Kforce Inc Q2 FY2024 Earnings Call

Hello and welcome to the Kforce Second Quarter 2024 Earnings Call. All lines have been muted to minimize background noise. Following the speakers' presentations, we will hold a question-and-answer session. I would now like to hand the conference over to Joe Liberatore, President and CEO. You may begin.

Good afternoon and thank you for your time today. This call contains certain statements that are forward-looking and 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 SEC. 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 our Investor Relations' portion of our website. Our second quarter performance, including the sequential growth in our Technology business, was consistent with our expectations. Operating trends over the first half of 2024 and discussions with our clients indicate to us that the current operating environment continues to be more stable and constructive than it was throughout most of 2023. The opinions on the U.S falling into a recession in the near future remain mixed. While the continued increases in the U.S. stock market indices suggest growing confidence that we may soon reach an inflection point, there still remains significant economic uncertainty as well as heightened geopolitical concerns. Against this backdrop, demand for technology resources and the desire for our clients to initiate new projects has remained consistent over the last three quarters. Clients, broadly speaking, have continued to exercise a degree of caution initiating new technology investments; however, the most critical projects continue to be initiated and proceed forward. As we look beyond the current uncertainties, we continue to be encouraged by the building backlog of strategically imperative technology investments that we expect to be high priorities for our clients to initiate at an accelerated pace once the macro uncertainties begin to clear. Given the secular underpinnings, there is simply no other market we would want to be focused in other than the technology talent solutions space. As we move throughout the second half of 2024, we will closely monitor our performance indicators and trends and make any necessary adjustments to our business. However, we intend to continue to invest in our strategic priorities, which we believe will greatly benefit both top line growth and operating profit improvements long-term and as markets become more constructive. We also continue to prioritize investments focused on retaining our most productive associates. As to our second quarter results, revenues were slightly above the midpoint of our guidance and earnings per share were near the top end of guidance. The growth in our technology consultants on assignment that we experienced in March 2024, following the build in our leading indicators earlier in 2024, contributed to our sequential revenue growth in the second quarter. Our consultants on assignment in Technology were largely stable throughout the second quarter following a degree of early-quarter natural assignment attrition. Dave Kelly will expand upon our operating trends in his remarks. Our message to our people remains unchanged, which is to control what we can, stay close to our people and our clients, while maintaining a long-term view in our decision-making. In addition, we continue to focus on client portfolio diversification efforts to best position Kforce for the eventual upcycle and to partner with our clients while they await a period of increased confidence. We are blessed to have a tenured Executive Leadership team, which has been through multiple economic cycles together and is prepared to quickly adjust to changing market conditions. We are equally blessed to have a high performing team that is tenured, dedicated, and passionate about what they do. While all economic cycles behave a bit differently, what remains clear is that the broad and strategic uses of technology, including the early-stage technology revolution associated with AI, will continue to evolve and play an increasingly instrumental role in powering businesses. As we have articulated on earnings calls and in conversations with shareholders, over the long-term, we believe that AI and other innovative technologies will follow the long historic pattern of ultimately driving demand for, rather than replace technology resources, and that the pace of change will continue to accelerate. We are ideally positioned to meet that demand. Our core competency is rooted in the ability to identify and provide highly skilled, critical resources, real-time and at scale, to help world-class companies solve complex problems and help them competitively transform their businesses. Our simple, focused operating model also allows us to be flexible and nimble in partnering with our clients to meet their needs across a broad spectrum of engagement forms, from direct hire, traditional staffing assignments to more solutions-oriented engagements and projects. We are continuing to experience growth in our consulting solutions offering, which we believe speaks to our value proposition to provide cost-effective and efficient IT solutions in an addressable IT solutions market that is many times greater than the technology staffing market. Our decision to grow our business organically with a consistent, refined business model has been critical to our success over many years, and we remain confident that our firm is positioned well for improving market conditions. Kforce was recently named one of America's Best Midsize Companies by Time Magazine. This is another testament to the strong company culture we have built. I am tremendously proud of our team’s efforts as they continue to execute with incredible resilience and passion to serve our clients, candidates, and consultants cohesively as one Kforce, while also meaningfully advancing our strategic enterprise priorities. I remain confident and excited about the future of Kforce. Dave Kelly, our Chief Operating Officer, will now give greater insights into our performance and recent operating trends. Jeff Hackman, Kforce’s Chief Financial Officer, will then provide additional detail on our financial results as well as our future financial expectations. Dave?

