Resources Connection 2026 Q1 Earnings Beats Expectations, Net Loss Narrows 57.9%

Resources Connection (RGP) reported fiscal 2026 Q1 results that outperformed its expectations, with significant improvements in gross margin and cost control. The company narrowed its net loss to $-2.40 million (57.9% improvement from the prior year) and provided cautious yet optimistic guidance for Q2 2026.

Revenue
Resources Connection’s total revenue for fiscal 2026 Q1 declined by 12.2% year-over-year to $120.23 million, primarily driven by a challenging macroeconomic environment and softer demand in the U.S. segments. Despite the overall decline, the Europe and Asia-Pacific region outperformed, with revenue increasing by 5% year-over-year to $19.89 million. The On-Demand Talent segment reported revenue of $44.44 million, a 16% decrease compared to the prior year, while the Consulting segment recorded $43.64 million, down 22%. The Outsourced Services segment bucked the trend with 4% year-over-year growth to $9.99 million, reflecting strong demand in venture-backed AI, fintech, and divestitures.

Earnings/Net Income
The company significantly improved its profitability, narrowing its net loss to $-2.40 million in Q1 2026, a 57.9% reduction compared to a net loss of $-5.71 million in Q1 2025. On a per-share basis, the company reduced its loss to $0.07 from $0.17, a 58.8% improvement. Adjusted EBITDA came in at $3.1 million, supported by a 39.5% gross margin for the quarter, which was 300 basis points higher than the prior year and exceeded expectations.

Price Action
The stock price of Resources Connection rose 1.85% during the latest trading day, but fell 1.98% over the past week and declined 3.88% month-to-date.

Post Earnings Price Action Review
The results reflect a strategic shift toward cost optimization and gross margin enhancement rather than broad-based revenue growth. The company achieved its improved performance through disciplined cost management, including a 7% reduction in SG&A expenses year-over-year to $44.5 million. The company also implemented a reduction in force in early October 2025, projecting $6 million to $8 million in annual savings. The balance sheet remains strong with $77.5 million in cash and no debt.

CEO Commentary
CEO Kate Duchene highlighted the company’s strong Q1 performance, exceeding expectations in revenue, gross margin, and SG&A. She emphasized growth in Europe, Asia-Pacific, and Outsourced Services, alongside rising demand for CFO advisory and digital transformation services. Duchene outlined the company’s strategic focus on integrated consulting, staffing, and outsourcing, driven by agility, global talent, and client-centric collaboration. She acknowledged macroeconomic challenges but expressed confidence in the company’s diversified model and cost optimization efforts.

Guidance
Resources Connection expects Q2 2026 revenue in the range of $115 million to $120 million, with gross margin between 38% and 39%. SG&A costs are projected at $43 million to $45 million, with non-run rate and noncash expenses around $5 million. The company anticipates stability in the On-Demand and Consulting segments while maintaining strong performance in Europe, Asia-Pacific, and Outsourced Services. The guidance aligns with the company’s focus on cost discipline and pipeline conversion amid macroeconomic uncertainties.

Additional News
Recent developments include the appointment of Scott Rottman as the new leader for CFO advisory, bringing expertise from the Big Four and Morgan Franklin. The company also added two new board members, offering a private equity perspective and transformation expertise to enhance bottom-line optimization. Additionally, Resources Connection announced dividend distributions of $2.3 million and $79 million remaining under its repurchase program. The company continues to expand its AI and automation capabilities in outsourced services and has launched strategic initiatives to integrate cross-functional collaboration and expand its client base in emerging sectors like AI and fintech.