Resources Connection, Inc. (RGP) Q1 2020 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the Resources Connection Incorporated Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I would like to turn the call over to your host for today's call, Ms. Alice Washington, General Counsel of Resources Connection. Ms. Washington, you may now begin.

Thank you, Operator. Good afternoon, everyone, and thank you for participating on this call. Joining me here today are Kate Duchene, our Chief Executive Officer; Tim Brackney, our Chief Operating Officer; and Jennifer Ryu, our Interim Chief Financial officer. During this call, we will be commenting on our results for the first quarter ended August 24, 2019. By now, you should have a copy of today's press release. If you need a copy and/or unable to access it on our website, please call Shannon McPhee at (714) 430-6363. During this call, we may make forward-looking statements regarding future events or future financial performance of the company. Such statements are predictions and actual events or results may differ materially. Please see our report on the form 10-K for the year ended May 25, 2019 for a discussion of risks, uncertainties and other factors such as seasonal and economic conditions, such factors may cause our business, results of operations and financial condition to differ materially from 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 our CEO, Kate Duchene.

Thank you, Alice. Good afternoon, everyone, and welcome to RGP's first conference call in fiscal '20. I'll start by welcoming Jenn to the call and to her role as our Interim Chief Financial Officer. I am very pleased to be working directly with Jenn, and I'm impressed with the impact she has made in our accounting and finance group. She contributed significantly to the strategic actions we took this quarter, and while Jenn joined RGP in April, it does feel like she's been with us far longer, given her insights, decisiveness, judgment and technical knowledge. Jenn, thank you for your outstanding contributions thus far. We expect to make the Chief Financial Officer decision permanent by the end of the calendar year. Next, I'll turn to briefly discuss our financial performance in the first quarter, given the significant activities we've completed in the past 90 days. These include an acquisition, a divestiture and an office closure. Our total revenues for the first quarter of fiscal '20 were $172.2 million. This represents a 3.6% decline over Q1 of fiscal '19, primarily because of a continued slowdown in Europe. The expected decline in our technical accounting revenue in North America, given project completion, and some slowing of client decision-making related to revenue opportunities in our largest markets. As we pivot to higher level project and advisory work, we are also experiencing longer sales cycles. Tim will provide more color on the actions we're taking to strengthen pipeline and momentum in Q2 and the balance of the fiscal year. The revenue bright spot this quarter is Asia Pacific, a region that delivered strong growth of 11.8%, 13% constant currency. This growth is led by Japan, India and Singapore, which we continue to see as expanding markets. The second bright spot in our financial performance this quarter is gross margin. We achieved gross margin of 39.2%, up from 38.2% in the quarter a year ago. This improvement is largely attributable to improved bill pay ratios, as Jenn will discuss later in the call. We're also increasingly utilizing the seller-doer leaders within our Advisory and Project Services team throughout the sales cycle, which will positively impact our results moving forward. In addition, as we have shared previously, we're building more advisory and strategic work in our client base, which improve the halo effect in positioning and pricing. With respect to SG&A performance in the quarter, I want to provide further details, so you better understand some of the strategic moves we have made in the past 90 days to strengthen the business in the mid- to longer-term. While we delivered results within the estimate we provided during the previous earnings call, specifically $57 million. This SG&A number includes approximately $2.3 million of one-time expense tied to two notable activities. First, we incurred one-time expenses related to the divestiture of the Nordics business and the closure of the Belgium practice. This decision followed an in-depth critical review of our geographic footprint and the number of strategic clients we serve in various markets. The practices we exited were not directly aligned to strategic clients and have been a drain on shareholder return for several years. We are bearing costs now to enhance our financial performance in the mid- and longer-term. In fiscal '19, Sweden and Belgium practice resulted in negative operating profit of $0.5 million. The other notable activity in Q1, which increased our SG&A spend was the completion of the acquisition of Veracity Consulting Group. To remind everyone, Veracity is an advisory and consulting business based in Richmond, Virginia, with approximately 110 employees. This consulting firm allows us to dive deeper and more broadly in the digital innovation space, especially in the health care ecosystem. The healthcare industry is right for transformation and has enormous opportunity for improvement through digital innovation. Veracity offers broad capabilities spanning strategy and roadmap, design