Good afternoon. My name is Krista and I'll be your conference operator today. At this time, I would like to welcome everyone to the Kforce Third Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, we will have a question-and-answer session. I would now like to turn the conference over to Joe Liberatore, Kforce's President and CEO. You may begin your conference.

Good afternoon. This call contains certain statements that are forward-looking. These statements are based upon current assumptions and expectations and are subject to risks and uncertainties. Actual results may vary materially from the factors listed in Kforce's public filings and other reports and filings with the Securities and Exchange Commission. We cannot undertake any duty to update any forward-looking statements. You can find additional information about our results in our earnings release and our SEC filings. In addition, we have published our prepared remarks within the Investor Relations portion of our website. The Firm continues to operate effectively against a challenging macro environment. Our laser focus on growing our business organically with a consistent, refined business model tailored to provide highly skilled technology talent solutions to world-class companies has been critical to our success. Third quarter results were stronger than we anticipated and results in our Technology business continue to be at the top of our peer group. Further to this point, we saw notable improvements in consultant retention in the back half of the third quarter, which contributed significantly to our better-than-expected third quarter performance. We have experienced an improving trend in new assignment starts in October. Our strategic position is solid, and our prospects are excellent. With that said, tremendous uncertainties still exist in the macro landscape, though the improvements in our results over the last quarter leave us cautiously optimistic. The prevailing view of economists continues to be that the US economy will fall into a recession in early 2024 following the aggressive monetary tightening by the Federal Reserve. The challenges in the geopolitical landscape continue to grow with the ongoing war in Ukraine, more recently with the war in Israel, along along with US political uncertainties and many others. Against this backdrop, the labor markets continue to be remarkably resilient with unemployment remaining at very low levels. The message to our people has been simple. There are many things that are uncontrollable in this environment. We have asked our teams to focus on what they can control, such as staying close to our internal associates, supporting our consultants, and continuing to listen to our clients and partner with them, solving their most significant and complex business problems. As we announced on our last earnings call, we took action in July to reduce our structural costs to better align with the lower revenues that we were experiencing, and announced certain executive organizational changes in September. While actions that affect our Kforce team are tremendously difficult to make and never taken lightly, we believe these changes allow us to navigate through the ongoing macroeconomic uncertainties and situate us well strategically for the future. Our third quarter results include charges related to these actions and certain other costs, which Jeff Hackman will address in greater detail in his commentary along with the annualized benefits we expect as a result of these actions. Our Executive Leadership team has been through multiple economic cycles and has the experience to skillfully navigate through whatever may lie ahead. We also are blessed to have a solid, highly tenured, and high-performing team at Kforce. The strength of the secular drivers of demand in technology accelerated significantly coming out of both the Great Recession, with advancements in mobility, cloud computing, among many others, and the 2020 Pandemic, with further digitalization of businesses and the continued headlines around Generative AI technologies. I have seen a lot of economic cycles in my 35-plus years in the business, and each one behaves a bit differently. The acceleration in spending during the pandemic may have been a driver to the reduction in technology spending during early 2023 and more severely impacted technology trends relative to other staffing disciplines. The recent stabilization in our Technology business suggests to us that we are migrating to a more traditional pattern. It remains clear to us that the broad and strategic use of technology will continue to evolve and play an increasingly instrumental role in powering businesses. While clients have been acting with heightened caution over the past year, their backlog of desired investments continues to grow. We expect these important technology investments to be high priorities once the macro uncertainties begin to clear. Technology investments are simply not optional in today's competitive and disruptive business climate. There is no other market we would want to be focused on other than the domestic technology talent solutions space. Our core competency is rooted in our ability to identify and provide critical resources in real-time at scale, to solve business problems for clients in virtually every industry. Our operating model also allows us to be flexible in partnering with our clients to meet their needs across a broad spectrum of engagement forms, from traditional staffing assignments to managed team engagements and also fully managed projects. We have built a solid foundation at Kforce and are partnering with world-class companies to solve complex problems and help them competitively transform their businesses. Our balance sheet is clean, and we expect this and our strong cash flows to continue to provide us great flexibility to return significant capital to our shareholders, given our significant bias towards organic growth. I could not be prouder of the performance of our collective Kforce team. Together, against a challenging operating environment, they have stepped up and met each and every challenge. I am excited about the future of Kforce operating consistently as one Firm. I'd like to take the opportunity to recognize two fellow participants on this afternoon's call. I am confident both will serve Kforce and its shareholders well in their new roles. As announced last month, Dave Kelly was promoted to be Kforce's Chief Operating Officer. Dave has been with the Firm for nearly 24 years in various progressive roles, including most recently serving as our Chief Financial Officer for the past 10-plus years. Dave will provide commentary on our performance, operating trends, and strategic positioning. I'd like to introduce Jeff Hackman to our call, who was recently promoted as our new Chief Financial Officer. Jeff began his professional career with Arthur Andersen in 2001 and has been with Kforce for nearly 15 years, most recently serving as our Senior Vice President of Finance and Accounting for the past eight years. He will provide additional detail on our financial results as well as our future financial expectations. Dave?

