Good afternoon, everybody. My name is Mark Marcon. I follow human capital technology and solutions for Baird. Our next presenting company is Kforce, one of the largest providers of IT staffing in the U.S. We're very pleased to have Michael Blackman, the Chief Corporate Development Officer, and Jeff Hackman, the CFO, with us today. You're gonna go through a little bit of a- Yeah presentation, and then after that, we're gonna open it up for a fireside chat. Perfect. Great. Can we go ahead to those of you on the phone? We're gonna start with slide three. Should say Kforce Overview on top. Before I get started, Mark, I wanna thank you and the Baird team. You know, I think this is probably about the 20th of these conferences I've had the honor of being at. I'm here to say that the attendance and interest and just the number of one-on-ones, to the best of my recollection, never better. And that's a testimony to you, the team, and on behalf of the whole management team, we're very, very appreciative. Before we start, I would just like to go through a brief- I'm gonna make sure so that people can see. A brief overview of Kforce today and our exciting positioning for the future. Again, for those of you listening in, it's available on the web. We're looking at slide three as a reference point. Couple of key points about Kforce. Kforce has a 100% organic domestic revenue footprint. 90% plus of our revenue is technology. 97% of that is a run rate business. Average bill rates in technology, and it's been this way for actually a number of quarters now, is about $90 an hour. We made a very conscious decision to narrow our focus to technology post the 2008, 2009 Great Recession, which of course overlapped with the advent of mobility. Technology is simply the broadest, deepest market that continues to power business strategies across all industries, and I wanna be very deliberate. Kforce, while technology is our focus, we service all, the whole industry spectrum. Yes, technology companies are a portion of, but, you know, everything from grocery chains, to airlines, to cruise companies, to telecom. So it's, you know, think of Kforce as technologists across that whole spectrum. While Jeff will go into greater detail, we have a very clean balance sheet and a long track record of returning capital to shareholders. Jeff will also comment on the tremendous opportunity we have at Kforce to significantly enhance profitability going forward. Many investors, in fact, we had quite a few today, have commented on our simplified and focused Kforce story, and, I guess this is a compliment, but we get called boring a lot. And I think our track record, and our organic basis, and our balance sheet, I think, I think it's a compliment, but we, we hear it all the time. As to operating trends, over the past two quarters, discussions with our clients indicate to us that the current operating environment is more stable and constructive than it was throughout most of 2023. There remains uncertainty about whether or not the U.S. economy will fall into a recession. However, the dialogue surrounding interest rate cuts, I'm sure everyone's noted, has shifted from a discussion referencing the number of anticipated cuts and when, as to whether or not we should even expect cuts in twenty fo- in 2024. You know, to reiterate, we're not economists. If anybody has the answer on the economy going forward, I'm available after the meeting today. Against this backdrop, our clients, broadly speaking, have continued to exercise a degree of caution initiating new technology investments. Importantly, this restraint does not appear to be increasing, but rather appears to be fairly stable. As we look beyond the current uncertainties, we continue to be encouraged by the backlog of strategically imperative investments that we expect to be high priorities for our clients as macro uncertainties begin to clear. Technology investments are simply not optional in today's competitive and disruptive business climate. Given the secular underpinnings, there is simply no other market that we would want to be focused on other than the technology staffing and solution space. As we move through the second half of 2024, we will closely monitor our performance indicators and trends and make any necessary adjustments to our business while continuing to invest in our long-term strategic priorities and retain our most productive associates. Our message to our people is unchanged. During these uncertain times, we must control what we can control, stay close to our people and our clients while maintaining a long-term view in our decision making. We are fortunate to have a highly tenured executive leadership team who has been through multiple economic cycles together and is prepared to quickly adjust to changing market conditions, and we are equally fortunate to have a high-performance field team that is tenured, dedicated, 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 most recent secular shift associated with AI, will continue to evolve and play an increasingly instrumental role in powering our business going forward. Over the long term, we believe that AI and other technologies will continue to drive demand for, rather than replace, technology resources, and that the pace of change will only accelerate. We are ideally positioned to meet that demand. Our core competency at Kforce is rooted in our ability to identify and provide critical resources, real time, at scale, to help world-class companies solve complex problems and help them competitively transform their