Good day, everyone, and welcome to the Kforce First Quarter 2024 Earnings Call. Today's call is being recorded, and I would now like to turn the call over to Joe Liberatore, President and CEO. Please go ahead, sir. Good afternoon. 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 risk and uncertainties. Actual results may vary materially from the factors listed in Kforce's public filing 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 relation portion of our website. Our first quarter performance was generally consistent with our expectations, and we were encouraged by March trends in our technology business. Operating trends over the past two quarters and 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 as to whether or not the U.S. economy will fall into recession. The dialogue surrounding interest rate cuts has shifted from a discussion referencing the number of anticipated cuts and when we should expect cuts in 2024, if there will be any cuts at all this year. Geopolitical concerns, including the war in Ukraine, the recent expansion of the war in Israel with Iran's aggression, further complicate forward-looking visibility. 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 strategic imperative investments that we expect to be high priorities for our clients once the macro uncertainties begin to clear. Technology investments are simply not optional in today's competitive and disruptive business climate. Given the secular underpinning, there are simply no other market we want to be focused in, other than technology talent solution space. As we move throughout the upcoming second quarter and 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. As to our first quarter results, revenues and earnings per share were both within our range of guidance. The improvement in our leading indicators that we spoke about on our last call translated into reasonably robust new assignment growth in March 2024, which encouragingly is expected to lead to sequential growth in our technology business in the second quarter at levels close to historic, seasonal, pre-pandemic levels. Dave Kelly will expand upon our operating trends in his remarks. Our message to our people is unchanged. During these uncertain times, we must control what we can, stay close to our people and our clients while maintaining a long-term view in our decision-making. We are blessed to have a 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 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 broad and strategic use of technology, including the most recent technology secular shift associated with AI, will continue to evolve and play an increasingly instrumental role in powering businesses. 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 accelerate. We are ideally positioned to meet that demand. Our core competency is rooted in the ability to identify and provide critical resources, real-time and at scale, to help world-class companies solve complex problems and help them competitively transform their businesses. 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 direct hire, traditional staffing assignments, to managed team 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 over many years, and we remain confident that our firm is positioned well for improving market conditions. I am tremendously proud of our team as they continue to execute with incredible passion to serve our clients, candidates, and consultants cohesively as One Kforce. 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 for the first quarter were $352 million, down 7.7% sequentially and 13.3% year-over-year. Our technology business declined 6.9% sequentially and 11.4% year-over-year. As we mentioned on our last call, following a slower start to the year and higher year-end assignment ends. We experienced an improvement in our leading indicators in late January and believed that those higher activity levels would contribute positively to new assignment starts in our technology business later in the quarter. As expected, we experienced a notable acceleration in our consultants on assignment throughout March, which should lead to sequential growth in Q2 within the range we saw before the pandemic. Our clients continued to undertake mission-critical projects and also recognized 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 increasing backlog of technology initiatives. Overall, average bill rates in our technology business have remained stable over the past few quarters and continue to reflect our focus on providing highly skilled talent on both traditional staffing assignments and as part of managed teams or managed projects. Our clients remain focused on critical technology initiatives in the areas of digital, data governance, AI and ML, UI, UX, cloud, data analytics, business intelligence, project and program management, and modernization efforts. This represents a continuation of recent trends and reflects some of the foundational work required by companies to gain the eventual benefit of AI-related investments. Flex margins of 25.3% in our technology business declined 10 basis points sequentially and 60 basis points year-over-year. The sequential decline was less than expected, as lower healthcare claims helped to offset the traditional annual tax resets. Our bill-pay spreads continued to be stable on a sequential basis, which is an encouraging data point given the cloudiness of the economic environment. We've continued 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 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. Our client portfolio is diverse and is comprised primarily 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. Given the seasonal