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OFFON

RESOURCES CONNECTION, INC.

(RGP)
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RESOURCES CONNECTION : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-K)

07/23/2021 | 05:29pm EDT
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and
related notes. This discussion and analysis contains forward-looking statements
that involve risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors including, but not limited to, those discussed in Part I,
Item 1A. "Risk Factors." and elsewhere in this Annual Report on Form 10-K. See
"Forward Looking Statements" above for further explanation.

Overview


Resources Global Professionals is a global consulting firm helping clients match
the right professional talent needed to tackle transformation, change and
compliance challenges. As a next-generation human capital partner for our
clients, we specialize in solving today's most pressing business problems across
the enterprise in the areas of transactions, regulations, and transformations.
Our engagements are designed to leverage human connection and collaboration to
deliver practical solutions and more impactful results that power our clients,
consultants and partners' success.

Disrupting the professional services industry since our founding in 1996, we are
the "now of work" - attracting the best talent in an increasingly fluid
gig-oriented environment. Based in Irvine, California, with offices worldwide,
our agile human capital model attracts top-caliber professionals with in-demand
skillsets who seek a workplace environment that embraces flexibility,
collaboration and human connection. Our agile professional services model
quickly aligns the right resources for the work at hand with speed and
efficiency. Our approach to workforce strategy uniquely positions us to help our
clients transform their businesses and workplaces. See Part 1, Item 1 "Business"
for further discussions about our business and operations.

Key Transformation Initiatives


Over the last several years, we have made strides to ensure our company is truly
global, scalable and distinctive in our culture and approach to professional
services. We completed a number of transformative enterprise initiatives
including cultivating a more robust sales culture, adopting a center-led
operating model for sales, talent and delivery, refreshing the RGP brand, and
developing a digital pathway to serve our clients through building and
commercializing our digital engagement platform and enhancing our consulting
capabilities in the digital transformation space.

To optimize our sales organization, we aligned our sales process using tools
such as Salesforce.com and implemented a new incentive compensation program
focused on driving growth in our business with the appropriate metrics. In
addition, we focused on client-centricity, including the establishment of our
Strategic Client Account Program to serve a set of our largest global
multi-national clients with a dedicated account team and our key industry
vertical in healthcare. We will continue to invest in building broader and
deeper relationships in these important clients to enhance the stickiness of our
revenue stream.

Under the new operating model, we realigned our organizational structure,
largely defined by functional area rather than on an office location basis. We
reorganized our Advisory and Project Services function, a team of seller-doer
professionals whose primary responsibility is to shepherd sales pursuits and
engagement delivery on our more complex projects. We believe this team deepens
the scoping conversation, achieves value-oriented pricing and improves delivery
management through greater accountability and a more seamless customer
experience.

Through an extensive brand refresh project, we adopted a new brand identity
focused on our human-centered approach to serving clients and engaging with our
consultants. We believe the continued development of our new brand will attract
and retain both clients and consultants, supporting future revenue growth.

Over recent years, explosive technological innovation has fueled the rise of
digital transformation as a corporate imperative. Our clients have been forced
to rethink the way they do business to stay ahead and compete with digitally
native new entrants. In order to support our clients - including these digitally
native businesses-we have evolved significantly to help clients solve their
digital needs including automation, functional process redesign and technology
migration. We acquired Veracity in 2019 to help us build end-to-end digital
solutions for our clients who strive to automate workflows and increase
collaboration - which has become even more important given the increasingly
virtual nature of today's workforce as a result of the Pandemic.

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As the Pandemic struck in the fourth quarter of our fiscal 2020, we evolved our
business to be more virtual and borderless. We launched the Borderless Talent
initiative, changing our employment paradigm and client delivery model by
finding and matching qualified talent with appropriate skill sets for specific
project needs on a global basis. As remote work became more mainstream, our
borderless talent management and deployment further enhanced our capabilities to
serve multinational clients in a seamless manner, broadened our client reach in
markets where we do not have a physical presence, allowed for improved operation
efficiency while offering clients and consultants more choice and agility. As
the economy opens up, our ability to flex seamlessly between traditional
on-premise and virtual models will offer greater optionality in how we deliver
projects and our go-to-market motion. Supply and demand alignment is a key
operating principle which we believe can be truly streamlined in a world of
borderless talent. Removing the constraint of geo-fencing our consultants based
on locality has opened up new avenues of opportunity for both our clients and
our talent. This enables us to attract and retain talent on a broader geographic
basis and allows for additional opportunities in terms of prospect cultivation,
client engagement and project delivery.

For RGP's clients specifically, the Pandemic has hastened the shift to fluid
talent strategies as a dynamic force for improving corporate performance. In
other words, in a world filled with technology change, demographic shifts, and
economic uncertainty, having the right talent in the right place at the right
time has become an imperative to compete and thrive in today's business
environment. As we move into more of a post-pandemic environment, the added
dimension of evolving labor preferences toward remote work, additional
flexibility and increased choice, has resulted in drastic changes to the human
capital marketplace. These factors explain why a growing number of large
enterprises now define staffing needs with agility in mind. We believe the agile
talent strategies that are taking hold today, play to our strengths and
capabilities.

Fiscal 2021 Strategic Focus Areas

Our strategic focus areas in fiscal 2021 were:

?Furthering our digital expansion through the launch of our human cloud platform and expanded go-to-market penetration for the business we acquired from Veracity

?Growing our core business through our strategic client and industry vertical programs

?Right sizing and controlling our cost structure globally, and optimizing our operations to achieve higher operating leverage


Our primary area of focus for fiscal 2021 was digital expansion and we have made
solid strides in this area. We are substantially ready to pilot our human cloud
platform with select clients in the fall of calendar 2021, which introduces a
new way for clients and talent alike to engage with us. Our efforts also include
expanding the go-to-market penetration for Veracity and launching a new Digital
Technology Practice in the Asia Pacific region, which is expected to enhance our
abilities to provide digital transformation and technology consulting services
from strategy and roadmap to technical implementation. Our focus on introducing
Veracity more broadly to our client base and integrating Veracity with the rest
of the RGP business operations has generated positive returns throughout fiscal
2021, with Veracity revenue growing 39.2% compared to fiscal 2020 and the
Technology and Digital solution offerings becoming one of the key drivers for
accelerating the overall RGP revenue recovery during fiscal 2021. We believe the
Pandemic and the resulting increase in virtual or remote delivery arrangements
have and will continue to accelerate digital transformation agendas in our
existing client base and create opportunities for us to engage with new clients.

The second focus area for this fiscal year was building our core business,
including through the growth of our strategic client and key industry vertical
programs, particularly in healthcare. The continued evolution of our delivery
model to be more flexible, virtual and borderless has allowed us to expand
opportunities within existing core clients and markets as well as to uncover
opportunities to effectively serve new clients in new markets. We are working to
further penetrate our existing core accounts at a time when many are looking to
reduce fixed costs by moving toward more flexible workforce strategies and
building relationships with higher value partners for project execution needs.
We are also actively extending our offerings to new buyers within these
organizations - like Chief Digital, Chief People and Chief Marketing Officers.
We see strong growth momentum in our biggest clients and robust opportunity in
the healthcare industry from pharmaceutical to medical device to payor and
provider, including in practice areas such as revenue cycle optimization,
clinical trials process redesign and supply chain transformation. We believe
these client needs align well with the capabilities of our dedicated industry
group.

Finally, with the goal to strengthen the business and right size our cost
structure globally, we have substantially completed our restructuring
initiatives across North America, APAC and Europe. The North America and APAC
Plan, which we initiated in the fourth quarter of fiscal 2020, and the European
Plan which we initiated in the second quarter of fiscal 2021 (collectively, the
" Restructuring Plans"), consisted of two key components: (i) an effort to
streamline the management and organizational structure and eliminate certain
positions as well as exit certain markets to focus on core solution offerings
and core high growth clients; and (ii) a strategic rationalization of our
physical geographic footprint and real estate spend to focus investment dollars
on high growth core markets for greater impact. As of May 29, 2021, we have
substantially completed the reduction in force under the Restructuring Plans,
and recognized substantially all of the associated expected employee termination
costs. Additionally, we made solid progress in executing our real estate exit
strategy, with all of the planned lease terminations in Europe and 79% of the
planned lease terminations in North America completed as of May 29, 2021,
generating substantial savings in occupancy costs. We expect to continue to push
for a more virtual footprint beyond the

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Restructuring Plans, although the exact amount and timing of the expenses and
resulting payments associated with our real estate exit plans are subject to a
number of variables which may not be within our control, such as the condition
of the real estate/leasing market. We believe the successful execution of the
Restructuring Plans has allowed us to operate with agility, resilience and
efficiency heading into fiscal 2022.