business. Our operating model allows us to be flexible in partnering with our clients to meet their needs across a broad spectrum of engagement forms, from direct hire, traditional staffing, to managed teams engagements, and managed projects. Our decision to grow 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 for many years, and we feel confident that our firm is well-positioned going forward. Turn it over to our CFO, Jeff Hackman. All right. Thank you, Michael. Once again, Mark, Andrej, and the rest of the Baird team, today was an absolutely tremendous day. Michael's done this a lot longer than I have, but I trust his judgment that this is one of the most robust days that we've had. Mm-hmm. So truly appreciate the efforts there. I'm gonna start us on slide seven. We experienced a notable acceleration in our consultants on assignment, largely throughout March, which led to our guidance for the second quarter, contemplating sequential growth of about 2%. Our clients continue to undertake mission-critical projects and also recognize the need to retain the highly skilled talent that we provide while they await a point of increased confidence to accelerate spending to address their increased backlog of technology initiatives. Overall, average bill rates in our technology business have remained stable over the past several quarters and continue to reflect our focus on providing highly skilled talent on both traditional staffing assignments, and as Michael mentioned, or as part of a managed team, or a project solution outcome. Our clients remain focused on critical technology initiatives in the areas of digital, data governance, of course, AI and ML, UI/UX, cloud and data analytics, business intelligence, project and program management, and modernization efforts. This represents a continuation of the recent trends and reflects some of the foundational work required by companies to gain the eventual benefit of AI-related investments. On slide eight, for those listening in, we have continued to broaden our service offerings beyond traditional staffing into consulting solutions, which we've been investing in organically building for more than five years. 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, recruiters, and consultants to provide higher value teams and project solutions that effectively and cost efficiently address our clients' challenges. Moving ahead to slide nine, we've 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 we continued that in the first quarter, with a total of approximately $9 million returned through dividends and share repurchases. All in, we've returned more than $900 million in capital to our shareholders since 2007, which has represented approximately 75% of the cash we 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 remains extremely 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. On slide 10, 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 objectives of attaining double-digit operating margins at slightly greater than $2 billion in annual revenues. To be clear, we're positioning Kforce for the next upcycle, and we would note that historically, each subsequent cycle has surpassed the prior ones, and we're excited about our position to win in that environment. With that, Mark, we'll turn it over for Q&A. Great. That was terrific. Why don't we start with the last point that you gave in terms of, you know, $2 billion, get the margins up fairly significantly.... Can you just talk about some of the leverage points, that we would need to achieve in order to get to those, you know, say, 11% type margins? Yeah, and I think, Mark, it's a great, great question. We spent a lot of time in the meetings today, talking about that. You know, clearly, scale is one of the factors that gets us from where we currently are to double-digit operating margins at slightly bigger than $2 billion. The other components we've been investing in technology initiatives internally for Kforce to drive productivity. That's in terms of both the, you know, front side of the house and the sales and delivery teams. We've implemented a lot of technology initiatives over the last, you know, five-plus years with our, you know, CRM, our TRM, which is all on the Microsoft platform. We saw really great productivity improvements leading up to the pandemic. We've continued to drive that. That is a component of, you know, what's gonna get us to double-digit operating margins. As you think about productivity for the back of the house, we've talked about on our earnings calls, that we've made the decision to implement Workday. We've been at this for the better part of a couple of years. We're gonna be implementing Workday over the next couple of years. When you look at the benefit that we expect as we, you know, continue to analyze that transformational program for us, compared to the level of investment that we're making now, when you factor in the benefits that we expect from technology, automation, trying to look at some process reengineering efforts, and where the work is supported and done, that overall benefit for the firm is about 100 basis points to our operating margin. Yeah. So a pretty significant component. We've talked about, you know, the, you know, relative linear nature or not of that back office transformation program as a little bit of a step-up function to the operating margins. So scale, productivity, you know, continuing to look at our and challenge our fixed costs in the business. We've done a lot of great work there in continuing to challenge our real estate needs. We're in the, I would say, later innings of some of that work, but still have a little bit yet to go on it. But, you know, Mark, we spent a lot of time talking about our, you know, financial objectives, and we spent a lot of time internally focused on it, and we're really confident about our ability to hit it. That's great, and you didn't mention needing to increase gross margins at all. Do you need to improve gross margins at all in order to get to those double digits or, or not? Yeah, I think, Mark, when you look at what we saw, and I'll... You know- Yeah ... 