UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~February 25,~~August 26, 2023

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to______

Commission File Number: 0-32113

RESOURCES CONNECTION, INC.

(Exact Name of Registrant as Specified in Its Charter)



Delaware	33-0832424
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

17101 Armstrong Avenue, Irvine, California 92614

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (714) 430-6400

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Exchange on Which Registered
Common stock, par value $0.01 per share	RGP	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer		Accelerated filer	

Non-accelerated filer		Smaller reporting company	

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of ~~March 30,~~September 28, 2023 ~~33,628,762~~, 33,697,769 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.

RESOURCES CONNECTION, INC.

INDEX


		Page
PART I—FINANCIAL INFORMATION
ITEM 1.	Consolidated Financial Statements (Unaudited)	3
	Consolidated Balance Sheets as of ~~February 25,~~August 26, 2023 and May ~~28, 2022~~27, 2023	3
	Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 2022	4
	Consolidated Statements of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 2022	5
	Consolidated Statements of Stockholders’ Equity for the Three ~~and Nine~~ Months Ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 2022	6
	Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 2022	87
	Notes to Consolidated Financial Statements	98
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2318
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3730
ITEM 4.	Controls and Procedures	3830

PART II—OTHER INFORMATION
ITEM 1A.	Risk Factors	3931
ITEM 2.5.	~~Unregistered Sales of Equity Securities and Use of Proceeds~~Other Information	3931
ITEM 6.	Exhibits	4031
	Signatures	4132

‎

PART I—FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.

RESOURCES CONNECTION, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value per share)


	February 25,		May 28,		August 26,		May 27,
	2023		2022		2023		2023
	(Unaudited)				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	103,905	$	104,224	$	112,595	$	116,784
Trade accounts receivable, net of allowance for doubtful accounts of $3,012 and $2,121 as of February 25, 2023 and May 28, 2022, respectively		143,584		153,154
Trade accounts receivable, net of allowance for doubtful accounts of $3,288 and $3,283 as of August 26, 2023 and May 27, 2023, respectively						131,628		137,356
Prepaid expenses and other current assets		7,046		6,123		5,811		5,187
Assets held for sale		-		9,889
Income taxes receivable		8,019		35,151		3,507		4,739
Total current assets		262,554		308,541		253,541		264,066
Goodwill		206,439		209,785		206,811		206,722
Intangible assets, net		12,327		15,760		10,415		11,521
Property and equipment, net		16,133		17,657		14,850		15,380
Operating lease right-of-use assets		16,469		17,541		15,180		15,856
Deferred tax assets		10,304		8,266		10,852		10,701
Other non-current assets		8,094		3,923		10,738		7,753
Total assets	$	532,320	$	581,473	$	522,387	$	531,999

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued expenses	$	16,548	$	13,630	$	15,657	$	14,464
Accrued salaries and related obligations		66,676		83,549		50,882		64,776
Operating lease liabilities, current		7,743		8,193		6,907		7,460
Liabilities held for sale		-		4,419
Other current liabilities		11,123		14,531		10,444		10,384
Total current liabilities		102,090		124,322		83,890		97,084
Long-term debt		-		54,000		-		-
Operating lease liabilities, non-current		11,510		13,352		9,799		10,274
Deferred tax liabilities		8,718		14,428		6,789		7,136
Other non-current liabilities		3,167		2,922		3,068		2,985
Total liabilities		125,485		209,024		103,546		117,479
Commitments and contingencies (see Note 12)
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000 shares authorized; zero shares issued and outstanding		-		-		-		-
Common stock, $0.01 par value, 70,000 shares authorized; 35,398 and 34,352 shares issued, and 33,625 and 33,197 shares outstanding as of February 25, 2023 and May 28, 2022, respectively		354		344
Common stock, $0.01 par value, 70,000 shares authorized; 35,765 and 35,545 shares issued, and 33,697 and 33,475 shares outstanding as of August 26, 2023 and May 27, 2023, respectively						358		355
Additional paid-in capital		374,563		355,502		384,381		378,657
Accumulated other comprehensive loss		(18,635)		(16,484)		(16,948)		(17,290)
Retained earnings		80,711		52,738		85,861		87,648
Treasury stock at cost, 1,773 and 1,155 shares as of February 25, 2023 and May 28, 2022, respectively		(30,158)		(19,651)
Treasury stock at cost, 2,068 and 2,070 shares as of August 26, 2023 and May 27, 2023, respectively						(34,811)		(34,850)
Total stockholders’ equity		406,835		372,449		418,841		414,520
Total liabilities and stockholders’ equity	$	532,320	$	581,473	$	522,387	$	531,999

The accompanying notes are an integral part of these consolidated financial statements.

RESOURCES CONNECTION, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended				Nine Months Ended				Three Months Ended
	February 25,		February 26,		February 25,		February 26,		August 26,		August 27,
	2023		2022		2023		2022		2023		2022
Revenue	$	186,777	$	204,609	$	591,194	$	587,987	$	170,169	$	204,062
Direct cost of services		115,170		127,815		353,770		361,020		103,168		120,595
Gross profit		71,607		76,794		237,424		226,967		67,001		83,467
Selling, general and administrative expenses		59,371		57,090		172,335		165,365		59,932		56,187
Goodwill impairment		2,955		-		2,955		-
Amortization expense		1,275		1,321		3,743		3,608		1,314		1,252
Depreciation expense		885		882		2,652		2,694		877		887
Income from operations		7,121		17,501		55,739		55,300		4,878		25,141
Interest expense, net		147		307		662		744
Interest (income) expense, net										(312)		316
Other income		(43)		(35)		(381)		(653)		(2)		(307)
Income before income tax (benefit) expense		7,017		17,229		55,458		55,209
Income tax (benefit) expense		(2)		(2,192)		12,867		8,561
Income before income tax expense										5,192		25,132
Income tax expense										2,075		6,992
Net income	$	7,019	$	19,421	$	42,591	$	46,648	$	3,117	$	18,140

Net income per common share:
Basic	$	0.21	$	0.59	$	1.27	$	1.42	$	0.09	$	0.55
Diluted	$	0.21	$	0.58	$	1.24	$	1.39	$	0.09	$	0.53

Weighted-average number of common and common equivalent shares outstanding:
Weighted-average number of common and common equivalent ‎shares outstanding:
Basic		33,466		32,738		33,418		32,951		33,412		33,277
Diluted		34,149		33,375		34,245		33,556		34,010		34,234

Cash dividends declared per common share	$	0.14	$	0.14	$	0.42	$	0.42	$	0.14	$	0.14

The accompanying notes are an integral part of these consolidated financial statements.

‎

RESOURCES CONNECTION, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended					Nine Months Ended			Three Months Ended
	February 25,		February 26,		February 25,		February 26,		August 26,		August 27,
	2023		2022		2023		2022		2023		2022

Net income	$	7,019	$	19,421	$	42,591	$	46,648	$	3,117	$	18,140
Foreign currency translation adjustment, net of tax		1,124		(963)		(2,151)		(5,319)		342		(4,989)
Total comprehensive income	$	8,143	$	18,458	$	40,440	$	41,329	$	3,459	$	13,151

The accompanying notes are an integral part of these consolidated financial statements.

‎

RESOURCES CONNECTION, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except per share amounts)

(Unaudited)

For the Three Months Ended February 25, 2023
Accumulated
Additional
Other
Total
Common Stock
Paid-in
Treasury Stock
Comprehensive
Retained
Stockholders'
Shares
Amount
Capital
Shares
Amount
Loss
Earnings
Equity
Balances as of November 26, 2022
35,108
$
351
$
367,948
1,473
$
(25,002)
$
(19,759)
$
78,608
$
402,146
Exercise of stock options
58
1
652
-
-
-
-
653
Stock-based compensation expense
-
-
2,610
-
-
-
-
2,610
Issuance of common stock purchased under
Employee Stock Purchase Plan
210
2
3,154
-
-
-
-
3,156
Issuance of restricted stock
22
-
-
-
-
-
-
-
Cash dividends declared ($0.14 per share)
-
-
-
-
-
-
(4,707)
(4,707)
Dividend equivalents on restricted stock units
and performance stock units
-
-
199
-
-
-
(209)
(10)
Repurchase of common stock
-
-
-
300
(5,156)
-
-
(5,156)
Currency translation adjustment
-
-
-
-
-
1,124
-
1,124
Net income for the three months ended
February 25, 2023
-
-
-
-
-
-
7,019
7,019
Balances as of February 25, 2023
35,398
$
354
$
374,563
1,773
$
(30,158)
$
(18,635)
$
80,711
$
406,835
For the Nine Months Ended February 25, 2023
Accumulated
Additional
Other
Total
Common Stock
Paid-in
Treasury Stock
Comprehensive
Retained
Stockholders'
Shares
Amount
Capital
Shares
Amount
Loss
Earnings
Equity
Balances as of May 28, 2022
34,352
$
344
$
355,502
1,155
$
(19,651)
$
(16,484)
$
52,738
$
372,449
Exercise of stock options
477
4
7,382
-
-
-
-
7,386
Stock-based compensation expense
-
-
6,970
-
-
-
-
6,970
Issuance of common stock purchased under
Employee Stock Purchase Plan
393
4
5,995
-
-
-
-
5,999
Issuance of restricted stock
97
1
(1)
-
-
-
-
-
Issuance of common stock upon vesting of
restricted stock units, net of shares withheld
to cover taxes
79
1
(1,762)
-
-
-
(5)
(1,766)
Cash dividends declared ($0.42 per share)
-
-
-
-
-
-
(14,136)
(14,136)
Dividend equivalents on restricted stock units
and performance stock units
-
-
477
-
-
-
(477)
-
Repurchase of common stock
-
-
-
618
(10,507)
-
-
(10,507)
Currency translation adjustment
-
-
-
-
-
(2,151)
-
(2,151)
Net income for the nine months ended
February 25, 2023
-
-
-
-
-
-
42,591
42,591
Balances as of February 25, 2023
35,398
$
354
$
374,563
1,773
$
(30,158)
$
(18,635)
$
80,711
$
406,835
For the Three Months Ended February 26, 2022
Accumulated
Additional
Other
Total
Common Stock
Paid-in
Treasury Stock
Comprehensive
Retained
Stockholders'
Shares
Amount
Capital
Shares
Amount
Loss
Earnings
Equity
Balances as of November 27, 2021
33,683
$
337
$
342,807
-
$
-
$
(11,749)
$
22,205
$
353,600
Exercise of stock options
312
3
4,311
-
-
-
-
4,314
Stock-based compensation expense
-
-
2,115
-
-
-
-
2,115
Issuance of common stock purchased under
Employee Stock Purchase Plan
243
2
2,825
-
-
-
-
2,827
Issuance of restricted stock
22
-
-
-
-
-
-
-
Cash dividends declared ($0.14 per share)
-
-
-
-
-
-
(4,635)
(4,635)
Dividend equivalents on restricted stock units
and performance stock units
-
-
70
-
-
-
(70)
-
Repurchase of common stock
-
-
-
1,155
(19,651)
-
-
(19,651)
Currency translation adjustment
-
-
-
-
-
(963)
-
(963)
Net income for the three months ended
February 26, 2022
-
-
-
-
-
-
19,421
19,421
Balances as of February 26, 2022
34,260
$
342
$
352,128
1,155
$
(19,651)
$
(12,712)
$
36,921
$
357,028

For the Nine Months Ended February 26, 2022
Accumulated
Additional
Other
Total
Common Stock
Paid-in
Treasury Stock
Comprehensive
Retained
Stockholders'
Shares
Amount
Capital
Shares
Amount
Loss
Earnings
Equity
Balances as of May 29, 2021
64,626
$
646
$
489,864
31,741
$
(520,800)
$
(7,393)
$
367,229
$
329,546
Exercise of stock options
741
7
10,696
-
-
-
-
10,703
Stock-based compensation expense
-
-
4,969
-
-
-
-
4,969
Issuance of common stock purchased under
Employee Stock Purchase Plan
463
4
5,174
-
-
-
-
5,178
Issuance of restricted stock
97
1
(1)
(2)
-
-
-
-
Issuance of common stock upon vesting of
restricted stock units, net of shares withheld
to cover taxes
72
1
(1,096)
-
-
-
-
(1,095)
Amortization of restricted stock issued out of
treasury stock to board of director members
-
-
(24)
-
114
-
(50)
40
Cash dividends declared ($0.42 per share)
-
-
-
-
-
-
(13,991)
(13,991)
Dividend equivalents on restricted stock units
and performance stock units
-
-
192
-
-
-
(192)
-
Retirement of treasury stock
(31,739)
(317)
(157,646)
(31,739)
520,686
-
(362,723)
-
Repurchase of common stock
-
-
-
1,155
(19,651)
-
-
(19,651)
Currency translation adjustment
-
-
-
-
-
(5,319)
-
(5,319)
Net income for the nine months ended
February 26, 2022
-
-
-
-
-
-
46,648
46,648
Balances as of February 26, 2022
34,260
$
342
$
352,128
1,155
$
(19,651)
$
(12,712)
$
36,921
$
357,028



	For the Three Months Ended August 26, 2023
									Accumulated
				Additional					Other				Total
	Common Stock			Paid-in		Treasury Stock			Comprehensive		Retained		Stockholders'
	Shares	Amount		Capital		Shares	Amount		Loss		Earnings		Equity
Balances at May 27, 2023	35,545	$	355	$	378,657	2,070	$	(34,850)	$	(17,290)	$	87,648	$	414,520
Exercise of stock options	22		1		341	-		-		-		-		342
Stock-based compensation expense	-		-		2,466	-		-		-		-		2,466
Issuance of common stock purchased under Employee Stock Purchase Plan	198		2		2,772	-		-		-		-		2,774
Issuance of restricted stock	-		-		-	(2)		39		-		(39)		-
Cash dividends declared ($0.14 per share)	-		-		-	-		-		-		(4,720)		(4,720)
Dividend equivalents on equity awards	-		-		145	-		-		-		(145)		-
Currency translation adjustment	-		-		-	-		-		342		-		342
Net income for the three months ended August 26, 2023	-		-		-	-		-		-		3,117		3,117
Balances at August 26, 2023	35,765	$	358	$	384,381	2,068	$	(34,811)	$	(16,948)	$	85,861	$	418,841


	For the Three Months Ended August 27, 2022
									Accumulated
				Additional					Other				Total
	Common Stock			Paid-in		Treasury Stock			Comprehensive		Retained		Stockholders'
	Shares	Amount		Capital		Shares	Amount		Loss		Earnings		Equity
Balances at May 28, 2022	34,352	$	344	$	355,502	1,155	$	(19,651)	$	(16,484)	$	52,738	$	372,449
Exercise of stock options	371		3		6,058	-		-		-		-		6,061
Stock-based compensation expense	-		-		2,171	-		-		-		-		2,171
Issuance of common stock purchased under Employee Stock Purchase Plan	183		2		2,841	-		-		-		-		2,843
Cash dividends declared ($0.14 per share)	-		-		-	-		-		-		(4,720)		(4,720)
Dividend equivalents on equity awards	-		-		76	-		-		-		(76)		-
Currency translation adjustment	-		-		-	-		-		(4,989)		-		(4,989)
Net income for the three months ended August 27, 2022	-		-		-	-		-		-		18,140		18,140
Balances at August 27, 2022	34,906	$	349	$	366,648	1,155	$	(19,651)	$	(21,473)	$	66,082	$	391,955

The accompanying notes are an integral part of these consolidated financial statements.

RESOURCES CONNECTION, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended				Three Months Ended
	February 25,		February 26,		August 26,		August 27,
	2023		2022		2023		2022
Cash flows from operating activities:
Net income	$	42,591	$	46,648	$	3,117	$	18,140
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization expense		6,395		6,302		2,191		2,139
Stock-based compensation expense		7,375		5,851		2,552		2,529
Gain on dispositions of subsidiaries		(238)		(959)
Goodwill impairment		2,955		-
Impairment of operating lease right-of-use assets		-		826
(Gain) on dispositions of subsidiaries						-		(238)
Adjustment to allowance for doubtful accounts		1,026		434		179		81
Deferred income taxes		(7,927)		(10,411)		(498)		(1,957)
Other, net		(291)		540		56		(385)
Changes in operating assets and liabilities, net of dispositions:
Trade accounts receivable		7,386		(36,399)		5,730		(6,131)
Prepaid expenses and other current assets		(914)		(622)		(627)		367
Income taxes		26,862		(1,036)		735		7,693
Other assets		(1,445)		(220)		(3,029)		1,792
Accounts payable and other accrued expenses		3,757		2,347		1,166		(794)
Accrued salaries and related obligations		(19,397)		19,857		(13,949)		(24,757)
Other liabilities		(4,257)		(10,482)		163		(3,775)
Net cash provided by operating activities		63,878		22,676
Net cash used in operating activities						(2,214)		(5,296)

Cash flows from investing activities:
Proceeds from sale of taskforce		2,984		-		-		2,984
Proceeds from sale of assets		5		256
Investments in property and equipment and internal-use software		(1,441)		(2,619)		(548)		(709)
Net cash provided by (used in) investing activities		1,548		(2,363)
Net cash (used in) provided by investing activities						(548)		2,275

Cash flows from financing activities:
Proceeds from exercise of stock options		8,257		11,293		350		6,686
Proceeds from issuance of common stock under Employee Stock Purchase Plan		5,999		5,178		2,774		2,843
Payment of contingent consideration liabilities		-		(3,575)
Proceeds from Revolving Credit Facility		15,000		73,393		-		15,000
Repayments on Revolving Credit Facility		(69,000)		(63,000)		-		(49,000)
Repurchase of common stock		(10,507)		(19,651)
Payment of debt issuance costs		-		(117)
Payment of cash dividends		(14,076)		(13,965)		(4,681)		(4,647)
Net cash used in financing activities		(64,327)		(10,444)		(1,557)		(29,118)

Effect of exchange rate changes on cash and cash equivalents		(1,418)		(2,071)		130		490
Net (decrease) increase in cash and cash equivalents		(319)		7,798
Net decrease in cash and cash equivalents						(4,189)		(31,649)
Cash and cash equivalents at beginning of period		104,224		74,391		116,784		104,224
Cash and cash equivalents at end of period	$	103,905	$	82,189	$	112,595	$	72,575

Supplemental cash flow disclosures
Income taxes paid, net of refund	$	(6,354)	$	20,201
Income taxes paid, net					$	1,620	$	1,041
Interest paid		875		766		88		309
Non-cash investing and financing activities
Capitalized leasehold improvements paid directly by landlord	$	-	$	7
Increase in long-term receivable in connection with the sale of taskforce		2,984		-	$	-	$	2,984
Dividends declared, not paid		4,707		4,635		4,720		4,720

The accompanying notes are an integral part of these consolidated financial statements.

