Good afternoon, ladies and gentlemen, and welcome to the Resources Connection Incorporated 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. As a reminder, this conference call is being recorded. At this time, I would like to turn the call over to your host for today's call, Ms. Alice Washington, General Counsel of Resources Connection. Ms. Washington, you may now begin.

Thank you, Operator. Good afternoon, everyone, and thank you for participating in this call. Joining me here today are Kate Duchene, our Chief Executive Officer; Tim Brackney, our Chief Operating Officer; and Jennifer Ryu, our Interim Chief Financial Officer. During this call, we will be commenting on our results for the second quarter ended November 23, 2019. By now, you should have a copy of today's press release. If you need a copy and are unable to access it on our website, please call Shannon McPhee at (714) 430-6363. During this call, we may make forward-looking statements regarding future events or future financial performance of the Company. Such statements are predictions, and actual events or results may differ materially. Please see our report on the Form 10-K for the year ended May 25, 2019 for a discussion of risks, uncertainties, and other factors such as seasonal and economic conditions; such factors may cause our business, results of operations, and financial conditions to differ materially from results of operations and financial conditions expressed or implied by forward-looking statements made during this call. I'll now turn the call over to our CEO, Kate Duchene.

Thanks, Alice. Good afternoon, and welcome to RGP's 2020 second quarter conference call. Happy New Year everyone. I will start with a brief overview of our operating results for the second quarter. Second, I will update you on our progress to become a more digital business both in how we serve our client base and how we operate. Third, I will discuss certain macro trends we believe will be beneficial to our business in the second half of this fiscal year and beyond, and fourth, I will preview a project we are initiating in Q3 to optimize our core operations and create more business agility. Our total revenues for the second quarter of fiscal 2020 were $184.5 million, which represents a slight decrease of about 2% over the second quarter a year ago. The sequential increase in revenue was 7.1%. The increase in revenue came from North America and Europe, aided by the addition of Veracity, the digital transformation firm we acquired in late July. Our Asia-Pacific revenue is down slightly, which is unusual in the second quarter, but mainly because of two different week-long holiday periods during the quarter in our largest markets. One holiday week was in China to celebrate the 70th anniversary of the People’s Republic, and the other holiday week occurred in Japan to honor the new Emperor’s reign. Without those significant holiday events, Asia-Pacific would have grown in Q2. We were also pleased by the improvement in gross margin to 40.3% in the quarter. This increase was led in North America by higher bill rates and a higher value mix of business. Finally, SG&A was below plan as we’ve been working to trim costs to deliver more profit. We achieved $22.7 million in adjusted EBITDA, or 12.3% of revenue, compared to $20 million, or 10.6% of revenue in the year-ago quarter. Despite revenue decline slightly in the second quarter, we were able to deliver improved profits. As stated previously, we intend to deliver more profits to the bottom line over the long-term through a combination of headcount efficiency, real estate spend reductions, expense management, improved pricing, and expanding our mix of business to higher value services. Over the past three years, we’ve been focused on building capabilities beyond staff augmentation, particularly in program and project management and solutions deployment. We will continue to make progress with our mix of business as clients continue to value us as a disruptor in professional services and an attractive alternative to the Big 4. Another important strategic initiative this fiscal year is the development of our digital capabilities driven principally through our digital innovation function. During Q2, we kicked off a phased go-to-market plan with our newly acquired Veracity Consulting Group. Veracity, as just mentioned, is an advisory and consulting business based in Richmond, Virginia, with approximately 110 employees focused on helping companies with digital transformation. Veracity’s capabilities include strategy and roadmap, design and brand, and client and employee experience. They also bring deep technical expertise and best-in-class technology partnerships, including ServiceNow, Sitecore, Akumina, and Mulesoft. We are encouraged by the quick ramp of pipeline opportunities within the first three months. These opportunities will take additional time