2023 and 2024, obviously, operating margins are a bit, Yeah ... you know, compressed, so let's take that out. When you look at our flexible margins, overall in our technology business, which is 92% of the overall pie, they were flat in 2020, but 2021 and 2022. So heading into, you know, these softer times for our business, it was kind of as stable as we go, steady, steady as we go. When you peel back that onion, of course, when you look at the staff augmentation portion of the business, we've probably seen some level of spread compression in our, you know, flex margin profiles. We continue to trade a little bit of rate for the volume benefit with some of our larger clients. You know, so we saw a little bit of that, but when you look at the project solutions, our consulting solutions business- Yeah ... that carries anywhere between 400+ basis points higher margin than our flexible staffing business. So that, you know, had a stabilizing effect to it. So when you look at, you know, where we ended 2022 compared to where we're going, Mark, we are not anticipating needing to grow flex margins in order to get to the, you know, double-digit operating margins. You know, might there be an opportunity for some margin enrichment as that project solutions portion of the business becomes an increasingly greater part of the mix? Could, but our internal models, we're not expecting that. Okay. And then, with regards to the productivity gains, can you, can you flesh some of that out, give some real-life examples, just in terms of like, you know, recruiter productivity? And we're still, you know, really early days with regards to implementing LLMs and AI- We are ... in terms of the processes, but it seems natural to assume that there's gonna be amazing efficiencies that could ultimately be generated. Yeah, a lot of it, Mark, historically, when you look at what we've implemented over the years to try to drive sales and delivery productivity, you know, going live with our CRM, I think back in 2017, that was a big step for us. We were leveraging some, you know, legacy, I guess you can call an applicant tracking system, as a CRM, and that's really given our sales associates a pretty powerful tool. We added to that, Microsoft Dynamics platform, with our talent relationship management system, which was implemented shortly before the pandemic, and that's where we explore with a lot of the, you know, matching, algorithms, et cetera, to try to, you know, bridge the gap, and make our recruiters much more efficient at the front end of that funnel on screening candidates and put more of the efforts towards the backside of that transaction to really close that deal. Those are investments that we've made. You mentioned AI. We've explored with a couple of proofs of concept, internally, some of them relatively small, with proposal services, which I think Joe Liberatore has highlighted, on our earnings call. That was to prove that the technology can work internally. We proved it to ourself there, but also trying to invest. We've got a couple of proofs of concept coming up, both- Mm ... in terms of the sales funnel with leveraging Microsoft and of course with their Copilot Dynamics Sales. And as well with some screening technologies as well, which will, you know, certainly give the benefit to our delivery folks, that they don't have to screen. When you got a one-to-one relationship between a delivery person and a candidate that they're screening... These large language models and some of these, you know, chatbots can have simultaneous conversations with thousands of candidates and screen them. They can send them out for skills assessments. They can bring back in the results of the skills assessments, bring all that into our talent relationship management system, which enables our recruiters to be that much more effective and that much more efficient. Yeah, and I would simply add to that, you know, there's capacity today. So, you know, we are, as Jeff said very clearly, we're playing for the next cycle. Right. As a matter of fact, we've, you know, added on the sales side. Sure. On the recruitment side, obviously, in this market, there is significant capacity, and it's really a twofer when you dial in those tools. Yeah, so Jeff, I don't think we can put a number around it, but, you know, on the way back up, there's certainly some runway before you had to incur costs to support it. Yeah, and we spent some time talking about that on our last earnings call. Yep. Yeah. You know, we've got capacity, both in terms of our current capacity, both in terms of our sales and our delivery capacity. So, you know, if we were to see some increase in demand, things start to, you know, loosen up in the second half of 2024- Mm. We think we can absorb that with the existing, you know, capacity that we have, which is great. To Michael's point, you get the productivity of the shortening of the, you know, cycle itself. You get the influx of the demand, so you don't have to add the