Thank you, Joe. Total revenues of $356 million were slightly above the midpoint of our expectations for the second quarter, increasing 1.3% sequentially and down 8.4% year-over-year. Our Technology business grew 1.7% sequentially and declined 6.4% year-over-year. After experiencing some early April assignment ends, consultants on assignment in our Technology business were largely stable throughout the remainder of the second quarter. That said, purchasing activity, even within the same industry, is uneven. We have seen significant growth in some of our largest clients, while others have taken a more conservative approach and reduced investment. This pattern is not industry-specific but rather reflected across the corporate landscape. It is clear that our clients, broadly speaking, are awaiting a period of increased confidence to begin more aggressively addressing the backlog of important technology initiatives that has built up over the last two years of measured investment. Given no apparent near-term catalyst and a moderation in the U.S. economy, we anticipate relatively stable sequential trends in our Technology business in the third quarter. Encouragingly, overall average bill rates in our Technology business of $90.39 grew 1.2% sequentially and over the last six to eight quarters have largely been stable. The consistent strong demand for highly skilled talent on both traditional staffing assignments or as part of a managed team or project solutions and the options these individuals have kept bill and pay rates stable, even as the overall industry trends have slowed in recent years. Our clients remain focused on critical technology initiatives in the areas of digital, data governance and analytics, AI and ML, UI/UX, cloud, business intelligence, project and program management, and modernization efforts. We have established a foundation of sourcing quality talent, at scale, for our clients across a range of skillsets for more than 60 years. As technology has evolved over the decades, including recent advancements around AI, we have evolved with the changing skillset demands of our clients. Flex margins of 25.9% in our Technology business increased 60 basis points sequentially, primarily due to annual payroll tax resets. As they have been over the last three quarters, bill-pay spreads in our Technology business were stable on a sequential basis, which continues to be an encouraging data point given the cloudiness in the economic environment. We have continued to broaden our service offerings beyond traditional staffing assignments to include managed teams and project solution engagements. 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 by utilizing our existing sales teams, recruiters, and consultants to provide higher value teams and project solutions engagements that effectively and cost-efficiently address our clients’ challenges. Our client portfolio is diverse and is mostly comprised of large, market-leading companies. Market leaders typically prioritize technology investments to maintain their competitive advantage. Our focus on addressing their needs continues to be critical in our ability to drive sustainable, long-term above-market performance. From an industry perspective, our largest vertical, Financial Services, experienced improvement sequentially after some recent headwinds, and we experienced notable growth in both business and professional services and travel and leisure industries. Looking forward to Q3, we expect Technology consultants on assignment to remain relatively consistent with the levels we saw at the conclusion of the second quarter. Revenue may be stable to slightly down sequentially should current patterns persist and year-over-year declines should decelerate a bit as compared to the second quarter. Our FA business, currently 8.0% of our revenues, declined approximately 6% sequentially and declined 23% year-over-year. The year-over-year decline reflects the impact of business we are no longer supporting due to our repositioning efforts and a more challenging macro-environment. Our average bill rate of approximately $51 per hour improved slightly sequentially and is reflective of the higher skilled areas we are pursuing that are more synergistic with our Technology service offering. We expect Q3 FA revenues to be down sequentially in the mid-single digits. Flex margins in our FA business increased 60 basis points sequentially driven by seasonal payroll tax resets. Flex margins in FA have improved 130 basis points over the last five years as our mix of business has significantly improved. We expect bill-pay spreads to remain fairly stable at these levels in Q3. We have taken necessary and thoughtful measures to strike a balance between associate productivity and our revenue expectations. As we have 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, which is progressing well. While the uncertainty in the macro environment has certainly persisted longer than most have expected, I remain tremendously excited about our strategic position and ability to continue delivering above-market performance in our Technology business as we have for over 15 years. The success that we have as an organization doesn’t happen without the unwavering trust that our clients, candidates, and consultants place in us. I appreciate the dedication, creativity, and resilience displayed by our incredible team. I will now turn the call over to Jeff Hackman, Kforce’s Chief Financial Officer.