See Note 13 - Restructuring Activities in the Notes to the Consolidated
Financial Statements included in Part II, Item 8 of this Annual Report on Form
10-K and "Results of Operations" below for additional disclosures regarding the
impact of the Restructuring Plans on our results of operations and cash flows
during the year ended May 29, 2021.

COVID-19 Impact and Outlook


The Pandemic has adversely impacted our business in the past year including,
among other things, reducing demand for or delaying client decisions to procure
our services. In response to the Pandemic, we evolved our operating model to be
more virtual and borderless. The move to virtual and borderless talent helped us
manage supply and demand more efficiently, which resulted in faster revenue
generation and reduced consultant turnover, mitigating the negative impact of
the Pandemic.

During fiscal 2021, our revenue declined 10.5% from the prior year, or 10.2% on
a same day constant currency basis, as the Pandemic started to impact the
Company on a worldwide basis in the fourth quarter of fiscal 2020. We reached a
trough in our revenue during the first quarter of fiscal 2021 and have since
experienced a steady recovery in each sequential quarter thereafter. By the
fourth quarter of fiscal 2021, our revenue, although declined 3.5% year over
year, exceeded the prior year quarter on a same day constant currency basis by
1.2%. Given the timing of our fiscal period and the latent impact of the
Pandemic in the fourth quarter of fiscal 2020, we did not yet see the full
impact of the recovery from the Pandemic in our results in the fourth quarter of
fiscal 2021. While the adverse financial impact of the Pandemic is undeniable,
it has also accelerated certain macro trends that we believe allow us to operate
from a position of strength. These include the increased use of contingent
talent, virtual or remote delivery becoming mainstream and new client attitudes
toward borderless talent models. The increasing value that CEO and other C-suite
decision-makers place on workforce flexibility and agility helped propel the
robust momentum in our professional staffing revenue growth in fiscal 2021. In
strengthening our core business, we expect to continue to evolve our client
engagement and talent delivery model to take advantage of these important
shifts.

As further described in "Fiscal 2021 Strategic Focus Areas" above, we have
substantially completed our restructuring initiatives across the globe as of the
end of fiscal 2021. We believe these actions initiated ahead of the onset of the
Pandemic have enabled us to operate with greater agility, as we seek to ensure
our organizational health and resilience, and weather the challenges associated
with the Pandemic. In order to strengthen our liquidity during the Pandemic, we
took proactive measures to increase our cash on hand including, but not limited
to, borrowing $39 million under our secured revolving credit facility in the
fourth quarter of fiscal 2020, reducing discretionary spending, and focusing on
receivables collections efforts. We also elected to defer the deposit of our
employer portion of social security taxes from April to December 2020, as
provided for under the Coronavirus Aid, Relief, and Economic Security Act
("CARES Act"). Due to our focused efforts to contain costs and manage working
capital, we generated healthy cash flows from our operations to afford the
ability to repay a total of $45 million on our borrowings during fiscal 2021 and
another $10 million subsequently on June 9, 2021. In addition, we elected to
repay a total of $6.3 million in deferred deposit of our employer portion of
social security taxes prior to May 29, 2021. See "Liquidity and Capital
Resources" below for additional information. Until we have further visibility
into the continued lingering impact of the Pandemic on the global economy, we
will remain focused on the health of our balance sheet and liquidity, cost
containment and strategic allocation of resources to drive key growth
initiatives in core markets and the expansion of our digital capabilities.

As of the close of fiscal 2021, our operations have stabilized in a majority of
the markets in which we operate, although we expect that some lingering adverse
effects of the Pandemic could continue into fiscal 2022. The full extent to
which the Pandemic impacts our business will depend on future developments that
are highly uncertain and cannot be predicted, including new information that may
emerge concerning the severity of the virus and the actions to contain its
impact, the impacts of new variants of the virus, and the timing, distribution,
efficacy and public acceptance of vaccines and other treatments for COVID-19.

Heading into fiscal 2022, we are encouraged by the revenue acceleration and the
continued improvements in sales and pipeline metrics, including win percentage,
close won amount and average deal size, as well as the continued recovery of our
average bill rate, as our clients rebound from the challenges caused by the
Pandemic and resume or increase their discretionary spending, especially on
advisory projects driven by digital transformation imperatives as a result of
the Pandemic, and continue to shift towards a more agile workforce model. With
sustained strength in our pipeline and accelerated revenue conversion, we remain
optimistic about our position to capitalize on the positive dynamic of an
economy in continued recovery.

Critical Accounting Policies and Estimates


The discussion and analysis of our financial condition and results of operations
included in this Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, are based upon our Consolidated Financial
Statements, which

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have been prepared in accordance with GAAP in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.

We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities. Actual results may differ from these estimates under different
assumptions or conditions.

The following represents a summary of our critical accounting policies and
estimates, defined as those policies and estimates we believe: (a) are the most
important to the portrayal of our financial condition and results of operations
and (b) involve inherently uncertain issues that require management's most
subjective or complex judgments.

Allowance for doubtful accounts - We maintain an allowance for doubtful accounts
for estimated losses resulting from our clients failing to make required
payments for services rendered. We estimate this allowance based upon our
knowledge of the financial condition of our clients (which may not include
knowledge of all significant events), review of historical receivable and
reserve trends and other pertinent information. While such losses have
historically been within our expectations and the provisions established, we
cannot guarantee that we will continue to experience the same credit loss rates
we have in the past. As of May 29, 2021 and May 30, 2020, we had an allowance
for doubtful accounts of $2.0 million and $3.1 million, respectively. A
significant change in the liquidity or financial position of our clients could
cause unfavorable trends in receivable collections and additional allowances may
be required. These additional allowances could materially affect our future
financial results.

Income taxes - In order to prepare our Consolidated Financial Statements, we are
required to make estimates of income taxes, if applicable, in each jurisdiction
in which we operate. The process incorporates an assessment of any income
subject to taxation in each jurisdiction together with temporary differences
resulting from different treatment of transactions for tax and financial
statement purposes. These differences result in deferred tax assets and
liabilities that are included in our Consolidated Balance Sheets. The recovery
of deferred tax assets from future taxable income must be assessed and, to the
extent recovery is not likely, we will establish a valuation allowance. An
increase in the valuation allowance results in recording additional tax expense
and any such adjustment may materially affect our future financial result. If
the ultimate tax liability differs from the amount of tax expense we have
reflected in the Consolidated Statements of Operations, an adjustment of tax
expense may need to be recorded and this adjustment may materially affect our
future financial results and financial condition. We also evaluate our uncertain
tax positions and only recognize the tax benefit from an uncertain tax position
if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such
positions are measured based on the largest benefit that has a greater than 50
percentage likelihood of being realized upon settlement. We record a liability
for unrecognized tax benefits resulting from uncertain tax positions taken or
expected to be taken in a tax return. Any change in judgment related to the
expected ultimate resolution of uncertain tax positions is recognized in
earnings in the period in which such change occurs. As of May 29, 2021 and May
30, 2020, a valuation allowance of $13.3 million and $11.1 million was
established on deferred tax assets totaling $31.9 million and $25.1 million,
respectively. Our income tax for the years ended May 29, 2021, May 30, 2020 and
May 25, 2019 was a benefit of $2.5 million, an expense of $6.9 million and an
expense of $16.5 million, respectively. Our total liability for unrecognized tax
benefits was $0.9 million and $0.8 million as of May 29, 2021 and May 30, 2020,
respectively.

Revenue recognition - Revenues are recognized when control of the promised
service is transferred to our clients, in an amount that reflects the
consideration expected in exchange for the services. Revenue is recorded net of
sales or other transaction taxes collected from clients and remitted to taxing
authorities. Revenues from contracts are recognized over time, based on hours
worked by our professionals. The performance of the agreed-upon service over
time is the single performance obligation for revenues. Certain clients may
receive discounts (for example, volume discounts or rebates) to the amounts
billed. These discounts or rebates are considered variable consideration.
Management evaluates the facts and circumstances of each contract and client
relationship to estimate the variable consideration assessing the most likely
amount to recognize and considering management's expectation of the volume of
services to be provided over the applicable period. Rebates are the largest
component of variable consideration and are estimated using the most likely
amount method prescribed by Accounting Standards Codification Topic 606, Revenue
from Contracts with Customers, contracts terms and estimates of revenue.
Revenues are recognized net of variable consideration to the extent that it is
probable that a significant reversal of revenues will not occur in subsequent
periods. Changes in estimates would result in cumulative catch-up adjustments
and could materially impact our financial results. Rebates recognized as
contra-revenue for the years ended May 29, 2021, May 30, 2020 and May 25, 2019
were $2.6 million, $1.4 million and $1.5 million, respectively.

