Good day, ladies and gentlemen, and welcome to Resource Global Professionals' Third Quarter Fiscal 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I would like to hand the conference over to Ms. Michelle Gouvion, Senior Legal Counsel for Resources Connection. Ma'am you may begin.

Thank you, operator. Good afternoon, everyone and thank you for participating today. Joining me on this call today are Don Murray, Chairman; Tony Cherbak, Chief Executive Officer; Tracy Stephens, Chief Operating Officer; and Nate Franke, our Chief Financial Officer. During this call, we will be providing you with comments on our results for the third quarter of fiscal year 2015. By now you should have a copy of today's press release. If you need a copy or are unable to access the copy on our website, please call Patricia Marquez at area code 714-430-6314, and she'll fax a copy to you. Before introducing Tony, I'd like to read an important announcement about certain statements that we will be making during today's call. Specifically, we will make forward-looking statements, in other words, statements regarding future events or future financial performance of the company. We wish to caution you that such statements are just predictions and actual events or results may differ materially. We refer you to our 10-K report for the year ended May 31, 2014 for a discussion of some of the risks, uncertainties and other factors such as seasonal and economic conditions that may cause our business, results of operations and financial conditions to differ materially from results of operations and financial conditions expressed or implied by forward-looking statements made today during this call. I'll now turn the call over to Tony Cherbak.

Thanks, Michelle. Good afternoon and welcome to the RGP third quarter conference call. I'm going to start by giving you a brief overview of our third quarter operating results. Total revenue for the third quarter of fiscal 2015 was $146.8 million, a 10.6% increase over the comparable quarter a year ago. It's important to remember that quarter-over-quarter comparisons are impacted by the fact that the Thanksgiving holiday fell in our third quarter last year, but was in our second quarter this year. Adjusting solely from the holiday shift, our pro forma quarter-over-quarter revenue increase was 7.6%. Our revenues for the third quarter were slightly below our expectations at the beginning of the quarter, substantially due to the strengthening of the U.S. dollar against certain foreign currencies, especially the Euro. Sequentially, foreign currency translation reduced our revenues by about $1.6 million. Consequently, if we translated our international revenues using fiscal 2015 second quarter exchange rates, our consolidated revenue for the third quarter would have been $148.4 million. Third quarter gross margin was 37.3%, an increase of 130 basis points from the comparable quarter a year ago. During the third quarter, our SG&A costs were $43.5 million, similar to the second quarter and up about $2 million from the comparable quarter a year ago. As Nate will expand on, our third quarter SG&A was lower than anticipated, primarily resulting from translating expenses denominated in foreign currencies to the strengthening U.S. dollar. During the third quarter, our adjusted EBITDA was $12.9 million, and we used cash in operations of $2.9 million. Additionally, we returned $10.1 million to shareholders during the quarter in the form of share repurchases and dividends. Our pre-tax income on a U.S. GAAP basis was $10.5 million versus $4.9 million a year ago. Based upon an effective tax rate of…

Thanks Tony. As mentioned, revenues for the quarter were $146.8 million, an increase of 10.6% from $132.7 million in the third quarter of fiscal 2014. On a sequential basis, revenues decreased 3.1%. As Tony mentioned, our third quarter revenues are not directly comparable as the prior year quarter did not include the Thanksgiving holiday. We estimate the revenue impact of the Thanksgiving holiday shift was about $4 million. Adjusting solely for this impact, the consolidated quarter-over-quarter revenue increase would be approximately 7.6%. Adjusting further for the holiday shift and currency changes from a year ago, our pro forma quarter-over-quarter revenue increase would have been 9.8%. I’ll now discuss highlights of our revenues geographically. For the third quarter, revenues in the U.S. were $121.3 million, up 17.3% quarter-over-quarter and down 1% sequentially. Adjusting for the previously mentioned shift in the Thanksgiving holiday, on a pro forma basis, our U.S. revenue would have increased by 13.4% quarter-over-quarter. For the third quarter, total revenues internationally were $25.5 million, down 13% quarter-over-quarter and sequentially. International revenue accounted for approximately 17% of total revenues for the quarter, down from 19% in the second quarter. Europe’s third quarter revenues decreased 27.8% quarter-over-quarter and 19.6% sequentially, while the Asia-Pacific region saw third quarter revenues increased 15% quarter-over-quarter and decreased 4.2% sequentially. On both a sequential and quarter-over-quarter basis, the U.S. dollar was stronger against the Euro and Yen. As a result, on a sequential constant currency basis, Europe’s revenue decrease would have been 13.7% and Asia Pacific’s revenue was essentially flat. On a quarter-over-quarter basis, Europe’s revenue decrease would have been 17.1% and Asia Pacific’s revenue would have increased 22.5%. Let me now discuss early revenue trends for the fourth quarter of fiscal 2015. Weekly revenues for the first five weeks of the fourth quarter totaled $58…

