What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2023-07-25 compared with 2022-07-28 · 566 added, 537 removed, 909 unchanged (55% of the section changed)

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Repurchases under the program may take place in the open market or in privately negotiated transactions and may be made pursuant to a Rule 10b5-1 plan.

There were no repurchases of our common stock during the fourth quarter of fiscal 2022.

The following summarizes shares of common stock repurchased by the Company during the fourth quarter of fiscal 2023:

Total Number of

Approximate Dollar

Value of Shares

Part of Publicly

that May Yet be

Announced Plans or

Purchased Under

the Plans or Programs

February 26, 2023— March 25, 2023

March 26, 2023 — April 22, 2023

April 23, 2023 — May 27, 2023

Total February 26, 2023 — May 27, 2023

Performance Graph

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Our customized peer group includes the following eight professional services companies that we believe reflect the competitive landscape in which we operate and acquire talent:

Barrett Business Services, Inc.;

CRA International, Inc.;

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Heidrick & Struggles International, Inc.;

Hudson Global, Inc.;

Huron Consulting Group Inc.;

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Kforce, Inc.;

and Korn Ferry.

and MISTRAS Group, Inc.

MANAGEME NT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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See “Forward Looking Statements” above for further explanation.

Resources Global Professionals is a global consulting firm focused on project execution services that power clients’ operational needs and change initiatives with on demand experienced and diverse talent.

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.

A disruptor within the professional services industry since its founding in 1996, today the Company finds itself enjoying a highly favorable macro environment that embraces its differentiated agile delivery model.

The trends in today’s marketplace favor the flexibility and agility RGP provides as businesses confront transformation pressures and speed-to-market challenges.

Based in Irvine, California, with offices worldwide, RGP’s agile delivery model attracts top-caliber professionals with in-demand skillsets who seek a workplace environment that embraces flexibility, collaboration and human connection.

Our unique approach to workforce strategy strongly positions us to help our clients transform their businesses and workplaces, especially in a time where high-quality talent is increasingly scarce and the usage of a flexible workforce to execute transformational projects has become the dominant operating model .

Resources Global Professionals is a global consulting firm focused on project execution services that power clients’ operational needs and change initiatives utilizing on-demand, experienced and diverse talent.

As a next-generation human capital partner for our clients, we specialize in co-delivery of enterprise initiatives typically precipitated by business transformation, strategic transactions or regulatory change.

Our engagements are designed to leverage human connection, expertise and collaboration to deliver practical solutions and more impactful results that power our clients’, consultants’ and partners’ success.

A disruptor within the professional services industry since its founding in 1996, today we embrace our differentiated agile delivery model.

The trends in today’s marketplace favor flexibility and agility as businesses confront transformation pressures and speed-to-market challenges.

As talent preferences continue to shift in the direction of flexibility, choice and control, employers competing in today’s business environment must rethink the way work gets done and consider implementing new, more agile workforce strategies.

Our client engagement and talent delivery model offer speed and agility and strongly positions us to help our clients transform their businesses and workplaces, especially in a time where high-quality talent is increasingly scarce and the usage of a flexible workforce to execute transformational projects is becoming the dominant operating model.

Based in Irvine, California, with offices worldwide, we attract top-caliber professionals with in-demand skillsets who seek a workplace environment that embraces flexibility, collaboration and human connection.

Our agile professional services model allows us to quickly align the right resources for the work at hand with speed and efficiency in ways that bring value to both our clients and talent.

See Part I, Item 1 “Business” for further discussions about our business and operations.

We are laser focused on driving long-term growth in our business by seizing the favorable macro shifts in workforce strategies and preferences, building an efficient and scalable operating model, and maintaining a distinctive culture and approach to professional services.

Our enterprise initiatives in recent years include refining the operating model for sales, talent and delivery to be more client-centric, cultivating a more robust performance culture by aligning incentives to business performance, building and commercializing our digital engagement platform, enhancing our consulting capabilities in digital transformation to align with market demand and improving our fixed-cost structure through a global restructuring initiative.

Despite the impact of the Pandemic, we successfully evolved our operating model to enable us to capitalize on the prominent macro industry trends that favor our business model.

These macro industry trends include the pivot to virtual and/or hybrid working models, the dramatic shift in talent preferences toward flexibility and career control and our clients responding to these trends by embracing new, more agile, workforce strategies.

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 ability to serve multinational clients in a seamless manner, broadened our client reach in markets where we do not have a physical presence, and allowed for improved operational efficiency while offering clients and consultants more choice and agility.

As the economy reopened and recovered in fiscal 2022, our ability to flex seamlessly between traditional on-premises and virtual models has offered greater optionality in how we deliver projects and our go-to-market motion.

Removing the constraint of geo-fencing our consultants based on locality has opened new avenues of opportunity for both our clients and our talent.

This enabled us to attract and retain talent on a broader geographic basis and allowed for additional opportunities in terms of prospect cultivation, client engagement and project delivery.

Our agile talent platform has helped clients pivot their workforce and operating models in an increasingly tightening labor market.

The robust top-line growth and margin expansion we achieved in fiscal 2022 were fueled by the favorable macro shifts in both talent and client preferences driving higher supply and demand, and the operational and go-to-market improvements we have achieved through our enterprise initiatives discussed above.

We believe we are continuing to lay the right foundation for further growth ahead.

Our enterprise initiatives in recent years include refining the operating model for sales, talent and delivery to be more client-centric, cultivating a more robust performance culture by aligning incentives to business performance, building and commercializing our digital engagement platform, enhancing our consulting capabilities in digital transformation to align with market demand, improving operating leverage through pricing, operating efficiency and cost reduction, and driving growth through strategic acquisitions.

We believe our focus and execution on these initiatives will serve as the foundation for growth ahead.

Fiscal 2023 Strategic Focus Areas

Our strategic focus areas in fiscal 2022 were:

• Drive meaningful revenue growth and deliver enhanced EBITDA margin;

• Commercialize our digital strategy;

• Modernize our global technology infrastructure;

• Strengthen the RGP brand.

Drive Revenue and EBITDA Growth — Driving meaningful growth in our top-line revenue and expanding our EBITDA (earnings before interest, taxes, depreciation and amortization) margin were our highest priorities this fiscal year.

In fiscal 2022, we continued to focus on the growth of our Strategic Client Account and key industry vertical programs, particularly in healthcare, leveraging broader market talent for virtual delivery and the increasing focus on account penetration.

Since inception, our Strategic Client Account program has been one of the key drivers of revenue and business growth.

In fiscal year 2022, we successfully expanded our Strategic Client Account program by moving additional accounts into the program and adopting a client-centric and borderless approach to serve these clients.

Revenue within this client set experienced significant growth over the prior fiscal years and represented 32% of our consolidated revenue .

We believe our efforts have and will continue to allow us to develop in-depth knowledge of these clients’ needs and increase the scope and size of our projects with them.

In our healthcare industry vertical, we experienced strong growth momentum 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.

Revenue from the healthcare industry vertical grew 22% year over year.

To align with market demand, we have been expanding our capabilities in such areas as revenue integrity, clinical trials support and supply chain optimization and leveraging our depth of industry expertise to help clients operate with enhanced agility and efficiency in the rapidly evolving healthcare industry.

In addition, the continued evolution of our operating and delivery model to be more flexible, virtual, and borderless has allowed us to further penetrate existing core clients and markets as well as to uncover opportunities to effectively serve new clients in new markets.

Revenue from our regional accounts grew 30% over the prior fiscal year.

As our clients continue to accelerate their digital and workforce paradigm transformations in this still uncertain economic environment, we are well positioned to deliver greater workforce agility and flexibility to our clients.

Building on significant cost savings achieved in fiscal 2021 and the fundamental improvement in our cost structure, coupled with heightened focus on pricing and operational efficiency, we delivered significant improvement in EBITDA performance in fiscal 2022 and enhanced shareholder value.

We improved our pay/bill ratio through value-based pricing and strategic management of our direct delivery costs.

In a world with intensified competition for talent, we strive to attract high-caliber professionals with the right skillsets and qualifications at competitive pay, and appropriately capture the value of the talent and solutions delivered in our bill rates.

In addition, we maintained the structural improvement in cost leverage through disciplined management of headcount, business expenses, and real estate costs in an increasingly digital, virtual market.

Commercialize Our Digital Strategy — 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 of, 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 address their digital needs including automation and digitization of business processes as well as offering digital pathways to serve their needs.

We have completed the development of the core functionalities of HUGO, our first-to-market employed-model digital staffing platform where talent and clients can connect, engage and even transact directly.

HUGO is designed to offer clients and talent unprecedented transparency, speed, and control.

We launched a limited pilot in the New York Tri-State area in October 2021 and continued to enhance its functionality with further artificial intelligence and machine learning.

We also have been developing sales and marketing strategies to increase client and talent adoption of the platform.

In fiscal 2023, our strategic focus areas were:

 Transform digitally;

 Amplify brand voice and optimize solution offerings;

 Deepen client centricity;

 Enhance pricing;

 Pursue targeted mergers and acquisitions.

Transform digitally – Our first area of focus was to improve operational efficiency, scale business growth, transform stakeholder experience and create long-term sustainability and stockholder value through digital means.

We believe the use of technology platforms to match clients and talent is the future of professional staffing.

HUGO by RGP ® (“HUGO”), our digital engagement platform, offers such an experience for clients and talent in the professional staffing space to connect, engage and even transact directly.

We piloted the platform in three primary markets – New York/New Jersey, Southern California and Texas, and have continued to expand its functionality with further artificial intelligence and machine learning.

We have also been developing sales and marketing strategies to increase client and talent adoption of the platform.

We plan to expand the geographic reach to other key markets within the U.S.

such as California and Texas in fiscal 2023.

Additionally, our efforts to commercialize our digital strategy this year included the acceleration of digital transformation revenue through the continued expansion of go-to-market penetration for Veracity in North America.

We continued to drive enhancement in 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 has generated positive returns since inception, with Veracity revenue growing 16% year over year in fiscal 2022.

We believe the increase in virtual or remote delivery arrangements resulting from the Pandemic has and will continue to accelerate digital transformation agendas in our existing client base and create opportunities for us to engage with new clients, contributing to further top-line revenue growth.

Modernize Our Global Technology Infrastructure — In the third quarter of fiscal 2022, we launched a holistic digital transformation project to elevate our technology infrastructure globally, including a cloud-based enterprise resource planning system and talent acquisition and management system.

We believe our investment in this technology initiative will accelerate our efficiency and data-led decision-making capabilities, optimize process flow and automation, scale our operations to support future growth, and create an enhanced digital experience for our consultants, clients and employees.

Strengthen the RGP Brand — We have continued to build upon the brand work conducted to date to further clarify and amplify our brand positioning in the marketplace.

Our employer-facing brand will continue to focus on the power of human.

Through enhanced transparency, flexibility and digital connection, fulfilling assignments, competitive compensation and benefits and continued education,

training and professional development, we are strengthening our professional community and delivering care and wellbeing to our consultants and employees.

We are positioning ourselves as the preferred professional environment for talent looking for greater flexibility, choice and career control than traditional employment models can offer.

As we announced at our Investor Day, held on April 12, 2022 at Nasdaq Marketplace, our corporate brand will focus on helping both talent and clients work differently in the new world of work.

We believe we are poised to own a dominant position as a leading project execution partner of choice and the brand work that we are doing is intended to support that effort.

in fiscal 2024 .

Over time, we expect to be able to drive volume through the HUGO platform by attracting more small- and medium-sized businesses looking for interim support and by serving a larger percentage of our current professional staffing business, which we believe will not only drive top-line growth but also enhance profitability.

We made significant progress executing the multi-year project to modernize and elevate our technology infrastructure globally, including a cloud-based enterprise resource planning system and talent acquisition and management system.

The new systems are expected to be deployed globally in two phases, first in North America, then in the Europe and Asia Pacific regions.

As of end of the fiscal year, we completed our global system design as well as configuration and build for the North America phase according to our project roadmap and expect to go live in North America in fiscal 2024.

We believe our investment in these technology transformation initiatives will accelerate our efficiency and data-led decision-making capabilities, optimize process flow and automation, improve consultant recruitment and retention, drive business growth with operational agility, scale our operations and further support our growth, goals and vision.

The third component of our digital transformation is to expand our digital consulting capabilities and geographic reach to better serve our clients.

As our clients continue to accelerate their digital and workforce paradigm transformations, the need for automation and self-service has been an increasing trend.

In fiscal 2023, we established a delivery hub in India to strengthen and augment our digital delivery capabilities;

we integrated our digital business in Asia Pacific with Veracity in North America to scale our digital practice and to expand our geographic reach;

we fortified our digital sales and business development infrastructure positioning us for growth;

and finally we successfully penetrated into many new clients across the globe with our digital transformation services.

We believe demand in the digital transformation arena will continue to be a growth driver for our business.

Amplify brand voice and optimize solution offerings – Our second focus area for fiscal year 2023 was to bring clarity and attention to our brand positioning to own the opportunity around project execution.

RGP has always focused our business on project execution, which is a distinct space on the continuum between strategy consulting and interim deployment.

Our business model of utilizing experienced talent to flatten the traditional consulting delivery pyramid is highly sought after in today’s market.

Most clients are capable of formulating business strategy organically or with the help of a strategy firm;

where they need help is in the ownership of executing the strategy.

In fiscal 2023, we made progress on clarifying our brand and activating our new brand positioning with our new tagline ― Dare to Work Differently.

TM ― which we believe showcases our hybrid workforce strategy and our ability to execute with subject matter expertise where our clients need us most.

Our co-delivery ethos was focused around partnering with clients on project execution.

Our brand marketing will continue to emphasize and accentuate our unique qualifications in this arena.

We believe clear articulation and successful marketing of our distinctive market position is key to attracting and retaining both clients and talent, enabling us to drive growth.

Key focus areas supporting this initiative included:

refining and finalizing our proposed solution architecture that clearly defines RGP’s core service offerings and streamlines the sales process;

validating the proposed messaging and architecture via roundtables with internal and external stakeholders;

and launching the new brand positioning and messaging through dynamic assets such as advertising campaigns, videos and events.

Deepen client centricity – The third area of focus for fiscal 2023 was to continue to deepen and broaden our trusted client relationships through expanded marquee account and key industry vertical programs to increase account penetration.

We maintained our Strategic Client Account program to serve a number of our largest clients with dedicated global account teams.

During fiscal 2023, we expanded the Strategic Client Account and industry programs by adding clients and taking a more client-centric and borderless approach to serving these clients.

We believe this focus has and will continue to enhance our opportunities to develop in-depth knowledge of these clients’ needs and the ability to increase the scope and size of projects with those clients.

In addition, we formed a new Emerging Accounts program, which consists of smaller clients where demand tends to be more episodic.

Our newly formed dedicated account team has been able to serve this segment of clients with more focus and attention while nurturing and growing the depth of client relationships.

Our services continue to emphasize a relationship-oriented approach to business rather than a transaction-oriented or assignment-oriented approach.

Client relationships and needs are addressed from a client-centric, not geographic, perspective so that our experienced management team and consultants understand our clients’ business issues and help them define their project needs to deliver an integrated, relationship-based approach to meeting the clients’ objectives.

We believe that by continuing to deliver high-quality services and by deepening our relationships with our clients, we can capture a significantly larger share of our clients’ professional services budgets.

Enhance pricing – Fourth, we have made solid progress in evolving and enhancing our pricing strategy to ensure we adopt a value-based approach for our project execution services, which has become increasingly more relevant and in demand in the current macro environment.

As we deepen our client relationships and raise our clients’ perception of our ability to add value through our services, we anticipate further increasing bill rates for our services to appropriately capture the value of the talent and solutions delivered.

We created more centralized pricing governance, strategy and approach;

we conducted a deep pricing analysis to identify and develop areas that need improvement;

and we instituted new pricing training for all sales, talent and other go-to-market team members.

Through these actions, we have been able to achieve higher bill rates across a majority of the markets in the current fiscal year to drive topline revenue and profitability.

Pursue targeted mergers and acquisitions – Lastly, we have been actively pursuing strategic acquisitions to accelerate growth.

Our acquisition strategy is centered around driving additional scale or expanding consulting capabilities that complement or augment our existing core competencies.

In particular, we have been actively building a pipeline of acquisition opportunities in the areas of digital and CFO services consulting.

We believe our expansive client base, deep client relationships and expert agile talent pool are attractive value propositions to potential targets and will enable us to drive post acquisition synergies and growth for the business.

Critical Accounting Policies and Estimates

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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.

The following represents a summary of our accounting policies that involve critical accounting estimates, defined as those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

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.

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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.

An increase in the valuation allowance results in recording additional tax expense and any such adjustment may materially affect our future financial results.

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.