and brand and client and employee experience. They also bring deep technical expertise and best-in-class technology partnerships, including ServiceNow, SiteCore, Akumina and MuleSoft. This is an important acquisition for the future of RGP as we expand our mix of services and offer additional advisory level digital and technology transformation services. Following the close of this acquisition and working closely with RGP's digital innovation function, we have implemented a 100-day plan to build pipeline and opportunity across the two enterprises. We are particularly focused in building opportunity in our top health care clients, who have significant project interest and budget dedicated to digital transformation as well as a targeted group of our SCP clients with interest in this space. As I outlined on our last earnings call, our digital innovation group is also focused on building products to be delivered within our finance transformation, project management and risk and compliance services. This team has nine products in development, both internally and externally focused, which include an internal audit automation tool, a digital-light project management framework and a tax automation product. This team will be commercializing two to three products throughout the balance of this fiscal year. We remain committed to enhancing our services delivery through digital innovation to drive better outcomes in our client projects with speed and value. The third area of focus for our digital innovation team is the build of our digital engagement platform or human cloud product, which is one of the products mentioned above. I'm very pleased to report that this week, we launched the digital match feature internally across North America. Our talent management group will now be using the product to assist them in improving alignment between supply and demand, closing opportunities with greater efficiency and speed and testing the algorithm to ensure we are getting the outcomes we desire before taking the platform to the external market. The team behind this product is led by Steve DelVecchia, who joined RGP from a small digital disruptor, which he founded in 2010, Adaptive Professional Solutions. Steve and his team just returned from the collaboration in the Gig Economy Conference in San Diego, which was hosted by staffing industry analysts and they are very excited about our product positioning and the opportunity ahead. A main differentiator for RGP's product is our focus on employees, not independent contractors. I'll share more in a minute about why we think that matters. The takeaway right now is that our vision is clear, the product strategy is sound and our timeline is credible. Let me close my remarks by addressing two macro trends that support our business model and can underpin further growth as we move through fiscal '20 and beyond. First, AB5, which is the newly enacted independent contractor law in California. It became law on September 18, 2019. AB5 imposes significant additional hurdles and risk on companies who engage with independent contractors directly for project work. In California, as many of you know, misclassification of independent contractors carries with it step civil and statutory penalties that can entitle contractors to collect various wages and benefits, while also exposing companies to scrutiny by taxing authorities. In most instances, AB5 softens the standard by which companies are subjected to these risks. It is a law intended to challenge directly the Gig workforce operating outside the employer-employee relationship. Although as written, it has even broader impact. We believe this regulatory change, which is likely to be followed by other states, offers expansion opportunities for RGP because we run a traditional employment model, with the important and desirable gig features. Specifically, we provide our consultants a curated employment experience with a full suite of associated benefits, and at the same time, flexibility, transparency and choice of project work offered with a gig orientation. Thus, RGP's model does not create risk for our client base as we operate fully as the consultants' employer. We believe this is an important differentiator. Second, there is continued research and survey data around the future of work trends, which are perfectly aligned with RGP's client service and talent platform. As I've said before, clients want to engage talent in more agile ways and talent wants to work in more flexible ways. Randstad Sourceright issued results of a new survey last week stating that 25% of global enterprises and mid-sized companies are shifting permanent roles to contingent positions this year to remain agile. The executives responding to the survey, said that these workers are having the same, if not more, impact upon the company's talent strategies. On the supply side of the equation more than 55% of working professionals indicate that they are more open to non-traditional work arrangements than they have been in the past. This new research continues to build on the change that is happening in the professional services landscape toward new approaches to total talent management and is validated through our own experience and interfacing with our most important clients. Again RGP's platform fits perfectly into the new realities surrounding the future of work. I'll now turn the call to Tim for additional color on operations and priority initiatives and trends in Q2.

