It’s that equation that’s going to give us the answer to the question that you’re asking, which we don’t have a crystal ball. And again, we get economists information from some of the highest respected economists on a weekly basis and we pay attention to those dynamics. It’s a matter of, hopefully, this will be a soft landing. If it’s a soft landing, absolutely, we might have seen the worst behind us. If there is a second step to this because of how the economy reacts and how clients react, you know, there could be another leg down and I really honestly do not know the answer to that question or I probably wouldn’t be sitting here on this call, I’d be sitting on an island somewhere. But at the end of the day, it comes down to the confidence in our management team to navigate.
Irrespective of which one of those scenarios played out, we are positioned and we will navigate through it.
Josh Chan: Okay. Yes. I appreciate the color, Joe, that makes a lot of sense. For my second question, normally this doesn’t have a big impact, but it looks like the Tech Direct Hire softened sequentially. Was that a function of the macro environment or your restructuring actions? You know, what’s driving that?
David Kelly: Yes, just, yes, the simple answer is, absolutely it was the macro environment, right. When you — Joe touched on it earlier, right, direct hire is typically as we go through these cycles, the part of our business that will suffer most. It’s quite frankly that volatility is part of the reason why we are now 97% Flexible in project solutions because of the volatility there. But yes, it is a macroeconomic impact that’s driving it.
Jeffrey Hackman: And Josh, I think, you know, part of the reason why Joe went through the history of what we typically see in the cycles, I think that’s part and parcel to where Joe was just going, not only from a conversions and what we were seeing within our Flex revenue base, but also the trends that we were seeing on the hiring of permanent staffing versus the trends that we saw in our Flex business and Technology being very stable mid-quarter through the end of the quarter and actually starting to improve, albeit modestly, but improve to start October. That’s directly in line with where Joe went about it in the last couple of economic cycles.
Josh Chan: That makes a lot of sense, Jeff. Thank you very much for you guys’ and time.
Joe Liberatore: Thanks, Josh.
David Kelly: Thanks, Josh.
Operator: [Operator Instructions] Your next question comes from the line of, I’m sorry, we have no further questions in our queue. I will now turn the call — I’m sorry, we do. Your next question comes from the line of Tobey Sommer from Truist Securities. Please go ahead.
Jack Wilson: Hi. This is Jack Wilson on for Tobey. Just when we think about AI as a long-term driver, is that mostly going to show up in demand for cloud and data work or do you have a direct exposure to sort of AI demand?
Joe Liberatore: Yes, it’s a great question, and obviously one that everybody is paying attention to. In fact, I think it was the International Data Corp Group, they just came out with, you know, basically predicting $16 billion of worldwide GenAI solutions in 2023, you know, which is really in and around software, related infrastructure, hardware, and IT business services. And by the way, they expected that to reach $143 billion in 2027. What we’re seeing from our customers is, we’re very much in the early innings where clients are preparing and experimenting and have yet to really make any substantial investments. I mean, there remains also, by the way, much to resolve around pricing, privacy, security, and government interventions.
You know, in fact, as we heard today, right, with the US government’s first action with a — an AI executive order. But at the end of the day, yes, you cannot do AI if you haven’t addressed the data aspects, and that’s why data has been front and center. It’s one of our four core offerings. So, that’s where we are seeing things. Everybody is working on cleaning up their data because you are not getting anywhere with AI if you don’t have pristine and pure data. You know, it’s the old garbage in, garbage out. And obviously with everything moving towards the cloud, they both play, which is another one of our core service offerings. So we like how we’re positioned. As AI investments continue to ramp up, we think our teams are very well-positioned to take advantage of that.
Jack Wilson: Yes, thank you for that color there. That’s very helpful. Then just sort of more from a modeling perspective, is that $14 million in annual cost savings achievable, sort of regardless of what the economic picture looks like in 2024?
Jeffrey Hackman: Yes, I think, Jack, the point we gave is, you know, obviously, in our second quarter call, so you know, we’re sitting here in an economic environment that’s a bit challenging. The structural cost reductions that we implemented back in July started to benefit the third quarter. We anticipated that when we issued third quarter guidance. The full amount of the quarterly benefit in the fourth quarter would be realized. So you got, effectively, one-third additional benefit that would be realized in the fourth quarter compared to the third. But the short answer, Jack, is yes. Irrespective of the economic environment, you know, we would expect those annualized benefits.
Jack Wilson: Perfect. Thank you so much. I’ll turn it over.
David Kelly: Thank you, Jack.
Operator: We have no further questions at this time. I will now turn the call back over to Joe Liberatore for closing remarks.
Joe Liberatore: Thank you for your interest in and support of Kforce. I’d like to say thank you to every Kforcer for your effort and to our consultants and clients for your trust in Kforce in partnering with you and allowing us the privilege to serve you. We look forward to talking with everyone again on — after our fourth quarter of 2023. Have a great evening. Thank you.
Operator: This concludes today’s conference call. Thank you for your participation and you may now disconnect.