resets we see at year-end, a number of our industry verticals declined sequentially in the first quarter, but we saw relative stability in our retail, transportation, and manufacturing verticals, and some headwinds in financial services after a steady performance in the fourth quarter. Looking forward to Q2, we expect technology consultants on assignment to remain relatively consistent with the levels we ended with in the first quarter and for revenue to increase sequentially in the low single digits. Year-over-year revenue declines will decelerate to the mid-single digits. Our FA business, currently 8.5% of our total revenues, declined approximately 16% sequentially and declined 27% 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 macroeconomic environment. Our average bill rate has continued to exceed $50 per hour as we continue to drive this business towards a higher skill set of business that is more synergistic with our technology service offering. We expect Q2 FA revenues to be down year-over-year in the mid-20% range. Flex margins in our FA business decreased 70 basis points sequentially due to a lower-margin project with a strategic client, but 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 Q2. We've taken 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're 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 persisted longer than many expected, I remain excited about our strategic position and ability to continue delivering above-market performance. The success that we have as a firm doesn't happen without the unwavering trust that our clients, candidates, and consultants place in us. We've been able to continue delivering a strong relative performance during this difficult period, while continuing to aggressively invest in the strategic initiatives that are critical to our long-term success and expect to continue to do so. I appreciate the dedication, creativity, and resilience displayed by our incredible team. I'll now turn the call over to Jeff Hackman, Kforce's Chief Financial Officer. Thank you, Dave. First quarter revenues of $352 million declined 13.3% year-over-year, and earnings per share of $0.58 were at the midpoint of our expectations. Overall, gross margins in the first quarter declined 20 basis points sequentially due to seasonal payroll tax resets, which was partially offset by lower healthcare costs. Margins declined 100 basis points year-over-year to 27.1% 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 was 22.2%, which is an increase of 20 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, have 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 and advancing our enterprise initiatives, both of which are expected to significantly contribute to our long-term financial objectives. Our operating margin of 4.5% was toward the high end of our expectations. Our effective tax rate in the first quarter was 27.1%, which was higher than we anticipated due to greater nondeductible expenses and adjustments to certain tax credits. Operating cash flows were approximately $13 million, and our return on invested capital was nearly 40%. 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 Q1, with a total of approximately $9 million returned through dividends and share repurchases. 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. We remain committed to returning capital regardless of the economic climate, and our threshold for any prospective acquisitions 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 second quarter has 64 billing days, which is the same as the first quarter of 2024 and the same as the second quarter of 2023. We expect Q2 revenues to be in a range of $352 million-$360 million, and earnings per share to be between $0.68 and $0.76. Our guidance 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 all of their efforts. We would now like to turn the call over for questions. Thank you. If you would like to ask a question on the phone lines today, please press star one on your telephone keypad. If your question has been answered, please press star one again to remove yourself from the queue. We'll take our first question from Mark Marcon with Baird. Hey, good afternoon, and thanks for taking my question. You mentioned that you did see some, you know, improvements in terms of your leading indicators in late January and believe those higher activity levels would contribute positively. Can you just talk a little bit more about that? Like, what exactly—which areas are you seeing the strength in? How broad-based is it? And in your client discussions, you know, what do you think would end up resolving some of the uncertainty that they're facing? I know the geopolitical's not within their control, but are there domestic things that they're looking for? Thank you. Yeah, Mark, I'll start. This is Dave Kelly. Yeah, as you mentioned, and we actually mentioned this on the call in January, you know, we've seen activity levels that the front-end indicators that we typically look at, you know, client visits, the amount of submittals, right? We saw a lot of increasing activity. And as a matter of fact, some of the activity job order flow, a lot of those activity levels were at levels that we had seen prior to the pandemic, so that was promising. And as we had indicated, you know, the expectation is the flow-through would lead to some increase in new starts activity, and that actually did occur in March. As a matter of fact, in each week in the month of March, we did see an increase. So it is very typical of what we have historically seen. Now, I'll point out, we saw that a couple of times, right? At the end of last year, we saw that in September, October. As we look into, as