filed with the Securities and Exchange Commission (“SEC”). This discussion and analysis contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to expectations concerning matters that are not historical facts. For example, statements discussing, among other things, expected costs and liabilities, business strategies, growth strategies and initiatives, acquisition strategies, future revenues and future performance, are forward-looking statements. Such forward-looking statements may be identified by words such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “remain,” “should” or “will” or the negative of these terms or other comparable terminology. In this Quarterly Report on Form 10-Q, such statements include statements regarding our growth, operational and strategic plans.

Previous wording

In fiscal 2022, we launched a multi-year global technology transformation project which includes replacing our core financial and talent software systems and optimizing our existing systems including Salesforce and Workday Human Capital Management. We have made significant progress to date and will be launching a new talent management system in North America in February 2024. We believe our investment in this important modernization initiative will enhance the experience for all of our core constituents and drive improved finance metrics through automation, better data analytics and faster global collaboration. Seamless global execution capability will enhance our competitive advantage as a preferred partner for global transformation projects.

Current wording

In fiscal 2022, we launched a multi-year global technology transformation project which includes replacing our core financial and talent software systems and optimizing our existing systems including Salesforce and Workday Human Capital Management. We have made significant progress to date and launched a new talent management system in North America in February 2024. We believe our investment in this important modernization initiative will enhance the experience for all of our core constituents and drive improved finance metrics through automation, better data analytics and faster global collaboration. Seamless global execution capability will enhance our competitive advantage as a preferred partner for global transformation projects.

Previous wording

Amplify brand voice and clarify solution offerings – Our second focus area for this fiscal year is a sustained effort to enhance and amplify our brand in the marketplace. We will be driving toward a refreshed view of our business, serving clients in three areas: (1) the core is our white-glove agile talent platform of deep functional experts that execute mission-critical projects for our clients. We empower expert, diverse professionals with ultimate career control and offer them access to opportunities to work with top enterprise brands. Our agile talent business also includes HUGO, which focuses on offering clients direct access to earlier career Accounting and Finance professionals through a digital self-service model; (2) our consulting business today consists largely of Veracity, our end-to-end digital transformation firm, and Sitrick and Company, a top strategic communications firm. We are actively working to grow our capabilities in the consulting arena both organically and through targeted M&A, with a special focus on digital transformation, financial advisory and operational excellence; (3) Countsy is our managed services business, offering finance, accounting, and HR solutions to venture-backed start-up clients through a unique combination of on-demand fractional leadership and a streamlined technology platform.

Current wording

Amplify brand voice and clarify solution offerings – Our second focus area for this fiscal year is a sustained effort to enhance and amplify our brand in the marketplace. We will be driving toward a refreshed view of our business, serving clients in three areas: (1) the core is our white-glove on-demand talent platform of deep functional experts that execute mission-critical projects for our clients. We empower expert, diverse professionals with ultimate career control and offer them access to opportunities to work with top enterprise brands. Our on-demand talent business also includes HUGO, which focuses on offering clients direct access to earlier career Accounting and Finance professionals through a digital self-service model; (2) our consulting business today consists largely of Veracity, our end-to-end digital transformation firm, and Sitrick and Company, a top strategic communications firm. We are actively working to grow our capabilities in the consulting arena both organically and through targeted M&A, with a special focus on digital transformation, financial advisory and operational excellence; (3) Countsy is our managed services business, offering finance, accounting, and HR solutions to venture-backed start-up clients through a unique combination of on-demand fractional leadership and a streamlined technology platform.

Previous wording

Our investment in the RGP brand notably includes development of fresh thought leadership content based on RGP’s own market research studies. Companies today are in a constant state of transformation – serving as a driving force for dynamic innovation and rethinking of business models. Foundationally, this includes a shift in the composition of the workforce. This year, we conducted an in-depth global research study which established that companies are increasing by double-digits their engagement with interim, on-demand and agile professional talent to deliver better outcomes with greater efficiency. This fall, we released a new research study that more closely examined this paradigm shift in workforce strategy. What we are seeing is organizations increasingly and intentionally embracing a hybrid approach that includes a mix of internal and external talent – what we are terming “The Dynamic Workforce.”

Current wording

Our investment in the RGP brand notably includes development of fresh thought leadership content based on RGP’s own market research studies. Companies today are in a constant state of transformation – serving as a driving force for dynamic innovation and rethinking of business models. Foundationally, this includes a shift in the composition of the workforce. This year, we conducted an in-depth global research study which established that companies are increasing by double-digits their engagement with interim, on-demand and agile professional talent to deliver better outcomes with greater efficiency. This fall, we released a new research study that closely examined this paradigm shift in workforce strategy. What we are seeing is organizations increasingly and intentionally embracing a hybrid approach that includes a mix of internal and external talent – what we are terming “The Dynamic Workforce.” In January, we conducted a pulse survey of 200+ decision makers to better understand their current investment priorities, organizational skill gaps and outlook for the year ahead. We learned that more than 80% of the respondents said they plan to increase investment in workforce development in 2024. Over half said their organization would increase workforce investment in balancing full-time headcount with outside talent should a lower interest rate environment unlock new capital in 2024. This research has informed our thought leadership content and helped drive awareness of the RGP brand through media coverage in national outlets and key industry trade publications in the second half of our fiscal year.

