Resources Connection, Inc. Price & Performance (RGP)

Thank you, operator. Thank you all for joining us today. In Q3, our results were in line or better than expected. Our total revenue was $1,294,000,000 dollars consistent with expectations and reflecting macroeconomic uncertainty client budget constraints, and slower project ramp up. Our gross margin and SG and A both beat the favorable end of our outlook ranges. Post election, the operating environment has remained sluggish this calendar year, given increased uncertainty and decreased consumer confidence in The United States. The news is not all about uncertainty, however. We saw strengthening across our practices in Europe, Japan, and The Philippines in Q3 Europe improved with several key performance indicators, including bill rate increases, sizable pipeline expansion, and the return of $1,000,000 plus project pursuits. Our Consulting segment also achieved material double digit bill rate improvement in Q3. Besides of enterprise wide engagements, increased on average by more than 20% and we improved our win ratio. We doubled the number of 1,000,000 plus engagements engagements we won this quarter over a year ago, and our pipeline of opportunities at the 5,000,000 plus level grown significantly, reflecting a quality improvement in pipeline over last year. We did not see this size and scope of opportunity a year ago.

These indicators show we're moving in the right direction but we need to increase volume as we execute our diversified services strategy. In this environment, many clients are moving work to the international stage. And we are strategically located to support them. Here, too, we're focused on increasing scale in our key markets in Southeast Asia and India. Our outsourced services business, Kelsey, delivered solid results in the third quarter. And our overall client retention in our top 100 accounts remained solid. During this relatively slower stretch for our industry, we've accelerated RGP's evolution by focusing on three key initiatives that position us for market share expansion. First, we have enhanced client offerings. We've built a diversified services platform to meet clients where they need us. Whether they require both strategy and execution support or they need our execution specialists working with in house teams, we deliver both with excellence. Our flexible engagement models are proving an important competitive differentiator as clients seek agility, price to value, and blended delivery teams. It used to be that the traditional consulting firms owned domain expertise and would deploy an army of consultants using their leveraged model. Times have changed, and we believe in RGP's favor.

Clients now know and own their strategy and need high quality flexible, value based execution support, a niche that RGP created and which we uniquely provide. We've also focused our services catalog of across our diversified offerings in areas where the market has the highest demand. Utilizing our core CFO relationships to expand into new buying centers, the Chief Technology Officer chief HR officer, Chief Procurement Officer, and senior supply chain leaders. Our core pillars of service capability are CFO services, digital technology and data, and strategy and operational performance. Most of the services are currently delivered to the office of the CFO, across these pillars, but the natural extensions are in risk and compliance technology modernization, supply chain optimization, and employee experience. We are leveraging this strategy of CFO plus one to enhance growth and client value creation. As Badresh will share, we've experienced positive momentum with cloud migration support for SAP and Oracle finance transformation, as well as ServiceNow optimizations to improve user experience around automation of process workflows in IT, HR, and risk and compliance. While industry wide M and A and IPO readiness initiatives have been slow to pick up this calendar year, We have the right capability to jump in and respond quickly when this event cycle turns.

For example, the Reference Point acquisition allows us to accelerate and broaden what we can do for clients around M and A integration, operating model assessments and design, data architecture and governance, and application modernization to help clients optimize enterprise performance and enable the adoption of AI. We have worked diligently to ensure we have the sales readiness and delivery skills to capitalize as the business environment improves. Client budgets strengthen and decision making accelerates. Last week, we closed a significant project and finance optimization by combining skills and building a delivery team of management consulting and agile execution specialists who know the client's industry. Second, we have improved operational efficiency. We've lowered our cost structure, and you can see the progress we've made. We're driving cost savings with optimized headcount, reduced real estate spend, and lower discretionary spending. We've lowered our run rate SG and A by 8% since the first fiscal quarter and will continue to drive efficiency to across the enterprise through technology, AI, and automation. Jen will offer additional commentary on our successful efforts around operating efficiency. Third, we made targeted investments to enhance value creation over the long term. We've made most of the investment needed to replace our technology and infrastructure for the North America business.

