Resources Connection Inc (NASDAQ:RGP) stock fell 9.41% (As on October 2, 11:25:31 AM UTC-4, Source: Google Finance) after the company posted lower than expected results for the first quarter of FY 25. Gross margin was 36.5% compared to 39.4% in the prior year quarter primarily due to less favorable leverage on indirect cost of services as a result of lower revenue, lower salaried consultant utilization, and a 60 basis point increase in the pay/bill ratio. Net loss was $5.7 million (net loss margin of 4.2%), compared to net income of $3.1 million (net income margin of 1.8%) in the prior year quarter, primarily due to lower revenue, a decline in gross profit, and the goodwill impairment charge related to Europe and Asia Pacific segment, partially offset by improved SG&A for the current year first quarter due to the Company’s continued focus on cost discipline as well as the $3.4 million gain on sale of the Irvine office building. The Company delivered an Adjusted EBITDA margin of 1.7% in the first quarter of fiscal 2025 compared to 6.8% in the prior year quarter.

RGP in the first quarter of FY 25 has reported break even adjusted earnings per share, missing the analysts’ estimates for the adjusted earnings per share of 4 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue decline of 19.5 percent to $136.94 million in the first quarter of FY 25, missing the analysts’ estimates for revenue by 0.63%. These declines reflected a persistently choppy demand environment driven by broader economic trends. Clients continue to be in a holding pattern, restrained in their decision to move forward with transformation projects which has resulted in extended timelines for opportunities to close in the pipeline. Compared to the prior year quarter, billable hours decreased by 15.3% and the average bill rate declined by 5.0% (or 4.7% on a constant currency basis). The decline in average bill rate reflects a more competitive pricing environment as well as a shift in revenue mix to the Asia Pacific region which typically carries a lower average bill rate. The United States (U.S.) and Europe average bill rates increased by 2.3% and 4.6% (or 2.3% and 4.5% on a constant currency basis) compared to the prior year, respectively, as a result of Company initiatives focused on value-based pricing, while average bill rates in the Asia Pacific region declined by 3.2% (although increased by 0.2% on a constant currency basis), also largely attributable to a shift in revenue mix across the countries within this region.