I commented in the prepared remarks, into the second quarter, we're still seeing, you know, a little bit of unevenness there. So, I think clearly, as Joe said, you know, there's certainly a fair amount of uncertainty still that we're seeing. So it's probably, from our perspective, too early to call those increases a trend per se. We want to be cautious about that. But certainly, it's clear that things have become quite a bit more stable than they have been, and there have been some, obviously, some periods of actually greater amounts of success and activity. I would say, I think you'd asked about where we're seeing that. It's pretty broadly based. You know, we obviously do business with predominantly very large companies across effectively every industry, and I couldn't point to any one particular industry driver or client type of a driver. You know, large companies, as we said, are big spenders in technology, and they- ... continue to expect to spend money on mission-critical projects. So it's really a client-by-client type of an evaluation you wanna do. I'd mentioned a number of industries, but even in financial services, where I'd said we saw some headwinds, we actually had clients there that actually had pretty robust increases in spend. So, so again, it's an execution game for us. We've got the benefit of being in many clients, many market-leading clients, and execution for us in those clients, in our portfolio, the strength of it, across geographies, has really led us to some success here, over the last couple quarters, frankly. Great. And then can you talk a little bit about, you know, pay bill spread? And, and specifically, what are you seeing with regards to, pay rates? I noticed that, you know, over the last, two quarters, we've had. You know, if we're looking at TxFLEX, you know, the hourly bill rate has come down very modestly relative to, Q3 in 2023. And I'm wondering, is there some mix change or is there, you know, just with the caution maybe and some overcapacity in the industry, slight, price pressure? Yeah. And Mark, this is Jeff Hackman. Good to talk with you. I think we talked about this last quarter. I think the relatively modest decline in the average bill rate, I wouldn't read too much into that. I think it's still roughly $90 an hour, you know, very modest, I think sequential decline, Q3 to Q4 of last year. Q4 to Q1 of this year was a very, very slight, you know, tick down. For the very large part of 2023, and that largely has continued in the Q1 of this year, the average bill rate's been actually quite stable. And in this environment, I think that's a, you know, good dynamic and an encouraging sign, for us. I think as it relates to spreads, I think the comment that I would give you is early on in 2023, we certainly saw some pricing pressures early on in the year. And for the large part of the second half of 2023, our spreads in our technology business actually were quite stable. When you look at the, you know, Q4 to Q1 trend in overall margins, I think in our technology business, they're rolling down ten basis points, and typically in a Q4 to Q1, you see that a little bit, a little bit more of a decline. And part of what Dave mentioned in his script is we saw some favorable healthcare costs. They came in a little bit lower than we expected there. But I think to answer your you know two questions, Mark, I would say, spreads are continuing to be quite stable. And as it relates to our average bill rates, it's still roughly $90 an hour, so it's, that's also quite stable as well. Yeah, the only, only other thing, Mark, that I would add to this, right? So you'd asked in terms of supply. Supply continues to be tight here, right? Even in a slower time, to have the marginal change in bill rates, it's really been almost inconsequential, and that is true with pay rates as well. Suggests, again, even in slower periods of technology spend, to find the right talent is gonna require us to pay the market rates, and our clients, obviously, understanding that, continue to understand that, and that's why bill rates haven't moved either. So much like it's been for many years, right? A supply of highly skilled talent, in particular, continues to be very difficult to find. Great. And then if I could squeeze one more in. Just with regards to, you know, current capacity, you did mention, you know, hey, if we get into the $2 billion mark, from a revenue perspective, we're gonna have significant expansion with regards to the margins. How much, how much excess capacity do you have in your field sales and recruiting force? How much... You know, how should we think about the incremental margin trajectory from here? Is it gonna be a fairly straight line or smooth line in terms of the uptick, or would we end up having some fairly significant increases in terms of personnel as we get towards back towards $2 billion? Yeah, Mark, this is Dave again. I think, you know, first off, and you've heard this often from us in slower periods, you know, maintaining our critical resources is very important. So we've always made sure that we've carried enough capacity. One, because those are the people who are gonna lead you out of the recession. And two, obviously, when things break, we don't wanna be shorthanded. So we certainly have ample capacity. We had mentioned, I think, in the past, obviously, in terms of focus, we actually have more sales, so sales-related associates, than we did a year ago, right? So there's always a bit of a mix shift here to ensure that we've got appropriate total capacity. So, clearly, additionally, we continue to invest in technology and things like that, process improvements that creates additional productivity