These enhancements allow us to implement AI and automation to our advantage in both client service and talent recruitment and management. This modern technology will allow us to streamline process and accelerate opportunity through our pipeline. We have also enhanced our sales and delivery team to ensure we have the right approach for both consulting and on demand solutioning when the buying environment improves, We're proud of the sales team we have and the relationships they nurture in our exceptional client base. And we're adding a new archetype to the team to drive growth. We had some go to market team attrition in Q3, much of it planned, which allows us to accelerate certain enhancements. Specifically, we've added consultative sales expertise, especially in the digital and technology areas and strategy and operations to support growth. For example, a new joiner in our New York practice was a senior finance executive at a top 10 financial services [indiscernible] Was a key buyer of CFO Services, a across the professional services continuum. Another recent senior hire in our New York office brings solution sales experience from a top tier digital consultancy. According to Kennedy Research, the two highest growth opportunities for consulting in the next three years will be strategy and operations and digital transformation.

Benefiting from our inherent competitive advantages including strength of CFO relationship, diversified engagement model, agility, price to value, and cross border collaboration, we are improving our positioning to earn this work as clients increasingly seek value and seamless global delivery areas in which we excel. Finally, I want to highlight the progress we've made this fiscal year in building more delivery capability in India. Our global delivery centers there are supporting work for the 500 clients. We just closed work in India for a long time New York based financial services firm who has previously only engaged with RGP in The US. This close also enabled us to expand our buying centers in this client. We now have strong delivery capability in Mumbai, Bangalore, Pune, and Hyderabad. I'll close with this reminder. While we always act with urgency, our pristine balance sheet allows us to take a long term view of value creation. Busy laying groundwork for growth and improving profitability when the client buying environment improves. We understand that the near term outlook across professional services in The US is uncertain and disruptive. But we're resolute in nurturing our key relationships standing at the ready, focusing our services so clients know to call us with utmost confidence.

Most importantly, we are committed to delivering long term value for our shareholders driven by our team's unwavering strategic focus. I'll now turn the call over to Padresh for detail on operational trends and key performance indicators.

Thank you, Kate, and good afternoon, everyone. I'm excited to share our quarterly update and highlight the progress we continue to make in executing our strategy. As Kate mentioned, our industry is evolving, and recent geopolitical events and actions have only served to create greater uncertainty in the market As a result, our position as a challenger brand is becoming increasingly relevant in reshaping professional services breaking away from traditional engagement and operating models, and offering clients a differentiated experience. Our strategy is designed to empower clients by offering flexibility in how they engage with us throughout their transformation and operational journey. Removing the rigid structures traditional firms impose, we offer our clients the ability to act as expert solution teams and core finance and HR outsourcing services in a way that best meets their needs. More client centric, flexible approach our competitors struggle to provide.

Our revised approach of offering on demand consulting and services under a single umbrella is setting the stage for our business to be more resilient and less cyclical. Our Q3 results show our top line performance tracking in line with expectations while delivering better than expected gross margin and bottom line results. While overall pipeline softened, we're seeing a positive shift in our win ratio and pipeline of new opportunities moving us up the value chain with our clients And we know these opportunities take longer to move through the sales cycle especially given the current instability of The US market. We are gaining traction with solutions that remain central to our clients' transformation agendas. These areas of high client priority, both within the CFO's office and CFO plus one, aligned closely with our core capabilities, cross sell strategy, and market demand. At the same time, remain focused on maximizing our on demand professional staffing services in The US where we benefit from long term solid client relationships particularly in the office of the CFO. Once the market dynamics improve, we are well positioned as we continue refining our operating model and optimizing our sales infrastructure to drive efficiency, breakdown silos, and better align our solutions with revenue generation.

This is leading to larger contract sizes with a stronger economic profile driven by our strategic shift in the business. Now I'll provide an update on our quarterly performance by segment. Our consulting segment performance was slightly down from prior year quarter, but continues to validate our strategy. As we're seeing steady bill rate improvements 13% higher than same quarter last year, and a 4% improvement sequentially. It is worth noting that given recent shifts in the policy landscape, our federal government work represents only 1.5% of our overall revenue.