Previous wording

Pursue targeted mergers and acquisitions – Lastly, we will seek to accelerate growth through strategic mergers and acquisitions (“M&A”) that drive additional scale or expand and complement our existing core capabilities, as demonstrated through our acquisition of CloudGo Pte Ltd. and its subsidiaries (collectively, “CloudGo”). Our M&A strategy is focused on expanding our consulting capabilities, with a special interest in financial advisory firms as well as digital transformation firms that serve to add scale and/or accelerate growth for our Veracity business. We believe that we are well positioned to grow and scale a boutique consulting firm through access to both our robust enterprise client base and our expansive agile talent pool.

Current wording

Pursue targeted mergers and acquisitions – Lastly, we will seek to accelerate growth through strategic mergers and acquisitions (“M&A”) that drive additional scale or expand and complement our existing core capabilities, as demonstrated through our acquisition of CloudGo Pte Ltd. and its subsidiaries (collectively, “CloudGo”) and pending acquisition of Reference Point LLC (“Reference Point”). Our M&A strategy is focused on expanding our consulting capabilities, with a special interest in financial advisory firms as well as digital transformation firms that serve to add scale and/or accelerate growth for our Veracity business. We believe that we are well positioned to grow and scale a boutique consulting firm through access to both our robust enterprise client base and our expansive agile talent pool.

Previous wording

In November 2023, we acquired CloudGo. Headquartered in Singapore, CloudGo is a digital transformation firm and a fast growing Elite ServiceNow Partner. We believe that CloudGo’s strategic capabilities and regional positioning will play a key role in our growth plans for our digital consulting business. CloudGo will be combined with Veracity’s digital business and we believe that it will accelerate the expansion of our digital presence across the Asia Pacific region. See Note 4 – Acquisitions and Dispositions in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.

Current wording

In November 2023, we acquired CloudGo. Headquartered in Singapore, CloudGo is a digital transformation firm and a fast growing Elite ServiceNow Partner. We believe that CloudGo’s strategic capabilities and regional positioning will play a key role in our growth plans for our digital consulting business. CloudGo has been integrated with Veracity’s digital business and we believe that it will continue to accelerate the expansion of our digital presence across the Asia Pacific region. See Note 4 – Acquisitions and Dispositions in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.

Previous wording

On a macro level, uncertain macroeconomic conditions (including inflation, volatility in energy and commodity prices, the impact of the conflicts in both Eastern Europe and the Middle East, increasing diplomatic and trade friction between the United States (“U.S.”) and China, supply chain issues, and labor shortages) as well as increases in interest rates and fluctuations in currency exchange rates have created significant uncertainty in the global economy, volatility in the capital markets and recessionary pressures. We expect these conditions will continue in fiscal 2024 and beyond. While we are not able to fully predict the potential impact, we continue to see more caution in spending within our client base. If these conditions persist and a prolonged economic downturn or recession develops, it could result in further decline in billable hours and negatively impact our bill rates which would adversely affect our financial results and operating cash flows.

Current wording

On a macro level, uncertain macroeconomic conditions (including inflation, volatility in energy and commodity prices, the impact of the conflicts in both Eastern Europe and the Middle East, increasing diplomatic and trade friction between the United States (“U.S.”) and China, supply chain issues, and labor shortages) as well as increases in interest rates and fluctuations in currency exchange rates have created significant uncertainty in the global economy, volatility in the capital markets and recessionary pressures. We expect these conditions will continue through the rest of fiscal 2024 and beyond. While we are not able to fully predict the potential impact, we continue to see more caution in spending within our client base. If these conditions persist and a prolonged economic downturn or recession develops, it could result in further decline in billable hours and negatively impact our bill rates which would adversely affect our financial results and operating cash flows.

Previous wording

The following discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are discussed in Note 2 –Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in our Fiscal Year 2023 Form 10-K, and in Note 2 –Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

The following discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are discussed in Note 2 –Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K (“Fiscal Year 2023 Form 10-K”) filed with the SEC on July 25, 2023 (File No. 0-32113), and in Note 2 –Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

Adjusted EBITDA is calculated as EBITDA plus or minus stock-based compensation expense, technology transformation costs, one-time acquisition costs and restructuring costs. Adjusted EBITDA at the segment level excludes certain shared corporate administrative costs that are not practical to allocate.

Current wording

Adjusted EBITDA is calculated as EBITDA plus or minus stock-based compensation expense, technology transformation costs, goodwill impairment, one-time acquisition costs and restructuring costs. Adjusted EBITDA at the segment level excludes certain shared corporate administrative costs that are not practical to allocate.