Thank you, Kate, and good afternoon, everyone. I will highlight trends and initiatives that directly impacted our results and operations for the first quarter, provide an update on our fiscal '20 operational priorities and discuss early trends in the second quarter. As Kate noted, we continue to see some client uncertainty prompted by concerns related to the global economic environment. Despite these choppier waters, we believe there is an opportunity to capture market share. Many companies continue to engage in crucial transformations and a flight to value typically insist. As in the previous quarter, we made positive strides with operational improvements and sales productivity, cost containment and delivery efficiency. I will briefly touch on each of these key operational objectives. While global revenue decreased 3.6% from the prior year quarter, we did see global productivity gains, including increases in outreach, meetings generated and average pipelines during the same period. In addition, gross margin percentage increased by over 100 basis points during the same period, reflecting an increase in bill pay ratio and a strong increase in bill rates in the U.S. business. These efforts and sustained sales motion and discipline, pricing governance and pipeline building helped to offset some of the macro factors discussed earlier and a meaningful drop in velocity due to natural completion of projects related to the implementation of new accounting regulations. Jenn will provide more detail around revenue, gross margin and bill rates. We are encouraged by the productivity strides, yet we recognize the urgency to increase revenue velocity, particularly in our largest markets, which as a group have not performed to a desired level. As a result, we have adjusted leadership, team focus and/or structure to ensure directed and granular concentration and go-to-market opportunity in several key markets, including Germany and the Netherlands, which we discussed last quarter as well as TriState, California and Texas markets and the Midwest region. These changes are intended to ensure we have deployed our best resources against the richest opportunities, and that market teams are laser focused on increasing new demand generation, accelerating deals through the pipeline and quickly marshalling our resources to the point of attack. In addition, we have made strategic hires in the southeast, Northern California and in the U.K., where we hired Dan Hindman, as Senior Vice President and Head of Europe. Dan brings a strong background and experience in sales and operational leadership and is chartered with accelerating our transformation and revenue growth in that operational theatre. We are in an active search for a leader in TriState and we will continue to be opportunistic in the pursuit of top talent in key markets. Today, we have seen good results in certain parts of North America, Philadelphia, Atlanta, Charlotte and Seattle to name a few markets, and in our county and executive search businesses. Task Force continues its strong performance along with Asia-Pac as a whole. We are buoyed by these bright spots, but we'll continue to focus relentlessly on our sales efforts globally. Next, let's discuss cost containment and productivity where we've made positive gains this quarter. We reduced SG&A and increased operating margin on a combined-theater basis when compared to the prior year quarter. During the quarter, we invested in some key hires in our talent and sales organizations in Asia-Pac, which has been on a strong run up performance and we are already seeing returns. As I noted last quarter, we are committed to investment prudence and the move to a more centralized operating model to gain scale. To that end, we continue to shift human capital to the places that offer the largest sustained return, while maintaining a tight lid on overall headcount and other controllable expenses. Additionally, as Kate noted earlier this quarter, we sold our practice in the Nordics and shut down our practice in Belgium. While we have no immediate plans to part with other practices, we remain committed to revenue growth and profitability and serving our clients as one RGP. Now onto our progress around delivery excellence. Last quarter, we discussed the reorganization of our Advisory and Project Services Organization, or APF, whose mission is to provide strong scoping and development on complex deals and delivery excellence once engaged. APS is already demonstrating strong positive impacts, resulting in the unearthing of larger prospective projects and a lift-in client satisfaction on complex project delivery. Additionally, this team's ability to open the aperture of opportunity at the point of sale has elevated our cross and upselling abilities. APS is expected to provide both operational and pricing leverage as we continue to achieve organizational altitude, selling into higher levels of client organization. Client focus is an enterprise imperative RGP and APS is key to providing an integrated and seamless customer experience. Last quarter, I laid out five main priorities for fiscal '20, three of which evolving into a preeminent sales organization, operational transformation in Europe and a commitment to delivery excellence have already been mentioned. Let me provide an update on the other two priorities that are serving our clients globally and improving alignment of our supply and demand curves. We are purposefully exploring ways to better execute a global coalition to serve our largest client. This was accomplished principally through a focus on global growth in both our strategic client and key account program, but perhaps more importantly, it is done through appropriate alignment of priorities and incentives across theaters. Combined quarter-over-quarter growth for these important client programs approximated 7%. Additionally, we saw key wins in Asia-Pac and Europe that were a direct result of strongly aligned cross-border pursuits in U.S. headquartered Fortune 500 company. We will continue to make intentional strides in this opportunity rich area, as we believe that operating our agile talent platform efficiently across borders provides a significant competitive advantage. Said another way, we will emphasize the G for global in RGP. Finally, let me discuss the alignment of supply and demand, which is an X factor for RGP in the future of work. Since exception, we have focused on attracting and retaining top talent globally on a gig basis, it is likely our greatest operational competency. As we mature our sales and delivery organizations, penetrating new markets, acquiring clients and climbing organizational level, our ability to efficiently match oscillating demand with itinerant supply will become a crucial point of differentiation in the consulting markets, especially one in which both clients and talent are rapidly adopting a gig orientation. To that end, we are diligently working to rationalize quick process, leverage expanded data sets for enhanced decision-making and be transparent throughout the sales cycle, allowing for better supply chain management and the ability to delight both our clients and consultants. Before I conclude my remarks, I want to provide some commentary about second quarter trends. Through the first four weeks of the quarter, trailing average enterprise run rate was the highest they've been in several months and we are seeing upward momentum in some of our key North American markets, including TriState, Detroit and Southern California. Some of this, what we see is typical at this time of year, but we're also seeing some gains, some pipeline pull through and projects starting that were delayed from previous quarters. Also, although the requirements for private company at least stand implementation have been delayed, we are beginning to see some strengthening of demand around these initiatives. While we are encouraged by these early trends and strengthening of our overall pipeline, we know we have to remain extremely focused and are committed to pushing hard on accelerating revenue velocity. I will now turn the call over to Jenn for more detailed review of our first quarter results.