cost from a sales and delivery standpoint to meet that demand. Yeah, and the only other thing I'd throw in is the ratio... And as an environment improves, the activity ratios to monetize a transaction also improve. You know, in this kind of environment, I mean, you know, a client might want to see, you know, eight backgrounds. In a more competitive environment for talent, the client will be very motivated, maybe after two, three, or four. So you get that factor as well. That's great, and how much excess capacity would you say you've got right now, and what sort of revenue total could you currently support with- Yeah, it's- The current capacity? It's probably tough to put a number on it, per se, Mark, but I think it's fair to say, and I think Dave Kelly commented on this on the last earnings call, you know, we can support a fair amount of incoming demand with current- Yeah ... capacity. You know, we announced it in Q2 of last year when we had our earnings call, that we had a reduction in force. We eliminated about $14 million in annual costs. That was to rebalance the cost structure to the lower revenue levels. And when you look at, Mark, what we've seen from a top-line standpoint since then, I know we had, you know, higher year-end assignment ends, and it took a little bit longer to, you know, start the year, to get the budgetary cycles approved, et cetera. But when you look at Q3 to Q4 of last year, we grew sequentially. When you look at the guide for Q2, that contemplated about 2% growth- Mm ... in our technology business from Q1- Q2. So we've largely been somewhat stable in the business since that point. So, you know, the view is, unless there's, you know, something significant outside the environment, I think we've got, you know, really solid capacity internally. Okay. And, you know, one question that almost every investor is asking about is just, you know, in terms of thinking about the demand trends, and, you know, you did mention that you did see a pickup in terms of March. And you wouldn't have mentioned that unless it was important. So can you talk a little bit about, like, what you're seeing in terms of the demand trends and the stability that you're seeing, and just, you know, what sort of variance there is between some of the various verticals that you typically end up serving? Yeah. I'm talking about for flex staffing, and then I wanna come back- Sure ... to managed teams. Yeah, I think, Mark, the performance in the first quarter, we talked about the, you know, larger amount of year-end assignment ends. We talked about the, you know, slightly delayed budgetary cycles getting approved. The typical ramp that we would expect in the first quarter, we started to see the KPIs towards the end of January and early February. We saw job orders back to Q3, Q4 of 2023 levels. We saw send outs, which is where we've identified a candidate. We're sending them out for an interview with the client. We saw those KPIs improve back to Q3, Q4 levels. The read on that from our perspective was that should translate into new assignment activity, as we got later in the first quarter. The comment that I made about March was the, I think, yield associated with those KPI activities. We saw a really solid month of March from the beginning to the end. I think our consultants on assignment, our technology business improved about 3%. And that led us to having confidence in the, you know, second quarter with the midpoint, with the 2% sequential growth. But when you look at what we contemplated in that guide, we contemplated pretty good stability with where we ended first quarter levels in the second quarter. To the second part of your question, Mark, on industries, I think we commented on the call, financial services for us has been a bit more incrementally negative than the overall. I wouldn't say that's a read on the entire financial services industry as a whole, because when you dissect that, we've got a couple of really solid-performing clients in the financial services- And zoom ... space, right? Jeff, for what it's worth, I mean, ASGN said the same thing yesterday- Yeah ... in terms of financial services was one of the areas, along with TMT, that was, you know, really pressured. Right. And so- Yeah, and for us, some of the, you know, linked to consumer spend, airlines, cruise lines, has been performing relatively well for us. You know, energy and utilities, which I guess you would expect, relatively speaking, more resilient to slower times. You know, we've seen some really good trends there. Some of those are new client acquisitions that we've been successful with. And our field teams are doing a phenomenal job of expanding where we can. You know, getting more outbound, diversifying the portfolio, so that when we are prepared for that, you know, influx of demand, you not only have the legacy relationships now starting to turn, but you've also got the fruition, the yield of all the activities of diversifying the portfolio over the last, you know, year. So, I don't think from an industry standpoint, outside of, you know, financial services, that we've really seen any particular weakness. But again, with a 3%-4% market share, Mark, I wouldn't read too much into the industry comments. Yeah, the only very quick thing I would add. So for people not in our business, it's sometimes not intuitive. I mean, Jeff, I don't think as a CFO, you're any different than most of our clients. So on your desk, you know, when I come in your office, when we're in Midtown, the pile of project requests. Sure. continues