Previous wording

(2) Acquisition costs represent one-time costs included in net income related to the Company’s acquisition of CloudGo, which include fees paid to the Company’s brokers and other professional services firms. See Note 4 – Acquisitions and Dispositions in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.

Current wording

(3) Acquisition costs primarily represent one-time costs included in net income related to the Company’s acquisitions, which include fees paid to the Company’s brokers and other professional services firms. See Note 4 – Acquisitions and Dispositions in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.

Previous wording

(3) The Company initiated the U.S. Restructuring Plan in October 2023 and substantially completed the U.S. Restructuring Plan during the second quarter of fiscal 2024. In fiscal 2021, the Company substantially completed the Global Restructuring Plans (defined below) and the remaining accrued restructuring liability on the books was released in fiscal 2023.

Current wording

(4) The Company initiated the cost reduction plan (the “U.S. Restructuring Plan”) in October 2023 and substantially completed the U.S. Restructuring Plan during the third quarter of fiscal 2024. In addition, the Company substantially completed the Global Restructuring Plans (defined below) in fiscal 2021 and the remaining accrued restructuring liability was released in fiscal 2023.

Previous wording

The following table sets forth our Consolidated Statements of Operations data for thethree and six months ended November 25, 2023 and November 26, 2022, respectively. These historical results are not necessarily indicative of future results. Our operating results for the periods indicated are expressed as a percentage of revenue(in thousands, except percentages).

Current wording

The following table sets forth our Consolidated Statements of Operations data for thethree and nine months ended February 24, 2024 and February 25, 2023, respectively. These historical results are not necessarily indicative of future results. Our operating results for the periods indicated are expressed as a percentage of revenue(in thousands, except percentages).

Previous wording

Revenue. Revenue decreased $37.2 million, or 18.6%, to $163.1 million in the second quarter of fiscal 2024 from $200.4 million in the second quarter of fiscal 2023. On a same-day constant currency basis, revenue decreased$38.4 million, or 19.2%. Billable hours decreased 15.1% and the average bill rate declined 4.7% (5.5% on a constant currency basis) from the prior year quarter due to reduced client spending as discussed below. The change in average bill rate was due to a shift in revenue mix across the globe to regions with lower bill rates. The United States (U.S.) and Europe average bill rates increased by 1.3% and 4.7% on a constant currency basis, respectively, compared to the prior year as a result of the Company’s initiative focused on value-based pricing, while average bill rates in the Asia Pacific region declined by 9.1% on a constant currency basis. The decline in the average bill rates in the Asia Pacific region was due to a shift in the revenue mix to countries with a historically lower bill rate.

Current wording

Revenue. Revenue decreased $35.5 million, or 19.0%, to $151.3 million in the third quarter of fiscal 2024 from $186.8 million in the third quarter of fiscal 2023. On a same-day constant currency basis, revenue decreased$36.6 million, or 19.6% reflecting the overall choppy macro environment as clients want more certainty in lower interest rates and improving economic indicators before moving ahead with many major initiatives. Billable hours decreased 12.3% and the average bill rate declined 7.8% (7.8% on a constant currency basis) from the prior year quarter due to an increasingly competitive pricing environment as well as a shift in revenue mix to the Asia Pacific region which carries lower average bill rate. The United States (U.S.) average bill rates increased by 0.9% compared to the prior year as a result of pricing actions taken to implement our value-based pricing model, while average bill rates in the Asia Pacific region declined by 10.1% (or 6.3% on a constant currency basis), also largely attributable to a shift in revenue mix across the countries within this region.

Previous wording

Revenue declined in all geographic regions during the second quarter of fiscal 2024 compared to the prior year quarter reflecting reduced client spending across a majority of our markets, client segments and solution offerings as a result of the continued challenging global macroeconomic environment. Gross pipeline remained relatively resilient, as the time to close opportunities in the pipeline continued to be protracted, typical in a tougher macro environment when clients are more hesitant to spend on professional services. North America experienced a revenue decline of 20.2%, or 20.5% on a same-day constant currency basis, from the second quarter of fiscal 2023. Europe revenue decreased 1.4%, or 9.1% on a same-day constant currency basis, compared to the second quarter of fiscal 2023. Asia Pacific revenue declined 11.0%, or 9.9% on a same-day constant currency basis, compared to the second quarter of fiscal 2023.

Current wording

Revenue declined in the North America and Europe regions during the third quarter of fiscal 2024 compared to the prior year quarter reflecting reduced client spending across a majority of our markets, client segments and solution offerings as a result of the continued challenging global macroeconomic environment. Gross pipeline remained relatively resilient; however, the time to close opportunities in the pipeline continued to be protracted, typical in a tougher macro environment when clients are more hesitant to spend on professional services. North America experienced a revenue decline of 20.8%, or 21.1% on a same-day constant currency basis, from the third quarter of fiscal 2023. Europe revenue decreased 14.8%, or 22.5% on a same-day constant currency basis, compared to the third quarter of fiscal 2023. Asia Pacific revenue increased 0.6%, or 1.8% on a same-day constant currency basis, compared to the third quarter of fiscal 2023. Large multinational clients continue to shift work to lower cost markets such as India and the Philippines, creating demand in our Asia Pacific region. In addition, CloudGo, our recent acquisition completed in the second fiscal quarter, contributed $1.9 million of revenue to the Asia pacific region.