Stock-based compensation - Under our 2020 Performance Incentive Plan, officers,
employees, and outside directors have received or may receive grants of
restricted stock, restricted stock units, performance stock units, options to
purchase common stock or other stock or stock-based awards. Under our ESPP,
eligible officers and employees may purchase our common stock in accordance with
the terms of the plan.

We estimate the fair value of stock-based payment awards on the date of grant as
described below. We determine the estimated value of restricted stock and
restricted stock unit awards using the closing price of our common stock on the
date of grant. We have

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elected to use the Black-Scholes option-pricing model for our stock options and
stock purchased under our ESPP which takes into account assumptions regarding a
number of highly complex and subjective variables. These variables include the
expected stock price volatility over the term of the awards and actual and
projected employee stock option exercise behaviors. Additional variables to be
considered are the expected term, expected dividends and the risk-free interest
rate over the expected term of our employee stock options. We use our historical
volatility over the expected life of the stock option award and ESPP option
award to estimate the expected volatility of the price of our common stock. The
risk-free interest rate assumption is based upon observed interest rates
appropriate for the term of our employee stock options. The impact of expected
dividends ($0.14 per share for each quarter during fiscal 2021 and 2020 and
$0.13 per share for each quarter during fiscal 2019) is also incorporated in
determining the estimated value per share of employee stock option grants and
purchases under our ESPP. Such dividends are subject to quarterly board of
director approval. Our expected life of stock option grants is 5.6 years for
non-officers and 8.1 years for officers, and the expected life of grants under
our ESPP is 6 months. We review the underlying assumptions related to
stock-based compensation at least annually or more frequently if we believe
triggering events exist.

In addition, because stock-based compensation expense recognized in the
Consolidated Statements of Operations is based on awards ultimately expected to
vest, it is reduced for estimated forfeitures. Forfeitures are estimated at the
time of grant and revised in subsequent periods if actual forfeitures differ
from those estimates. Forfeitures are estimated based on historical experience.
We review the underlying assumptions related to stock-based compensation at
least annually or more frequently if we believe triggering events exist. If
facts and circumstances change and we employ different assumptions in future
periods, the compensation expense recorded may differ materially from the amount
recorded in the current period. Stock-based compensation expense for the years
ended May 29, 2021, May 30, 2020 and May 25, 2019 was $6.6 million, $6.1 million
and $6.6 million, respectively.

Valuation of long-lived assets - For long-lived tangible and intangible assets,
including property and equipment, right-of-use assets, and finite-lived
intangible assets, we assess the potential impairment periodically or whenever
events or changes in circumstances indicate the carrying value may not be
recoverable from the estimated undiscounted expected future cash flows expected
to result from their use and eventual disposition. In cases where the estimated
undiscounted expected future cash flows are less than net book value, an
impairment loss is recognized equal to the amount by which the net book value
exceeds the estimated fair value of assets. We performed our assessment of
potential qualitative impairment indicators of long-lived assets, including
property and equipment, right-of-use assets outside of exited markets, and
finite-lived intangible assets as of May 29, 2021. We determined that for such
long-lived assets, no impairment indicators were present as of May 29, 2021, and
no impairment charge was recorded during fiscal 2021. For right-of-use assets
within exited markets as we continue to execute the Restructuring Plans and move
towards a more virtual footprint in certain markets, we assess the potential
impairment whenever an impairment indicator was present. For further discussion
regarding impairment of right-of-use assets in exited markets, see Note 13 -
Restructuring Activities in the Notes to the Consolidated Financial Statements
included in Part II, Item 8 of this Annual Report on Form 10-K. Estimating
future cash flows requires significant judgment, and our projections may vary
from the cash flows eventually realized. Future events and unanticipated changes
to assumptions could result in an impairment in the future. Although the
impairment is a non-cash expense, it could materially affect our future
financial results and financial condition.

Valuation of goodwill - Goodwill represents the excess of the purchase price
over the fair value of the net tangible and identifiable intangible assets
acquired in each business combination. We evaluate goodwill for impairment
annually on the last day of our fiscal year, and whenever events indicate that
it is more likely than not that the fair value of a reporting unit could be less
than its carrying amount. In assessing the recoverability of goodwill, we make a
series of assumptions including forecasted revenue and costs, estimates of
future cash flows, discount rates and other factors, which requires significant
judgment. A potential impairment in the future, although a non-cash expense,
could materially affect our financial results and financial condition.

In testing the goodwill of our reporting units for impairment, we have the
option to first assess qualitative factors to determine whether it is more
likely than not that the fair value of each of our reporting units is less than
their respective carrying amounts. If it is deemed more likely than not that the
fair value of a reporting unit is greater than its carrying value, no further
testing is needed and goodwill is not impaired. Otherwise, the next step is a
quantitative comparison of the fair value of the reporting unit to its carrying
amount. We have the option to bypass the qualitative assessment for any
reporting unit and proceed directly to performing the quantitative goodwill
impairment test. If a reporting unit's estimated fair value is equal to or
greater than that reporting unit's carrying value, no impairment of goodwill
exists and the testing is complete. If the reporting unit's carrying amount is
greater than the estimated fair value, then a non-cash impairment charge is
recorded for the amount of the difference, not exceeding the total amount of
goodwill allocated to the reporting unit.

Under the quantitative analysis, the estimated fair value of goodwill is
determined by using a combination of a market approach and an income approach.
The market approach estimates fair value by applying revenue and EBITDA
multiples to each reporting unit's operating performance. The multiples are
derived from guideline public companies with similar operating and investment
characteristics to our reporting units, and are evaluated and adjusted, if
needed, based on specific characteristics of the reporting units relative to the
selected guideline companies. The market approach requires us to make a series
of assumptions that involve significant judgment, such as the selection of
comparable companies and the evaluation of the multiples. The income approach
estimates fair value based on our estimated future cash flows of each reporting
unit, discounted by an estimated weighted-average cost of capital that reflects
the relevant

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risks associated with each reporting unit and the time value of money. The
income approach also requires us to make a series of assumptions that involve
significant judgment, such as discount rates, revenue projections and adjusted
EBITDA margin projections. We estimate our discount rates on a blended rate of
return considering both debt and equity for comparable guideline public
companies. We forecast our revenue and adjusted EBITDA margin based on
historical experience and internal forecasts about future performance.

The following is a discussion of our goodwill impairment tests performed during fiscal 2021.

Second Quarter 2021 Goodwill Impairment Test


As further discussed in Note 2 - Summary of Significant Accounting Policies and
Note 18 - Segment Information and Enterprise Reporting in the Notes to the
Consolidated Financial Statements included in Part II, Item 8 of this Annual
Report on Form 10-K and in "Operating Results of Segment" below, effective in
the second quarter of fiscal 2021, we revised our historical one segment
position and identified the following new operating segments: RGP, taskforce and
Sitrick, each of which represents a reporting unit. Concurrent with the segment
change, we completed a goodwill impairment assessment using the quantitative
analysis, as further discussed above, and concluded that no goodwill impairment
existed immediately before or after the change in segment reporting. We
reallocated goodwill to the new reporting units on the relative fair value
basis.

2021 Annual Goodwill Impairment Analysis


We performed our annual goodwill impairment test as of May 29, 2021 on our three
reporting units. Considering the recent quantitative goodwill impairment
analysis completed and the conclusion reached, we elected to perform a
qualitative analysis and assessed the relevant events and circumstances to
determine if it is more likely than not that the fair value of any of our
reporting units is less than its respective carrying amount. We considered such
events and circumstance including, macroeconomic factors, industry and market
conditions, financial performance indicators and measurements, and other
factors. Based on our assessment of these factors, we do not believe that it is
more likely than not that the fair value of any of our reporting units is less
than its respective carrying value, and no further testing is needed. We
concluded that there was no goodwill impairment as of May 29, 2021.

While we believe that the assumptions underlying our quantitative and
qualitative assessment are reasonable, these assumptions could have a
significant impact on whether or not a non-cash impairment charge is recognized
and also the magnitude of such charge. The results of an impairment analysis are
as of a point in time. There is no assurance that the actual future earnings or
cash flows of our reporting units will be consistent with our projections. We
will continue to monitor any changes to our assumptions and will evaluate
goodwill as deemed warranted during future periods.