opportunities for us. We feel very comfortable that when things return, I think, to a trajectory of growth in technology spend, we'll be able to take advantage of that. Doesn't mean we won't need to add resources. We expect to be able to do so, but certainly, productivity improvements are what's driven a lot of the profitability, if not all of the profitability improvements that we've seen in the past. That is certainly the biggest driver to get to the operating margins that we had expected. In terms of how that plays out, obviously, nothing is purely linear. As things start to improve, we are gonna see a gradual improvement in operating margins, but we've got some other big opportunities as well. So it's gonna be a bit uneven, Mark. There are pieces that are linear, there are pieces that are not. So, I would say still, our thought process and thesis has not changed, that when we get to something a little over $2 billion, 10% is where we expect to continue to be from an operating margin standpoint. ... Yeah, Mark, the only other thing that I would add to everything that Dave just shared with you is throughout 2023 and here into 2024, we've continued to build our sales capacity. 'Cause needless to say, to ramp up salespeople, relationship getting entry points into clients is a much longer process. So, we've actually increased our, our, our headcount from a sales standpoint within our technology area. From a recruiting standpoint, plenty of capacity to service existing needs, as well as, as market turns, and there's a ramp up in job orders coming in to service those job orders. Also, our team has clearly demonstrated, 'cause we've invested a lot in technologies and automation on the delivery front, that we can turn that dial very quickly, if and when necessary. But we have plenty of capacity to address anything, for quite some period of time. But then, as we needed to accelerate that, we'd be able to do that. Likewise, I would say, especially here over the course of the last 24 months, we've continued to add a lot of capacity within our KCS, our consulting solutions organization, bringing on a lot of industry expertise, subject matter expertise. And they're really making a difference in terms of elevating our game, taking our conversations and the work that we're pursuing within clients, to a whole another level. So we've been making a lot of investments on those fronts, which I think all these things are just building greater capacity as well. Perfect. Appreciate the answers. Thank you. Thank you, Mark. We'll take our next question from Kartik Mehta with North Coast Research. Please go ahead. Thank you. Joe, you mentioned something about AI and obviously having a positive impact on the company in the long run. But I'm wondering, in the short run, is it causing any pause for your clients as they figure out maybe how to implement it, maybe how to use it internally, what resource they need from an external perspective? And could that be causing any delays in orders or jobs? Yeah, but kind of the way I would characterize what we're experiencing within our clients is they're all in the, I would say, preparatory efforts in areas such as building out their infrastructure and data to take advantage of GenAI, as well as large language models, for example. You know, we're supporting clients with integration work to ensure that their segmented systems are talking more seamlessly with each other. And in many instances, that also means moving things to the cloud. And then likewise, you know, from a data standpoint, you know, there's major massive data efforts going on, whether that be they're addressing data structure, governance, data cleansing efforts. So we've been successful at winning engagements in these areas and also have been assisting our clients with what I'll call the exploratory efforts, understanding the technology and evolving their strategies and potential use cases. So I—no, I don't believe, I don't believe that it's pausing anything. We're seeing a lot of energy in those areas as organizations organize themselves so that they can take advantage of things. And by the way, I don't think this is something that's going to change anytime in the near-term future. Meaning for, for entities such as a Kforce, who's not a strategy firm like a McKinsey, this is where the sweet spot and where the true revenue is gonna be generated. It's gonna be in, in these infrastructure areas, it's gonna be in the, in cloud, it's gonna be in the data areas for the foreseeable future. I mean, I would say that it's highly probability that, you know, the application of generative AI and the use of large language models will ultimately prove to be beyond powerful and widespread accelerator for our business for a long time to come. So we're really excited about how we're positioned, where our focus already was. It kind of everything played to our favor on those fronts. So I don't—hopefully, that gives you a little bit of a backdrop. Yeah, it does. And I just wanted to make sure I understood your commentary on margins. And I think, if we continue to see a sequential increase in revenue, do you think that portends well for margins? Or as you're adding capacity, could there be just some volatility in margins for the rest of the year? Yeah, I think, Kartik, generally speaking, as revenues improve, margins are gonna improve, right? So, that has been consistently how we've been managing the business. The capacity that we talked about, obviously, some of that will get absorbed. We'll continue to invest, but we'll be prudent to make sure that, we return, you know, appropriately, you know, the revenue to the bottom line. So I expect margins will expand as revenue