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RGP Resources Connection

Participants
Kate Duchene Chief Executive Officer
Tim Brackney President & Chief Operating Officer
Jenn Ryu Chief Financial Officer
Josh Vogel Sidoti
Andrew Steinerman JPMorgan
Mark Marcon Baird
Call transcript
Operator

Good afternoon, ladies and gentlemen, and welcome to the Resources Connection, Inc. Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I would like to remind everyone that management will be commenting on results for the fourth quarter ended May 29, 2021. They will also refer to non-GAAP financial measures. An explanation and reconciliation of these measures to the most comparable GAAP financial measures is included in the press release issued today. Today's press release can be viewed in the Investor Relations section of RGP's website and was also filed today with the SEC. Also during this call, management may make forward-looking statements regarding plans, initiatives and strategies, and the anticipated financial performance of the company. Such statements are predictions and actual events or results may differ materially. Please see the Risk Factors section in RGP's report on Form 10-K for the year ended May 30, 2020 for a discussion of risks, uncertainties and other factors that may cause the company's business results of operations and financial condition to differ materially from what is expressed or implied by forward-looking statements made during this call. Such discussion will also be included in the Risk Factors section in RGP's report on Form 10-K for the year ended May 29, 2021, which will be filed on or around July 23, 2021. I'll now turn the call over to RGP's CEO, Kate Duchene.

Kate Duchene

Thank you, operator and welcome to our quarter four fiscal 2021 earnings call. Thanks for joining us today. I'll cover three topics during my remarks starting with a quick review of fourth quarter performance. I'll then outline our enterprise objectives for fiscal 2022 to position the company against market opportunity and improve shareholder value. And lastly, I'll comment on positive macro trends that we're watching as the economic recovery unfolds.

As we discussed last quarter, we expected Q4 to strengthen and it did. Q4 revenue came in at $172.3 million reflecting a sequential improvement of 10%. This improvement returned RGP to year-over-year growth and exceeded the high end of revenue guidance. In analyzing our results, please keep the following important timing comparison in mind. RGP's fiscal year is June to May.

We will not see the full impact of COVID-related recovery in our results until we report performance in Q1 of the current fiscal year. In other words, we did not experience the negative impact of COVID until well into Q4 last year. And that quarter also had an extra week of revenue, which covered some of the impact. Thus RGP's double-digit revenue bounce back will really be seen when we report on results for the current quarter. One further highlight from the financial results before I move on, we're especially pleased with the improved adjusted EBITDA performance at $20.7 million or a 12% margin in the quarter. That's up 600 basis points sequentially and 160 basis points year-over-year. We've worked hard to improve the profitability of the business and we'll continue to do so. We exceeded gross margin guidance and SG&A performance was better than guided. Today given what we're currently tracking in pipeline and committed revenue, we believe Q1 fiscal 2022 will be another strong quarter especially given the easier comparisons.

While COVID numbers seem to be creeping back up in parts of the world, we are better positioned today to execute remotely and virtually than we were 18 months ago. Clients trust us and know we have the quality, tools and process to deliver in a disrupted environment.

Now I'll outline our enterprise objectives for fiscal 2022. These are the main priority items for the management team to accomplish and they align everyone in our organization for the year. There are five enterprise objectives and I'll briefly comment on each.

First, we've launched a project to elevate the technology infrastructure of RGP globally. This means we're upgrading our core ERP system and our core talent acquisition and management system. This technology initiative will accelerate our efficiency goals and data led decision making capabilities. We're eager to accelerate optimized process flow and automation.

As the second enterprise objective, we'll be focused on further commercializing our digital strategies. The two areas of activity are driving more digital transformation revenue through RGP channels both for Veracity and Digital Asia and the launch of HUGO, RGP's digital engagement platform. In fiscal 2021, we grew the Veracity digital consulting business by 36% Q4 2021 over Q4 2020 despite dealing with a global pandemic. Today we have improved process and structure to drive that opportunity forward even more in fiscal 2022. HUGO represents an accretive source of revenue given it's both a new digital engagement channel as well as the service category we haven't capitalized on yet.

As a reminder HUGO empowers clients and gig workers to engage digitally for project work with a focus on early to mid career level finance and accounting professionals. Powerfully combining digital with RGP's employment model and tradition of exceptional service, HUGO will continue to put humans first. We're completing soft launch development and we'll introduce the platform in New York City in the fall. The exact timing will be communicated during Q2 to ensure that the New York marketplace is healthy and is open sufficiently for a successful introduction.