Previous wording

Direct Cost of Services. Direct cost of services decreased $18.4 million, or 15.6%, to $99.7 million for the second quarter of fiscal 2024 from $118.0 million for the second quarter of fiscal 2023. The decrease in direct cost of services was primarily attributable to a 15.1% decline in billable hours and a 3.3% decrease in average pay rate during the second quarter of fiscal 2024 compared to the prior year quarter.

Current wording

Direct Cost of Services. Direct cost of services decreased $19.9 million, or 17.3%, to $95.3 million for the third quarter of fiscal 2024 from $115.2 million for the third quarter of fiscal 2023. The decrease in direct cost of services was primarily attributable to a 12.3% decline in billable hours and a 6.5% decrease in average pay rate during the third quarter of fiscal 2024 compared to the prior year quarter.

Previous wording

Direct cost of services as a percentage of revenue was 61.1% for the second quarter of fiscal 2024 compared to 58.9% for the second quarter of fiscal 2023. The increased percentage compared to the prior year quarterwas primarily attributable to a 30 basis point increase in the pay/bill ratio as a result of the shift in global revenue mix to the international regions as well as a decrease in leverage on cost of service as a result of lower topline revenue. In addition, we experienced a 130 basis point increase in employee health benefit expenses as a percentage of revenue. We continue to seek improvement in the overall pay/bill ratio and indirect cost leverage through strategic pricing, while offering competitive compensation and benefits to our consultants to attract and retain the best talent in the marketplace.

Current wording

Direct cost of services as a percentage of revenue was 63.0% for the third quarter of fiscal 2024 compared to 61.7% for the third quarter of fiscal 2023. The increased percentage compared to the prior year quarterwas primarily attributable to a 60 basis point increase in the pay/bill ratio as a result of the shift in global revenue mix to the international regions as well as a decrease in leverage on cost of service as a result of lower topline revenue, including a 30 basis point increase related to employee health benefit. We continue to seek improvement in the overall pay/bill ratio and indirect cost leverage through strategic pricing, while offering competitive compensation and benefits to our consultants to attract and retain the best talent in the marketplace.

Previous wording

The number of consultants on assignment at the end of the second quarter of fiscal 2024 was 3,167 compared to 3,255 at the end of the second quarter of fiscal 2023.

Current wording

The number of consultants on assignment at the end of the third quarter of fiscal 2024 was 2,765 compared to 3,164 at the end of the third quarter of fiscal 2023.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses (“SG&A”) was $53.0 million, or 32.5% of revenue, for the second quarter of fiscal 2024 compared to $56.8 million, or 28.3% of revenue, for the second quarter offiscal 2023. The $3.8 million improvement in SG&A year-over-year was primarily attributed to a decrease inbonuses and commissions of $5.6 million primarily related to less incentive compensation as a result of lower revenue and profitability achievement compared to the incentive targets and a decrease of $1.7 million in stock-based compensation expense as a result of forfeitures and remeasurement of achievement associated with performance-based equity awards. These reductions in costs were partially offset by one-time costs of $2.2 million of employee termination benefits in connection with the reduction in force incurred in the second quarter of fiscal 2024, and $1.1 million of costs related to the acquisition of CloudGo.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses (“SG&A”) was $49.6 million, or 32.8% of revenue, for the third quarter of fiscal 2024 compared to $59.4 million, or 31.8% of revenue, for the third quarter offiscal 2023. The $9.8 million improvement in SG&A year-over-year was primarily attributed to a decrease inbonuses and commissions of $7.3 million primarily related to lower revenue and profitability achievement compared to incentive compensation targets in the current fiscal year, lower management compensation expense of $2.6 million partially due to the U.S. Restructuring Plan initiated in October 2023, and a decrease of $1.4 million in stock-based compensation expense as a result of forfeitures and remeasurement of achievement associated with performance-based equity awards. These reductions in costs were partially offset by one-time costs of $1.6 million of employee termination benefits in connection with further actions taken under the U.S. Restructuring Plan during the third quarter of fiscal 2024.

Previous wording

Management and administrative headcount was 850 at the end of the second quarter of fiscal 2024 and 907 at the end of the second quarter of fiscal 2023. Management and administrative headcount includes full time equivalent headcount for our seller-doer group, which is determined by utilization levels achieved by the seller-doers. Any unutilized time is converted to full time equivalent headcount.

Current wording

Management and administrative headcount was 830 at the end of the third quarter of fiscal 2024 and 924 at the end of the third quarter of fiscal 2023. Management and administrative headcount includes full time equivalent headcount for our seller-doer group, which is determined by utilization levels achieved by the seller-doers. Any unutilized time is converted to full time equivalent headcount.

