Good day, ladies and gentlemen and thank you for your patience. You have joined the Resources Global Professionals Fiscal 2017 Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference maybe recorded. I would now like to turn the call over to your host, Interim General Counsel, Ms. Alice Washington. Ma’am, you may begin.

Thank you, operator. Good afternoon, everyone and thank you for participating today. Joining me on this call today are Kate Duchene, our Chief Executive Officer and Herb Mueller, our Chief Financial Officer. During this call, we will be providing you with comments on our results for the second quarter of fiscal year 2017. By now you should have a copy of today’s press release. If you need a copy and are unable to access the copy on our website, please call Patricia Marquez at 714-430-6314 and she will assist you. Before introducing Kate, I would like to read an important announcement about certain statements we may make during this call. Specifically, we may 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 Form 10-K report for the year ended May 28, 2016 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 during this call. I will now turn the call over to Kate Duchene.

Thank you, Alice. Happy New Year everyone and thank you for joining us today. Welcome to Resources’ second quarter conference call for fiscal year 2017. I would like to start this call with some overall commentary about events during the quarter and then I will turn the call over to Herb Mueller, our Chief Financial Officer to review our business performance in detail. Let me start by sharing how honored I am to have received the permanent appointment as President and CEO of Resources about two weeks ago. I appreciate the Board’s confidence in me, and I am humbled to lead an organization of this caliber. I have worked hard for it and believed in this company for over 17 years. I have worked on many aspects of the business over that time period and have had the great privilege to work with colleagues all over the world. When I joined the company, we were a little over $100 million in annual revenue focused on interim high level staffing needs of our client base, almost exclusively in the United States. We had 26 offices and approximately 1,400 employees. Today, we are approaching $600 million in annual revenues serving clients in 20 countries with over 3,400 employees. I believe in our people and our business model now more than ever. We fill a unique niche in the consulting space as a premier project execution firm. Given the pace of regulatory change, M&A activity, digital transformation, and globalization impacting our client base, our business model remains on trend. Our clients need access to exceptional talent that is agile, experienced, and focused. They also want a services partner that can deliver solutions in a value-oriented way. The market opportunity ahead for Resources continues to be robust. To deliver on such opportunity, however, we…

Thank you, Kate. Total revenue for the second quarter of fiscal 2017 was $147.6 million, a 2.2% decrease from the comparable quarter a year ago. Sequentially, however, revenue was up 2.9%. On a constant currency basis, revenue decreased 1.8% quarter-over-quarter and increased 3.3% sequentially. Our second quarter gross margin was 38.3%, representing a 70 basis point decrease from the prior year. SG&A expenses of $46.1 million compared to $43.2 million in the second fiscal quarter a year ago. However, SG&A in the current quarter included $1.5 million of severance costs related to the departure of a senior executive. For the quarter, our pre-tax income was $9.6 million based on an effective tax rate of approximately 41%. Our GAAP net income was $5.7 million or $0.16 per share. On a pro forma basis excluding the severance mentioned above, net income would have been $0.19 per share. In quarter two, adjusted EBITDA was $12.3 million or 8.3% of revenue compared to $17.1 million or 11.3% of revenue in the year ago quarter. As we reported in October, weekly revenue during the five weeks of the second quarter totaled $55.8 million during the 5-week period where weekly revenues averaged $11.2 million. During the final eight weeks of the quarter, average weekly revenues were $11.5 million per week including Thanksgiving week. Without the Thanksgiving week, the average was $12 million. Now, let’s discuss some of the highlights of our revenues geographically. For the second quarter, revenues in the U.S. were $117.6 million, a decrease of 4% quarter-over-quarter and an increase of 1.7% sequentially. For the second quarter, total revenues internationally were $29.9 million versus $28.3 million in the second quarter a year ago, an increase of 5.5% quarter-over-quarter or 7.6% on a constant currency basis and an increase of 7.8% sequentially, 9.9% on constant…