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As of May 27, 2023 and May 28, 2022, a valuation allowance of $6.5 million and $8.2 million was established on deferred tax assets totaling $33.2 million and $34.3 million, respectively.

Our income tax for the years ended May 28, 2022, May 29, 2021 and May 30, 2020 was an expense of $15.8 million, a benefit of $2.5 million and an expense of $6.9 million, respectively.

Our total liability for unrecognized tax benefits was $0.9 million as of both May 28, 2022 and May 29, 2021.

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.

Our income tax for the years ended May 27, 2023, May 28, 2022 and May 29, 2021 was an expense of $18.3 million, an expense of $15.8 million and a benefit of $2.5 million, respectively.

As of May 27, 2023 and May 28, 2022, our total liability for unrecognized tax benefits was $1.0 million and $0.9 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 awards, 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 at a discount in accordance with the terms of the plan.

During fiscal 2022, the Company started issuing performance stock unit awards under the 2020 Performance Incentive Plan that will vest upon the achievement of certain company-wide performance targets at the end of the defined three-year performance period.

Vesting periods for restricted stock, restricted stock units and stock option awards range from three to four years.

During fiscal 2023, the Company issued performance stock unit awards under the 2020 Performance Incentive Plan that will vest upon the achievement of certain company-wide performance targets at the end of the defined three-year performance period.

Vesting periods for restricted stock awards, restricted stock units and stock option awards range from three to four years.

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, restricted stock unit and performance stock unit awards using the closing price of our common stock on the date of grant.

We determine the estimated value of restricted stock awards, restricted stock unit and performance stock unit awards using the closing price of our common stock on the date of grant.

We have 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 complex and subjective variables.

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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.

We use our historical volatility over the expected life of the stock option award and ESPP 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.

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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.

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The following is a discussion of our goodwill impairment tests performed during fiscal 2023.

Third Quarter 2023 Goodwill Impairment Test

As further discussed in Note 2 – Summary of Significant Accounting Policies and Note 5 – Goodwill and Intangible Assets in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, during the third quarter of fiscal 2023, the Company determined the existence of impairment indicators on goodwill associated with Sitrick, one of the Company’s operating segments and reporting units, as a result of its declining business performance.

Based on the quantitative

impairment test, the Company concluded that the carrying amount of Sitrick exceeded its fair value, which resulted in an impairment charge of $3.0 million on the goodwill within the Company’s Other Segments on the Consolidated Statements of Operations.

No goodwill remains within Other Segments as of May 27, 2023.

2023 Annual Goodwill Impairment Analysis

We performed our annual goodwill impairment test as of May 28, 2022 on our three reporting units.

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.

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 performed our annual goodwill impairment test as of May 27, 2023 on our RGP reporting unit.

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 our reporting unit is less than its carrying amount.

We considered such events and circumstances 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 our reporting unit is less than its carrying value, and no further testing is needed.

We concluded that there was no goodwill impairment as of May 27, 2023.

While we believe that the assumptions underlying our qualitative assessment are reasonable, these assumptions could have a significant impact on whether 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.

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We will continue to monitor any changes to our assumptions and will evaluate goodwill as deemed warranted during future periods.

R esults 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 28, 2022, May 29, 2021 and May 30, 2020 consisted of 52, 52, and 53 weeks, respectively (amounts in thousands, except percentages).

For the Years Ended

Direct cost of services

Selling, general and administrative expenses

Amortization expense

Depreciation expense

Income from operations

Interest expense, net

Income before provision for income taxes

Income tax expense (benefit)

Non-GAAP Financial Measures

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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 expense, depreciation expense, interest and income taxes plus stock-based compensation expense, restructuring costs, technology transformation costs, and plus or minus contingent consideration adjustments.

 EBITDA is calculated as net income before amortization expense, depreciation expense, interest and income taxes.

 Adjusted EBITDA is calculated as EBITDA plus or minus stock-based compensation expense, technology transformation costs, goodwill impairment, restructuring costs, and contingent consideration adjustments.

Adjusted EBITDA at the segment level excludes certain shared corporate administrative costs that are not practical to allocate.

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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.

The following table presents a reconciliation of same-day constant currency revenue, a non-GAAP financial measure, to revenue as reported in the Consolidated Statements of Operations, the most directly comparable GAAP financial measure, by geography.

RESOURCES CONNECTION, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

Three Months Ended

(In thousands, except number of business days)

Three Months Ended

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Revenue by Geography

(Amounts in thousands, except number of business days)

(Unaudited, except for GAAP amounts)

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Asia Pacific (3)

(1) Total Consolidated revenue and Europe revenue as reported under GAAP include taskforce revenue of zero and $7.7 million for the three months ended May 27, 2023 and May 28, 2022, respectively, and $0.2 million and $27.6 million for the year ended May 27, 2023 and May 28, 2022, respectively.

(2) This represents the number of business days in the U.S.

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

(3) The business days in international regions represents the weighted average number of business days.

EBITDA, A djusted EBITDA and Adjusted EBITDA Margin

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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 EBITDA, 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 (amounts in thousands, except percentages).

RESOURCES CONNECTION, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands, except percentages)

For the Years Ended

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Stock-based compensation expense

Technology transformation costs (1)

Goodwill impairment (2)

Restructuring costs (3)

Contingent consideration adjustment

Technology transformation costs (1)

Adjusted EBITDA

(1) Technology transformation costs represent costs included in net income related to the Company’s initiative to upgrade its technology platform globally, including a cloud-based enterprise resource planning system and talent acquisition and management system.

Costs for the fiscal year ended May 28, 2022 primarily include software licensing costs, third-party consulting fees and costs associated with dedicated internal resources.

Such costs primarily include software licensing costs, third-party consulting fees and costs associated with dedicated internal resources that are not capitalized.

(2) Goodwill impairment charge recognized during the year ended May 27, 2023 was related to Sitrick operating segment.

(3) The Company substantially completed our global restructuring and business transformation plan (the “Restructuring Plans”) in fiscal 2021.

All remaining accrued restructuring liability on the books related to employee termination costs was either paid or released as of May 27, 2023.

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 measures of financial performance or financial condition prepared in accordance with GAAP for purposes of analyzing our revenue, profitability or liquidity.

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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.

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 27, 2023, May 28, 2022 and May 29, 2021 all consisted of 52 weeks (in thousands, except percentages).

For the Years Ended

Direct cost of services

Selling, general and administrative expenses

Amortization expense

Depreciation expense

Goodwill impairment

Income from operations

Interest expense, net

Income before income tax

expense (benefit)

Income tax expense (benefit)

Year Ended May 27, 2023 Compared to Year Ended May 28, 2022

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Fiscal 2023 and fiscal 2022 consisted of 52 weeks.

Revenue increased $175.5 million, or 27.9%, to $805.0 million for the year ended May 28, 2022 from $629.5 million for the year ended May 29, 2021.

On a same-day constant currency basis, revenue increased 28.7% in fiscal 2022 compared to fiscal 2021.

In addition to higher volume of billable hours, we improved bill rates.

Billable hours increased by 25.0% and the average bill rate improved 2.4% year over year, meaningfully contributing to the overall year over year revenue growth in fiscal 2022.

The following table represents our GAAP consolidated revenues by geography (amounts in thousands, except percentages) :

Revenue decreased $29.4 million, or 3.6%, to $775.6 million for the year ended May 27, 2023 from $805.0 million for the year ended May 28, 2022.

We completed the sale of taskforce on May 31, 2022.

Refer to Note 3 – Dispositions in the Notes to Consolidated Financial Statements for further information.

Excluding $27.6 million of revenue attributable to taskforce during the year ended 2022, revenue in fiscal 2023 was relatively consistent with the prior year (increased 1.1% on a same-day constant currency basis).

The following table represents our GAAP consolidated revenues by geography (in thousands, except percentages) :

For the Years Ended

North America

Revenue grew across all geographies during fiscal 2022 compared to fiscal 2021, as we continued to benefit from favorable secular trends including a shift in businesses adopting more workforce agility, workforce gaps caused by the tightening labor market, the demand for digital transformation services, an increase in client spending on significant and transformational initiatives, our sustained improvement in sales execution and operational efficiency to match supply and demand and continued progress in raising our bill rates.

The strong revenue performance was also driven by our client segmentation and client service strategy to deepen our relationship within the Strategic Client Account base as well as other key client sets to further expand our presence across multiple buying centers.

Our successful execution led to larger deal sizes, longer project durations and record high pipelines and closed deals.

The robust revenue growth was across most client segments, and the majority of our markets, and was led by solution areas in Finance and Accounting, Risk and Compliance and Business Transformation.

North America experienced robust revenue growth of 31.9%, or 32.4% on a same-day constant currency basis, compared to fiscal 2021.

As the macro economy in the U.S.

continued to strengthen in fiscal 2022, our clients increased their spending to advance change initiatives, such as finance and digital and workforce paradigm transformation.

The tightening labor market and almost record low unemployment rate drove significant growth in our professional staffing revenue, particularly in the U.S., as our clients looked to us to supply quality talent to fill their temporary workforce gaps.

The shift towards workforce agility and the increased acceptance of co-delivery and remote delivery not only enhanced our value proposition to our clients, but also allowed for better and more efficient matching of supply and demand, enabling us to achieve sustained improvement in our operational efficiency.

In Europe, our adoption of a more integrated global go-to-market approach to focus on serving our tier one multi-national clients in this region also drove sustained top-line growth.

Europe revenue in fiscal 2022 grew 4.9%, or 7.0% on a same-day constant currency basis, compared to fiscal 2021.

Asia Pacific revenue improved 18.7%, or 22.1% on a same-day constant currency basis, compared to fiscal 2021, as the economies in this region continued to strengthen despite episodic COVID-19 outbreaks.

Revenue in North America grew 0.7% (0.6% on a same-day constant currency basis) compared to fiscal 2022.

Due to a robust backlog and healthy demand environment at the start of the fiscal year, we saw a strong revenue trend in the first half of fiscal 2023.

As the macro economy gradually softened throughout the remainder of the fiscal year, the overall pace of client initiatives and spend also slowed down, leading to a more muted revenue trend in the second half of the fiscal year.

While our pipeline activities remained healthy throughout the year, the sales cycle lengthened, leading to slower revenue conversion.

In certain cases, we also experienced delays in engagement starts as clients managed through their own budgetary considerations.

Total billable hours decreased by 3.0% compared to fiscal 2022, while the average bill rate increased by 3.9% as we continue to pursue strategic pricing.

Our Strategic Client Accounts continued to perform well during the current fiscal year.

Revenues from our Strategic Client Accounts in North America grew 2.7% during fiscal 2023 compared to fiscal 2022.

From a solution standpoint, Finance and Accounting continued to be resilient at a 3.2% growth rate while Technology and Digital displayed particular strength with an 11.8% growth rate despite the softer macro environment, partially offset by softer performance in certain other solution offerings.

E uropean revenue decreased 44.1% (37.2% on a same-day constant currency basis) during fiscal 2023 compared to fiscal 2022.

Excluding the impact of the taskforce divestiture, revenue in Europe decreased 12.8% (2.0% on a same-day constant currency basis).

The decline in Europe’s revenue was primarily the result of delayed client buying patterns throughout the current fiscal year due to

uncertainties in the macro environment in the European reg ion.

Excluding taskforce which historically carried higher bill rates, average bill rate was lower by 2.5% (higher by 7.4% on a constant currency basis) and billable hours declined by 11.0% during fiscal year 2023 compared to fiscal year 2022.

Asia Pacific revenue declined slightly by 0.7%, although it represented a 10.7% increase on a same-day constant currency basis during fiscal 2023 compared to fiscal 2022.

The growth in Asia Pacific revenue on a same-day constant currency basis is primarily driven by a 5.6% increase in billable hours, which was partially offset by a lower average bill rate of 6.5% (although a 3.3% increase on a constant currency basis).

The notable revenue growth in Asia Pacific on a same-day constant currency basis was primarily driven by our Strategic Client Accounts as large global businesses continue to shift share services centers to the Asia Pacific region driving demand for our services.

Direct Cost of Services .

Direct cost of services increased $100.3 million, or 25.8%, to $488.4 million during fiscal 2022 from $388.1 million for fiscal 2021.

The increase in direct cost of services year over year was primarily attributable to a 25.0% increase in billable hours.

Direct cost of services decreased $25.9 million, or 5.3%, to $462.5 million during fiscal 2023 from $488.4 million for fiscal 2022.

The decrease in direct cost of services year over year was primarily attributable to a 4.7% decrease (2.6% decrease on a constant currency basis) in average pay rate during fiscal 2023 compared to fiscal 2022.

The decrease in average pay rate was largely attributable to the divestiture of taskforce , which historically carried higher pay rates.

Billable hours decreased 3.9% (1.9% excluding taskforce ) during fiscal 2023 compared to fiscal 2022.

Direct cost of services as a percentage of revenue was 59.6% for fiscal 2023 compared to 60.7% for fiscal 2022.

The decreased percentage compared to the prior year was primarily attributable to bill rate increases leading to an improvement of 100 basis points in the overall pay/bill ratio.

Pay rate increases were relatively modest in fiscal 2022 despite tight labor supply conditions and rising wages.

In addition to these macro labor market conditions, other factors impacting average pay rate included the impact of revenue mix across solutions and geographies and foreign currency fluctuations against the U.S.

Our target direct cost of services percentage is below 60%.

The decreased percentage compared to the prior year was primarily attributable to a 220 basis point reduction in the overall pay/bill ratio.

This favorable impact was partially offset by an increase in employee-related benefits, primarily in self-insured medical costs and holiday pay.

The number of consultants on assignment at the end of fiscal 2023 was 3,145 compared to 3,388 at the end of fiscal 2022.

Selling, General and Administrative Expenses .

SG&A was $224.7 million, or 27.9% as a percentage of revenue, for the year ended May 28, 2022 compared to $209.3 million, or 33.3% as a percentage of revenue, for the year ended May 29, 2021.

SG&A as a percentage of revenue improved by 5.4% in fiscal 2022 compared to fiscal 2021 as a result of the improvement in our operating leverage due to significant year over year revenue growth.

The $15.4 million increase in SG&A year over year was primarily attributed to (1) a $21.0 million increase in management compensation and benefits primarily related to higher incentive compensation due to significant growth in both revenue and profitability, (2) a $1.6 million increase in stock-based compensation expense, (3) an increase of $1.4 million in technology transformation costs incurred in fiscal 2022, (4) a $1.3 million increase in other business and travel expenses as the impact of the Pandemic subsided and business travel started to resume gradually, (5) a $1.2 million increase in computer software and consulting costs, (6) $0.5 million of impairment related to exiting a real estate facility, and (7) a $1.2 million increase in all other general and administration expenses.

These incremental costs were partially offset by (1) a decrease of $7.4 million in restructuring costs as the restructuring activities wound down toward completion in fiscal 2022, (2) a $4.3 million adjustment related to the Veracity contingent consideration recorded in the prior year, and (3) a $1.1 million gain in foreign currency related to the dissolution of a foreign entity in the third quarter of fiscal 2022.

Selling, general and administrative expenses (“SG&A”) was $228.8 million, or 29.5% of revenue, for the year ended May 28, 2023 compared to $224.7 million, or 27.9% of revenue, for the year ended May 28, 2022.

The $4.1 million increase in SG&A year-over-year was primarily attributed to an increase of $7.7 million in management compensation, an increase of $4.9 million in technology transformation costs, a $2.4 million increase in business and travel expenses as business travel normalizes post Pandemic to reflect a hybrid work model, a $1.4 million increase in stock-based compensation expense, a $1.3 million increase in computer software costs, an increase of $0.9 million in bad debt expenses, an increase of $0.9 million in self-insurance medical benefits, an increase of $0.9 million resulting from the adverse effect of changes in foreign currency exchange rates, and a $2.9 million increase in all other general and administration expenses to support the business.

These incremental costs were partially offset by lower bonus and commissions of $16.1 million due to lower revenue and profitability achievement compared to the incentive targets, a decrease in occupancy costs of $1.9 million from real estate footprint reduction , and a $1.2 million decrease in restructuring costs related to exiting certain markets and real estate facilities in fiscal 2022.

Management and administrative headcount was 917 at the end of fiscal 2023 and 871 at the end of fiscal 2022.

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Any unutilized time is converted to full-time equivalent headcount.

Restructuring charges .

The Company initiated its global restructuring and business transformation plan in North America and Asia Pacific (the “North America and APAC Plan”) in March 2020 and in Europe (the “European Plan” and, together with the North America and APAC Plan, the “Restructuring Plans”) in September 2020.

We substantially completed our Restructuring Plans in fiscal 2022.

