Joe Liberatore: Yes. And what I would add to that, if we were to compare the beginning of 2023 to the beginning of 2024, probably the most material difference is we’re hearing more optimism from our clients here in 2024 at the beginning of the year, even albeit the years have started out very similar. Whereas in 2023, there was a lot of concern with the customers. There were a lot of internal things going on within organizations, about holding back, about getting prepared to cut back, we are not necessarily hearing those types of things. So I think this is more of just a delay and pause. So it’s kind of the equation of looking through that windshield. It was really cloudy in 2023. The windshield looks pretty clear at this point in time.
And I think everybody is just a matter of where perception is of the overall economy, what’s going to be happening with the Fed and rate cuts and all those dynamics. So I think everybody is still in a little bit of wait and see. But overall, I’d say a lot more optimism than what we were experiencing in the beginning of 2023.
Josh Chan: Okay. That’s really helpful color. Thanks for that characterization, Joe. I guess if we look at the long-term goal, thanks for the goalpost that you’ve kind of put up today, Am I reading it right, that to get to the 10% margin from the current profile. It sounds like most of the drivers are SG&A related, meaning that gross margins could be flattish at the current levels and then you’re looking to take SG&A down to get to 10%? Is that the right read?
Jeffrey Hackman: Yes. I think, Josh, this is Jeff. Good to speak with you. I think for the most part, Josh, when you look at the components of the benefit of scale, certainly, that is going to be leveraging our existing infrastructure at its leisured pace. When you think about the back office transformation program which we’ve been driving for a number of years now. But yes, that gives us the benefit of scale. Yes, that gives us better predictability of SG&A. The gross margin tie into that, when you think about Joe and Dave’s comments earlier, gross margins were down, call it, year-over-year, about 120 basis points. As the economic skies start to clear to a degree, we would expect to recapture some of that gross margin. Obviously, in times where you’ve got a little bit more certainty in the U.S. GDP, certainly positive.
Our direct hire mix would improve. Obviously, right now, it’s a little bit depressed at about 2.5% but historically, we’ve been roughly 3.5%. So, I think as the economy starts to become more clear for our clients. We would expect to recapture some of the gross margin that we’ve lost but to your point, Josh, SG&A is a primary driver for us.
David Kelly: Yes. I would add, so as a planning mechanism, right, stable margins is how we’re thinking about it. And that’s the plan we’ve been executing on opportunities, as Jeff mentioned, direct hire. Obviously, we continue to have success in the managed teams and project solutions space, that typically carries a higher gross margin. So there’s opportunity there but that is not part of it. Our — when we’re talking about today, the path to improve profitability that is — we look at that as a potential opportunity. That’s not part of the — what we’re counting on.
Operator: Our next question comes from the line of Marc Riddick with Sidoti & Company.
Marc Riddick: So a lot of my questions have already been answered. I was wondering if you could just touch a little bit on the cash usage, the announcement of the dividend boost and the share repurchase authorization. Maybe you touch a little bit on that and maybe share your thoughts on CapEx for the year.
Jeffrey Hackman: Yes, Marc, good to chat with you. I know we put this in some of the prepared remarks but I think it’s worth reiterating. I think the short answer on the capital side, as you should expect in 2024, very similar to what we have been doing, we’ve been at repurchasing shares for a long time. Actually before it was in vogue to be repurchasing shares in the face of a more difficult macro environment. We believe in our ability to generate significant long-term shareholder appreciation. I believe that organic revenue growth is naturally for us where to go. You avoid the disruptions that can tend to come from acquisitions in a human capital-centric business. So I think we’ve had this for quite a while, Marc. We gave the quote earlier on having 42 million shares in 2007 and about 19.5 million shares as we sit here today.
When you take all in since 2007, we’ve returned slightly more than $900 million in capital through our dividend program and our share repurchases, that’s significant. And yet again, our Board of Directors continues to support that deployment of capital by raising our dividend 5.5% which was our fifth consecutive year and also, at the same time, increase that share repurchase authorization to $100 million which I’ll remind you, we also did last Q1 this time. So if you look at that, Marc and you look over the long term of what we bought back and we’re probably in the high teens-to-low $20 range. So I think from a shareholder perspective, it’s been very friendly and for us has been generating significant returns.
Marc Riddick: Excellent. And then any thoughts on maybe ballpark range as far as CapEx for the year?
Jeffrey Hackman: Yes. I think CapEx, Marc, I would imagine somewhere between $6 million and $8 million in total for CapEx, it’s about what we’ve been running at. We’ve obviously got our back office transformation program which we talked about here that could tend to lift CapEx to a degree but the other thing is we’ve been rationalizing our real estate footprint over time. Leasehold improvements is another area of our CapEx that historically has been part of that, less so as we sit here moving into 2024. So I think it’s got a netting effect as we move into ’24. So I’d look at it as relatively flat with ’23.
Operator: [Operator Instructions] Our next question comes from the line of Tobey Sommer with Truist Securities.
Tobey Sommer: I was wondering if you could give us some color about how you’re managing your sales people sort of account manager head count here after a couple of slow years. And what your recruiter head count looks like either sequentially or year-over-year, so that we can get a sense for what kind of capacity you would have to absorb and deal with an increase in demand should occur?
David Kelly: Yes. Tobey, this is Dave. So I would — I’ll start off by saying we’ve got more than enough capacity to meet current needs and as things accelerate to meet those needs. As you, I think, know, obviously, our intention with a lot of the investments that we’ve made over the years and continue to make are to improve the capabilities of our sales and delivery capabilities and allow them to generate more activity and that is continuing to add to our capacity. And that is continuing as part of the investment cycle as well as we look forward. So in terms of our thought process, as Joe had mentioned earlier, obviously, there’s been a bit of an elongation, there’s more activity in the sales cycle. While we’ve seen, I think, year-over-year, relatively stable, slight decline in the entire sales and recruiting force, obviously, we always look at where the right allocation is.
And net-net, we’ve added to the number of salespeople that we have, relative to the recruiters, because a lot of our technology investments have been focused on making sure our recruiters can become increasingly productive in sourcing candidates. So we’re always looking at that. We’re always making sure that we’re thinking about not just the short term as well, right? We’re not focused on ensuring we maintain maximum profitability levels in slower periods. We are always playing for the long term and continue to do so and feel like we’re in a very good place as we move forward.
Joe Liberatore: Yes. Tobey, we’re playing for the other side, to Dave’s point which is why we’ve actually netted up people on the sales side because as you well know, relationships take time to build. So we’re in that build process playing for the other side because, as you well know, relationships take time to build. So we’re in that build process playing for the other side because of what David mentioned, all the investments we’ve made on the delivery side, the recruitment side with technologies and we’re also exploring other technologies. We have a pretty good model that we can ramp up recruiters very quickly. So we have great capacity right now. We also have to balance those things to make sure that we have enough requirements that our people can survive and we can feed them, that they can make the appropriate levels of income.