Third, we'll grow top line revenue leveraging these key strategies among others.

For starters, we're broadening the strategic client program, moving 22 additional accounts into the program for fiscal 2022 with dedicated client service personnel. We're also adding capability to the health care practice in the areas of revenue integrity, clinical trial support and supply chain optimization.

In addition, we're adding personnel to our fast growing Countsy business. Countsy is a finance and HR-as-a-service offering for start-up and divested entities that choose strategically to outsource these functions. Finance-as-a-service is a growing opportunity and we have a bespoke approach built on the NetSuite Oracle platform, proprietary IP and exceptional fractional CFO talent.

As a fourth enterprise objective we'll continue to improve our adjusted EBITDA performance to deliver even more shareholder value through disciplined management of head count, business expense and real estate cost. In fiscal 2021, we reduced our cost structure by $26 million or 12% and we'll continue to eliminate expense in an increasingly digital, virtual world. We're also focused on improving both utilization and pricing of salaried consultants in our APS group and other high-value segments like Veracity.

For example, Veracity increased bill rates by 6% year-over-year. The competition for talent is heating up and we'll continue to adjust our pricing to keep pace and reflect value delivered. Fifth, we'll strengthen the RGP brand.

Our brand is built on the power of human and the world is moving in this direction. This year we'll focus even more on our human-first brand to improve consultant experience. This means creating more digital connection, providing opportunities for upskilling and professional community and delivering care and well-being to our consultants. We can deliver what talent wants today, which is radical flexibility, work with a purpose and a connection to an employer who cares about them personally and professionally. We're a business model built for the new realities of work. The encouraging signs in the macro client environment also indicate that the time is now for RGP. This month for example Chief Executive Magazine issued its July polling. CEO confidence in current business conditions has rebounded to a three year high. CEOs are forecasting increases in transformation projects and CapEx for the year ahead and anticipate talent needs growing double digits. Simply put big deals are back and at the same time companies are engaged in workforce strategies built for flexibility, speed and resiliency. Ceridian, a human capital software firm, reported just yesterday in its Future of Work study that 62% of the 2000 senior global executives polled during the spring, believe that gig workers will substantially replace full-time employees within the next five years. Agile talent needs are rising, whether it's categorized as staffing or project-based work and business leaders plan to leverage gig workers to increase the size of their teams.

All of these factors are converging to make work more modular and time-boxed. RGP is built to deliver on modular work whether it's on-site, remote or outsourced. We partner with clients every day to fill skills gaps and we do so with speed and flexibility. We find the right skills and deploy those skills for the right period. To close my remarks, I'm pleased to invite you to learn more about the macro trends impacting our business and progress against the fiscal 2022 objectives during our upcoming Investor Day to be held at NASDAQ on October 13 in New York City. We've not hosted a live Investor Day in many, many years and we're excited to share more during that event. It is an inflection point for RGP. The world has turned in our direction. I'll now turn the call over to Tim for an update on operational trends initiatives and opportunities.

Tim Brackney

Thank you, Kate, and good afternoon, everyone.

During the quarter, we saw good progress in our revenue and operating metrics as the economy recovers. The combination of client and prospect nurturing, coupled with the release of pent-up demand resulted in increased momentum in revenue and pipeline growth. Lead generation and opportunity identification have reached pre-pandemic levels as new and existing buyers look to launch initiatives quickly in a competitive labor market. Enhanced outreach throughout the year is paying dividends as closed engagements in our core business in Asia Pacific, Europe and North America, reached fiscal 2019 levels and pipeline continues to be strong. In sum, the strengthening of the economic environment combined with operational effectiveness has led to improved results.

As Kate touched on our fourth quarter results exceeded the high end of our revenue guidance.

We continue to see the positive dynamic of clients resuming engagements that have been paused, initiating projects that were delayed and generally looking at their project portfolio through a broader and longer-term lens as commercial confidence rises. This has led to increased demand for both professional staffing and project consulting, which we believe will continue as a permanent workforce shift around the use of variable workforce solutions for project co-delivery. This change predated the pandemic, but was clearly accelerated in the last 18 months as clients and talent increasingly embraced flexibility initially out of necessity but now by design.