Thank you, Dave. Second quarter revenues of $356.3 million declined 8.4% year-over-year and were just above the midpoint of our expectations. Earnings per share of $0.75 were near the high end of our guidance. Overall gross margins in the second quarter increased 70 basis points sequentially, primarily due to seasonal payroll tax resets and a slightly improved direct hire mix. Margins declined 50 basis points year-over-year to 27.8% due to a combination of a lower mix of direct hire revenue and a slight degree of pricing compression, which has significantly moderated following earlier 2023 pricing sensitivities. In fact, Flex Margins in Q2 in our Technology business were unchanged year-over-year. As we look forward to Q3, we again expect them to be essentially unchanged given the stability we are experiencing. Overall SG&A expenses as a percentage of revenue were 21.8%, which is an increase of 50 basis points year-over-year. Our variable-based compensation structure, the adjustments we made in July 2023 to reduce our structural costs to the lower revenue levels, and disciplined cost management has significantly mitigated the impact of lower revenue and gross profit levels on our profitability. With that said, we are continuing to prioritize investments in retaining our most productive associates, making targeted investments in leadership and our sales capabilities, and advancing our enterprise initiatives, all of which are expected to significantly contribute to our longer-term financial objectives and prepare us well for when companies more aggressively invest in their technology initiatives. Our operating margin of 5.5% was toward the high end of our expectations as we benefited from strong flex margins and lower-than-anticipated SG&A costs. Our effective tax rate in the second quarter was 26.3%, which aligned with expectations. Operating cash flows were approximately $21 million and our return on equity was 35%. We have prudently managed our business by driving solid organic growth over many years, which has resulted in consistently strong results and a pristine balance sheet with minimal debt. Our pattern of returning significant capital to our shareholders has been consistent over many years and continued in Q2, with over $15 million returned through dividends and share repurchases. This consistent repurchase activity continues to be strongly accretive to earnings. Additionally, we have increased our dividend in each of the past five years, and the current yield of 2.2% is amongst the highest in our industry. All-in, we have returned slightly more than $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. Our strong predictable cash flows allow us to remain committed to investing in our business, while continuing to aggressively return capital regardless of the economic climate and still maintaining minimal debt levels. Our threshold for any prospective acquisition remains very high. Our strong 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 third quarter has 64 billing days, which is the same as the second quarter of 2024 and one more than the third quarter of 2023. We expect Q3 revenues to be in the range of $347 million to $355 million and earnings per share to be between $0.65 and $0.73. Our guidance is based upon the assumption of a stable environment and does not consider the potential impact of any other unusual or non-recurring items that may occur. We remain excited about our strategic position and prospects for continuing to deliver above-market results over the long-term, while continuing to make the necessary investments to help drive long-term growth and enable us to achieve our longer-term profitability objective of attaining double-digit operating margins at slightly greater than $2 billion in annual revenues. On behalf of our entire management team, I’d like to extend a sincere thank you to our teams for their efforts. We'd now like to turn the call over for questions.

Thank you. Your first question comes from Mark Marcon with Baird. Your line is open.