to? Continues to come in. Right. So in our industry- And grow ... it's kind of, you know, the demand is there. I view it as it's a funding issue. You know, and it's the approvals, the tug of war. I don't... If you're an airline, your app has to be as good as the other airlines. If you're a takeout food company, you don't have a choice. You know, the amount of transactions done over those little devices today by everybody in this room, it's probably over 80%. You know, be it travel, food, ordering a car, and so, you know, I wish I could sit up here and say that we're bending electrons and changing the world, but we're doing things that our clients have to do to remain competitive. Thus, at a point, just, you know, Jeff, do you hear every day from people, "We gotta do this? Sure, sure. Yeah, and so I don't think we're any different. So just to wrap it up, you know, so when we think about demand, it's in that context versus, you know, a restaurant where there's just no one coming through the door, and you can't create it. We have the demand. It's a matter of getting the go-ahead to do it. Is that fair? Yeah, and the projects are being deferred- Correct ... not canceled. Correct. Eventually there should be some pent-up demand. You would think. In the short term, we basically, you've got a little bit of excess capacity. Other people have excess capacity. Mm-hmm. You did mention that, you know, if we take a look at the pay bill spread, on the flex side, you've been seeing a little bit of pressure. Can you dimensionalize that, just in terms of how much you're seeing? Yeah, it, and Mark, I'd say it was more acute in the early part of the first half of 2023. Mm-hmm. I think our flex margins and our technology business were down 60 or 70 basis points, year-over-year. That's typical of what we see in slower times in our business. I mentioned the stability that we saw heading into 2023. And largely in the second half of last year and into this year, they've been very stable. Mm-hmm. You know, Q1 to Q4 was very consistent. Excuse me, Q4 to Q1 was very consistent with our expectations. I think they were down 10 basis points, when you would expect them to be down a bit more, perhaps, with the payroll tax- Right ... reset impact. And frankly, what we contemplated going forward is, when you normalize for the payroll tax resets, we still expect stability. Great. You know, it gets to the netting effect that I talked about between staff augmentation and the more consulting solutions. Well, let's talk about those consulting solutions. So been trying forever to get Michael to give a percentage, but why don't you talk a little bit about the size of the managed teams, how you're structuring that offering, what's the risk? And certainly it's encouraging to hear that you've got, you know, 400 basis points of gross margin- Right ... improvement as you're moving up the value chain. Yeah, I think, Mark, the way that we're not gonna size it sitting here in this room today, either we try to keep the, you know, the simplicity- But- ... of the Kforce model. But what's the negative with-... you know, giving a rough percentage? Yeah. Let me jump in for a sec. So, you know, it's always a fun discussion. Yes. Yeah, it's like disclosing bill rates. I wish everybody disclosed bill rates, 'cause bill rates tell you what people actually do. Words don't tell me anything. The word consulting is perhaps one of the most overused words today in the business community, so we are electing to put the numbers up on the scoreboard. We think the economics over time take our clients to the type of solution that we're offering. We yet to be very clear, we're not gonna disintermediate, nor are we gonna do, you know, what Accenture, Deloitte, PwC, et cetera, does. On the other hand, nor are clients gonna keep paying those crazy bill rates to them when parts of a project can be carved out, as we are doing on our own- Sure ... internal work. Sure. I'm sorry, you can- No, it, Mark, the way... We've talked about this, too. Yeah. We've been organically investing in this, you know- Right ... consulting solutions business since 2017. Mm-hmm. You know, we've been hiring out of the large consulting names, leaders in charge of our, you know, cloud, practice area, our app engineering area, data, et cetera. You know, and are seen as part of when Joe Liberatore talks about integrated strategy, the beauty about the Kforce model is we're doing business with three-quarters of the Fortune 500. Mm-hmm. You know, back in, you know, 2016 and 2017, we saw clients increasingly coming to us, looking for us to bid on opportunities that were outside of the norm of what staff augmentation was, which was a trigger for us to say, "The economics at play for the clients just make a lot of sense." And, you know, we've been really successful growing that. I will tell you that it is growing disproportionately better than traditional staff augmentation. You've heard that in the market as well. Mm-hmm ... from, from others. That is true for, for us. We're excited about that opportunity. I think that the benefit for, for us, not only in terms of the margin, the higher average bill rate, the longer length of assignment, the stickier relationship that it creates with the clients, and the continuity of that business, through and through. We're really excited about, you know, longer term, where that business can go. Great. Unfortunately, we're out of time. Mm. Please join me in thanking. Great, thank you. Thank you. Thank you. Thanks for coming. Yeah, absolutely. We really appreciate it.