Thank you, Tim. Good afternoon, everyone, and thank you, Kate, for the kind remarks. I've really enjoyed getting to know this organization since joining in April, and it's been great to work more closely with Kate, Tim and the rest of the executive team this quarter. I'm inspired by Kate's vision and the long-term prospects for the company. Now, I will start by giving detail on our first quarter financial results, and we'll then discuss the trends we're seeing in the second quarter of fiscal 2020. Starting with an overview of our first quarter results. Total revenues for the first quarter of fiscal '20 was $172.2 million, a 3.6% decrease from the comparable quarter of fiscal '19 and a 5.4% decrease sequentially. On a constant currency basis, revenue decreased 3% year-over-year and 5.3% sequentially. Our first quarter gross margin was 39.2%, up 100 basis points from the prior-year first quarter, primarily due to improvement in our bill pay ratio, reflecting the favorable impact of our internal pricing initiatives. SG&A expenses for the quarter were $57 million or 33.1% of revenue compared to $56.4 million, 31.6% of revenue last year. As Kate mentioned earlier, SG&A in the first quarter fiscal '20 includes a number of onetime items, which I will discuss later in detail. Our net income for the first quarter was $4.9 million or $0.15 per diluted share compared to $5.7 million or $0.18 per diluted share in the prior-year quarter. In Q1, adjusted EBITDA, which we define as EBITDA before stock compensation and contingent consideration adjustments was $11.9 million or 6.9% of revenue compared to $13.2 million or 7.4% of revenue in the prior-year quarter. Now let me provide some color around our first quarter revenue geographically. Our U.S. revenue, excluding our recently acquired entity Veracity decreased 4% year-over-year and 5.2% sequentially. Veracity contributed $1.4 million to our first quarter revenue. As Kate said earlier, we're seeing prolonged decision making around initiatives via existing and potential clients. The sequential decrease also reflects the impact of two U.S. holidays and summer holiday breaks taken by our consultants. There were no paid holidays in the fourth quarter of fiscal '19. Europe's first quarter revenue decreased 9.3% year-over-year, however, just 5.5% on a constant currency basis. Sequentially, first quarter revenue in Europe decreased by 13.1% or 12% on a constant currency basis. Notable practices to call out in Europe are Taskforce and U.K. Taskforce continues to - well and outperform compared to the prior-year period, while U.K. lags largely due to the uncertain political environment. Further, we also experienced significant decreases in revenues from the Nordics and Belgian markets, which we have recently divested. Excluding revenue from these practices in both Q1 of fiscal '20 and fiscal '19, Europe's revenue would have just decreased by 4.2%. Asia-Pac first quarter revenue increased 11.8% year-over-year, but decreased 3.5% sequentially. On a constant currency basis, APAC's revenue increased 13% year-over-year and decreased 3.5% sequentially. The growth in Asia-Pac is primarily led by Japan, as we continue to penetrate deeper into our SCP client base. Turning to early revenue trends for the second quarter of fiscal 2020. Based on early revenue trends, and if this trends continue, we expect our second quarter revenue to fall in the range of $181 million to $185 million compared to $188 million in Q2 of fiscal '19. Second quarter revenue forecast includes the impact of Veracity and excludes C's revenue resulting from the divestiture of our Nordics businesses and closure of the Belgian practice. As Tim mentioned earlier, the momentum of technical accounting implementation work has slowed down, notably in revenue recognition, with Veracity's recent proposal to postpone the effective date of lease accounting adoption for private company to 2021. Some clients and prospect are delaying these implementation projects. However, this also provides us with a longer time frame to identify and close opportunities we might otherwise have missed. Despite the headwinds, North America is continuing to grow in many markets, though, at a slower pace in the last several quarters. We're seeing excellent growth in Seattle, the Carolinas and Detroit in early second quarter. On the international front, taskforce in Japan are showing a healthy growing trend. Now turning to gross margin. Gross margin in the first quarter increased 100 basis points from the prior year equivalent period, yet decreased 90 basis points sequentially. The year-over-year increases related primarily to an improved bill pay ratio, driven by internal initiatives to improve pricing. That initiative has been successful in the U.S., but less so internationally, masking some of the meaningful progress we've made when looking at our consolidated bill rates. The sequential decrease is primarily due to holiday pay for consulting for the Memorial Day and 4th of July in the U.S. There were no paid holidays