Good afternoon and thanks for taking my questions. I've got a couple. The first one is, David, when you were going through your prepared comments, you mentioned that you're awaiting a period of increased confidence. And one of the things I'm wondering about, and it's come up because the cycle has been very different than other cycles is to what extent is the lack of confidence or what we're currently seeing in terms of slight revenue declines a function of a softening economic environment versus how much of it is just that some companies over-hired during the COVID rebound period and now they're overstaffed? And then to what extent do you think we may end up having some sort of impact from uncertainty in terms of how AI is going to end up evolving? And does that cause some IT managers to kind of freeze up? I'm just wondering what your thoughts are there? And what signs you're looking for in terms of an increased level of confidence?

Thank you for your questions, Mark. There’s definitely a lot to unpack. We are still experiencing uncertainty in the marketplace, but I want to emphasize that our business has shown a significant level of stability over the past year, particularly in technology revenue and margins. While companies are feeling pressure to accelerate their investments, the economic landscape is inconsistent. We've seen strong performance around Labor Day, but have also faced some unexpected downturns and inflationary concerns. This uncertainty is causing companies to focus on essential activities, and those with investment opportunities may be hesitant to act right now. You mentioned hiring trends during the pandemic, and I think the current restraint in resource addition can be partly attributed to previous overhiring. It’s important to note that spending patterns vary among companies; some are increasing their budgets while others are more cautious, so it’s not a uniform response. Regarding AI, I believe we are still in the early stages. Many companies are just starting to explore how AI can benefit them, but there are data-related concerns that need addressing. While our managed solutions business is seeing demand from companies aiming to streamline their data, we have not yet observed a significant surge in AI-related projects. I doubt that companies are simply waiting to see how AI develops before making investment decisions, as that would risk falling behind. Leading companies are always seeking ways to invest and maintain their competitive edge, so I think many of them cannot afford to delay until the AI landscape becomes clearer. I hope I addressed your questions effectively.

Thank you for the answers, David. You mentioned that we still expect double-digit operating margins if we reach $2 billion in annual revenue, provided the stable pattern continues. If this pattern holds for another year, would you maintain overcapacity to prepare for the $2 billion revenue target? Alternatively, if revenue levels remain closer to $1.4 billion or $1.5 billion, would you consider taking steps to align margins with targeted levels? How are you approaching this uncertainty?

Yes, Mark, I’d like to clarify our approach regarding our cost structure. We definitely have the capacity to grow this business, but we're not keeping excess capacity solely to align with a $2 billion revenue target. You’ve followed the company closely over the years, and I believe we've effectively maintained sufficient capacity during downturns, allowing us to capitalize when conditions improve. We're also continuing to invest in technology in this regard. Specifically about capacity, our focus on driving the business has largely been through bolstering our sales efforts. Many of our investments have enhanced our recruiting capabilities, leading to increased productivity among our teams. We recognize that winning new business is taking longer and requires more effort. As we add more personnel, our emphasis remains on the sales side. It’s also crucial to note, as Joe mentioned, that we are investing significantly to achieve long-term benefits related to productivity, efficiency, and operating costs, in both the front and back offices. While we maintain our capacity, we see this period as an opportune time to invest for the future. We aim to prepare ourselves to harness opportunities to boost both revenue and operating margins, and we believe we are on the right path to do so this cycle, as we have in previous ones.

And I think, Mark, you mentioned our profitability objectives of double-digit operating margin, it's slightly greater than $2 billion. I think Dave touched on a number of key points. And I think that speaks to the linear nature of how we might see that operating margin progress towards double-digit as we grow. As you look at the investments that we're making today's point, both from a sales and delivery standpoint, disproportionately make the investments to try to drive greater efficiencies in the delivery of that. We've talked also about our back-office transformation program and that is not an insignificant part of getting from where we currently are to our double-digit operating margin as well. And I know we've made comment to this, Mark, in the past, but as you look at our current investment in some of these programs compared to the benefits that we expect, that contribution towards operating margin, we expected about 100 basis points of operating margin. So, you certainly have the linear equation of investing in activity, which I think Dave commented on and a bit of a step equation, certainly on the back office as well.