‎

RESOURCES CONNECTION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of the Company and its Business

Resources Connection, Inc. (the “Company”), a Delaware corporation, was incorporated on November 16, 1998. The Company’s operating entities provide services primarily under the name Resources Global Professionals (“RGP”). RGP is a global consulting firm focused on project execution services that power clients’ operational needs and change initiatives utilizing on-demand, experienced and diverse talent. As a next-generation human capital partner for its clients, the Company specializes in co-delivery of enterprise initiatives typically precipitated by business transformation, strategic transactions or regulatory change. The Company’s principal markets of operations are North America, Europe and Asia Pacific.

The Company’s fiscal year consists of 52 or 53 weeks, ending on the Saturday in May closest to May 31. The ~~third~~first quarters of fiscal ~~2023~~2024 and ~~2022~~2023 each consisted of 13 weeks. The Company’s fiscal year ~~2023~~2024 will consist of 52 weeks.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited financial statements of the Company as of and for the three ~~and nine~~ months ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 2022 have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. These financial statements include all adjustments (consisting only of normal recurring adjustments) the Company’s management considers necessary for a fair presentation of its financial position at such dates and the operating results and cash flows for those periods. The financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates and assumptions are adequate, actual results could differ from the estimates and assumptions used.

The fiscal ~~2022~~2023 year-end balance sheet data was derived from audited consolidated financial statements, and certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to Securities and Exchange Commission (“SEC”) rules or regulations; however, the Company believes the disclosures made are adequate to make the information presented not misleading.

The unaudited consolidated results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for the full fiscal year. These interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended May ~~28, 2022,~~27, 2023, which are included in the Company’s Annual Report on Form 10-K (“Fiscal Year ~~2022~~2023 Form 10-K”) filed with the SEC on July ~~28, 2022~~25, 2023 (File No. 0-32113).

A complete listing of the Company’s significant accounting policies is discussed in Note 2 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in the Fiscal Year ~~2022~~2023 Form 10-K.

Reporting Segments

On May 31, 2022, the Company divested taskforce – Management on Demand GmbH, and its ~~wholly-owned~~wholly owned subsidiary skillforce – Executive Search GmbH, a German professional services firm operating under the taskforce brand (“taskforce”); see Note 4 – Dispositions for further information. Since the second quarter of fiscal 2021, ~~and prior to the divestment,~~ the business operated by taskforce, along with its parent company, Resources Global Professionals (Germany) GmbH (“RGP Germany”), an affiliate of the Company, represented an operating segment of the Company and was reported as a part of Other Segments.

Effective May 31, 2022, the Company’s operating segments consist of the following:

RGP – a global consulting firm focused on project execution services that power clients’ operational needs and change initiatives utilizing on-demand, experienced and diverse talent; and

Sitrick – a crisis communications and public relations firm which operates under the Sitrick brand, providing corporate, financial, transactional and crisis communication and management services.

Each of these segments reports through a separate management team to the Company’s Chief Executive Officer, who is designated as the Chief Operating Decision Maker (“CODM”) for segment reporting purposes. RGP is the Company’s only ~~operating segment that meets the quantitative threshold of a~~ reportable segment. Sitrick does not individually meet the quantitative threshold to qualify as a reportable segment. Therefore, Sitrick is disclosed in Other Segments. Each of these segments represents a reporting unit for the purposes of assessing goodwill for impairment.

Prior-period comparative segment information was not restated as a result of the divestiture of taskforce as the Company did not have a change in internal organization or the financial information that the CODM uses to assess performance and allocate resources. See Note 13 – Segment Information and Enterprise Reporting for further information.

Per Share Information

The Company presents both basic and diluted earnings per share (“EPS”). Basic EPS is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS is based upon the weighted-average number of common shares and common equivalent shares outstanding during the period, calculated using the treasury stock method. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect. Stock options for which the exercise price exceeds the average market price over the period are anti-dilutive and are excluded from the calculation. Performance stock units are also excluded from the basic EPS calculation, since the number of shares subject to the award that will vest will not be determined until after the end of the applicable performance period.

The following table summarizes the calculation of net income per common share for the three ~~and nine~~ months ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 2022 (in thousands, except per share amounts):


	Three Months Ended				Nine Months Ended				Three Months Ended
	February 25,		February 26,		February 25,		February 26,		August 26,		August 27,
	2023		2022		2023		2022		2023		2022

Net income	$	7,019	$	19,421	$	42,591	$	46,648	$	3,117	$	18,140
Basic:
Weighted-average shares		33,466		32,738		33,418		32,951		33,412		33,277
Diluted:
Weighted-average shares		33,466		32,738		33,418		32,951		33,412		33,277
Potentially dilutive shares		683		637		827		605		598		957
Total diluted shares		34,149		33,375		34,245		33,556		34,010		34,234
Net income per common share:
Basic	$	0.21	$	0.59	$	1.27	$	1.42	$	0.09	$	0.55
Diluted	$	0.21	$	0.58	$	1.24	$	1.39	$	0.09	$	0.53
Anti-dilutive shares not included above		694		1,924		650		2,009		1,388		-

Financial Instruments

The fair value of the Company’s financial instruments reflects the amounts that the Company estimates it will receive in connection with the sale of an asset in an orderly transaction between market participants at the measurement date (exit price).

The Company’s financial instruments, including cash and cash equivalents, trade accounts receivable, accounts payable and other accrued expenses and long-term debt are carried at cost, which approximates their fair value because of the short-term maturity of these instruments or because their stated interest rates are indicative of market interest rates.

~~Goodwill Impairment~~

Goodwill is tested for impairment on an annual basis in the fourth quarter and more frequently if indicators of potential impairment exist. Impairment testing is conducted at the reporting unit level. Application of the goodwill impairment test requires judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the Company’s business, and determination of the Company’s weighted average cost of capital. Under Accounting Standards Codification (“ASC”) 350, ~~Intangibles - Goodwill and Other~~, the qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions, and changes in projected future cash flows or planned revenue or earnings of the reporting unit as potential indicators when determining the need for a quantitative assessment of impairment. The Company has assessed the existence of impairment indicators on goodwill associated with Sitrick, one of the Company’s operating segments and reporting units, as of February 25, 2023, and determined that quantitative impairment analyses were required due to its business performance.

As a result of the quantitative impairment test, the Company concluded that the carrying amount of the Sitrick exceeded its fair value, which resulted in an impairment charge of $3.0 million on the goodwill associated within the Other Segments on the consolidated statements of operations for the three and nine months ended February 25, 2023. No goodwill remains within Other Segments as of February 25, 2023. See Note 5 – ~~Goodwill and Intangible Assets~~ ~~for further information.~~

~~Assets and Liabilities Held for Sale~~

Assets and liabilities held for sale represent primarily cash, accounts receivable, goodwill and other assets and liabilities that met the criteria of “held for sale” accounting, as specified by ASC 360, ~~Property, Plant, and Equipment. The effect of suspending amortization on noncurrent assets held for sale was immaterial to the Company’s results of operations.~~

The Company records assets and liabilities held for sale at the lower of carrying value or fair value less cost to sell. Fair value was based on the estimated proceeds from the sale of the business utilizing the purchase price as defined in the agreement. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset or disposal group until the date of sale.

~~As of May 28, 2022, the Company classified certain assets and liabilities as held for sale in connection with the sale of~~ ~~taskforce, which closed on May 31, 2022. See Note 4 –~~ ~~Dispositions~~ ~~for further information.~~

Capitalized Hosting Arrangements

The capitalized hosting arrangements costs are primarily related to the implementation of a cloud-based enterprise resource planning system and talent acquisition and management ~~system.~~systems. Such costs include third party implementation costs and costs associated with internal resources directly involved in the implementation. Capitalized hosting arrangements are stated at historical cost and amortized on a straight-line basis over an estimated useful life of the expected term of the hosting arrangement, taking into consideration several other factors such as, but not limited to, options to extend the hosting arrangement or options to terminate the

hosting arrangement. The amortization of capitalized implementation costs for hosting arrangements will commence when the systems are ready for their intended use and will be presented as operating expenses on the consolidated statements of operations consistent with the presentation for expensing the fees for the associated hosting arrangement.

As of ~~February 25,~~August 26, 2023, the capitalized costs related to hosting arrangements incurred during the application development stage were ~~$3.2~~$9.1 million. These capitalized hosting arrangements are included in other non-current assets on the consolidated balance sheet and ~~no costs~~less than $0.1 million were ~~amortized.~~amortized during the three months ended August 26, 2023. There were no$6.0 million capitalized costs recorded as of May ~~28,~~27, 2023 and no costs were amortized during the three months ended August 27, 2022.

~~Stock Repurchases and Retirement~~

The Company’s stock repurchase program provides an opportunity for the Company to repurchase shares at the discretion of the Company’s senior executives based on numerous factors, including, without limitation, share price and other market conditions, the Company’s ongoing capital allocation planning, the levels of cash and debt balances, and other demands for cash. The Company recognizes treasury stock based on the amount paid to repurchase its shares. Direct costs incurred to acquire treasury stock are treated like stock issue costs and added to the cost of the treasury stock.

The Company accounts for the retirement of repurchased shares using the par value method under which the cost of repurchased and retired shares in excess of the par value is allocated between additional paid-in capital and retained earnings. When the repurchase price is greater than the original issue proceeds, the excess is charged to retained earnings. The Company uses the weighted-average cost flow assumption to identify and assign the original issue proceeds to the cost of the shares repurchased and retired. The Company believes that this allocation method is preferable because it more accurately reflects its paid-in capital balances by allocating the cost of the shares repurchased and retired to paid-in capital in proportion to paid-in capital associated with the original issuance of those shares. ~~See Note 9 –~~ ~~Stockholders’ Equity~~ ~~for further information.~~

Recent Accounting Pronouncements

No recent accounting pronouncements or changes in accounting pronouncements have been issued or adopted that are of material significance, or have potential material significance, to the Company’s financial statements since those discussed in the Company’s Fiscal Year ~~2022~~2023 Form 10-K.

3. Revenue Recognition

The timing of revenue recognition, billings and cash collections affects the recognition of trade accounts receivable, contract assets and contract liabilities.

Contract assets represent the Company’s rights to consideration for completed performance under the contract (i.e., unbilled receivables), in which the Company has transferred control of the product or services before there is an unconditional right to payment. Contract assets were ~~$40.7~~$37.0 million and ~~$42.6~~$35.4 million as of ~~February 25,~~August 26, 2023 and May ~~28, 2022,~~27, 2023, respectively, which were included in trade accounts receivable in the Consolidated Balance Sheets.

Contract liabilities represent deferred revenue when cash is received in advance of performance of services and are presented in other current liabilities in the Consolidated Balance Sheets. Contract liabilities were ~~$3.7~~$2.9 million and ~~$4.2~~$3.1 million as of ~~February 25,~~August 26, 2023 and May ~~28, 2022,~~27, 2023, respectively. ~~Revenues~~Revenue recognized during the three ~~and nine~~ months ended ~~February 25,~~August 26, 2023 ~~which were~~that was included in deferred revenue as of May ~~28, 2022 were $0.6 million and $2.3 million, respectively.~~27, 2023 was $1.6 million.

4. Dispositions

~~Sale of taskforce~~

On April 21, 2022, RGP Germany entered into a Sale and Purchase Agreement (the “SPA”) to sell its business in taskforce to MoveVision – Management-, Beteiligungs- und Servicegesellschaft mbH and Blue Elephant – Management-, Beteiligungs- und Servicegesellschaft mbH (collectively, the “Purchasers”), owned by the original founder and a member of the senior leadership team of taskforce, respectively. The SPA provided for the sale of all of the shares of taskforce from RGP Germany to the Purchasers for a purchase price of approximately EUR 5.5 million, subject to final working capital adjustments, with 50% of the consideration to be paid in cash in connection with the closing and the remaining 50% payable on July 1, 2024 and bearing interest based on the Company’s average borrowing interest rate plus 285 basis points, compounded annually.

On May 31, 2022, the Company completed the sale of taskforce. Upon conclusion of the Final Completion Accounts and Calculation (as defined in the Sale and Purchase Agreement), the final purchase price was determined to be EUR 5.5 million (approximately $6.0 million), of which EUR 2.8 million (approximately $3.0 million) was received in cash and EUR 2.7 million (approximately $3.0 million) shall become due in July 2024 in accordance with the SPA. ~~Such~~During fiscal year 2023, the Company received full payment from the purchasers of taskforce on the note receivable ~~is presented in other non-current assets~~ in the ~~Consolidated Balance Sheets.~~ ~~See Note 14 –~~ ~~Subsequent Event~~ ~~for further information.~~

amount of EUR 2.7 million (approximately $3.0 million), which included an interest payment. The Company recognized a $0.2 million gain on the sale ~~during~~in the ~~nine~~three months ended ~~February 25, 2023,~~August 27, 2022, which was recorded in other income in the Company’s Consolidated Statements of Operations.

~~As of May 28, 2022, assets and liabilities of~~ ~~taskforce~~ were classified as held for sale in the Company’s Consolidated Balance Sheets. Such assets and liabilities were presented at the lower of carrying value or fair value less any costs to sell. The Company concluded that the agreed-upon transaction price of the business approximated fair value, which exceeded the carrying value of the related assets and liabilities as of May 28, 2022. As such, the assets and liabilities related to the sale were recorded and presented at their carrying value.

The following table presents information related to the major classes of assets and liabilities that were classified as held for sale in the Consolidated Balance Sheets as of May 28, 2022 (in thousands):


~~Assets & Liabilities Held for Sale~~	~~As of~~
~~taskforce~~ ~~- Management on Demand GmbH~~	~~May 28, 2022~~

~~Cash and cash equivalents~~	$	~~245~~
~~Trade accounts receivable, net of allowance for doubtful accounts~~		~~4,044~~
~~Prepaid expenses and other current assets~~		~~262~~
~~Income taxes receivable~~		6
~~Goodwill~~		~~3,886~~
~~Intangible assets, net~~		~~1,060~~
~~Property and equipment, net~~		~~204~~
~~Operating right-of-use assets~~		~~177~~
~~Other assets~~		5
~~Total assets held for sale~~	$	~~9,889~~

~~Accounts payable and accrued expenses~~	$	~~2,316~~
~~Accrued salaries and related obligations~~		~~325~~
~~Operating lease liabilities, current~~		91
~~Other liabilities~~		~~158~~
~~Intercompany balances with other entities~~		~~1,441~~
~~Operating lease liabilities, noncurrent~~		88
~~Total liabilities held for sale~~	$	~~4,419~~

~~The Company accrued approximately $0.1 million in disposal costs related to the sale of~~ ~~taskforce~~ ~~in the Consolidated Balance Sheets as of May 28, 2022 and recorded an immaterial amount of disposal costs during the nine months ended February 25, 2023.~~ The disposition of taskforcedid not qualify as a discontinued operation because it did not represent a strategic shift that has or will have a major effect on the Company’s operations or financial results.

~~Other Dispositions~~

As part of its restructuring effort in Europe which began in fiscal 2021, the Company completed the dissolution of the following three foreign subsidiaries during the nine months ended February 26, 2022: Resources Global Professionals (France) SAS, Resources Global Professionals (Denmark) AS, and Resources Global Professionals (Italy) SRL. The Company recognized a total gain on dissolution of $1.1 million and $1.0 million during the three and nine months ended February 26, 2022, respectively. The net gain on the dissolution was primarily related to the recognition of the accumulated translation adjustment associated with these foreign subsidiaries, which was included in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations. None of the markets sold or exited during the nine months ended February 26, 2022 represented a strategic shift of the Company’s operations.

5. Goodwill and Intangible Assets

During the third quarter of fiscal 2023, the Company completed a goodwill impairment analysis for Sitrick, a strategic and crisis communications business acquired in 2009. Despite signing numerous new clients over the last two years, restricted travel during the pandemic and forced court shutdowns and delayed legal proceedings both during and in the aftermath of the pandemic adversely impacted Sitrick’s business. The Company determined that the carrying value of Sitrick, also a reporting unit, was in excess of its fair value and as such recorded a non-cash impairment charge of $3.0 million during the quarter ended February 25, 2023, reducing the goodwill within the Other Segments to zero as of February 25, 2023. ~~See Note 2 –~~ ~~Summary of Significant Accounting Policies~~ ~~for further information.~~

The Company determined the fair value of Sitrick (within Other Segments) based on an income approach, using the present value of future discounted cash flows. Significant estimates used to determine fair value included the weighted-average cost of capital and financial projections.

The following table summarizes the activity in the Company’s goodwill balance (in thousands):

RGP
Other Segments
Total
Balance as of May 28, 2022
$
206,830
$
2,955
$
209,785
Goodwill impairment
-
(2,955)
(2,955)
Impact of foreign currency exchange rate changes
(391)
-
(391)
Balance as of February 25, 2023
$
206,439
$
-
$
206,439


	RGP		Other Segments		Total
Balance as of May 27, 2023	$	206,722	$	-	$	206,722
Impact of foreign currency exchange rate changes		89		-		89
Balance as of August 26, 2023	$	206,811	$	-	$	206,811

The following table presents details of the Company’s intangible assets, estimated lives and related accumulated amortization (in thousands):


		As of February 25, 2023						As of May 28, 2022							As of August 26, 2023						As of May 27, 2023
	Estimated	Gross				Net		Gross				Net		Estimated	Gross				Net		Gross				Net
	Useful	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying		Useful	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Life	Amount		Amortization		Amount		Amount		Amortization		Amount		Life	Amount		Amortization		Amount		Amount		Amortization		Amount
Customer contracts and relationships	3 - 8 years	$	22,000	$	(13,073)	$	8,927	$	22,000	$	(10,889)	$	11,111	3 - 8 years	$	22,000	$	(14,530)	$	7,470	$	22,000	$	(13,802)	$	8,198
Computer software	2 - 3.5 years		7,071		(3,671)		3,400		6,762		(2,149)		4,613	2 - 3.5 years		7,749		(4,804)		2,945		7,541		(4,218)		3,323
Tradenames	3 - 10 years		-		-		-		3,070		(3,034)		36
Backlog	17 months		-		-		-		1,210		(1,210)		-
Total		$	29,071	$	(16,744)	$	12,327	$	33,042	$	(17,282)	$	15,760		$	29,749	$	(19,334)	$	10,415	$	29,541	$	(18,020)	$	11,521

The Company recorded amortization expense of $1.3 million for ~~both~~each of the three months ended ~~February 25,~~August 26, 2023 and ~~February 26, 2022,~~ ~~and $3.7 million and $3.6 million for the nine months ended~~ ~~February 25, 2023~~ ~~and February 26, 2022, respectively~~.August 27, 2022.

