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Resources Connection gains on upbeat Q1 results

Resources Connection (RECN) reported a 171% jump in earnings for the first quarter helped by strategic revenue growth and management of costs across its platform. Following the better-than-expected results, shares of the business consulting services provider soared over 9% in the after-market session.

EPS surged 157% to $0.18 per share as the company benefited from the favorable impact of the Tax Cuts and Jobs Act.

Revenue climbed 26.5% to $178.6 million. Geographically, US organic revenue rose 24.8% from last year, while European organic revenue climbed 36.5%. Asia Pacific organic revenue increased 15.9%.

Gross margin rose slightly to 38.2% from 38% last year due to lower costs in the company’s self-insured medical program. The share buybacks in the first quarter totaled about 468,000 shares for $7.5 million, with $112.5 million remaining for future common stock purchases as of August 25, 2018.

In addition, the company has completed the implementation in North America of the strategic initiatives it laid out in fiscal 2017 and is now focused on implementation in Europe and the Asia Pacific. In fiscal 2019, the company implemented a new incentive compensation program to focus on revenue generation and gross margin improvement.

The company remains focused on reducing selling, general and administrative expenses as a percent of revenue. With integration and special transformation costs largely complete, Resources Connection expects SG&A to reduce as a percentage of revenue in the coming quarters. As continuing to wind down transformation and acquisition costs over the next few quarters, the company plans to deliver more profit to the bottom line.

Shares of Resources Connection ended Wednesday’s regular session down 0.73% at $16.43 on the Nasdaq. The stock had risen by 15% for the past year and over 6% for the year so far.

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