Business combinations - We allocate the fair value of the purchase consideration
of our acquisitions to the tangible assets, liabilities, and intangible assets
acquired based on their estimated fair values. Purchase price allocations for
business acquisitions require significant judgments, particularly with regards
to the determination of value of identifiable assets, liabilities, and goodwill.
Often third-party specialists are used to assist in valuations requiring complex
estimation. The excess of the fair value of purchase consideration over the fair
values of these identifiable assets and liabilities is recorded as goodwill.
Acquisition-related expenses are recognized separately from the business
combination and are expensed as incurred.

Purchase agreements related to certain business acquisitions may include
provisions for the payment of additional cash consideration if certain future
performance conditions are met. These contingent consideration arrangements are
recognized at their acquisition date fair value and included as part of the
purchase price at the acquisition date. These contingent consideration
arrangements are classified as accrued liabilities or other long-term
liabilities in our Consolidated Balance Sheets and are remeasured to fair value
at each reporting period, with any change in fair value being recognized in the
applicable period's results of operations. Measuring the fair value of
contingent consideration at the acquisition date, and for all subsequent
remeasurement periods, requires a careful examination of the facts and
circumstances to determine the probable resolution of the contingency(ies). We
utilize the Monte Carlo simulation model and estimate fair value of the
contingent consideration based on unobservable input variables related to
meeting the applicable contingency conditions as per the terms of the applicable
agreements. Total contingent consideration liabilities were $7.1 million and
$7.9 million as of May 29, 2021 and May 30, 2020, respectively. Contingent
consideration adjustment was an expense of $4.5 million and $0.8 million,
respectively, for the years ended May 29, 2021 and May 30, 2020, respectively,
and a benefit of $0.6 million for the year ended May 25, 2019.

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Results of Operations

The following tables set forth, for the periods indicated, our Consolidated Statements of Operations data. These historical results are not necessarily indicative of future results.


Our operating results for the periods indicated are expressed as a percentage of
revenue below. The fiscal years ended May 29, 2021, May 30, 2020 and May 25,
2019 consisted of 52, 53, and 52 weeks, respectively. (Amounts in thousands,
except percentages.)

                                                        For the Years Ended
                                          May 29,             May 30,             May 25,
                                           2021                2020                2019
Revenue                               $ 629,516 100.0 %   $ 703,353 100.0 %   $ 728,999 100.0 %
Direct cost of services                 388,112  61.7       427,870  60.8       446,560  61.3
Gross profit                            241,404  38.3       275,483  39.2       282,439  38.7
Selling, general and                    209,326  33.3       228,067  32.4       223,802  30.7
administrative expenses
Amortization of intangible assets         5,228   0.8         5,745   0.8         3,799   0.5
Depreciation expense                      3,897   0.6         5,019   0.8         4,679   0.6
Income from operations                   22,953   3.6        36,652   5.2        50,159   6.9
Interest expense, net                     1,600   0.2         2,061   0.3         2,190   0.3
Other income                            (1,331) (0.2)         (637) (0.1)             -     -
Income before provision for              22,684   3.6        35,228   5.0        47,969   6.6
income taxes
Income tax (benefit) expense            (2,545) (0.4)         6,943   1.0        16,499   2.3
Net income                            $  25,229   4.0 %   $  28,285   4.0 %   $  31,470   4.3 %


Non-GAAP Financial Measures

We use certain non-GAAP financial measures to assess our financial and operating
performance that are not defined by, or calculated in accordance with GAAP. A
non-GAAP financial measure is defined as a numerical measure of a company's
financial performance that (i) excludes amounts, or is subject to adjustments
that have the effect of excluding amounts, that are included in the comparable
measure calculated and presented in accordance with GAAP in the Consolidated
Statements of Operations; or (ii) includes amounts, or is subject to adjustments
that have the effect of including amounts, that are excluded from the comparable
measure so calculated and presented.

Our primary non-GAAP financial measures are listed below and reflect how we evaluate our operating results.

?Same day constant currency revenue is adjusted for the following items:

oCurrency impact. In order to remove the impact of fluctuations in foreign currency exchange rates, we calculate constant currency revenue, which represents the outcome that would have resulted had exchange rates in the current period been the same as those in effect in the comparable prior period.


oBusiness days impact. In order to remove the fluctuations caused by comparable
periods having a different number of business days, we calculate same day
revenue as current period revenue (adjusted for currency impact) divided by the
number of business days in the current period, multiplied by the number of
business days in the comparable prior period. The number of business days in
each respective period is provided in the "Number of Business Days" section in
the table below.

?Adjusted EBITDA is calculated as net income before amortization of intangible
assets, depreciation expense, interest and income taxes plus stock-based
compensation expense, restructuring costs, and plus or minus contingent
consideration adjustments. Adjusted EBITDA at the segment level excludes certain
shared corporate administrative costs that are not practical to allocate.

?Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenue.

Same Day Constant Currency Revenue

Same day constant currency revenue assists management in evaluating revenue trends on a more comparable and consistent basis. We believe this measure also provides more clarity to our investors in evaluating our core operating performance and facilitates a comparison of such performance from period to period. The following table presents a reconciliation of same day constant currency revenue to revenue, the most directly comparable GAAP financial measure, by geography.


?

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                                   RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
                                    Three Months Ended              Three Months Ended              For the Years Ended
Revenue by Geography            May 29,       February 27,          May 29,        May 30,          May 29,        May 30,
                                 2021             2021                2021          2020              2021           2020
(Amounts in thousands,                (Unaudited)                       (Unaudited)                 (Unaudited, except for
except number of business                                                                                GAAP amounts)
days)
North America
As reported (GAAP)            $ 141,518     $      127,913       $   141,518     $ 148,568       $   512,777     $  580,185
Currency impact                     (4)                                (384)                               8
Business days impact            (8,709)                                8,685                           6,105
Same day constant currency
revenue                       $ 132,805                          $   149,819                     $   518,890

Europe
As reported (GAAP)            $  19,371     $       17,751       $    19,371     $  18,383       $    72,496     $   74,546
Currency impact                      37                              (1,817)                         (4,679)
Business days impact                316                                1,570                             938
Same day constant currency
revenue                       $  19,724                          $    19,124                     $    68,755

Asia Pacific
As reported (GAAP)            $  11,429     $       10,967       $    11,429     $  11,618       $    44,243     $   48,622
Currency impact                     222                                (405)                         (1,241)
Business days impact              (188)                                  711                             870
Same day constant currency
revenue                       $  11,463                          $    11,735                     $    43,872

Total Consolidated
As reported (GAAP)            $ 172,318     $      156,631       $   172,318     $ 178,569       $   629,516     $  703,353
Currency impact                     255                              (2,606)                         (5,912)
Business days impact            (8,581)                               10,966                           7,913
Same day constant currency
revenue                       $ 163,992                          $   180,678                     $   631,517

Number of Business Days
North America (1)                    65                 61                65            69               252            255
Europe (2)                           62                 63                62            67               253            257
Asia Pacific (2)                     62                 61                62            66               247            252

(1) This represents the number of business days in the U.S. (2) This represents the number of business days in the countries in which the revenues are most concentrated within the geography.



?

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Adjusted EBITDA and Adjusted EBITDA Margin


Adjusted EBITDA and Adjusted EBITDA Margin assist management in assessing our
core operating performance. We also believe these measures provide investors
with useful perspective on underlying business results and trends and facilitate
a comparison of our performance from period to period. The following table
presents Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated
and includes a reconciliation of such measures to net income, the most directly
comparable GAAP financial measure:

                                      Three Months Ended              For the Years Ended
                                      May 29,      May 30,      May 29,     May 30,    May 25,
                                       2021         2020         2021        2020       2019
                                            (Amounts in thousands, except percentages)
Net income                          $    23,248   $   4,067    $  25,229   $  28,285  $  31,470
Adjustments:
Amortization of intangible assets         1,104       1,592        5,228       5,745      3,799
Depreciation expense                        943       1,106        3,897       5,019      4,679
Interest expense, net                       284         535        1,600       2,061      2,190
Income tax (benefit) expense            (7,814)       2,948      (2,545)       6,943     16,499
Stock-based compensation expense          1,674       1,408        6,613       6,057      6,570
Restructuring costs                       (185)       4,982        8,260       4,982          -
Contingent consideration adjustment       1,460       1,914        4,512         794      (590)
Adjusted EBITDA                     $    20,714   $  18,552    $  52,794   $  59,886  $  64,617
Revenue                             $   172,318   $ 178,569    $ 629,516   $ 703,353  $ 728,999
Adjusted EBITDA Margin                    12.0%       10.4%         8.4%        8.5%       8.9%


Our non-GAAP financial measures are not measurements of financial performance or
liquidity under GAAP and should not be considered in isolation or construed as
substitutes for revenue, net income or other cash flow data prepared in
accordance with GAAP for purposes of analyzing our revenue, profitability or
liquidity. Further, a limitation of our non-GAAP financial measures is they
exclude items detailed above that have an impact on our GAAP reported results.
Other companies in our industry may calculate these non-GAAP financial measures
differently than we do, limiting their usefulness as a comparative measure.
Because of these limitations, these non-GAAP financial measures should not be
considered a substitute but rather considered in addition to performance
measures calculated in accordance with GAAP.