While there are lingering effects of the pandemic and we're not yet completely out of the woods, they do not dominate how we operate.

We continue to deliver successfully using a blend of on-prem and off-site resources, a trend that plays to our strengths and we'll continue with increased prevalence as companies have learned to care more about resourcing based on fit for purpose versus proximity. This sets the table for better matching of supply-demand, which leads to elevated operational efficiency for RGP.

While there have been some increased calls for on-prem resourcing, most companies are utilizing a hybrid workforce themselves and are comfortable engaging with us in the same manner.

As an example, this quarter we began in earnest the complex financial transformation and compliance projects with a financial services client that will require a large and distributed cadre of project consulting support for a number of months. Geography is important for some aspects of the project but in other cases mostly virtual delivery will suffice.

Another illustration is an engagement our healthcare practice won to stand up a project management office for an R&D transformation initiative for a top life sciences company, leading program and change management and supporting organizational redesign. The multiyear project consists of nearly a dozen work streams spanning multiple functional areas.

Our delivery team for this project is delivering both on-site and remotely working with our clients in the way that is most effective for successfully delivering project outcomes. These engagements punctuate the fact that project delivery has more -- to be more flexible and unconstrained in an environment that requires it. These are demand trends that will continue and play to our core strengths of rapid deployment pristine delivery and strong project and change management. Reported economic trends know the significant constriction in the labor market; and while we continually monitor for potential operational impacts, we haven't noted any material effects to date. With our broad geographic network, we were able to utilize borderless talent deployment to our advantage and as a differentiator. We work seamlessly as one RGP and in working this way consultants have been deployed more quickly on engagement with longer duration.

In fact, given the tight labor market and the increased demand for co-delivery on strategic initiatives, we have also seen clients leaning into the concept of captive labor pools to ensure they have the ability to complete key projects, while accepting and in many cases asking for distributed support.

We have had several discussions with key clients in this arena and this is a burgeoning trend and opportunity. Working in a more flexible fashion and maintaining control over key career decisions is the hallmark of employment choice in the new economy. This agility combined with membership in our professional community is an RGP core tenet, which allows us to produce an average consultant tenure of nearly three years. We believe that in the near term as more professionals assess their career objectives and opt for more flexible work, the powerful combination of A-list clients, career control, flexible delivery and professional community will make us an employer of choice.

While we feel the trends are broadly favorable to our model, we will continue to focus on operational discipline, prioritization and resource allocation, and pricing governance.

Now, let me turn to our fourth quarter operations.

During the quarter we saw continued growth in the pipeline and average daily revenue grew by approximately 6% from the first weeks of the quarter to the last.

In fact, average daily revenue rates ended the quarter at the highest they have been since early FY 2020 and pipeline of booked revenue have reached pre-pandemic levels. The majority of markets demonstrated sequential progress, while several markets including Tri-State, Los Angeles, Chicago, U.K., Cleveland, Portland, Japan, Hawaii and Mexico demonstrated growth both sequentially and over prior year quarter.

Finally Veracity and Countsy both grew sequentially and over prior year quarter tenaciously ending the year as they began it with strong growth.

While we remain focused on revenue expansion, we target profitable growth through operational leverage. Throughout this year and in the quarter, we continue to make strides in controlling fixed costs and improving efficiency.

We will remain balanced with respect to expense going forward, knowing the importance of in-person interactions, but heeding lessons learned during the last 18 months. To that end, we will continue to sell, deliver and operate in a more borderless fashion, look for opportunities to reduce real estate footprint and utilize technology to extend and strengthen our community.

Before handing over to Jen, I want to provide some additional insight on early first quarter trends. The early weeks of Q1 have shown a strong continuation of positive trends in both revenue and growing pipeline.

We will be watching for vacation trends this summer coming out of the pandemic, but to-date there is no unusual pattern of note. I will now turn the call over to Jenn for a more detailed review of our fourth quarter results.

Jenn Ryu

Thank you, Tim, and good afternoon, everyone.

During our fourth quarter, demand in the business propelled revenue acceleration, resulting in meaningful growth both from the sequential quarter and the fourth quarter a year ago. Gross margin rebounded from the third quarter, as we continue to focus on the bill/pay spread.