expands. Perfect. Thank you very much. I appreciate it. Sure. We'll take our next question from Trevor Romeo with William Blair. Hi, good afternoon. Thanks so much for taking the questions. First one I had was, just on project types, I guess. I know you have, an integrated sales function. It's not necessarily two different businesses, but I was just wondering if you could comment on trends for the managed teams and project solutions versus kind of more staff augmentation work, what kind of demand you're seeing for each one, and, whether client preferences are kind of evolving or changing in this environment? Yeah, I'd say we're seeing demand on both fronts, and that's one of the reasons why we like approaching this from an integrated strategy standpoint, because, you know, there's professional staffing needs tied to every project. And then the project opportunities allow us to gain greater visibility, get involved more strategically with the clients. But we continue to see our opportunity pipeline, as we move through Q1, continued to build and has continued to build here into the early part of Q2. I'd say our existing projects and our strongest pipelines have been in and around application development, probably, you know, around digital transformation initiatives, which often focus on the customer and their internal experiences, as well as realizing that much of that work also touches the cloud. We also continue to see a lot of projects that are data-oriented, which often also require interfacing to the cloud and requirements on that front. So we've continued to see those pipeline opportunities for traditional data work. However, we also, as I mentioned a little bit earlier in my last response, we continue to engage more in and around data opportunities as the clients are preparing for AI and ML in the future. So I'd say with all that said, we're seeing development, cloud, data, digital, all continue to remain very healthy in terms of areas of need. So we feel we're positioned very well in terms of market. Okay, great. That makes sense, Joe. Thanks. And then- Sure. To follow up on, I guess, competition, it feels like we've been kind of in this stable, but, you know, lower level demand, for a while now. Have you guys started to see any changes in the way competitors are positioning themselves to win business? And I guess, similarly, have you seen any changes in the way clients look to choose a provider? And I guess, generally, does it feel like, you're gaining, maintaining, or losing market share in this type of environment? Yeah, Trevor, I think a couple things. I think one thing that is clear, the clients that we do business with obviously are looking for those things that we do quite well, right? We can provide services across the country, but certainly the trends, and you hear it from us, you've been hearing it from us repeatedly, and Joe just touched on it, right? The ability to deliver a spectrum of services from staff augmentation all the way through managed solutions is critical because clients are looking for companies such as Kforce, who can deliver the talent in whatever way that they'd like it to be delivered. There are obviously, within these large clients, a number of different project structures that they will see. So that is clearly a growing trend that we've seen. And so for us, and you hear it across the industry repeatedly, the ability to deliver those services in various ways is a huge, hugely important competitive advantage. What I would add to that is, you know, realizing a lot of our focus is in those larger organizations, large consumers of the services that we provide. These aren't organizations where any competitor can just walk in the door and get requirements. I mean, they're very sophisticated from their vendor management. Most of them have been going through for years, vendor consolidation. So it's very difficult to get an entry point and get your foot in the door at those organizations. So we don't see a lot changing from the competitive landscape there. I'd say inside those organizations, when we're dealing with larger competitors that also have compliance, regulatory, delivery capabilities, services capabilities similar to Kforce, we haven't seen any competitors, you know, predatory pricing or anything of that nature. It's been pretty much business as usual, competing as usual, so no major fundamental shifts there. I would say then when you get into, you know, more localized business where, you know, maybe it's a $1 billion or $2 billion local organization, where they may utilize, what I'll call a more, you know, market-based organization, the mom-and-pop, the smaller organizations, you know, we're seeing the same thing that we usually see at this point in the cycle, where, yes, they are willing to, you know, give things away, give their services away for nominal margin, which puts pressure. But what we're also seeing is the pressure on those organizations in terms of, you know, they're typically 1 account away from bankruptcy because they don't have a lot of reserves for, you know, bad debt and those types of things. So we do start to see those organizations are being pressured because of those practices, and then when something goes south, it puts them in a difficult situation. You know, this is my fourth cycle through this, and every one of these cycles, we see a flushing take place. As we move through these cycles, it's not typically the larger providers who are more disciplined and financially astute. It's more the local, the regional players that really haven't organized effectively, and when something goes south on them, then they typically are headed down a very difficult path. So