The following table presents future estimated amortization expense based on existing intangible assets (in thousands):

Fiscal Years:


2023 (remaining three months)	$	1,275
2024		5,017
2024 (remaining nine months)			$	3,899
2025		3,542		3,768
2026		2,238		2,463
2027		255		285
2028				-
Total	$	12,327	$	10,415

Actual future estimated amortization expense could differ from these estimated amounts as a result of future acquisitions, dispositions, impairments, and other factors or changes.

6. Leases

The Company currently leases office space, vehicles and certain equipment under operating leases through fiscal 2030. In addition, the Company owns its headquarters office building located in Irvine, California and leases approximately 13,000 square feet of the approximately 57,000 square feet of the building to independent third parties pursuant to operating lease agreements with terms through fiscal 2025.

Lease cost components included within selling, general and administrative expenses in the Consolidated Statements of Operations were as follows (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended
	February 25, 2023		February 26, 2022		February 25, 2023		February 26, 2022		August 26, 2023		August 27, 2022
Operating lease cost (1)	$	1,891	$	2,185	$	5,364	$	6,672	$	1,864	$	1,529
Short-term lease cost		32		23		64		66		57		25
Variable lease cost		336		504		925		1,587		373		246
Sublease income (2)		(113)		(282)		(402)		(800)		(129)		(148)
Total lease cost	$	2,146	$	2,430	$	5,951	$	7,525	$	2,165	$	1,652

(1) Operating lease cost for the ~~nine~~three months ended ~~February 25, 2023~~August 27, 2022 includes a $0.4 million reduction resulting from a one-time settlement of a lease liability involving an office space.

(2) Sublease income does not include rental income received from owned property, which is not material.

The weighted-average lease term and weighted-average discount rate for operating leases as of ~~February 25,~~August 26, 2023 and May ~~28, 2022~~27, 2023 are presented in the following table:

As of

February 25, 2023

May 28, 2022

August 26, 2023

May 27, 2023

Weighted-average remaining lease term

3.6 years

3.3 years

3.4 years

Weighted-average discount rate

3.91%

3.81%

4.10%

3.97%

Cash flow and other noncash information related to operating leases is included in the following table (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended
	February 25, 2023		February 26, 2022		February 25, 2023		February 26, 2022		August 26, 2023		August 27, 2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	2,269	$	2,720	$	7,045	$	8,501	$	2,209	$	2,473
Right-of-use assets obtained in exchange for new operating lease obligations	$	217	$	231	$	4,206	$	1,699	$	983	$	3,601

Future maturities of operating lease liabilities as of ~~February 25,~~August 26, 2023 are presented in the following table (in thousands):


Fiscal Years:	Operating Lease Maturity		Operating Lease Maturity
2023 (remaining three months)	$	2,218
2024		7,788
2024 (remaining nine months)			$	5,999
2025		4,083		4,664
2026		2,523		3,053
2027		1,662		1,830
2028				1,495
Thereafter		2,376		882
Total future lease payments		20,650	$	17,923
Less: interest		(1,397)		(1,217)
Present value of operating lease liabilities	$	19,253	$	16,706

7. Long-Term Debt

Prior to November 12, 2021, the Company had a $120.0 million secured revolving credit facility (the “Previous Credit Facility”) with Bank of America, pursuant to the terms of the Credit Agreement dated October 17, 2016 between the Company and Resources Connection LLC, as borrowers, and Bank of America, N.A. as lender (as amended, the “Previous Credit Agreement”). The Previous Credit Agreement was set to mature on October 17, 2022.

On November 12, 2021, the Company and Resources Connection LLC, as borrowers, and all of the Company’s domestic subsidiaries, as guarantors, entered into a ~~new~~ credit agreement with the lenders ~~that are~~ party thereto and Bank of America, N.A. as administrative agent for the lenders (the ~~“New Credit~~“Credit Agreement”)~~, and concurrently terminated the Previous Credit Facility~~. The ~~New~~ Credit Agreement provides for a $175.0 million senior secured revolving loan (the ~~“New Credit~~“Credit Facility”), which includes a $10.0 million sublimit for the issuance of standby letters of credit and a swingline sublimit of $20.0 million. The ~~New~~ Credit Facility also includes an option to increase the amount of the revolving loan up to an additional $75.0 million, subject to the terms of the ~~New~~ Credit Agreement. The ~~New~~ Credit Facility matures on November 12, 2026. The obligations under the ~~New~~ Credit Facility are secured by substantially all assets of the Company, Resources Connection LLC and all of the Company’s domestic subsidiaries.

~~Borrowings~~Future borrowings under the ~~New~~ Credit Facility bear interest at a rate per annum of either, at the Company’s election, (i) Term SOFR (as defined in the ~~New~~ Credit Agreement) plus a margin ranging from 1.25% to 2.00% or (ii) the Base Rate (as defined in the ~~New~~ Credit Agreement), plus a margin of 0.25% to 1.00% with the applicable margin depending on the Company’s consolidated leverage ~~ratio, which resulted in an interest rate of 0% as of February 25, 2023 (due to no borrowings) and 2.15% as of May 28, 2022. The~~ratio. In addition, the Company pays an unused commitment fee on the average daily unused portion of the ~~New~~ Credit Facility, which ranges from 0.20% to 0.30% depending onupon the Company’s consolidated leverage ratio.

The ~~New~~ Credit Agreement contains both affirmative and negative covenants. Covenants include, but are not limited to, limitations on the Company’s and its subsidiaries’ ability to incur liens, incur additional indebtedness, make certain restricted payments, merge or consolidate and make dispositions of assets. In addition, the ~~New~~ Credit Agreement requires the Company to comply with financial covenants including limitation on the Company’s total funded debt, minimum interest coverage ratio and maximum leverage ratio. The Company was compliant with all financial covenants under the ~~New~~ Credit Agreement as of ~~February 25,~~August 26, 2023.

~~The~~As of August 26, 2023 and May 27, 2023, the Company had no ~~borrowings as of February 25, 2023 and borrowed $54.0 million as of May 28, 2022~~debt outstanding under the ~~New~~ Credit Facility. In addition, the Company had $0.8 million ~~and $1.2 million~~ of outstanding letters of credit issued under the Credit Facility as of ~~February 25,~~both August 26, 2023 and May ~~28, 2022, respectively, in each case under the New Credit Facility.~~27, 2023. As of ~~February 25,~~August 26, 2023, there was $174.2 million remaining capacity under the ~~New~~ Credit Facility.

On November 2, 2022, Resources Global Enterprise Consulting (Beijing) Co., ~~Ltd~~.Ltd. (a wholly-owned subsidiary of the Company), as borrower, and the Company, as guarantor, entered into a RMB 13.4 million (USD $1.8 million based on the prevailing exchange rate on November 2, 2022) revolving credit facility with Bank of America, N.A. (Beijing) as the lender (the “Beijing Revolver”). The Beijing Revolver bears interest at loan prime rate plus 0.80%. Interest incurred on borrowings will be payable monthly in arrears. As of ~~February 25,~~August 26, 2023, the Company had no ~~borrowings~~debt outstanding under the Beijing Revolver and RMB 13.4 million ($1.9 million based on the prevailing exchange rate on ~~February 25,~~August 26, 2023) in ~~availability under the Beijing Revolver.~~available credit. The availability of proceeds under the Beijing Revolver is at the lender's absolute discretion and may be terminated at any time by the lender, with or without prior notice to the borrower.

8. Income Taxes

For the three months ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 2022, ~~the Company’s income tax benefit was nearly zero, an effective tax benefit rate of less than 0.1%, and $2.2 million, an effective tax benefit rate of 12.7%, respectively.~~ ~~For the nine months ended~~ ~~February 25, 2023~~ ~~and~~ ~~February 26, 2022~~, the Company’s income tax expense was ~~$12.9~~$2.1 million, an effective tax rate of ~~23.2%~~40.0%, and ~~$8.6~~$7.0 million, an effective tax rate of ~~15.5%~~27.8%, respectively. The higher effective tax rate ~~for~~in the ~~third~~first quarter of fiscal ~~2022~~2024 was attributed ~~largely~~ to lower pre-tax income globally when compared to the first quarter of fiscal 2023. We incurred pre-tax losses in various foreign entities where we could not recognize income tax benefits as a ~~non-recurring tax benefit of $2.6 million from the dissolution~~result of the ~~Company’s French entity and a tax benefit of $4.9 million from~~required valuation allowances. This lower global pre-tax income causes the ~~release of a valuation allowance in a specific European entity. The~~ effective tax rate ~~for~~to increase because the ~~third quarter of fiscal 2023 was attributed largely~~permanent GAAP to a tax ~~benefit of $1.9 million from~~differences are measured against the ~~release of a valuation allowance in two European entities.~~lower base amount.

The Company operates in an international environment. Accordingly, the consolidated effective tax rate is a composite rate reflecting the earnings (losses) in various locations and the applicable tax rates in those jurisdictions, and fluctuations in the consolidated effective tax rate year over year, are due to the changes in the mix of operating income and losses amongst the various jurisdictions in which the Company operates. Given the current earnings and anticipated future earnings of some of the Company’s foreign locations, the Company believes there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow it to reach a conclusion that the valuation allowance on the deferred tax assets of certain foreign entities will no longer be needed. Releasing the valuation allowance would result in the recognition of previously unrecognized deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change depending on the level of profitability that the Company is able to actually achieve.

~~For the three months ended~~ ~~February 25, 2023~~ ~~and~~ ~~February 26, 2022, the~~The Company recognized a tax benefit of approximately $0.2 million and ~~$0.5~~$0.6 million respectively, associated with the exercise of nonqualified stock options, vesting of restricted stock or restricted stock unit awards, and disqualifying dispositions by employees of shares acquired under the Employee Stock Purchase Plan (“ESPP”). For the nine months ended ~~February 25, 2023~~ ~~and~~ ~~February 26, 2022, the Company recognized a tax benefit of approximately $2.0 million and $1.3 million, 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.~~Employee Stock Purchase Plan (“ESPP”) during the three months ended August 26, 2023 and August 27, 2022, respectively.

The Company’s total liability for unrecognized gross tax benefits, including accrued interest and penalties, was ~~$0.9~~$1.0 million as of both ~~February 25,~~August 26, 2023 and May ~~28, 2022,~~27, 2023, which, if ultimately recognized, ~~any differences in assessment or non-assessment~~ would impact the effective tax rate in future periods. The unrecognized tax benefits are included in other long-term liabilities in the Consolidated Balance Sheets. None of the unrecognized tax benefits are short-term liabilities as the Company does not anticipate any cash payments within 12 months to settle the liability.

In April 2022, the Company filed for a U.S. federal income tax refund in the amount of $34.8 million related to the carry back of the fiscal year 2021 net operating loss to fiscal years 2016 to 2018 and refund of alternative minimum tax (“AMT”) credits for fiscal years 2019 and 2020. As of February 25, 2023, the Company has received a refund of $35.5 million (including interest income of $0.7 million). The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law by the U.S. government. The IRA includes implementation of a new alternative minimum tax, an excise tax on stock buybacks, and significant tax incentives for energy and climate initiatives, among other provisions. The Company is evaluating the provisions included under the IRA and does not expect the provisions to have a material impact to the Company’s consolidated financial statements.

9. Stockholders’ Equity

Stock Repurchase Program

The Company’s board of directors has previously approved a stock repurchase program authorizing the repurchase, at the discretion of the Company’s senior executives, of the Company’s common stock for a designated aggregate dollar limit. The current program was authorized in July 2015 (the “July 2015 Program”) and set an aggregate dollar limit not to exceed $150 million. Subject to the aggregate dollar limit, the currently authorized stock repurchase program does not have an expiration date. Repurchases under the program may take place in the open market or in privately negotiated transactions and may be made pursuant to a Rule 10b5-1 plan. During the three months ended ~~February 25,~~August 26, 2023 and August 27, 2022, the Company ~~purchased 300,000 shares~~made no repurchases of its common stock on the open market at an average price of $17.19 per share, for an aggregate total purchase price of approximately $5.2 million. During the nine months ended February 25, 2023, the Company purchased 618,438 shares of its common stock on the open market at an average price of $16.99 per share, for an aggregate total purchase price of approximately $10.5 million.stock. As of ~~February 25,~~August 26, 2023, approximately ~~$54.9~~$50.2 million remained available for future repurchases of the Company’s common stock under the July 2015 Program.

On December 8, 2021, the Company repurchased 1,155,236 shares of the Company’s common stock in a privately negotiated transaction with Dublin Acquisition, LLC (the “Seller”) pursuant to the terms of a Stock Purchase Agreement, dated December 3, 2021, entered into between the Company and the Seller (the “Stock Purchase Agreement”). The Stock Purchase Agreement provided that the purchase price per share was $17.01, equal to the lower of (i) the 10-day volume-weighted average price for the period ending on Friday December 3, 2021 or (ii) the closing price on December 3, 2021. The purchased shares had previously been issued to the Seller in connection with the Company’s acquisition of Accretive Solutions, Inc. in November 2017.

Quarterly Dividend

Subject to approval each quarter by its board of directors, the Company pays a regular dividend. On ~~January 19,~~July 27, 2023, the board of directors declared a regular quarterly dividend of $0.14 per share of the Company’s common stock. The dividend was paid on ~~March 16,~~September 21, 2023 to stockholders of record at the close of business on ~~February 16,~~August 24, 2023. As of ~~February 25,~~both August 26, 2023 and May ~~28, 2022,~~27, 2023, $4.7 million ~~and $4.6 million, respectively, were~~was accrued and recorded in other current liabilities in the Company’s Consolidated Balance Sheets for dividends declared but not yet paid. We pay dividend equivalents on outstanding restricted stock units and performance stock units. Dividend equivalents are accrued and paid upon vesting of restricted stock units and earned performance stock units. Continuation of the quarterly dividend is at the discretion of the board of directors and depends upon the Company’s financial condition, results of operations, capital requirements, general business condition, contractual restrictions contained in the ~~New~~ Credit Facility and other agreements, and other factors deemed relevant by the board of directors.

~~Retirement of Treasury Shares~~

On November 8, 2021, the Company retired 31.7 million shares of its common stock held in treasury. The shares were returned to the status of authorized but unissued shares. As a result, the treasury stock balance decreased by approximately $520.7 million. In connection with the retirement, the Company reduced its common stock, additional paid-in capital, and retained earnings balances by $0.3 million, $157.6 million, and $362.7 million, respectively. Refer to Note 2 — ~~Summary of Significant Accounting Policies~~ ~~for the Company’s accounting policy for the retirement of treasury shares.~~

10. Restructuring Activities

During calendar year 2020, the Company initiated a global restructuring and business transformation plan in North America, Asia Pacific and Europe (the “Restructuring Plans”). The Restructuring Plans consisted of two key components: (i) an effort to streamline the management and organizational structure and eliminate certain positions as well as exit certain markets to focus on core solution offerings and high-growth clients; and (ii) a strategic rationalization of the Company’s physical geographic footprint and real estate spend to focus investment dollars in high-growth core markets for greater impact. The Company incurred employee termination and facility exit costs associated with the Company’s restructuring initiatives within its RGP segment, ~~which~~and were recorded in selling, general and administrative expenses in its Consolidated Statements of Operations.

The Restructuring Plans were substantially completed in fiscal 2021. Restructuring ~~costs were insignificant for both the three months ended February 25, 2023 and February 26, 2022. Restructuring costs,~~adjustments, including real estate exit costs and adjustments to employee termination costs, associated with the restructuring activities ~~were~~was zero and ($0.4) million ~~and $0.8 million~~ for the ~~nine~~three months ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 2022, respectively. ~~Restructuring~~There was no remaining restructuring liability ~~recorded in accounts payable and accrued expenses in the Consolidated Balance Sheet was zero and $0.4 million~~ as of ~~February 25, 2023 and~~ May ~~28, 2022, respectively.~~27, 2023. See Note 14 –

Subsequent Event for further information.

1713

11. Stock-Based Compensation Plans

General

The Company’s stockholders approved the Resources Connection, Inc. 2020 Performance Incentive Plan (the “2020 Plan”) on October 22, 2020, which replaced and succeeded in its entirety the Resources Connection, Inc. 2014 Performance Incentive Plan (the “2014 Plan”). Executive officers and certain employees, as well as non-employee directors of the Company and certain consultants and advisors are eligible to participate in the 2020 Plan. The maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 2020 Plan equals: (1) 1,797,440 (which represents the number of shares that were available for additional award grant purposes under the 2014 Plan immediately prior to the termination of the authority to grant new awards under the 2014 Plan as of October 22, 2020), plus (2) the number of any shares subject to stock options granted under the 2014 Plan or the Resources Connection, Inc. 2004 Performance Incentive Plan (together with the 2014 Plan, the “Prior Plans”) and outstanding as of October 22, 2020 which expire, or for any reason are cancelled or terminated, after that date without being exercised, plus (3) the number of any shares subject to restricted stock and restricted stock unit awards granted under the Prior Plans that are outstanding and unvested as of October 22, 2020 which are forfeited, terminated, cancelled, or otherwise reacquired after that date without having become vested.

Awards under the 2020 Plan may include, but are not limited to, stock options, stock appreciation rights, restricted stock, performance stock, stock units, stock bonuses and other forms of awards granted or denominated in shares of common stock or units of common stock, as well as certain cash bonus awards. Historically, the Company has granted restricted stock, restricted stock units and stock option awards under the 2020 Plan that typically vest in equal annual installments, and performance stock unit awards under the 2020 Plan that vest upon the achievement of certain Company-wide performance targets at the end of the defined performance period. Stock option grants typically terminate ten years from the date of grant. Vesting periods for restricted stock, restricted stock units and stock option awards range from three to four years. The performance ~~period~~periods for the performance stock unit awards isare three years. As of ~~February 25,~~August 26, 2023, there were ~~1,219,929~~1,252,835 shares available for further award grants under the 2020 Plan.

Stock-Based Compensation Expense

Stock-based compensation expense included in selling, general and administrative expenses was $2.6 million and $2.5 million for the three months ended August 26, 2023 and August 27, 2022, respectively. These amounts consisted of stock-based compensation expense related to employee stock options, restricted stock awards, restricted stock unit awards and performance stock unit awards under the 2020 Plan and Prior Plans, employee stock purchases made via the ESPP, and stock units credited under the Directors Deferred Compensation Plan. The Company recognized a tax benefit of approximately $0.5 million and $0.7 million associated with such stock-based compensation expense during the three months ended August 26, 2023 and August 27, 2022, respectively.