Our restructuring efforts coupled with the virtual operating model continue to yield favorable SG&A results. Executing on all three fronts enabled us to deliver a notable 12% adjusted EBITDA margin, a 160 basis point expansion from the same period last year.

Now, let me provide more color on our operating results starting with revenue. With quarterly revenue of $172.3 million, we well exceeded the high end of our revenue guidance of $167 million. After adjusting for business day and currency impact, our Q4 revenue represents a 4.7% improvement sequentially and 1.2% growth year-over-year.

As Kate stated, given the timing of our fiscal period and the latent impact of COVID in the fourth quarter of the previous fiscal year we did not yet see the full impact of top line recovery from COVID. Revenue growth in the fourth quarter was driven by the combination of pent-up client demand as well as new demand in areas such as digital transformation, as clients accelerate their digital agenda.

In addition macro trends accelerated by the pandemic, including increased use of contingent talent and the shift towards a more agile workforce model also drove healthy momentum in professional staffing revenue. Professional staffing revenue has achieved an increasing sequential growth rate of 4.4%, 5.5% and 14.4% over the last three quarters and we expect this trend to continue. In North America, revenue improved sequentially by 3.8% on a same-day constant currency basis, and 0.8% year-over-year. Growth in the fourth quarter was across the majority of our solutions, core markets and industry verticals. Most notably, Veracity grew 15% sequentially and 36% year-over-year, on a same-day basis, furthering our progress in growing our mix of technology and digital solutions.

As employee experience and digital technologies continue to increase in importance, we see strong opportunity for digital to drive collaboration, automation and self-service.

We also experienced strong growth in the financial services industry and our strategic client accounts, with 10% and 3% sequential revenue improvement, respectively. In Europe, our strategy to adopt an integrated global go-to-market approach to focus on serving our Tier one multinational clients in the region has proven to be successful. On a same-day, constant currency basis, Europe revenue improved by 11.1% sequentially and 4% year-over-year. Both, U.K. and our taskforce business contributed significantly.

More importantly, not only did we expand our top line. The restructuring initiative took significant fixed costs out of the business and positioned us for profitable growth in the future.

Asia Pacific experienced sporadic COVID outbreaks in certain geographic pockets throughout the quarter.

However, revenue was back to pre-COVID level, by the end of the fourth quarter. And on a same-day, constant-currency basis, Asia Pac's revenue improved 4.5% sequentially and 1% from, a year ago.

Our fourth quarter gross margin was 39.6% compared to 40.4%, a year ago. Pay/bill ratio is up 85 basis points year-over-year, due to some lingering impact of pricing concessions provided earlier in the fiscal year. Compared to the third quarter we improved our pay/bill ratio by 58 basis points, primarily as a result of better pricing governance. To alleviate any pressure the tightening labor market may impose on our gross margin, we're taking a disciplined approach to price our engagement to market appropriately.

We also see opportunities in achieving higher bill rates across certain solution sets such as, digital transformation services.

As an example average bill rate in Q4 for Veracity was $153, up from $150 in Q3 and $144 a year ago. Run rate SG&A expenses for the quarter were $47.8 million after excluding non-cash stock compensation, contingent consideration expense and restructuring charges, representing 27.8% of revenue, a meaningful improvement of $5.9 million or 230 basis points, compared to the same period a year ago.

Turning to other components of our financial statements, we had an income tax benefit of $7.8 million for the fourth quarter, representing an effective tax benefit rate of 50.6%, compared to $2.9 million of income tax expense or an effective tax rate of 42% in the prior year quarter.

As part of our tax planning strategy we made changes to the capitalization of certain fixed assets, which resulted in an NOL carryback permitted under the CARES Act, contributing to the income tax benefit for the quarter and for the full fiscal year. Adjusted diluted EPS for Q4 which excludes the net of tax impact of restructuring charges, stock compensation and contingent consideration rose significantly to $0.80 per share, compared to $0.33 per share in Q4 of fiscal 2020. The current quarter's adjusted EPS includes a favorable impact of $0.39 per share related to the NOL carrybacks.

Our balance sheet remains strong and we continue to generate positive cash flow from operations, paying down $45 million of outstanding debt under our credit facility in the course of the fiscal year.