to close as Veracity’s sales cycle is longer than for our traditional staff augmentation and project works. As I updated in the last earnings call, the digital innovation group is also focused on building products to be delivered with our finance transformation, project management, and risk and compliance services. This team currently has multiple products in various stages of development. The two products closest to market include an internal audit automation tool and a digitalized end-to-end project management framework. We expect to release these on a limited basis in Q3, including potential client pilots, followed by wider sales in Q4. We also are applying this methodology as we modernize our internal platform, starting with the redesign of our knowledge management system. With further products in consideration for research and development within our portfolio through the next 12 months, we remain committed to enhancing our services delivery and pricing through digital innovation to drive better outcomes in our client projects with speed and value. The third area of focus for our digital innovation team is the build of our digital engagement platforms or human cloud products. Since we reported last quarter, we have released a more powerful version of our match algorithm across North America and will continue to enhance it as we progress toward the completion and full release of our platform to the market. As part of this progress, we have also completed the first iteration of our digital consulting profile tool, which will empower and incentivize our consultants to directly manage their profile information, contributing valuable input such as video introductions that can enhance marketability and likelihood of rapid selection. As a reminder, a main differentiator for this product is our focus on employees, not independent contractors. We are working through the commercial aspects of the platform and anticipate launch to a select group of markets by end of Q4. Turning to the macro environment, there are two regulatory developments occurring that we believe will favorably impact opportunities in the new calendar year. The first is a renewed regulatory scrutiny on independent contractors in the professional services arena. With the passage of AB 5 in California and other pending legislation around the world, we believe clients will turn to our model more frequently, especially in the staff augmentation arena. We compete against individual contractors and small boutiques that run contractor models. Given that the legislation now includes heightened financial risk, the company to engage talent via an independent contractor structure, we believe our model will benefit from this regulatory shift and is well-positioned to gain market share. We deliver agile talent to our client base, which we also refer to as our form of the gig economy. But we do so with the protections and benefits of traditional employment. We believe that this provides the best of both worlds and is unique in the global professional services space, given our commitment to mitigate client risk and invest in consultant professional development. Second, we are seeing an increase in client requests for support with our IFRS 17 compliance in both Europe and Asia-Pacific. IFRS 17 is a new standard that impacts the accounting treatment for insurance contracts. Issued by the International Accounting Standards Board, the compliance date is currently January 2021. We are hearing that the resulting workload is substantial. It involves many work streams, and most impacted firms have not begun the serious work. We expect this regulatory event will provide us with increased market opportunity in Europe and Asia-Pac at the start of the calendar year and continue throughout 2020. We are also developing a partnership with one of the Big 4 firms to assist with these compliance efforts. We expect there to be a meaningful talent shortage in the Big 4 and the impact on the client base, which we can address with our core finance and accounting and technology consultants. We are also actively increasing our talent pipeline in these regions to align supply and demand. Before I turn the call over to Tim and then Jen, I want to close my remarks by previewing a project we are initiating in Q3 to optimize our core operations and improve our cost structure. This project is also aligned with our continued digital transformation and the impact of automation in how we operate. Given the potential recession looming over the economy, we want to ensure that our infrastructure is well prepared to weather a downturn. We are conducting a thorough review of the business to trim costs ahead of any negative trend in client buying patterns. We will have an update on this project in advance of the next earnings call. I'll now turn the call over to Tim for a more detailed review of operations in the second quarter.