Year Ended May 29, 2021 Compared to Year Ended May 30, 2020

Percentage change computations are based upon amounts in thousands. Fiscal 2021 consisted of 52 weeks while fiscal 2020 consisted of 53 weeks.


Revenue.  Revenue decreased $73.8 million, or 10.5%, to $629.5 million for the
year ended May 29, 2021 from $703.4 million for the year ended May 30, 2020.
Billable hours decreased by 10.4% year-over-year in fiscal 2021, while the
average bill rate remained relatively consistent between the two periods. In
fiscal 2021, we approached pricing opportunistically with certain clients when
warranted but remained cautious to recover concessions and rebates extended
during the Pandemic. On a same day constant currency basis, revenue decreased
$71.8 million, or 10.2%, to $631.5 million for the year ended May 29, 2021 from
$703.4 million for the year ended May 30, 2020.

The following table represents our GAAP consolidated revenues by geography:

                                 For the Years Ended
                      May 29,                               May 30,
                       2021                                  2020
                      (Amounts in thousands, except percentages)
North America $      512,777     81.5 %                 $ 580,185  82.5 %
Europe                72,496     11.5                      74,546  10.6
Asia Pacific          44,243      7.0                      48,622   6.9
Total         $      629,516    100.0 %                 $ 703,353 100.0 %


Revenue declined across all geographies during fiscal 2021 as compared to fiscal
2020 due to the adverse impact of the Pandemic and fewer business days in each
geography in fiscal 2021.

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North America experienced the most significant decline at 11.6%. Revenue level
troughed during the first quarter of fiscal 2021 and has since recovered
steadily in each quarter thereafter as uncertainties related to the Pandemic
began to subside beginning in the second fiscal quarter as vaccine development
advanced. We experienced sustained improvement in revenue momentum, especially
in the fourth quarter, as both pipeline and sales productivity continued to pick
up, resulting from the combination of better operational execution and some
level of pent-up demand, especially in advisory projects, as clients begin to
resume their discretionary spending and continue to accelerate their digital and
workforce paradigm transformations. Certain macro trends accelerated by the
Pandemic, including increased use of contingent talent and the shift towards a
more agile workforce model also helped propel the momentum in professional
staffing in fiscal 2021. Our European and Asia Pacific region experienced
similar trends as North America in fiscal 2021 due to the Pandemic, albeit with
a more modest decline of 2.7% and 9.0%, respectively. Europe's revenue decline
of $2.1 million in fiscal 2021 was driven by the decline in revenue of $2.6
million as a result of exiting certain markets in connection with our
restructuring initiative, partially offset by revenue growth in certain other
European markets, as we continue to adopt an integrated global go-to-market
approach to focus on serving our tier one multi-national clients in this region.
Despite sporadic COVID-19 outbreaks in certain parts of Asia in the second half
of fiscal 2021, revenue in Asia Pacific returned to pre-Pandemic level by the
end of the fourth quarter.

To capitalize on the upward momentum in the macro environment across all three
geographies, we focused our efforts on our strategic client accounts, core
markets, key solution offerings as well as key industry verticals, and drove
meaningful acceleration and growth in the second half of the fiscal year. During
the fourth quarter of fiscal 2021, we achieved a 16.9% rebound in consolidated
revenue compared to the first quarter trough in fiscal 2021. Although still a
decline of 3.5% year over year, revenue in the fourth quarter of fiscal 2021
improved 1.2% from the prior year quarter on the same day constant currency
basis. Given the timing of our fiscal period and the latent impact of the
Pandemic in the fourth quarter of fiscal 2020, we did not yet see the full
impact of the recovery from the Pandemic in our results in the fourth quarter of
fiscal 2021.

Direct Cost of Services.  Direct cost of services decreased $39.8 million, or
9.3%, to $388.1 million for the year ended May 29, 2021 from $427.9 million for
the year ended May 30, 2020. The decrease is primarily due to a 10.4% decrease
in billable hours between the two periods offset slightly by a 2.0% increase in
the average consultant pay rates from fiscal 2020 to fiscal 2021.

Direct cost of services as a percentage of revenue was 61.7% for the year ended
May 30, 2021 compared to 60.8% for the year ended May 30, 2020. The increased
percentage compared to the prior year was partially attributable to an increase
in the pay/bill ratio of 60 basis points, as the 0.8% increase in average bill
rate was outpaced by the 2.0% increase in average pay rate during fiscal 2021
compared to fiscal 2020. This was primarily caused by a more opportunistic
pricing approach with certain clients, while offering competitive pay rates to
consultants as the labor market continues to tighten. Additionally, the increase
in non-billable pay and unfavorable healthcare costs further contributed to the
increased direct cost of services as a percentage of revenue. These negative
impacts were partially offset by lower passthrough revenue from client
reimbursement and less holiday pay due to the timing of the Memorial Day holiday
which occurred after our fiscal 2021 year-end. Our target direct cost of
services percentage is 60%.

The number of consultants on assignment at the end of fiscal 2021 was 2,902 compared to 2,495 at the end of fiscal 2020.


Selling, General and Administrative Expenses ("SG&A").  SG&A expenses were
$209.3 million, or 33.3% as a percentage of revenue, for the fiscal year ended
May 29, 2021 compared to $228.1 million, or 32.4% as a percentage of revenue,
for the fiscal year ended May 30, 2020. Contingent consideration and
restructuring costs contributed $12.8 million and $5.8 million to SG&A expense
in fiscal 2021 and 2020, respectively. Excluding contingent consideration and
restructuring costs, SG&A expense improved $25.7 million, or 11.6%, compared to
fiscal 2020. Management compensation and bonus and occupancy costs were reduced
by $12.5 million and $3.5 million, respectively, compared to the prior year,
primarily as a result of the restructuring initiatives the Company undertook at
the end of fiscal 2020 and one less week included in fiscal 2021 compared to
fiscal 2020. The Company continued to benefit from its virtual work environment
and disciplined cost measures, reducing general business expenses by $5.7
million compared to the prior year. Additionally, the Company reduced its bad
debt expense by $1.9 million compared to the prior year, as strengthened
collections drove improvement in accounts receivable aging. The Company reduced
its legal costs by $2.0 million primarily due to its continued spending
discipline and the recovery of $1.0 million of legal costs during fiscal 2021
related to a collection case. Contingent consideration expense was $4.5 million
in fiscal 2021 compared to $0.8 million in fiscal 2020.

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Restructuring charges. We initiated our North America and APAC Plan in March
2020 and the European Plan in September 2020. All employee termination and
facility exit costs incurred under the Restructuring Plans were associated with
the RGP segment, as further discussed in Note 18 - Segment Information and
Enterprise Reporting in the Notes to the Consolidated Financial Statements
included in Part II, Item 8 of this Annual Report on Form 10-K. Restructuring
costs for the years ended May 29, 2021 and May 30, 2020 were as follows (in
thousands):

                           For the Year Ended May 29, 2021            For 

the Year Ended May 30, 2020

                       North America     European                 North America     European
                       and APAC Plan       Plan        Total      and APAC Plan       Plan        Total
Employee
termination costs     $         1,024   $    4,838   $   5,862   $          3,927   $       -   $    3,927
Real estate exit
costs                           1,052          666       1,718              1,055           -        1,055
Other costs                         -          680         680                  -           -            -
Total restructuring
costs                 $         2,076   $    6,184   $   8,260   $          

4,982 $ - $ 4,982



For further information on our restructuring initiatives, please refer to Note
13 - Restructuring Activities in the Notes to the Consolidated Financial
Statements included in Part II, Item 8 of this Annual Report on Form 10-K and
"Fiscal 2021 Strategic Focus Areas" above.

