Resources Connection Inc (NASDAQ:RGP) stock fell 6.49% (As on October 5, 11:46:21 AM UTC-4, Source: Google Finance) after the company posted mixed result for the first quarter of FY 24. Gross margin was 39.4% compared to 40.9% in the first quarter of fiscal 2023. The reduction in gross margin was due to a higher pay/bill ratio and a decrease in leverage on cost of service as a result of lower topline revenue. While the pay/bill ratio in the U.S. remained consistent with the prior year, the enterprise pay/bill ratio was negatively impacted by an increased proportion of revenue in regions with higher pay/bill ratio. The Company continues to execute its value-based pricing initiative to expand bill pay spread and improve operating leverage. Net income was $3.1 million (net income margin of 1.8%), compared to $18.1 million (net income margin of 8.9%) in the prior year quarter, due primarily to lower gross profit resulting from the overall macro-environment and higher SG&A as the Company continued to execute on its technology implementation project to drive long-term growth and efficiency. The Company delivered an Adjusted EBITDA margin of 6.8% in the first quarter of fiscal 2024. Available financial liquidity is of $286.8 million, up from $226.4 million.

RGP in the first quarter of FY 24 has reported the adjusted earnings per share of 20 cents, beating the analysts’ estimates for the adjusted earnings per share of 12 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue of $170.17 million in the first quarter of FY 24, missing the analysts’ estimates for revenue by 0.72%. On a constant currency basis, revenue decreased by 17.0% reflecting the impact of a persistently challenging macroeconomic environment. While gross pipeline remained relatively resilient, opportunities are taking longer to close, typical in a tougher macro environment when clients are more hesitant to spend on professional services. Compared to the prior year quarter, billable hours decreased by 14.6% and the average bill rate declined by 2.3% (or 3.1% on a constant currency basis). The change in average bill rate was due to a shift in revenue mix across the globe to regions with lower average bill rate. The United States (U.S.) and Europe average bill rates increased by 2.1% and 4.4% on a constant currency basis, respectively, compared to the prior year as a result of the Company’s initiative focused on value based pricing.