in the fourth quarter of fiscal 2019, the bill pay ratio remained the same between the two quarters. For the first quarter, our gross margin in the U.S. was 40.6% compared to 39% last year, and our international gross margin was 33.7% compared to 34.9% a year ago. The average hourly bill rate for the quarter was approximately $122 compared to $124 in both prior year and sequential quarters. U.S. average bill rate increased 5%, while international average bill rate declined, mainly as a result of the revenue growth in Asia-Pac, contributing to a more significant share of international revenue. As we've shared previously, Asia-Pac historically has had the lowest average bill rates across our operational theatres. As a result of the geographic mix similar to average bill rates, the average pay rate for the first quarter of fiscal 2020 was $61, a drop from $63 and $62 in the first and fourth quarters of fiscal '19 respectively. In the second quarter of fiscal '20, we expect our gross margin to be in the range of 39.5% to 40% compared to 38.9% a year ago. We expect to continue making strides in improving bill rates and gross margin and e-deal. In addition, at conventions, we believe the formation of our APS organization will further enhance our ability to achieve better pricing leverage by driving a shift in our engagement mix towards more complex and higher value advisory services. As a reminder, hourly rates are derived based on prevailing exchange rates during each given period. Now, looking at other components of our first quarter financial results. SG&A expenses were $57 million or 33.1% of revenue. This compares to SG&A of $56.4 million or 31.6% of revenue in the first quarter of fiscal '19 and $56.9 million or 31.2% of revenue in the fourth quarter of fiscal '19. As I mentioned earlier, SG&A for the first quarter of fiscal '20 includes a number of onetime items totaling $2.3 million, of which the primary items are $0.9 million of retention bonus and severance cost, $0.6 million of exit costs in connection with the divestiture of our Nordics business and the closure of the Belgium office and $0.6 million in transaction costs related to the acquisition of Veracity. Excluding these costs, SG&A for the first quarter of fiscal '20 would have been 31.7% of revenue. Looking ahead to the second quarter of fiscal 2020, we expect SG&A to be in the range of $55 million to 55.5 million. Turning to other components of our financial statements, depreciation was $1.4 million and amortization was $1.1 million respectively. Our income tax provision for the first quarter was $2.6 million, representing an effective tax rate of 35%. Our effective tax rate primarily impacted by valuation allowances on our foreign NOLs. On a cash basis, our tax rate was approximately 30%. Our GAAP tax rate for each of upcoming quarters is difficult to predict and could fluctuate as the rate will be dependent on several factors, including the operating results of our U.S. and foreign locations, each of which are taxed or benefited at different statutory rates, any offset of the tax benefit of foreign losses in certain locations by valuation allowances. Finally, let me turn to our balance sheet. Cash and cash equivalents at the end of the first quarter was $45.7 million, receivables at quarter-end were approximately $129.6 million compared to $133.3 million at the end of the fourth quarter fiscal 2019. Days of revenue outstanding were approximately 67 days compared to 62 days in prior year and 66 days in the fourth quarter fiscal '19. The addition of Veracity's outstanding receivables towards the end of the quarter negatively impacted our DSO for the first quarter. We recorded $41.5 million of right-of-use assets and $48.6 million of lease liability upon adoption as ASC 842. The adoption of the new lease accounting pronouncement did not have a material impact on our results of operations. Capital expenditures were $0.5 million during the quarter, we expect CapEx to be in the $1 million to $2 million range in Q2. We will continue to return cash to shareholders through our quarterly dividend. We paid $4.1 million in dividends during the quarter. Our Board of Directors approved an 8% increase in our dividend for fiscal 2020. This is the ninth consecutive year that we have increased the dividend. We expect quarterly dividend payments to be in the $4.4 million range for the rest of the fiscal year. We did not repurchase stock during the quarter to preserve cash for the Veracity acquisition. Our stock buyback program has $90.1 million remaining. Due to the proximity and the timing of our incentive compensation and annual bonus payments and the close of the Veracity acquisition in the first quarter, we borrowed $35 million under our credit facility. We're continually evaluating uses of cash to reduce debt and to facilitate our growth both organically and strategically. Our shares outstanding at the end of the first quarter were approximately 32 million. Now, I like to turn the call back to Kate for some closing comments.