Amortization and Depreciation Expense.  Amortization of intangible assets was
$5.2 million and $5.7 million in fiscal 2021 and fiscal 2020, respectively. The
decrease in amortization expense is primarily due to certain acquired intangible
assets being fully amortized at the end of the first quarter in fiscal 2021,
partially offset by the amortization of identifiable intangible assets acquired
through Veracity and certain internally developed software put in service in the
second quarter of fiscal 2021. Depreciation expense was $3.9 million and $5.0
million in fiscal 2021 and fiscal 2020, respectively. The decrease in
depreciation expense was primarily due to computer equipment becoming
fully-depreciated in periods prior to fiscal 2021, and the write-off of
leasehold improvement as part of the real estate exit initiatives executed under
the Restructuring Plans.

Other Income. Other income for fiscal 2021 was $1.3 million compared to $0.6
million for fiscal 2020. Other income in fiscal 2021 was primarily related to
government COVID-19 relief funds received globally. Other income in fiscal 2020
was primarily related to the gain on the settlement of a pre-acquisition claim
with the seller of Accretive, an acquisition completed in fiscal 2018.

Interest Expense, Net. Net interest expense for fiscal 2021, including
commitment fees, was $1.6 million compared to $2.1 million in fiscal 2020. The
decrease was due to a lower average interest rate in fiscal 2021 as compared to
the prior fiscal year.

Income Taxes. Income tax was a benefit of $2.5 million (effective tax benefit
rate of approximately 11.2%) for the year ended May 29, 2021 compared to an
expense of $6.9 million (effective tax rate of approximately 19.7%) for the year
ended May 30, 2020. We operate in an international environment. Accordingly, the
consolidated effective tax rate is a composite rate reflecting the earnings
(losses) in various locations and the applicable tax rates in those
jurisdictions, and fluctuations in the consolidated effective tax rate reflect
the changes in the mix of earnings (losses) in these jurisdictions. We record
tax expense based upon actual results versus a forecasted tax rate because of
the volatility in the profitability of our international operations. The income
tax benefit for fiscal 2021 was primarily related to our tax planning strategies
under which we elected to make certain changes to the capitalization of fixed
assets, resulting in an NOL carryback permitted under the CARES Act. As a
result, we recognized a discrete tax benefit of $12.8 million in the fourth
quarter of fiscal 2021, resulting in an overall effective tax benefit rate of
11.2% and an expected federal tax refund in the amount of $34.0 million that we
expect to file for within the next 12 months. The prior year effective tax rate
of 19.7% was primarily a result of a $6.6 million discrete tax benefit from the
deduction of the investment basis in four European entities upon their
dissolutions.

We recognized a breakeven and a net tax benefit of $0.2 million from compensation expense related to stock options, restricted stock awards, restricted stock units and disqualifying dispositions under our ESPP during fiscal 2021 and fiscal 2020, respectively.


We review the components of both book and taxable income to prepare the tax
provision. There can be no assurance that our effective tax rate will remain
constant in the future because of the lower benefit from the United States
statutory rate for losses in certain foreign jurisdictions, the limitation on
the benefit for losses in jurisdictions in which a valuation allowance for
operating loss carryforwards has previously been established, our election to
change certain tax methods, and the unpredictability of timing and the amount of
disqualifying dispositions of certain stock options. Based upon current economic
circumstances and our business performance, management will continue to monitor
the need to record additional or release existing valuation allowances in the
future, primarily related to certain foreign jurisdictions. Realization of the
currently reserved foreign deferred tax assets is dependent upon generating
sufficient future taxable income in those foreign territories.

We have maintained a position of being indefinitely reinvested in our foreign
subsidiaries' earnings by not expecting to remit foreign earnings in the
foreseeable future. Being indefinitely reinvested does not require a deferred
tax liability to be recognized on the foreign earnings. Management's indefinite
reinvestment position is supported by:

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?RGP in the United States has generated more than enough cash to fund operations and expansion, including acquisitions. RGP uses its excess cash to, at its discretion, return cash to stockholders through dividend payments and stock repurchases.


?RGP has sufficient cash flow from operations in the United States to service
its debt and other current or known obligations without requiring cash to be
remitted from foreign subsidiaries.

?Management's growth objectives include allowing cash to accumulate in RGP's profitable foreign subsidiaries with the expectation of finding strategic expansion plans to further penetrate RGP's most successful locations.

?The consequences of distributing foreign earnings have historically been deemed to be tax inefficient for RGP or not materially beneficial.

Operating Results of Segment


As discussed in Business Segments in Item 1, Note 2 - Summary of Significant
Accounting Policies and Note 18 - Segment Information and Enterprise Reporting
in the Notes to the Consolidated Financial Statements included in Part II,
Item 8 of this Annual Report on Form 10-K, we revised our historical one segment
position and identified the following new operating segments effective in the
second quarter of fiscal 2021 to align with changes made in our internal
management structure and our reporting structure of financial information used
to assess performance and allocate resources: RGP, taskforce, and Sitrick. RGP
is the Company's only reportable segment. taskforce and Sitrick do not
individually meet the quantitative thresholds to qualify as reportable segments.
Therefore, they are combined and disclosed as Other Segments.

The following table presents our operating results by segment. All prior year
periods presented in the table and referenced below were recast to reflect the
impact of the preceding segment changes (amounts in thousands, except
percentages).

                                 For the Years Ended
                            May 29,              May 30,
                           2021 (2)            2020 (2)
Revenues:
RGP                    $  587,620   93.3 % $  662,475   94.2 %
Other Segments             41,896    6.7       40,878    5.8
Total revenues         $  629,516  100.0 % $  703,353  100.0 %

Adjusted EBITDA:
RGP                    $   77,589  147.0 % $   87,836  146.7 %
Other Segments              3,580    6.8        2,601    4.3

Reconciling Items (1) (28,375) (53.8) (30,551) (51.0) Total Adjusted EBITDA $ 52,794 100.0 % $ 59,886 100.0 %



(1) Reconciling items are generally comprised of unallocated corporate
administrative costs, including management and board compensation, corporate
support function costs and other general corporate costs that are not allocated
to segments.

(2) Fiscal year 2020 consisted of 53 weeks. Fiscal year 2021 consisted of 52 weeks.


Revenue by Segment

RGP - RGP revenue decreased $74.9 million, or 11.3%, in fiscal 2021 compared to
fiscal 2020, primarily as a result of a 10.8% decline in billable hours
year-over-year. Revenue from RGP represents more than 90% of total consolidated
revenue and generally reflects the overall consolidated revenue trend.

The number of consultants on assignment under the RGP segment as of May 29, 2021 was 2,795 compared to 2,407 as of May 30, 2020.


Other Segments - Other Segments' revenue for fiscal 2021 increased $1.0 million,
or 2.5%, compared to fiscal 2020. The revenue growth was primarily due to the
continued revenue synergy generated from combining RGP Germany to operate under
taskforce despite the adverse impact from the Pandemic and the more recent
COVID-19 lock-downs in Germany.

The number of consultants on assignment under Other Segments as of May 29, 2021 was 107 compared to 88 as of May 30, 2020.

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Adjusted EBITDA by Segment


RGP - RGP adjusted EBITDA decreased $10.2 million, or 11.7%, in fiscal 2021,
compared to fiscal 2020. Adjusted EBITDA margin decreased slightly by 6 basis
points to 13.2% in fiscal 2021. Compared to the prior year, revenue decreased
$74.9 million, which was partially offset by the decrease in cost of services of
$42.0 million and significant cost savings of $22.0 million primarily in SG&A
costs attributed to RGP. The trend in revenue, cost of services and other costs
and expenses at RGP year-over-year is generally consistent with those at the
consolidated level, as discussed above, with the exception that the SG&A used to
derive segment Adjusted EBITDA does not include certain unallocated corporate
administrative costs.

Other Segments - Other Segments' adjusted EBITDA improved $1.0 million, or
37.6%, in fiscal 2021 compared to fiscal 2020. Adjusted EBITDA margin increased
by 220 basis points to 8.5% in fiscal 2021. The improvement in adjusted EBITDA
and EBITDA margin was primarily attributable to the $2.1 million improvement in
SG&A year-over-year, partially offset by higher cost of services as a percentage
of revenue, mostly driven by lower utilization of fixed salaried consultants.