Previous wording

Acquisition Costs. We completed the acquisition of CloudGo in the second quarter of fiscal 2024. All acquisition costs are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Acquisition costs were $1.1 million for the six months ended November 25, 2023, which includes fees paid to the Company’s brokers and other professional services firms.

Current wording

Acquisition Costs. Acquisition costs are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Acquisition costs were $0.2 million for the three months ended February 24, 2024, which includes fees paid to the Company’s other professional services firms.

Previous wording

Restructuring Costs. We initiated a U.S. Restructuring Plan in October 2023 and substantially completed the U.S. Restructuring Plan during the second quarter of fiscal 2024. All restructuring costs incurred were associated with the RGP segment, and are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Restructuring costs were $2.3 million for the three months ended November 25, 2023. The restructuring liability was $0.3 million and zero as of November 25, 2023 and May 27, 2023, respectively.

Current wording

Restructuring Costs. We initiated a U.S. Restructuring Plan in October 2023 and substantially completed the U.S. Restructuring Plan during the third quarter of fiscal 2024. All restructuring costs incurred were associated with the RGP segment, and are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Restructuring costs were $1.6 million for the three months ended February 24, 2024. The restructuring liability was $1.7 million and zero as of February 24, 2024 and May 27, 2023, respectively.

Previous wording

Amortization and Depreciation Expense. Amortization expense was $1.3 million and $1.2 million in the second quarter of fiscal 2024 andfiscal 2023, respectively. Depreciation expense was $0.8 million and $0.9 million in the second quarter of fiscal 2024 and fiscal 2023, respectively.

Current wording

Amortization and Depreciation Expense. Amortization expense was $1.4 million and $1.3 million in the third quarter of fiscal 2024 andfiscal 2023, respectively. Depreciation expense was $0.7 million and $0.9 million in the third quarter of fiscal 2024 and fiscal 2023, respectively.

Previous wording

Income Taxes. Income tax expense was $3.8 million (effective tax rate of 43.4%) for the second quarter of fiscal 2024 compared to $5.9 million (effective tax rate of 25.2%) for the second quarter of fiscal 2023. We record tax expense based upon actual results versus a forecasted tax rate because of the volatility in our international operations that span numerous tax jurisdictions. The higher effective tax rate in the second quarter of fiscal 2024 was attributed primarily to a nonrecurring increase in forfeiture of stock options, coupled with the capitalization of acquisition related costs for tax purposes. Additionally, the lower effective tax rate in the three months ended November 26, 2022 resulted from a number of one-time tax benefits recognized and a larger pretax income base lowering the tax expense ratio.

Current wording

Income Taxes. Income tax expense was $1.9 million (effective tax rate of 43.2%) for the third quarter of fiscal 2024 compared to an income tax benefit of nearly zero (effective tax benefit rate of less than 0.1%) for the third quarter of fiscal 2023. We record tax expense based upon actual results versus a forecasted tax rate because of the volatility in our international operations that span numerous tax jurisdictions. The income tax benefit in the three months ended February 25, 2023 resulted largely from a one-time tax benefit recognized on the release of valuation allowance in our Europe region. The higher effective tax rate in the three months ended February 24, 2024 resulted largely from a lower pretax income base increasing the tax expense ratio.

Previous wording

The Company recognized a tax benefit of approximately $1.0 million and $1.1 million for the three months ended November 25, 2023 and November 26, 2022, respectively, associated with the exercise of nonqualified stock options, vesting of restricted stock awards, restricted stock units, and disqualifying dispositions by employees of shares acquired under the Employee Stock Purchase Plan (“ESPP”).

Current wording

The Company recognized a tax benefit of approximately $0.1 million and $0.2 million for the three months ended February 24, 2024 and February 25, 2023, respectively, associated with the exercise of nonqualified stock options, vesting of restricted stock awards, restricted stock units, and disqualifying dispositions by employees of shares acquired under the Employee Stock Purchase Plan (“ESPP”).

Previous wording

Revenue. Revenue decreased $71.1 million, or 17.6%, to $333.3 million for the six months ended November 25, 2023 from $404.4 million for the six months ended November 26, 2022. On a same-day constant currency basis, revenue for the first half of fiscal 2024 decreased $73.2 million, or 18.1%, compared to the first half of fiscal 2023. Billable hours decreased 14.8% and the average bill rate declined 3.9% in the first half of fiscal 2024 compared to the first half of fiscal 2023. The decrease in billable hours is due to reduced client spending and the lower average bill rate for the first half of fiscal 2024 was due to the ongoing shift in revenue mix across the globe, as previously discussed.

