- Revenue Decline and EBITDA Margin: Consolidated revenue fell 18.4% to $117.7M YoY, but adjusted EBITDA reached $4M (3.4% margin), exceeding expectations via cost discipline.
- Segment Performance: On-Demand and Consulting revenue dropped 18.4% and 28.8% respectively, while Europe/Asia Pac (+0.6%) and Outsourced Services (+0.8%) showed growth.
- Balance Sheet Strength: $89.8M in cash with no debt, and $2.3M in quarterly dividend distributions, reflecting a balanced capital allocation strategy.
- Q3 Guidance: Revenue projected at $105–$110M, gross margin of 35–36%, and SG&A expenses of $40–$42M (excluding $6–$7M restructuring costs).
- Healthcare Cost Impact: Q2 gross margins were negatively affected by 100 basis points due to rising healthcare costs.
Segment Performance
On-Demand revenue was $43 million, down 18.4% year-over-year; Consulting revenue was $42.6 million, down 28.8%; Europe and Asia Pac revenue was $20.1 million, up 0.6%; and Outsourced Services revenue was $9.4 million, up 0.8%. The decline in on-demand and consulting revenues was a significant drag on overall performance, while growth in Europe and Asia Pac and Outsourced Services segments provided some offset.
Operational Efficiency and Cost Management
The company is taking actions to align its cost structure with current revenue levels, refocus on-demand offerings, and scale its consulting business. SG&A expenses were $40-42 million, exclusive of $6-7 million in non-cash restructuring costs. Healthcare costs had a significant impact on gross margins, with a 100-basis-point hit in Q2. CEO Roger Carlisle highlighted the need to focus on providing relevant skills and solutions to clients, at a price that brings them better overall value than other providers.
Guidance and Outlook
Guidance for Q3 is $105 to $110 million in revenue, with a gross margin of 35% to 36%, and run rate SG&A expense of $40 to $42 million. The company is focused on improving sales execution, optimizing talent and consulting solutions, and driving an efficient cost structure. Analysts estimate next year's revenue growth at 5.1%, indicating a potential recovery in the business.
Valuation and Dividend Yield
With a P/S Ratio of 0.35 and an EV/EBITDA of -9.99, the market appears to have priced in significant challenges for the company. However, the Dividend Yield is 6.64%, which may be attractive to income-focused investors. The current valuation metrics suggest that the market is cautious on the company's prospects, but the dividend yield provides a potential upside.