Keith Waddell: We can’t.
Jeffrey Silber: I wanted to focus on contract Talent Solutions bill rates. They were very strong in the quarter. Do you expect them to stay at this level? I’m just curious what’s incorporated in your outlook for the first quarter and what should we expect for the rest of the year?
Keith Waddell: We would expect them to subside somewhat. And so while that might have a topline impact, as we’ve talked before, they will have not much gross margin impact because with the higher pay rates, we pretty much pass them through intact and haven’t expanded gross margins. So if that unwinds to some degree, which I think would be reasonable, given economic expectations that rather than be at 7%, 8%, 9%, it would return to something more normal, call it, 3%, 4%, 5%. It’s going to more be a topline phenomenon than a margin phenomenon.
Jeffrey Silber: Okay. That’s helpful. And then on conversion fees, you gave us a little bit of color what we should incorporate in terms of 1Q. Can you just remind us what the historical range of conversion fees have been for your company in up cycles and down cycles? And any reason to think things will be different this time?
Keith Waddell: Well, depending on what time frame you use, I can remember saying many times the typical range is 3% to 5% of revenue, but that 5% is long ago, if you look at the past 10 years, and I’m not looking at anything specifically, it tops out probably more in the low 4s than getting to 5. And so there’s downside 100, 150 basis points versus where we are. It tracks to some degree with permanent placement, which as a percent of the total, also gets smaller. But again, very normal and comes back strong. In fact, if anything, perm in conversions come back stronger when things improve, that is the case on the contract side.
Jeffrey Silber: All right. That’s helpful. Thanks so much.
Operator: And your next question comes from the line of Manav Patnaik with Barclays. Please go ahead.
John Kennedy: This is Ronan Kennedy on for Manav. Thank you for taking my question. You shed some light on this to a certain extent with regards to the comments on the labor markets remaining tight, demand for talent high, clients continuing to hire at slower pace. Just wondering, with all the news and the data we see on the labor markets, I think even recently, there were headlines on the contributions from SMB and four out of five open rolls are for SMB, although December had the highest levels of termination at temp since early 2021. Can you just kind of reconcile what you saw throughout the quarter in December in the first two weeks in your lead comments and results with the broader headlines and narratives within the news media on the labor market?
Keith Waddell: Well. First of all, I think this is the most anticipated downturn ever. And the cumulative impact of all that negative news clearly has an impact on confidence. And I believe the same story you’re referencing, toward the end, also talked about the NFIB small businesses. Their optimism index was down 12 straight months lower than their 48-year average. And so while the hard data seems to be hanging in there pretty well, the softer data, which is about expectations be it NFIB, be it conference board’s leading indicators, being the NABE, which also had some negative expectation data. I think all of those would point to some continued softness. But there’s no question that there’s tension between the very resilient labor market data, which clearly is indicative of supply and the forward-looking expectations data of the groups I’ve talked about, which we see as more consistent with our clients.
