Joe Liberatore: Sure.
Operator: We’ll take our next question from Trevor Romeo with William Blair.
Trevor Romeo: 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 clients are either kind of evolving or changing in this environment?
Joe Liberatore: Yes, 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 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 client. But we continue to see our opportunity pipeline as we move through Q1 continue 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 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.
Trevor Romeo: Okay, great. That makes sense, Joe. Thanks. And then just to follow up on, I guess, competition. It feels like we’ve been kind of in the stable, but lower level of 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?
David Kelly: Yes, Trevor, I think a couple of 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. 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. And 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 hugely important competitive advantage.
Joe Liberatore : Yes. And what I would add to that is 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, 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 more localized business where maybe it’s a $1billion or $2 billion local organization where they may utilize what I’ll call more market-based organization, the mom and pop the smaller organizations. We’re seeing the same thing that we usually see at this point in the cycle where yes they are willing to 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 — they’re typically one account away from bankruptcy because they don’t have a lot of reserves for 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 to put them in a difficult situation. 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.
Trevor Romeo: Okay. Thanks so much for all the comments.
Joe Liberatore: Sure.
Operator: We’ll take our next question from Marc Riddick with Sidoti.
Marc Riddick: Hi, good evening. 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 have we seen much of a difference in behavior from your larger versus slightly smaller customer base as far as prioritization of things that they want to act on sooner rather than later?
David Kelly: Yes. Marc this is Dave. I wouldn’t say so in terms of client size. 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. Behaviorally, 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 obviously as we’ve mentioned a 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.
Marc Riddick: Okay, great. And then I wanted to shift on to and a lot of the things I would have asked about have already been asked, so I want to save you the time on that. I was sort of curious as to your views as far as talent availability and maybe some of the things that might bring some talent into the fold now relative to maybe year-end or the like. Have you seen much to sort of make folks move from the sidelines onto the playing field?
David Kelly: Yes, for us, and I’ve made this comment before. So we’re sitting here and this has quite frankly been true for the last 20 years. 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 want to 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.
Joe Liberatore: Yes, I would say probably the only dynamic where we have seen a little bit of a shift is when you look at things such as conversions. 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 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 we all experienced what was happening on that front. So people were making moves for money. People are not making those moves because that is not what the landscape provides today.
So I would say that is probably the one dynamic that has shifted here over the course of the last 6 months to 9 months would be on that front, but still the space we play there has always been high demand for talent. There has always been a supply-demand imbalance there. So this goes back to what I always have believed at Kforce one of 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 have made a lot of progress related to our consulting solutions type business because we are providing those clients with the best available talent on the market at a given point in time 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.
Marc Riddick: I appreciate all the commentary. Thank you so much.
Operator: We’ll take our next question from Josh Chan with UBS.
Josh Chan: Hi, good afternoon, Joe, Dave and Jeff. Thanks for taking my questions. I guess if you took a step back over the last three, six, nine months six months, nine months, has the activity recovery or demand recovery played out a little bit more slowly than you would have guessed and if so why do you think that has been so far?