Current wording

Revenue. Revenue decreased $106.6 million, or 18.0%, to $484.6 million for the nine months ended February 24, 2024 from $591.2 million for the nine months ended February 25, 2023. On a same-day constant currency basis, revenue for the nine months ended February 24, 2024 decreased $109.9 million, or 18.6%, compared to the nine months ended February 25, 2023. Billable hours decreased 14.0% and the average bill rate declined 4.7% (4.7% on a constant currency basis) in the nine months ended February 24, 2024 compared to the nine months ended February 25, 2023. The decrease in billable hours is due to reduced client spending and the lower average bill rate for the nine months ended February 24, 2024 was due to an increasingly competitive pricing environment as well as the ongoing shift in revenue mix to Asia Pacific region which carries lower average bill rate, as previously discussed.

Previous wording

The following table represents our consolidated revenues by geography for the six months ended November 25, 2023 and November 26, 2022, respectively (in thousands, except percentages):

Current wording

The following table represents our consolidated revenues by geography for the nine months ended February 24, 2024 and February 25, 2023, respectively (in thousands, except percentages):

Previous wording

Revenue declined in all geographic regions during the six months ended November 25, 2023 compared to the same period in fiscal 2023. North America experienced a revenue decline of 19.3%, or 19.6% on a same-day constant currency basis, from the first six months of fiscal 2023. Europe revenue decreased 1.8%, or 7.7% on a same-day constant currency basis, as compared to the first half of fiscal 2023. Asia Pacific revenue declined 8.1%, or 6.4% on a same-day constant currency basis, compared to the first half of fiscal 2023. We continue to make strides in improving our bill rates during fiscal 2024. The U.S. and Europe average bill rates increased by 1.9% and 4.2% on a constant currency basis, respectively, compared to the prior year as a result of the Company’s initiative focused on value-based pricing, while the average bill rate in the Asia Pacific region declined by 4.4% on a constant currency basis in the first half of fiscal 2024 compared to the first half of fiscal 2023. The decline in the average bill rate in the Asia Pacific region was due to a shift in the revenue mix to countries with a historically lower bill rate.

Current wording

Revenue declined in all geographic regions during the nine months ended February 24, 2024 compared to the same period in fiscal 2023. North America experienced a revenue decline of 19.7%, or 20.1% on a same-day constant currency basis, from the nine months ended February 25, 2023. Europe revenue decreased 5.9%, or 12.6% on a same-day constant currency basis, as compared to the nine months ended February 25, 2023. Asia Pacific revenue declined 5.3%, or 3.7% on a same-day constant currency basis, compared to the nine months ended February 25, 2023. We continue to focus on improving pricing during fiscal 2024. Despite the competitive pricing environment, the U.S. and Europe average bill rates increased by 1.5% and 2.8% on a constant currency basis, respectively, compared to the prior year as a result of pricing actions taken to implement our value-based pricing model, while the average bill rate in the Asia Pacific region declined by 5.3% on a constant currency basis in the nine months ended February 24, 2024 compared to the nine months ended February 25, 2023. The decline in the average bill rate in the Asia Pacific region was due to a shift in the revenue mix to countries with a historically lower bill rate.

Previous wording

Direct Cost of Services. Direct cost of services decreased $35.8 million, or 15.0%, to $202.8 million for the six months ended November 25, 2023 from $238.6 million for the six months ended November 26, 2022. The decrease in direct cost of services year over year was primarily attributable to a 14.8% decrease in billable hours and a 1.7% decrease in average pay rate in the first six months of fiscal 2024 compared to the first six months of fiscal 2023.

Current wording

Direct Cost of Services. Direct cost of services decreased $55.7 million, or 15.7%, to $298.1 million for the nine months ended February 24, 2024 from $353.8 million for the nine months ended February 25, 2023. The decrease in direct cost of services year over year was primarily attributable to a 14.0% decrease in billable hours and a 3.8% decrease in average pay rate in the nine months ended February 24, 2024 compared to the same period in fiscal 2023.

Previous wording

Direct cost of services as a percentage of revenue was 60.9% for the six months ended November 25, 2023 compared to 59.0% for the six months ended November 26, 2022. The increased percentage compared to the prior year was primarily attributable to an increase of 70 basis points in the overall pay/bill ratio and a 100 basis point increase in employee health benefit expenses as a percentage of revenue.

Current wording

Direct cost of services as a percentage of revenue was 61.5% for the nine months ended February 24, 2024 compared to 59.8% for the nine months ended February 25, 2023. The increased percentage compared to the prior year was partially attributable to an 80 basis point increase in employee health benefit expenses as a percentage of revenue and a 10 basis point increase in the pay/bill ratio.

Previous wording

Selling, General and Administrative Expenses. SG&A was $112.9 million, or 34.0% of revenue, for the six months ended November 25, 2023 compared to $113.0 million, or 28.0% of revenue, for the six months ended November 26, 2022. The $0.1 million decrease in SG&A year-over-year was primarily attributed to a reduction in bonuses and commissions by $7.3 million primarily related to reduced incentive compensation as aresult of lower revenue and profitability achievement compared to the incentive targets, and a decrease of $1.7 million in stock-based compensation expense as a result of forfeitures and remeasurement of achievement associated with performance-based equity awards. These reductions in cost were partially offset by one-time costs of $2.6 million of employee termination benefits in connection with the reduction in force incurred in the first six month of fiscal 2024, higher management compensation and benefit expense of $1.7 million due to employee compensation adjustments to remain competitive in the current labor market offset bythe lower headcount due to the reduction in force, $1.1 million of one-time costs related to the acquisition of CloudGo, $1.1 million increase in computer software and certain professional services fees, an increase of $0.9 million in technology transformation costs, an increase in employee health benefit costs of $0.9 million and a $0.7 million increase in all other general and administration expenses.

