Why Resource Connection stock is down nearly 12% today

Wednesday was not an ideal day to hold shares of the business advisory services specialist Connection to resources (RGP -11.83%). After releasing quarterly earnings numbers after the market closed on Tuesday, investors strongly sold the news that the company missed the top and bottom.

When the smoke cleared, Resource Connection’s stock price was down nearly 12%, which compared rather unfavorably to the company’s ultimately flat performance. S&P 500 index.

An unimpressive start to fiscal year 2025

The market was certainly concerned about the double-digit decline in Resources Connection’s revenue, not to mention the more dramatic erosion in profitability. In the first quarter of fiscal 2025, the company reported revenue of less than $137 million, down nearly 20% year over year.

Worse, it reversed to a generally accepted accounting principles (GAAP) net loss of more than $5.7 million, from a profit of $3.1 million in the previous quarter. The news was only slightly better on an adjusted basis and per share, where the company broke even. However, in the first quarter of fiscal 2024, it was well in the black at $0.20 per share.

Additionally, Resources Connection’s fundamentals missed analyst consensus estimates. Analysts following the stock were modeling just over $146 million in revenue and adjusted net income of $0.02 per share.

One of the major reasons for the revenue decline was a 33% drop in revenue for its former No. 1 earning segment. 1, in-demand talent, mainly due to over 30% reduction in billable hours. It has now fallen to No. 2, behind consulting activities.

Much to prove

In Resources Connection’s earnings release, management expressed optimism that a recently enacted restructuring program will bear fruit. It reorganized its business segments to, in its words, “better align with changes in its internal management framework and the reporting of financial information that is used to evaluate performance and allocate resources.”

It will have to prove to investors soon that the move can trigger growth from above and below.