The Company recognizes stock-based compensation expense on time-vesting equity awards ratably over the applicable vesting period based on the grant date fair value, net of estimated forfeitures. Expense related to the liability-classified awards reflects the change in fair value during the reporting period. The number of performance stock units earned at the end of the applicable performance period may equal, exceed or be less than the targeted number of shares depending on whether the performance criteria are met, surpassed or not met. During each reporting period, the Company uses the latest forecasted results to estimate the number of shares ~~expected~~ to be issued at the end of the performance period. Any resulting changes to stock compensation expense are adjusted in the period in which the change in estimates occur.

~~Stock-based compensation expense included in selling, general and administrative expenses was~~ ~~$2.6~~ ~~million and~~ ~~$2.2~~ ~~million for the three months ended February 25, 2023 and February 26, 2022, respectively,~~ ~~and $7.4 million and $5.9 million for the nine months ended~~ ~~February 25, 2023~~ ~~and~~ ~~February 26, 2022, respectively~~. These amounts consisted of stock-based compensation expense related to employee stock options, restricted stock awards, restricted stock unit awards and performance stock unit awards under the 2020 Plan and Prior Plans, employee stock purchases made via the ESPP, and stock units credited under the Directors Deferred Compensation Plan. The Company recognized a tax benefit of approximately $0.5 million associated with such stock-~~based compensation expense during each of the three months ended February 25, 2023 and February 26, 2022,~~ ~~and $1.5 million and $1.3 million during the nine months ended~~ ~~February 25, 2023~~ ~~and~~ ~~February 26, 2022, respectively~~.

Stock Options

The following table summarizes the stock option activity for the ~~nine~~three months ended ~~February 25,~~August 26, 2023 (in thousands, except weighted-average exercise price):

Number of Options
Weighted-Average Exercise Price
Outstanding at May 28, 2022
3,350
$
16.08
Exercised
(477)
15.48
Forfeited
(28)
17.42
Expired
(36)
16.05
Outstanding at February 25, 2023
2,809
$
16.18
Exercisable at February 25, 2023
2,590
$
16.07
Vested and expected to vest at February 25, 2023 (1)
2,797
$
16.17


	Number of Options	Weighted-Average Exercise Price
Outstanding at May 27, 2023	2,648	$	16.44
Exercised	(22)		15.15
Forfeited	(4)		17.44
Expired	(24)		14.27
Outstanding at August 26, 2023	2,598	$	16.47
Exercisable at August 26, 2023	2,387	$	16.39
Vested and expected to vest at August 26, 2023 (1)	2,596	$	16.47

(1) The options expected to vest are the result of applying the pre-vesting forfeiture rate assumptions to options not yet vested of ~~218,745~~211,285 as of ~~February 25,~~August 26, 2023.

As of ~~February 25,~~August 26, 2023, there was $~~0.5~~0.1 million of total unrecognized compensation ~~cost~~costs related to unvested and outstanding employee stock options. The cost is expected to be recognized over a weighted-average period of ~~0.58~~0.12 years.

Employee Stock Purchase Plan

On October 20, 2022, the Company’s stockholders approved an amendment toand restatement of the 2019 ESPP that increased the number of shares authorized for issuance under the ESPP by 1,500,000, resulting in a maximum number of shares of the Company’s common stock authorized for issuance under the ESPP of ~~3,325,000.~~3,325,000 shares.

The Company’s ESPP allows qualified employees (as defined in the ESPP) to purchase designated shares of the Company’s common stock at a price equal to 85% of the lesser of the fair market value of common stock at the beginning or end of each semi-annual stock purchase period. The Company issued ~~approximately~~ ~~393,060~~198,150 and ~~463,000~~183,000 shares of common stock pursuant to the ESPP during the ~~nine~~three months ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 2022, respectively. There were ~~1,778,924~~1,580,774 shares of common stock available for issuance under the ESPP as of ~~February 25,~~August 26, 2023.

Restricted Stock Awards (“RSAs”)

The following table summarizes the activities for the unvested RSAs for the ~~nine~~three months ended ~~February 25,~~August 26, 2023 (in thousands, except weighted-average grant-date fair value):


	Shares	Weighted-Average Grant-Date Fair Value		Shares	Weighted-Average Grant-Date Fair Value
Outstanding at May 28, 2022	183	$	15.88
Outstanding at May 27, 2023				209	$	17.19
Granted	97		18.31	2		16.07
Vested	(71)		15.37	(2)		15.49
Forfeited	-		-	-		-
Unvested as of February 25, 2023	209	$	17.19
Expected to vest as of February 25, 2023	182	$	17.13
Unvested as of August 26, 2023				209	$	17.18
Expected to vest as of August 26, 2023				186	$	17.13

As of ~~February 25,~~August 26, 2023, there was ~~$2.7~~$2.1 million of total unrecognized compensation ~~cost~~costs related to unvested RSAs. The cost is expected to be recognized over a weighted-average period of ~~1.61~~1.44 years.

Restricted Stock Units (“RSUs”)

The Company may issue either equity-classified RSUs, which are awards granted to employees under the 2020 Plan that settle in shares of the Company’s common stock, or liability-classified RSUs, which are awards credited to board of director members under the Directors Deferred Compensation Plan that settle in cash.

The following table summarizes the activities for the unvested RSUs, including both equity- and liability-classified RSUs, for the ~~nine~~three months ended ~~February 25,~~August 26, 2023 (in thousands, except weighted-average grant-date fair value):


	Equity-Classified RSUs			Liability-Classified RSUs			Total RSUs			Equity-Classified RSUs			Liability-Classified RSUs			Total RSUs
	Shares	Weighted-Average Grant-Date Fair Value		Shares	Weighted-Average Grant-Date Fair Value		Shares	Weighted-Average Grant-Date Fair Value		Shares	Weighted-Average Grant-Date Fair Value		Shares	Weighted-Average Grant-Date Fair Value		Shares	Weighted-Average Grant-Date Fair Value
Outstanding at May 28, 2022	579	$	14.03	66	$	14.89	645	$	14.12
Outstanding at May 27, 2023										631	$	15.78	60	$	16.55	691	$	15.85
Granted (1)	244		18.24	25		18.60	269		18.27	6		15.90	1		15.90	7		15.90
Vested	(175)		13.63	(31)		15.35	(206)		13.89	-		-	-		-	-		-
Forfeited	(17)		12.96	-		-	(17)		12.96	(3)		14.79	-		-	(3)		14.79
Unvested as of February 25, 2023	631	$	15.77	60	$	16.55	691	$	15.84
Expected to vest as of February 25, 2023	567	$	15.70	60	$	16.55	627	$	15.78
Unvested as of August 26, 2023										634	$	15.79	61	$	16.55	695	$	15.86
Expected to vest as of August 26, 2023										588	$	15.71	61	$	16.55	649	$	15.79

(1) The dividend equivalents are included in the granted ~~shares.~~shares

As of ~~February 25,~~August 26, 2023, there was ~~$7.6~~$6.2 million of total unrecognized compensation ~~cost~~costs related to unvested equity-classified RSUs. The cost is expected to be recognized over a weighted-average period of ~~1.85~~1.65 years.

As of ~~February 25,~~August 26, 2023, there was ~~$0.9~~$0.7 million of total unrecognized compensation ~~cost~~costs related to unvested liability-classified RSUs. The cost is expected to be recognized over a weighted-average period of ~~1.90~~1.70 years.

Performance Stock Units (“PSUs”)

~~During the nine months ended February 25, 2023 and February 26, 2022, the~~The Company has issued PSUs to certain members of management and other select employees. The total number of shares that would vest under the PSUs will be determined at the end of the ~~respective~~applicable three-year performance period based on the Company’s achievement of certain revenue and Adjusted EBITDA (as defined below in Note 13 – Segment Information and Enterprise Reporting) percentage targets over the applicable performance period. The total number of shares that may be earned for these awards based on performance over the performance period ranges from zero to 150% of the target number of shares.

The following table summarizes the activities for the unvested PSUs for the ~~nine~~three months ended ~~February 25,~~August 26, 2023 (in thousands, except weighted-average grant-date fair value):


	Shares (1)	Weighted-Average Grant-Date Fair Value		Shares (1)	Weighted-Average Grant-Date Fair Value
Outstanding at May 28, 2022	196	$	18.41
Outstanding at May 27, 2023				434	$	18.32
Granted (2)	240		18.24	4		15.90
Vested	-		-	-		-
Forfeited	(4)		18.44	(2)		18.34
Unvested as of February 25, 2023	432	$	18.32
Expected to vest as of February 25, 2023	386	$	18.32
Unvested as of August 26, 2023				436	$	18.31
Expected to vest as of August 26, 2023				402	$	18.32

(1) Shares are presented in this table at the stated target, which represents the base number of shares that would vest over the ~~respective~~ performance period. Actual shares that vest may be zero to 150% of the target based on the achievement of the specific company-wide performance targets.

(2) The dividend equivalents are included in the granted shares.

As of ~~February 25,~~August 26, 2023, there was ~~$5.5~~$2.9 million of total unrecognized compensation ~~cost~~costs related to unvested PSUs. The cost is expected to be recognized over a weighted-average period of ~~1.86~~1.34 years.

12. Commitments and Contingencies

Legal Proceedings

The Company is involved in certain legal matters arising in the ordinary course of business. In the opinion of management, none of such matters, if disposed of unfavorably, would have a material adverse effect on the Company’s financial position, cash flows or results of operations.

13. Segment Information and Enterprise Reporting

The tables below reflect the operating results of the Company’s segments consistent with the management and performance measurement system utilized by the Company. Upon completing the sale of the taskforce operating segment, effective May 31, 2022, the Company’s operating segments consist of RGP and Sitrick. Prior-period comparative segment information was not restated. See Note 2 – Summary of Significant Accounting Policies for further discussion about the Company’s operating and reportable segments.

Performance measurement is based on segment Adjusted ~~EBITDA, a non-GAAP measure.~~EBITDA. Adjusted EBITDA is defined as net income before amortization expense, depreciation expense, interest and income taxes plus or minus stock-based compensation expense, technology transformation costs ~~goodwill impairment,~~and restructuring ~~costs, and contingent consideration adjustments.~~costs. Adjusted EBITDA at the segment level excludes certain shared corporate administrative costs that are not practical to allocate. The Company’s CODM does not evaluate segments using asset information.

The following table discloses the Company’s revenue and Adjusted EBITDA by segment for ~~all~~both periods presented (in thousands):


	Three Months Ended					Nine Months Ended
	February 25,		February 26,		February 25,		February 26,		Three Months Ended
	2023		2022		2023		2022		August 26,		August 27,
	(Unaudited)				(Unaudited)				2023		2022
Revenue:
RGP	$	184,270	$	195,251	$	582,849	$	557,584	$	167,504	$	200,995
Other Segments (1)		2,507		9,358		8,345		30,403		2,665		3,067
Total revenue	$	186,777	$	204,609	$	591,194	$	587,987	$	170,169	$	204,062

Adjusted EBITDA:
RGP	$	25,320	$	30,656	$	101,331	$	91,833	$	20,798	$	38,347
Other Segments (1)		113		579		761		2,817		71		316
Reconciling items (2)		(8,817)		(8,766)		(25,135)		(24,881)		(9,323)		(7,953)
Total Adjusted EBITDA (3)	$	16,616	$	22,469	$	76,957	$	69,769	$	11,546	$	30,710

(1) Amounts reported in Other Segments for the three ~~and nine~~ months ended ~~February 25, 2023~~August 27, 2022 include Sitrick and ~~for the nine months ended February 25, 2023,~~ an immaterial amount from taskforce from May 29, 2022 through May 31, 2022, the completion date of the sale. ~~Amounts previously reported for the three and nine months ended February 26, 2022 included the Sitrick and taskforce operating segments~~.

(2) Reconciling items are generally comprised of unallocated corporate administrative costs, including management and board compensation, corporate support function costs and other general corporate costs that are not allocated to segments.

(3) A reconciliation of the Company’s net income to Adjusted EBITDA on a consolidated basis is presented below.

The table below represents a reconciliation of the Company’s net income to Adjusted EBITDA for ~~all~~both periods presented (in thousands):


	Three Months Ended				Nine Months Ended
	February 25,		February 26,		February 25,		February 26,		Three Months Ended
	2023		2022		2023		2022		August 26,		August 27,
	(Unaudited)				(Unaudited)				2023		2022
Net income	$	7,019	$	19,421	$	42,591	$	46,648	$	3,117	$	18,140
Adjustments:
Amortization expense		1,275		1,321		3,743		3,608		1,314		1,252
Depreciation expense		885		882		2,652		2,694		877		887
Interest expense, net		147		307		662		744
Income tax (benefit) expense		(2)		(2,192)		12,867		8,561
Interest (income) expense, net										(312)		316
Income tax expense										2,075		6,992
EBITDA		9,324		19,739		62,515		62,255		7,071		27,587
Stock-based compensation expense		2,609		2,202		7,375		5,851		2,552		2,529
Technology transformation costs (1)		1,737		461		4,476		690		1,923		991
Goodwill impairment (2)		2,955		-		2,955		-
Restructuring costs (3)		(9)		67		(364)		807
Contingent consideration adjustment		-		-		-		166
Restructuring adjustments (2)										-		(397)
Adjusted EBITDA	$	16,616	$	22,469	$	76,957	$	69,769	$	11,546	$	30,710

(1) Technology transformation costs represent costs included in net income related to the Company’s initiative to upgrade its technology platform globally, including a cloud-based enterprise resource planning system and talent acquisition and management ~~system.~~systems. Such costs primarily include hosting and certain other software licensing costs, third-party consulting fees and costs associated with dedicated internal resources that are not capitalized.

(2) ~~Goodwill impairment charge recognized during the three and nine months ended February 25, 2023 was related to the Sitrick operating segment.~~

~~(3)~~ The Company substantially completed the Restructuring Plans in fiscal 2021. ~~Substantially all~~All of the remaining accrued restructuring liability on the books related to employee termination costs ~~was~~that were either paid or released ~~as of February 25,~~in fiscal 2023.

14. Subsequent Event

~~Collection on taskforce’s note receivable~~

On ~~March 3,~~October 2, 2023, the Company ~~received EUR 2.4~~initiated a cost reduction plan, including a reduction in force of approximately 8% of its U.S. management and administrative workforce intended to reduce costs and streamline operations. The Company expects to incur charges of $2.0 million ~~(approximately~~to $2.5 ~~million) of repayment on the note receivable from the Purchasers of~~ ~~taskforce. See Note 4 –~~ ~~Dispositions.~~ ~~Including accrued interest, the remaining balance~~million related to one-time employee termination benefits. The Company expects that substantially all of the ~~note receivable was EUR 0.6 million (approximately $0.6 million).~~charges will be recognized and paid by the end of the second quarter of fiscal 2024.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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 25,~~August 26, 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 ~~28, 2022~~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.

These statements and all phases of our operations are subject to known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievements and those of our industry to differ materially from those expressed or implied by these forward-looking statements. Risks and uncertainties include, but are not limited to, the following: risks related to an economic downturn or deterioration of general macroeconomic conditions, (including recessionary pressures, decreases in consumer spending power or confidence and significant uncertainty in the global economy and capital markets resulting from rising inflation, volatility in energy and commodity prices, the impact of the Russia-Ukraine war, increasing diplomatic and trade friction between the U.S. and China, and related supply chain issues), risks arising from epidemic diseases or pandemics, ~~potential adverse effects to our and our clients’ liquidity and financial performances from bank failures or other events affecting financial institutions,~~ the highly competitive nature of the market for professional services, risks related to the loss of a significant number of our consultants, or an inability to attract and retain new consultants, the possible impact on our business from the loss of the services of one or more key members of our senior management, risks related to potential significant increases in wages or payroll-related costs, our ability to secure new projects from clients, our ability to achieve or maintain a suitable pay/bill ratio, our ability to compete effectively in the competitive bidding process, risks related to unfavorable provisions in our contracts which may permit our clients to, among other things, terminate the contracts partially or completely at any time prior to completion, potential adverse effects to our and our clients’ liquidity and financial performances from bank failures or other events affecting financial institutions, our ability to realize the level of benefit that we expect from our restructuring initiatives, risks that our recent digital expansion and technology transformation efforts may not be successful, our ability to build an efficient support structure as our business continues to grow and transform, our ability to grow our business, manage our growth or sustain our current business, our ability to serve clients internationally, additional operational challenges from our international activities including due to social, political, regulatory, legal and economic risks in the countries and regions in which we operate, possible disruption of our business from our past and future acquisitions, the possibility that our recent rebranding efforts may not be successful, our potential inability to adequately protect our intellectual property rights, risks that our computer hardware and software and telecommunications systems are damaged, breached or interrupted, risks related to the failure to comply with data privacy laws and regulations and the adverse effect it may have on our reputation, results of operations or financial condition, our ability to comply with governmental, regulatory and legal requirements and company policies, the possible legal liability for damages resulting from the performance of projects by our consultants or for our clients’ mistreatment of our personnel, risks arising from changes in applicable tax laws or adverse results in tax audits or interpretations, the possible adverse effect on our business model from the reclassification of our independent contractors by foreign tax and regulatory authorities, the possible difficulty for a third party to acquire us and resulting depression of our stock price, the operating and financial restrictions from our credit facility, risks related to the variable rate of interest in our credit facility, the possibility that we are unable to or elect not to pay our quarterly dividend payment, and other factors and uncertainties as are identified in our most recent Annual Report on Form 10-K for the year ended May ~~28, 2022~~27, 2023 and our other public filings made with the SEC (File No. 0-32113). Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business or operating results. Readers are cautioned not to place undue reliance on the forward-looking statements included herein, which speak only as of the date of this filing. We do not intend, and undertake no obligation, to update the forward-looking statements in this filing to reflect events or circumstances after the date of this filing or to reflect the occurrence of unanticipated events, unless required by law to do so. References in this filing to “Resources Global Professionals,” the “Company,” “we,” “us,” and “our” refer to Resources Connection, Inc. and its subsidiaries.

Overview

Resources Global Professionals (“RGP”) is a global consulting firm based in Irvine, CA (with offices worldwide) focused on project execution services that power clients’ operational needs and change initiatives utilizing on-demand, ~~experienced~~expert and diverse talent. As a next-generation human capital partner for our clients, we specialize in co-delivery of enterprise initiatives typically precipitated by business transformation, strategic transactions or regulatory change. Our engagements are designed to leverage human connection and collaboration to deliver practical solutions and more impactful results that power our clients’, consultants’ and partners’ success.