we're seeing those same things unfold. Okay. Thanks so much for all the comments. Sure. We'll take our next question from Mark Riddick with Sidoti. Hi, good evening. Good evening. Good evening. So I wanted to touch a little bit on just a different way of dicing it, I guess. I wanted to sort of get your views on a couple of things. One, are we seeing much of a difference in behavior from your larger versus slightly smaller customer base as far as prioritization of things that they wanna act on sooner rather than later? Yeah, Yeah, Mark, this is Dave. I wouldn't say so in terms of, client size, right? So all of them are looking for ways to make sure that they fund those initiatives that are critical for them from a technology perspective. You know, behaviorally, you know, obviously, things here have been a little bit slower. That doesn't mean necessarily that they're not undertaking those projects. They may be looking to do them a little bit more efficiently, taking a little bit longer, to do those projects because, they're obviously very cost-conscious. But the behavioral change of continuing to invest in those things that are strategically critical has not changed, and that is not size-specific. You know, obviously, as we've mentioned, the significant majority of our business is with very, very large customers. So maybe we're not a great proxy, but we haven't seen it even within our portfolio, a different mindset, really. No. Okay, great. And then I wanted to shift on to, and a lot of the things I would've asked about have already been asked, so I wanna save you the time on that. I was sort of curious as to your views as far as talent availability and some, you know, maybe some of the things that might bring some talent into the fold now relative to maybe at year-end or the like. Have you seen much to sort of, you know, make folks move from the sidelines onto the playing field? Yeah, for us, and I've made this comment before, right? So we're sitting here, and this has, quite frankly, been true for the last 20 years, right? For highly skilled talent, there are always opportunities, and that's effectively where the focus of our recruiting efforts are. We don't have a lot of people who are on the sidelines who have suddenly said, "I wanna work." They have always been difficult to find. And typically, again, the highly skilled people have a number of opportunities, so I don't think anything really has changed, generally speaking. Yeah, I'd say probably the only dynamic where we have seen a little bit of a shift is, so when you look at things such as conversions. You know, our conversions are significantly down on a year-over-year basis, and I think that also ties into... And you see the same data we see, when you look at quit rate. So there is no question that even in these high-demand technology professionals that are on the consulting side of the equation, you know, they are not as active in the marketplace as they were during that euphoria of 2021, first half of 2022. Mainly because there was an opportunity to make moves, and with wage inflation, you know, we all experienced what was happening on that front. So people were making moves for money. People are not making those moves because that's not what the landscape provides today. So I'd say that's probably the one dynamic that has shifted here over the course of the last, you know, 6-9 months, would be on that front. But still, the space we play, there's always been high demand for talent. There's always been a supply-demand imbalance there. So and this goes back to what I always have believed. At Kforce, one of our... Our number one core competency is the ability to recruit and identify the best talent in the market, at a given time. So that real-time aspect is also why I believe we've made a lot of progress related to our consulting solutions type business, because we're providing those clients with the best available talent on the market at a given point in time, at the at-market prices, versus giving them bench people that might not have the right skills for those engagements. We are seeing that make a difference. I appreciate all the commentary. Thank you so much. Sure. As a reminder, everyone, that is star one to ask a question. We'll take our next question from Josh Chan with UBS. Hi, good afternoon, Joe, Dave, and Jeff. Thanks for taking my questions. I guess if you- Sure, Josh. Yeah. Hi. I guess if you took a step back, you know, over the last 3, 6, 9 months, has the activity recovery or demand recovery played out a little bit more slowly than you would've guessed? If so, why, why do you think that has been so far? Yeah, this is Dave, Josh. I would say it's played out more slowly than we would've hoped. I think that's fair, right? But I'd mentioned a few minutes ago, it has been a bit uneven, right? We've seen slight periods where we've seen some benefits, but generally speaking, you know, the economic environment continues to be challenged. It continues to be uncertain, right? For us, as Joe alluded to at the beginning of this call, some of the drivers, right? Clients are being very cautious because they don't wanna overcommit. And so, you know, it's slower than we had anticipated. I think, you know, slower than some economists have been saying, but, you know, there have been predictions of a recession. We don't know what's gonna happen, when Joe touched on rate cuts. So it's clear, if there's one thing I think that's clear, is I don't think anybody knows what's gonna happen, right? And so I think it's just imparting significant amount of caution that continues to be the case across effectively every industry. Sure. That makes sense. I appreciate that. And then