Thank you, Joe. Revenue for the third quarter meaningfully exceeded the top end of our guidance. The performance of our Technology business, which declined less than expected due to positive late Q3 trends, was the most significant driver. Overall revenues in Q3 declined 13.4% year-over-year with flexible revenues in our Technology staffing and solutions business declining about 11% off very difficult prior-year comps. As a reminder, our Technology business grew organically approximately 16% on a year-over-year basis in the third quarter of 2022 and nearly 30% in the third quarter of 2021. When you look at our Technology business from Q2 to Q3, revenue declines moderated sequentially to only 2% as compared to a nearly 4% decline from Q1 to Q2. As Joe mentioned, our consultants on assignment stabilized mid-quarter in Q3 and actually showed a very modest improvement at the end of the quarter. This trend has continued into October. The volume of new assignments and projects still remains at lower levels than a year ago, though assignment retention was significantly better than we anticipated, and new assignment starts have recently improved. We believe this may be indicative of clients reaching minimum staff levels necessary to perform required activities and execute on mission-critical initiatives. Based on our conversations with clients, they recognize the need to retain highly skilled talent while they await a point of increased confidence to more aggressively address their increasing backlog of desirable and important technology investments. Overall average bill rates in our technology business remain near record levels at approximately $90 per hour, which improved slightly sequentially and 2.3% year-over-year. Even in this uncertain environment, highly skilled talent remains in short supply and high demand, which is reflective of the stability in bill rates. We are also benefiting from an increase in the proportion of managed teams and managed project engagements within our overall Technology business. Looking ahead, we believe average bill rates will continue to remain at or near these levels and will trend higher over time. Our clients remain focused on critical technology initiatives in the areas of digital, UI/UX, cloud, data analytics, business intelligence, project and program management, and modernization efforts. Flex margins of 25.5% in our Technology business declined 40 basis points sequentially, due primarily to seasonal factors such as higher consultant paid time off, and 50 basis points year-over-year as a result of higher price sensitivities and higher healthcare costs. The year-over-year declines in Technology Flex margins that we have seen recently are fairly typical of what we have seen in prior slowdowns, and we normally see margins recover as the macroeconomic environment stabilizes. As we look forward to Q4, Flex margin spreads in our Technology business are expected to be stable, though overall Flex margins are expected to be slightly down due to seasonally higher paid time off in the fourth quarter. Our clients expect us to continue to broaden our service offerings beyond traditional staffing to include managed teams and project solutions. Clients consider access to the right talent essential to their success and see our services as a cost-effective solution for their project requirements. Our integrated strategy capitalizes on the strong relationships we have with world-class companies. We are utilizing our existing sales, recruiters, and consultants to provide higher-value teams and project solutions that effectively and cost-efficiently address our clients' challenges. Our client portfolio is diverse and includes large, market-leading customers. Market leaders typically prioritize technology investments to maintain their competitive advantage and our focus on addressing their needs has been, and will continue to be critical in our ability to drive sustainable, above-market performance in the long term. While short-term disruption may occur with certain clients or industries, our diverse client base provides an outstanding platform for consistent, long-term growth. We experienced sequential declines in some of our larger industry verticals in Q3, and while our Financial Services and Technology verticals were slightly down, trends stabilized later in the quarter. Healthcare and Retail are experiencing some headwinds most recently, while Transportation and Utilities have been relative strengths. October trends have continued to improve from Q3 levels and new starts activity in October has been meaningfully better than it was in early Q3. As a result, the midpoint of our guidance for the fourth quarter contemplates slight sequential revenue growth in our Technology business from Q3 to Q4 and low double-digit decline on a year-over-year basis. Full-year flexible revenues in Technology are expected to be down approximately 7%, which is consistent with what we saw during the Great Recession. Our FA business declined approximately 5% sequentially and 25% year-over-year. The year-over-year decline reflects the impact of business we are no longer supporting due to our repositioning efforts, as well as a more challenging macro-environment. We expect revenues to be down sequentially in the low single digits and approximately 30% year-over-year, which is partially driven by a Hurricane Ian support project in Q4 last year. Our average bill rate in the third quarter was $51 compared to $38 in the first quarter of 2020. Not surprisingly, our higher skill set business is where we are seeing relatively better performance. Flex margins in our FA business increased 10 basis points sequentially and have improved nearly 400 basis points since the first half of 2020 as our mix of business has improved due to repositioning efforts. We anticipate Flex margins to remain fairly stable at these levels now that the significant majority of business that we are no longer pursuing has run off. We have taken necessary and thoughtful measures to strike a balance between associate productivity and our revenue expectations. As we've done in prior economic downturns, we are focused on retaining our most productive associates and making targeted investments in the business to ensure that we are well-prepared to capitalize on the market demand when it accelerates. We continue to invest in our managed teams and project solutions capabilities and the integration of those offerings within the Firm. We are fortunate to have one of the most recognized brands in the market for providing technology talent solutions. Our reputation has been established over our 60-plus-year operating history and we are proud to carry a world-class net promoter score as rated by our clients and consultants. We also carry the highest overall Glassdoor rating within our peer group. In addition, Kforce was recently named to Fortune's 2023 list for Best Workplaces in Consulting and Professional Services and Best Workplaces for Women. I am extremely excited about our strategic positioning and ability to continue delivering above-market growth. The success that we have as an organization doesn't happen without the unwavering trust that our clients, candidates, and consultants place in us, and I appreciate the dedication, creativity, and resilience displayed by our incredible team. I will now turn the call over to my partner for many years and Kforce's new Chief Financial Officer, Jeff Hackman. Welcome to the call. Jeff?