Most importantly, we have nearly doubled the number of $1,000,000 plus opportunities won and doubled the number of opportunities greater than $1,000,000 in our pipeline compared to same quarter last year. We are actively pursuing multiple opportunities each exceeding $5,000,000 in value driven by the expanded capabilities from our acquisition or reference point, and the increased digital scale gained through CloudGo, now fully integrated into our consulting segment. This growth was driven by our expansion into new buying centers within existing clients and higher level conversations around client transformation initiatives. Some notable wins include the Australian Singapore government, a Fortune two fifty integrated health care delivery system, a Fortune 200 life sciences company, a large medical device company, and a Fortune 500 bank. Notable large pipeline opportunities include a Fortune 50 financial services company, preferred supplier status for Fortune 50 financial services client, in a large federal agency. I want to emphasize this time last year, we were not engaged in opportunities of this magnitude in our client base.

As our strategy continues to show results, we remain focused on building scale through our transformation recognizing it will take time to expand to drive growth.

As I mentioned earlier, and as is typical with solution selling, these opportunities take time to generate and materialize, especially given our current environment and ongoing uncertainty. Turning to on demand. While revenue was down from the prior year, we're seeing early traction from our cross selling initiatives benefiting from our long term strong client relationships in the office of the CFO, and our CFO plus one strategy. While we continue to add net new logos, we're also intensely focused on keeping our current experts engaged with clients making extension management a key priority for our revenue and talent teams which did increase by 5.4% sequentially. RGP is poised as an attractive option for organizations needing on demand specialized support without the need for long term commitments or additional hires, especially as companies continue to tighten their belts in the current economic landscape and strive to do more with less.

While revenue backlog in our Europe and Asia segment was higher sequentially, we did see a slowdown in growth compared to the previous quarter. Europe was impacted by a larger than usual consultant holiday, while APAC growth was hindered by ongoing macroeconomic challenges in our China business. However, we remain cautiously optimistic about accelerating growth as project extensions improved for the first time in three quarters. This trend should provide greater stability and a foundation for future growth. Particularly in The United Kingdom, Philippines, Japan, where we are seeing stronger momentum compared to other regions. Our outsourced services segment continues to achieve top line revenue growth both prior year quarter and sequential quarter driven by our efforts to acquire new venture backed clients and expanding our focus on spin outs. In summary, since launching our refreshed brand positioning and service segmentation, client feedback has been overwhelmingly positive They recognize our capabilities and appreciate the flexibility our various engagement models offer reinforcing their desire to partner with us. While we all understand the uncertainties in our current environment, we remain excited by the progress we're making in executing our strategy and remaining focused on delivering value to our clients. I'll now hand the call over to Jen.

Thank you, Vidresh, and good afternoon, everyone. Our third quarter performance was in line or better than our expectations. Revenue of $129,400,000 was in the middle of our outlook range. While both gross margin and run rate SG and A expense were better than the favorable end of our outlook range. We delivered adjusted EBITDA of $1,700,000 or a 1.3% adjusted EBITDA margin reflecting the holiday seasonality during the third fiscal quarter. The year over year revenue gap continued to moderate in the third quarter to 11% on a same day constant currency basis, which is an improvement over last quarter's 13%. We're encouraged to see continued stabilization in our Europe and Asia Pac and a year over year growth in our outsourced services segment. Our on demand and consulting segment, which are both predominantly U. Based were impacted by the increased level of uncertainty in the macro environment driven by a number of domestic government policy changes. Gross margin for the quarter was 35.1% again, better than expected and off by 190 basis points from the prior year quarter. Reflecting unique holiday timing, including Thanksgiving, which is typically in Q2 as well as a mid week timing of Christmas and New Year's Day.