All employee termination and facility exit costs incurred under the Restructuring Plans were associated with the RGP segment, and are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations, as further discussed in Note 19 – Segment Information and Enterprise Reporting in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Restructuring costs for the years ended May 28, 2022, May 29, 2021 and May 30, 2020 were as follows (amounts in thousands):

For the Year Ended

‎ May 28, 2022

Goodwill Impairment.

During the third quarter of fiscal 2023, we completed a goodwill impairment analysis for Sitrick, a strategic and crisis communications business acquired in 2009.

Many of Sitrick’s target clients were impacted by the initial closures of U.S.

courts during the Pandemic and the continued lingering impact on the court system despite the reopening, resulting in less opportunities and a slower revenue conversion typically provided by Sitrick.

As a result, we performed a qualitative and quantitative impairment analysis relating to the goodwill within Sitrick as of February 25, 2023.

We determined that the carrying value of Sitrick was in excess of its fair value and as such fully impaired its goodwill in the amount of $3.0 million during the third quarter of fiscal 2023.

Goodwill within the Other Segments remained at zero as of May 27, 2023 .

Restructuring Costs .

We substantially completed the Restructuring Plans in fiscal 2021.

Restructuring costs for the years ended May 27, 2023 and May 28, 2022 were as follows (in thousands):

For the Year Ended

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European Plan

North America and APAC Plan

European Plan

Employee termination costs

Real estate exit costs

Total restructuring costs

For further information on our restructuring initiatives, please refer to Note 14 – Restructuring Activities in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Employee termination costs (adjustments)

Real estate exit costs (adjustments)

Total restructuring costs (adjustments)

All employee termination and facility exit costs incurred under the Restructuring Plans were considered completed as of August 27, 2022, and as a result, the remaining accrued restructuring liability on the books was released.

Restructuring liability was zero and $0.4 million as of May 27, 2023 and May 28, 2022, respectively.

Amortization and Depreciation Expense .

Amortization expense was $5.0 million and $4.9 million in fiscal 2023 and fiscal 2022, 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 our internally developed digital engagement platform (HUGO).

HUGO was placed in service in October 2021 as we launched the software in the New York Tri-state area, resulting in amortization expense associated with the development costs in fiscal 2022.

Depreciation expense was $3.5 million and $3.6 million in fiscal 2023 and fiscal 2022, respectively.

The decrease in depreciation expense was primarily due to fully-depreciated computer equipment during fiscal 2022.

Income Taxes.

The provision for income taxes was $15.8 million (effective tax rate of 19.0%) for the year ended May 28, 2022 compared to an income tax benefit of $2.5 million (effective benefit rate of 11.2%) for the year ended May 29, 2021.

We record tax expense based upon actual results versus a forecasted tax rate because of the volatility in our international operations that span numerous tax jurisdictions and the resulting uncertainty of our ability to utilize historical net operating losses in such jurisdictions.

The current year rate benefitted from the improvement in operating results in the international entities, enabling us to utilize the benefits from historical net operating losses in certain foreign jurisdictions by reversing a $4.9 million valuation allowance in a specific European entity in the third quarter.

The Company also recognized a $2.6 million benefit from the dissolution of our France entity.

In fiscal 2021, we recognized a $12.8 million benefit from the carryback of net operating losses to higher tax rate years as permitted under the Coronavirus Aid, Relief, and Economic Security Act (“ CARES Act”) in the U.S., resulting in an effective tax benefit rate of 11.2%.

The losses carried back resulted from accounting method changes in the treatment of self-constructed assets.

We recognized a net tax benefit of $2.1 million for fiscal 2022 and a breakeven impact in fiscal 2021 from compensation expense related to stock options, restricted stock awards, restricted stock units, performance stock units and ESPP during fiscal 2022 and fiscal 2021, respectively.

The provision for income taxes was $18.3 million (effective tax rate of 25.1%) for the year ended May 27, 2023 compared to $15.8 million (effective tax rate of 19.0%) for the year ended May 28, 2022.

The lower effective tax rate for fiscal 2022 when compared to fiscal 2023 was primarily attributed to a non-recurring tax benefit of $2.6 million from the dissolution of our French entity and a tax benefit of $4.9 million from the release of a valuation allowance in Europe in the prior fiscal year as compared to $1.9 million of valuation allowance release in fiscal 2023.

We recognized a tax benefit of approximately $2.1 million and $2.0 million for the years ended May 27, 2023 and May 28, 2022, respectively, associated with the exercise of nonqualified stock options, vesting of restricted stock awards and restricted stock units, and disqualifying dispositions by employees of shares acquired under the ESPP .

We reviewed the components of both book and taxable income to prepare the tax provision.

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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, 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.

Realization of the currently reserved deferred tax assets is dependent upon generating sufficient future taxable income in the domestic and 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.

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 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 19 – Segment Information and Enterprise Reporting in the Notes to 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.

Operating Results of Segments

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 Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, the Company divested taskforce on May 31, 2022.

Since the second quarter of fiscal 2021 and prior to the divestment, the business operated by taskforce , along with its parent company, Resources Global Professionals (Germany) GmbH, an affiliate of the Company, represented an operating segment of the Company and was reported as a part of Other Segments.

Effective May 31, 2022, the Company’s operating segments consist of RGP 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.

We regularly evaluate all parts of our business to ensure that we align our time, resources and efforts to market opportunities that will enable us to maximize profitability and shareholder value.

On May 31, 2022, we completed the sale of taskforce to the senior leaders of the business.

We believe an interim management business that primarily serves the middle market client base in Germany no longer aligns with our strategy in the European region, which highly focuses on providing project consulting and execution services to large global clients.

Beginning in fiscal 2023, we will operate in the remaining two operating segments, RGP and Sitrick.

See the discussion in Note 2 – Summary of Significant Accounting Policies and Note 20 – Subsequent Events in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

The following table presents our operating results by segment (amounts in thousands, except percentages):

Sitrick does not individually meet the quantitative threshold to qualify as a reportable segment.

Therefore, Sitrick is disclosed as Other Segments.

Prior-period comparative segment information was not restated as a result of the divestiture of taskforce as we did not have a change in internal organization or the financial information our Chief Operating Decision Maker uses to assess performance and allocate resources.

The following table presents our current operating results by segment (in thousands, except percentages):

For the Years Ended

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Total revenue

For the Years Ended

Adjusted EBITDA:

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Total Adjusted EBITDA (3)

(1) Amounts reported in Other Segments for the year ended May 27, 2023 include Sitrick and an immaterial amount from taskforce from May 29, 2022 through May 31, 2022, the completion date of the sale.

Amounts previously reported for the years ended May 28, 2022 included the Sitrick and taskforce operating segments .

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

(2) A reconciliation of the Company’s net income to Adjusted EBITDA on a consolidated basis is presented above under “Non-GAAP Financial Measures--Reconciliation of GAAP to Non-GAAP Financial Measures.”

(3) A reconciliation of the Company’s net income to Adjusted EBITDA on a consolidated basis is presented above under “Non-GAAP Financial Measures.”

Revenue by Segment

RGP – RGP revenue increased $176.7 million, or 30.1%, to $764.4 million compared to $587.6 million in fiscal 2021, primarily as a result of a 25.6% increase in billable hours and a 3.3% increase in bill rate year over year.

Revenue from RGP generally represents more than 90% of total consolidated revenue.

Geographic revenue trends in North America and Asia Pacific within the RGP segment are consistent with the revenue trends discussed within Consolidated Operating results above.

Revenue in the European region within the RGP segment grew by 8.1%, or 8.8% on a same-day constant currency basis, during fiscal 2022 compared to fiscal 2021.

The growth in the European region outside of Germany was led by continued penetration and growth in the Strategic Client Account base.

RGP – RGP revenue remained consistent at $764.5 million in fiscal 2023 compared to $764.4 million in fiscal 2022.

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 27, 2023 was 3,131 compared to 3,263 as of May 28, 2022.

Other Segments – Other Segments’ revenue decreased $1.2 million, or 2.9%, in fiscal 2022 compared to fiscal 2021, primarily due to a $1.2 million decrease in Sitrick revenue.

The declines in Sitrick revenue during fiscal 2022 compared to the prior year were primarily due to the closure of the U.S.

Other Segments – Other Segments’ revenue decreased $29.5 million, or 72.6%, to $11.1 million in fiscal 2023 compared to fiscal 2022, as a result of a $27.3 million decline in revenue from the divestiture of taskforce in fiscal 2023 and a $2.2 million decline in Sitrick revenue.

The decline in Sitrick revenue during fiscal 2023 compared to the prior year was primarily due to the closure of the U.S.

courts during the Pandemic and the continued lingering impact on the court system, resulting in slower business development and revenue conversion.

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Adjusted EBITDA by Segment

RGP – RGP Adjusted EBITDA increased $56.6 million, or 72.9%, to $134.2 million in fiscal 2022, compared to $77.6 million in fiscal 2021.

The increase was primarily attributable to the $176.7 million increase in segment revenue partially offset by the increase in the related cost of services of $101.0 million.

Additionally, SG&A costs attributed to RGP increased $18.4 million in fiscal 2022 as compared to fiscal 2021 primarily due to the increase in bonuses and commissions of $17.8 million as a result of higher revenue and profitability achieved;

an increase in other business and travel expenses of $1.2 million as the impact of the Pandemic subsided and business travel started to resume gradually;

a $0.4 million increase in recruiting expenses;

a $0.5 million impairment related to exiting a real estate facility;

a $0.7 million reduction in other income;

and a $0.6 million increase in all other general and administration expenses;

and partially offset by reductions in occupancy costs of $2.4 million primarily as a result of the restructuring effort and fixed management compensation of $0.4 million in fiscal 2021 that did not occur in fiscal 2022.

For fiscal 2022, the material costs and expenses attributable to the RGP segment that are not included in computing the segment measure of Adjusted EBITDA included depreciation and amortization expense of $8.0 million and stock-based compensation expense of $7.6 million.

RGP – RGP Adjusted EBITDA declined $1.8 million, or 1.3%, to $132.4 million in fiscal 2023 compared to $134.2 million in fiscal 2022.

Compared to the prior year, revenue increased $0.2 million and the cost of services decreased by $4.9 million in fiscal 2023.

These were offset by an increase in SG&A costs attributed to RGP of $6.7 million in fiscal 2023 as compared to fiscal 2022 primarily due to the increase in management compensation of $8.5 million partially as a result of employee compensation adjustments reflecting the current labor market trend , a $2.9 million increase in computer software and consulting costs, an increase in business and travel expenses of $2.2 million as business travel normalizes post Pandemic to reflect a hybrid work model, a $0.7 million increase in recruiting expenses, and a $4.6 million increase in all other general and administration expenses.

These cost increases were partially offset by a $11.0 million reduction in bonuses and commissions as a result of lower revenue and profitability achievement compared to the incentive targets and $1.2 million of reductions in occupancy costs as a result of our real estate reduction effort.

For fiscal 2023, the material costs and expenses attributable to the RGP segment that are not included in computing the segment measure of Adjusted EBITDA included stock-based compensation expense of $8.4 million, depreciation and amortization expense of $8.4 million and technology transformation costs of $6.4 million .

The trend in revenue, cost of services, and other costs and expenses at RGP year over year are 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 declined $0.1 million in fiscal 2022 compared to the same period in fiscal 2021.

This decline was primarily driven by a decrease in revenue of $1.2 million, which was partially offset by a decrease of $0.8 million in cost of services and a $0.3 million reduction in general and administrative expenses.

For fiscal 2022, the material costs and expenses attributable to the Other Segments that are not included in computing the segment measure of Adjusted EBITDA included depreciation and amortization expense of $0.5 million and stock-based compensation expense of $0.6 million.

Other Segments – Other Segments’ Adjusted EBITDA declined $2.3 million in fiscal 2023 compared to fiscal 2022.

The decline is attributable to the $27.3 million decrease in revenue due to the divestiture of taskforce at the beginning of fiscal 2023 and $2.2 million related to the slow business recovery in Sitrick from the Pandemic, which is partially offset by a $21.0 million decrease in the cost of services primarily due to the divestiture of taskforce .

In addition, management compensation decreased by $2.9 million, bonus and commissions decreased by $1.9 million, occupancy costs were reduced by $0.6 million, and all other general and administration expenses decreased by $0.8 million, which were primarily attributed to the divestiture of taskforce .

For fiscal 2023, the material costs and expenses attributable to the Other Segments that are not included in computing the segment measure of Adjusted EBITDA included depreciation and amortization expenses of $0.2 million, stock-based compensation expense of $1.1 million and goodwill impairment of $3.0 million.

Year Ended May 28, 2022 Compared to Year Ended May 29, 2021

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Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by our operations, our $175.0 million senior secured revolving credit facility, as further discussed below, and, historically, to a lesser extent, stock option exercises and ESPP purchases.

Our primary sources of liquidity are cash provided by operating activities, our $175.0 million senior secured revolving credit facility (as further discussed below) 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.

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.

As of May 27, 2023, we had $116.8 million of cash and cash equivalents, including $50.4 million held in international operations.

Prior to November 12, 2021, we had a $120.0 million secured revolving credit facility with Bank of America (the “Previous Credit Facility”), which was scheduled to mature on October 17, 2022.

On November 12, 2021, the Company and Resources Connection LLC and all domestic subsidiaries of the Company as guarantors, entered into the New Credit Agreement and concurrently terminated the Previous Credit Facility.

The New Credit Agreement provides for a $175.0 million senior secured revolving loan, which includes a $10.0 million sublimit for the issuance of standby letters of credit and a swingline sublimit of $20.0 million .

The New Credit Facility also includes an option to increase the amount of the revolving loan up to an additional $75.0 million, subject to the terms of the agreement.

The New Credit Facility matures on November 12, 2026.

Borrowings under the New Credit Facility bear interest at a rate per annum of either, at the Company’s election, (i) Term SOFR (as defined in the New Credit Agreement) plus a margin ranging from 1.25% to 2.00% or (ii) the Base Rate (as defined in the New Credit Agreement), plus a margin of 0.25% to 1.00% with the applicable margin depending on the Company’s consolidated leverage ratio.

In addition, the Company pays an unused commitment fee on the average daily unused portion of the New Credit Facility, which ranges from 0.20% to 0.30% depending upon on the Company’s consolidated leverage ratio.

The New Credit Facility is available for working capital and general corporate purposes, including potential acquisitions, dividend distribution and stock repurchases.

Additional information regarding the New Credit Facility is included in Note 8 – Long-Term Debt in the Notes to consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K.

As of May 28, 2022, we had $54.0 million outstanding under the New Credit Facility.

We borrowed $20.0 million under the New Credit Facility on December 6, 2021 to finance the repurchase of 1,155,236 shares of our common stock from Dublin Acquisition, LLC (the “Seller”) pursuant to a Stock Purchase Agreement, dated December 3, 2021, entered into between the Company and the Seller.

See Note 12 – Stockholders’ Equity in the Notes to consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K.

On November 12, 2021, the Company and Resources Connection LLC, as borrowers, and all of the Company’s domestic subsidiaries, as guarantors, entered into a credit agreement with the lenders that are party thereto and Bank of America, N.A.

as administrative agent for the lenders (the “Credit Agreement”), and concurrently terminated the then existing credit facility, which provided a $120.0 million revolving loan.

The Credit Agreement provides for a $175.0 million senior secured revolving loan (the “Credit Facility”), which includes a $10.0 million sublimit for the issuance of standby letters of credit and a swingline sublimit of $20.0 million.

The Credit Facility also includes an option to increase the amount of the revolving loan up to an additional $75.0 million, subject to the terms of the Credit Agreement.

The Credit Facility matures on November 12, 2026.

The obligations under the Credit Facility are secured by substantially all assets of the Company, Resources Connection LLC and all of the Company’s domestic subsidiaries.

Future borrowings under the Credit Facility will bear interest at a rate per annum of either, at the Company’s election, (i) Term SOFR (as defined in the Credit Agreement) plus a margin ranging from 1.25% to 2.00% or (ii) the Base Rate (as defined in the Credit Agreement), plus a margin of 0.25% to 1.00% with the applicable margin depending on the Company’s consolidated leverage ratio.

In addition, the Company pays an unused commitment fee on the average daily unused portion of the Credit Facility, which ranges from 0.20% to 0.30% depending upon the Company’s consolidated leverage ratio.

As of May 27, 2023, the Company had no borrowings outstanding and $0.8 million of outstanding letters of credit issued under the Credit Facility .

As of May 27, 2023, there was $174.2 million remaining capacity under the Credit Facility.

The Credit Facility is available for working capital and general corporate purposes, including potential acquisitions, dividend distribution and stock repurchases.

Additional information regarding the Credit Facility is included in Note 8 – Long-Term Debt in the Notes to consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K.