Thank you, Kate, and Happy New Year everyone. I will highlight trends and initiatives that directly impacted our results from operations through the second quarter, provide an update on our fiscal 2020 operational priorities, and discuss early trends in the third quarter. We saw increased velocity in pipeline throughout the second quarter and into the first few weeks of the third quarter. Despite some client uncertainty posed by a lack of clarity in the global economic environment, we have been working very hard to control our own performance, intelligently increasing activity levels, building pipelines, and converting leads to wins. As I mentioned last quarter, we believe there is continued opportunity for upward momentum as many clients and targets are engaging in crucial projects and transformation efforts. Transformation activities in an economic environment favoring agile solutioning and value, combined with a clear market shift towards gig-oriented employment models, is the ideal environment for our business to thrive. We continue to make positive strides in optimizing our core business platforms with a key focus on sales productivity, cost containment, delivery effectiveness, and the efficient matching of supply and demand. I will briefly touch on each of these key operational objectives. While global revenue decreased approximately 2% from the prior year quarter due to declines in North America and Europe, offset by an increase in Asia-Pac and revenue from Veracity, we did see nice productivity gains in terms of outreach and meetings and a significant increase in total pipeline when compared to the prior year quarter. Additionally, we saw a 140 basis point increase in gross margins for Q2 fiscal 2019 due to a better bill-pay ratio reflective of ongoing pricing initiatives and governance, as well as the timing of holidays. The U.S. business margin gains flowed by a nearly 2% increase in average bill rates. We are pleased with the continued effort and discipline around lead generation, sustained sales notions, and deal pricing, but we know that we still have more upside and are committed to putting in the requisite work to obtain it. In her discussion, Jen will provide more detail around revenues, gross margin, and bill rates. We are encouraged by the productivity strides, and we recognize the urgency to increase revenue results. While we saw some misses in our largest markets, the group as a whole has outperformed at the desired levels. We adjusted leadership personnel and focus, including recently hiring a new leader in states, and are starting to see positive momentum from these changes. To-date, we are seeing good results in certain parts of North America, including Dallas, Atlanta, Detroit, the Carolinas, and Seattle, to name a few markets, and also in our accounts and executive search businesses. Our task force continues its strong performance along with Asia-Pac as a whole. We appreciate these bright spots but continue to be laser-focused on revenue replacement, performance consistency, and velocity in our global sales efforts as we ultimately strive to become a world-class sales organization. Next, let’s discuss cost containment where we've made positive gains again this quarter. As an enterprise, we increased operating margin and reduced SG&A in North America and Europe both sequentially and compared to the prior year quarter. As I noted above and in the previous quarter, we continue to place a strong emphasis on managing controllable expenses and leveraging existing assets and a more centralized operating model to gain sales and productivity. To that end, we will continue to evaluate our core operations and geographic presence to ensure that we are maximizing returns relative to fixed costs. For example, we believe that we can gain revenue velocity with a footprint that is more concentrated in the markets that have the highest locus of opportunity while leveraging our agile platform to serve our client base with headquarters and operations outside of these compounds. Now on to our progress around delivery excellence. Last quarter we noted the early success of our advisory and project services organization, or APS, whose mission is to bring subject matter expertise to support the sales process on complex deals and deliver excellence once engaged. APS continues to demonstrate strong positive impacts, and our objective in the second half of this fiscal year is to narrow the focus of our sales teams and better align our pursuit of APS and our consultant inventory to increase our win rate and ensure efficient delivery. As this seat map provides an impetus for targeted second half sales campaigns, localized sales plays, and allows for a renewed push around high opportunity offerings with the greatest delivery capacity. APS will continue to provide both operational and pricing leverage as we gain altitude and breadth selling into clients and prospects. Now let me provide an update on a few other operational priorities, including better serving our clients globally and improving alignment of our supply and demand curve. Our strategic client program, or SCP, continues to forge the path for the company as we improve our service to our largest clients on a global basis. The program grew approximately 12% overall and 8% internationally over the first half of the prior year. SCP’s existing growth trajectory, coupled with the appropriate alignment of priorities and incentives articulated in a client-centric global enterprise plan, will help us achieve a more seamless client experience and provide more lead generation for our international operations. We continue to see key wins in Asia-Pac and Europe that were a direct result of strongly aligned cross-border pursuits. We know this is an opportunity for us, and when combined with our flexible platforms, significantly distinguishes us from our competition. Finally, let me discuss the alignment of client demand, which is the fulcrum of our business. We have become experts at attracting and retaining talent to our platform on an employed-gig basis. We have achieved this by allowing our consultants to control their careers and portfolios of experience while offering access to learning in a professional community, market wages, benefits, and a rich client base, all while keeping them in the business they would like to be. This derisking of gig work in the professional arena has allowed RGP to maintain an average consultant tenure nearing three years. While we certainly developed this strong competitive advantage in this base, we know that directly aligning client needs with the preferences of an agile talent base requires strong core processes and data transparency. We are working on optimizing important aspects of our business and are making solid strides. This quarter, when compared both sequentially and to the prior year quarter, we saw improvements in consultant retention, time to sale, win rates, and overall yield statistics. We are fiercely committed to continuous improvement in this area, and we know that better supply chain management, stronger sales and operations planning, and enhanced communication and decision-making will create optimized performance. Before I conclude my remarks, I want to provide some insight into early third-quarter trends. Recognizing that third-quarter results will be adversely impacted by both the timing and number of holidays, nonetheless we are pleased with operational trends to date. Through the first few non-holiday weeks of the quarter, trailing average enterprise run rate are the highest within this fiscal year and the highest in several months. Additionally, we are seeing upward momentum in some of our key North American markets including the Tri-state area, Northern California, Los Angeles, Dallas, and Detroit. Some of the lift we see is seasonal, but we are also seeing gains from pipeline growth and pull-throughs. We are encouraged by these early trends and strengthening of our overall pipelines, but we know we must remain hyper-focused to push velocity through the holiday effect in the third quarter and build pipeline for Q4 and Q1 fiscal 2021. I will now turn the call over to Jen for a more detailed review of our first-quarter results.