We're pleased that the pay bill ratio for the third quarter strengthened as a result of a notable improvement in the enterprise average bill rates. Despite the competitive pricing environment across the globe, we improved enterprise wide average bill rate to $124 constant currency from one and nineteen a year ago. Led by our consulting segment with a 13% increase over the prior year quarter, as well as a 4% sequential increase over the second quarter. Average bill rate in the Europe and Asia Pac segment also increased by 5% over the prior year and sequentially on a constant currency basis. The improvements within these segments are the result of our efforts to drive value based pricing and are reflective of a favorable mix shift we're starting to achieve in winning higher value and larger consulting projects. The addition of reference points project portfolio, and joint project involving reference point solution capabilities also boosted average bill rates. In our on demand and outsourced services segment, average bill rates were both down slightly from the prior year quarter. Pricing in these segments remains competitive which requires us to balance between rate and volume to optimize revenue as well as margin. As we strive to drive higher bill rates in all business segments and geographic regions, revenue mix will continue to be reflected in our total company average bill rate.

Especially as we increasingly leverage our global delivery center for offshore delivery teams. Importantly, while the use of offshore teams will typically blend down our average bill rates. We expect it will enable us to enhance gross margin and to more effectively. Now on to SG and A. Our enterprise run rate SG and A expense for the quarter was $43,700,000 an improvement from $45,200,000 a year ago. Primarily driven by lower management compensation expense as a result of actions taken in December to reduce headcount. As well as an elevated level of attrition in our sales force during the quarter. While we fight to improve top line in the persistently choppy environment, we are working diligently to pull the levers we can control to protect profitability in the near term, but ultimately to create a lighter cost structure for the future. We've been consistently implementing initiatives to reduce fixed costs in areas such as real estate and to increase operating efficiencies through our newly implemented technology platform. Next, I'll provide some additional color on segment performance. All year over year percentage comparisons for revenue are adjusted for business days and currency impact. And as a reminder, [indiscernible] Revenue for our Consulting segment was $52,600,000 a decline of 2% from the prior year.

Third quarter segment adjusted EBITDA was $5,900,000 or an 11% margin compared to $8,800,000 or a 16% margin in the prior year quarter. Revenue for our On Demand segment was $47,100,000 a decline of 24% versus prior year. Segment adjusted EBITDA was $2,600,000 or a margin of 5% compared to $7,300,000 on 11% margin in the prior year quarter. Adjusted EBITDA margins in both segments reflect negative operating leverage on the softer top line. While our on demand business has been more impacted by the macroeconomic conditions, we're pleased with the role it has played in supporting the talent needs of our consulting segment. Our strategy is to continue driving opportunities for such blended delivery teams to mitigate utilization exposure. Turning to our Europe and Asia Pac segment, revenue was $18,600,000 a decline of 2%. Segment adjusted EBITDA was $800,000 or a 5% margin compared to $1,300,000 and a 7% margin in the prior year quarter. Finally, our outsourced services segment revenue was $9,400,000 similar to the prior year quarter, but with an implied growth of 3% on an adjusted basis. Segment adjusted EBITDA was $1,500,000 or 16% margin, which is approximately the same as the prior year quarter. I also want to note we recorded a non cash goodwill impairment charge of $42,000,000 in the third quarter in response to the continued sluggish demand environment in both our on demand and consulting segments. 12,400,000.0 was recorded for our on demand segment and $20,600,000 was recorded for our Consulting segment.

Turning to liquidity. Our balance sheet remains strong with $73,000,000 of cash and cash equivalents and zero outstanding debt.

We distributed $4,600,000 worth of dividends in this quarter and repurchased $3,000,000 worth of shares at an average price of $8.46 per share. With our cash on hand, combined with available borrowing capacity under our credit facility, we will continue to take a balanced approach to capital allocation between investing in the business to drive growth and returning cash to shareholders through dividends and opportunistic share repurchases under our share repurchase program with $79,000,000 remaining at the end of the quarter. I'll now close with our fourth quarter outlook. As mentioned earlier, recent government policies in The US have introduced additional uncertainty as our clients sort through the potential impact on their own business as terrorists and doge actions unfold. While we're encouraged to see improving quality in the pipeline with larger deal opportunities, We experienced lighter volume of activities starting in the second half of Q3 and expect delays in client decision making to continue in the near term. As a result, early fourth quarter weekly revenue run rate has shown some deceleration from the third quarter. Thus our outlook cost for revenue of 132,000,000 $137,000,000. On the gross margin front, we anticipate maintaining the improved pay bill ratio we achieved through Q3.

