Wednesday, professional service provider Resources Connection Inc. (RECN) reported a swing to loss in the second quarter, hurt by a 36.1% decline in revenues and lower gross margin. Loss for the quarter, as well as revenue were below the analysts' expectations.
The Irvine, California-based company reported a net loss for the second quarter of $1.91 million or $0.04 per share, compared to net income of $9.48 million or $0.21 per share in the year-ago quarter.
On average, nine analysts polled by Thomson Reuters expected the company to earn $0.01 per share for the quarter. Analysts estimates typically exclude special items.
Revenues for the quarter decreased 36.1% to $121.53 million from $190.23 million in the prior-year quarter. Eight analysts had a revenue consensus of $124.06 million for the second quarter.
The decline was primarily due to a 35.0% drop in revenues from the US, as well as a 39.0% drop in revenues from the International market. On a constant dollar basis, revenues from the International market dropped 42.6% from the same quarter last year.
Commenting on the results, Resources Connection's chief operating officer, Tony Cherbak said, "It is gratifying to see sequential improvement in our quarterly revenue. Of particular note is that our weekly revenue experienced the week before Thanksgiving represents an increase of 17.6% from our 'non-holiday' 52 week low of $8.5 million experienced last August."
The company recorded an operating loss of $498 thousand for the quarter, compared to an operating profit of $17.19 million in the same quarter last year, hurt primarily by a decline in gross margin. Gross margin for the quarter declined to 38.1% from 39.0% a year ago.
Selling, general and administrative expenses for the second quarter of fiscal year 2010 were $44.2 million and included about $600 thousand of charges related to the acquisition of business of strategic communications firm Sitrick Brincko Group.
On November 23, the company closed the acquisition of Sitrick Brincko for aggregate initial consideration of approximately $44.7 million, comprising $28.6 million in cash and about 822 thousand shares of restricted stock, plus an earn-out based on the achievement of certain adjusted earnings before interest, income taxes, depreciation and amortization levels over a period of four years from the date of closing.
The company's pre-tax loss for the second quarter was $331 thousand, with provision for income taxes during the second quarter at $1.6 million.
In the sequentially preceding quarter, Resources Connection slipped to a $7.19 million or $0.16 per share loss, compared to a profit of $12.49 million or $0.27 per share in the previous year, mainly due to a 42.9% drop in revenue.
Amongst others in the sector, Accenture plc (ACN) reported a decline in its first quarter profit, hurt badly by a sharp fall in quarterly revenues, reflecting weak performance from almost all its operating segments, amid weakness in the global economy. The Dublin, Ireland-based Accenture reported net income of $444.82 million or $0.67 per share, compared with $479.87 million or $0.74 per share in the prior year quarter.
For the six-month period, the company reported a net loss of $9.10 million or $0.20 per share, compared to net income of $22.00 million or $0.48 per share in the same period last year.
Revenue for the first half of fiscal year 2010 declined to $239.79 million from $397.54 million in the year-ago period.
RECN closed Wednesday's regular trading at $21.65, up $0.19 or 0.89%, on a volume of 0.36 million shares on the Nasdaq. However, the stock lost $0.01 to trade at 21.6468 in after hours. The stock has traded in a broad range of $12.70 - $21.89 for the past 52 weeks, with a 3-month average volume of 0.28 million shares.
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