Thank you, Nate. We're pleased with the continued improvement in our consolidated operating results. On year-to-date basis, we’ve increased revenue 7.7%, while improving our gross margin by 90 basis points. Additionally, we’ve increased our year-to-date adjusted EBITDA margin by more than 20% from 8.1% a year ago to just about 10% as of the end of the first nine months of fiscal 2015. While the early weeks of the fourth quarter reflect a moderation of our quarter-over-quarter revenue growth we remain bullish on our business through the upcoming year. In the U.S. we believe a portion of this moderation results from Easter occurring earlier this year and therefore the impact of spring break related vacation following two weeks earlier this year than last year. Additionally, a contraction of services in the U.S. based oil and gas industry has reduced current revenues probably by 1% from prior year's level. And during the past several weeks though, we commence revenue recognition assessment projects at three Fortune 100 companies and continue to work on several other engagements. We believe most companies are in the early stages of assessing their FAS business standards. Those that have commenced the assessment and implementation of the new standard have had difficulties from a technical and information system standpoint among other issues. And due to the complexities of implementing the standard, last week the FASB proposed extending the transition period by an additional year. We also continue to see opportunities to assist new and existing clients with their merger, integration of regulatory compliance and data governance initiatives to name a few. So let me share some additional statistics, which we believe reflect the continuing health and strength of our core business. Client continuity is outstanding. During the third quarter, we served all of our top 50 clients from fiscal 2014 and 47 from fiscal 2013. We continue to increase the number of clients and fees exceeding $500,000. Due to the third quarter fiscal 2015, on a run rate basis we have served 237 clients with fees exceeding $500,000 compared to 220 clients in 2014. Our top 50 clients approximated 42% of total revenues and 50% of our revenues came from 76 clients. Our loyal client following is reflective of our client service approach and the quality of the work performed with our consultants. Our largest client for the quarter was approximately 3% of revenues. During the third quarter, 96% of our top 50 clients have used more than one service line. 82% of those top 50 clients have used three or more service lines. So this service line penetration reflects a diversity of our relationships we have within our client's organizations. This concludes our prepared remarks and we’ll be happy to answer your questions at this time.

Thank you. [Operator Instructions] Your first question comes from Jeff Silber from BMO Capital Markets. Your line is open please go ahead.

Thanks so much. I wanted to focus on Europe first. Can you just remind us roughly what Europe is as a percentage of your business?

It’s about 9% right now.

Okay. I’m sorry, thank you so much. And then, I realized the trends have been subpar, but we’re hearing from others that have exposure there, and you're seeing some economic indicators that things seem to be improving a little bit yet we’re not seeing that in your numbers. I just wonder if you can address that?

Tracy, do you want to take it.

Sure, as we stated earlier, improving our performance in Europe is still a real big priority for us, top priority for us. We have many people that are continuing to work hard on this issue on a daily basis. We do have revenue growth year-to-date in certain of our countries in Europe. Currently, we’re focusing a lot in the Netherlands, which is our largest practice currently in Europe and spending a lot of time on improvement in that area. We’re also seeing some good activities out at the U.K. currently that are giving us a real positive trend and possibilities in that area. Additionally, we’ve added some client service people in Europe, and we have a few more in the process and we’re hoping that’s going to help stabilize and strengthen our business development efforts in the future in Europe.

Jeff, as I had talked about in the prepared remarks as well, we’re doing everything that we can to try to help these guys, and we’ve implemented like a new training program over there to kind of take some of the best practices that we have going in some of our top offices in the U.S. and train them on those. And we're trying to take some of our key service line leaders and help them with information management supply chain which they don’t have nearly the experience that we do in those areas and that’s starting to pay off in just a few projects that we saw on the IM side, just recently I think I mentioned seven wins across three different offices. So we’re trying -- we realize that it’s an issue, it is only 9% of our revenues, but it's an important 9% of the revenues, and we just know that it’s, just know that it’s a top priority for us.