Thank you, Tim, and good afternoon everyone. I will start by giving detail on our second fiscal quarter financial results, and will then discuss the trends we are seeing in the third quarter of fiscal 2020, starting with an overview of our second quarter results. Total revenues for the second quarter of fiscal 2020 were $184.5 million, a 2.3% decrease from the comparable quarter a year ago and a 7.1% increase sequentially. On a constant currency basis, revenue decreased 1.9% year-over-year and increased 7.3% sequentially. Excluding the impact of the acquisition and divestiture that took place in fiscal 2020, total revenue for the second quarter was $178.4 million compared to $184.8 million a year ago, representing a 3.4% decrease, or a 3.1% decrease on a constant currency basis. Our second quarter gross margin was 40.3%, up 100 basis points from the second quarter of fiscal 2019 and up 110 basis points sequentially. SG&A expenses for the quarter were $53.8 million, or 29.1% of revenue, compared to $55 million, also 29.1% of revenue last year. Despite lower year-over-year revenue, our net income for the second quarter was $12.2 million, or $0.38 per diluted share, up from $10.6 million, or $0.33 per diluted share in the prior year quarter. In Q2, adjusted EBITDA, which we define as EBITDA before stock compensation and contingent consideration adjustments, was $22.7 million, or 12.3% of revenue, up from $20 million, or 10.6% of revenue in the prior year quarter. Now let me provide some color around our second quarter revenues geographically. Our North America revenue, excluding Veracity, decreased 4.7% year-over-year and increased 5.5% sequentially. Veracity contributed $5.8 million of revenue in the second quarter. Comparing to the prior year, the decline in North America’s organic revenue reflects the impact of lease accounting project revenue being at its peak reach in Q2 of fiscal 2019. Sequentially, compared to Q1 of fiscal 2020, the rebound in organic revenue reflects active pipeline management and business development efforts, coupled with the impact of fewer holidays in the U.S. as well as favorable seasonal impacts. Second quarter fiscal 2020 included only Labor Day, while the first quarter included Memorial Day, July 4th holiday, as well as summer holiday breaks taken by our consultants. While revenue momentum has improved in the second quarter, we were still experiencing a lag in our Tri-state and Northern and Southern California markets compared to the prior year. Nonetheless, we are seeing significant improvement in markets such as the Carolinas, Dallas, Seattle, and Philadelphia, and notable gains in our account fee business. Europe's second-quarter revenue decreased 16.4% year-over-year and increased 3.2% sequentially. Our exit from the Nordics and Belgium resulted in a $3.7 million decrease in revenue compared to Q2 of fiscal 2019. Excluding this impact, Europe’s second-quarter revenue showed a modest decline of 0.4% compared to a year ago, but an increase of 3.4% on a constant currency basis. Task Force continues to show strong performance compared to last year. Asia-Pac second quarter revenue increased 7.6% year-over-year with Q3’s down 2.8% sequentially. On a constant currency basis, Asia-Pac’s revenue increased 7.1% year-over-year and decreased 1.9% sequentially. The year-over-year growth is primarily led by Japan and India as our international operations continue to benefit from our global SCP programs. The sequential decrease in the first quarter, as Kate mentioned earlier, is due to week-long holidays during Q2 in both Japan and China, two of our largest markets in Asia-Pac. Absent these extensive holiday periods, Asia-Pac would have seen growth this quarter. Turning to early revenue trends for the third quarter of fiscal 2020. Based on early revenue trend that may seemingly persist, we expect revenue for the third quarter of fiscal 2020 to fall in a range of $154 million to $159 million compared to $179.5 million in Q3 of fiscal 2019. There are a number of factors significantly impacting the revenue forecast for Q3 compared to the previous fiscal year. First, Q3 fiscal 2020 includes two additional holidays due to the timing of Thanksgiving compared to the previous year, with an estimated impact in the $4 million to $5 million range. Again, please be mindful that these estimates are based on early revenue trends in Q3. Second, the midweek timing of both Christmas Day and New Year’s Day further cycles revenue momentum, with the estimated impact being in the $7 million to $8 million range. Third, the loss of revenue from the Nordics and Belgium is expected to be approximately $2.4 million compared to the third quarter of fiscal 2019. Offsetting the adverse factors I just mentioned, Veracity is expected to add approximately $5 million to our revenue in Q3. Thus far, the U.S. daily revenue run rate in Q3 has been trending ahead of the first half of fiscal 2020. However, comparing it to the daily run rate of Q3 fiscal 2019, we are still seeing a slight gap, principally due to the lift from lease accounting project revenue in the prior year. We believe our efforts in replacing the revenue stream from lease accounting projects with other opportunities are starting to pay off due to pipeline growth and