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spk00: Good day and thank you for your standby. Welcome to the K-4's second quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. If you require any further assistance, please press star 0. I would now like to turn the call over to David Dunkel, Chairman and Chief Executive Officer. Please go ahead.
spk01: Good afternoon. I'd like to remind you that this call may contain certain statements that are forward-looking. These statements are based upon current assumptions and expectations and are subject to risks and uncertainties. Actual results may vary materially from the factors listed in K-Force's public filings and other reports and filings with the Securities and Exchange Commission. We cannot undertake any duty to update any forward-looking statements. You can find additional information about this quarter's results in our earnings release in our SEC filings. In addition, we have published our prepared remarks within the investor relations portion of our website. The significant strength in our financial results leading into, during, and now after the pandemic continues to affirm our strategic decision to focus our business on domestic technology, staffing, and solutions. Prior to the Great Recession, 50% of our business was providing technology solutions to commercial clients. Our executive and leadership teams and dedicated associates have all participated in completely reshaping the composition of our business, using as a foundation our 50-plus years of experience in delivering quality solutions to our clients. This reshaping involved numerous divestitures, evolving our client portfolio to be more significantly focused in industry-leading companies and disproportionately investing in growing our technology business organically. Staffing industry analysts noted that the domestic technology staffing market was the largest staffing market segment in 2020, with spend of nearly $31 billion, which represents growth of nearly 100 percent since the Great Recession. The technology solutions market is estimated at greater than $100 billion which represents new growth opportunities for our managed teams and solutions efforts. As we look to the future, this market is expected to continue its rapid growth rate. With our revenues concentrated approximately 85% in technology, coupled with a complementary finance and accounting footprint, we are ideally positioned. There is no other market we would want to be focused in other than the domestic technology market, as it has, in our view, the greatest prospects for strong, sustained, profitable revenue growth. Further to this point, our technology businesses demonstrated remarkable resilience. Our full-year technology revenues in 2020 were essentially flat from 2019 levels, despite an unprecedented macro environment. Revenues began to grow shortly after businesses began to shut down and have continued to build tremendous momentum over the course of the first half of 2021 in early stages of the third quarter. This is evident not only in our completely organic 21% year-over-year technology revenue growth in the second quarter, but this is significant growth of a relatively strong comp in the second quarter of 2020, where we declined only 3%. Our technology business has now grown approximately 17% since the second quarter of 2019 pre-pandemic. The secular demand drivers, coupled with improving corporate prospects across virtually every industry, result in overall revenues for the second quarter exceeding the high end of our expectations. Our sequential and year-over-year growth rates of 9% and 21% respectively represent the highest organic growth rates we have on record. We continue to make progress in our objective of migrating our FAA business towards higher-end skill sets for decision support and analytics. We believe this strategic shift will provide an important complement to the technology services we provide our clients. During the lowest points in the COVID-19 crisis, we found several opportunities to assist our clients in providing resources to help key areas of relief efforts associated with the pandemic. The revenue streams from these projects provided us an important bridge to navigate through the pandemic. Not only did they allow us to retain the existing infrastructure in our business, but they provided an opportunity to increase investments that we believe will further enable sustained above-market growth in the future. As the economy is now recovering, we have not pursued these opportunities further. Therefore, COVID-19-related revenues will significantly diminish in Q3, as Dave Kelley will elaborate. We will be left with the high-quality revenue stream we anticipated prior to the pandemic, growing at a rate of over two times SIA market estimates. We also continue to make great progress in positioning our firm to have a more flexible hybrid work environment through our K-force reimagined initiative. The sale of our corporate headquarters facility in the second quarter, which generated nearly 24 million net proceeds, is aligned to this initiative. We are actively seeking a location for our future corporate headquarters in the Tampa Bay area, which will be a more modern, open, technology-enabled office, very similar to how we will be transitioning our field offices. Our business continues to generate significant operating cash flows, and we were again active in repurchasing our stock during the second quarter. The strength in our balance sheet and availability under our credit facility allows us to be opportunistic with respect to returning additional capital to our shareholders while continuing to evaluate potential tuck-in acquisitions. We will continue to apply very stringent cultural and financial criteria to any potential transaction as we are sensitive to the distraction this creates to our strong performing technology business. Given our confidence in our future growth prospects, we expect to remain active in purchasing our shares at current stock price levels. In addition, our board of directors recently approved a 13% increase to our quarterly dividend, which is the second increase in 2021. Our dividend is up 30% from prior year levels, and we believe a strong signal of our belief in the strength of our business. As we look ahead, we are incredibly excited about our strategic position. We have the right team in place to capture additional market share within what we believe will be a continued strong demand environment for our services. It's our belief that the pandemic has exponentially elevated the imperative for companies to rapidly digitize their businesses, transform business models, and drive productivity gains through technology investment. I will now turn the call over to Joe Liberatore, President, who will give greater insights into our performance, recent operating trends, and other insights into our operating environment. Dave Kelly, CFO, will then give greater detail on our financial results and position. as well as our financial expectations and guidance for the third quarter. Joe?