With the holiday season now behind us, we expect a stronger and a more normalized gross margin in the range of 30% to 37%. For SG and A expense, we expect our fourth quarter run rate SG and A to be in a range of 45,000,000 to $47,000,000 reflecting a fourteen week quarter as opposed to the typical thirteen weeks. Non run rate and non cash expenses for the fourth quarter will be around 2,000,000 to $3,000,000 consisting mostly of non cash stock compensation expense. In closing, during the current operating environment, we continue to refine our strategy and improve our execution to drive long term value creation. With improving economic clarity over time. We will be well positioned for a return to growth. This concludes our prepared remarks and we will now open the call for Q and A. Thank you.

One moment for questions. Our first question comes from Joe Gomes with Noble Capital. You may proceed. Good afternoon. Thank you for taking my questions.

Hi, Joe.

Hello, Joe. I wanted to start out we talk about for the clients, these are high priority transformational activities you know, but obviously we're seeing the ongoing delays and push out of start date. Mean, how high priority are these? How long, I guess, can the clients go? Or hold off without you know, starting some of these activities.

So I wish I had an answer for you across the board, Joe. I do believe it one of the reasons Europe has started to bounce back because the the pent up demand has started to open up. And so we're seeing some of those projects move forward, whether it's M and A activity or technology transformation, like move to a global payroll system, or a cloud migration on ERP, that's one of the reasons you're hitting it that Europe has started to improve. The US is a little bit different story. I mean, liberation today. We all hear what's happening with the tariffs. I think people are hesitant to make firm, expensive decisions in an uncertain landscape. And that's what we saw happen in the second half of Q3, which guides us to be careful as we think about what happening in Q4. I mean, if you ask any professional services folks everybody thought M and A would really open up in the first half of calendar 2025. And in fact, the opposite has happened. You can look at a graph of what's happening in the S and P or the Russell, and see how negative sentiment has become.

And that does cause more conservative decision making. As we look at our reports on opportunities opened in the pipe, by week, As we've shared, consulting is really growing. But the time to close is longer and budget constraints are always noted. When we lose work, generally it's been because of budget or delayed decision making. And that's the reality of The US marketplace right now.

Okay, thank you for that. Given where the marketplace is, I mean, how is the retention of the consultants or what are you doing to retain the consultants given the the challenging times in getting work.

Yeah. So that's obviously one of the most important parts of our business is the care and feeding of great consultants. We are working very hard to get consultants in front of prior clients. We are working at the right pricing in our On Demand business. You see the progress we've made in our consulting bill rates. And financial metrics. So that we can make some of those investment decisions we need to, to get consultants busy. And we stay close to them, even if they roll off our active roster, we stay engaged through alumni activity.

Consultants really feel, I think, the Carens care and feeding of our talent team. And that matters and will matter more as the environment turns more positive.

Okay, one more for me, if I may, You talked again about looking at ways for efficiencies, How much more is there, I guess, that could be cut before you're starting to really cut into muscle in the business?

Yeah. Hi, Joe. This is Jen. I can answer that question. Yeah, we're looking across the board within the company, different areas to continue reduce our fixed costs. And it's not just reducing fixed costs, it's also leveraging the technology that we just implemented in order to, you know, become more efficient. And we have seen some efficiencies from the technology but I think that's going take a little bit of time. And you know different areas that we're looking at Kate mentioned I did too in our remarks, real estate is another area that we're going to continue to to look at to optimize And then, you know, discretionary spending. I mean, we are getting, you know, tighter and tighter every quarter so that we can control our costs. I think for the near term, we are doing everything we can to protect our profitability, but we're also obviously need to manage the business for the long term as well. So as we think about investing in key areas of the business, there's going be a lot of puts and takes you know, so that so that we can retain all of the cost savings that we've already generated so far.

Thank you for that. I'll get back in queue. Thanks, Joe.

Thank you. Our next question comes from Mark Marcon with Baird. You may proceed.