Okay, fair enough. And just continuing to focus outside the U.S. you had some real sizable margin expansion -- gross margin expansion internationally. What drove that? Is it a mix shift either geographically or functionally or are you still able to increase gross margins on your existing projects?

Jeff, what I would tell you is, overall we are seeing improvement in bill pay. Obviously, in the revenue numbers that we gave with Asia Pac, the mix of the international business being at a -- leaning towards a greater portion of Asia PAC also has allowed that overall international gross margin expansion, but as I said, when you look at the quarter-over-quarter gross margin increase, substantially all of that is coming from improved bill pay spreads.

Okay, great just a quick numbers question. I’ll turn back in the queue, what should be modeling for capital expenditures in this quarter and any early insight on what your CapEx budget will be for next fiscal year.

Yeah, what I would say is in Q4 we will try planning between 300,000 and 400,000. The very preliminary view for fiscal ’16 is right around $3 million, and that will be somewhat frontloaded in the first half of this year from what we can see now.

Okay, great, thanks so much.

Thank you. Our next question comes from Andrew Steinerman from JPMorgan. Your line is open. Please go ahead.

Good afternoon. Two question, the first one on gross margin, looking at the 150 basis point sequential improvement you’re looking for the fourth quarter to get us to about 38.8, is that a normal lift meaning when you think about payroll taxes, reduction in holiday comp, is that usually about a 150 basis points? I’m trying to get to your point, is the third quarter gross margin improvement that you talked about the bill pay rate spread all sustainable and the variation into the fourth quarter, is that seasonal, is that the best way to think about it?

Well, Andrew, what I would say is, it is -- I think you have -- the increase sequentially comes from one less holiday and then the decline in the impact of the payroll taxes. We started to see improvement on the bill pay in the fourth quarter. We aren’t -- in the numbers I gave you, we aren’t projecting a continued improvement, but I would tell you our people are very focused on continuing to call back the few bucks an hour that we’ve given up over the past few years, and we continue to strive for reporting on an annual basis getting to a 39% GAAP gross margin, and I think we’re going to end the year close to that this year.

Right and then just one quick FX question for the fourth quarter, I didn’t quite hear when you do the $150 million calculation, are you assuming current FX rates go through the end of the quarter?

Yes.

Thank you.

You bet Andrew.

You got it.

Thank you. Our next question comes from Mark Marcon from Robert W. Baird. Your line is open. Please go ahead.

Good afternoon. I was wondering in the U.S., in terms of the year-over-year increase that you’re seeing thus far in the quarter, what would that translate to -- you gave us the overall numbers and you gave it to us on a constant currency basis, but obviously Europe is still a drag. So, just wondering if you could give a little bit of clarity with regards to the U.S. trends, in terms of whether they're sustainable?

Yes, it was 3.6% overall. The U.S. is up about 8.5% in the four weeks, the four non-holiday weeks that we had so far Mark.

Okay. Is there -- are there any meaningful changes, because if I heard you correctly, it was about 13% in the U.S. during the last quarter?

That’s correct, but this year as you know, the Thanksgiving -- the Easter holiday fell a couple of weeks early. We believe that the Spring break holidays also occurred a little bit earlier. So we’re anticipating as we go forward a little bit of an uptick, but we won’t know what that is until the next couple of weeks.

How was it with exclusive of the weeks that included the Spring break holiday and the Easter time period?

Well, what I’m saying is you can’t compare them because this year they occurred earlier. So it’s kind of -- it’s not an apples and apples comparison, if they occurred lately.

I get that. I’m just talking about there were a few weeks where there was absolutely no difference, and that’s where I was referring to?

Yeah Mark, I didn’t -- the way I might look at it is kind of the first week of quarter, which was kind of before Spring break, we were hovering around that $11.9 million, $12 million a week, and then it dropped approximately $3 million in those middle weeks and then we popped $300,000 in that week. The week before Good Friday popped back up to that $11.9 million. So I think that’s really what Tony is saying. When we do the computation, we've taken the average, but there is -- if the normal trends that we believe will occur, we would hope to see a bounce back that’s what I think Tony was describing.