Thank you, Herb. As we embark on the new calendar year, we are all focused on driving growth and working hard to accelerate the productivity of the business development and subject matter expertise investments we have made. As I mentioned previously, we are evolving the business to respond to the solution demands of our clients. We believe that second assessments will provide positive return for us in the long-term. For example, during the quarter we learned that we were appointed to be the internal audit partner for a global consumer products company for a 3-year term. This 3-year engagement is a multimillion dollar deal for resources and was procured by packaging our talent and solutions together to deliver an end-to-end service for the clients. In winning this work, we competed against three of the big four firms. Our value proposition and our customized global client service and delivery approach provided a compelling solution to the clients. We are constantly proposing similar package solutions in the internal audit space to several other global firms. Let me now share some additional statistics which we believe reflect the continuing health and strength of our core business. Client continuity remains outstanding. During our second quarter, we served all of our top 50 clients from fiscal 2016 and 48 of the 50 from 2015. In fiscal 2017, we have 261 clients for whom we provide services exceeding $500,000 in fees on a run-rate basis, up from 243 in the first half of fiscal 2016. In addition, our top 50 clients represented 38.1% of total revenues, while 50% of our revenues came from 92 clients. Our loyal client following is reflective of our client service approach and the talent and quality of the work performed by our consultants. Our largest client for the quarter was approximately…

Thank you, ma’am. [Operator Instructions] Our first question comes from the line of Andrew Steinerman of JPMorgan. Your line is open.

Hi, Kate. Congratulations on your new position. I wanted to go over the first new growth agenda bullet when you were talking about more of a solutions approach and providing a point of view in technology. My question is are you still going to be billing on an hourly basis or is this a business model change and are you taking on any assumption of kind of solutions risk?

Great. Well, thanks for the good wishes, Andrew. I know we have known each other for a long time. So, the answer is; no, we are not taking on a material and different risk profile with a solutions practice. We are building up our subject matter expertise in our management consultant bench a little bit in order to provide the quality control and the oversight we need on these projects, but I don’t see a significant shift in how we engage legally with our clients or the risk profile that we are taking on as an organization.

Yes, no, I like that. And then just a little more comment about the technology piece, you said you wanted to add in a technology piece. And I know at times, Resources has had some technology, let’s call it, backbone to its solutions?

Right. So, I don’t see us building a lot internally, but we do need to invest in the right kind of channel partner relationship and to partner with those emerging technology firms that may not have a services component, but would be perfect partner for us, and we have not invested time and attention to-date in that strategy, and I think that’s one that could play out very positively for our organization.

Perfect. And then just to finish it off, you said something right after technology like accelerators something like that, just tell us what you meant by that last piece of your first bullet?

Yes. So, I led the legal services practice, and in a number of those proposals, what we see clients asking for in RFPs are a category of technology accelerators. So, what kind of tools would we recommend as part of our services offering to really provide a more complete solution, that’s what I mean by it, not that we would grow these internally, but that we have enough market knowledge and intelligence to help a client craft a full solution.

Great. That makes a lot of sense. Thank you so much.

You are welcome.

Thank you. Our next question comes from Kevin McVeigh of Deutsche Bank. Your question please.

Great, thanks. Let me add my congratulations as well to you and obviously Herb, as well, settling in. Hey, are there going to be any incremental costs associated with this strategy? And as you think about it longer term, how should we think about it from a revenue perspective as it scales in terms of how big can it become?

Well, Kevin, again thank you for the good wishes. I think Herb and I are settling in to our positions, both being new to these roles. So, this is a balanced approach. We know we need to make some investments. We know that some of our infrastructure is not up to par, and I think salesforce is our first big step to have a global platform where we can really serve our clients most effectively and efficiently by having access to information in real-time across the globe to serve them. So, that’s our first start, but we do have some other investments that we will make, but make in a balanced fashion. We know our SG&A is higher this quarter. It’s something we are keeping our eye on very carefully. But as you work towards short-term results and then long-term value creation strategies, that’s our balance. And Herb and I and the rest of the executive team will be working together very carefully to make sure that we are striking the right balance for the business and keeping all of our constituents in mind.

Right. And some of them may have a stair step impact, for example, as we are investing right now in our management consultant program, the subject matter experts to build up the expertise in some of these areas that we need in order to be able to drive growth. So, you will have the shorter term SG&A impact that we will see over the next couple of quarters, but the belief is – is that will lead to greater revenue and be able to help us there as well.