Thank you, Joe and Dave, for your support over the years and your comments. We are blessed to have the unwavering support and passion of the entire Kforce team in moving our firm forward. I appreciate the opportunity to provide some comments about our financial position and forward-looking expectations. In the third quarter, we recognized expenses related to actions to reduce our structural costs to better align them with the lower revenue levels, and also incurred expenses related to the executive realignment that we announced in September. These costs, as well as certain legal accruals for the expected settlement of outstanding legal matters, amounted to $8.4 million. As you remember, we included $5.5 million within third quarter guidance, so there was an incremental $2.9 million recognized in the quarter. These total costs, net of the related tax benefit, impacted GAAP earnings per share by $0.36. In my commentary, I will discuss certain non-GAAP items. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the impact of these costs on our financial results. Our press release provides the reconciliation of differences between GAAP and non-GAAP financial measures. Third quarter revenues of $373.1 million declined 13.4% year-over-year. GAAP earnings per share was $0.54. As adjusted for the previously mentioned costs, earnings per share of $0.90 was at the high end of our third-quarter expectations. Overall gross margins declined 60 basis points sequentially and declined 130 basis points year-over-year to 27.7% in the third quarter due to a combination of a lower mix of direct hire revenue and a decline in Flex margins. Overall SG&A expenses as a percentage of revenue, as adjusted for the third quarter charges, was 20.9%, which was a decrease of 60 basis points year-over-year. Given our exceptional growth in 2021 and 2022, our compensation plan structure rewarded our top-performing associates with very significant bonuses and commissions. With growth coming off those historically very high levels, we are generating leverage in our SG&A costs through lower overall performance-based compensation costs. We have also been successful at driving greater cost efficiencies from our real estate portfolio given our office-occasional model and are exercising greater discretionary spend control in this macro environment. Our operating margin, as adjusted for the third quarter charges, was 6.5%, which was at the top end of our expectations. Our effective tax rate in the third quarter, as adjusted, was 27.8%. Operating cash flows were $29 million and our return on invested capital was approximately 40% in the third quarter. We are fortunate to have intentionally managed our business by driving solid organic growth that has resulted in a pristine balance sheet with very little debt. We expect to generate close to $100 million of operating cash flows in 2023 and anticipate returning approximately 100% of the cash flow generated to our shareholders. Our pattern of returning significant capital to our shareholders has been consistent over many years, not just in this operating environment. In fact, since we initiated our dividend in 2014, we have increased it 360%, and since 2007, we have reduced our weighted average shares outstanding from 42.3 million to 19.5 million. All in, we have returned nearly $900 million in capital to our shareholders since 2007, which has represented approximately 75% of the cash generated, while significantly growing our business and improving profitability levels. We remain committed to returning capital regardless of the economic climate and our threshold for any prospective acquisitions is extremely high. Our balance sheet and the flexibility we have under our credit facility provides us with the opportunity to get more aggressive in repurchasing our stock if there is a dislocation between expected future financial performance and the valuation of our shares. The fourth quarter has 61 billing days, which is two fewer than the third quarter of 2023 and the same as the fourth quarter of 2022. We expect Q4 revenues to be in the range of $359 million to $367 million and earnings per share to be between $0.74 and $0.82. Our guidance does not consider the potential impact of any other unusual or nonrecurring items that may occur. As Joe referenced in his opening remarks, we implemented some very difficult changes this quarter that immediately reduced our costs to better align overall support of the Firm with current and expected near-term revenue levels. It is worth reinforcing what we said on our last earnings call that the actions taken are expected to reduce annual operating costs by approximately $14 million, or $3.5 million per quarter. To be clear, the benefit to the third quarter of roughly two-thirds of this quarterly figure was contemplated in our third-quarter guidance. These reductions do not impact our commitment to our critical initiatives. Our overall operating performance at these revenue levels remains well above what we have previously seen, which is reflective of the return we are seeing from previous strategic investments. Looking beyond what we expect may be short-term macroeconomic uncertainties, we remain extremely excited about our strategic position and prospects for continuing to deliver above-market growth while continuing to make the necessary investments in our integrated strategy and the ongoing transformation of our back office that we expect will help drive long-term growth and put us in a position to attain double-digit operating margins as we grow. On behalf of our entire management team, I'd like to extend a sincere thank you to our teams for their efforts.