On November 2, 2022, Resources Global Enterprise Consulting (Beijing) Co., Ltd , (a wholly owned subsidiary of the Company), as borrower, and the Company, as guarantor, entered into a RMB 13.4 million ($1.8 million based on the prevailing exchange on November 2, 2022) revolving credit facility with Bank of America, N.A.

(Beijing) as the lender (the “Beijing Revolver”).

The Beijing Revolver bears interest at loan prime rate plus 0.80%.

Interest incurred on borrowings will be payable monthly in arrears.

As of May 27, 2023, the Company had no borrowings outstanding under the Beijing Revolver.

In addition to cash needs for ongoing business operations, from time to time, we have strategic initiatives that could generate significant additional cash requirements.

Our initiative to upgrade our technology platform, as described in “Fiscal 2023 Strategic Focus Areas” above, requires significant investments over multiple years.

As of May 28, 2022, we have non-cancellable purchase obligations totaling $9.9 million, which are payable as follows pursuant to the licensing arrangements that we have entered into in connection with this initiative:

$3.4 million due during fiscal 2023 and 2024, $3.6 million due during fiscal 2025 and 2026, and $2.9 million due thereafter.

While we are still finalizing the assessment of the total amount of the investments required for this multi-year initiative, we currently expect to incur total investments between $20.0 million to $25.0 million through the completion of the system implementation.

Such costs primarily include software licensing fees, third-party consulting fees and costs associated with dedicated internal resources that are not capitalized.

The exact amount and timing will depend on a number of variables, including progress made on the implementation.

We expect the majority of the investment will take place in fiscal 2023 and fiscal 2024.

As of end of fiscal 2023, the amount of the investments required for this multi-year initiative was estimated to be in the range of $30.0 million to $33.0 million.

Such costs primarily include software licensing fees, third-party implementation and consulting fees, incremental costs associated with additional internal resources needed on the project and other costs in areas including change management and training.

The actual amount of investment and the timing will depend on a number of variables, including progress made on the implementation.

As we proceed through the project, we will continue to evaluate our progress against the implementation plan and assess the impact on our investments, if any.

In fiscal 2023, we capitalized $6.0 million of investments and recorded $6.5 million of expenses relating to these investments.

We expect the majority of the remaining planned investments to take place in fiscal 2024.

In addition to our technology transformation initiative, we expect to continue to invest in digital pathways to enhance the experience and touchpoints with our end users, including current and prospective employees (consultants and management employees) and clients.

Such effort will require additional cash outlay and could further elevate our capital expenditures in the near term.

We believe our current cash, ongoing cash flows from our operations and funding available under our New Credit Facility will provide sufficient funds for these initiatives.

At May 28, 2022, we have substantially completed our restructuring initiatives globally.

We do not expect future cash requirements for restructuring initiatives to be material.

Additionally, during the three months ended November 27, 2021, we made the final cash earn-out payment of $7.0 million related to the acquisition of Veracity.

We have no remaining contingent consideration liabilities as of May 28, 2022.

Other trends impacting our near-term liquidity include the deferral of payroll taxes under the CARES Act and certain tax planning strategies implemented in the fourth quarter of fiscal 2021.

The CARES Act includes provisions, among others, allowing deferral of the employer portion of the social security payroll taxes and addressing the carryback of net operating losses (“NOLs”) for specific periods.

We previously elected to defer the employer portion of social security payroll taxes through December 31, 2020 totaling $12.6 million.

Subsequent to the deferral, we elected to make a partial repayment of $6.3 million in May 2021 and $2.3 million in December 2021.

We expect to pay the remaining $4.0 million of deferred payroll taxes in late 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 NOLs of fiscal 2021 to fiscal years 2016 to 2018.

We recognized a discrete tax benefit of $12.8 million in fiscal 2021 and filed for a federal tax refund in the amount of $34.8 million in April 2022.

We expect to receive such refund in the first half of fiscal 2023.

On a macro level, the Pandemic and uncertain macroeconomic conditions, including recent inflationary pressures, rise in interest rates and global uncertainties associated with the current conflict in Ukraine, have created significant uncertainty in the global economy and capital markets, which is expected to continue into fiscal 2023 and beyond and impact our financial results and liquidity.

These efforts will require additional cash outlay and could further elevate our capital expenditures in the near term.

As of May 27, 2023, we have non-cancellable purchase obligations totaling $16.0 million, which primarily consists of payments pursuant to the licensing arrangements that we have entered into in connection with this initiative:

$5.0 million due during fiscal 2024;

$4.8 million due during fiscal 2025;

$3.1 million due during fiscal 2026;

and $3.1 million due thereafter .

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into law.

The CARES Act included provisions, among others, allowing federal net operating losses (“NOLs”) incurred in calendar year 2018 to 2020 (the Company’s fiscal years 2019, 2020 and 2021) to be carried back to the five preceding taxable years.

As part of the Company’s tax planning strategies, management made certain changes related to the capitalization of fixed assets effective for fiscal 2021.

This strategy allowed the Company to carry back the NOLs of fiscal 2021 to fiscal years 2016 to 2018 and allowed us to request refunds for alternative minimum tax credits for fiscal years 2019 and 2020.

The Company filed for federal income tax refunds in the U.S.

in the amount of $34.8 million (before interest) in April 2022.

As of May 27, 2023, the Company has received a federal income tax refund of $35.5 million (including interest income of $0.7 million).

Uncertain macroeconomic conditions and increases in interest rates have created significant uncertainty in the global economy, volatility in the capital markets and recessionary pressures, which may adversely impact our financial results, operating cash flows and liquidity needs.

If we are required to raise additional capital or incur additional indebtedness for our operations or to invest in our business, we can provide no assurances that we would be able to do so on acceptable terms or at all.

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In addition, we may consider making strategic acquisitions or initiating additional restructuring initiatives, which could require significant liquidity and adversely impact our financial results due to higher cost of borrowings.

We believe that our current cash, ongoing cash flows from our operations and funding available under our New Credit Facility will be adequate to meet our working capital and capital expenditure needs for at least the next 12 months.

Beyond the next 12 months, if we require additional capital resources to grow our business, either organically or through acquisitions, we may seek to sell additional equity securities, increase use of our New Credit Facility, expand the size of our New Credit 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 New Credit Facility.

We believe that our current cash, ongoing cash flows from our operations and funding available under our Credit Facility will be adequate to meet our working capital and capital expenditure needs for at least the next 12 months.

Beyond the next 12 months, if we require additional capital resources to grow our business, either organically or through acquisitions, we may seek to sell additional equity securities, increase use of our Credit Facility, expand the size of our Credit 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 Credit Facility.

The sale of additional equity securities or certain forms of debt financing could result in additional dilution to our stockholders.

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In fiscal 2023, cash provided by operations resulted from net income of $54.4 million and non-cash adjustments of $12.8 million.

Additionally, in fiscal 2022, net unfavorable changes in operating assets and liabilities totaled $24.7 million.

These changes primarily consisted of a $44.8 million increase in trade accounts receivable, mainly attributable to accelerated revenue growth throughout fiscal 2022, and a $5.5 million decrease in other liabilities, which includes the final Veracity contingent consideration payment, of which $3.7 million was categorized as operating (the remaining $3.3 million of the total $7.0 million contingent consideration payment was categorized as financing cash flow) p artially offset by a $22.0 million increase in accrued salaries and related obligations due to the significant increase in accrued incentive compensation as a result of strong business performance during the fiscal year, and a $2.1 million decrease in prepaid income taxes due to timing of estimated quarterly tax payments.

Additionally, net favorable changes in operating assets and liabilities totaled $14.5 million, primarily consisting of a $30.0 million decrease in income taxes (which included $35.5 million in U.S.

federal income tax refunds including interest income), $13.6 million decrease in trade accounts receivable and a $1.6 million increase in accounts payable and other accrued expenses.

These favorable changes are partially offset by a $21.5 million decrease in accrued salaries and related obligations, mainly due to the timing of our pay cycle and the payout of the annual incentive compensation during fiscal 2023, a $5.3 million decrease in other liabilities and a $4.1 million increase in other assets attributed primarily to the capitalized cost of implementing our technology transformation .

In fiscal 2022, cash provided by operations resulted from net income of $67.2 million and non-cash adjustments of $6.9 million.

Additionally, in fiscal 2021, 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, 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.

Additionally, in fiscal 2022, net unfavorable changes in operating assets and liabilities totaled $24.7 million.

These changes primarily consisted of a $44.8 million increase in trade accounts receivable, mainly attributable to accelerated revenue growth throughout fiscal 2022, and a $5.5 million decrease in other liabilities, which includes the final Veracity contingent consideration payment, of which $3.7 million was categorized as operating activity (the remaining $3.3 million of the total $7.0 million contingent consideration payment was categorized as financing cash flow) partially offset by a $22.0 million increase in accrued salaries and related obligations due to the significant increase in accrued incentive compensation as a result of strong business performance during the fiscal year, and a $2.1 million decrease in prepaid income taxes due to the timing of estimated quarterly tax payments.

Investing Activities, Fiscal 2023 and 2022

Net cash used in investing activities was $3.0 million in fiscal 2022 compared to $3.8 million in fiscal 2021.

Net cash used in investing activities in both periods was primarily for the development of internal-use software and acquisition of property and equipment.

Net cash provided by investing activities was $3.9 million in fiscal 2023 compared to net cash used in investing activities of $3.0 million in fiscal 2022.

Net cash provided by investing activities in fiscal 2023 was primarily related to the EUR 5.7 million (approximately $6.0 million) in cash proceeds received from the divestiture of taskforce (which included approximately EUR 5.5 million for the purchase price and EUR 0.2 million in interest), partially offset by the cost incurred for the development of internal-use software and acquisition of property and equipment.

Net cash used in investing activities in fiscal 2022 was primarily for the development of internal-use software and acquisition of property and equipment.

Financing Activities, Fiscal 2023 and 2022

The primary sources of cash in financing activities are borrowings under our New Credit 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 New Credit Facility, payment of contingent consideration, repurchases of our common stock and cash dividend payments to our stockholders.

The primary sources of cash in financing activities are borrowings under our Credit 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 Credit Facility, payment of contingent consideration, repurchases of our common stock and cash dividend payments to our stockholders.

Net cash used in financing activities totaled $71.9 million in fiscal 2023 compared to $13.4 million in fiscal 2022 .

Net cash used in financing activities during fiscal 2022 consisted of $19.7 million used for the repurchase of our common stock, cash dividend payments of $18.6 million, the final Veracity contingent consideration payment, of which $3.3 million was categorized as financing (the remaining $3.7 million of the total $7.0 million final Veracity contingent consideration payment was categorized as operating) , and the Expertforce Interim Projects GmbH, LLC (“Expertence”) contingent consideration payment of $0.3 million, partially offset by $10.4 million of net borrowing under the New Credit Facility (consisting of $73.4 million of proceeds and $63.0 million of repayment), and $17.9 million in proceeds received from ESPP share purchases and employee stock option exercises.

Net cash used in financing activities in fiscal 2021 consisted of repayments under the Previous Credit 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).

These were partially offset by $6.8 million in proceeds received from ESPP share purchases and employee stock option exercises.

Net cash used in financing activities during fiscal 2023 consisted of net repayments on the Credit Facility of $54.0 million (consisting of $69.0 million of repayments and $15.0 million of proceeds from borrowing), cash dividend payments of $18.8 million, and $15.2 million to purchase 914,809 shares of common stock on the open market.

These uses were partially offset by $16.1 million in proceeds received from ESPP share purchases and employee stock option exercises.

Net cash used in financing activities in fiscal 2022 consisted of $19.7 million used for the repurchase of our common stock, cash dividend payments of $18.6 million, the final Veracity contingent consideration payment, of which $3.3 million was categorized as financing (the remaining $3.7 million of the total $7.0 million final Veracity contingent consideration payment was categorized as operating), and the Expertforce Interim Projects GmbH, LLC contingent consideration payment of $0.3 million, partially offset by $10.4 million of net borrowing under the Credit Facility (consisting of $73.4 million of proceeds from borrowings and $63.0 million of repayment), and $17.9 million in proceeds received from ESPP share purchases and employee stock option exercises.

For a comparison of our cash flow activities for the fiscal years ended May 28, 2022 and May 29, 2021, 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 28, 2022, filed with the SEC on July 28, 2022 (File No.

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Interest Rate Risk.

We are primarily exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the market values of our cash and cash equivalents and our borrowings under the New Credit Facility that bear interest at a variable market rate.

As of May 28, 2022, we had approximately $104.2 million of cash and cash equivalents and $54.0 million of borrowings under our New Credit Facility.

We are primarily exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the market values of our cash and cash equivalents and our borrowings under the Credit Facility that bear interest at a variable market rate.

As of May 27, 2023, we had approximately $116.8 million of cash and cash equivalents and no borrowings under our Credit Facility.

The earnings on cash and cash equivalents are subject to changes in interest rates;

however, assuming a constant balance available for investment, a 10% decline in interest rates would reduce our interest income but would not have a material impact on our consolidated financial position or results of operations.

We are exposed to interest rate risk related to fluctuations in the term SOFR rate.

See “Sources and Uses of Liquidity” above and Note 8 – Long-Term Debt in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further discussion about the interest rate on our New Credit Facility.

At the current level of borrowing as of May 28, 2022 of $54.0 million, a 10% change in interest rates would have resulted in approximately a $0.1 million change in annual interest expense.

We may become exposed to interest rate risk related to fluctuations in the term SOFR rate used under our Credit Facility.

As of May 27, 2023, we had no borrowings outstanding under our Credit Facility .

At our level of borrowing as of May 28, 2022 of $54.0 million, a 10% change in interest rates would have resulted in approximately a $0.1 million change in annual interest expense for fiscal 2022.

Foreign Currency Exchange Rate Risk.

For the year ended May 27, 2023, approximately 14.3% of our revenues were generated outside of the U.S.

compared to approximately 17.5% of our revenues for the year ended May 28, 2022.

As a result, our operating results are subject to fluctuations in the exchange rates of foreign currencies in relation to the U.S.

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dollars at the exchange rate effective at the end of each monthly reporting period.

Approximately 66.1% of our fiscal year-end balances of cash and cash equivalents were denominated in U.S.

The remaining amount of approximately 33.9% was comprised primarily of cash balances translated from Euros, Japanese Yen, Chinese Yuan, Mexican Pesos and Canadian Dollar.

Approximately 56.9% of our cash and cash equivalents balances as of May 27, 2023 were denominated in U.S.

The remaining amount of approximately 43.1% was comprised primarily of cash balances translated from Euros, Japanese Yen, Mexican Pesos, Chinese Yuan, Canadian Dollar, Indian Rupee and British Pound Sterling.

This compares to approximately 66.1% of our cash and cash equivalents balances as of May 28, 2022 that were denominated in U.S.

dollars and approximately 33.9% that were comprised primarily of cash balances translated from Euros, Japanese Yen, Chinese Yuan and Canadian Dollars.

The difference resulting from the translation in each period of assets and liabilities of our non-U.S.-based operations is recorded as a component of stockholders’ equity in accumulated other comprehensive income or loss.

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To the Stockholders and the Board of Directors of Resources Connection, Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Resources Connection, Inc.

and its subsidiaries (the “Company”) as of May 28, 2022 and May 29, 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended May 28, 2022, and the related notes to the consolidated financial statements (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 28, 2022 and May 29, 2021, and the results of its operations and its cash flows for each of the three years in the period ended May 28, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of May 28, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated July 28, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

and its subsidiaries (the “Company”) as of May 27, 2023 and May 28, 2022, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended May 27, 2023, and the related notes (collectively referred to as the “financial statements”).

We also have audited the Company's internal control over financial reporting as of May 27, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of May 27, 2023 and May 28, 2022, and the results of its operations and its cash flows for each of the three years in the period ended May 27, 2023, in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 27, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Basis for Opinions

The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying.

Our responsibility is to express an opinion on the Company's financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

As described in Note 9 to the consolidated financial statements, during the year the Company reversed approximately $7.5M of its valuation allowance on deferred tax assets in the Netherlands.

Management made the decision to reverse this allowance based on a history of earnings, forecasted income in future periods sufficient to utilize deferred tax assets in the Netherlands and changes in Netherlands tax law that removed expiration dates on net operating loss carryforwards.

The valuation allowance for deferred tax assets in the Netherlands has been identified as the critical audit matter due to the significant assumptions management made as to when and in what amount to reverse the valuation allowance.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

As described in Note 9 to the consolidated financial statements, the Company has valuation allowances in several of its foreign jurisdictions.

During the year, the Company reversed approximately $1.9 million of its valuation allowance on deferred tax assets in two European jurisdictions and retained its valuation allowance of approximately $6.5 million in all other foreign jurisdictions.

