Resources Connection has spent the past year proving it can cut costs. The fiscal first-quarter report on October 7 needs to show something harder: that shrinking revenue is finally approaching a floor. Management finished its restructuring, hired a fresh sales force, and described its markets as stabilizing. Yet the quarterly revenue line still steps down every period, and the promised return to growth has again been pushed to the back half of fiscal 2027. That leaves this report stuck between two stories, and the numbers will decide which one wins.
Wall Street expects a GAAP loss of $0.22 per share on revenue of $99.5 million. That would be a 17.2% revenue decline from the $120.2 million reported a year ago, and a much deeper loss than the $0.04 per share lost in the same quarter last year. It would also double the $0.11 loss from last quarter. The revenue estimate sits near the middle of management's guidance of $97 million to $102 million. Part of the sequential drop from $106.1 million is explained by the Citrix divestiture and normal seasonality. Even so, the guidance marked a clear retreat from the prior quarter's $104 million to $109 million outlook. If the company lands in the upper half of its range, that would support the idea that demand is leveling off. A result near $97 million would suggest the erosion is more than a one-time portfolio adjustment.
The most important test lies below the revenue line. Adjusted EBITDA has been negative for two straight quarters, at minus $1.4 million and then minus $0.6 million, after positive results in the first half of fiscal 2026. Management has lowered run-rate SG&A to $40.5 million, about 12% below the prior year, and says the major cost actions are done. It also expects non-run-rate charges to fall to $2 million to $3 million, down from double-digit millions in recent quarters. Gross margin is guided to 37% to 38%, roughly in line with last quarter's 37.6% and well above the 35.7% trough. If the company hits those marks, EBITDA should move back toward breakeven even on lower sales. That would show the cost reset is doing its job. Another negative EBITDA quarter despite lighter restructuring costs would be a warning. It would mean revenue is falling faster than the company can resize.
Consulting remains the swing factor. The segment's revenue fell 23% last quarter, and its EBITDA margin dropped to 6.3% from 16.3% a year earlier. Utilization is stuck in the low 60s, far below management's target of 75% to 80% or more, and that gap costs roughly 200 basis points of gross margin. Several items would count as real progress. The first is any rise in utilization. The second is shorter sales cycles. The third is early evidence that the new consulting hires and the AI initiatives led by the new technology leadership are turning into signed work. Europe also deserves attention after large-client project timing hurt the Europe and Asia-Pacific segment, where EBITDA margin fell to 2.1%. On the positive side, rising bill rates in North America and steady growth in outsourced services have been reliable, and both should continue.
Sentiment has cooled, with bullish readings slipping to 24.5% from 31.5% ahead of the last report. The stock reflects that fatigue. Shares are down 3.1% since the last report while the S&P 500 gained 3.6%. At $3.76, the stock trades below its 200-day moving average of $4.26. It also sits just above the post-earnings low of $3.63, far from the $4.61 high. The market is not paying for a turnaround it cannot yet see.
That modest bar cuts both ways. Revenue near the middle of guidance with EBITDA near breakeven could reassure a skeptical market that the company has hit bottom on both cost and demand. The central question is whether the fiscal second-quarter outlook shows sequential stabilization. If guidance points lower again, the back-half recovery will start to look like a promise that keeps moving further out.