pull-through. We are narrowing the year-over-year revenue gap. Turning to gross margins, gross margin for the second quarter was 40.3%, increasing by 140 basis points from the prior year equivalent period and increasing by 110 basis points sequentially. The year-over-year increase is related primarily to an increased bill-to-pay ratio, as well as a decrease in holiday pay for consultants in the U.S. due to the timing of the Thanksgiving holidays. The sequential increase is primarily due to a decrease in holiday pay for consultants in the U.S. as a result of fewer holidays, along with lower payroll taxes. The bill pay ratio remains relatively flat between the two periods. For the second quarter, our gross margin for the U.S. was 41.7% compared to 39.7% last year, and our international gross margin was 34.3% compared to 35.9% a year ago. The average hourly bill rate for the quarter was approximately $123 compared to $124 in the prior year quarter, and $122 sequentially. The U.S. average bill rate increased by 2.8% compared to the prior year quarter. However, the consolidated average bill rate saw a slight decrease as a result of the mix. Europe, which has the highest bill rate, experienced a decline in revenue, whereas Asia-Pac, which has the lowest bill rate, showed increased revenue. The average pay rate for the second quarter of fiscal 2020 was $61 compared to $62 in the second quarter of fiscal 2019 and $61 in the first quarter of fiscal 2020. For the third quarter, we expect our gross margin to be adversely impacted by the additional holidays, Thanksgiving, and midweek timing of both Christmas Day and New Year's Day. We estimate gross margin to be in the range of 36.7% to 37%, compared to 37.8% a year ago. As a reminder, these hourly rates are derived based on prevailing exchange rates during each given period. Beyond looking at other components of our second quarter financial results, SG&A expenses were $53.8 million, or 29.1% of revenue. This compares to SG&A of $55 million, or 29.1% of revenue in the second quarter of fiscal 2019, and $57 million, or 33.1% of revenue in the first quarter of fiscal 2020. The year-over-year dollar decrease is primarily attributable to a decrease in incentive compensation as a result of lower revenue in the second quarter, lower costs associated with business expenses as we continue to closely manage discretionary spend, and lower severance expense, partially offset by an increase in payroll and benefit costs due to the additional headcount related to project delivery and digital transformation efforts, including Veracity. Sequentially, SG&A as a percentage of revenue decreased by 400 basis points from the first quarter of fiscal 2020. SG&A increased significantly, primarily due to tighter management expense, lower payroll taxes, as well as a number of one-time costs incurred in the first quarter, including acquisition costs related to Veracity, severance, and other costs related to the exit activities in Europe. Looking ahead to the third quarter of fiscal 2020, we expect SG&A to be in a range of $54 million to $54.5 million. SG&A expense in Q3 is impacted by higher payroll taxes at the beginning of the calendar year. Turning to other components of our financial statements, we delivered pre-tax income of $17.7 million in the second quarter, up from $15.7 million in the prior year quarter. Our income tax provision for the second quarter was $5.3 million, representing an effective tax rate of 30%. Our effective tax rate is primarily impacted by valuation allowances on our foreign net operating losses. On a cash basis, our tax rate was approximately 29%. Our GAAP tax rate for each of the operating quarters is difficult to predict and could be volatile, as the rates will be dependent upon several factors, including the operating results of our U.S. and foreign locations, each of which are taxed or benefited at different statutory rates. The offset of the tax benefit of foreign losses on certain locations or valuation allowances and potential U.S. tax deductions related to the exit activity in Europe. Now let me turn to our balance sheet. Cash and cash equivalents at the end of the second quarter were $42 million. Receivables at quarter-end were $137.4 million, compared to $133.3 million at the end of the fourth quarter of fiscal 2019. Days of revenue outstanding were approximately 68 days, compared to 71 days in the prior year, and 67 days in the first quarter of fiscal 2020. We paid $4.5 million in dividends during the quarter. Capital expenditures were $1.3 million through the first half of fiscal 2020, and we expect CapEx to be in the range of $1 million to $2 million in Q3. We did not repurchase stock during the quarter. Our stock buyback program has $90.1 million remaining. During the first half of fiscal 2020, we borrowed $35 million to finance the acquisition of Veracity, and we repaid $24 million under our revolving credit facility. We will continue to return cash to shareholders through our quarterly dividends while balancing debt repayment and capital required for growing our business, both organically and strategically. Our shares outstanding at the end of the second quarter were approximately 32.1 million. Now I would like to turn the call back to Kate for some closing comments.