Good afternoon and thanks for taking my questions.

So obviously it's a tough environment and there is a lot of uncertainty. Can you describe what you're actually what you've been seeing since the second half of the third quarter just in terms of are the clients characterizing potential projects as things that they have to push back? How much have you seen in terms of cancellations And it sounds like you're not seeing early terminations of existing projects. So I wanna make sure I heard that correctly as well.

Yeah, we aren't, Mark. And in fact, it extensions are growing. And it's one of the reasons that Europe is really strengthened too because not only are they adding projects, but they're extending. And that's always been a little bit of a balance for them, was on extensions. And we're seeing those extensions pull through, which is a good thing. So it's not so much project cancellations, although it happens occasionally because of budget approval. But we're just seeing more delay. And I'll give you a real world example. We were just chosen on a significant RFP to be a preferred provider. Now, that doesn't guarantee us a level of revenue, but it sure guarantees us that we're one of the first to get the opportunity and grow this account, which is a significant financial services account. We thought that RFP would be decided early in our Q3. And instead, we just learned the in Q4. We've had a proposal at a major technology company one of the top five. That we thought would be decided in late October. And we still have not gotten a decision. So it's just delaying It's not cancellations. But delay. And I think it is really tied to what's happening in government and what will the fallout be?

Once we know what the fallout is, then people start making decisions.

Can you can you describe a little bit about [indiscernible] the magnitude of uncertainty that your clients are expressing how how pronounced or how much more pronounced does that become in recent weeks? I'm talking about the last two to three relative to towards the back end of the third quarter?

I'd say the back end of the third quarter and the most recent weeks have been probably the most disrupted. Badresh might want to share another point of view. But now that we have the announcements from today, I think that will provide some clarity if going to create a more expensive business environment for all as I understand he announced that there's virtually a 10% tariff on almost everything and they go up to 30%. We all read the articles about how many cars were purchased over the weekend. In anticipation of today. So people will make plans once they know you know, that the dust has settled a bit. And we're all following I saw a headline that says has Doge's time come to an end? You know, we need some of that to settle down and move forward. Because I do believe there's pent up [indiscernible] We felt this way coming out of COVID, too, that people delayed things for so long that you can't delay any longer. But we're in this you know, period of being squeezed. So as we said in our prepared remarks, we've done everything we can to and we will continue to do.

The only thing we haven't done fully is our cost savings. And we continue to look at that hard, whether it's looking at personnel offshore too, But we have positioned with respect to client offerings what the marketplace needs in recovery. And I think we've done some really good work internally.

And then, can you just talk a little bit about what's embedded with regards to the revenue guide for the fourth quarter, just in terms of the split between On Demand versus Consulting? And I wanna make sure I heard things right. Was did you mention that the fourth quarter is a fourteen week quarter? Yeah. And and it's if so, what is the implication with regards to on a same day basis what the revenue decline would end up being for the fourth quarter.

Yeah. Hey, Mark. So the guide for writing for the fourth quarter, what we're expecting Europe and Asia Pac as well as outsourced services segment to stay relatively stable. And I don't think that they're gonna create much variability there. The variability is really gonna come from North America within the on demand as well as consulting segment. And the consulting segment's really, know, as you heard, we're working on larger [indiscernible] And so how fast and how fast we can close those deals as well as how how fast we can push the project to start is going to kind of determine, right, whether where on the range we fall. Q4 has sixty nine days. So there's four more business days compared to compared to last year. And so on a year over year basis, you're looking at a decline of comparing Q4 to Q4, building a decline of about 14%.

Great. That's helpful. And and then lastly, just when we take a look at the the cash flow from operations for the first nine months, Can you just describe like what were some of the unusual cash outflows so that we can normalize that a little bit and while your balance sheet is is quite strong and pristine, I'm wondering are there any thoughts with regards to the sustainability of the dividend dividend yields obviously quite high. And so am getting questions with regards to whether or not that might potentially change.