Your first question comes from the line of Mark Marcon from Baird. Please go ahead.

Hey, good afternoon, and thanks for taking my questions. David, Jeff, congratulations on the well-deserved promotions. Joe or David, can you please talk a little bit more about what you were seeing intra-quarter regarding the stabilization/slight upturn with regards to the demand that you're seeing in Tech Flex? How broad-based was that? How pervasive is that? How confident are you that that may end up continuing? And to what extent does the guidance contemplate potential furloughs at the very end of December as you have gone through multiple cycles? Typically, end of the year, we do see some companies that do pull back and decide to send all the consultants home. So, wondering, to what extent is there a pad for that to occur?

Thank you for your kind words, Mark. To address your questions, let's start with our thoughts on Q3 as we provided guidance approximately 90 days ago. We took a mathematical approach to our Q3 guidance, considering the slight but consistent declines in the number of consultants on assignment during the last months of the previous quarter and the first month of this quarter. Our guidance reflected the expectation that this trend would continue. However, we observed stabilization in the number of consultants on assignment in Technology starting midway through Q3, which persisted through the end of the quarter. The number of new assignments and projects remained stable, although new starts were lower than during the pandemic. The key point here is that demand stabilized around the midpoint of the quarter, contrasting with the declines we experienced in the previous two quarters. It's also worth noting that this stability can be attributed to clients retaining consultants, as we experienced low attrition levels this quarter. As Joe mentioned, this reflects clients reaching minimum staffing levels necessary for executing critical contracts. Encouragingly, as we've moved into October, we've seen an increase in billable consultants on assignment. While uncertainty still exists, these signs are positive early in the quarter and are complemented by a growing pipeline of opportunities in managed teams and projects. Overall, this suggests slight sequential billing day growth in Q4, which is fairly broad-based and not limited to specific industries or client sizes. Regarding your second question about Q4 guidance and potential furloughs, it's important to note that the fourth quarter has two fewer billing days than the third quarter. Consistent with last year, we see clients implementing shutdowns or soft closes around the holidays, encouraging time off. At Kforce, we also have a soft close between Christmas and New Year's, leading to increased paid time off for consultants, which impacts Q4 revenues. These patterns are typical, and we've accounted for them in our guidance. Despite this, we still anticipate flat or slight sequential growth in Technology, which is quite encouraging.