2318

A disruptor within the professional services industry since our founding in 1996, today ~~the Company embraces its~~we embrace our differentiated agile delivery model. We attract top-caliber professionals with in-demand skill sets who seek a workplace environment characterized by choice and control, collaboration and human connection. The trends in today’s marketplace favor ~~the~~ flexibility and agility ~~that RGP provides~~ as businesses confront transformation pressures, severe skilled labor shortages and speed-to-market challenges. While these forces were already at play in 2019, the COVID-19 pandemic (the “Pandemic”) has served to significantly transform the modern workplace in ways that offer us a clear competitive advantage. As talent preferences ~~have shifted dramatically~~continue to shift in the direction of flexibility, ~~choice and control,~~ employers ~~struggling to compete~~competing in today’s business environment must rethink the way work gets done and consider implementing new, more agile workforce strategies.

~~We expect to continue to evolve our~~ Our client engagement and talent delivery model ~~to take advantage of these dramatic~~offers speed and ~~important shifts in the direction of flexibility, control and choice. Our unique approach to workforce strategy~~agility, strongly ~~positions~~positioning us to help our clients transform their businesses and workplaces, especially at a time ~~when~~where high-quality talent is ~~increasingly~~ scarce and ~~the usage of~~reliance on a flexible workforce to execute transformational projects ~~has become the dominant operating model.~~ ~~We believe that we are continuing to lay a solid foundation for the future.~~is increasingly imperative.

~~Based~~We are laser-focused on driving long-term growth in ~~Irvine, California,~~our business by seizing the favorable macro shifts in workforce strategies and preferences, building an efficient and scalable operating model, and maintaining a distinctive culture and approach to professional services. Our enterprise initiatives in recent years include refining the operating model for sales, talent and delivery to be more client-centric, cultivating a more robust performance culture by aligning incentives to business performance, building and commercializing our digital engagement platform, enhancing our consulting capabilities in digital transformation to align with ~~offices worldwide,~~market demand, improving operating leverage through pricing, operating efficiency and cost reduction, and driving growth through strategic acquisitions. We believe our ~~agile human capital model attracts top-caliber professionals with in-demand skillsets who seek a workplace environment that embraces flexibility, collaboration~~focus and ~~human connection. Our agile professional services model allows us to quickly align~~execution on these initiatives will serve as the ~~right resources~~foundation for ~~the work at hand with speed and efficiency in ways that bring value to both our clients and talent.~~growth ahead. See Part 1, Item 1 “Business” of our Fiscal Year ~~2022~~2023 Form 10-K for further discussions about our business and operations.

Fiscal ~~2023~~2024 Strategic Focus Areas

~~Our~~Building upon the foundation we established through fiscal 2023, we will continue to execute the following enterprise growth drivers ~~and strategic focus areas~~ in fiscal ~~2023 include:~~2024:

Transform digitally;

Amplify brand voice and ~~optimize~~clarify solution offerings;

~~Deepen client centricity;~~Evolve operating model;

~~Enhance~~Migrate to value-based pricing; and

Pursue targeted mergers and acquisitions.

Transform digitally – Our first ~~objective is~~area of focus remains embracing continued digital transformation to improve operational efficiency, scale business growth, transform stakeholder experience and create long-term sustainability and stockholder value.

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. 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 ~~digital means~~.automation, better data analytics and faster global collaboration. Seamless global execution capability will allow us to differentiate RGP from the Big Four and other consultancies as a preferred partner for global transformation projects.

We believe the use of technology platforms to match clients and talent is the future of professional staffing. HUGO by RGP^TM (“HUGO”), our digital engagement platform, allows ~~such an experience for~~ clients and talent in the professional staffing space to connect, engage and even transact directly. We ~~piloted the platform~~completed our pilot in three primary markets – New York/New Jersey, Southern California and Texas – and ~~have~~ ~~continued to enhance its functionality with further artificial intelligence~~received positive and ~~machine learning. We have also been developing sales and marketing strategies to increase client~~encouraging feedback from clients and talent ~~adoption of the platform.~~alike. We are now ready to pursue a more aggressive digital marketing plan to ~~expand~~accelerate commercialization and achieve broader adoption. With the ~~geographic reach~~accounting profession losing talent in unprecedented numbers, we believe HUGO offers these professionals a viable alternative to ~~other key markets within~~ the ~~United States (“U.S.”)~~.traditional accounting firm career path – one founded on flexibility, choice and career-control. Over time, we expect to be able to drive volume through the HUGO platform by attracting more small- and medium-sized businesses looking for interim support and by serving a larger percentage of our current ~~professional staffing~~interim business, which we believe will not only drive top-line growth but also enhance profitability.

We continue to execute on the multi-year project to modernize and elevate our technology infrastructure globally, including a cloud-based enterprise resource planning system and talent acquisition and management system. We believe our investment in these technology transformation initiatives will accelerate our efficiency and data-led decision-making capabilities, optimize process flow and automation, improve consultant recruitment and retention, drive business growth with operational agility, scale our operations and further support our growth, goals and vision.

~~As our clients continue to accelerate their digital and workforce paradigm transformations, t~~he need for automation and self-service has been an increasing trend, especially in light of the continuing impact of the trends started by the Pandemic. We have been focused on expanding our digital consulting capabilities and their geographic reach to drive growth in the business by capturing the market demand and opportunities.

Amplify brand voice and ~~optimize~~clarify solution offerings – Our second focus area for this fiscal year is a sustained effort to ~~bring clarity~~enhance and ~~attention to~~amplify our brand ~~positioning to own~~in the ~~opportunity around project execution.~~ ~~RGP has always focused~~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 ~~project execution, which is~~offering clients direct access to earlier career Accounting and Finance professionals through a ~~distinct space on the continuum between strategy~~digital self-service model; (2) our consulting business today consists largely of Veracity, our end-to-end digital transformation firm, and ~~interim deployment. Our business model of utilizing experienced talent~~Sitrick and Company, a top strategic communications firm. We are actively working to flatten the traditional consulting delivery pyramid is highly sought after in today’s market. Most clients are capable of formulating business strategy organically or with the help of a strategy firm; where they need help isgrow our capabilities in the ~~ownership~~consulting arena both organically and through targeted M&A, with a special focus on digital transformation, business technology, 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 ~~executing the strategy.~~on-demand fractional leadership and a streamlined technology stack.

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~~In fiscal 2022, we introduced our new tagline ―~~ ~~Dare to Work Differently.~~^TM ― to clarify our brand voice to align with hybrid workforce strategy and where our clients need us most: execution with subject matter expertise. We implemented further clarification and activation of our new brand positioningOur investment in the ~~first nine months~~RGP brand notably includes development of ~~fiscal 2023. Our co-delivery ethos~~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 will be releasing a new research study that will more closely examine this paradigm shift in workforce strategy. What we are seeing is ~~focused around partnering with clients on project execution. Our brand marketing will continue to emphasize~~organizations increasingly and ~~accentuate our unique qualifications in this arena. We believe clear articulation~~intentionally embracing a hybrid approach that includes a mix of internal and ~~successful marketing of our distinctive market position is key to attracting and retaining both clients and~~external talent ~~enabling us to drive continued growth.~~– what we are terming “The Dynamic Workforce.”

Key focus areas supporting this initiative include: refining and finalizing our proposed solution architecture that clearly defines RGP’s core service offerings and streamlines the sales process; validating the proposed messaging and architecture via roundtables with internal and external stakeholders; and launching the new brand positioning and messaging through dynamic assets such as advertising campaigns, videos and events.

~~Deepen client centricity~~Evolve operating model – The third area of focus for fiscal ~~2023~~2024 is to ~~continue~~evolve our operating model to ~~deepen~~optimally organize the company in view of the operational efficiencies we are gaining through our global technology transformation initiative and ~~broaden~~with a view to align resources in the right way to support our ~~trusted client relationships through expanded marquee account~~strategic vision. Operating model evolution will also include better definition and ~~key industry vertical programs to increase our focus on account penetration.~~ ~~We maintain our Strategic Client Account program to serve a number~~structure of our ~~largest clients with dedicated global account teams. During fiscal 2023, we have expanded the Strategic Client Account~~offerings to clearly articulate our value proposition, differentiators versus competition, and industry programs by adding clients and taking a more client-centric and borderless approach to serving these clients. We believe this focus has and will continue to enhance our opportunities to develop in-depth knowledge of these clients’ needs and the ability to increase the scope and size of projects with those clients.client segment focus.

~~In addition, we formed a new Emerging Accounts program, which consists of smaller clients where demand tends~~Migrate to ~~be more episodic. Our newly formed dedicated account team have been able to serve this segment of clients with more focus and attention while nurturing and growing the depth of our relationships.~~ Our services continue to emphasize a relationship-oriented approach to business rather than a transaction-oriented or assignment-oriented approach. Client relationships and needs are addressed from a client-centric, not geographic, perspective so that our experienced management team and consultants understand our clients’ business issues and help them define their project needs to deliver an integrated, relationship-based approach to meeting the clients’ objectives. We believe that by continuing to deliver high-quality services and by deepening our relationships with our clients, we can capture a significantly larger share of our clients’ professional services budgets.

~~Enhance~~value-based pricing – Fourth, we ~~have made solid progress in evolving~~will continue to evolve and ~~enhancing~~enhance our pricing strategy ~~to ensure we adopt~~by adopting a value-based ~~approach for our project execution services, which has become increasingly more relevant and in demand in the current macro environment.~~approach. As we deepen our client relationships and raise our clients’ ~~perception~~understanding of our ability to add value through our services, we anticipate further increasing bill rates for our services to capture appropriately ~~capture~~ the value of the talent and solutions delivered. Key focus areas include: creating more centralized pricing governance, strategy and approach; conducting a deep pricing analysis to identify and ~~develop~~confront areas that need improvement; and instituting new pricing training for all sales, talent and ~~other~~ go-to-market team members. ~~Through these actions, we have been able~~We believe there is ample opportunity to ~~achieve higher bill rates across a majority of the markets~~drive further growth in ~~the current fiscal year to drive~~both our topline revenue and ~~profitability.~~profitability through pricing.

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. ~~Following the successful acquisition~~Our M&A strategy is focused on expanding our consulting capabilities, with a special interest in financial advisory firms and ~~integration of Veracity Consulting Group, LLC (“Veracity”), which accelerated our~~ digital ~~capabilities and our ability to offer comprehensive digital innovation services, we have been actively building a pipeline of acquisition opportunities~~transformation firms that serve to add scale ~~to Veracity~~ and/or ~~augment and expand the breadth and depth of our digital transformation capabilities. In addition to digital, we have also been pursuing other consulting capabilities that would drive and foster~~accelerate growth ~~opportunity~~ for our ~~core~~Veracity business. We are also looking at inorganic opportunities that may serve to enhance our industry focus in Healthcare and Financial Services. 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.

Market Trends and Uncertainties

On a macro level, uncertain macroeconomic conditions (including ~~bank failures and other events affecting financial institutions, rising~~ inflation, volatility in energy and commodity prices, the impact of the Russia-Ukraine war, increasing diplomatic and trade friction between the U.S. and China, supply chain issues and labor ~~shortages)~~shortages, and bank failures and other events affecting financial institutions) 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 ~~the remainder of~~ fiscal ~~2023~~2024 and beyond. While we are not able to fully predict the potential impact, we are seeing more caution in spending within our client base. If these conditions persist and a prolonged economic downturn or recession develops, it could result in a further decline in billable hours and ~~a negative~~negatively impact on our bill rates that would adversely affect our financial results and operating cash flows.

Critical Accounting Policies and Estimates

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 ~~2022~~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.

There have been no material changes in our critical accounting policies, or in the estimates and assumptions underlying those policies, from those described under the heading “Critical Accounting Policies and Estimates” in Item 7 of Part II of our Fiscal Year ~~2022~~2023 Form 10-K.

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures to assess our financial and operating performance that are not defined by or calculated in accordance with GAAP. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the Consolidated Statements of Operations; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable GAAP measure so calculated and presented.

Our primary non-GAAP financial measures are listed below and reflect how we evaluate our operating results.

Same-day constant currency revenue is adjusted for the following items:

oCurrency impact. In order to remove the impact of fluctuations in foreign currency exchange rates, we calculate same-day constant currency revenue, which represents the outcome that would have resulted had exchange rates in the current period been the same as those in effect in the comparable prior period.

oBusiness days impact. In order to remove the fluctuations caused by comparable periods having a different number of business days, we calculate same-day revenue as current period revenue (adjusted for currency impact) divided by the number of business days in the current period, multiplied by the number of business days in the comparable prior period. The number of business days in each respective period is provided in the “Number of Business Days” section in the table below.

EBITDA is calculated as net income before amortization expense, depreciation expense, interest and income taxes.

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

Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by revenue.

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Same-Day Constant Currency Revenue

Same-day constant currency revenue assists management in evaluating revenue trends on a more comparable and consistent basis. We believe this measure also provides more clarity to our investors in evaluating our core operating performance and facilitates a comparison of such performance from period to period. The following table presents a reconciliation of same-day constant currency revenue, a non-GAAP financial measure, to revenue as reported in the Consolidated Statements of Operations, the most directly comparable GAAP financial measure, by geography (in thousands, except number of business days).


	Three Months Ended				Nine Months Ended				Three Months Ended
	February 25,		February 26,		February 25,		February 26,		August 26,		August 27,
Revenue by Geography	2023		2022		2023		2022		2023		2022
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
North America
As reported (GAAP)	$	163,790	$	173,569	$	519,994	$	492,602	$	146,583	$	179,549
Currency impact		(196)				(171)				(695)
Business days impact		-				-				-
Same-day constant currency revenue	$	163,594			$	519,823			$	145,888

Europe
As reported (GAAP) (1)	$	10,176	$	17,856	$	31,752	$	56,642	$	10,946	$	11,175
Currency impact		824				4,198				(559)
Business days impact		642				736				92
Same-day constant currency revenue	$	11,642			$	36,686			$	10,479

Asia Pacific
As reported (GAAP)	$	12,811	$	13,184	$	39,448	$	38,743	$	12,640	$	13,338
Currency impact		1,230				4,704				496
Business days impact		433				471				(199)
Same-day constant currency revenue	$	14,474			$	44,623			$	12,937

Total Consolidated
As reported (GAAP) (1)	$	186,777	$	204,609	$	591,194	$	587,987	$	170,169	$	204,062
Currency impact		1,858				8,731				(758)
Business days impact		1,075				1,207				(107)
Same-day constant currency revenue	$	189,710			$	601,132			$	169,304

Number of Business Days
North America (2)		61		61		186		186		63		63
Europe (3)		59		63		187		192		64		64
Asia Pacific (3)		59		62		183		186		63		62

(1) Total Consolidated revenue and Europe revenue as reported under GAAP include taskforce revenue of zero and ~~$6.7~~$0.2 million for the three months ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 2022, ~~respectively, and $0.2 million and $19.9 million for the nine months ended February 25, 2023 and February 26, 2022,~~ respectively.

(2) This represents the number of business days in the U.S.

(3) The business days in international regions represents the weighted average number of business days.

‎

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EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin assist management in assessing our core operating performance. We also believe these measures provide investors with a useful perspective on underlying business results and trends and facilitate a comparison of our performance from period to period. The following table presents EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated and includes a reconciliation of such measures to net income and net income margin, the most directly comparable GAAP financial measures (in thousands, except percentages):


	Three Months Ended								Nine Months Ended								Three Months Ended
	February 25,		% of		February 26,		% of		February 25,		% of		February 26,		% of		August 26,		% of		August 27,		% of
	2023		Revenue		2022		Revenue		2023		Revenue		2022		Revenue		2023		Revenue		2022		Revenue
	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Net income	$	7,019	3.8	%	$	19,421	9.5	%	$	42,591	7.2	%	$	46,648	7.9	%	$	3,117	1.8	%	$	18,140	8.9	%
Adjustments:
Amortization expense		1,275	0.7			1,321	0.6			3,743	0.6			3,608	0.6			1,314	0.8			1,252	0.6
Depreciation expense		885	0.4			882	0.4			2,652	0.4			2,694	0.5			877	0.5			887	0.4
Interest expense, net		147	0.1			307	0.2			662	0.1			744	0.1
Income tax (benefit) expense		(2)	-			(2,192)	(1.1)			12,867	2.3			8,561	1.5
Interest (income) expense, net																		(312)	(0.2)			316	0.2
Income tax expense																		2,075	1.3			6,992	3.4
EBITDA		9,324	5.0			19,739	9.6			62,515	10.6			62,255	10.6			7,071	4.2			27,587	13.5
Stock-based compensation expense		2,609	1.4			2,202	1.1			7,375	1.2			5,851	1.0			2,552	1.5			2,529	1.2
Technology transformation costs (1)		1,737	0.9			461	0.2			4,476	0.8			690	0.1			1,923	1.1			991	0.5
Goodwill impairment (2)		2,955	1.6			-	-			2,955	0.5			-	-
Restructuring costs (3)		(9)	-			67	0.1			(364)	(0.1)			807	0.2
Contingent consideration adjustment		-	-			-	-			-	-			166	-
Restructuring adjustments (2)																		-	-			(397)	(0.2)
Adjusted EBITDA	$	16,616	8.9	%	$	22,469	11.0	%	$	76,957	13.0	%	$	69,769	11.9	%	$	11,546	6.8	%	$	30,710	15.0	%

(2) ~~Goodwill impairment charge recognized during the three and nine months ended February 25, 2023 was related to the Sitrick operating segment.~~

Our non-GAAP financial measures are not measurements of financial performance or liquidity under GAAP and should not be considered in isolation or construed as substitutes for revenue, net income or other measures of financial performance or financial condition prepared in accordance with GAAP for purposes of analyzing our revenue, profitability or liquidity. Further, a limitation of our non-GAAP financial measures is that they exclude items detailed above that have an impact on our GAAP reported results. Other companies in our industry may calculate these non-GAAP financial measures differently than we do, limiting their usefulness as a comparative measure. Because of these limitations, these non-GAAP financial measures should not be considered a substitute but rather considered in addition to performance measures calculated in accordance with GAAP.

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Results of Operations

The following table sets forth our Consolidated Statements of Operations data for the three ~~and nine~~ months ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 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).