Mark, so as you know, we've been going through our technology transformation. So the last few years, couple of years, our cash flow really has been impacted by the amount that we're spending on the implementation. Starting in fiscal, now that we're, you know, the transformation is behind us, starting in fiscal twenty six, we should we should see a pickup of about, you know, anywhere between 5 to $7,000,000 in operating cash flow. The point about dividend, well dividend is set by the board each quarter. It is our intention to drive down the payout ratio. With a higher stock price over time as we begin to benefit from the strategic plan and, you know, especially as the market condition improves. You know, we we we know our investors have come to appreciate the consistent dividend. As I mentioned in prepared remarks, we are taking a measured and balanced approach towards capital allocation. We wanna consider what's best for the business long term. So that includes investing in organic growth you know, or dividend and share repurchase Right. And then just going back to the cash flow and maybe margins from a sustainable basis, obviously it's an unusual time period.

Things have changed and I mean, things have been rough for multiple years. When you think about like if we ended up having some stability in revenue potentially a little bit of growth, where would you target EBITDA margins and operating margins? And and what sort of free cash flow conversion would you hope to be able to achieve?

I think as the broader environment normalizes, we're full year with the full year guidance now, we're gonna be in the, you know, in the pie mid to high 500,000,000 as the broader environment normalizes, you know, as we get back into the $600,000,000 even get into 700 you know, I do think that given our lower cost structure now, we should be able to get back into kind of where we used to, which is high single digit. Now we go above 700,000,000 and we can get into the double digit, And I do expect that our cost structure you know, over time, especially as I mentioned with the tech investment, you know, we we we should be able to, you know, realize more efficiency in how we operate. And what I'm sorry, what was your other question? The cash flow? Oh, yes. Cash flow. Cash flow conversion. Look, our historical trend has been around 75 to to 85% of free cash flow conversion from EBITDA. So as we recover and improve, I expect that that obviously is requires working capital that may be a little bit lower, but I'm not concerned that we're going to be able to get back to, I think, normalized, get back to that level of free cash flow conversion.

Great. Thank you.

Mhmm.

Thank you.

Next question comes from Andrew Steinerman with JPMorgan. You may proceed.

Hi, Jen. I heard your answer before about the 14% decline in the fourth quarter. Revenue guide. And I think that was up dollar basis adjusted for days. I wasn't sure if that was at the midpoint or not. My question is a little bit different. I would like to know in the midpoint of the fourth quarter revenue guide, what's the organic constant currency revenue growth on the same day basis I ask because I know the Reference Point acquisition hasn't anniversaried yet.

Yeah. At the midpoint, excluding reference point, 17% year over year.

And that that's constant currency?

Correct. I mean, look, currency is moving around a lot. Andrew, and especially, right, given all the tariffs, and it's really hard to kind of predict currency. So, yeah, I mean, expect that Q4's currency movement is probably gonna be neutral. So that's this is on an organic same day basis.

Okay. Great. And let me just ask one more question. I haven't heard much about YUGO in in a while. I wanted to get a short update there. Like, is there any revenue traction that's moving the total revenue needle for the company or anything that talks about the volume of work that's going on assignment through Hugo? Yeah.

So we've seen a pickup of Hugo revenue this year. We've really folded that offering into our on demand segment. So we won't be reporting it separately. Experience we've learned, Andrew, is that it's been adopted on the talent side. And it's really helped us learn some new behaviors on how to operate faster on the on demand talent side. We have not seen clients yet adopt a self serve environment. So I don't know if that's I think part of it's because they're so used to our white gloves service at RGP. But we have not seen that adopt yet. So in turn, we've taken some cost out of the Hugo business so that we can make money. And we are driving new opportunities in our client base. So this is an offering we're really pushing in our existing client base. For the kind of roles that are, as we've said before, accretive to us a level or two down And we are driving growth there.

Got it. That makes a lot of sense. Thank you. You're welcome.

Thank you. I would now like to turn the call back over to Kate Duchene for any closing remarks.

Well, I thank you all for listening in and RGP. We look forward to updating you on our progress after Q4. Thanks very much, everyone.

Thank you. This concludes the conference. Thank you for your You may now disconnect.

Sorry, Badrash. We took all the