That's great. Thanks for the clarity there, David. And then just shooting a little bit ahead, I'm not asking for guidance, but just, you know, in terms of broadly speaking, when you think about the pipeline and how it seems to be building out and then thinking about kind of the normal seasonal variations, you know, when people go from Q4 to Q1, typically there is a little bit of a slower start in terms of Q1. We obviously have the payroll reset. What are some of the things that investors should think about as they think about modeling ahead beyond the fourth quarter?

Yeah, Mark, this is Dave again. I'll let Joe and Jeff add any other comments. As you pointed out, we usually notice project completions at the end of the year that affect the business. However, this year, based on what we're hearing, I don't believe we are seeing anything unusual compared to a typical year-end scenario given our current visibility.

And Mark, this is Jeff. I appreciate your comments at the front end of this. The only thing I'd add to that is when you look at our typical year-end assignment ends in our Technology business over the last three years, they were actually going into 2023, they were lower in the number of consultants that we lost at the end of the year than they were if you go back to the pre-pandemic period. And this is not a crystal ball trying to forecast that, Mark, we'll get some visibility and clarity as the fourth quarter goes on here. But I think, fair to say, just given the criticality of the technology consultants to these resources and the projects themselves, that the last three years have been lower than what we've historically seen pre-pandemic as far as consultants we've retained through the end of the year.

Great. And then, can you talk a little bit about Flex gross margins and just how the discussions are going with regards to pay-bill ratio? And what are you seeing in terms of the pay ratios? Because, you mentioned year-over-year roughly 2% growth, you know, which is slightly below inflation. How are the pay rates going? What is the competition like for the consultants? Do you have more flexibility with regards to managing those? How should we think about the gross margins on the Flex side going forward?

Yes. So, Mark, good. This is Dave again. I think I'd start out by saying in a very positive way, same story, different day. So, as you pointed out, bill rates continue to hold up well, still north of $90, as you point out, up a couple of percent. We think that continues to be reflective of a low supply, high demand for highly skilled talent, which is obviously reflective of our bill rate. I made a specific comment, and this has been a consistent comment over the course of the last many quarters, there clearly is an upward bias over the longer term for increased bill rates given the dynamics in the marketplace and the need for this talent. As it relates to margins and spreads, the spread between bill and pay rates continues to be very consistent. In this slower environment, we did actually see a slight decline, but as I'd mentioned, that's Healthcare cost related predominantly. So that spread between bill rates and pay rates continues to be very stable. And the last comment I would make is kind of a reiteration of my prepared remarks is that, in the longer term, not atypical in a slow environment as things improve, although sometimes you might see lags, we would typically see some expansion in the longer term. So again, the dynamics are playing out as they have historically here.

Appreciate the comments. Thank you.

Hi. Good afternoon. Thanks so much for taking the questions. I will also congratulate Dave and Jeff on their new roles. First, you know, I was just wondering if you might have any insights from client conversations on how IT budgets are trending as we kind of move into the year-end budget cycle and what that might mean for IT project spending for your clients next year?

Yes, Trevor, this is Joe Liberatore. I'd say most of our clients are still in the early terms of locking down 2024 budgets. However, as a whole, what we're really hearing about is kind of flat to slightly increasing budgets over 2023, with an emphasis on projects that are focused to gain efficiencies both internally and externally. Needless to say, there are industries and client-specific drivers which we believe play to our favor with the quality, and the diversity of our overall portfolio. But we're seeing budget discussions being allocated a little bit differently than prior years. There seems to be a focus on stretching the dollar to get more out of it. I would say on our end, the good news is, that's really opening up more opportunities for us as clients are no longer exclusively looking at traditional consulting firms due to the cost differential between with those firms who engage versus a Kforce or firms like Kforce. So, we believe that provides a lot of opportunity for us with a more efficient option to staffing and solutions within those clients. Does that give you a feel for what you're looking for?