Year Ended May 30, 2020 Compared to Year Ended May 25, 2019


For a comparison of our results of operations at the consolidated level for the
fiscal years ended May 30, 2020 and May 25, 2019, see Part II, Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of our Annual Report on Form 10-K for the fiscal year ended May 30,
2020, filed with the SEC on July 27, 2020 (File No. 0-32113).

Operating Results of Segment


As discussed in Business Segments in Item 1, Note 2 - Summary of Significant
Accounting Policies and Note 18 - Segment Information and Enterprise Reporting
in the Notes to the Consolidated Financial Statements included in Part II,
Item 8 of this Annual Report on Form 10-K, we reorganized our reporting segments
in fiscal 2021, and the discussion and analysis for our reporting segments set
forth below conform to the current presentation of our reporting segments.
Amounts in thousands, except percentages.

                                 For the Years Ended
                             May 30,            May 25,
                           2020 (2)            2019 (2)
Revenues:
RGP                    $  662,475   94.2 % $  689,602   94.6 %
Other Segments             40,878    5.8       39,397    5.4
Total revenues         $  703,353  100.0 % $  728,999  100.0 %

Adjusted EBITDA:
RGP                    $   87,836  146.7 % $   87,728  135.8 %
Other Segments              2,601    4.3        3,323    5.1

Reconciling Items (1) (30,551) (51.0) (26,434) (40.9) Total Adjusted EBITDA $ 59,886 100.0 % $ 64,617 100.0 %



(1) Reconciling items are generally comprised of unallocated corporate
administrative costs, including management and board compensation, corporate
support function costs and other general corporate costs that are not allocated
to segments.

(2) Fiscal year 2020 consisted of 53 weeks. Fiscal year 2019 consisted of 52 weeks.


Revenue by Segment

RGP - RGP revenue decreased $27.1 million, or 3.9%, in fiscal 2020 compared to
fiscal 2019, primarily as a result of a 3.5% decline in billable hours
year-over-year while average bill rate remained relatively consistent between
the two periods. Revenue from RGP represents more than 90% of total consolidated
revenue and generally reflects the overall consolidated revenue trend.

The number of consultants on assignment under the RGP segment as of May 30, 2020 was 2,407 compared to 2,858 as of May 25, 2019.


Other Segments - Other Segments' revenue for fiscal 2020 increased $1.5 million,
or 3.8%, compared to fiscal 2019. The improvement in revenue was primarily due
to the continued strong revenue growth at taskforce since our acquisition in
fiscal 2018.

The number of consultants on assignment under Other Segments as of May 30, 2020 was 88 compared to 107 as of May 25, 2019.

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Adjusted EBITDA by Segment


RGP - RGP adjusted EBITDA increased $0.1 million, or 0.1%, in fiscal 2020,
compared to fiscal 2019. Adjusted EBITDA margin increased by 50 basis points to
13.3% in fiscal 2020. Compared to the prior year, revenue decreased $27.1
million which was offset by a $20.1 million reduction in cost of services and
cost savings of approximately $6.6 million primarily as a result of savings in
general business expenses mainly attributable to cost containment measures and
reduced business travel during the Pandemic and a decrease in internal
consultants costs as we continued to leverage our existing resources more
efficiently on various projects and initiatives. The trend in revenue, cost of
services and other costs and expenses at RGP year-over-year is generally
consistent with that at the consolidated level, with the exception that the SG&A
used to derive segment Adjusted EBITDA does not include certain unallocated
corporate administrative costs.

Other Segments - Other Segments' adjusted EBITDA decreased $0.7 million, or
21.7%, in fiscal 2020 compared to fiscal 2019. Adjusted EBITDA margin decreased
by 210 basis points to 6.4% in fiscal 2020. The decline in adjusted EBITDA
margin was primarily attributable to higher sales commission costs at taskforce
as a result of the revenue growth.

Liquidity and Capital Resources


Our primary source of liquidity is cash provided by our operations, our
$120.0 million secured revolving credit facility with Bank of America (the
"Facility") and, historically, to a lesser extent, stock option exercises and
ESPP purchases. On an annual basis, we have generated positive cash flows from
operations since inception, and we continued to do so for the year ended May 29,
2021, despite significant additional cash payouts associated with the execution
of our restructuring initiatives across our geographies. Our ability to generate
positive cash flow from operations in the future will be, at least in part,
dependent on global economic conditions and our ability to remain resilient
during economic downturns, such as the current one caused by the Pandemic. As of
May 29, 2021, we had $74.4 million of cash and cash equivalents including $27.6
million held in international operations.

As described in Note 7 - Long-Term Debt in the Notes to Consolidated Financial
Statements included in Part II, Item 8 of this Annual Report on Form 10-K, we
entered into a Credit Agreement, dated October 17, 2016, between the Company and
Resources Connection LLC, as borrowers, and Bank of America, N.A. as lender (as
amended, the "Credit Agreement"), which provides for a Facility for working
capital and general corporate purposes, including potential acquisitions and
stock repurchases. Until September 3, 2020, the Facility consisted of (1) a
$90.0 million revolving loan facility ("Revolving Commitment"), which included a
$5.0 million sublimit for the issuance of standby letters of credits, and (ii) a
$30.0 million reducing revolving loan facility ("Reducing Revolving
Commitment"), any amounts of which could not be reborrowed after being repaid.
We entered into the Fifth Amendment to the Credit Agreement (the "Fifth
Amendment") with Bank of America, N.A. as lender on September 3, 2020, and the
Sixth Amendment to the Credit Agreement (the "Sixth Amendment") with Bank of
America, N.A. as lender on May 25, 2021, both of which amended the terms of the
Facility. The Fifth Amendment, among other things, (1) eliminated the $30.0
million Reducing Revolving Commitment and (2) increased the Revolving Commitment
by $30.0 million to $120.0 million. The Sixth Amendment, among other things, (1)
further revised the definition of Consolidated EBITDA in the Credit Agreement to
include addbacks for certain restructuring costs, (2) included customary
provisions relating to the transition from LIBOR as the benchmark interest rate
under the Credit Agreement, including providing for a Benchmark Replacement
option (as defined in the Credit Agreement) to replace LIBOR, and (3) decreased
the interest rate floor as described below.

Borrowings under the Facility bear interest at a rate per annum of either, at
our option, (i) a LIBOR interest rate defined in the Credit Agreement plus a
margin or (ii) an alternate base rate, plus a margin, with the applicable margin
depending on our consolidated leverage ratio. The alternate base rate is the
highest of (i) Bank of America's prime rate, (ii) the federal funds rate plus
0.50% and (iii) the Eurodollar rate plus 1.0%. Prior to entering into the Fifth
Amendment, the margin for loans based on LIBOR was 1.25% to 1.50%, and the
margin for loans based on the alternate base rate was 0.25% to 0.50%, and the
LIBOR interest rate floor was 0%. Effective upon entering into the Fifth
Amendment, the appliable margin increased by 0.25% and the LIBOR interest rate
floor increased to 0.25%. Effective upon entering into the Sixth Amendment, the
LIBOR interest rate floor was removed and reverted to 0%. We pay an unused
commitment fee on the average daily unused portion of the Facility, which, prior
to entering into the Fifth Amendment, was a rate of 0.15% to 0.25% per annum
depending on our consolidated leverage ratio and, effective upon entering into
the Fifth Amendment, is 0.25% per annum. The unused commitment fee remains at
0.25% per annum under the Sixth Amendment.

The Facility expires on October 17, 2022. The Facility contains both affirmative
and negative covenants. We were in compliance with all financial covenants under
the Facility as of May 29, 2021 and do not expect material uncertainties in our
continued ability to be in compliance with all financial covenants through the
remaining term of the Facility. As of May 29, 2021, our borrowings on the
Facility were $43.0 million outstanding under the Facility, bearing an average
interest rate per annum of 1.93% and we had $1.3 million of outstanding letters
of credit issued under the Facility.

The Pandemic has created significant uncertainty in the global economy and
capital markets for a large part of fiscal 2021. While there appears to be more
certainty and clarity in the macro environment and capital markets in the recent
months, there could be lingering adverse effect into the remainder of calendar
2021 and beyond. We currently believe that our cash on hand, ongoing cash flows

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from our operations and funding available under our Facility will be adequate to
meet our working capital and capital expenditure needs and fund for our
restructuring initiatives, systems and technology transformations and upgrades,
and potential future contingent consideration payments associated with our
acquisitions for at least the next 12 months and beyond.