Thank you, Jen. Looking ahead, the second half of the fiscal year is strengthening. While Q3 will be impacted by the holiday season, both in terms of the number of holidays and the timing during mid-week, we like the trend we are seeing in non-holiday weeks during the first month of the quarter. We see strong interest coming from RGP's client base for Veracity services, and our pipeline overall is much improved year-over-year. Before turning to any questions, I would also like to share our client continuity statistics for Q2 in fiscal 2020. Client continuity remained strong. During our second quarter, we served 49 of our top 50 clients from fiscal 2019, and 48 of the top 50 from 2018. In the quarter, we had 294 clients for whom we provide services at a run rate exceeding $500,000 in fees, and that's up from 281 in fiscal 2019. In addition, our top 50 clients for the quarter represented 39% of total revenues, while 50% of our revenues came from 93 clients. Our largest client for the quarter represented approximately 3.4% of revenue. At the end of the second quarter, 86% of our top 50 clients have used more than one type of solution category. This penetration reflects the diversity of relationships we have within our client organizations and reinforces the opportunity for growth that we continue to execute through improved account planning and penetration. That concludes our prepared remarks, and we are now happy to answer any questions.

Our first question comes from the line of Andrew Steinerman of JP Morgan. Your line is open.

Hi team. This might be a kind of a bold question here. But I am listening to the various digital and strategic initiatives going on at Resources, and I surely understand the puts and takes in the revenues currently. I just wanted to know what level of organic revenue growth Resources is targeting, kind of over the medium-term?

Andrew, that is a bold question. As you know, because our revenue is cyclical, we have ups and downs. As I look at our revenue year-over-year in particular, you can definitely see the ending of the lease accounting work that we delivered with the compliance date of last year. We are targeting mid-single digits; I think that is the reality of it. But keep in mind, we've had some exit activities in Europe. We are going to continue to work actively at our geographic footprint. So, at the end of the day, we can deliver better profitability in the business, and when you take actions like that, they are a bit disruptive.

That's fair. And could you mention just how significant the lease accounting in the U.S. is? I definitely realize you've anniversary’d it and it's a tougher comp. But just could you give us a magnitude of how much success you had in doing that type of work in the past year?

Yes, I am going to ask Jen to give you the detail.

Yes. So, the revenue from lease accounting projects peaked last year in Q3 of fiscal 2019 at close to about $9 million and in Q3 of last year as well, and we enjoyed a pretty good lift from the lease accounting revenue. So in the range of about $8 million.

I understand. Thank you again.

Thanks, Andrew.

Thank you. Our next question comes from the line of Mark Marcon of Baird. Your question, please.

Good afternoon. I was wondering if you could just give us a little bit more feedback with regards to AB5. You mentioned that as a potential positive. But just what are you hearing from your clients at this early stage, where it seems like there is a little bit of confusion out there, in terms of how to react to it?