Management made the decision to reverse the valuation allowance based on a history of recent earnings and forecasted income in future periods sufficient to utilize the deferred tax assets in the two European jurisdictions.

Additionally, management decided to maintain the valuation allowance in its remaining foreign jurisdictions.

The reversal of the valuation allowance for deferred tax assets in the two European jurisdictions and the decision not to reverse the valuation allowance in the remaining foreign jurisdictions has been identified as the critical audit matter due to the significant assumptions management made as to if, when, and in what amount to reverse the valuation allowances.

These significant assumptions require management to make estimates related to the forecast of future earnings.

Auditing management’s assumptions requires a high degree of auditor judgment and increased audit effort due to the significant impact these assumptions have on the amount of the valuation allowance reversed.

Our audit procedures related to the valuation allowance reversed included the following, among others:

Auditing management's assumptions require a high degree of auditor judgment and increased audit effort due to the significant impact these assumptions have on the amount of the valuation allowance and when and if it should be reversed.

Our audit procedures related to the valuation allowance included the following, among others:

 We obtained an understanding of the relevant control related to the evaluation of the valuation allowance and tested such control for design and implementation and operating effectiveness.

 Utilized our tax specialists to test the change to the tax law in the Netherlands and its applicability to the Company’s Netherlands operations.

 Performed mathematical accuracy procedures over the forecast of earnings developed by management.

 Tested the reasonableness of assumptions within the forecast including subjected the forecast to sensitivity analysis on key assumptions regarding future sources of income, evaluation of management’s ability to forecast by comparing management’s prior forecasts to historical results, comparing management’s forecasted income growth rates to independent market data, validated management’s recent history of book income and earnings trend and developed an understanding of management’s operational plans for future years related to the Netherlands.

 Tested the reasonableness of assumptions within the forecast, including subjecting the forecast to sensitivity analysis on key assumptions, evaluation of future sources and amounts of income, evaluated management's ability to forecast by comparing management’s prior forecasts to historical results, compared management’s forecasted income growth rates to independent market data, validated management’s recent history of book income and earnings trends and developed an understanding of management's operational plans for future years.

/s/ RSM US LLP

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CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except par value per share)

(In thousands, except par value per share)

Current assets:

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Operating right-of-use assets

Deferred income taxes

Deferred tax assets

Other non-current assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Accrued salaries and related obligations

Operating lease liabilities

Contingent consideration liabilities

Operating lease liabilities, current

Liabilities held for sale

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Long-term debt

Operating lease liabilities

Deferred income taxes

Other long-term liabilities

Operating lease liabilities, non-current

Deferred tax liabilities

Other non-current liabilities

Total liabilities

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CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

(In thousands, except per share amounts)

For the Years Ended

Direct cost of services, primarily payroll and related taxes

for professional services employees

Direct cost of services

Selling, general and administrative expenses

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Depreciation expense

Goodwill impairment

Income from operations

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Net income per common share:

Weighted average number of common and common equivalent

shares outstanding:

Weighted-average number of common and

‎ common equivalent shares outstanding:

Cash dividends declared per common share

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(In thousands)

For the Years Ended

COMPREHENSIVE INCOME:

Foreign currency translation adjustment, net of tax

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except per share amounts)

(In thousands, except per share amounts)

Treasury Stock

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Employee Stock Purchase Plan

Cancellation of restricted stock

Issuance of restricted stock

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treasury stock to board of director members

Repurchase of common stock

Cash dividends declared ($ 0.56 per share)

Issuance of common stock in connection with

‎ the acquisition of Accretive

Dividend equivalents on restricted stock

Currency translation adjustment

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Issuance of restricted stock

Issuance of common stock upon vesting of

restricted stock units, net shares withheld to

Amortization of restricted stock issued out of

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Cash dividends declared ($ 0.56 per share)

Retirement of treasury stock

Repurchase of common stock

Dividend equivalents on restricted stock

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restricted stock units, net shares withheld to

‎ cover taxes

Amortization of restricted stock issued out of

‎ treasury stock to board of director members

Cash dividends declared ($ 0.56 per share)

Retirement of treasury stock

Repurchase of common stock

Dividend equivalents on restricted stock

Dividend equivalents on performance stock

Currency translation adjustment

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(In thousands)

For the Years Ended

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Contingent consideration adjustment

Loss on disposal of assets

Gain on dissolution of subsidiaries

Amortization of debt issuance costs and lender fees

Loss or (Gain) on dissolution of subsidiaries

Goodwill impairment

Impairment of right-of-use and other costs

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Deferred income taxes

Changes in operating assets and liabilities, net of effects of business combinations:

Changes in operating assets and liabilities, net of dispositions:

Trade accounts receivable

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Cash flows from investing activities:

Redemption of short-term investments

Proceeds from sale of taskforce

Proceeds from sale of assets

Acquisition of Expertence, net of cash acquired

Acquisition of Veracity , net of cash acquired

Investments in property and equipment and internal-use software

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

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Payment of debt issuance costs

Cash dividends paid

Net cash (used in) provided by financing activities

Payment of cash dividends

Net cash used in financing activities

Effect of exchange rate changes on cash

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Cash and cash equivalents at end of period

Supplemental cash flow disclosures

Income taxes (refund) paid, net

Interest paid

Non-cash investing and financing activities

Capitalized leasehold improvements paid directly by landlord

Dividends declared, not paid

The accompanying notes are an integral part of these consolidated financial statements.

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The Company’s fiscal year consists of 52 or 53 weeks, ending on the Saturday in May closest to May 31.

Fiscal years 2022 and 2021 consisted of four 13 -week quarters and included a total of 52 weeks of activity in the fiscal year.

For fiscal year 2020, the first three quarters consisted of 13 weeks each and the fourth quarter consisted of 14 weeks, with a total of 53 weeks of activity in the fiscal year.

Fiscal years 2023, 2022 and 2021 consisted of four 13 -week quarters and included a total of 52 weeks of activity in each fiscal year.

Summary of Significant Accounting Policies

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Reporting Segments

Effective in the second quarter of fiscal 2021, the Company revised its historical one -segment position and identified the following new operating segments to align with changes made in its internal management structure and its reporting structure of financial information used to assess performance and allocate resources:

On May 31, 2022, the Company divested taskforce – Management on Demand GmbH, and its wholly-owned subsidiary skillforce – Executive Search GmbH, a German professional services firm operating under the taskforce brand (“ taskforce ”);

see Note 3 – Dispositions for further information.

Since the second quarter of fiscal 2021 and prior to the divestment, the business operated by taskforce , along with its parent company, Resources Global Professionals (Germany) GmbH (“RGP Germany”), an affiliate of the Company, represented an operating segment of the Company and was reported as a part of Other Segments.

Effective May 31, 2022, the Company’s operating segments consist of the following:

 RGP – a global business consulting firm focused on project execution services that power clients’ operational and change initiatives with experienced and diverse talent;

 taskforce – a German professional services firm that operates under the taskforce brand.

It utilizes a distinct independent contractor/partner business model and infrastructure and focuses on providing senior interim management and project management services to middle-market clients in the German market;

 Sitrick – a crisis communications and public relations firm which operates under the Sitrick brand, providing corporate, financial, transactional and crisis communication and management services.

Each of these three segments reports through a separate management team to the Company’s Chief Executive Officer, who is designated as the Chief Operating Decision Maker (“CODM”) for segment reporting purposes.

Each of these segments reports through a separate management team to the Company’s Chief Executive Officer, who is designated as the Chief Operating Decision Maker (“CODM”) for segment reporting purposes.

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.

Sitrick does not individually meet the quantitative threshold to qualify as a reportable segment.

Therefore, Sitrick is disclosed in Other Segments.

Each of these segments represents a reporting unit for the purposes of assessing goodwill for impairment.

All prior-period comparative segment information was recast to reflect the current reportable segments in accordance with Accounting Standards Codification (“ASC”) 280, Segment Reporting .

The change in segment reporting did not impact the Company’s consolidated financial statements.

On May 31, 2022, the Company divested of taskforce .

The resulting change in segments will be reported in fiscal 2023 following the disposition.

S ee Note 20 – Subsequent Events for further information .

Prior-period comparative segment information was not restated as a result of the divestiture of taskforce as the Company did not have a change in internal organization or the financial information that the CODM uses to assess performance and allocate resources.

See Note 18 – Segment Information and Enterprise Reporting for further information .

Reclassifications

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The Company’s clients are contractually obligated to pay the Company for all hours billed.

The Company invoices the majority of its clients on a weekly basis or, in certain circumstances, on a bi-weekly or monthly basis, and its typical arrangement of payment is due within 30 days.

The Company invoices most of its clients on a weekly basis or, in certain circumstances, on a bi-weekly or monthly basis, and its typical arrangement of payment is due within 30 days.

To a much lesser extent, in certain circumstances, the Company also earns revenue if one of its consultants is hired by, or if the Company places an outside candidate with, its client.

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and c) the start date is within the Company’s current quarter.

Conversion fees were 0.3 %, 0.3 % and 0.4 % of revenue for the years ended May 28, 2022, May 29, 2021 and May 30, 2020, respectively.

Permanent placement fees were 0.6 % of revenue for each of the years ended May 28, 2022, May 29, 2021 and May 30, 2020.

Conversion fees were 0.3 %, of revenue for each of the years ended May 27, 2023, May 28, 2022 and May 29, 2021.

Permanent placement fees were 0.3 %, 0.6 % and 0.6 % of revenue for the years ended May 27, 2023, May 28, 2022 and May 29, 2021, respectively.

The Company’s contracts generally have termination-for-convenience provisions and do not have termination penalties.

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Stock options for which the exercise price exceeds the average market price over the period are anti-dilutive and are excluded from the calculation.

The following table summarizes the calculation of net income per share for the years ended May 28, 2022, May 29, 2021 and May 30, 2020 (amounts in thousands, except per share amounts):

The following table summarizes the calculation of net income per share for the years ended May 27, 2023, May 28, 2022 and May 29, 2021 (in thousands, except per share amounts):

For the Years Ended

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The fair value of the Company’s financial instruments reflects the amounts that the Company estimates it will receive in connection with the sale of an asset in an orderly transaction between market participants at the measurement date (exit price).

The fair value hierarchy prioritizes the use of inputs used in valuation techniques into the following three levels:

Level 1 – Quoted prices in active markets for identical assets and liabilities.

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets.

Level 3 – Unobservable inputs.

The following table shows the Company’s financial instruments that are measured and recorded in the consolidated financial statements at fair value on a recurring basis (amounts in thousands):

Contingent consideration liabilities

Total liabilities

Contingent consideration liabilities presented in the table above is for estimated future contingent consideration cash payments related to the Company’s acquisitions.

Total contingent consideration liabilities were zero and $ 7.1 million as of May 28, 2022 and May 29, 2021, respectively.

The fair value measurement of the liability is based on significant inputs not observed in the market and thus represents a Level 3 measurement.

The significant unobservable inputs used in the fair value measurement of the contingent consideration liabilities are the Company’s measures of the estimated payouts based on internally generated financial projections and discount rates.

The fair value of contingent consideration liabilities is remeasured on a quarterly basis by the Company using additional information as it becomes available, and any change in the fair value estimates are recorded in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations .

See Note 3 – Acquisitions and Dispositions for further information.

The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and long-term debt, are carried at cost, which approximates their fair value because of the short - term maturity of these instruments or because their stated interest rates are indicative of market interest rates.

The Company’s financial instruments, including cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses and long-term debt, are carried at cost, which approximates their fair value because of the short - term maturity of these instruments or because their stated interest rates are indicative of market interest rates.

Allowance for Doubtful Accounts

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If the financial condition of the Company’s clients deteriorates or there is an unfavorable trend in aggregate receivable collections, additional allowances may be required.

The following table summarizes the activity in the allowance for doubtful accounts (amounts in thousands):

The following table summarizes the activity in the allowance for doubtful accounts (in thousands):

Currency Rate

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Fair value was determined based on the estimated proceeds from the sale of the business utilizing the purchase price as defined in the Sale and Purchase Agreement.

See Note 4 – Assets and Liabilities Held for Sale and Note 20 – Subsequent Events for further information .

See Note 3 – Dispositions and Note 4 – Assets and Liabilities Held for Sale for further information .

Property and Equipment

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The impairment test comprises two steps.

The first step compares the carrying amount of the asset to the sum of expected undiscounted future cash flows.

The first step compares

the carrying amount of the asset to the sum of expected undiscounted future cash flows.

If the sum of expected undiscounted future cash flows exceeds the carrying amount of the asset, no impairment is taken.

If the sum of expected undiscounted future cash flows is less than the carrying amount of the asset, a second step is warranted and an impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value calculated using the present value of estimated net future cash flows.

The Company recorded an impairment against its right-of-use (“ROU”) assets and leasehold improvements of $ 0.8 million, $ 0.9 million and $ 0.6 million for the years ended May 28, 2022, May 29, 2021 and May 30, 2020, respectively, primarily associated with exiting certain real estate leases as part of its restructuring initiatives.

The Company recorded no impairment against its right-of-use (“ROU”) assets and leasehold improvements for the year ended May 27, 2023, and recorded an impairment against its ROU assets and leasehold improvements of $ 0.8 million and $ 0.9 million for the years ended May 28, 2022 and May 29, 2021, respectively, primarily associated with exiting certain real estate leases as part of its restructuring initiatives.

The impairment charges are included in selling, general and administrative expense in the Company’s Consolidated Statements of Operations.

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Significant management judgment is required in the forecasts of future operating results that are used in these evaluations.

The Company’s identifiable intangible assets include customer contracts and relationships, tradenames, backlog, consultant list, non-compete agreements and computer software, including internally-developed software.

Impairment testing is conducted at the reporting unit level.

Application of the goodwill impairment test requires judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the Company’s business, and determination of the Company’s weighted average cost of capital.

Under Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other , the qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions, and changes in projected future cash flows or planned revenue or earnings of the reporting unit as potential indicators when determining the need for a quantitative assessment of impairment.

As of February 25, 2023, the Company assessed the existence of impairment indicators on goodwill associated with Sitrick, one of the Company’s operating segments and reporting units, and determined that an interim quantitative impairment analysis was required due to its business performance.

As a result of the quantitative impairment test, the Company concluded that the carrying amount of the Sitrick reporting unit exceeded its fair value, which resulted in an impairment charge of $ 3.0 million on the goodwill associated within the Other Segments on the Consolidated Statements of Operations for the third quarter of fiscal 2023.

No goodwill remains within Other Segments as of May 27, 2023.

See Note 5 – Goodwill and Intangible Assets for further information.

The Company’s identifiable intangible assets include customer contracts and relationships, and computer software, including internally-developed software.

These assets are amortized on a straight-line basis over lives ranging from two to ten years .

See Note 5 — Intangible Assets and Goodwill for a further description of the Company’s goodwill and intangible assets, including information about the Company’s goodwill impairment assessment in connection with its change in segment reporting effective in the second quarter of fiscal 2021 .

See Note 5 — Goodwill and Intangible Assets for a further description of the Company’s goodwill and intangible assets, including information about the Company’s goodwill impairment assessment .

The Company currently leases office space, vehicles and certain equipment under operating leases expiring through 2028.

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Operating lease liabilities are presented as operating lease liabilities, current or operating lease liabilities, noncurrent in the Company’s Consolidated Balance Sheets based on their contractual due dates.

Operating lease expense is recognized on a straight-line basis over the lease term, and is recognized in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations.

Operating lease expense is recognized

on a straight-line basis over the lease term, and is recognized in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations.

Most of the Company’s leases do not provide an implicit rate that can be readily determined.

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Additionally, the Company has also made an accounting policy election to recognize the lease payments under short-term leases as an expense on a straight-line basis over the lease term without recognizing the lease liability and the ROU asset.

See Note 7 — Leases for a further information on the Company’s leases.

See Note 7 — Leases for further information on the Company’s leases.

Capitalized Hosting Arrangements

The capitalized hosting arrangements costs are primarily related to the Company’s implementation of a cloud-based enterprise resource planning system and talent acquisition and management system.

Such costs include third party implementation costs and costs associated with internal resources directly involved in the implementation.

Capitalized hosting arrangements are stated at historical cost and amortized on a straight-line basis over an estimated useful life of the expected term of the hosting arrangement, taking into consideration several other factors such as, but not limited to, options to extend the hosting arrangement or options to terminate the hosting arrangement.

The amortization of capitalized implementation costs for hosting arrangements will commence when the systems are ready for their intended use and will be presented as operating expenses on the Company’s Consolidated Statements of Operations consistent with the presentation for expensing the fees for the associated hosting arrangement.

As of May 27, 2023, the capitalized costs related to hosting arrangements incurred during the application development stage were $ 6.0 million.