Yes. Thanks, Joe. That was helpful. And then, I guess, you know, to the team's credit, I think Kforce's revenue on the Tech side continues to hold up better than a lot of companies in the peer set. Just wondering from your perspective, are you seeing any notable changes in market share or competitive behavior across the market? Do you see further opportunity to take market share in this type of environment?

Yes. I think, you know, we've seen some of our competitors are performing well in this challenging environment as much as we are. And what I would say is probably, you know, we like to see our competitors do well because that's an indication of the overall opportunities in the market. I would say probably not just us, but probably them as well. I think probably more of the market there is coming from the more localized and regional operators than those that have very expanded platforms. Because we continue to see our opportunity pipeline build. As we were moving through Q3 and into the early part of Q4, our existing projects and our strongest pipelines have really been in and around application development, around digital transformation initiatives, which often focus on those customer and internal experiences, realizing much of that work also touches our cloud practices, which we really like, and we're also seeing a lot of things happening from a data standpoint, which also often have cloud requirements within there. Existing projects and pipeline opportunities in the data side are really more traditional. Although we are starting to see some of the front-end aspects as customers are experimenting with and exploring AI and really setting themselves up to take care of that. So, I think with all that said, we believe we're really focused on those areas where demand is there. Application development, cloud, data, and digital, all continue to be robust areas and really position us well near-term and long-term. So I would say part of the driver I believe is we've honed our focus so much over the years and we're focused in those areas where there is so much mission-critical stuff that's taking place. I'm not inside competitors, I don't know how focused they've become. But I would say, if I were to say a differentiator would be that aspect and then our team has just been crushing it from an execution standpoint. I mean their resiliency and persistency has played a big part. And I guess I would say this, you know, we've seen probably a 15% year-over-year deterioration in our largest customers and we've only seen 5% in those customers that we are earlier on in our relationships. And what I get excited about there is similar to the pandemic when some of our largest customers, things really tightened up and our team had to diversify and get into new customers and that's what they've done here once again. This is a tough time to penetrate into new clients. And what that really gets me excited about is, as things stabilize and start to recover, all those larger clients back online, and we're going to get more acceleration out of the customers that have been developed and diversified in our footprint. And when you put those two things together, I would attribute a lot of our exponential growth coming out of the pandemic was because of both of those things happening simultaneously. I see those same things playing out because of our team's efforts as this recovery were to come about.

All right. Thanks, Joe. I appreciate the comments.

Thank you. Good afternoon. So, I was wondering, Joe, just on assignments, you know, if you looked at three months ago, I think you and others had talked about assignments were just being delayed and not canceled, which was a positive sign. And I'm wondering if you're seeing some of those assignments that were delayed coming back on, or is it just that your existing customers are feeling a little bit better and spending more money?

Yes, I would say it's probably the latter. We haven't seen any major changes from what we've been seeing earlier in the year in terms of your question. What we're really more so seeing, and Dave and Jeff touched upon this, is the retention that we've seen with our consultant base; we have seen a noticeable difference as we move through the third quarter. I would say one of the other things that we've been observing is that our conversions have actually come down. I mean, on a year-over-year basis, our conversions are down roughly 55%. So, what those things really point to me is that, in this industry, in every recession or cycle that I've been involved with, the first thing that happens is clients start to exit consultants. Then the next segment is, they start to tighten up on their FTEs and start to align their full-time workforce. And then the third stage is, they start to bring flexible consultants back on while they're waiting for certainty that the economy is off to the races. So we could be seeing some of those earlier dynamics. We experienced this last year; I think we had three sequential quarters of negative sequential growth in our Tech Flex business. Historically, if you were to go back to the financial crisis and you would go back to the pandemic, we had two down sequentially. If our stabilization holds as we put in within our Wall Street guidance, basically here in Q4, we would start to turn positive on a sequential basis. And then what would typically happen after that is, you start to see the expansion as customers start to bring on more and more Flex consultants. So, I mean, I don't have a crystal ball. I don't know where the ultimate economy is going, but I'm just looking at history.