	Three Months Ended								Nine Months Ended								Three Months Ended
	February 25,		% of		February 26,		% of		February 25,		% of		February 26,		% of		August 26,		% of		August 27,		% of
	2023		Revenue (1)		2022		Revenue (1)		2023		Revenue (1)		2022		Revenue (1)		2023		Revenue		2022		Revenue
	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenue	$	186,777	100.0	%	$	204,609	100.0	%	$	591,194	100.0	%	$	587,987	100.0	%	$	170,169	100.0	%	$	204,062	100.0	%
Direct cost of services		115,170	61.7			127,815	62.5			353,770	59.8			361,020	61.4			103,168	60.6			120,595	59.1
Gross profit		71,607	38.3			76,794	37.5			237,424	40.2			226,967	38.6			67,001	39.4			83,467	40.9
Selling, general and administrative expenses		59,371	31.8			57,090	27.9			172,335	29.2			165,365	28.1			59,932	35.2			56,187	27.6
Goodwill impairment		2,955	1.6			-	-			2,955	0.5			-	-
Amortization expense		1,275	0.7			1,321	0.6			3,743	0.6			3,608	0.6			1,314	0.8			1,252	0.6
Depreciation expense		885	0.4			882	0.4			2,652	0.4			2,694	0.5			877	0.5			887	0.4
Income from operations		7,121	3.8			17,501	8.6			55,739	9.5			55,300	9.4			4,878	2.9			25,141	12.3
Interest expense, net		147	-			307	0.2			662	0.1			744	0.1
Interest (income) expense, net																		(312)	(0.2)			316	0.2
Other income		(43)	-			(35)	-			(381)	(0.1)			(653)	(0.1)			(2)	-			(307)	(0.2)
Income before income tax (benefit) expense		7,017	3.8			17,229	8.4			55,458	9.5			55,209	9.4
Income tax (benefit) expense		(2)	-			(2,192)	(1.1)			12,867	2.3			8,561	1.5
Income before income tax expense																		5,192	3.1			25,132	12.3
Income tax expense																		2,075	1.3			6,992	3.4
Net income	$	7,019	3.8	%	$	19,421	9.5	%	$	42,591	7.2	%	$	46,648	7.9	%	$	3,117	1.8	%	$	18,140	8.9	%

~~(1) The percentage of revenue may not foot due to rounding.~~

Consolidated Operating Results – Three Months Ended ~~February 25,~~August 26, 2023 Compared to Three Months Ended ~~February 26,~~August 27, 2022

Revenue. Revenue decreased ~~by $17.8~~$33.9 million, or ~~8.7%~~16.6%, to ~~$186.8~~$170.2 million in the ~~third~~first quarter of fiscal ~~2023~~2024 ~~compared to $204.6~~from $204.1 million in the ~~third~~first quarter of fiscal ~~2022. We completed the sale of~~ ~~taskforce~~ ~~on May 31, 2022. Refer to Note 4 –~~ ~~Dispositions~~ ~~in the Notes to Consolidated Financial Statements for further information. Excluding $6.7 million of revenue contributed by~~ ~~taskforce~~ ~~during the third quarter of fiscal 2022, revenue in the third quarter of fiscal 2023 decreased by 5.6% over the prior year quarter, or 4.1% on~~2023. On a same-day constant currency ~~basis. Excluding~~ ~~taskforce, the decrease in~~basis, revenue ~~was primarily due to a 7.4% decline in billable~~decreased $34.8 million, or 17.0%. Billable hours ~~that was partially offset by an increase in~~decreased 14.6% and the average bill rate declined 2.3% from the prior year quarter. 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 2.1% and 4.4% on a constant currency basis, respectively, compared to the prior year as a result of ~~1.6% (or 3.1%~~the Company’s initiative focused on value-based pricing, while average bill rate in the Asia Pacific region declined slightly by 1.5% on a constant ~~currency) during the third quarter of 2023.~~currency basis.

The following table represents our consolidated revenues by geography for the three months ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 2022, respectively (in thousands, except percentages):


	Three Months Ended								Three Months Ended
	February 25,		% of		February 26,		% of		August 26,		% of		August 27,		% of
	2023		Revenue		2022		Revenue		2023		Revenue		2022		Revenue
	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
North America	$	163,790	87.7	%	$	173,569	84.8	%	$	146,583	86.2	%	$	179,549	88.0	%
Europe		10,176	5.4			17,856	8.7			10,946	6.4			11,175	5.5
Asia Pacific		12,811	6.9			13,184	6.5			12,640	7.4			13,338	6.5
Total consolidated revenue	$	186,777	100.0	%	$	204,609	100.0	%
Total									$	170,169	100.0	%	$	204,062	100.0	%

~~North American revenue~~Revenue declined ~~by $9.8 million or 5.6% (5.7% on a same-day constant currency basis)~~in all geographic regions during the first quarter of fiscal 2024 compared to the ~~third~~prior year quarter reflecting reduced client spending across majority of ~~fiscal 2022, primarily driven by~~the markets, client segments and solution offerings as a ~~9.0% decrease~~result of the challenging global macroeconomic environment. While gross pipeline remained relatively resilient, opportunities are taking longer to close, typical in ~~billable hours, partially offset by improvement in the average bill rate by 4.2%. The decrease in billable hours was due~~a tougher macro environment when clients are more hesitant to ~~the uncertainty and slowdown in the macro economy. Many clients have become increasingly cautious with their spending, causing delays in deal closings and project starts during~~spend on professional services. Project extensions continued to remain healthy throughout the quarter. ~~While our pipeline remains healthy, the pace and volume~~North America experienced a revenue decline of revenue conversion continue to be moderate. Our efforts to raise bill rates yielded positive impact on revenue during the third quarter. We will continue to optimize pricing to align bill rates to the value delivered to our clients.

~~European revenue decreased by $7.7 million or 43.0%~~18.4%, or ~~34.8%~~18.7% on a same-day constant currency basis, from the ~~third~~first quarter of fiscal ~~2022. Excluding the impact of the~~ ~~taskforce~~ ~~divestiture and~~2023. Europe revenue decreased 2.0%, or 6.2% on a same-day constant currency ~~basis,~~basis. Asia Pacific revenue ~~in Europe increased by $0.5 million~~declined 5.2%, or ~~4.3%~~3.0% on a same-day constant currency basis, compared to the ~~third~~first quarter of fiscal ~~2022. The increase is primarily the result of better execution.~~

Asia Pacific revenue decreased by $0.4 million or 2.8%, or a 9.8% increase on a same-day constant currency basis, compared to the third quarter of fiscal 2022. The growth in Asia Pacific revenue on a same-day constant currency basis was primarily driven by healthy demand from our strategic client accounts, particularly in the southeast Asia region. The increase is primarily driven by an improvement in the average bill rate of 6.3% and a 0.6% increase in billable hours.2023.

Direct Cost of Services. Direct cost of services decreased ~~$12.6~~$17.4 million, or ~~9.9%~~14.5%, to ~~$115.2~~$103.2 million for the ~~third~~first quarter of fiscal ~~2023~~2024 from ~~$127.8~~$120.6 million for the ~~third~~first quarter of fiscal ~~2022.~~2023. The decrease in direct cost of services was ~~primarily~~ attributable to a ~~9.2% decline~~14.6% decrease in billable hours ~~(1.9% attributed to the divestiture of~~ ~~taskforce~~) and a ~~3.1%~~1.6% decrease (3.3% in constant currency) in average pay rate ~~on a constant currency basis during~~in the ~~third~~first quarter of fiscal ~~2023~~2024 compared to the prior ~~year’s~~year quarter. ~~The decrease in average pay rate was largely attributable to the divesture of~~ ~~taskforce, that has historically carried higher pay rates.~~

Direct cost of services as a percentage of revenue was ~~61.7%~~60.6% for the ~~third~~first quarter of fiscal ~~2023~~2024 compared to ~~62.5%~~59.1% for the ~~third~~first quarter of fiscal ~~2022.~~2023. The ~~decreased~~increased percentage compared to the prior year quarter was primarily attributable to ~~an improvement of 190~~a 40 basis ~~points~~point increase in the ~~overall~~ pay/bill ratio ~~partially offset by an increase~~as a result of the shift in ~~consultant holiday pay resulting from~~global revenue mix to the ~~addition~~international regions as well as a decrease in leverage on cost of ~~Martin Luther King Jr. Day~~service as ~~an official Company holiday in fiscal 2023, and higher self-insured medical costs.~~a result of lower topline revenue. We will seek ~~to continue~~ to drive 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.

The number of consultants on assignment at the end of the ~~third~~first quarter of fiscal ~~2023~~2024 was ~~3,164~~2,885 compared to ~~3,445~~3,386 at the end of the ~~third~~first quarter of fiscal ~~2022.~~2023.

Selling, General and Administrative Expenses. Selling, general and administrative expenses (“SG&A”) was ~~$59.4~~$59.9 million, or ~~31.8%~~35.2% of revenue, for the ~~third~~first quarter of fiscal ~~2023~~2024 compared to ~~$57.1~~$56.2 million, or ~~27.9%~~27.6% of revenue, for the ~~third~~first quarter of fiscal ~~2022.~~2023. The ~~$2.3~~$3.7 million ~~rise~~increase in SG&A year-over-year ~~was primarily attributed~~reflected a higher management compensation and benefit expense of $2.0 million due to employee compensation adjustments to remain competitive in the current labor market, a $1.2 million increase in computer software and certain professional services fees, an increase of ~~$2.7 million in management compensation, an increase of $1.3~~$0.9 million in technology transformation costs, and a ~~$1.1 million foreign exchange gain in the prior year quarter related to the dissolution of a number of foreign legal entities in connection of the Company’s restructuring efforts in Europe, a $0.7~~$1.3 million increase in ~~business and travel expenses to support business development activities, an increase of $0.4 million in stock-based compensation expense, and an increase of $1.4 million in~~all other general and administration ~~expenses to support the business.~~ expenses. These ~~increases~~incremental costs were partially offset by ~~lower incentive compensation~~a reduction in ~~the amount~~bonus and commissions of ~~$4.4~~$1.7 million as a result of ~~business performance in~~lower revenue and profitability achievement compared to the current fiscal year, a $0.5 million impairment related to exiting a real estate facility in the third quarter of fiscal 2022, and a decrease in occupancy costs of $0.4 million from a real estate footprint reduction.incentive targets.

Management and administrative headcount was ~~924~~909 at the end of the ~~third~~first quarter of fiscal ~~2023~~2024 and ~~868~~887 at the end of the ~~third~~first quarter of fiscal ~~2022.~~2023. Management and administrative headcount includes ~~full time~~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~~full-time equivalent headcount.

~~Goodwill Impairment.~~Goodwill is tested for impairment on an annual basis in the fourth quarter and more frequently if indicators of potential impairment exist. Impairment testing is conducted at the reporting unit level. During the third quarter of fiscal 2023, we completed a goodwill impairment analysis for Sitrick, a strategic and crisis communications business acquired in 2009. Despite signing numerous new clients over the last two years, restricted travel during the pandemic and forced court shutdowns and delayed legal proceedings both during and in the aftermath of the pandemic adversely impacted Sitrick’s business. As a result, we performed a qualitative and quantitative impairment analysis relating to the goodwill within Sitrick as of February 25, 2023. We determined that the carrying value of Sitrick was in excess of its fair value and as such recorded a non-cash impairment charge of $3.0 million during the quarter ended February 25, 2023, reducing the goodwill within the Other Segments to zero as of February 25, 2023.

Restructuring Costs. We substantially completed our global restructuring and business transformation plan (the “Restructuring Plans”) in fiscal 2021. All employee termination and facility exit costs incurred under the Restructuring Plans were associated with the RGP segment, and are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Restructuring costs, including real estate exit costs and adjustments to employee termination costs, associated with the restructuring activities were ~~insignificant~~zero and ($0.4) million for ~~both~~ the three months ended ~~February 25,~~August 26, 2023 and ~~February 26, 2022. All employee termination and facility exit costs incurred under the Restructuring Plans were considered completed as of~~ August 27, 2022, ~~and as a result, the~~respectively. There were no remaining ~~accrued~~ restructuring ~~liability on the books was released. Restructuring liability was zero and $0.4 million~~liabilities as of ~~February 25, 2023 and~~ May ~~28, 2022, respectively.~~27, 2023.

Amortization and Depreciation Expense. Amortization expense was $1.3 million in both of the ~~three months ended February 25,~~first quarters of fiscal 2024 and fiscal 2023 ~~and February 26, 2022.~~ . Depreciation expense was $0.9 million in both of the ~~three months ended February 25, 2023~~first quarters of fiscal 2024 and ~~February 26, 2022.~~fiscal 2023.

Income Taxes. Income tax ~~benefit~~expense was ~~near zero (effective tax benefit rate less than 0.1%), compared to an income tax benefit of $2.2~~$2.1 million (effective tax ~~benefit~~ rate of ~~12.7%~~40.0%) infor the ~~prior year quarter.~~first quarter of fiscal 2024 compared to $7.0 million (effective tax rate of 27.8%) for the first quarter of fiscal 2023. We record tax expense based ~~upon~~on actual results versus a forecasted tax rate because of the volatility in our international operations that span numerous tax jurisdictions. The higher effective tax ~~benefit~~ rate ~~for~~in the ~~third~~first quarter of fiscal ~~2022~~2024 was attributed ~~largely~~ to ~~a non-recurring tax benefit of $2.6 million from~~lower pre-tax income globally when compared to the ~~dissolution of the Company’s French entity and a tax benefit of $4.9 million from the release of a valuation allowance in a specific European entity. The effective tax benefit rate for the third~~first quarter of fiscal ~~2023 was attributed largely~~2023. We incurred pre-tax losses in various foreign entities where we could not recognize income tax benefits as a result of the required valuation allowances. This lower global pre-tax income causes the effective tax rate to aincrease because the permanent GAAP to tax ~~benefit of $1.9 million from~~differences are measured against the ~~release of a valuation allowance in two European entities.~~lower base amount.

The Company recognized a tax benefit of approximately $0.2 million and ~~$0.5~~$0.6 million ~~for the three months ended February 25, 2023 and February 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”). during the three months ended August 26, 2023 and August 27, 2022, respectively.

Periodically, we review the components of both book and taxable income to prepare the tax provision. There can be no assurance that our effective tax rate will remain constant in the future because of the lower benefit from the U.S. statutory rate for losses in certain foreign jurisdictions, the limitation on the benefit for losses in jurisdictions in which a valuation allowance for operating loss carryforwards has previously been established, and the unpredictability of timing and the amount of disqualifying dispositions of certain stock options.

Given the current earnings and anticipated future earnings of some of the Company’s foreign locations, we believe there is a reasonable possibility that, within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that the valuation allowance on the deferred tax assets of certain foreign entities will no longer be needed. Releasing the valuation allowance would result in the recognition of previously unrecognized deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually achieve.

Comparability of Quarterly Results. Our quarterly results have fluctuated in the past and we believe they will continue to do so in the future. Certain factors that could affect our quarterly operating results are described in Part I, Item 1A of our Fiscal Year ~~2022~~2023 Form 10-K and our other public filings made with the SEC. Due to these and other factors, we believe quarter-to-quarter comparisons of our results of operations may not be meaningful indicators of future performance.

~~Consolidated Operating Results – Nine Months Ended February 25, 2023 Compared to Nine Months Ended February 26, 2022~~

~~Revenue.~~ ~~Revenue increased by $3.2 million, or 0.5%, to $591.2 million for the nine months ended February 25, 2023 compared to $588.0 million for the nine months ended February 26, 2022. Excluding revenue from~~ ~~taskforce~~ (~~$0.2 million and $19.9 million of revenue contributed by~~ ~~taskforce~~ ~~during the first three quarters of fiscal 2023 and 2022, respectively),~~ revenue in the first three quarters of fiscal 2023 increased by 4.0% compared to the first three quarters of fiscal 2022, or 5.8% on a same-day constant currency basis. Billable hours and average bill rate for the nine months ended February 25, 2023, excluding ~~taskforce, increased by 1.9% and 2.4% (4.0% constant currency), respectively.~~

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

Nine Months Ended
February 25,
% of
February 26,
% of
2023
Revenue
2022
Revenue
(Unaudited)
(Unaudited)
North America
$
519,994
88.0
%
$
492,602
83.8
%
Europe
31,752
5.3
56,642
9.6
Asia Pacific
39,448
6.7
38,743
6.6
Total consolidated revenue
$
591,194
100.0
%
$
587,987
100.0
%

Revenue grew in North America during the nine months ended February 25, 2023 compared to the same period in fiscal 2022 by 5.6%, or 5.5% on a same-day constant currency basis. We benefited from healthy demand for our services through the first half of fiscal 2023 while the demand environment has softened in the third quarter due to the overall slowdown in the macro economy. Overall, demand from our Strategic Client Accounts has remained relatively stable during the first three quarters of the current fiscal year. Revenues from our Strategic Client Accounts in North America grew 7.4% during the first nine months of fiscal 2023 compared to the first nine months of fiscal 2022. We continue to make strides in improving our bill rates during fiscal 2023. Average bill rates in North America on a constant currency basis improved by 5.0% during the first nine months of fiscal 2023. The combination of both volume and pricing improvement resulted in revenue growth over the same prior fiscal year period.

European revenue decreased 43.9%, or 35.2% on a same-day constant currency basis, during the nine months ended February 25, 2023 compared to the nine months ended February 26, 2022. Excluding the impact of the ~~taskforce~~ divestiture, revenue in Europe decreased 14.2%, or 0.8% on a same-day constant currency basis. The decline in Europe’s revenue was primarily the result of delayed client buying patterns throughout the current fiscal year due to uncertainties in the macro environment in the European region.

Asia Pacific revenue grew 1.8%, or 15.2% increase on a same-day constant currency basis, during the nine months ended February 25, 2023 compared to the nine months ended February 26, 2022. The growth in Asia Pacific revenue was primarily driven by healthy demand from our Strategic Client Accounts, particularly in the southeast Asia region. Revenues from our Strategic Client Accounts in Asia Pacific grew 16.6% compared to the first nine months of fiscal 2022. Average bill rates in Asia Pacific on a constant currency basis improved by 4.1% during the first nine months of fiscal 2023. The combination of both volume and pricing improvement resulted in revenue growth over the same prior fiscal year period.

~~Direct Cost of Services~~. Direct cost of services decreased $7.2 million, or 2.0%, to $353.8 million for the nine months ended February 25, 2023 from $361.0 million for the nine months ended February 26, 2022. The decrease in direct cost of services year over year was primarily attributable to a 3.2% decrease (1.6% decrease on a constant currency basis) in average pay rate in the first nine months of fiscal 2023 compared to the first nine months of fiscal 2022. The decrease in average pay rate was largely attributable to the divesture of ~~taskforce, that has historically carried higher pay rates. Billable hours were relatively consistent (increased by 1.9% excluding~~ ~~taskforce) in the first nine months of fiscal 2023 compared to the first nine months of fiscal 2022.~~

Direct cost of services as a percentage of revenue was 59.8% for the nine months ended February 25, 2023 compared to 61.4% for the nine months ended February 26, 2022. The decreased percentage compared to the prior year was primarily attributable to an improvement of 200 basis points in the overall pay/bill ratio. This favorable impact was partially offset by an increase in employee-related benefits, primarily in self-insured medical costs and holiday pay.

