Good day, ladies and gentlemen, and welcome to the Resources Global Professionals' Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instruction will follow at that time [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Alice Washington., General Counsel. 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 communicating on our results for the fourth quarter of fiscal 2017. 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 Web site, please call Patricia Marquez at area code 714-430-6314, and she will assist you. Before introducing Kate, I would like to remind you that we may make forward-looking statements during this call. Such statements regarding future events or future financial performance of the Company are just predictions. Actual events or results may differ materially. Please see 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 condition to differ materially from the results of operations and financial conditions expressed or implied by forward-looking statements made during this call. I'll now turn the call over to Kate Duchene.

Thank you, Alice. Good afternoon, and welcome to Resources' 2017 Fourth Quarter and Year End Conference Call. Here is a quick roadmap for my remarks. First, I will start with an update on our SalesForce implementation. Second, I will give a brief overview of our fourth quarter and year-end operating results. Third, I will report on our progress against the three strategic initiatives we announced at our third quarter earnings call. Fourth, I will outline new actions we have taken to address certain underperforming markets. And fifth, I will close by reflecting on what we're looking forward to in fiscal '18. We are excited about bringing new technology into RGP, both to support our business operations, and our client and consultant experiences. Our first significant move in fiscal '17 to support this priority was the execution of Project Skyrocket, our SalesForce implementation initiative. Project Skyrocket delivered an aligned and defined six-step sales process for use throughout the global organization. It has also driven our global implementation of SalesForce as RGP's customer relationship management tool. I'm pleased to hear today that we have successfully completed our North American implementation on time and on budget, bringing the SalesForce platform to approximately 82% of our operations. By close of business on day one of go live, we had approximately 75% user login and participation in the new system. We are driving a 100% adoption with a disciplined sales management program that will provide greater sales efficiency, accountability, and transparency. Ultimately, this project is all about improving our ability to serve our clients with better information, insights, and ease. We expect to complete the SalesForce implementation across our global business by the end of Q2 fiscal year '18. Now, I will turn to the three key measures in our operating results. Our total revenues…

Thank you, Kate, and good afternoon everyone. I will start by giving detail on our fiscal fourth quarter financial results, and will then discuss the trends we are seeing in the first quarter of fiscal 2018. I'll also give further detail on the financial impacts of the strategic growth initiatives that Kate discussed a little earlier. Starting with an overview of our fourth quarter results, total revenue for the fourth quarter fiscal 2017 was $148.6 million, a 2.6% decrease from the comparable quarter a year ago. Sequentially, revenue was up 3.3%. On a constant currency basis, revenue decreased 1.6% quarter-over-quarter, but increased 3% sequentially. Our fourth quarter gross margin was 39.1%, representing an 80 basis point decrease from the prior year. SG&A expenses were $48.4 million, compared to $44.4 million in the fiscal fourth quarter a year ago. Our net income was $4.4 million, or $0.15 per diluted share. Please keep in mind that without the [RIP] [ph] expense, this would have been $0.20 per share. In Q4, adjusted EBITDA was $11 million, or 7.4% of revenue compared to $17.8 million, or 11.7% of revenue in the year ago quarter. Now, let me discuss some highlights of our revenues geographically. As Kate mentioned, we've seen some improving trends across our international businesses with revenues in Europe and Asia-Pac increasing during the quarter. However, our U.S. performance continues to be below our expectations due to the ongoing weakness primarily in the Tri-State and Chicago areas. As Kate mentioned, we've made leadership changes to address this, and while we do not expect an immediate turnaround we're confident that new leadership will help drive improvement and performance in these geographies. We have already seen improvement in Chicago as well as Houston in the new fiscal year compared to last year. For the fourth…