As we head into fiscal 2022, assuming the macro environment remains stable, we're regularly evaluating our long-term capital allocation strategy taking a balanced approach between investing in the business and returning value to our shareholders. I'll close with our first quarter outlook, and an update on client statistics. We're optimistic about the sustained improvements in sales and pipeline metrics, including win percentage, close engagement and average deal size as well as the continued recovery of the average bill rate.

We expect revenue in Q1 to be in the range of $173 million to $177 million, an estimated 20% increase compared to Q1 of fiscal 2021. Gross margin is expected to be in the range of 38% to 38.5%, reflecting seasonal impact of summer vacation.

We expect run-rate SG&A to be in the range of $50 million to $53 million.

Finally, RGP's client continuity was outstanding this quarter. And we believe, our retention statistics demonstrate the value add, we bring to clients every day.

During Q4, we served 49 of our top 50 clients from fiscal 2020 and 45 of the top 50 from 2019. This strong retention has remained consistent year-over-year, despite the global pandemic. With that now we are happy to take questions.

Operator

Thank you. [Operator Instructions] Our first question comes from Josh Vogel with Sidoti.

You may proceed with your question.

Josh Vogel

Thank you. Good afternoon, everyone. Hope you are all well? Certainly, nice to see the business recovering, et cetera a fast clip here. A couple of questions.

Looking at the bill/pay spread improvement year-over-year maybe this is for you Jen. I know you brushed on it in your prepared remarks. But can you just give some more broad strokes on what you think the pricing environment will look like in fiscal 2022? I know you said that there's higher bill rates on the digital transformation work. And I may have asked this before. But is there any difference in how a consultant is paid whether they're fully remote or in a hybrid position?

Jenn Ryu

Hi, Josh. Yes. No I'll answer that question first. I mean there is no difference between a remote consultant and an off-site consultant in the way they're paid. From a bill/pay spread standpoint, I mean the bill/pay spread is still down compared to year-over-year, if you compare Q4-to-Q4 but we did see sequential improvement from Q3.

So the bill rate environment, such that we are seeing some opportunities in the digital transformation services area as well as our healthcare industry vertical. And pay rate, we talked about in our prepared remarks.

We are expecting some – maybe some constriction on the supply side of things but so far we haven't really noted any pervasive pay rate increase in the business.

And so going forward in fiscal 2022 is really – we're monitoring that very closely. And while we want to pay competitive rates to our consultants so that we can attract and retain the right talent, it's really on the bill rate side that we are – that we need to get ahead of the trend so that we don't get squeezed in terms of our margin.

Josh Vogel

All right. Great. Thank you for those insights.

You mentioned about a nice traction and rebound in the staffing side of the business.

So I was curious if you could break down results between project consulting versus professional staffing. Is it still kind of like a 60-40 split? And then what's implied in that 20% growth guidance in Q1 between the two?

Jenn Ryu

Yes sure. Yes our historical project consulting versus professional staffing, it is roughly about a 60-30 split and the remaining 10% is our managed services business. Countsy, we talked about that and executive search.

And so this year the mix between the two has shifted a little bit because professional staffing revenue did continue to grow throughout the year.

So we're seeing that. That mix is shifting by about 2%.

So professional staffing is up to about 33% now and consulting is down slightly.

Going into this next year 2022, I mean while we want to we think this trend is going to continue with professional staffing revenue continue to increase but we're also working really hard on growing our project consulting side too.

So I think the whole pie is going to grow in revenue. It just depends on which side of the business outpaces the other.

So I do expect the mix to stay relatively consistent because we do expect both sides of the business to grow.

Josh Vogel

All right. Great. And maybe one for Tim. Is it possible to quantify how much the pipeline grew over the past six months? And what percent of that do you think will get converted to revenue over the next 12 months?

Tim Brackney

Hey, Josh. I don't want to – I would just tell you this that we had pretty significant growth in pipeline from the beginning of the fiscal to the – to where we are now, such that we're pretty close to where we were in pre-pandemic level.

In terms of conversion, our conversion rate has stayed very consistent and actually increased a little bit in the latter half of this year as demand kind of came back online.

So I guess the easiest way to think about it is that our – from Q2, from the latter part of Q2 to where we ended up Q4, pipeline was up over 20% and conversion rates stayed about the same.