Got it.

Yes. Let me just add, Kevin, if we are doing this right, let’s take the salesforce tool for example. My firm belief is that should pay for itself quickly as we have better access to information. We know what our global client initiatives are and we can work effectively in all parts of the globe on helping our clients with those initiatives. Right now, our process, we have been very committed to that client service, but it’s been very inefficient with phone calls or e-mails that don’t allow us to move with the speed and the action that we need in our business today.

That was going to be my next question, Kate, just not to get too in depth, but I have always thought the model as kind of an MD-type person running an office that’s got to call into the CFO Controller that they are selling the services into. Does that process change in terms of you have got a dedicated sales force that’s more proactive or is it still the same and those folks just have additional responsibility based on new software that’s going to allow them to be more responsive?

Yes. Kevin, I think it’s both really. I think that’s a good question. I think what we are going to do is really just raise our game here. We are going to still have that one-on-one outreach in markets, but we are also going to have an enterprise-wide focus that may utilize sales automation tools in a way that we haven’t used before and also have an enterprise-wide sales team that’s driving opportunity at different levels in the organization and in different ways. So, I think the short answer is both.

Right. And I will add to that, where we have piloted salesforce, we have seen significant growth in those markets and that’s been primarily adding the capability for them to do better job of tracking their outreach and being able to do it just in that classic model approach in the single markets. What the global implementation will do for us now as Kate mentioned has really enhance the communication so far of Fortune 500 customers that will have lot better understanding of what’s happening with those customers in the different markets.

Got it. And then Herb, I just want to make sure, because I know you would typically give an implied revenue range. It sounds like you gave it through the first five weeks, somewhere around $52 million or so. Is there anyway to kind of quarterize that, just so we get a sense of what that would imply for the quarter?

I think the way to look at it as I mentioned, I think right now we are tracking about 2% behind a year ago. And I think there is a little bit of upside to that.

Got it. Okay, so a range of kind of down 2% to flat, is that a fair way to think about it?

I would think so.

Okay, thank you.

You are welcome.

Thank you. [Operator Instructions] Our next question comes from Mark Marcon of Baird. Your line is open.

Good afternoon and let me add my congratulations, Kate. We have known each other for a long time and nice to see the new position.

Thank you.

With regards to just the revenue trends that you are currently seeing, frequently you end up – you mentioned that things were picking up and frequently you have given us kind of like the weekly color, can you do that for us for the first five weeks of this quarter?

I am going to turn that to Herb.

Right. What we had for first week 12,010,000, second week, 12,071,000, third week 11,934,000, fourth week, 10,090,000, fifth week, 5,829, and so again you get into the Christmas holidays.

Sure. And so, but it sounds like you are seeing some real improvement just from a current perspective in terms of both on the energy side as well as flattening out with regards to the financial services clients and then you have this new project that’s coming on with the consumer packaged goods company. So, is it possible that you could end up doing even better than flat versus a year ago?

It is possible. The momentum is definitely in the right direction. As I mentioned, energy is sequentially up. There is a possibility of a nice upside on financial services as we get into the New Year. As I mentioned, the technical accounting areas, the rev/rec and the lease accounting has increased significantly and we are kicking off and it’s hard to say how much of that will completely impact Q3, because we have got with some of the projects that we closed were getting started now, but at a little lower level as these companies are getting through their audit and then picking up going into our Q4, but there is definitely a lot more bullish signs than bearish.

Great. And you mentioned during the last quarter that you were starting to see these projects pickup with regards to rev/rec and a little bit on the lease accounting side. Can you just give us a little bit more color, because I mean there has been some recent articles that have come out that suggest some companies are still behind and I am trying to balance that opportunity relative to what sounds like a period of new initiatives which can lead to changes in terms of personnel and some stops and starts before things really take off?