These capitalized hosting arrangements are included in other non-current assets on the consolidated balance sheet and no costs were amortized.

There were no capitalized costs recorded as of May 28, 2022.

Stock-Based Compensation

The Company recognizes compensation expense for all share-based payment awards made to employees and directors, including restricted stock awards, restricted stock units, employee stock options, performance stock units awarded under the Company’s 2020 Performance Incentive Plan (the “2020 Plan”) and the Company’s 2014 Performance Incentive Plan (the “2014 Plan”), stock units credited under the Directors Deferred Compensation Plan and employee stock purchases made via the Company’s 2019 Employee Stock Purchase Plan (the “ESPP”), based on estimated fair value at the date of grant.

The Company recognizes compensation expense for all share-based payment awards made to employees and directors, including restricted stock awards, restricted stock units, employee stock options, performance stock units awarded under the Company’s 2020 Performance Incentive Plan (the “2020 Plan”) and the Company’s 2014 Performance Incentive Plan (the “2014 Plan”), stock units credited under the Directors Deferred Compensation Plan and employee stock purchases made via the Company’s 2019 Employee Stock Purchase Plan, as amended (the “ESPP”), based on estimated fair value at the date of grant.

The Company estimates the fair value of share-based payment awards on the date of grant using the Black-Scholes valuation model for stock options, including options under the ESPP, and the closing price of the Company’s common stock on the date of grant for restricted stock awards, restricted stock units and performance stock units.

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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.

The Company recognizes interest and penalties related to income tax matters, if applicable, in income tax expense.

Share Repurchases and Retirement of Treasury Shares

Shares of common stock repurchased by the Company are held as treasury shares.

The Company’s stock repurchase program provides an opportunity for the Company to repurchase shares at the discretion of the Company’s senior executives based on numerous factors, including, without limitation, share price and other market conditions, the Company’s ongoing capital allocation planning, the levels of cash and debt balances, and other demands for cash.

The Company recognizes treasury stock based on the amount paid to repurchase its shares.

Direct costs incurred to acquire treasury stock are treated like stock issue costs and added to the cost of the treasury stock.

The Company accounts for the retirement of treasury shares using the par-value method under which the cost of repurchased and retired treasury shares in excess of the par value is allocated between additional paid-in capital and retained earnings.

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The Company believes that this allocation method is preferable because it more accurately reflects its paid-in capital balances by allocating the cost of the repurchased and retired treasury shares to paid-in capital in proportion to paid-in capital associated with the original issuance of those shares.

See Note 12 — Stockholders’ Equity for further information on the retirement of treasury shares.

See Note 12 — Stockholders’ Equity for further information on the repurchase shares and retirement of treasury shares.

Recent Accounting Pronouncements

No recent accounting pronouncements or changes in accounting pronouncements have been issued or adopted in fiscal 2023 that are of material significance, or have potential material significance, to the Company.

Acquisitions and Dispositions

The Company did no t complete any acquisitions during the years ended May 28, 2022 and May 29, 2021.

In fiscal 2020, the Company acquired two entities.

The first acquisition, completed November 30, 2019, was Expertforce Interim Projects GmbH, LLC (“Expertence”), a leading provider of professional interim management services, based in Munich, Germany.

The results of operations and the amount of the acquisition costs included in the Company’s Consolidated Statement of Operations related to the Expertence acquisition were not material to the Company’s consolidated results of operations for the year ended May 30, 2020.

The second acquisition, completed on July 31, 2019, was the digital consulting firm Veracity Consulting Group, LLC (“Veracity”), which contributed $ 18.8 million to consolidated revenue and $ 4.1 million to income from operations during the year ended May 30, 2020.

In addition, the Company recorded $ 1.3 million in expenses associated with an increase in the fair value of the Veracity contingent consideration liability, and incurred $ 0.6 million in acquisition costs, both of which were recorded in selling, general and administrative expenses in the Company’s Consolidated Statement of Operations for the year ended May 30, 2020.

On April 21, 2022, RGP Germany entered into a Sale and Purchase Agreement (the “SPA”) to taskforce to MoveVision – Management-, Beteiligungs- und Servicegesellschaft mbH and Blue Elephant – Management-, Beteiligungs- und Servicegesellschaft mbH (collectively, the “Purchasers”), which are owned by the original founder and a member of the senior leadership team of taskforce , respectively.

The SPA provided for the sale of all of the shares of taskforce from RGP Germany to the Purchasers for a purchase price of approximately EUR 5.5 million, subject to final working capital adjustments, with 50 % of the consideration to be paid in cash in connection with the closing and the remaining 50 % payable on July 1, 2024 and bearing interest based on the Company’s average borrowing interest rate plus 285 basis points, compounded annually.

On May 31, 2022, the Company completed the sale of taskforce .

Upon conclusion of the Final Completion Accounts and Calculation (as defined in the SPA), the final purchase price was determined to be EUR 5.5 million (approximately $ 6.0 million), of which EUR 2.8 million (approximately $ 3.0 million) was received in cash and EUR 2.7 million (approximately $ 3.0 million) shall become due in July 2024 in accordance with the SPA.

Such receivable is presented in other non-current assets in the Consolidated Balance Sheet as of May 28, 2022.

During fiscal year 2023, the Company received full payment from the purchasers of taskforce on the note receivable in the amount of EUR 2.7 million (approximately $ 3.0 million), which included an interest payment.

The Company recognized a $ 0.2 million gain on the sale during the year ended May 27, 2023, which was recorded in other income in the Company’s Consolidated Statements of Operations.

During fiscal 2023, the Company completed the dissolution of the following three foreign subsidiaries:

Compliance.co.uk Ltd, Resources Compliance (UK) Ltd and RGP Poland spolka z ograniczona odpowiedzialnoscia.

The Company recognized a total net loss on dissolutions of $ 0.5 million during fiscal 2023.

As part of its restructuring effort in Europe which began in fiscal 2021, the Company initiated the wind-down and dissolution of certain entities.

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The Company recognized a total gain on dissolutions of $ 0.9 million during fiscal 2022.

The net gain on the dissolutions of these subsidiaries was primarily related to the recognition of the accumulated translation adjustment associated with the foreign subsidiaries, which was included in selling, general and administrative expenses in the Company’s Consolidated Statement of Operations for the year ended May 28, 2022.

The net gain or loss on the dissolutions of these subsidiaries in both fiscal years was primarily related to the recognition of the accumulated translation adjustment associated with the foreign subsidiaries, which was reclassified from accumulated other comprehensive loss in the Company’s Consolidated Balance Sheet and included in selling, general and administrative expenses in the Company’s Consolidated Statement of Operations for the year ended May 27, 2023 and May 28, 2022, respectively.

See Note 14 – Restructuring Activities for further information on the Company’s restructuring initiatives.

In fiscal 2020, the Company engaged in the sale of certain assets and liabilities in Sweden and discontinued operations in Belgium, Luxemburg and Norway.

In connection with the exit activities in these markets, the Company recognized a loss on the sale of assets and liabilities in Sweden and $ 0.7 million of expenses primarily related to employee termination benefits.

Such expenses were included in selling, general and administrative expenses in the Consolidated Statement of Operations for the year ended May 30, 2020.

None of the markets sold or exited in fiscal 2023 and 2022 are considered strategic components of the Company’s operations.

Assets and Liabilities Held for Sale

On April 21, 2022, Resources Global Professionals (Germany) GmbH (“RGP Germany”), a subsidiary of the Company, entered into a Sale and Purchase Agreement (the “Sale and Purchase Agreement”) with MoveVision – Management-, Beteiligungs- und Servicegesellschaft mbH and Blue Elephant – Management-, Beteiligungs- und Servicegesellschaft mbH (collectively, the “Purchasers”), owned by the original founder and a member of the senior leadership team of taskforce – Management on Demand GmbH (“ taskforce ”), respectively.

The Sale and Purchase Agreement provided for a purchase price of approximately EUR 5.5 million (approximately $ 5.9 million), subject to final working capital adjustments on July 31, 2022.

See Note 20 – Subsequent Events for further information on the Company’s sale of taskforce .

On April 21, 2022, RGP Germany entered into the SPA with the Purchasers, owned by the original founder and a member of the senior leadership team of taskforce .

The SPA provided for a purchase price of approximately EUR 5.5 million (approximately $ 5.9 million), subject to final working capital adjustments on July 31, 2022.

As of May 28, 2022, the Company determined the criteria of classifying the assets and liabilities of taskforce as held for sale was met, which requires us to present the related assets and liabilities as separate line items in our Consolidated Balance Sheet.

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As such, the assets and liabilities related to the sale were recorded and presented at their carrying value.

The following table presents information related to the major classes of assets and liabilities that were classified as held for sale in our Consolidated Balance Sheets (amounts in thousands):

The following table presents information related to the major classes of assets and liabilities that were classified as held for sale in our Consolidated Balance Sheets (in thousands):

Assets & Liabilities Held for Sale

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The above-referenced transaction did not qualify as discontinued operations because the sale of taskforce did not represent a strategic shift that has or will have a major effect on the Company’s operations or financial results .

See Note 2 – Summary of Significant Accounting Policies and Note 20 – Subsequent Events for further information on the Company’s taskforce business.

Intangible Assets and Goodwill

The following table presents details of the Company’s intangible assets, estimated lives and related accumulated amortization (amounts in thousands):

As of May 28, 2022

As of May 29, 2021

Customer contracts and relationships

‎ ( 3 - 8 years )

Tradenames ( 3 - 10 years )

Backlog ( 17 months )

Consultant list ( 3 years )

Non-compete agreements ( 3 years )

Computer software ( 2 - 3.5 years)

The weighted-average useful lives of the customer contracts and relationships, tradenames, backlog, and computer software are approximately 7.6 years, 3.0 years, 1.4 years, and 3.3 years, respectively.

The weighted-average useful life of all of the Company’s intangible assets is 5.7 years.

The Company recorded amortization expense of $ 4.9 million, $ 5.2 million, and $ 5.7 million for the years ended May 28, 2022, May 29, 2021 and May 30, 2020, respectively.

The following table presents future estimated amortization expense based on existing intangible assets held for use (amounts in thousands):

As further described in Note 19 – Segment Information and Enterprise Reporting , the Company changed its segment reporting effective in the second quarter of fiscal 2021, and reallocated goodwill to the new reporting units on the relative fair value basis.

Concurrent with the segment change, the Company completed a goodwill impairment assessment, and concluded that no goodwill impairment existed immediately before or after the change in segment reporting.

The Company’s interim and annual goodwill impairment analysis indicated that there was no related impairment for the fiscal years ended May 28, 2022, May 29, 2021 and May 30, 2020.

The following table summarizes the activity in the Company’s goodwill balance.

Fiscal year 2020 information was recast to reflect the impact of the preceding segment change (amounts in thousands):

See Note 2 – Summary of Significant Accounting Policies and Note 3 – Dispositions for further information on the Company’s taskforce business.

Goodwill and Intangible Assets

During the third quarter of fiscal 2023, the Company completed an interim goodwill impairment analysis for Sitrick, a strategic and crisis communications business acquired in 2009.

Many of Sitrick’s target clients were impacted by the initial closures of U.S.

courts during the COVID-19 pandemic (the “Pandemic”) and the continued lingering impact on the court system despite the reopening,

resulting in less opportunities and a slower revenue conversion typically provided by Sitrick.

The Company determined that the carrying value of Sitrick, also a reporting unit, was in excess of its fair value and as such recorded a non-cash impairment charge of $ 3.0 million during the third quarter of fiscal 2023, reducing the goodwill within the Other Segments to zero as of May 27, 2023.

See Note 2 – Summary of Significant Accounting Policies for further information.

The Company determined the fair value of Sitrick (within Other Segments) based on an income approach, using the present value of future discounted cash flows.

Significant estimates used to determine fair value included the weighted-average cost of capital and financial projections.

As of May 27, 2023 , the Company completed its annual goodwill impairment assessment and concluded that no additional goodwill impairment existed.

The Company’s annual goodwill impairment analysis indicated that there was no related impairment for the fiscal years ended May 28, 2022 and May 29, 2021.

The following table summarizes the activity in the Company’s goodwill balance (in thousands):

Other Segments

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Impact of foreign currency exchange rate changes

Impact of held for sale reclass (1)

Balance as of May 28, 2022

Goodwill impairment

Impact of foreign currency exchange rate changes

Impact of held for sale reclass (1)

Balance as of May 27, 2023

(1) The 2022 decrease is due to taskforce’s goodwill being reclassified as held for sale as of May 28, 2022.

(1) The fiscal 2022 decrease is due to taskforce’s goodwill being reclassified as held for sale as of May 28, 2022.

See Note 4 – Assets and Liabilities Held for Sale

The following table presents details of the Company’s intangible assets, estimated lives and related accumulated amortization (in thousands, except for estimated useful life):

As of May 27, 2023

As of May 28, 2022

Customer contracts and relationships

Computer software

2 - 3.5 years

The weighted-average useful lives of the customer contracts and relationships, and computer software are approximately 7.6 years, and 3.2 years, respectively.

The weighted-average useful life of all of the Company’s intangible assets is 6.5 years.

The Company recorded amortization expense of $ 5.0 million, $ 4.9 million, and $ 5.2 million for the years ended May 27, 2023, May 28, 2022 and May 29, 2021, respectively.

The following table presents future estimated amortization expense based on existing intangible assets held for use (in thousands):

Fiscal Years:

Actual future estimated amortization expense could differ from these estimated amounts as a result of future acquisitions, dispositions, impairments, and other factors or changes.

Property and Equipment

Property and equipment consist of the following (amounts in thousands):

Property and equipment consist of the following (in thousands):

Building and land

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Property and equipment, net

Lease cost components included within selling, general and administrative expenses in the Consolidated Statements of Operations were as follows (amounts in thousands):

Lease cost components included within selling, general and administrative expenses in the Consolidated Statements of Operations were as follows (in thousands):

For the Years Ended

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Weighted-average discount rate

Cash flow and other information related to operating leases is included in the following table (amounts in thousands):

Cash flow and other information related to operating leases is included in the following table (in thousands):

For the Years Ended

Cash paid for amounts included in the measurement of operating lease liabilities

Right-of-use assets obtained in exchange for new operating lease obligations

Future maturities of operating lease liabilities at May 28, 2022 are presented in the following table (amounts in thousands):

Cash paid for amounts included in the

measurement of operating lease liabilities

Right-of-use assets obtained in exchange

for new operating lease obligations

Future maturities of operating lease liabilities at May 27, 2023 are presented in the following table (in thousands):

Operating Lease Maturity

Total minimum payments

Total future lease payments

Present value of operating lease liabilities

The Company leases approximately 13,000 square feet of the approximately 57,000 square feet of a company-owned building located in Irvine, California to independent third parties and has operating lease agreements for sublet space with independent third parties expiring through fiscal 2025.

Rental income received for the years ended May 28, 2022, May 29, 2021 and May 30, 2020 totaled $ 199,000 , $ 162,000 and $ 210,000 , respectively.

Under the terms of these operating lease agreements, rental income from such third-party leases is expected to be $ 219,000 , $ 219,000 , and $ 77,000 in fiscal 2023 through 2025, respectively.

Rental income received for the years ended May 27, 2023, May 28, 2022 and May 29, 2021 totaled

$ 195,000 , $ 199,000 and $ 162,000 , respectively.

Under the terms of these operating lease agreements, rental income from such third-party leases is expected to be $ 159,000 and $ 56,000 in fiscal 2024 and 2025, respectively.

Long-Term Debt

Prior to November 12, 2021, the Company had a $ 120.0 million secured revolving credit facility (the “Previous Credit Facility”) with Bank of America, pursuant to the terms of the 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 “Previous Credit Agreement”).

The Previous Credit Agreement was set to mature on October 17, 2022 .

On November 12, 2021, the Company, and Resources Connection LLC, and all domestic subsidiaries of the Company, as guarantors entered into a credit agreement with the lenders’ party thereto and Bank of America, N.A.

as administrative agent for the lenders (the “New Credit Agreement”), and concurrently terminated the Previous Credit Facility .

The New Credit Agreement provides for a $ 175.0 million senior secured revolving loan (the “New Credit Facility”), which includes a $ 10.0 million sublimit for the issuance of standby letters of credit and a swingline sublimit of $ 20.0 million.

The New Credit Facility also includes an option to increase the amount of the revolving loan up to an additional $ 75.0 million , subject to the terms of the New Credit Agreement .

The New Credit Facility matures on November 12, 2026 .

The obligations under the New Credit Facility are secured by substantially all assets of the Company, Resources Connection LLC and the Company’s domestic subsidiaries.