Thank you, Herb. We are excited and focused on our strategic initiatives. We have already made tangible progress since we outlined our plans last quarter, and look forward to continued improvement in our performance. Before turning to questions, I will review our client continuity statistics for fiscal '17. Client continuity remains strong. During our fourth quarter, we served all of our top 50 clients from fiscal 2016, and 49 of the 50 from 2015. In fiscal 2017, we have 249 clients for whom we've provided services exceeding $500,000 in fees, up from 245 in fiscal 2016. In addition, our top 50 clients represented 37.1% of total revenues, while 50% of our revenues came from 99 clients. Our largest client for the quarter was approximately 2.6% of revenue. Through the fourth quarter, 98% of our top 50 clients have used more than one practice area, and 80% of those top 50 clients have used three or more practice areas. This practice area penetration reflects the diversity of relationships we have within our clients' organizations, and supports the opportunity for growth, especially powered by our new SalesForce tool. That concludes our prepared remarks. And we are now happy to answer any questions you may have.

Thank you. [Operator Instructions] Our first question comes from the line of Ato Garrett from Deutsche Bank. Your line is now open.

Good afternoon. Just about your SG&A forecast of $45 million for the first quarter; I want to confirm, is that inclusive of the $1.3 million on severance charges that you also plan to take in the first quarter?

No, that is not inclusive, so in total, yes.

Then with that, looking at the cost saves from the restructuring charge reported in the fourth quarter, it looks like that's – that you're forecasting $1.7 million in the first quarter. Is that going to come in pretty evenly across the remaining quarters or are you going to see some incremental savings from that $1.3 million you're going to take in the first quarter?

No, that's consistent with the future quarters. So as we mentioned, we're still continuing to look at some other cost saving opportunities.

Okay, great. And then finally, just looking at your SalesForce implementation, so that's going to look like it'll be over in the first half of this coming fiscal year, does that -- any incremental expenses related to that whether its hiring the consulting firm or just implementation itself, is that already baked into your SG&A costs or should we think about that ramping up as they [indiscernible]?

Yes, that is baked into the current estimate. So we'll have the opportunity for that to start ramping down in the second half of the year.

Okay, great. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Andrew Steinerman from J.P. Morgan. Your line is now open.

Hi, this is Michael Chow in for Andrew. Just a couple of quick questions, just in terms of the strategic initiatives, I mean I think you gave some stats on the Strategic Client Program, but I mean that, and even in the mid market opportunity. Is there a way you can help us, I guess, frame the incremental revenue opportunity from those initiatives?

On the Strategic Client Program, we are targeting double-digit growth. As Kate mentioned in the script, that's been running this past year between 7%-7.5% of our revenue. We're targeting that to go up double-digit, so it gives you a rough idea. On the middle market, I don't have that broken out right in front of me right now on what that total amount is; but again it's fairly substantially and probably similar to -- a little bit bigger than the Strategic Client Program, and that we're not projecting double-digit growth there, but we do think we can get mid-to-upper single digits in that area.

Michael, let me just add to that. I think that what we're testing now are some sales practices in this smaller group that we're starting with that should have positive impact as we bring other clients into this program, and learn how to serve these clients consistently across geographies with a lot more information at our fingertips wherever we operate, so I'm optimistic of the impact of this program with the right tools and the right sales discipline can have in the organization. With respect to middle market, that has not been the bulk of our client base, but it's one over the last two years that we've seen positive growth. And I think with some very clear focus and accountability from our newly formed enterprise business development team that we will see continued growth in that marketplace, especially for our solutions practices where we bring a lot of big-four level talent, as I said before, at a price that is unparalleled -- a value that's unparalleled.

Understood, thank you, that's helpful. And then just a quick follow-up on the previous question with the 1.3 in the SG&A charge for first quarter, did you say how much cost savings that that will bring in an ongoing basis or…?

I did not, and we're working through that now.

Okay, got it. Thank you.

Thank you.

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

Hi. Exclusive of the individual market challenges, how would you characterize just the overall level of demand that's out there within the U.S.? Do you think things are a little bit better than they were, say, three months ago just from an overall demand environment, exclusive of your executional issues in the Tri-State and the couple of other markets?