Josh Vogel

All right. That's helpful. Thank you. And just one more and I'll jump back in the queue. Obviously, it's very buzzy these days anything related to digital transformation; and clearly you're seeing traction there. I'm curious what exactly are the nature of the engagements you're winning or buying for, or another way to put it what are clients' primary digital agendas today? And then knowing that this is a broad category are there any specific apps in the portfolio with regard to your capabilities in digital transformation specifically in it's where you're seeing outside demand in the marketplace. Thank you.

Kate Duchene

Yes. Josh, it's Kate. Thank you, and hope you're well too.

So when you our digital transformation business is largely with our Veracity subsidiary. And when you think about the kind of work they're doing and the kind that we're starting to pull from our RGP client base, it's to accelerate the ability to collaborate and automate process and workflows. Especially, growing and this is also tied to a gap is the work we're doing with ServiceNow with the ServiceNow software platform and also Akumina. Those are two technology providers that we see growing opportunity with. And if Veracity had a gap, they would say we need more ServiceNow-certified personnel in order to keep growing.

So we're looking for them.

I think everybody you talk to will say that technical talent is the hardest to find right now.

And so we're also looking at some offshore strategies in order to help that team build more quickly. And that's also the power of our footprint and network at RGP that we can go to places like Mexico City or India and look for the kind of qualified talented resources that they need.

Josh Vogel

All right. Great, well I appreciate all the insights. And thank you, for taking my questions. Look forward to Jenn soon

Kate Duchene

Thanks, Josh.

Operator

Thank you.

Our next question comes from Andrew Steinerman with JPMorgan.

You may proceed with your question.

Andrew Steinerman

Hi, Kate. Once you fully recover from pandemics and get back to the revenue base what do you think the medium-term organic revenue growth profile will be? And what do you think the margin associated with that organic revenue growth profile will be?

Kate Duchene

Yes. I mean we're looking Andrew at a growth kind of range between 8% and 14% as you look over the next two to four years and that's what we're focused on.

I think the gross margin we're still very focused on 40%, but the mix is going to come differently than it has in the past, as we strengthen pricing for our APS services, which are more of our management consulting services. And HUGO we're expecting because it's in the adjacent market that's a little lower level earlier career that we'll be competing in an arena with a lower margin profile.

So you'll see our mix shift a bit.

Andrew Steinerman

Right. And I'm sure you realized to grow 18% to 14% that would be much faster than the big four accounting firms will likely be growing.

And so it's just been a while in my observation since the time, when resources very regularly was able to outpace the big four firms. My question to you is, don't you think the big four firms will start to notice again if you're able to grow at that growth rate. Or is it really not really as competitively close with the big four firms as you're asking about?

Kate Duchene

Well, Andrew, I think we're not apples to apples and that's a really important comment that I just made.

So if you believe like I do that talent wants something different in their careers moving forward, it won't be to align with the professional partnerships in the future. It will be to align with employers and consulting firms like ours, which are offering career paths that are more flexible more agile and more directed. And I think that's going to be the winning workforce strategy in the future. In my prepared remarks I highlighted a study, I read that came out of Ceridian produced by a research firm. And in talking to the clients that we have every day they really are finally starting to shift their workforce strategies in ways that are not aligned with the partnership track of the past. I'd also tell you some of our recent wins in the financial services industry is because that industry is recognizing their overreliance on the big 4 and COVID has given them both the courage and cover make different decisions.

So you're right. My remarks are more optimistic than we've been in the past but I think for good reason and tied to both research and trending information that we see in the macro environment.

Andrew Steinerman

Well okay. Thank you.

Operator

Thank you.

Our next question comes from Mark Marcon with Baird.

You may proceed with your question.

Mark Marcon

Hi Kate, Tim and Jen. Really nice to hear the improvement that's occurring and it sounds like it's really broad-based.

The first question is for Tim perhaps is just you went through a list of the offices that seem like they're improving. It sounds like it's really broad-based. How would you assess the leadership across the office footprint? How many offices -- or what percentage of the offices do you feel like are optimized from that perspective?

Tim Brackney

Hi Mark, thanks for the question. Yes, it is broad-based. We do have a lot of markets so of course we're not going to have every market hitting -- going full speed at the same time. But what I would tell you is that both from a performance standpoint -- I listed off markets that grew sequentially and year-over-year, but we had a much odder base than actually do sequentially. And then when I look at forward-looking metrics from our pipeline and close business an even -- a probably even more positive picture. And it goes directly to what you were talking about. I feel like our leadership structure is as broad and as deep as it's been in a while.