you mentioned that the sequential increase in activity is similar to normal seasonality, going from Q1 to Q2. Is the margin development similar as well to pre-COVID, or how do you think about the margin expansion going from Q1 to Q2 versus normal? Yeah, Josh, this is Jeff. Good to talk with you. Yeah, I think the anticipation, Josh, and contemplated our guide is a fairly seasonal improvement in our bottom line profitability and overall operating margin. You know, when you look at the, you know, first quarter, obviously seasonally lower because of the payroll tax dynamic. Clearly, we're getting the alleviation of that in our second quarter guide. The margins, as we've mentioned a couple of times, have been, you know, very stable from a flex margin standpoint. So absent the alleviation of the payroll taxes, expect that to be, you know, stable Q1 to Q2. Dave and Joe each touched on the capacity that we have within our current, you know, associate population, and I think that, you know, gets you to a point, Josh, where we can absorb capacity if we were to, you know, see some additional revenue growth higher than perhaps what we, you know, contemplate. So that gets you into a, would we expect to see a profitability kind of normal seasonal uptick? And I think the answer to that is yes. ... you know, we are still, as we've talked about in the past, investing in our enterprise priorities, and continuing to advance those as we look to the long term. You know, as we, you know, talk about the slightly greater than $2 billion in annual revenue and double-digit operating margin, our enterprise priorities play a significant role in that. So we're still making those investments, for the long term, but, yeah, I think the short answer is yes. Okay, great. Now, thanks for the color, and good luck in Q2. Thank you, Josh. Thank you. We'll take our next question from Tobey Sommer with Truist. Thanks. With respect to the sequential growth you're anticipating in tech, are you accessing new customers to achieve that and then, you know, taking some share, or is this a pickup in sort of staying customer growth? Yeah, Toby, this is Dave. So the answer is, both, right? So, we obviously have had some success. It's been pretty broad-based, I would say, across every industry, as I said, across many different clients. As you might expect, some larger clients, when you don't necessarily have a lot of incremental spend, you know, we obviously have a very strong sales engine, and diversification is always an important part of what we are doing and what we continue to attempt to do. So is some of that growth from new client logos? It sure is, yeah. So it's a combination of those things that we're seeing, but I would say in a footprint that we've consistently been attacking. So large clients, we don't do business with every large client, and there are certainly plenty of opportunities to build business, both with new clients and to gain traditional client share. So again, a combination of both of those things. Thanks. I'd love to get your perspective on your customers' internal recruiting capacity, 'cause we talk about cycles and so forth, but, you know, this has not been a recession. It's been a drift down for 18 months, 2 years, in outsourcing recruiting demand. You know, we've had GDP growth, and we've had pretty good job growth. I'm trying to get your perspective on what growth would look like in the staffing industry, in your own business, in the first year of sort of an acceleration in growth, where there is more demand. Can your, can your customers satisfy kind of more of that themselves, or do you think they're gonna have to turn to you pretty quickly? Yeah, Toby, it's Joe. You know, if we're gonna see the same cycle that we always see. I mean, this is another pattern that has existed probably going back into the nineties, at the advent of the monsters and kind of the leveling the playing field a little bit on talent access. And ultimately, what happens is, during this part in the cycle. I mean, their recruiting capabilities have been decimated. You know, what's gonna happen when it turns is, yes, they're gonna be pointing to providers such as the Kforces and others in the world because they're not gonna have recruiting capacity. Then what's gonna happen is they're gonna start to hire recruiting capacity, build recruiting capacity, and then we're in the, you know, the thick of the cycle where there's demand across the board for everybody, so we don't really feel that. I mean, this is one of the things I try and coach individuals on this. When they're making moves for money, purely money, that ultimately what happens is when we go into tougher times, the first function that's cut inside these large corporate customers is the recruiting function. And sure enough, that's what happened to many of our individuals this cycle, as it's happened in other cycles, and then they find themselves in difficult spots in terms of, you know, career-wise and those types of things. So, this cycle is one of those ones that just keeps coming around and plays out the same way every time. Thank you. Sure. That concludes the question and answer session. I'd like to turn the call back over to Joe Liberatore for any additional or closing remarks. Well, thank you for your interest in supporting Kforce. I'd like to say thank you to every Kforcer for your efforts and to our consultants and clients for your trust in Kforce and partnering with you and allowing us the privilege of serving you. We look forward to talking with you again after our second quarter of 2024. Thank you. That does conclude today's presentation. Thank you for your participation today, and you may now disconnect.