I appreciate that. Thank you and then with regards to the bill rates and the pay rates obviously there is couple of foreign elements that are driving that. If we were just looking at the U.S. how would those look?

If we were looking at just the U.S. they would be up in both cases with a better margin improvement, again on a quarter-over-quarter basis.

Great and can you give us a sense for some of the areas where you’re seeing continuing strength that’s driving that low double-digit growth just in terms of the areas that are really driving that?

Certainly the regulatory compliance is still very strong for us. We’re doing a lot of work in M&A. As we talked about in some of the prepared remarks, we’ve gotten some new revenue recognition assignments, also information management on the integrated governance side has been working well, data privacy and security and business intelligence. So all of those areas have been very, very strong for us.

Great. And then those seven assignments that you ended up winning in their International offices, the new ones, are those sizable or significant or are they just modest changes?

I would say overall they're probably fairly modest, but I think that in information management sometimes you’ll start with a three week assessment and that might turn into something much larger because if you’re assessing like the application of a system, you might then get into more of an implementation effort. So those right now those projects probably range from three weeks to six months. So they’re kind of all over the Board.

Great, thank you.

Thank you. [Operator Instructions] Your next question comes from Kevin McVeigh from Macquarie. Your line is open. Please go ahead.

Great thanks. Hi Tony and Nate, it sounds like oil and gas was about 1% of revenue, did you see any weather related impact in the quarter that you would expect to kind of revert back in Q4?

No Kevin, I would tell you, we looked at that and clearly in several of our East Coast practices they had days here and there where I think people struggled to get to work. I think overall that those hours we’ll work next week and are being worked now. So it wasn’t anything that we would necessarily point to that was a huge impact in the quarter.

Got it. And then just with the M&A environment being what it is, what percentage of the revenue is at today. Is that translating into -- obviously there has been some fairly sizable deal. Is that translating into larger engagements for you folks in that sector or has it been pretty steady?

Well I would tell you we’re seeing more and more activity. I don’t have what I would call a breakdown of revenue and M&A. While the things we do are pretty wide encompassing. In the F&A side, we’ll end up doing a lot of work on the financial statements, pro forma financial statements those types of things, it impacts our IM and change management practices. But we’re seeing an uptick in as Don mentioned the merger integration activity. So these are the post merger activities of bringing systems and policies together and I would say we have a number of very recent announcements that we’re chasing as well. So I think as we see that activity pick up that will be beneficial for us given our Fortune 500 client basis where we’re seeing that activity.

Got it. And then just real quick, in terms of sourcing candidates, has that gotten any more challenging just given the current environment or is there still a fairly sizable pool?

I think our view is there’s a still a very sizable and growing pool I would tell it's similar to what we’ve said in the past. You can have difficulties in certain areas, especially as you get into IM and data security and certain software packages that are probably little less common and perhaps industry specific. But again our operating capabilities are very robust and that’s why I think so many clients use us on a consistent basis as our ability to deliver that specific talent.

Got it. Thank you.

Thank you. We have a follow-up question from Mark Marcon from Robert W. Baird. Your line is open please go ahead.

Just with regards to the European offices of your 10 largest offices in Europe or your eight largest what -- how many are expanding at this point?

Mark, what I would tell you is this probably split down the middle and I think the biggest issue is some of our largest practices are the ones that are seeing the negative growth, but also…

But the U.K. is up right.

What’s that?

The U.K. is up still, right.

Yes the U.K. is growing and that would be an example of a practice that is actually adding people. We’re also adding selected individuals to some of the other offices that are having difficulty in an effort to help them grow. So like the -- we’re seeing a little bit of progress in Sweden. Little bit of progress in the Netherlands as well. So when you look at our three largest practices U.K. doing fairly well. It’s actually up year-to-date on a revenue track. And then the Netherlands and Sweden just recently we’ve added some people and we hope to see some growth in those two practices as well.

And how big is the Netherlands at this point just on an absolute dollar basis?

The Netherlands revenue in Q3 on just a dollar basis was $3.4 million.

Okay, great. Thank you.

Thank you.

Thank you. I'm showing no further questions at this time. I would like to hand the conference back over to Mr. Don Murray for closing remarks.

I’d like to thank you for your continued support and interest in Resources and we look forward to our next update for the yearend of fiscal 2015.