We have some pockets where we're involved in probably doing more turnaround versus pieces of the country where we're still working through both from a personnel standpoint and a go-to-market standpoint getting to an optimal level. But those pieces are a smaller unit than they've been in the past.

Mark Marcon

That's great to hear. And then Kate, the 8% to 14% growth that you talked about what do you think price is going to be within that as opposed to volume? Because it would seem like bill rates should be continuing to pace up as well as pay rates?

Kate Duchene

Yes I think of it more -- I don't have a specific breakdown. Jen might because we've been doing our 5-year planning.

And so, I think of it more as increasing our share in the consulting marketplace than pricing. Strictly from the standpoint that we are launching HUGO, we will see some new revenue streams with a lower margin profile.

And so I think that will -- there will be a trade-off in how we're growing the overall business and growing shareholder value. Jen do you have -- anything you want to add there?

Jen Ryu

Yes. I mean I think we definitely have additional cushion or a ceiling in terms of our bill rate without a doubt.

Mark Marcon

Great. And can -- Kate can you elaborate with what you meant by with regards to HUGO in terms of how that would end up impacting the pricing?

Kate Duchene

Well, I think that we should expect a slightly lower margin in that business than our more experienced project-based or even management consulting-based resources.

So if you think about it we're going to launch in an adjacent space where some of the other staffing companies are probably more dominant. And we'll be competing against those margin profiles which have generally been lower than RGP. And -- so we expect that.

I think that the product that we're developing or the pathway if you think about HUGO is really a service delivery pathway for us, that's new, more efficient and therefore can operate with just a strong profitability with lower margins.

And so, if we're talking about say, a payroll manager, the marketplace is telling us that that probably isn't a 40% margin piece of business. It's something lower. But it's incumbent on us to create the experience that's so delightful for our clients that that's the pathway they want to use. And oh, by the way, we're building it with lower cost of sales so we can deliver bottom line profitability within our financial metrics.

So I hope that helps.

Mark Marcon

That really -- that does. Thank you. And then can you talk a little bit about what you're seeing from a pipeline perspective and even during the most recent quarter in terms of the amount of work that's coming from financial transactions whether it's destacking situations, companies going public just things along those lines where things are obviously perking up quite a bit.

Tim Brackney

Yes. Mark just a comment on overall pipeline and bookings. I would say, this was from a bookings perspective, one of the strongest quarters we've had in recent memory. And our pipeline has tracked since the end of the last quarter to a very consistent level so still very strong looking out on sort of a two-quarter vantage point.

In terms of the things that are happening from transactions, I would say that we are getting a lot of stack work. I don't know that it -- I think that some of the larger engagements that we're working on really have -- are more transformative in nature versus transactional in nature, but both sides of that business are tracking up.

So there are a number of mergers and acquisitions that are occurring. We're in the mix for helping with integration and doing some of the front-end diligence on some of that. But I would tell you that the sort of the larger engagements that we're getting and the things that are kind of -- that are filling up our pipeline right now have more to do with companies that have started transformations and maybe slowed them down a little bit and realizing now that as we kind of come out into normalcy that they need to speed up again really quickly. And that piece of the pipeline is speeding up probably at the fastest rate.

Mark Marcon

That's great to hear. And then in terms of Europe despite the restructuring, it sounds like things are really going well over there. Can you talk a little bit about what you're seeing in -- across the various countries? And to what extent have you seen any sort of impact from Delta on your London operations?

Tim Brackney

Not much impact from Delta yet. And you can't see me, but I'm knocking on wood for sure on that. And I would tell you that our UK practice is -- have been very strong. It's been one of our strongest practices if not the strongest practice in Europe.

I think our German practice has been strong all year with taskforce involved -- with the taskforce business and the German RGP business operating under the same leadership. They actually had year-over-year growth on a year-to-date basis, so very strong performance there. And the -- we shrank our footprint there, so we don't do business -- or we don't have physical presence in Italy and France and more -- and we don't have business in the Nordics. And our Netherlands practice which was -- is down a little bit year-over-year, but it's really focused on our key clients there.

So, overall from an operational leverage standpoint doing well. But from a top line standpoint, the UK is really, really sort of leading the charge.