~~Selling, General and Administrative Expenses~~. ~~SG&A was $172.3 million, or 29.2% of revenue, for the nine months ended February 25, 2023 compared to $165.4 million, or 28.1% of revenue, for the nine months ended February 26, 2022.~~ The $6.9 million increase in SG&A year-over-year was primarily attributed to an increase of $6.3 million in management compensation and benefits, an increase of $3.8 million in technology transformation costs, a $2.1 million increase in business and travel expenses to support business development activities, a $1.5 million increase in stock-based compensation expense, $1.3 million increase in computer software costs, an increase of $0.6 million in bad debt expenses, an increase of $0.5 million resulting from the adverse effect of changes in foreign currency exchange rates, and a $1.6 million increase in all other general and administration expenses to support the business. These incremental costs were partially offset by lower bonus and commissions of $9.0 million due to more moderate growth in the business, and a decrease in occupancy costs of $1.8 million from real estate footprint reduction.

~~Goodwill Impairment.~~ ~~The drivers for the nine-month goodwill impairment are consistent with the three-month period.~~

~~Restructuring Costs.We substantially completed our Restructuring Plans in fiscal 2021.~~ Restructuring costs, including real estate exit costs and adjustments to employee termination costs, associated with the restructuring activities, were ($0.4) million and $0.8 million for the nine months ended February 25, 2023 and February 26, 2022, respectively.

~~Amortization and Depreciation Expense.~~ Amortization expense was $3.7 million and $3.6 million in the first nine months of fiscal 2023 and fiscal 2022, respectively. Depreciation expense was $2.7 million for both the first nine months of fiscal 2023 and fiscal 2022.

~~Income Taxes.~~ Income tax expense was $12.9 million (effective tax rate of 23.2%) for the nine months ended February 25, 2023 compared to $8.6 million (effective tax rate of 15.5%) for the nine months ended February 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 effective tax rate for the first nine months of fiscal 2022 was attributed largely to a non-recurring tax benefit of $2.6 million from the dissolution of the Company’s French entity and a tax benefit of $4.9 million from the release of a valuation allowance in a specific European entity. The effective tax rate for the first nine months of fiscal 2023 was attributed largely to a tax benefit of $1.9 million from the release of a valuation allowance in two European entities.

The Company recognized a tax benefit of approximately $2.0 million and $1.3 million for the first three quarters of fiscal 2023 and fiscal 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 ESPP.

Operating Results of Segment

On May 31, 2022, ~~the Company~~we divested taskforce; refer to Note 2 – Summary of Significant Accounting Policies and Note 4 – Dispositions in the Notes to Consolidated Financial Statements for further information. Since the second quarter of fiscal 2021, ~~and prior to the divestment,~~ the business operated by taskforce, 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.

Effective May 31, 2022, the Company’s operating segments consist of ~~RGP and Sitrick beginning with~~ the ~~reporting period for the three and nine months ended February 25, 2023.~~following:

RGP – a global consulting firm focused on project execution services that power clients’ operational needs and change initiatives utilizing on-demand, experienced and diverse talent; and

RGP is the Company’s only operating segment that meets the quantitative threshold of a reportable segment. Sitrick does not individually meet the quantitative thresholds to qualify as a reportable segment. Therefore, Sitrick is disclosed in Other Segments. Prior-period comparative segment information was not restated as a result of the divestiture of taskforce 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.

The following table presents our current operating results by segment for the three ~~and nine~~ months ended ~~February 25,~~August 26, 2023 and ~~February 26,~~August 27, 2022, respectively (in thousands, except percentages).


	Three Months Ended								Nine Months Ended								Three Months Ended
	February 25,				February 26,				February 25,				February 26,				August 26,				August 27,
	2023				2022				2023				2022				2023				2022
Revenue:	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
RGP	$	184,270	98.7	%	$	195,251	95.4	%	$	582,849	98.6	%	$	557,584	94.8	%	$	167,504	98.4	%	$	200,995	98.5	%
Other Segments (1)		2,507	1.3			9,358	4.6			8,345	1.4			30,403	5.2			2,665	1.6			3,067	1.5
Total revenue	$	186,777	100.0	%	$	204,609	100.0	%	$	591,194	100.0	%	$	587,987	100.0	%	$	170,169	100.0	%	$	204,062	100.0	%

Adjusted EBITDA:
RGP	$	25,320	152.4	%	$	30,656	136.4	%	$	101,331	131.7	%	$	91,833	131.6	%	$	20,798	180.1	%	$	38,347	124.9	%
Other Segments (1)		113	0.7			579	2.6			761	1.0			2,817	4.0			71	0.6			316	1.0
Reconciling items (2)		(8,817)	(53.1)			(8,766)	(39.0)			(25,135)	(32.7)			(24,881)	(35.6)			(9,323)	(80.7)			(7,953)	(25.9)
Total Adjusted EBITDA (3)	$	16,616	100.0	%	$	22,469	100.0	%	$	76,957	100.0	%	$	69,769	100.0	%	$	11,546	100.0	%	$	30,710	100.0	%

(3) A reconciliation of the Company’s net income to Adjusted EBITDA on a consolidated basis is presented above under “Non-GAAP Financial Measures.”

Revenue by Segment

RGP – RGP revenue decreased ~~$11.0~~$33.5 million, or ~~5.6%~~16.7%, in the ~~third~~first quarter of fiscal 2024 compared to the first quarter of fiscal 2023, ~~compared to the third quarter of fiscal 2022,~~ primarily as a result of a ~~7.4%~~14.6% decrease in billable hours ~~that was partially offset by the effect of~~and a 2.4% ~~increase~~decrease in ~~the~~ average bill rate from the prior year quarter, as discussed in the consolidated operating results discussion above. For the first nine months of fiscal 2023, RGP revenue increased $25.3 million, or 4.5%, to $582.8 million compared to $557.6 million for the first nine months of fiscal 2022, primarily as a result of a 3.3% increase in average bill rate and 2.0% increase in billable hours year over year. Revenue from RGP represents more than ~~90%~~98% of total consolidated revenue and generally reflects the overall consolidated revenue trend.

The number of consultants on assignment under the RGP segment as of ~~February 25,~~August 26, 2023 was ~~3,149~~2,871 compared to ~~3,328~~3,369 as of ~~February 26,~~August 27, 2022.

Other Segments – Other Segments’ revenue for the ~~third~~first fiscal quarter of ~~fiscal 2023 decreased $6.9~~2024 declined by $0.4 million to ~~$2.5~~$2.7 million, compared to the ~~third~~first quarter of fiscal ~~2022.~~2023. The revenue ~~decrease~~decline is ~~primarily~~ due to the ~~$6.7~~$0.2 million decline in revenue as a result of the divestiture of taskforce on May 31, 2022 and a $0.2 million decline in Sitrick’s revenue for the ~~third~~first quarter of ~~2023~~2024 compared to the ~~third~~first quarter of fiscal 2022. Sitrick continued to be affected by the lingering impact of the Pandemic on the court system resulting in delays in court proceedings and more settlements, hindering leads for revenue generation in the business. For the first nine months of fiscal 2023, revenue from Other Segments decreased $22.1 million, or 72.6%, to $8.3 million from $30.4 million for the first three quarters of fiscal 2022, primarily as a result of a $19.7 million decline in revenue from the divestiture of ~~taskforce~~ ~~in the current year and a $2.4 million decline in Sitrick revenue.~~2023.

The number of consultants on assignment under Other Segments as of ~~February 25,~~August 26, 2023 was 1514 compared to ~~117~~17 as of ~~February 26,~~August27, 2022. ~~The decrease was related to the divestiture of~~ ~~taskforce~~.

Adjusted EBITDA by Segment

RGP – RGP’s Adjusted EBITDA decreased ~~$5.3~~$17.5 million, or ~~17.4%~~45.8%, ~~to $25.3 million for~~in the ~~third~~first quarter of fiscal ~~2023,~~2024, compared to ~~$30.7 million for~~ the ~~third~~first quarter of fiscal ~~2022.~~2023. Compared to the prior year quarter, revenue decreased ~~$11.0~~$33.5 million, ~~for the third quarter of fiscal 2023~~ which was partially offset by ~~a $7.5 million~~the decrease in the related cost of ~~services.~~ ~~In addition,~~services of $17.3 million. SG&A costs attributed to RGP increased ~~$1.9~~$1.0 million ~~for~~in the ~~third~~first quarter of fiscal 2024

as compared to the first quarter of fiscal 2023 ~~as compared to the third quarter fiscal 2022~~ primarily due to ~~the~~a $1.6 million increase in management compensation expense ~~of $2.5 million partially~~ as a result of employee compensation adjustments to remain competitive in the current labor ~~market;~~market, a ~~$0.8~~$1.2 million increase in computer software and ~~consulting costs; an~~certain professional services fees, a $0.2 million increase ~~of $0.6 million~~ in ~~business~~marketing expense, and ~~travel expenses to support go-to-market activities; and a $0.9~~$0.2 million increase in all other general and administration ~~expenses. These cost increases were~~expenses, partially offset by ~~reductions~~a $1.9 million reduction in ~~bonus~~bonuses and commissions ~~of $2.6 million~~ as a result of ~~more moderate business growth than anticipated~~lower revenue and profitability achievement compared to the incentive targets, and a ~~decrease in occupancy costs of~~ $0.3 million reduction in recruiting expenses.~~from real estate footprint reduction~~. For ~~the third quarter of~~ fiscal ~~2023,~~2024, the material costs and expenses attributable to the RGP segment that are not included in computing the segment measure of Adjusted EBITDA included depreciation and amortization expenses of $2.2 million and stock-based compensation expense of $2.3 ~~million and technology transformation costs of $1.7~~ million.

RGP’s Adjusted EBITDA increased $9.5 million, or 10.3%, to $101.3 million for the first nine months of fiscal 2023, compared to $91.8 million in the first three quarters of fiscal 2022. The increase was primarily attributable to the $25.3 million increase in revenue ~~for the first nine months of fiscal 2023, which was partially offset by an in~~crease in the cost of services by $8.1 million. Additionally, SG&A costs attributed to RGP increased $7.4 million for the first nine months of fiscal 2023 as compared to the first nine months of fiscal 2022 primarily due to the increase in management compensation of $6.5 million partially as a result of employee compensation adjustments to remain competitive in the current labor market; a $1.9 million increase in business and travel expenses; a $2.1 million increase in computer software and consulting costs; a $0.8 million increase in recruiting expenses; and a $2.3 million increase in all other general and administration expenses. These cost increases ~~were partially offset by reductions in bonuses and commissions of $5.1 million as a result~~ ~~of more moderate business growth than anticipated~~ ~~and a decrease in occupancy costs of $1.1 million~~ ~~from real estate footprint reduction~~. For the first three quarters of fiscal 2023, the material costs and expenses attributable to the RGP segment that are not included in computing the segment measure of Adjusted EBITDA included depreciation and amortization expenses of $6.3 million and stock-based compensation expense of $6.6 million and technology transformation costs of $4.5 million.

The trend in revenue, cost of services and other costs and expenses at RGP compared to the prior year period is generally consistent with those at the consolidated level, as discussed above, with the exception that the SG&A used to derive segment Adjusted EBITDA does not include certain unallocated corporate administrative costs.

Other Segments – Other Segments’ Adjusted EBITDA declined ~~$0.5~~$0.2 million ~~or 80.7%, for~~to $0.1 million in the ~~third~~first quarter of fiscal ~~2023~~2024 compared to the ~~third~~first quarter of fiscal ~~2022.~~ ~~The decline was primarily driven by a $6.9 million decrease in revenue due to the divestiture of~~ ~~taskforce~~ and slow business recovery in Sitrick from the Pandemic, which is partially offset by a $5.1 million decrease in the cost of services. In addition, management compensation decreased by $0.4 million, and bonus and commissions decreased by $0.4 million, which are primarily attributed to the divestiture of ~~taskforce~~.2023. For the ~~third~~first quarter of fiscal ~~2023,~~2024, the material costs and expenses attributable to the Other Segments that are not included in computing the segment measure of Adjusted EBITDA included depreciation and amortization expenses of less than $0.1 million and stock-based compensation expense of $0.3 ~~million and goodwill impairment of $3.0~~ million.

Other Segments’ Adjusted EBITDA declined $2.1 million, or 73.0%, to $0.8 million in the first nine months of fiscal 2023 compared to the same period in fiscal 2022. The decline is attributable to the $22.1 million decrease in revenue due to the divestiture of ~~taskforce~~ ~~at the beginning of fiscal 2023 and slow business recovery in Sitrick from the Pandemic, which is partially offset by a $15.3 million decrease in the cost of services.~~ ~~In addition, management compensation decreased by $2.4 million, bonus and commissions decreased by $1.4 million, and occupancy costs were reduced by $0.6 million, which are primarily~~ ~~attributed to the divestiture of~~ ~~taskforce~~. For the first three quarters of fiscal 2023, the material costs and expenses attributable to the Other Segments that are not included in computing the segment measure of Adjusted EBITDA included depreciation and amortization expenses of $0.1 million and stock-based compensation expense of $0.8 million and goodwill impairment of $3.0 million.

Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by operating activities, our $175.0 million senior secured revolving credit facility (as discussed further below) and historically, to a lesser extent, stock option exercises and ESPP purchases. OnDuring the three months ended August 26, 2023, we generated negative cash flow from operations. However, on an annual basis, we have generated positive cash flows from operations ~~since inception.~~for over two decades. Our ability to generate positive cash flows from operations in the future will depend, at least in part, on global economic conditions and our ability to remain resilient during periods of deteriorating macroeconomic conditions and any economic downturns. As of ~~February 25,~~August 26, 2023,, we had ~~$103.9~~$112.6 million of cash and cash equivalents, including ~~$45.7~~$44.0 million held in international operations.

On November 12, 2021, the Company and Resources Connection LLC, as borrowers, and all of the Company’s domestic subsidiaries, as guarantors, entered into a ~~new~~ credit agreement with the ~~lenders that are~~lenders’ party thereto and Bank of America, N.A. as administrative agent for the lenders (the ~~“New Credit~~“Credit Agreement”)~~, and concurrently terminated the Previous Credit Facility.~~. The ~~New~~ Credit Agreement provides for a $175.0 million senior secured revolving loan (the ~~“New Credit~~“Credit Facility”), which includes a $10.0 million sublimit for the issuance of standby letters of credit and a swingline sublimit of $20.0 million. The ~~New~~ Credit Facility also includes an option to increase the amount of the revolving loan up to an additional $75.0 million, subject to the terms of the ~~New~~ Credit Agreement. The ~~New~~ Credit Facility matures on November 12, 2026. The obligations under the ~~New~~ Credit Facility are secured by substantially all assets of the Company, Resources Connection LLC and all of the Company’s domestic subsidiaries.

~~As of February 25, 2023, we had paid down all the outstanding debt~~Future borrowings under the ~~New Credit Facility. Borrowings under the New~~ Credit Facility bear interest at a rate per annum of either, at the Company’s election, (i) Term SOFR (as defined in the ~~New~~ Credit Agreement) plus a margin ranging from 1.25% to 2.00% or (ii) the Base Rate (as defined in the ~~New~~ Credit Agreement), plus a margin of 0.25% to 1.00% with the applicable margin depending on the Company’s consolidated leverage ratio. In addition, the Company pays an unused commitment fee on the average daily unused portion of the ~~New~~ Credit Facility, which ranges from 0.20% to 0.30% depending onupon the Company’s consolidated leverage ratio. As of August 26, 2023, we had no debt outstanding under the Credit Facility and $174.2 million remaining capacity under the Credit Facility.

The Credit Facility is available for working capital and general corporate purposes, including potential acquisitions, dividend distribution and stock repurchases. Additional information regarding the Credit Facility is included in Note 7 – Long-Term Debt in the Notes to Consolidated Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q.

On November 2, 2022, Resources Global Enterprise Consulting (Beijing) Co., Ltd, (a wholly owned subsidiary of the Company), as borrower, and the Company, as guarantor, entered into a RMB 13.4 million ($1.8 million based on the prevailing exchange on November 2, 2022) revolving credit facility with Bank of America, N.A. (Beijing) as the lender (the “Beijing Revolver”). The Beijing Revolver bears interest at a loan prime rate plus 0.80%. Interest incurred on borrowings will be payable monthly in arrears. As of ~~February 25,~~August 26, 2023, the Company had no ~~borrowings~~debt outstanding under the Beijing Revolver.

The New Credit Facility is available for working capital and general corporate purposes, including potential acquisitions, dividend distribution and stock repurchases. Additional information regarding the Company’s debt is included in Note 7 – ~~Long-Term Debt~~ ~~in the Notes to Consolidated Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q.~~

In addition to cash needs for ongoing business operations, from time to time, we have strategic initiatives that could generate significant additional cash requirements. Our initiative to upgrade our technology platform, as described in “Fiscal ~~2023~~2024 Strategic Focus Areas” above, requires significant investments over multiple years.During fiscal 2023, we refined the deployment roadmap and the estimated amount of the investments required for this multi-year initiative to be in the range of $30.0 million to $33.0 million through the completion of the system implementation. Such costs primarily include software licensing fees, third-party implementation and consulting fees, incremental costs associated with additional internal resources needed on the project and other costs in areas including change management and training. The ~~actual~~exact amount ~~of investment~~ and ~~the~~ timing will depend on a number of variables, including progress made on the implementation. As we proceed through the project, we will continue to evaluate our progress against the implementation plan and assess the impact on our investments, if any. As of August 26, 2023, we capitalized $9.1 million of investments and recorded $1.9 million of expenses in the first quarter of fiscal 2024 relating to these investments. At the end of the first quarter of fiscal 2024, the remaining investments required for this multi-year initiative was estimated to be in the range of $20.0 million to $23.0 million. We expect the majority of the investment will take place in fiscal ~~2023~~2024 and fiscal ~~2024.~~2025. In addition to our technology

transformation initiative, we expect to continue to invest in digital pathways to enhance the experience and touchpoints with our end users, including current and prospective employees (consultants and management employees) and clients. These efforts will require additional cash outlay and could further elevate our capital expenditures in the near term. We believe our current cash, ongoing cash flows from our operations and funding available under our ~~New~~ Credit Facility will provide sufficient funds for these initiatives. As of ~~February 25,~~August 26, 2023, we have non-cancellable purchase obligations totaling ~~$16.1~~$15.9 million, which ~~primarily consists of payments~~are payable as follows pursuant to the licensing arrangements that we have entered into in connection with this initiative: ~~less than $0.1 million due in the fourth quarter of fiscal 2023; $5.0~~$4.9 million due during fiscal 2024; $4.8 million due during fiscal 2025; $3.1 million due during fiscal 2026; ~~and $3.1~~$2.1 million due ~~thereafter.~~

~~We have completed our restructuring initiatives globally~~during fiscal 2027; and do not expect any future cash requirements for these restructuring initiatives. In fiscal 2021, we elected to adopt the payroll taxes deferral option and implement certain tax planning strategies under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act included provisions, among others, allowing deferral of the employer portion of the social security payroll taxes and addressing the carryback of net operating losses (“NOLs”) for specific periods. The previously deferred employer social security payroll taxes totaling $12.61.0 million were paid throughout calendar year 2021 and 2022. As of February 25, 2023, all deferred payroll taxes were paid in full. In addition, as part of our tax planning strategies, we made certain changes related to the capitalization of fixed assets effective for fiscal 2021. This strategy allowed us to carry back the NOLs of fiscal 2021 to fiscal years 2016 to 2018 and allowed us to request refunds for alternative minimum tax (“AMT”) credits for fiscal years 2019 and 2020. We filed for a federal income tax refund in the U.S. for the amount of $34.8 million (before interest) in April 2022. ~~As of February 25, 2023, we have received a refund of~~ ~~$35.5 million (including interest income of $0.7 million).~~due thereafter.