That's helpful. Three months ago, you weren't the only company discussing uncertainty in the economy; most companies involved in temporary staffing mentioned it too. I don't believe that uncertainty has disappeared, at least based on some of your comments. Out of curiosity, what do you think has changed that makes companies feel a bit more optimistic about spending money? Is it the types of projects, or something else? What differences do you see from three months ago when you provided your guidance to now, where you seem a bit more positive?

Yes, and again, just in listening to our people and what they are experiencing inside the clients and the client feedback. You know, and again, I've seen this every cycle; people cut too far and now they can't get the mission-critical work done that has to be done. We could be seeing some of those things that are unfolding here, which is why, and this isn't just Kforce; if you listen to our competitors that have announced prior to us, you are hearing about a general stabilization on the technology front, and that's typically what happens when they go a little bit too far, because you got to realize the amount of backlog of projects. It's not the nice-to-have projects; it's the must-do projects. When you start to cut, those things start to now get impacted on those projects that have to be moved forward. So, I think that that's what really creates this stabilization that's going on.

Hi. Good evening, everyone.

Good evening, Riddick.

I wanted to first say congratulations, Dave and Jeff, as others have said, congratulations on the roles, and certainly looking forward to continuing to move forward there. I just wanted to follow up, piggyback on one of your comments earlier, Joe, about the customer behavior that you had and I really appreciate all the color that you've already given. I was wondering if you're seeing from a sense of, are there sort of industry customer segment leaders that are kind of further along that process of sort of making that turn that you're seeing or are you generally seeing that across the board?

That's a bit of a challenging question. We noted that several industries, like Financial Services, Healthcare, and Retail, are facing some challenges. However, as Joe mentioned, the critical activities are what leaders in the market need to focus on to maintain their positions. There are other industries that seem to be performing better, such as Transportation and Utilities. In those sectors, we've observed relatively strong performance. Still, I can't point to any specific industry that stands out as being significantly different from the others. As I mentioned, leaders in every field are carefully considering what it takes to stay ahead.

Okay. And then the last one for me, actually, is just around, I wonder if you could sort of share some thoughts on candidate availability and maybe what you're seeing, if there are certain pockets where that's starting to loosen up a little bit, or, you know, versus maybe some others where it's extraordinarily about I guess maybe it's the same or maybe more difficult to find the type of candidates that you're looking for. Thanks.

Yes. I would say that, again, you know, especially in the technology areas that we play in, which are the highest demand areas, candidates are always hard to come by. They've been hard to come by for as long as I've been in this industry. The segments have changed, the skill sets have changed, but we've always focused in those areas of highest demand. So, I mean, again, this is why I go back to if somebody ever asked me what is your number one core competency? It is the ability to go out and identify the best candidates available in the market, bring them to our clients in a timely fashion, and engage them. That's one that really doesn't change for us over time. I will say one of the dynamics that has changed over the course of the last year is probably the amount of competing offers those individuals have on their table. Obviously, so that helps a little bit in terms of when we do have a client that's interested, our ability to engage that consultant with that client, because we're not dealing with competing offers. If you were to go back into that very robust 2021, 2022 time period, there were a lot of individuals that our customers wanted to engage, but they elected to pursue another opportunity just because there was so much demand out there. You do see less of that. We also see people more probably considerate in terms of those opportunities they'll want to look at in these types of clients, which means, when you do engage with consultants that are in the marketplace and they're looking to make a move, they're much more serious about it because they're not going to take risks in a little bit more of an uncertain climate. Those are the kind of dynamics that we deal with more versus availability of candidates.

The only other point I would make is that bill rates and pay rates continue to increase. If there were any dislocation in the availability of talent, it would be reflected in what clients are willing to pay and what candidates are willing to accept.

Great. Thank you very much.

Thank you for your interest in and support of Kforce. I'd like to say thank you to every Kforcer for your effort and to our consultants and clients for your trust in Kforce in partnering with you and allowing us the privilege to serve you. We look forward to talking with everyone again after our fourth quarter of 2023. Have a great evening. Thank you.

This concludes today's conference call. Thank you for your participation and you may now disconnect.