Mark Marcon

Great. And then…

Kate Duchene

Yes, I think Mark keep in mind, sorry to jump in here. But keep in mind, we are still delivering mostly virtually and remotely, which keeps our population healthier and less risk oriented. And we can do that given the level and the caliber of people that we are employing and then deploying to our clients.

Mark Marcon

That's great to hear. And can you talk a little bit about the increasing attractiveness of hybrid work and virtual work and what you're seeing just in terms of the candidate profiles and how easy or difficult it is to fill the positions that are coming open for you?

Kate Duchene

Yes.

Let me jump in and I'm sure Tim will have some color too since he -- our Head of Talent reports directly to Tim. But what I see in the marketplace is really this great -- what we're calling great reassessment. It's talent -- professional-level talent signing up for a different kind of exchange with an employer. And it's not about as I've said before climbing one corporate ladder. It's creating what we call a portfolio of experiences with some of the most beloved brands in the world. And that's what we can offer talent.

We have long-standing client relationships with some of the most innovative beloved brands companies doing really interesting things. And we can offer them access in their career development to those kinds of projects. I am betting that that is the way of the future. And if you talk to younger professional talent across the board, they will tell you that's what they're looking for.

So, as we said before, maybe this business model was built a little too soon, but we're certainly built for now. And therefore, we have to continue to improve how we deliver our services to both our clients and consultants in order to attract the very best talent because that's what everybody is shooting for now and the paradigm has shifted.

Tim Brackney

I think that's right. Back from a macro perspective, it certainly makes our platform that much more attractive as Kate noted. And if you think about it tactically, it just opens up a bunch of different pathways for our consulting population to work with our clients when you think about hybrid.

As an example, it's not -- nothing is all or nothing anymore.

And so that could mean anything from working across time zones and we actually have -- I may have used this example before -- consultants working in Florida for our clients in Washington State.

If you think about that that's -- pre-pandemic that likely wouldn't have happened. But as we start to open up, I think the other pathways that are actually very impactful as well are -- that you're going to have people who work on site for part of the week and remotely for the rest of the week. And that really wasn't an option before, if you think about just the practical elements of commuting. That opens up the filters for people who are thinking about the type of work -- or the type of clients that would be within their sphere of consideration. It just opens it up broadly and it does the same for clients, because it opens up a catalog of talent that they're willing to work with and engage with in a different way. And we're already starting to see that.

Mark Marcon

Great. And what are you seeing in terms of fill rates? I mean, just obviously everybody is pursuing top talent.

So...

Tim Brackney

Our fill rates are still very consistent.

In fact, one of the things that's probably anomalous coming through the pandemic is that you had -- we had more supplies than demand. And as demand creeps up, we still have a very healthy form of supply. It's a lot -- there's a lot of competition for it and that -- we see that to be a good thing. But our fill rates have not -- we haven't seen degradation in our fill rates. And frankly, even thinking about what we just talked about with respect to hybrid and sort of being able to utilize talent that maybe wasn't accessible before, we hope to stay well ahead of that so that we don't have degradation issues even as we continue to climb the demand curve.

Mark Marcon

Great. And then, Jenn, is there anything that we should factor in in terms of just the forward outlook on SG&A just in terms of a rebuild with regards to travel and entertainment or anything along those lines that have temporarily ceased?

Jenn Ryu

Yeah.

Going into fiscal 2022, our SG&A is expected to go up for a few reasons, right? One is as our revenue top line growth the variable component of our SG&A will naturally go up. And to your point, the traveling and the business expenses will go up a bit. But we've said before that it's not going to go back to pre-COVID level and we're holding our business expenses at about 50% of pre-COVID level.

So it's really adopting that hybrid kind of virtual working model still. And yeah, I mean I think overall SG&A I foresee this year SG&A we think we have made significant strides in reducing fixed cost.

I think we always look at SG&A not just dollar, but also as a percentage of revenue.

And so, we do expect that we're going to see a meaningful improvement in our SG&A percentage as a percentage of -- compared to last year as a percentage of revenue.

Mark Marcon

Great. Thank you very much.

Operator

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Kate Duchene for any further remarks.

Kate Duchene

I just want to thank you all again for attending our Q4 and year-end call. And we look forward to talking with you again at the end of our first quarter of fiscal 2022. Thanks everyone and stay healthy.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating.

You may now disconnect.