Borrowings under the New Credit Facility bear interest at a rate per annum of either, at the Company’s election, (i) Term SOFR (as defined in the New Credit Agreement) plus a margin ranging from 1.25 % to 2.00 % or (ii) the Base Rate (as defined in the New Credit Agreement), plus a margin of 0.25 % to 1.00 % with the applicable margin depending on the Company’s consolidated leverage ratio, which resulted in an interest rate of 2.15 % as of May 28, 2022.

The Company pays an unused commitment fee on the average daily unused portion of the New Credit Facility, which ranges from 0.20 % to 0.30 % depending upon on the Company’s consolidated leverage ratio.

The New Credit Agreement contains both affirmative and negative covenants.

On November 12, 2021, the Company, and Resources Connection LLC, as borrowers, and all of the Company’s domestic subsidiaries, as guarantors entered into a credit agreement with the lenders that are party thereto and Bank of America, N.A.

as administrative agent for the lenders (the “Credit Agreement”), and concurrently terminated the then existing credit facility, which provided a $ 120.0 million revolving loan .

The Credit Agreement provides for a $ 175.0 million senior secured revolving loan (the “Credit Facility”), which includes a $ 10.0 million sublimit for the issuance of standby letters of credit and a swingline sublimit of $ 20.0 million.

The Credit Facility also includes an option to increase the amount of the revolving loan up to an additional $ 75.0 million , subject to the terms of the Credit Agreement .

The Credit Facility matures on November 12, 2026 .

The obligations under the Credit Facility are secured by substantially all assets of the Company, Resources Connection LLC and all the Company’s domestic subsidiaries.

Future borrowings under the Credit Facility will bear interest at a rate per annum of either, at the Company’s election, (i) Term SOFR (as defined in the Credit Agreement) plus a margin ranging from 1.25 % to 2.00 % or (ii) the Base Rate (as defined in the Credit Agreement), plus a margin of 0.25 % to 1.00 % with the applicable margin depending on the Company’s consolidated leverage ratio.

In addition, the Company pays an unused commitment fee on the average daily unused portion of the Credit Facility, which ranges from 0.20 % to 0.30 % depending upon the Company’s consolidated leverage ratio.

The Credit Agreement contains both affirmative and negative covenants.

Covenants include, but are not limited to, limitations on the Company’s and its subsidiaries’ ability to incur liens, incur additional indebtedness, make certain restricted payments, merge or consolidate and make dispositions of assets.

In addition, the New Credit Agreement requires the Company to comply with financial covenants including limitation on the Company’s total funded debt, minimum interest coverage ratio and maximum leverage ratio.

The Company was compliant with all financial covenants under the New Credit Agreement as of May 28, 2022.

As of May 28, 2022, the Company has borrowed $ 54.0 million under the New Credit Facility, and borrowed $ 43.0 million as of May 29, 2021 under the Previous Credit Facility.

In addition, the Company had $ 1.2 million of outstanding letters of credit issued under the New Credit Facility as of May 28, 2022 and $ 1.3 million of outstanding letters of credit issued under the Previous Credit Facility as of May 29, 2021.

As of May 28, 2022, there was $ 119.8 million remaining capacity under the New Credit Facility.

The following table represents the current and deferred income tax expense (benefit) for federal, state and foreign income taxes attributable to operations (amounts in thousands):

In addition, the Credit Agreement requires the Company to comply with financial covenants including limitation on the Company’s total funded debt, minimum interest coverage ratio and maximum leverage ratio.

The Company was compliant with all financial covenants under the Credit Agreement as of May 27, 2023.

As of May 27, 2023, the Company had no borrowings outstanding and borrowed $ 54.0 million as of May 28, 2022 under the Credit Facility.

In addition, the Company had $ 0.8 million and $ 1.2 million of outstanding letters of credit issued under the Credit Facility as of May 27, 2023 and May 28, 2022, respectively.

As of May 27, 2023, there was $ 174.2 million remaining capacity under the Credit Facility.

On November 2, 2022, Resources Global Enterprise Consulting (Beijing) Co., Ltd .

(a wholly-owned subsidiary of the Company), as borrower, and the Company, as guarantor, entered into a RMB 13.4 million (USD $ 1.8 million based on the prevailing exchange rate on November 2, 2022) revolving credit facility with Bank of America, N.A.

(Beijing) as the lender (the “Beijing Revolver”).

The Beijing Revolver bears interest at loan prime rate plus 0.80 %.

Interest incurred on borrowings will be payable monthly in arrears.

As of May 27, 2023, the Company had no borrowings outstanding under the Beijing Revolver and RMB 13.4 million ($ 1.9 million based on the prevailing exchange rate on May 27, 2023) in availability.

The availability of proceeds under the Beijing Revolver is at the lender's absolute discretion and may be terminated at any time by the lender, with or without prior notice to the borrower.

The following table represents the current and deferred income tax expense (benefit) for federal, state and foreign income taxes attributable to operations (in thousands):

For the Years Ended

Income tax expense (benefit)

Income before income tax expense (benefit) is as follows (amounts in thousands):

Income before income tax expense (benefit) is as follows (in thousands):

For the Years Ended

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Worthless stock deduction

Worthless debt deduction

Permanent items

Deferred tax impact of foreign rate changes

Prior year true-ups

Tax impact of foreign rate changes

Return-to-provision & other adjustments

Prior year interest and penalty

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rates fluctuates year over year due to the changes in the mix of operating income and losses amongst the various states and foreign jurisdictions in which the Company operates.

The current year rate benefitted from the improvement in operating results in the international entities, enabling us to utilize the benefits from historical net operating losses in certain foreign jurisdictions by reversing a $ 4.9 million valuation allowance in a specific European entity in the third quarter.

We also recognized a $ 2.6 million benefit from the dissolution of our France entity.

The components of the net deferred tax (liability) asset consist of the following (amounts in thousands):

Our current year rate primarily benefitted from the release of a valuation allowance of $ 1.9 million in two of our European entities.

Our accounting policy is to recognize the U.S.

tax effects of global intangible low-taxed income as a component of income tax expense in the period it arises.

The components of the net deferred tax asset (liability) consist of the following (in thousands):

Deferred tax assets:

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Goodwill and intangibles

Net deferred tax liability

(1) Prior year amounts have been reclassified and presented separately for the impact from lease liability and ROU asset to be comparable with the current year presentation.

There is no change in the resulting net deferred tax liability as reported in the prior year.

In March 2020, the CARES Act was enacted into law.

The CARES Act made various tax law changes, including among other things (i) enacting technical corrections so that qualified improvement property can be immediately expensed under IRC Section 168(k) and (ii) allowing federal net operating losses (“NOLs”) incurred in calendar year 2018 to 2020 (the Company’s fiscal years 2019, 2020 and 2021) to be carried back to the five preceding taxable years.

The NOL carryback is intended to generate tax benefits at higher tax rates in the carryback periods.

As part of the Company’s tax planning strategies, management made certain changes related to the capitalization of fixed assets effective in fiscal 2021.

The strategy allowed the Company to carry back the net operating losses of fiscal 2021 to fiscal years 2016 to 2018.

The Company recognized a discrete tax benefit of $ 12.8 million in the fourth quarter of fiscal 2021, and subsequently an additional $ 0.2 million in the fourth quarter of fiscal 2022 after the fiscal year 2021 federal tax return was filed.

The Company had a net income tax receivable of $ 34.0 million as of May 28, 2022 and $ 36.1 million as of May 29, 2021, respectively.

We expect to receive our tax refund in the first half of fiscal 2023.

The tax benefit associated with the exercise of nonqualified stock options and disqualifying dispositions by employees of shares acquired pursuant to incentive stock options or under the Company’s ESPP reduced income taxes payable by $ 2.0 million and $ 0.4 million for the years ended May 28, 2022 and May 29, 2021, respectively.

The Company has foreign net operating loss carryforwards of $ 64.3 million and foreign tax credit carryforwards of $ 0.6 million.

The foreign tax credits will expire beginning in fiscal 2023.

The following table summarizes the net operating loss expiration periods (amounts in thousands):

Net deferred tax asset (liability)

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into law.

As part of the Company’s tax planning strategies, management made certain changes related to the capitalization of fixed assets effective for fiscal 2021.

The Company filed for federal income tax refunds in the U.S.

in the amount of $ 34.8 million (before interest) in April 2022.

As of May 27, 2023, the Company has received a federal income tax refund of $ 35.5 million (including interest income of $ 0.7 million).

The Company’s policy is to recognize interest and penalties related to income tax matters, if applicable, in income tax expense.

In August 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law.

The IRA included provisions such as the implementation of a new alternative minimum tax, an excise tax on stock buybacks and significant tax incentives for energy and climate initiatives.

The Company is monitoring the provisions included under the IRA and does not expect the provisions to have a material impact to its consolidated financial statements.

The Company recognized a tax benefit of approximately $ 2.1 million and $ 2.0 million for the years ended May 27, 2023 and May 28, 2022, respectively , associated with the exercise of nonqualified stock options, vesting of restricted stock awards, restricted stock units, and disqualifying dispositions by employees of shares acquired under the ESPP .

The Company has tax-effected foreign net operating loss carryforwards of $ 16.2 million ($ 65.3 million on a gross basis), tax-effected state net operating loss carryforwards of $ 0.5 million and foreign tax credit carryforwards of $ 0.4 million.

The state net operating loss carryforwards will expire beginning in fiscal 2031 and the foreign tax credits will expire beginning in fiscal 2025.

The following table summarizes the foreign net operating losses expiration periods (in thousands):

Expiration Periods

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Fiscal Years Ending:

The following table summarizes the activity in the Company’s valuation allowance accounts (amounts in thousands):

2027 and beyond

The following table summarizes the activity in the Company’s valuation allowance accounts (in thousands):

Realization of deferred tax assets is dependent upon generating sufficient future taxable income.

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Deferred income taxes have not been provided on the undistributed earnings of approximately $ 34.9 million from the Company’s foreign subsidiaries as of May 27, 2023 since these amounts are intended to be indefinitely reinvested in foreign operations.

If the earnings of the Company’s foreign subsidiaries were to be distributed, management estimates that the income tax impact would be immaterial as a result of the transition tax and federal dividends received deduction for foreign source earnings provided under the US Tax Cuts and Jobs Act of 2017.

The following table summarizes the activity related to the gross unrecognized tax benefits (amounts in thousands):

Tax Cuts and Jobs Act of 2017.

The following table summarizes the activity related to the gross unrecognized tax benefits (in thousands):

For the Years Ended

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Gross increases-tax positions in prior period

Gross increases-tax positions in current period

Unrecognized tax benefits, end of year

The Company’s total liability for unrecognized gross tax benefits was $ 908,000 and $ 872,000 as of May 28, 2022 and May 29, 2021, respectively, which, if ultimately recognized, would impact the effective tax rate in future periods.

The Company’s total liability for unrecognized gross tax benefits was $ 962,000 and $ 908,000 as of May 27, 2023 and May 28, 2022, respectively, which, if ultimately recognized, any differences in assessment or non-assessment would impact the effective tax rate in future periods.

Management believes there is a reasonable possibility that within the next 12 months, unrecognized gross tax benefits of $ 962,000 are expected to be recognized due to the expiration of a statute of limitation.

The unrecognized tax benefits are included in long-term liabilities in the Consolidated Balance Sheets.

None of the unrecognized tax benefits are short-term liabilities due to the closing of the statute of limitations.

None of the unrecognized tax benefits are short-term liabilities as management does not anticipate any cash payments within 12 months to settle the liability .

The Company’s major income tax jurisdiction is the U.S., with federal statutes of limitations remaining open for fiscal 2020 and thereafter.

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in which the Company does significant business, the Company remains subject to examination for fiscal 2019 and thereafter.

Major foreign jurisdictions in Europe remain open for fiscal years ended 2017 and thereafter.

Most major foreign jurisdictions remain open for fiscal years ended 2018 and thereafter.

The Company recognizes interest and penalties related to unrecognized tax benefits as a part of its provision for income taxes.

During the fiscal years ended May 28, 2022 and May 29, 2021, the Company accrued for interest of $ 36,000 and $ 24,000 , respectively, as a component of the liability for unrecognized tax benefits.

During the fiscal years ended May 27, 2023 and May 28, 2022, the Company accrued interest of $ 54,000 and $ 36,000 , respectively, as a component of the liability for unrecognized tax benefits.

Accrued Salaries and Related Obligations

Accrued salaries and related obligations consist of the following (amounts in thousands):

Accrued salaries and related obligations consist of the following (in thousands):

Accrued salaries and related obligations

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No single client accounted for more than 10% of revenue for the years ended May 27, 2023, May 28, 2022 and May 29, 2021.

No single client accounted for more than 10% of trade accounts receivable as of May 28, 2022 and May 29, 2021.

Only one client accounted for more than 10% of trade accounts receivable, which was predominantly less than 30 days aged, as of May 27, 2023 and no single client accounted for more than 10% of trade accounts receivable as of May 28, 2022.

Stockholders’ Equity

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Repurchases under the program may take place in the open market or in privately negotiated transactions and may be made pursuant to a Rule 10b5-1 plan.

On December 8, 2021, the Company repurchased 1,155,236 shares of the Company’s common stock in a privately negotiated transaction with Dublin Acquisition, LLC (the “Seller”) pursuant to the terms of a Stock Purchase Agreement, dated December 3, 2021, entered into between the Company and the Seller (the “Stock Purchase Agreement”).

During the year ended May 27, 2023, the Company purchased 914,809 shares of its common stock on the open market at an average price of $ 16.62 per share, for an aggregate total purchase price of approximately $ 15.2 million.

As of May 27, 2023, approximately $ 50.2 million remained available for future repurchases of the Company’s common stock under the July 2015 Program.

The Stock Purchase Agreement provided that the purchase price per share was $ 17.01 , equal to the lower of (i) the 10 -day volume-weighted average price for the period ending on Friday December 3, 2021 or (ii) the closing price on December 3, 2021.

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The shares of common stock were purchased by the Company pursuant to the Company’s July 2015 Program.

The Company did no t purchase any shares of its common stock during the year ended May 29, 2021.

During the year ended May 30, 2020, the Company purchased on the open market approximately 0.3 million shares of its common stock at an average price of $ 15.70 per share for approximately $ 5.0 million.

As of May 28, 2022, approximately $ 65.4 million remained available for future repurchases of the Company’s common stock under the July 2015 Program.

The Company did not purchase any additional shares of its common stock during the year ended May 28, 2022.

Quarterly Dividend

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The dividend was paid on June 15, 2023 to holders of record as of May 18, 2023.

As of May 28, 2022 and May 29, 2021, $ 4.6 million was accrued and recorded in other current liabilities in each of the Company’s Consolidated Balance Sheets for dividends declared but not yet paid.

As of May 27, 2023 and May 28, 2022, approximately $ 4.7 million and $ 4.6 million, respectively, was accrued and recorded in other current liabilities in each of the Company’s Consolidated Balance Sheets for dividends declared but not yet paid.

Continuation of the quarterly dividend is at the discretion of the Board of Directors and depends upon the Company’s financial condition, results of operations, capital requirements, general business condition, contractual restrictions contained in the Company’s current credit agreements and other agreements, and other factors deemed relevant by the Board of Directors.

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Restructuring Activities

The Restructuring Plans consist 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 high-growth clients;

and (ii) a strategic rationalization of the Company’s physical geographic footprint and real estate spend to focus investment dollars in high-growth core markets for greater impact.

All of the employee termination and facility exit costs associated with the Company’s restructuring initiatives are within its RGP segment, and are recorded in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations.

Unpaid employee termination benefits were included in accounts payable and other accrued expenses in the Company’s Consolidated Balance Sheets.

See Note 2 – Summary of Significant Accounting Policies and Note 19 – Segment Information and Enterprise Reporting for further discussion about the Company’s segment reporting.

Restructuring costs for the years ended May 28, 2022, May 29, 2021 and May 30, 2020 were as follows (amounts in thousands):

During calendar year 2020, the Company initiated a global restructuring and business transformation plan in North America, Asia Pacific and Europe (the “Restructuring Plans”).

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 high-growth clients and (ii) a strategic rationalization of the Company’s physical geographic footprint and real estate spend to focus investment dollars in high-growth core markets for greater impact.

The Company incurred employee termination and facility exit costs associated with the Company’s restructuring initiatives within its RGP segment, which were recorded in selling, general and administrative expenses in its Consolidated Statements of Operations.

The Restructuring Plans were substantially completed in fiscal 2021.

A ll the remaining accrued restructuring liability on the books related to employee termination costs was either paid or released as of May 27, 2023.

Restructuring liability recorded in accounts payable and accrued expenses in the Consolidated Balance Sheet was zero and $ 0.4 million as of May 27, 2023 and May 28, 2022, respectively.

