RGP: Bottoming Out with Customer Backing and AI on the Front Line

For Resources Connection (RGP), a small-cap professional services firm, the fiscal Q4 2026 call was a study in controlled optimism. The company, which has seen its stock fall nearly 80% from its 2022 peak, is now trying to convince investors that the cyclical downturn has bottomed and that its restructuring and investments are about to bear fruit.

Stability, According to the Customer Survey

CEO Roger Carlile opened the call by declaring that “global market conditions remain broadly consistent to the third quarter with some regions and industry sectors showing more progress than others” — Roger Carlile, CEO · 2026-07-22. The company's North American business was flat sequentially on a GAAP basis, while Europe was softer but deemed non-systemic. But the most notable new element was a voice-of-customer survey of 500 decision makers. As Carlile explained, “we very recently completed a voice of the customer survey... we undertook this survey to ensure we anchor our strategy investments in market reality” — Roger Carlile, CEO · 2026-07-22. The early data shows RGP rated stronger than "execution and staffing focused competitors" though still behind larger consultancies. The headline: "95% of our customers indicating their intent to increase or maintain their level of engagement with RGP." This is a fresh, company-unique piece of evidence — the customer survey is brand new in the company's keyword trajectory (it didn't appear in any of the prior 12 quarters). It's RGP trying to move from anecdote to data in a market where confidence is everything.

The revenue picture remains difficult. Total revenue fell 18% year-over-year on a same-day constant-currency basis to $106.1 million, and the trend is stark: revenue peaked at $207M in Q4 2022 and has since dropped 41%. Yet Carlile argues the "activity seems stable heading into the first quarter of '27," and the company's Q1 guide of $97–$102 million implies a flat-to-slightly-down quarter after adjusting for seasonality and the Sitrick divestiture.

AI and the Rebuilt Pipeline

The second pillar of the story is AI. RGP has been talking about AI for several quarters, but this call elevated it from a defensive response to a proactive strategy. Carlile said, “AI remains an important strategic priority for RGP. We see AI fundamentally changing how work gets done” — Roger Carlile, CEO · 2026-07-22. He rejected the "death knell" narrative: "There's a number of people that want to paint AI as the death knell for professional services and consulting... I don't buy it." Instead, the firm is hiring AI-savvy leaders like Prashant Lamba and Jessica Block, and pushing AI into client conversations. This is a strategic priority that's been on the list for four quarters, but the tone has shifted from "we're monitoring it" to "we're investing heavily behind it."

The company added 7 new sales professionals and senior consulting talent, and management was explicit that the ramp-up period means results will come in the second half of FY27. In the prior quarter call (April 2026), Carlile was already confident: “I'm confident that fiscal year 2027 will be growth over fiscal year 2026” — Roger Carlile, Chief Executive Officer · 2026-04-08. Now he's doubling down, saying the investments are "basically complete" and "we expect that to occur in the latter half of the year." This is a subtle but important change: previously the cost-cutting was the main lever; now it's growth investment.

The cost actions have also been substantial. Run-rate SG&A fell 12% year-over-year to $40.5 million, and additional cost reductions are planned. But the company is also reallocating capital toward go-to-market, which suggests the era of pure defensive restructuring is over.

Guidance and the Path to Normalized Margins

The financial guidance for Q1 FY27 was in line with the stabilization narrative: revenue of $97–$102 million, gross margin of 37–38%, and run-rate SG&A of $41–$43 million. CFO Jennifer Ryu summarized the outlook in her prepared remarks:

We expect first quarter revenue to be relatively consistent with fourth quarter levels, adjusting for normal summer seasonality and the impact of the Sitrick divestiture... Gross margin to be in between 37 to 38%, also reflecting typical seasonal dynamics in the quarter.

The key operational metric is consultant utilization, which is currently in the "low 60s" for salaried consultants. Jennifer noted that the target is "above 75 to 80%," and getting there would be worth "roughly 200-plus basis points" of gross margin. That's a huge lever, and it ties directly to the revenue mix and the AI-enabled higher-value work the company is pursuing. In a Q&A exchange, Jennifer elaborated: “we're around in the low 60s right now for our salary consultants” — Jennifer Ryu, CFO · 2026-07-22.

The management team also pointed to a path back to normalized margins. When asked about incremental margins as revenue normalizes, Jennifer said, "I think we can get to the more normalized, I would say, 6% to 8% margin when revenue gets above $500 million." That's a clear target that implies significant operating leverage if the stabilization turns into growth.

Contrast this with the fear-laden calls of a year ago. In April 2026, Carlile was reassuring investors that "we're confident that we're going to grow" — but the tone was more defensive. Jennifer, in the same call, admitted that “we are nearing the stability level for SG&A” — Jennifer Ryu, Chief Financial Officer · 2026-04-08, acknowledging the cost actions were still settling. The prior quarter's cautious language — "we're still in a choppy environment" (from October 2025) — has been replaced by "the markets seem to be somewhat stable" now.

The stock has also started to react. RGP's 90-day price return is +19.9%, a sharp bounce off the lows, though still down 80% from the 2022 peak. The recent uptrend, combined with the survey and AI narrative, suggests investors are giving management the benefit of the doubt that the bottom is in. Whether the survey's 95% customer intent translates into actual revenue depends on the ramp of the new hires and the macro environment — but for the first time in years, RGP has a data-backed story to tell.