Right. And we saw as we mentioned in the last quarter’s call that we are starting to see the momentum. The SEC has become much more vocal lately on asking companies to start disclosing not only in their Q, but on the earnings call, how are they coming on rev/rec. The institutional shareholder services have been telling companies hey, you need to get going on this. So, it’s getting definitely a lot more attention. We ran some metrics comparing this quarter to last quarter and number of proposals that we generated was up 250% over a year ago and the projects that we closed were up 3 times from a year ago. So we are definitely seeing some significant attention and growth there. I mean, it’s definitely on everybody’s radar. You have got a combination of things. You have got some companies that they have been aware of it and they have been trying to do it internally and then realizing that they need outside help and then the clients you have got, some were in the executive offices, they were downplaying the impact and their auditors are finally awaking them to the fact that, hey, there is a lot of work even if you don’t think that this is going to impact you, we still have to really look at your sales contracts and what’s going on and evaluate and do that assessment. So, right now, some of these projects that we are looking at are ranging anywhere from $15,000 to $2 million. So, they are significant and they are really – I am not going to quantify it much more than that at this time, but there is definitely some upside that we haven’t really baked into the – when you look at our forecast mathematically.

Okay, great. And then in terms of the proposals being up 250% and three times the closes, could you just give us some level of magnitude in terms of what that – I mean, is that up 250% from 100 proposals a year ago, 200 proposals a year ago?

No, it’s less than that. I am not going to get into those exact numbers, but it’s enough to be meaningful and it certainly has our attention.

Great. And then can you talk a little bit more about some of the initiatives just in terms of the stair step function when would you fully implement salesforce and how should we think about that from a CapEx perspective?

Yes, great question. That’s going over the course of 2017. We are going to have different phases of it. The initial part is to get out our sales teams up to speed and being able to utilize that to track prospects and work through that and we will be working on that fairly aggressively. I think in the course of the calendar year you could see neighborhood of little over $1 million of capital expenditure related to that. You can see some SG&A impact of perhaps just under $1 million a year for that. However, there is also little bit of offset as we are working through that, but certainly, we are going to have an impact, but again we look at this long and hard. We have been piloting it for several years and have seen the results in our pilots and very excited about what we can do going forward.

Great. And then with regards to the adding some thought leaders and business development folks, how should we think about that in terms of when that would stair step through, are you talking about adding one additional person per office how should we just think about that just in terms of the scope of the investment?

Right. The bulk of it has been made and you are seeing that and that’s what the increase in SG&A that we are going through right now has happened and it’s put us in a position, for example, where we could close the project that the multimillion dollar 3-year project that Kate talked about earlier as well as being able to support some of these rev/rec projects and the data solutions group and again a higher level of service, so that investment is there and it’s poised us for a significant amount of growth that it would support.

Yes, let me just add a little more color there, Mark, for you. This is a process. It doesn’t happen overnight. I give great credit to Tonya to view on the worksheets done with the talent acquisition group to really up our game in terms of the kind of talent that we are bringing in to our organization and the new roles that we are bringing in to the organization, that’s a great start, but once they really then standup our toolkits and I will speak to really our M&A transaction services toolkits. We have a lot of capability templates, tools, methodologies that we can bring to a client engagement in that regard, but a piece of it then is agitating our incumbent management team on those capabilities. And again that doesn’t happen overnight. We have to get materials ready for that internal marketing effort, so it does take some time. I think Herb is right he has made a lot of the hiring to-date. Now, it’s our job and our focus is making those hiring decisions and those investments productive for our business. And we are all focused on that. I think the company is really energized by some change. I can tell you are having done a couple of town hall calls with the employee group. We are ready. We are ready to go. We are ready to try some new activities. We are excited about the future and we are being led by what our clients are asking us for. And I think that’s really critical returning to the core of what our clients want.

That’s great. Super. I will follow-up a little bit more offline. Thanks.

Okay, great.

Thank you. At this time, I would like to turn the call over to Chief Executive Officer, Kate Duchene for any closing remarks. Ma’am?

Yes, thank you operator. We will thank you everyone for your continued support and interest in Resources. We look forward to our next update for the third quarter of 2017. Thanks again.

Thank you, ma’am and thank you, ladies and gentlemen for your participation. That does conclude your program. You may disconnect your lines at this time. Have a wonderful day.