I appreciate your comments about the back office. My concern is that in 2022, we generated $1.7 billion, and we have since fallen short of that figure amidst significant uncertainty. I do anticipate that as confidence grows, we will witness a revenue rebound. However, considering the overcapacity you mentioned, I am curious if the $1.7 billion could represent more of an organic limit. Aside from the 100 basis points you referred to, could we still see notable improvements in our margins if we determine that the environment is more stable rather than expanding?

Yes, as a proactive management team, we are flexible in our approach to the business. We will continue to adjust as needed. While we do have some capacity, it's limited. As revenues may improve, albeit more slowly than desired, we still anticipate enhancements in operating margin that will surpass the revenue increases due to the nature of our business model. We believe that as revenues rise, we'll be able to further capitalize on our technology investments aimed at boosting productivity. We've observed this in past cycles where we experienced significant improvements in operating margin, even with modest revenue growth. Therefore, we plan to remain adaptable. Based on current observations, we believe we are headed in the right direction. However, we are aware of potential challenges, and if we foresee a prolonged period of slower growth, we will take that into account for every investment decision and assess our capacity needs accordingly.

Yes, Mark, this is Joe. I'd like to add that this situation is multidimensional. Time is a crucial factor because when we discussed this earlier, we were at a higher revenue level and considering the progress of various strategic priorities, particularly the back-office transformation. As time goes on, we anticipate gaining greater leverage from that. Even in a more stable environment, not focused on growth, time will work in our favor and influence our operating margin. From the perspective of our back-office transformation and integrated strategy, the efforts our teams are making in refining our go-to-market tactics will allow us to build pipelines over time. This positions us to either gain market share or increase revenue more quickly. Therefore, we shouldn't overlook the role of time in the maturation of these elements and the productivity and efficiency benefits we will obtain. That’s why it's a challenging question to answer without all the factors considered.

I really appreciate that, Joe. And then one last one for me and this is more of a minor numbers question. But you've clearly been deemphasizing F&A, clearly, the emphasis is on IT. You're fulfilling the higher-level roles that some of your key strategic clients are interested in. And I fully appreciate all of that and the justification. I'm just wondering, is there a level in terms of F&A, where you would say at a certain quarterly run rate or annual run rate, that should end up basing out? Or is it possible that we could continue these levels of decline for multiple years? Just trying to figure out if that's going to base out at some point?

Yes, so, Mark, this is Dave again. So, obviously, the market for F&A is challenged just in general, right? We've seen that. And I think that in the near term, I don't think that that expectation has changed. I think for us, I'll continue to say we've done a nice job, I think, in transitioning that business. Our average bill rate there, as I mentioned, is $51 an hour. There's a lot more synergy there as it relates to projects with our Technology business. We've got some very strong people who are involved in that business. And right now, we think we're on the right path. Obviously, we're consistently looking at the market, looking at how we address that business and enhance that business. So, but right now, our plans remain unchanged in terms of the direction that we're taking.

Great. Thank you.

Thank you.

Your next question comes from the line of Trevor Romeo with William Blair. Your line is open.

Hi, good afternoon team and thanks for taking the questions. I just had one on kind of the progression of demand over the past several months, I guess. I think you saw that uptick in new assignments in March. And then it sounded like you haven't really seen a further uptick since then. So, just sitting here a few months later, has something changed since March? Or was it kind of more of a one-off increase, I guess, just any thoughts on why that uptick you saw in March was so short-lived?