Yes, Mark, it's Kate. Yes, I think we're more bullish on demand right now. If you look at – disruption is happening everywhere, and transformation is in front of most clients right now, and our business model fits perfectly into that in terms of being able to bring in the right agile talent that clients need for these special projects. We're seeing more and more demand in our very large client base for change management support, which we deliver with excellence, and project management support, which it continues to grow. And as clients -- we're not just focused on the office of the CFO; there's transformation happening in the digital space, transformation happening in the compliance arena, in the HR space, that we're perfectly matched to help our client base with.

Great. And then with regards to just the pricing trend that you're seeing, can you comment a little bit about that, and how we should think about the gross margins going into the current quarter, and how you see that developing over the course of the year?

The pricing trends, overall, I would say are static. The opportunity for us is as we move in to some of the larger client bases, the solutions options that we have, and then rebuilding our Tri-State practice, I think we've had an opportunity there to increase that, because there's pluses and minuses on both sides of it. There's constantly cost pressure on the one hand, but then on the flipside as we move into new clients, we often can do a little bit better job on bill rates.

Great. And then you mentioned the Tri-State. What percentage of U.S. revenue is in the Tri-State region now, and where was it at the peak?

Yes, it's been over 20%. And it's now in roughly -- I'm trying to look at that number right now, but it's been running I think of around the 17% mark. Let me double-check that and get back to you. We got it here somewhere, but it's definitely down, but still substantial part of our business.

Mark, it's also the substantial element of our decline in North America. So I think it's what Herb…

Yes, it's actually -- 16% is the actual number.

Okay, so it's running at 16%. And you mentioned during your prepared remarks that you were seeing a bottoming there, although it sounds like there's still some leadership changes to add to.

Yes.

So, can you just describe the confidence that you have with regards to things bottoming there, or how certain are you of that?

Yes. We feel fairly comfortable, with caveats. There's been straighter focus of attention for a while, and we see some positive signs what's happening there right now. And again, the weekly revenues have leveled off. The activity level is looking better. The initial assessment of our new leadership there has been fairly positive that we really believe we still got some good people. We just got to get the direction shifted on, and really start higher level of accountability on the middle market opportunities that we've got, in the SCP, just really to bring focus, and doing so initially I'll always have some concerns that you could have some drop-off when you're having major leadership change, but we're encouraged right now that I don't think that's going to happen. And it's just a matter of taking the new processes. And we've got a lot that we're at, and they're adopting SalesForce for the first time, we just went live with that, the new sales processes, new level of accountability. So, there's a lot of change going on there. But, again, the positive thing is that we feel like we've got some quality people there.

Great. And then with regards to international, it sounds like things are going better over there. Do you see momentum continuing to build? It certainly sounds like it, but I just wanted to confirm that.

Yes, we do, Mark.

Okay, great. And then lastly, on 606 in lease accounting; you're currently running around 4.7% of revenue. Do you think that that could increase by another 50% over the coming year, or are we kind of getting to the point where 606 is kind of topping out, but lease is still ramping?

Interestingly, we don't see a topping out yet. We're still finding -- in fact, we were having -- our leaders in that areas were having some conversations with one of the big four partners that we work with on some of these. And we're still amazed at how slow the adoption rate has been. And there's still wakeup calls going on out there that, "Wow, we are really behind and we've got to scramble." So I still think there's potential for ongoing growth, certainly on the lease side, there's no question about that. But then our activity levels are still up, the level of proposals that we have are up right now. So I think there's potential for increased growth there continuing.

Great. Thank you.

Thank you. I'm showing no further questions at this time. I would like to turn the conference back over to Kate Duchene, CEO, for closing remarks.

Thank you, Operator. Again, thank you all for attending this call, and for your interest in Resources. We look forward to talking with you once again on our next earnings call following our first fiscal quarter of 2018. Have a good day.