Current wording

Selling, General and Administrative Expenses. SG&A was $162.5 million, or 33.5% of revenue, for the nine months ended February 24, 2024 compared to $172.3 million, or 29.2% of revenue, for the nine months ended February 25, 2023. The $9.8 million decrease in SG&A year-over-year was primarily attributed to a reduction in bonuses and commissions by $14.6 million primarily related tolower revenue and profitability achievement compared to incentive compensation targets in the current fiscal year, a decrease of $3.1 million in stock-based compensation expense as a result of forfeitures and remeasurement of achievement associated with performance-based equity awards, and a lower management compensation expense of $0.9 million partially due to the U.S. Restructuring Plan initiated in October 2023. These reductions in cost were partially offset by an increase of $4.3 million of employee termination benefits in connection with actions taken under the U.S. Restructuring Plan during the nine months ended February 24, 2024, a $1.6 million increase in computer software and certain professional services fees, $1.3 million of one-time costs related to the acquisition of CloudGo, an increase in employee health benefit costs of $1.0 million, and an increase of $0.5 million in technology transformation costs.

Previous wording

Acquisition Costs. We completed the acquisition of CloudGo in the second quarter of fiscal 2024. All acquisition costs are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Acquisition costs were $1.1 million for the three months ended November 25, 2023, which includes fees paid to the Company’s brokers and other professional services firms.

Current wording

Acquisition Costs. We completed the acquisition of CloudGo in the second quarter of fiscal 2024. All acquisition costs are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Acquisition costs were $1.3 million for the nine months ended February 24, 2024, which includes fees paid to the Company’s brokers and other professional services firms.

Previous wording

Restructuring Costs. We initiated a U.S. Restructuring Plan in October 2023 and substantially completed the U.S. Restructuring Plan during the second quarter of fiscal 2024. We substantially completed our Global Restructuring Plans in fiscal 2021. All restructuring costs incurred were associated with the RGP segment, and are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Restructuring costs were $2.2 million and ($0.4) million for the six months ended November 25, 2023 and November 26, 2022, respectively. The restructuring liability was $0.3 million and zero as of November 25, 2023 and May 27, 2023, respectively.

Current wording

Restructuring Costs. We initiated a U.S. Restructuring Plan in October 2023 and substantially completed the U.S. Restructuring Plan during the third quarter of fiscal 2024. We substantially completed our Global Restructuring Plans in fiscal 2021. All restructuring costs incurred were associated with the RGP segment, and are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Restructuring costs were $3.9 million and ($0.4) million for the nine months ended February 24, 2024 and February 25, 2023, respectively. The restructuring liability was $1.7 million and zero as of February 24, 2024 and May 27, 2023, respectively.

Previous wording

Amortization and Depreciation Expense. Amortization expense was $2.6 million and $2.5 million in the first six months of fiscal 2024 and fiscal 2023, respectively. Depreciation expense was $1.7 million and $1.8 million in the first six months of fiscal 2024 and fiscal 2023, respectively.

Current wording

Amortization and Depreciation Expense. Amortization expense was $4.0 million and $3.7 million in the first nine months of fiscal 2024 and fiscal 2023, respectively. Depreciation expense was $2.4 million and $2.7 million in the first nine months of fiscal 2024 and fiscal 2023, respectively.

Previous wording

Income Taxes. Income tax expense was $5.8 million (effective tax rate of 42.1%) for the six months ended November 25, 2023 compared to $12.9 million (effective tax rate of 26.6%) for the six months ended November 26, 2022. We record tax expense based upon actual results versus a forecasted tax rate because of the volatility in our international operations that span numerous tax jurisdictions. The higher effective tax rate in the first six months of fiscal 2024 was attributed primarily to a nonrecurring increase in forfeiture of stock options, coupled with the capitalization of acquisition related costs for tax purposes. Additionally, the lower effective tax rate in the six months ended November 26, 2022 resulted from a number of one-time tax benefits recognized and a larger pretax income base lowering the tax expense ratio.

Current wording

Income Taxes. Income tax expense was $7.8 million (effective tax rate of 42.4%) for the nine months ended February 24, 2024 compared to $12.9 million (effective tax rate of 23.2%) for the nine months ended February 25, 2023. We record tax expense based upon actual results versus a forecasted tax rate because of the volatility in our international operations that span numerous tax jurisdictions. The higher effective tax rate in the first nine months of fiscal 2024 was attributed primarily to a nonrecurring increase in forfeiture of stock options, coupled with the capitalization of acquisition related costs for tax purposes. The lower effective tax rate in the nine months ended February 25, 2023 resulted from a number of one-time tax benefits recognized, including the release of valuation allowance, and a larger pretax income base lowering the tax expense ratio.