Thank you, Jenn. Looking ahead, we are committed to improving the revenue trajectory, investing in the right capabilities to compete successfully in the future and delivering solid financial returns to our shareholders. We are excited about the work ahead in fiscal '20 and look forward to updating you as we progress. Before turning to questions, as usual, I'm happy to report our client continuity statistics for Q1 of fiscal '20. Client continuity remained strong, during our first quarter, we served all of our top 50 clients from fiscal '19 and 49 at the top 50 from 2018. In the quarter, we have 281 clients for whom we provide services at a run rate exceeding 500,000 in fees. This number is consistent with fiscal 2019. In addition, our top 50 clients for the quarter represented 37% of total revenues, while 50% of our revenues came from a 103 clients. Our largest client for the quarter was approximately 3.3% of revenue. At the end of the first quarter, 94% of our top 50 clients have used more than one type of service or solution. This penetration reflects the diversity of relationships we are building within our clients organizations and reinforces the opportunity for growth. That concludes our prepared remarks, and we're now happy to answer any questions.

[Operator Instructions] Our first question comes from Andrew Steinerman with JPMorgan. Please proceed.

You have mentioned positioning the company to gain market share. So I'd be curious to know which vendors you see Resources gaining market share from and why? And if I could, I'm going to ask a second question of Jenn, could you just go over the revenue impact in the second quarter of the first quarter acquisition divestiture and Belgian office closing?

Sure. Thanks for the question, Andrew. But what I was referring to is that what we've seen in other scenarios where macro impacts to affect the marketplace is that there is a flight to value. And what I mean by that is there are clients who are still going through large initiatives and transformation and they need assistance to do it. But they're less likely to use big ticket, big consulting firms. And so we believe that - in that environment, we have the ability to take share.

Okay.

Andrew, this is Jenn. Yeah so our revenue forecast in Q2 includes the impact of Veracity and also includes the [indiscernible] revenue from our Belgium and Sweden practices. And on a - it's a net increase to the Q2 revenue forecast.

Could you tell me how much?

I think we're still working through, Andrew, what the run rate for Veracity. They've been in our financials for a short period of time and we're still working through some of their projections. They've had one client that has reduced their service needs from us and they are just onboarding another client that is likely to have a more significant positive impact in the quarter, that I wouldn't want to provide an answer right now without really understanding the impact of those two moves.

Maybe can I just try one other way, Jenn, maybe look back on the first quarter. I think you said revenues - for total revenues, constant currency was down 3% year-over-year. What would it be on a kind of organic constant currency year-over-year basis?

Comparing Q2 forecast to Q2 last year?

No first quarter, I'm saying, let's look back at the first quarter, we just reported. And I'm saying instead of just looking at constant currency, let's make adjustments for the divestiture and the acquisition and think about what the year-over-year revenue change would be in the first quarter just reported?

It would be as close to a wash, Andrew.

Okay.

So we really need. I mean, the bottom line is we need more experience to give you a more credible answer to your question for Q2. And I don't want us to provide something that we're not comfortable with yet. So we'll be prepared as we continue to work together and get more of a sense. Jenn needs to visit with that client or excuse me, that part of our company in more detail following the close of this quarter. And she'll be doing that shortly.

Thank you. [Operator Instructions] I'm not showing any further questions at this time. I would now like to turn the call back over to Kate Duchene for any closing remarks.

Okay. Thank you, Operator. Thank you again, everyone, for attending this call and for your interest in RGP. We look forward to talking with you again after on our next earnings call following the close of our second quarter. Thank you.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.