Yes. We already know, and it was reported today, by SIA that two organizations have already filed suit, they filed suit Monday against this law. So we are going to see active litigation. The challenge here is that, especially in the staff augmentation arena, I think clients are going to be more hesitant to engage independent contractors because of heightened liability risk that comes in the form of wage and hour complaints and penalties, which, as you know, is substantial, but also from tax obligations. So, the more careful approach, and we are starting to see clients, including our largest client, moving toward using vendors that operate with an employed model and afford not only to derisk their own position but also because they believe in professional development and commitment to talent. That client in particular recognizes that they want to work with vendors that attract the best talent, and in order to attract the best talent, you have to care for your people broadly. That means providing a full suite of benefits and professional development that comes with it. So, we are starting to have more active dialogues with several large clients in California, looking at their needs and hopefully concentrating some of that need with us going forward.

Okay, great. And then, you gave us the lease accounting for the third quarter of last year. How much would you anticipate that it will drop off to, by the time we get out to, say, the fourth quarter?

Well, I can tell you that the delta for this quarter compared to last year is about $3 million to $4 million.

Okay, great. And then, just as you are thinking about there being lots of different puts and takes when it comes to the revenue guidance for this current quarter, when we think about it on a non-holiday affected, so same billing date basis, stripping out Veracity, what's that organic revenue growth rate coming out to when you peel through the onion?

Hey Mark, it's Tim Brackney and Happy New Year.

Happy New Year.

I don't know that we'll give you that exact growth rate. What I can tell you is that when we look at the non-holiday, when we look at the non-holiday daily revenue run rate, it's the highest it's been this fiscal year and it's higher than it was last fiscal year. So, I think that its order of magnitude is tough because we have so many different factors, including the timing of holidays and when they pop out. But I can tell you, when I look at the inputs into what goes into our revenue velocity, which includes our pipeline growth, win rate, and activity rate, all those are well north of where we were, both sequentially and in prior year.

Got it. I was just trying to figure out if we just took the midpoint of the range and then stripped out expected drags from the holidays. I just didn't know if Jen had gone through that or not.

Yes, I think she tried to take you through that, Mark, with our disclosure. If you want to discuss it with her more in detail and walk through it again, just give her a call offline.

Okay.

This quarter, while we are, as I said, more optimistic about the pipeline and the opportunities we see, and certainly about the sentiment I was reading more about in the economy today, for example, and preparing and the mood today versus a year ago was quite different. One of the things that we saw coming out of the holiday last year was a more depressed mood. Now, we are seeing a more optimistic mood in our client base, and I think it does impact the pipeline we are seeing, and the willingness and readiness of clients to still engage in transformation projects and other initiatives that obviously are good for our business.

Great. And then, just with regards to the Tri-states, I was a little confused. Are things getting better in the Tri-states, or are they still anticipated to be a bit of a drag?

They are getting better. I would definitely say they are getting better. As I said, we hired a new leader. When I look at them sequentially and when I look at them from a velocity perspective, we are moving in the right direction. Just being in that market, as Kate was saying, there is a lot of optimism still in that market in terms of usage of our services. Whatever uncertainty there is around the economy, we believe there is still upside for us there. So, we're cautiously optimistic about the Tri-states.

Great. And then I know it's early, but as it relates to Europe, specifically, London and Brexit, what do you see?

I'm sorry, what are we seeing?

Yes.

I think we're all relieved. I think we would say for the Brexit discussion to be resolving. It is early days, though, and I'm not sure that we've seen any real positive or negative fallout from the results in England. We have new leadership in Europe overall, and so we are still transitioning, getting that new leader up to speed on our business. We have a new leader in our Netherlands business, as you know. While I think the trends there are strengthening, as I said in my earlier remarks, these are early days for us and so we need to keep that moving in the right direction. We are starting to see a lot more program management and project management work. We are starting to see change management work with some high-profile clients that give us reason for optimism in that business. But again, these are early days, and with new leadership, we have to see how that all plays out.

Appreciate the response. I'll follow up offline. Thank you.

Thank you, Mark.

And as there are no questions in queue, I'd like to turn the call back over to Chief Executive Officer, Kate Duchene for closing remarks. Ma'am?

Yes. Thank you, operator, and again, thank you everyone for attending this call and your interest in RGP. We'll look forward to talking to you again on our next earnings call following the third quarter of fiscal '20. Thanks again.

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