Release Date: April 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Hi, good afternoon, and thanks for taking my question. You mentioned that you did see some improvement 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, what do you think would end up resolving some of the uncertainty that they're facing? I know the geopolitical is not within their control, but are there domestic things that they're looking for? Thank you.
A: (David Kelly - Kforce Inc - Director) Yes, Mark, I'll start. This is Dave Kelly. Yes, 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, client visits, the amount of submittals. We saw a lot of increasing activity, and as a matter of fact, some of the 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, 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 pretty typical of what we had historically seen. Now, I'll point out, we saw that a couple 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 in activity. And I would say, I think you'd ask 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 spend money on mission-critical projects. So, it's really a client-by-client type of an evaluation you want to do. I mentioned a number of industries, but even in financial services, where I said we saw some headwinds, we actually had clients there that actually had pretty robust increases in spend. 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.
Q: Great. And then can you talk a little bit about, you know, pay bills spread, and specifically what are you seeing with regards to pay rates? Notice that, over the last two quarters, we've had a, if we're looking at TxFLEX, you know, the hourly bill rate has come down very modestly relative to Q3 in 2023.
A: (Jeffrey Hackman - Kforce INC - CFO and Principal Financial Officer) Yes. 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, very modest, I think, sequential decline Q3 to Q4 of last year. Q4 to Q1 of this year was a very, very slight, 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 good dynamic and an encouraging sign for us. I think as it relates to spread, 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 '23, our spreads in our Technology business actually were quite stable. When you look at Q4 to Q1 trend and overall margins, I think in our technology business, they're rolling down 10 basis points. And typically, in a Q4 to Q1, you see that a little bit more of a decline. And part of what Dave mentioned in his script is we saw some favorable healthcare costs that came in a little bit lower than we expected there. But I think to answer your 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 also quite stable as well.
Q: Right. And then if I could squeeze one more in, just with regards to current capacity, you did mention, hey, if we get into the $2 billion mark from a revenue perspective, we're going to have significant expansion with regards to the margins. How much excess capacity do you have in your field sales and recruiting force? How should we think about the incremental margin trajectory from here? Is it going to 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 back towards 2 billion?
A: (David Kelly - Kforce Inc - Director) Yes, Mark. This is Dave again. I think, first off, and you've heard this often from us in slower periods, 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 going to lead you out of the recession. And two, obviously, when things break, we don't want to be shorthanded. So we certainly have ample capacity. We have mentioned, I think, in the past, obviously, in terms of focus, we actually have more 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
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