During fiscal 2021, we paid approximately $6.5 million related to employee
termination costs, consisting of $2.5 million under the North America and APAC
Plan and $4.0 million under the European Plan. We currently estimate the cash
requirement for completing the remaining restructuring actions to be in the
range of $2 million to $4 million. The exact amount and timing of the expenses
and resulting payments are subject to a number of variables which may not be
within our control, such as the condition of the real estate/leasing market.

We also have certain contractual obligations, such as operating lease
obligations and purchase obligations. At May 29, 2021, we had operating leases,
primarily for office premises, and purchase obligations include payments due
under various types of licenses, expiring at various dates through March
2028. As described further in Note 6 - Leases in the Notes to Consolidated
Financial Statements included in Part II, Item 8 of this Annual Report on Form
10-K, we had a total of $33.2 million of minimum operating lease obligations.
These minimum lease payments range from approximately $1.6 million to $11.2
million on an annual basis over the next five years. At May 29, 2021, we had
purchase obligations of $2.3 million outstanding, including $1.9 million and
$0.4 million expiring in fiscal 2022 and fiscal 2023, respectively. Our total
liability for unrecognized tax benefits could also impact operating cash flows,
which was $872,000 as of May 29, 2021, although we are unable to reasonably
estimate the period during which this obligation may be incurred, if at all.

As described in Note 3 - Acquisitions and Dispositions in the Notes to
Consolidated Financial Statements included in Part II, Item 8 of this Annual
Report on Form 10-K, the purchase agreements for Veracity and Expertence require
cash earn-out payments to be made when certain performance conditions are met.
We estimated the fair value of contingent liabilities under the Monte Carlo
simulation model based on unobservable input variables related to meeting the
applicable contingency conditions as per the terms of the applicable agreements.
The estimated fair value of the contingent consideration liability as of May 29,
2021 was $7.1 million, all of which is due before the end of calendar 2021.

In March 2020, the CARES Act was enacted into law. The CARES Act includes
provisions, among others, addressing the carryback of net operating losses
("NOLs") for specific periods, and provides for deferral of the employer-paid
portion of the social security payroll taxes. We have elected to defer the
employer-paid portion of social security payroll taxes through December 31, 2020
until May of 2021 when we chose to make a partial payment of previously deferred
payroll taxes in the amount of $6.3 million. As of May 29, 2021, $6.3 million of
deferred payroll taxes remain and is expected to be paid in calendar 2022. In
addition, as part of our tax planning strategies, we made certain changes
related to the capitalization of fixed assets effective for fiscal 2021. This
strategy allowed us to carry back the net operating losses of fiscal 2021 to
fiscal years 2016 to 2018. We recognized a discrete tax benefit of $12.8 million
in the fourth quarter of fiscal 2021 and expect to file for a federal tax refund
in the amount of $34.0 million within the next 12 months.

Our ongoing operations and growth strategy may require us to continue to make
investments in critical markets and in systems and technology. In addition, we
may consider making strategic acquisitions or initiating additional
restructuring initiatives, which could require significant liquidity. In order
to strengthen our liquidity during the Pandemic, we took proactive measures to
increase our cash on hand including, but not limited to, borrowing of $39
million under our Facility in the fourth quarter of fiscal 2020, reducing
discretionary spending, and focusing on receivables collections efforts. We
repaid a total of $45 million on our borrowings during fiscal 2021, and another
$10 million subsequently on June 9, 2021 as a result of our ability to generate
adequate cash flows from operations and improved clarity in the capital market.

Beyond the next 12 months, if we require additional capital resources to grow
our business, either organically or through acquisition, we may seek to sell
additional equity securities, increase use of our Facility, expand the size of
our Facility or raise additional debt. In addition, if we decide to make
additional share repurchases, we may fund these through existing cash balances
or use of our Facility. The sale of additional equity securities or certain
forms of debt financing could result in additional dilution to our stockholders.
We may not be able to obtain financing arrangements in amounts or on terms
acceptable to us in the future. In the event we are unable to obtain additional
financing when needed, we may be compelled to delay or curtail our plans to
develop our business or to pay dividends on our capital stock, which could have
a material adverse effect on our operations, market position and
competitiveness. Notwithstanding the potential liquidity challenges described
above, we expect to meet our long-term liquidity needs with cash flows from
operations and financing arrangements.

However, we could be required, or could elect to seek additional funding prior
to that time. Our future capital requirements will depend on many factors,
including our ability to continue to adapt and efficiently serve our clients,
our clients' project needs in the future, and our clients' financial health and
ability to make timely payments on our receivables. A material adverse impact
from the Pandemic could result in a need for us to raise additional capital or
incur additional indebtedness to fund strategic initiatives or operating
activities.

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Operating Activities, fiscal 2021 and 2020


Operating activities provided $39.9 million and $49.5 million in cash in fiscal
2021 and fiscal 2020, respectively. Cash provided by operations in fiscal 2021
resulted from net income of $25.2 million and net favorable non-cash reconciling
adjustments of $33.9 million. These were partially offset by net unfavorable
changes in operating assets and liabilities totaling $19.2 million, primarily
consisting of an increase in income taxes receivable of $32.6 million as a
result of certain tax method changes elected in the fourth quarter of fiscal
2021 and the first quarter of fiscal 2022, which allowed us to recognize a tax
benefit of $12.8 million in fiscal 2021, as described further in Note 8 - Income
Taxes in the Notes to Consolidated Financial Statements included in Part II,
Item 8 of this Annual Report on Form 10-K, partially offset by a decrease in
trade accounts receivable of $11.4 million, mostly attributable to improved
collection on our accounts receivable and an increase in accrued salaries and
related obligations of $2.4 million primarily as a result of increased vacation
accrual year-over-year. In fiscal 2020, cash provided by operations resulted
from net income of $28.3 million and net favorable non-cash reconciling
adjustments of $21.5 million. These amounts were partially offset by a net
unfavorable change in operating assets and liabilities of $0.3 million primarily
due to a $7.9 million decrease in accounts payable, a $6.8 million decrease in
accrued salaries and related obligations and a $2.5 million increase in prepaid
income taxes, partially offset by a $10.0 million decrease in trade accounts
receivable and a $7.3 million increase in other liabilities.

Investing Activities, fiscal 2021 and 2020


Net cash used in investing activities was $3.8 million for fiscal 2021, compared
to $26.8 million in fiscal 2020. We used $3.8 million of cash in fiscal 2021 to
develop internal-use software and acquire property and equipment. In fiscal
2020, we used $30.3 million of cash (net of cash acquired) to acquire Veracity.
We also redeemed $6.0 million of short-term investments in fiscal 2020, which we
purchased in fiscal 2019.

Financing Activities, fiscal 2021 and 2020


The primary sources of cash in financing activities are borrowings under our
Facility, cash proceeds from the exercise of employee stock options and proceeds
from the issuance of shares purchased under our ESPP. The primary uses of cash
in financing activities are repayments under the Facility, payment of contingent
consideration, repurchases of our common stock and cash dividend payments to our
stockholders.

Net cash used in financing activities totaled $59.5 million in fiscal 2021
compared to net cash provided by financing activities of $30.9 million in fiscal
2020. Net cash used in financing activities during the year ended May 29, 2021
consisted of repayments on the Facility of $45.0 million, cash dividend payments
of $18.2 million, and the first Veracity contingent consideration payment, of
which $3.0 million was categorized as financing (the remaining $2.3 million of
the total $5.3 million Veracity year one contingent consideration payment was
categorized as operating cash flow). These were partially offset by $6.8 million
in proceeds received from ESPP share purchases and employee stock option
exercises. Additional information regarding dividends is included in Note 11 -
Stockholders' Equity in the Notes to Consolidated Financial Statements included
in Part II, Item 8 of this Annual Report on Form 10-K. Net cash provided by
financing activities of $30.9 million in fiscal 2020 consisted of $74.0 million
of proceeds borrowed from the Facility and $10.3 million from the issuance of
shares under ESPP and the exercise of employee stock options, partially offset
by principal repayments of $29.0 million under the Facility, $17.6 million of
cash dividend payments and $5.0 million for share repurchases.

For a comparison of our cash flow activities for the fiscal years ended May 30,
2020 and May 25, 2019, see Part II, Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of our Annual Report
on Form 10-K for the fiscal year ended May 30, 2020, filed with the SEC on July
27, 2020 (File No. 0-32113).

Recent Accounting Pronouncements


Information regarding recent accounting pronouncements is contained in Note 2 -
Summary of Significant Accounting Policies in the Notes to the Consolidated
Financial Statements included in Part II, Item 8 of this Annual Report on Form
10-K.

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