Yes, Trevor, this is Jeff. It's a good question that you asked. And we talked last quarter about the improvements that we saw in late January, early February, ahead of our Q4 earnings call, and we expected that to manifest itself and yield of new assignment starts in the month of March. We talked about last quarter, we did see that. I think Dave mentioned in his prepared remarks that at the beginning of each quarter, there's a bit of a, I would say, natural quarterly assignment attrition or ends. We saw that in early April. And for the remainder of the second quarter, our consultants on assignment in our Technology business were largely very stable and contemplated, Trevor, and our third quarter guidance is a very similar dynamic as what we experienced during the second quarter, where a little bit of a natural quarter ends in our consultants on assignment and then a stable as you go from there. So, at all of our KPIs, and we, as you well know, Trevor, pay attention to those every day, every week. I think Dave also mentioned in his prepared remarks that absent an event or some driver to a positive inflection point, what we're seeing in the business is great stability at this time. So, it was good for us. It was a result of a lot of hard work leading up to being able to sequentially grow Q1 to Q2. And when you look at our Technology business at the midpoint, it is down very slightly Q2 to Q3. So, very stable as you go.

Just maybe, Trevor, a couple of other data points in terms of stability. I think that is the key word. Our margin in the Technology business has remained basically unchanged for the last four quarters. Our average bill rate of $90.39 hasn't changed in almost two years. So, we're seeing a steady demand for those skilled high-end resources. Naturally, these talented professionals expect to be compensated fairly. Therefore, we're observing signs of stability in our clients' behavior and in the supply and demand dynamics in the marketplace. So yes, the key word is stability, no question.

Yes. Okay, that makes a lot of sense. Thank you. And I guess kind of along those lines, it was nice to see the sequential revenue growth come through for Tech Flex. I think if you look maybe some of the others in the industry or some others that we've spoken with, didn't necessarily see that sequential growth from Q1 to Q2. Was there anything four specific you think that drove that, like new logos, new project wins, anything like that that drove better performance in Q2?

Trevor, it's a great question. I think it's a combination of a lot of the efforts that we've been after for the better part of the last years and the execution of the team. So, I mean, I would have to give the team the credit on that because as you well know, the market is not expanding, which means it's coming from a market share graph. So, I think our teams are executing more effectively than they have in the past, and we're just getting started on that front. So, I'm very optimistic, especially with some of the programs that we've put in place and where we are in the evolution of those programs. So, I think that's a big piece of what's really unfolded here.

Okay. Thank you all very much.

Thank you.

Thanks Trevor.

Your next question comes from the line of Kartik Mehta with Northcoast Research. Your line is open.

Thank you. Joe, I think you talked about a little bit about pricing competition. And I'm wondering, any concern about pricing competition increasing? Are there others that are keeping capacity because there's a lot of uncertainty in the market? I want to be back at a point when demand really picks up and you don't have the people, if that were to happen. So, I'm wondering if you have any concerns about rising competition or that could be next area where you really have to focus on?

From a competition perspective, each cycle is unique. In this cycle, we haven't seen as many competitors leave the market as we have in past downturns like the dot-com crash or the financial crisis. Pricing competition has remained quite stable, with no significant players engaging in predatory pricing. The demand for technology talent continues to be strong, influencing pricing through the basic principles of supply and demand. Additionally, our strategic shift towards solutions and managed services typically yields 300 to 400 basis points better pricing conditions, and this segment of our business is growing faster than our traditional staffing operations. We are committed to educating our team on pricing strategies to ensure we deliver valuable services that align with what clients expect. Moreover, we are positioned in a space that merges consulting and staff augmentation, allowing us to offer a more efficient model compared to traditional consulting firms. This efficiency enables us to provide high-quality deliverables while minimizing unnecessary resource deployment, ensuring we meet clients’ specific needs effectively and economically. All these factors contribute to our pricing strategy.

And then just one last one. You've talked about looking at a lot of indicators to kind of figure out how business is moving forward. I'm wondering if you're seeing any clients that are slowing down the projects, just you anticipated that they were going to start a project and all of a sudden stop? Or on the other end, you're seeing clients extend projects where you thought maybe there might be a slowdown, maybe even on the margin, just curious since I'm trying to figure out where the fundamentals are moving?