Restructuring costs for the years ended May 27, 2023, May 28, 2022 and May 29, 2021 were as follows (in thousands):

For the Year Ended

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European Plan

Employee termination costs

Real estate exit costs

Total restructuring costs

Employee termination costs during fiscal 2022 were insignificant as the Company has substantially completed the planned employee headcount reduction under the Restructuring Plans and recognized substantially all of the expected employee termination costs in connection with the reduction in workforce.

Any future changes in estimates of total employee termination costs are expected to be immaterial.

Real estate exit costs for the year ended May 28, 2022 consisted of $ 0.3 million of noncash impairment of ROU assets and $ 0.6 million of loss on disposal of fixed assets and other related costs under the North America and APAC Plan.

Real estate exit costs for the year ended May 29, 2021 consisted of $ 0.4 million in lease early termination costs, $ 0.4 million in loss on disposal of property and equipment, and $ 0.9 million of impairment of ROU assets.

Other costs incurred under the European Plan for the year ended May 29, 2021 of $ 0.7 million were primarily related to legal and professional fees associated with the exit of certain non-core markets in Europe.

Real estate exit costs for the year ended May 30, 2020 consisted of $ 0.6 million of impairment of ROU assets and $ 0.5 million in loss on disposal of property and equipment.

The following table summarizes the employee termination activity under both the North America and APAC Plan and the European Plan for the years ended May 29, 2021 and May 28, 2022 (amounts in thousands):

Liability balance at May 30, 2020

Increase in liability (restructuring costs)

Reduction in liability (payments and others)

Liability balance at May 29, 2021

Increase in liability (restructuring costs)

Reduction in liability (payments and others)

Liability balance at May 28, 2022

The Company expects the remaining liability of $ 0.4 million recorded in accounts payable and accrued expenses in the Consolidated Balance Sheet as of May 28, 2022 to be paid prior to the end of December 2022.

Employee termination costs (adjustments)

Real estate exit costs (adjustments)

Total restructuring costs (adjustments)

Stock-Based Compensation Plans

T he Company’s stockholders approved the 2020 Performance Incentive Plan (the “2020 Plan”) on October 22, 2020, which replaced and succeeded in its entirety the 2014 Performance Incentive Plan (the “2014 Plan”).

T he Company’s stockholders approved the 2020 Plan on October 22, 2020, which replaced and succeeded in its entirety the 2014 Plan.

Executive officers and certain employees, as well as non-employee directors of the Company and certain consultants and advisors are eligible to participate in the 2020 Plan.

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Awards under the 2020 Plan may include, but are not limited to, stock options, stock appreciation rights, restricted stock, performance stock, stock units, stock bonuses and other forms of awards granted or denominated in shares of common stock or units of common stock, as well as certain cash bonus awards .

Historically, the Company has granted restricted stock units and stock option awards that typically vest in equal annual installments, and restricted stock awards vest based on an individual grant basis as described in the award agreement.

Historically, the Company has granted (i) time-based restricted stock units and stock option awards that typically vest in equal annual installments, (ii) performance-based restricted stock units that vest upon the achievement of certain Company-wide performance targets at the end of a defined three-year performance period and (iii) restricted stock awards that vest based on an individual grant basis as described in the award agreement.

Stock option grants typically terminate ten years from the date of grant.

During fiscal 2022, the Company issued stock unit awards under the 2020 Plan that will vest upon the achievement of certain Company-wide performance targets at the end of a defined three-year performance period.

Vesting periods for restricted stock, restricted stock units and stock option awards range from three to four years .

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Any resulting changes to stock compensation expense are adjusted in the period in which the change in estimates occur.

The Company recognized a tax benefit of approximately $ 2.0 million, $ 1.7 million, and $ 1.3 million, associated with such stock-based compensation expense for the years ended May 27, 2023, May 28, 2022, and May 29, 2021, respectively.

Stock Options

The following table summarizes the stock option activity for the year ended May 28, 2022 (amounts in thousands, except weighted average exercise price):

The following table summarizes the stock option activity for the year ended May 27, 2023 (in thousands, except weighted average exercise price):

Weighted Average

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Exercisable at May 27, 2023

Vested and expected to vest at May 28, 2022 ( 1 )

Vested and expected to vest as of May 27, 2023 ( 1 )

(1) The expected to vest options are the result of applying the pre-vesting forfeiture rate assumptions to options not yet vested of 215,035 and 645,449 as of May 27, 2023 and May 28, 2022, respectively.

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Employee Stock Purchase Plan

On October 15, 2019, the Company’s stockholders approved the ESPP which superseded the 2014 Employee Stock Purchase Plan.

The maximum number of shares of the Company’s common stock authorized for issuance under the ESPP is 1,825,000 .

On October 20, 2022, the Company’s stockholders approved an amendment and restatement of the 2019 ESPP that increased the number of shares authorized for issuance under the ESPP by 1,500,000 , resulting in a maximum number of shares of the Company’s common stock authorized for issuance under the ESPP of 3,325,000 shares.

The Company’s ESPP allows qualified employees (as defined in the ESPP) to purchase designated shares of the Company’s common stock at a price equal to 85 % of the lesser of the fair market value of common stock at the beginning or end of each semi-annual stock purchase period.

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Restricted Stock Awards

The following table summarizes the activities for the unvested restricted stock awards for the year ended May 28, 2022 (amounts in thousands, except weighted average grant-date fair value):

Weighted Average Grant-Date Fair Value

The following table summarizes the activities for the unvested restricted stock awards for the year ended May 27, 2023 (in thousands, except weighted average grant-date fair value):

Weighted-Average

Grant-Date Fair Value

Outstanding at May 28, 2022

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The weighted average estimated fair value per share of restricted stock awards granted during the years ended May 27, 2023, May 28, 2022 and May 29, 2021 was $ 18.31 , $ 18.28 and $ 12.47 , respectively.

Restricted Stock Units

Restricted Stock Units (“RSUs”)

In 2018, the Company adopted the amended and restated Directors Deferred Compensation Plan, which provides the non-employee members of the Company’s Board of Directors with the opportunity to defer certain cash compensation and equity awards earned or granted for their service in the form of stock units (“Stock Units”).

The Stock Units are used solely as a device for determining the amount of cash eventually paid to the director.

Each Stock Unit has the same value as one share of Resources Connection, Inc.

common stock.

Each Stock Unit has the same value as one share of the Company’s common stock.

Stock Units are not paid out until the director leaves the Board of Directors, at which time the cash value of the Stock Units is paid out in accordance with terms of the plan and the director’s election.

Additional Stock Units are credited to reflect dividends paid on shares of Resources Connection, Inc.

common stock.

Additional Stock Units are credited to reflect dividends paid on shares of the Company’s common stock.

Stock Units credited to a director pursuant to an election to defer cash compensation (and any dividend equivalents credited thereon) are fully vested at all times.

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The Company recognizes stock-based compensation expense on these Stock Units using the straight-line method over the requisite service period.

The Company also grants restricted stock units to its employees under the 2020 Plan, which are classified as equity awards.

The following table summarizes the activities for the unvested restricted stock units, including both equity- and liability-classified restricted stock units, for the year ended May 28, 2022 (amounts in thousands, except weighted average grant-date fair value):

Equity-Classified Restricted Stock Units

Liability-Classified Stock Units

Total Restricted Stock Units

The Company also grants RSUs to its employees under the 2020 Plan, which are classified as equity awards.

The following table summarizes the activities for the unvested RSUs, including both equity- and liability-classified RSUs, for the year ended May 27, 2023 (in thousands, except weighted average grant-date fair value):

Equity-Classified RSUs

Liability-Classified RSUs

Weighted-Average Grant-Date Fair Value

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Expected to vest as of May 27, 2023

As of May 28, 2022, there was $ 5.8 million of total unrecognized compensation cost related to unvested restricted stock units (which are the restricted stock units granted under the 2020 Plan that settle in shares of the Company’s common stock) .

(1) The dividend equivalents are included in the granted shares.

As of May 27, 2023, there was $ 6.9 million of total unrecognized compensation cost related to unvested RSUs (which are the RSUs granted under the 2020 Plan that settle in shares of the Company’s common stock) .

The cost is expected to be recognized over a weighted-average period of 1.73 years.

As of May 28, 2022, there was $ 0.8 million of total unrecognized compensation cost related to unvested liability-classified restricted stock units (which are the stock units credited under the Directors Deferred Compensation Plan that settle in cash).

As of May 27, 2023, there was $ 0.8 million of total unrecognized compensation cost related to unvested liability-classified RSUs (which are the stock units credited under the Directors Deferred Compensation Plan that settle in cash).

That cost is expected to be recognized over a weighted average period of 1.79 years.

The weighted average estimated fair value per share of restricted stock units granted during the years ended May 28, 2022, May 29, 2021 and May 30, 2020 was $ 18.25 , $ 11.51 and $ 14.98 , respectively.

Performance Stock Units

During the second quarter of fiscal 2022, the Company issued performance stock units to certain members of management and other select employees.

The total number of shares that would vest under the performance stock units will be determined at the end of the three-year performance period based on the Company’s achievement of certain revenue and Adjusted EBITDA percentage targets over the performance period.

The weighted average estimated fair value per share of RSUs granted during the years ended May 27, 2023, May 28, 2022 and May 29, 2021 was $ 18.27 , $ 18.25 and $ 11.51 , respectively.

Performance Stock Units (“PSUs”)

The Company issued PSUs to certain members of management and other select employees.

The total number of shares that will vest under the PSUs will be determined at the end of a three-year performance period based on the Company’s achievement of certain revenue and Adjusted EBITDA percentage targets over the performance period.

The total number of shares that may be earned for these awards based on performance over the performance period ranges from zero to 150 % of the target number of shares.

The following table summarizes the activities for the unvested performance stock units for the year ended May 28, 2022 (amounts in thousands, except weighted average grant-date fair value):

Weighted Average Grant-Date Fair Value

The following table summarizes the activities for the unvested PSUs for the year ended May 27, 2023 (in thousands, except weighted average grant-date fair value):

Weighted-Average

‎ Grant-Date Fair Value

Outstanding at May 28, 2022

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Expected to vest as of May 27, 2023

(1) Shares granted during the year ended May 28, 2022 are presented at the stated target, which represents the base number of shares that would vest.

(1) Shares are presented at the stated target, which represents the base number of shares that would vest.

Actual shares that vest may be 0 - 150 % of the target based on the achievement of the specific company-wide performance targets.

As of May 28, 2022, there was $ 3.2 million of total unrecognized compensation cost related to unvested performance stock units.

(2) The dividend equivalents are included in the granted shares.

As of May 27, 2023, there was $ 3.6 million of total unrecognized compensation cost related to unvested PSUs.

That cost is expected to be recognized over a weighted-average period of 1.55 years.

The Company maintains the Resources Global Professionals 401(k) Savings Plan, a defined contribution plan (the “401(k) Plan”) which generally covers all employees in the U.S.

who have completed 90 days of service and are age 21 or older.

who have completed three months of service.

Participants may contribute up to 75 % of their annual salary, up to the maximum amount allowed by applicable law.

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For the years ended May 27, 2023, May 28, 2022 and May 29, 2021, the Company contributed $ 8.7 million, $ 8.1 million and $ 6.2 million, respectively, to the 401(k) Plan as Company matching contributions.

Supplemental Disclosure of Cash Flow Information

Additional information regarding cash flows is as follows (amounts in thousands):

For the Years Ended

Income taxes paid

Interest paid

Non-cash investing and financing activities:

Capitalized leasehold improvements paid directly by landlord

Acquisition of Veracity:

Liability for contingent consideration

Acquisition of Expertence:

Liability for contingent consideration

Acquisition of Accretive:

Issuance of common stock

Dividends declared, not paid

Commitments and Contingencies

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Segment Information and Enterprise Reporting

As discussed in Note 2 — Summary of Significant Accounting Policies , the Company revised its 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 its internal management structure and its reporting structure of financial information used to assess performance and allocate resources:

RGP, taskforce , and Sitrick.

As discussed in Note 2 — Summary of Significant Accounting Policies , from May 29, 2022 to May 31, 2022, the Company had three operating segments – RGP, Sitrick and taskforce .

Upon completing the sale of the taskforce operating segment, effective May 31, 2022, the Company’s operating segments consist of RGP 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.

Sitrick does not individually meet the quantitative thresholds to qualify as a reportable segment.

Therefore, Sitrick is disclosed as Other Segments.

Prior-period comparative segment information was not restated.

See Note 2 – Summary of Significant Accounting Policies for further discussion about the Company’s operating and reportable segments.

The tables below reflect the operating results of the Company’s segments consistent with the management and performance measurement system utilized by the Company.

Fiscal 2020 results were recast to reflect the impact of the preceding segment changes.

Performance measurement is based on segment Adjusted EBITDA.

Adjusted EBITDA is defined as net income before amortization expense, depreciation expense, interest and income taxes plus stock-based compensation expense, restructuring costs, technology transformation costs, and plus or minus contingent consideration adjustments.

Performance measurement is based on segment Adjusted EBITDA, a non-GAAP measure.

Adjusted EBITDA is defined as net income before amortization expense, depreciation expense, interest and income taxes plus or minus stock-based compensation expense, technology transformation costs, goodwill impairment, restructuring costs, and contingent consideration adjustments.

Adjusted EBITDA at the segment level excludes certain shared corporate administrative costs that are not practical to allocate.

The Company’s CODM does not evaluate segments using asset information.

The following table discloses the Company’s revenue and Adjusted EBITDA by segment for all periods presented (in thousands):

For the Years Ended

(Amounts in thousands)

Other Segments (1)

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Total Adjusted EBITDA (3)

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

(1) Amounts reported in Other Segments for the year ended May 27, 2023 include Sitrick and an immaterial amount from taskforce from May 29, 2022 through May 31, 2022, the completion date of the sale.

Amounts previously reported for the years ended May 28, 2022 and May 29, 2021 included the Sitrick and taskforce operating segments.

(2) 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.

(3) A reconciliation of the Company’s net income to Adjusted EBITDA on a consolidated basis is presented below.

The table below represents a reconciliation of the Company’s net income to Adjusted EBITDA for all periods presented:

The table below represents a reconciliation of the Company’s net income to Adjusted EBITDA for all periods presented (in thousands):

For the Years Ended

(Amounts in thousands)

Amortization expense

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Stock-based compensation expense

Technology transformation costs (1)

Goodwill impairment (2)

Restructuring costs (3)

Contingent consideration adjustment

Technology transformation costs (1)

Adjusted EBITDA

(1) Technology transformation costs in fiscal 2022 represent costs included in net income related to the Company’s initiative to upgrade its technology platform globally, including a cloud-based enterprise resource planning system and talent acquisition and management system.

Such costs primarily include software licensing costs, third-party consulting fees and costs associated with dedicated internal resources that are not capitalized.

The table below represents the Company’s revenue and long-lived assets by geographic location (amounts in thousands):

(2) Goodwill impairment charge recognized during the year ended May 27, 2023 was related to Sitrick operating segment.

(3) The Company substantially completed the Restructuring Plans in fiscal 2021.

All the remaining accrued restructuring liability on the books related to employee termination costs that was either paid or released as of May 27, 2023.

The table below represents the Company’s revenue and long-lived assets by geographic location (in thousands):

Revenue for the Years Ended

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(1) Long-lived assets are comprised of property and equipment and ROU assets .

Subsequent Events

Sale of taskforce

On April 21, 2022, RGP Germany entered into the Sale and Purchase Agreement for the sale of taskforce to Purchasers owned by the original founder and a member of the senior leadership team of taskforce .

The Sale and Purchase Agreement provided for the sale of all of the shares of taskforce from RGP Germany to the Purchasers for a purchase price of approximately EUR 5.5 million (approximately $ 5.9 million), subject to final working capital adjustments on July 31, 2022, with 50 % of the consideration to be paid in cash in connection with the closing and the remaining 50 % payable on July 1, 2024 and bearing interest based on the Company’s average borrowing interest rate .

On May 27, 2022, the Company received a purchase payment of EUR 2.5 million (approximately $ 2.7 million) in cash prior to the closing of the sale.

The amount has been recorded as cash and cash equivalents with a corresponding increase in other liabilities in the Consolidated Balance Sheet as of May 28, 2022.

The sale of taskforce was completed o n May 31, 2022.

The Company considers the Purchasers of taskforce to be related parties as defined in ASC 850 , Related Party Disclosures .

See Note 2 – Summary of Significant Accounting Policies and Note 4 – Assets and Liabilities Held for Sale for further information on the Company’s taskforce business .

Repayment under the New Credit Facility

The Company elected to repay a total of $ 34.0 million under the New Credit Facility on June 16, 2022 and subsequently borrowed $15.0 million on July 22, 2022.

CHAN GES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity