RGP Q3 2026: A Leaner Run for a Professional Services Firm as Revenue Dips

Key takeaways in plain English

• Revenue for the quarter came in at $107.9 million, down from $129.4 million a year earlier, with a same-day constant-currency slide of about 19.6% and billable-hours declines.
• GAAP diluted loss per common share was $0.28, an improvement from a $1.34 loss in the prior-year quarter; net loss narrowed to $9.5 million from $44.1 million, signaling a meaningful shift in profitability dynamics even as revenue softness persists.
• Gross margin ticked up to 35.7% from 35.1%, while SG&A expenses fell in dollar terms but remained a bit elevated as a percentage of revenue (GAAP SG&A of $45.8 million, about 42.5% of revenue).
• Adjusted SG&A expenses improved to $39.4 million versus $43.7 million a year ago, and Adjusted EBITDA was negative $1.4 million (compared with positive $1.7 million a year earlier), highlighting lingering profitability headwinds despite cost discipline.
• The company signaled strategic portfolio moves, including the sale of its Sitrick crisis communications business as part of ongoing streamlining, along with restructuring-related charges and impairment on a right-of-use asset.
• Management framed the results as aligning with a lower-revenue run-rate while pursuing three or four core priorities aimed at positioning the business for a steadier revenue trajectory and improved cost structure.

The numbers, with an eye on the narrative

RGP’s third quarter of fiscal 2026 ended February 28, 2026. Revenue declined to $107.9 million from $129.4 million a year earlier. On a same-day constant-currency basis, the year-over-year revenue decrease was 19.6%, with billable hours down 16.3% and the average bill rate down 1.0% year over year (2.1% on a constant-currency basis). The U.S. market bucked the rate trend somewhat, with the average U.S. bill rate rising 2.8% versus the prior year.

Gross margin rose to 35.7% from 35.1%, a modest improvement that the company attributes to mix and cost discipline, plus lower holiday pay and self-insured medical costs. SG&A expenses, as reported, were $45.8 million or about 42.5% of revenue, compared with $51.2 million or 39.5% of revenue in the prior-year quarter; the latter percentage point rise reflects ongoing structural costs even as dollars fall.

On a non-GAAP basis, Adjusted SG&A improved to $39.4 million from $43.7 million; the company logged an Adjusted EBITDA of negative $1.4 million, versus positive $1.7 million in the year-ago period, underscoring that tweaking the cost base is not yet translating into EBITDA expansion.

Net loss narrowed to $9.5 million, with an 8.8% net loss margin, and GAAP diluted loss per share was $0.28 (vs $1.34 in the prior year). The tax line swung from a benefit of $5.6 million in the prior-year quarter to an expense of $0.7 million in this quarter, a swing that-weighted on the earnings per share backdrop.

Where the levers moved

Management commentary emphasizes a disciplined focus: align the cost structure with current revenue levels, refocus On-Demand Talent offerings, scale the Consulting segment, and streamline operating practices. The company also highlighted ongoing impact from restructuring activities in the period, including a non-cash impairment charge tied to a right-of-use asset tied to office space, and a separate bad debt expense line.

A notable strategic shift is the announced plan to sell Sitrick crisis communications to streamline the portfolio toward higher-priority client work. This aligns with a broader theme across professional services firms: pruning non-core assets to free up capital for the core consulting and talent management businesses.

Management commentary and strategic moves

Roger Carlile, Chief Executive Officer, framed the quarter as aligned with the company’s outlook for revenue and gross margin, while noting that run-rate SG&A was better than the outlook. He underscored four priorities: (1) align cost structure with current revenue, (2) refocus On-Demand Talent offerings, (3) scale Consulting, and (4) streamline operations. The leadership’s signal is not that the business is booming, but that it has begun pruning toward a more predictable cost base and a more defensible portfolio positioning.

Outlook, earnings expectations, and sector implications

The press release does not provide a full-year revenue forecast in a traditional sense, but the commentary implies an expectation that the revenue trajectory will stabilize from current-quarter run-rate levels. In the language of markets, investors will watch for an earnings-per-share trajectory and a credible revenue forecast for the remainder of the year and beyond. The presence of an earnings surprise risk remains real, particularly if the demand environment for professional services remains soft in broader markets.

For sector peers, the combination of margin discipline, portfolio rationalization, and selective investment in higher-growth segments could be a template. However, the magnitude and duration of demand weakness in professional services vary by geography and vertical, so observers should beware of a one-size-fits-all read. RGP’s experience suggests that a leaner cost base can improve margins even as top-line growth stagnates, but the durability of that margin lift will hinge on revenue stabilization and the success of portfolio shifts.

Bottom line

RGP’s Q3 2026 results portray a company actively trimming cost and refocusing its portfolio while navigating a softer demand environment. The improved loss metrics and the decision to divest non-core assets portend a shift toward a more sustainable earnings profile, contingent on a nascent recovery in billable demand and a continued narrowing of structural costs. In the near term, investors will be watching EPS momentum and the revenue forecast for the remainder of fiscal 2026 and beyond, with the market likely weighing whether the Sitrick sale and other portfolio moves translate into a durable competitive advantage for RGP and its peers.