Previous wording

The Company recognized a tax benefit of approximately $1.2 million and $1.7 million for the first half of fiscal 2024 and fiscal 2023, respectively, associated with the exercise of nonqualified stock options, vesting of restricted stock awards, restricted stock units, and disqualifying dispositions by employees of shares acquired under the ESPP.

Current wording

The Company recognized a tax benefit of approximately $1.3 million and $2.0 million for the first three quarters of fiscal 2024 and fiscal 2023, respectively, associated with the exercise of nonqualified stock options, vesting of restricted stock awards, restricted stock units, and disqualifying dispositions by employees of shares acquired under the ESPP.

Previous wording

On May 31, 2022, the Company divested taskforce; refer to Note 2 –Summary of Significant Accounting Policies and Note 4 –Acquisitions and Dispositions in the Notes to Consolidated Financial Statements for further information. Since the second quarter of fiscal 2021, the business operated bytaskforce, along with its parent company, Resources Global Professionals (Germany) GmbH, an affiliate of the Company, represented an operating segment of the Company and was reported as a part of Other Segments. Prior-period comparative segment information was not restated as a result of the divestiture oftaskforce as we did not have a change in internal organization or the financial information our Chief Operating Decision Maker uses to assess performance and allocate resources.

Current wording

On May 31, 2022, the Company divested taskforce; refer to Note 2 –Summary of Significant Accounting Policies and Note 4 –Acquisitions and Dispositions in the Notes to Consolidated Financial Statements for further information. Since the second quarter of fiscal 2021, the business operated bytaskforce, along with its parent company, Resources Global Professionals (Germany) GmbH, an affiliate of the Company, represented an operating segment of the Company and was reported as a part of Other Segments. Prior-period comparative segment information was not restated as a result of the divestiture oftaskforce as the Company did not have a change in internal organization or the financial information our Chief Operating Decision Maker uses to assess performance and allocate resources.

Previous wording

The following table presents our current operating results by segmentfor thethree and six months ended November 25, 2023 and November 26, 2022, respectively (in thousands, except percentages).

Current wording

The following table presents our current operating results by segmentfor thethree and nine months ended February 24, 2024 and February 25, 2023, respectively (in thousands, except percentages).

Previous wording

RGP – RGP revenue decreased $36.7 million, or 18.6%, in the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023, primarily as a result of a 15.1% decrease in billable hours and a 4.0% decrease in average bill rate from the prior year quarter, as discussed in the consolidated operating results discussion above. For the first half of fiscal 2024, RGP revenue decreased $70.2 million, or 17.6%, to $328.4 million compared to $398.6 million for the first half of fiscal 2023, primarily as a result of a 14.8% decrease in billable hours and a 3.2% decrease in average bill rate year over year. Revenue from RGP represents more than 95% of total consolidated revenue and generally reflects the overall consolidated revenue trend.

Current wording

RGP – RGP revenue decreased $35.3 million, or 19.1%, in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023, primarily as a result of a 12.3% decrease in billable hours and a 7.6% decrease in average bill rate from the prior year quarter, as discussed in the consolidated operating results discussion above. For the nine months ended February 24, 2024, RGP revenue decreased $105.5 million, or 18.1%, to $477.4 million compared to $582.8 million for the nine months ended February 25, 2023, primarily as a result of a 14.1% decrease in billable hours and a 4.7% decrease in average bill rate year over year, as discussed in the consolidated operating results discussion above. Revenue from RGP represents more than 95% of total consolidated revenue and generally reflects the overall consolidated revenue trend.

Previous wording

The number of consultants on assignment under the RGP segment as of November 25, 2023 was 3,154 compared to 3,238 as of November 26, 2022.

Current wording

The number of consultants on assignment under the RGP segment as of February 24, 2024 was 2,752 compared to 3,149 as of February 25, 2023.

Previous wording

Other Segments – Other Segments’ revenue for the second quarter of fiscal 2024 declined by $0.5 million, or 18.7%. to $2.3 million, compared to the second quarter of fiscal 2023. For the first half of fiscal 2024, revenue from Other Segments decreased $0.9 million, or 15.8%, to $4.9 million from $5.8 million for the first half of fiscal 2023, primarily as a result of a $0.7 million decline in Sitrick revenue.

Current wording

Other Segments – Other Segments’ revenue for the third quarter of fiscal 2024 declined by $0.2 million, or 7.8%. to $2.3 million, compared to the third quarter of fiscal 2023. For the nine months ended February 24, 2024, revenue from Other Segments decreased $1.1 million, or 13.4%, to $7.2 million from $8.3 million for the nine months ended February 25, 2023, primarily as a result of a $0.9 million decline in Sitrick revenue. Sitrick continued to be affected by delays in court proceedings and more settlements, hindering leads for revenue generation in the business.