Theodore Hanson: Yes. I think it’s best, Maggie, I mean, we still — we see in our numbers, and we still believe that as a consultative part of our business becomes bigger. It comes at a better gross margin and EBITDA margin, and that’s levering up our margin profile. Even here where some of our more cyclical businesses that have higher margins are down, we’re still doing a good job if that’s the right way to say it, of generating plus 12% EBITDA margin here in the third quarter. So I think it’s mostly around that. I mean I’ve said before, our range that we gave in our 3-year plan, which was about 12% to 12.5% is a short-term target. But — and with most quarters, we play within that range. But given there’s nothing that says in the future, it won’t continue to grow higher because of the things we laid out in our Investor Day and because of the kind of quarter-to-quarter mix shift that you can see in our consulting business.
Operator: Our next question comes from the line of Mark Marcon with Baird.
Mark Marcon: On the margins, I mean, you’ve done a really nice job here in terms of protecting the EBITDA margins. Wondering how you’re thinking about internal headcount going forward? Over the course of this coming year, how should we think about your priorities with regards to preserving the margin strength relative to building out capabilities that will probably benefit whenever the environment truly improves?
Theodore Hanson: Yes. Well, good question, Mark. I mean that’s a great and I believe that we can pace this out. I mean I don’t think we have to sabotage margin to way invest ahead of something. Right now, our head counts are coming down, incentives coming down. Those are some of the stabilizers that are part of our business stabilizers and it helps us protect the margin. But as incentives come back, and we need to add headcount, either in solution areas or in certain other areas, I think we’ll pace those out. We’ve done it before. We saw this in ’08 and ’09. So again, I don’t think we’re cutting our nose off to spite our face here. I mean this is something we feel pretty good about the balance. And the attrition that we’re seeing is the natural attrition that’s built into the business, and we’re watching it.
There are some areas where we’re investing today, frankly. There are other areas where we’re letting natural attrition work. And so we’re monitoring and wary of all that.
Randolph Blazer: Ted and Mark, If I can add real quickly. You can’t talk about headcount without talking about productivity. And quietly, we’ve been continuing to upgrade, refit some of the technology we use in our areas, in the recruiting area and certainly in our methodologies and the way we go to work with the engagement. So there’s room here also in productivity improvement to absorb some of the growth. So we’re watching both of those things, okay? And investing in it, in fact.
Mark Marcon: That’s great. Do you have any more perspective with regards to — I know it’s early days, but when the AI work transition from being exploratory to larger engagements. And when it does become larger engagements, what sort of magnitude are you thinking about? And would you be in a good position to be a prime on some of those?
Theodore Hanson: Rand?
Randolph Blazer: Well, the answer is yes. Mark, with you and others, we’ve talked about 3 layers of the road to AI, and that’s the processing power and the work that’s happening, not just in chips, but also in the software enterprise software world. And you see — and then the next layer is cloud and the data. And the data preparation and the data readiness and the third is use cases. So there’s a lot of work, obviously, for companies like us in that middle layer in the data side, the use cases will be an application of that data. So I would think if I were a client, I’m presuming this will happen. The client says, look, you’ve done some great work with our data work. I need you to now extend it to our use cases and what we’re trying to accomplish at the end of the day.
By the way, we’re building the data in a way that supports some of these use cases that are vision envisioned. So should we be a prime? Yes, because of our inroads with data and the cloud and the infrastructure of data. And should we also be smart on the technologies that continue to emerge, not just the enterprise technology, but these newer technologies that are coming out, and we’re doing both, not just through our alliance relationships, but our experience. So I hope we are in great position to support them as we go. And if you remember, Gartner pointed out that they thought the customer experience was going to be the highest and best use cases for AI in the future. And our creative marketing team has done cyber — Creative Circle has done a lot of work, both pioneering, working, articulating and helping clients think about their use case strategy.
So I’m hoping we’re in good position. But importantly, we’re doing the building block work that we need to do to be in that position.
Theodore Hanson: I think one more point is, remember, Mark, we now for several years running have been identified as the #1 provider of AI capabilities in the federal government space. So that’s an internal solution capability that not only supports our federal customer, but we can leverage that know-how in certain commercial areas.
Mark Marcon: That’s terrific. And then can you talk a little bit about like the supply side in terms of obviously these skills are in really high demand. I’m wondering like what is the pipeline? Where are you getting the contractors that truly have the knowledge, what level do they have? And how are you thinking about the bill rates and the margins, given the scarcity relative to the demand? It sounds like this should be over who knows whether it’s a year from now or 3 years from now, but a really promising area.
Theodore Hanson: Yes. Well, remember, we’re not just hiring one AI expert, right? There’s multiple facets and layers to this, as Rand mentioned, I mean, today in the data world, we have many of these in our — many of these people in our organization and working on other data type projects that can port to these AI use cases and be effective there. So I mean, I think a lot of these players will come from pools of solution capabilities that we already have in our business today, if you will.
Mark Marcon: Great. And in terms of TMT, you’ve mentioned that the accounts look like they’re a little bit stable, but TMT was down 27% versus 18%. Are you seeing sequential stability like on a week-to-week basis? Just wondering how you’re thinking about that.
Theodore Hanson: Yes. I’d say the answer is yes. But Rand, do you want to comment on that one?
Randolph Blazer: Yes. I think we’re watching both, and we’re watching what I call micro indicators. So we watch certain things in the marketplace. Things we’ve mentioned whether companies are having their earnings, are they growing themselves, which products, if you will, in the technology and telecommunications area growing. Where is that spending being added in media to help those businesses. And you’re seeing some of that starting to turn around. When we look at stability, obviously, we’ve declined through the year. Keep in mind, our comps from a year ago were quite high. But definitely, as we exited Q3 and we started in Q4, we see — which to us is a step in the right direction, steadiness in the work and the workflow. But I think you look at these other indicators, and you see that there’s maybe a light at the end of the tunnel coming.