Yes, I would say that there is certainly a thorough investigation by clients when considering new projects. There have been instances where some clients have been aggressive in their spending. However, many clients are more hesitant as we find ourselves in a state of equilibrium. Looking back a year or two, there were more clients who ended projects prematurely and decided not to spend further. Now, clients seem to be more prudent, following through on projects once they commence because they recognize their critical nature. This stability provides us with some confidence, suggesting that we may have moved past some challenges. Currently, spending appears consistent, and I believe that as we look to the near term, we will likely continue to see this trend until there is a substantial shift in sentiment, which we have not observed yet.

I would like to add that our teams are focusing on application development, cloud, data, and digital. These areas are essential for businesses to keep investing in. They cannot be turned off or reduced. It's crucial for companies to stay competitive in the marketplace and improve how they serve customers and support their internal teams. We have dedicated significant time to refining our focus. Initially, we narrowed our service lines, then concentrated our technology service offerings to gain depth and breadth in areas we believe are vital for sustainable technology use, both internally and in effectively serving customers to maintain competitiveness.

Thank you very much. I really appreciate it.

Sure. Thank you, Kartik.

Your next question comes from Tobey Sommer with Truist. Your line is open.

Thank you. I have a couple of follow-up questions. With your investments in managed teams, are you gaining new capabilities? Can you provide some insight into what those investments are achieving compared to a year or two ago? Also, regarding the F&A, is the repositioning still in progress? I thought we had most of that behind us. Thanks.

Hi Tobey, this is Dave. I'll answer the F&A question, and then Joe can make the additional comments on our Consulting business. So, that repositioning is relatively complete, Tobey, that's why I said, bill rates have gone up significantly. It's a difficult environment right now. I think it's fair to say, right? I don't think we are alone in terms of performance of our F&A business. But no, that repositioning is largely complete. Does that mean we're not looking to enhance that skill set to continue to look for opportunities, synergistic opportunities with our Technology business? It certainly does mean that. But in terms of the business that we are doing, essentially, if I look back a number of years, there was a lot of lower-end finance and accounting, more transactional-type business, we're really not doing any of that anymore. So, what we're seeing now is a market dynamic here predominantly. But no, that is largely complete in terms of the action repositioned.

And Tobey, regarding our managed teams and managed services solutions, we underwent an organizational restructuring about two years ago. The progress our leadership team has achieved during this time has been remarkable. With over 35 years in this industry, I can say it has been transformational, particularly in terms of enhancing the talent we've brought in and adding individuals with advanced technology expertise and industry knowledge. This is what I mean by deepening and broadening our focus areas. We've attracted a lot of talent and made significant investments in this sector. Many of the people we've hired come from reputable brands and top-tier consulting firms, contributing to our capabilities. Additionally, we've invested heavily in our delivery performance to ensure clear communication with our clients about our project progress, which fosters repeat business and opens up further opportunities within those organizations. We've been implementing this in an integrated manner, utilizing our established relationships in the market. In the past couple of quarters, we have secured significant wins by diversifying our service offerings for our current clients, leveraging those connections and our track record in staff augmentation. This strategy not only enables us to capture more spending but also opens doors as we see a slowdown or margin compression in the staff augmentation sector. Recently, we've had notable successes with large retail, transportation, and financial services clients in key modernization projects. In these instances, acquiring staff augmentation work has become increasingly challenging for our clients, prompting our team to pivot towards our Kforce Consulting Solutions, which has yielded positive results.

Thank you.

Thank you, Tobey.

This concludes the question-and-answer session. I'll turn the call to Joe Liberatore for closing remarks.

Yes. So, thank you for your interest and support in Kforce. I'd like to express my gratitude to every Kforcer for your ongoing efforts and passion, and to our consultants and clients for your trust and faith in partnering with Kforce and allowing us the privilege to serve you. We look forward to talking with you again after our third quarter 2024.

This concludes today's conference call. Thank you for joining. You may now disconnect.