As described under Market Trends and Uncertainties, uncertain macroeconomic conditions and increases in interest rates have created significant uncertainty in the global economy, volatility in the capital markets and recessionary pressures, which have adversely impacted, and may continue to adversely impact, our financial results, operating cash flows and liquidity needs. If we are required to raise additional capital or incur additional indebtedness for our operations or to invest in our business, we can provide no assurances that we would be able to do so on acceptable terms or at all. Our ongoing operations and growth strategy may require us to continue to make investments in critical markets and further expand our internal technology and digital capabilities. In addition, we may consider making strategic acquisitions or initiating additional restructuring initiatives, which could require significant liquidity and adversely impact our financial results due to higher cost of borrowings. WeHowever, we believe that our current cash, ongoing cash flows from our operations and funding available under our ~~New~~ Credit Facility will be adequate to meet our working capital and capital expenditure needs for at least the next 12 months.

Beyond the next 12 months, if we require additional capital resources to grow our business, either organically or through acquisitions, we may seek to sell additional equity securities, increase the use of our ~~New~~ Credit Facility, expand the size of our ~~New~~ Credit Facility or raise additional debt. In addition, if we decide to make additional share repurchases, we may fund these through existing cash balances or the use of our ~~New~~ Credit Facility. The sale of additional equity securities or certain forms of debt financing could result in additional dilution to our stockholders. Our ability to secure additional financing in the future, if needed, will depend on several factors. These include our future profitability and the overall condition of the credit markets. Notwithstanding these considerations, we expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements.

Other than as described herein, there have been no material changes to our material cash requirements, including commitments for capital expenditures, described under the heading “Liquidity and Capital Resources” in Item 7 of Part II of our Fiscal Year ~~2022~~2023 Form 10-K.

Operating Activities

Operating activities for the first ~~nine months~~quarter of fiscal ~~2023 provided~~2024 used cash of ~~$63.9~~$2.2 million compared to ~~$22.7~~$5.3 million of cash ~~provided~~used for the first ~~nine months~~quarter of fiscal ~~2022.~~2023. In the first ~~nine months~~quarter of fiscal ~~2023,~~2024, cash ~~provided by~~used in operations resulted from net income of ~~$42.6~~$3.1 million and non-cash adjustments of ~~$9.3~~$4.5 million. Additionally, net ~~favorable~~unfavorable changes in operating assets and liabilities totaled ~~$12.0~~$9.8 million, primarily consisting of a $26.9 million decrease in income taxes (which included $35.5 million in U.S. federal income tax refunds including interest income); $7.4 million decrease in trade accounts receivable and a $3.8 million increase in accounts payable and other accrued expenses. These favorable changes are partially offset by a $19.4$13.9 million decrease in accrued salaries and related obligations, ~~mainly~~primarily due to the timing of our pay cycle and the payout of the annual incentive ~~compensation~~ during the first ~~nine months~~quarter of fiscal ~~2023;~~2024; a ~~$4.3 million decrease in other liabilities and a $1.4~~$3.0 million increase in other assets ~~attributed~~primarily due to the capitalized ~~cost of implementing our technology transformation.~~implementation costs for hosting arrangements; and a $0.6 million increase in prepaid expenses and other current assets, partially offset by a $5.7 million decrease in trade accounts receivable; a $1.2 million increase in accounts payable and other accrued expenses; and a $0.8 million increase in income taxes payable and other liabilities.

In the first ~~nine months~~quarter of fiscal ~~2022,~~2023, cash provided by operations resulted from net income of ~~$46.6~~$18.1 million and non-cash adjustments of ~~$2.6~~$2.2 million. Additionally, ~~for the first three quarters of fiscal 2022,~~ net unfavorable changes in operating assets and liabilities totaled ~~$26.6~~$25.6 million, primarily consisting of a ~~$36.4~~$24.8 million decrease in accrued salaries and related obligations, primarily due to the timing of our pay cycle and the payout of the annual incentive during the first quarter of fiscal 2023; a $6.1 million increase in trade accounts ~~receivable, mainly attributable to accelerated revenue growth throughout the first three quarters of fiscal 2022, the final Veracity contingent consideration payment, of which $3.7~~receivable; and $3.8 million ~~was categorized as operating (the remaining $3.3~~decrease in other liabilities (which included a $2.7 million settlement of the ~~total $7.0~~previously recorded deposit liability at the completion of the sale of taskforce on May 31, 2022), partially offset by a $7.7 million ~~contingent consideration payment was categorized as financing cash flow) and a $1.0 million increase~~decrease in prepaid income taxes due to the timing of estimated quarterly tax ~~payments,~~ ~~and a $10.5 million decrease in other liabilities~~ ~~partially offset by a $19.9 million increase in~~ ~~accrued salaries and related obligations due to the significant increase in accrued incentive compensation during the first nine months of fiscal year.~~payments.

Investing Activities

Net cash ~~provided by~~used in investing activities was ~~$1.5~~$0.5 million for the first ~~nine months~~quarter of fiscal ~~2023~~2024 compared to ~~the~~ net cash ~~used~~provided of ~~$2.4~~$2.3 million for the first ~~nine months of~~quarter in fiscal ~~2022.~~2023. Net cash ~~provided by~~used in investing activities in the first ~~nine months~~quarter of fiscal 2024 was primarily related to the development of internal-use software and acquisition of property and equipment. Net cash used in investing activities in the first quarter of fiscal 2023 was primarily related to the cash proceeds from the divestiture of taskforce partially offset by the cost incurred for the development of internal-use software and acquisition of property and equipment. ~~Net cash used in investing activities in the first nine months of fiscal 2022 was primarily for the development of internal-use software and acquisition of property and equipment.~~

3628

Financing Activities

Net cash used in financing activities totaled ~~$64.3~~$1.6 million in the first ~~nine months~~quarter of fiscal ~~2023~~2024 compared to ~~$10.4~~$29.1 million in the first ~~nine months~~quarter of fiscal ~~2022.~~2023. Net cash used in financing activities during the first ~~nine months~~quarter of fiscal 2024 consisted of cash dividend payments of $4.7 million and was partially offset by $3.1 million in proceeds received from ESPP share purchases and employee stock option exercises. Net cash used in financing activities of $29.1 million for the first quarter of fiscal 2023 consisted of net repayments on the ~~New~~ Credit Facility of ~~$54.0~~$34.0 million (consisting of ~~$69.0~~$49.0 million of repayments and $15.0 million of proceeds), cash dividend payments of ~~$14.1~~$4.6 million, and ~~$10.5 million to purchase 618,438 shares of common stock on the open market. These uses were~~was partially offset by $14.3 million in proceeds received from ESPP share purchases and employee stock option exercises. Net cash used in financing activities during the first nine months of fiscal 2022 consisted of $19.7 million used for the repurchase of our common stock, cash dividend payments of $14.0 million, the final Veracity contingent consideration payment, of which $3.3 million was categorized as financing (the remaining $3.7 million of the total $7.0 million final Veracity contingent consideration payment was categorized as operating), and the Expertence contingent consideration payment of $0.3 million. These uses were partially offset by $10.4 million of net borrowing under the New Credit Facility (consisting of $73.4 million of proceeds and $63.0 million of repayment), and $16.5$9.5 million in proceeds received from ESPP share purchases and employee stock option exercises.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk. We are primarily exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the market values of our cash and cash equivalents and our borrowings under the ~~New~~ Credit Facility that bear interest at a variable market rate.

As of ~~February 25,~~August 26, 2023, we had approximately ~~$103.9~~$112.6 million of cash and cash equivalents. The earnings on cash and cash equivalents are subject to changes in interest rates; however, assuming a constant balance available for investment, a 10% decline in interest rates would reduce our interest income but would not have a material impact on our consolidated financial position or results of operations.

As of ~~February 25,~~August 26, 2023, we had no ~~borrowings~~outstanding debt under our ~~New~~ Credit Facility. We ~~may be~~are exposed to interest rate risk related to fluctuations in the term SOFR ~~rate and, to a lesser extent, the loan prime rate on the Beijing Revolver related to any outstanding debt.~~rate. See “Sources and Uses of Liquidity” above and Note 7 – Long-Term Debt in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion about the interest rate on our ~~New~~ Credit Facility ~~and the Beijing Revolver~~. To the extent that there is a significant increase in the level of borrowings, a sharp rise in interest rate could have a material impact on our consolidated financial position or results of operations.

Foreign Currency Exchange Rate Risk. For the ~~nine~~three months ended ~~February 25,~~August 26, 2023, approximately ~~14.1%~~17.2% of our ~~revenues were~~revenue was generated outside of the U.S. As a result, our operating results are subject to fluctuations in the exchange rates of foreign currencies in relation to the U.S. dollar. ~~Revenues~~Revenue and expenses denominated in foreign currencies are translated into U.S. dollars at the monthly average exchange rates prevailing during the period. Thus, as the value of the U.S. dollar fluctuates relative to the currencies in our non-U.S.-based operations, our reported results may vary.

Assets and liabilities of our non-U.S.-based operations are translated into U.S. dollars at the exchange rate effective at the end of each monthly reporting period. Approximately ~~56.1%~~60.9% of our balances of cash and cash equivalents as of ~~February 25,~~August 26, 2023 were denominated in U.S. dollars. The remaining amount of approximately ~~43.9%~~39.1% was comprised primarily of cash balances translated from Euros, British Pound Sterling, Japanese Yen, Canadian Dollar, Chinese Yuan, Indian Rupee, and Mexican Pesos. This compares to approximately 56.9% of our cash and cash equivalents balances as of May 27, 2023 that were denominated in U.S. dollars and approximately 43.1% that were comprised primarily of cash balances translated from Euros, Japanese Yen, Mexican Pesos, Chinese Yuan, Canadian Dollar, Indian Rupee and British Pound Sterling. The difference resulting from the translation in each period of assets and liabilities of our non-U.S.-based operations is recorded as a component of stockholders’ equity in accumulated other comprehensive income or loss.

Although we monitor our exposure to foreign currency fluctuations, we do not currently use financial hedges to mitigate risks associated with foreign currency fluctuations including in a limited number of circumstances when we may be asked to transact with our client in one currency but are obligated to pay our consultants in another currency. Our foreign entities typically transact with clients and consultants in their local currencies and generate enough operating cash flows to fund their own operations. We believe our economic exposure to exchange rate fluctuations has not been material. However, we cannot provide assurance that exchange rate fluctuations will not adversely affect our financial results in the future.

ITEM 4. CONTROLS AND PROCEDURES.

As required by Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) as of ~~February 25,~~August 26, 2023. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~February 25,~~August 26, 2023. There has been no change in the Company’s internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the Exchange Act, during the fiscal quarter ended ~~February 25,~~August 26, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

3830

PART II—OTHER INFORMATION

ITEM 1A. RISK FACTORS.

~~Other than as set forth below, there~~There have been no material changes in our risk factors from those disclosed in Part 1, Item 1A of our Fiscal Year ~~2022~~2023 Form 10-K, which was filed with the SEC on July ~~28, 2022.~~25, 2023. See “Risk Factors” in Item 1A of Part I of such Fiscal Year ~~2022~~2023 Form 10-K for a complete description of the material risks we face.

~~Bank failures or other events affecting financial institutions could adversely affect our and our clients’ liquidity and financial performance.~~

We regularly maintain domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks, which exceed the FDIC insurance limits. We also maintain cash deposits in foreign banks where we operate, some of which are not insured or are only partially insured by the FDIC or other similar agencies. The failure of a bank, or events involving limited liquidity, defaults, non-performance or other adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, or concerns or rumors about such events, may lead to disruptions in access to our bank deposits or otherwise adversely impact our liquidityITEM 5. and financial performance. There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or applicable foreign government, or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions or by acquisition in the event of a failure or liquidity crisis.OTHER INFORMATION.

Our clients, including those of our clients that are banks, may be similarly adversely affected by any bank failure or other event affecting financial institutions. Any resulting adverse effects to our clients’ liquidity or financial performance could reduce the demand for our services or affect our allowance for doubtful accounts and collectability of accounts receivable. A significant change in the liquidity or financial position of our clients could cause unfavorable trends in receivable collections and cash flows and additional allowances for anticipated losses may be required. These additional allowances could materially affect our future financial results.

In addition, instability, liquidity constraints or other distress in the financial markets, including the effects of bank failures, defaults, non-performance or other adverse developments that affect financial institutions, could impair the ability of one or more of the banks participating in our current or any future credit agreement from honoring their commitments. This could have an adverse effect on our business if we were not able to replace those commitments or to locate other sources of liquidity on acceptable terms.Insider Trading Arrangements

None.

~~ITEM 2.~~ ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~.Recent Restructuring Action

~~The following table provides information about purchases~~On October 2, 2023, we commenced a reduction of our U.S. management and administrative workforce intended to reduce costs and streamline operations. We expect the reduction in force to be substantially completed by the ~~Company~~end of ~~its common stock for the three months ended February 25, 2023. All shares were repurchased pursuant to the July 2015 program as described in footnote~~ ~~(1)~~ ~~below.~~second quarter of fiscal 2024.

Total Number of
Average
Shares
Approximate Dollar
Total
Price
Purchased as
Value of Shares
Number
Paid
Part of Publicly
that May Yet be
of Shares
per
Announced Plans or
Purchased Under
Period
Purchased
Share
Programs (1)
the Plans or Programs
November 27, 2022— December 24, 2022
-
$
-
-
$
60,094,931
December 25, 2022 — January 21, 2023
236,749
$
17.24
236,749
$
56,012,228
January 22, 2023 — February 25, 2023
63,251
$
16.97
63,251
$
54,939,002
Total November 27, 2022 — February 25, 2023
300,000
$
17.19
300,000
$
54,939,002

~~(1) In July 2015, our board~~We expect to incur charges of ~~directors approved a stock repurchase program (the “July 2015 program”), authorizing~~$2.0 million to $2.5 million in connection with the ~~purchase, at~~workforce reduction, which consists primarily of cash charges for one-time employee termination benefits. We expect that substantially all of the ~~discretion~~charges will be recognized and paid during the second quarter of our senior executives, of our common stock for an aggregate dollar limit not to exceed $150 million. Subject to the aggregate dollar limit, the currently authorized stock repurchase program does not have an expiration date. Repurchases under the program may take placefiscal 2024. See Note 14 – Subsequent Event in the ~~open market or~~Notes to Consolidated Financial Statements included in ~~privately negotiated transactions and may be made pursuant to a Rule 10b5-1 plan.~~Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

ITEM 6. EXHIBITS.

The following exhibits are filed with, or incorporated by reference in, this Quarterly Report on Form 10-Q.


Exhibit Number	Description of Document
~~10.1*+~~3.1	Amended and Restated Certificate of Incorporation of Resources Connection, Inc. ~~Directors’ Compensation Policy (Revised January 19, 2023)~~(incorporated by reference to Exhibit 10.21 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2004).
3.2	Third Amended and Restated Bylaws, as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on August 31, 2015).
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*	The following unaudited interim consolidated financial statements from the Company’s Quarterly Report on Form ~~10‑~~10-Q for the fiscal quarter ended ~~February 25,~~August 26, 2023, formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.
104*	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

~~______~~_________

* Filed herewith.

** Furnished herewith.

+~~Indicates a management contract or compensatory plan or arrangement.~~

4031

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	RESOURCES CONNECTION, INC.

Date: ~~April 6,~~October 4, 2023	/s/ KATE W. DUCHENE
	Kate W. Duchene
	President, Chief Executive Officer (Principal Executive Officer)

Date: ~~April 6,~~October 4, 2023	/s/ JENNIFER RYU
	Jennifer Ryu
	Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

4132


	RGP		Other Segments		Total
Balance as of May 28, 2022	$	206,830	$	2,955	$	209,785
Goodwill impairment		-		(2,955)		(2,955)
Impact of foreign currency exchange rate changes		(391)		-		(391)
Balance as of February 25, 2023	$	206,439	$	-	$	206,439


	Number of Options	Weighted-Average Exercise Price
Outstanding at May 28, 2022	3,350	$	16.08
Exercised	(477)		15.48
Forfeited	(28)		17.42
Expired	(36)		16.05
Outstanding at February 25, 2023	2,809	$	16.18
Exercisable at February 25, 2023	2,590	$	16.07
Vested and expected to vest at February 25, 2023 (1)	2,797	$	16.17



				Total Number of
		Average		Shares	Approximate Dollar
	Total	Price		Purchased as	Value of Shares
	Number	Paid		Part of Publicly	that May Yet be
	of Shares	per		Announced Plans or	Purchased Under
Period	Purchased	Share		Programs (1)	the Plans or Programs
November 27, 2022— December 24, 2022	-	$	-	-	$	60,094,931
December 25, 2022 — January 21, 2023	236,749	$	17.24	236,749	$	56,012,228
January 22, 2023 — February 25, 2023	63,251	$	16.97	63,251	$	54,939,002
Total November 27, 2022 — February 25, 2023	300,000	$	17.19	300,000	$	54,939,002