spk02: Thank you, Dave, and thanks to all of you for your interest in K-Force. The momentum across our business is continuing to accelerate. Total revenues for the second quarter exceeded the high end of our guidance, increased 17.7% on a year-over-year basis, and has improved 19.1% compared to Q2 2019. Total firm year-over-year growth in the second quarter is the highest organic growth rate we have on record. The operating trends we continue to experience in our technology business have been impressive. New assignment starts are not only reaching all-time highs, but they have been remarkably consistent and broad-based throughout the second quarter and thus far in the third quarter. We believe that this speaks volumes as to the vital non-discretionary mission critical work that we are performing across our blue chip client portfolio. While the clear driving factor to our record levels of technology growth is demand for additional resources, we continue to see increases in bill rates. Our average bill rate is now approximately $81 per hour, which is indicative of the demand for higher end technology talent for project and solutions work. Available consultants on assignment began increasing shortly after the inception of the pandemic and have grown sequentially for four consecutive quarters. Consultants on assignment are now at levels 28% greater than in June 2020 and increased 6% from the beginning of the second quarter to the end of the quarter, which is a great indication for accelerated growth year over year in the third quarter. Job order flow has largely returned to pre-pandemic levels, And we are also continuing to see higher fill ratios due to the improved job order quality as clients are executing against an overall higher mix of critical technology initiatives. We also believe the trends we are experiencing are reflective of the growing confidence in restarting projects that may have been deferred or delayed, the scarcity of high-end IT resources, and securing resources for new transformative initiatives. We continue to see the acceleration of critical technology initiatives within our clients in areas such as cloud, mobile, data analytics, project and program management, with a strong focus geared towards improving the consumer's digital experience. The investments that we've made in front-end technology and processes over the last several years have matured our capabilities to efficiently provide clients with highly diverse top talent at scale and a now boundary-less environment across the U.S. A significant accelerant to our overall technology growth has been the investments we've made over the last three years in our managed teams and solutions capabilities to provide higher value, differentiated offerings to our clients. We have continued to add highly talented, experienced resources coming out of the most respected solution providers to this dedicated team and are investing further to arm them with state-of-the-art tools and technology. Growth in this offering is outpacing that of our overall technology staffing business due to the success we've had in bringing this offering to our clients where we have strong long-standing partnerships. We intend on making further investments in this capability throughout 2021 and for the foreseeable future given the long-term demand environment we see for these services. We feel extremely confident in the positioning of our technology business and the ability to continue expanding our market share. There remains broad strength in demand across virtually every industry. This was true in particular in business services, financial services, and wholesale retail during the second quarter. These same highlighted industries have shown resilience throughout the pandemic and have been significant contributors to our growth on a year-over-year basis. Given the momentum we've carried into the third quarter, we expect revenues in our technology business may grow approximately 25% on a year-over-year basis, which would represent over 20% organic growth over the third quarter of 2019 pre-pandemic. We are clearly continuing to take market share, which we would attribute to the lack of distractions with an operating model keenly focused on providing domestic technology solutions to world-class clients and an outstanding team of K forces that are executing at levels we have not experienced in our history. I cannot be prouder of how our teams have responded. Their innovation, combined with a lean-forward, not-look-back attitude since the start of the pandemic, has played a major role in the success K forces are experiencing. Our SA Flex revenues were up 2.7% year-over-year in the second quarter. which included the contribution of approximately $35 million of revenue from our support of government-sponsored initiatives tied to the economic fallout and recovery efforts from the COVID-19 pandemic. The results of our FAA business were consistent with our expectations. The vast majority of these projects concluded at the end of the second quarter and into the first part of July. Thus, we expect COVID revenues could approximate $5 to $7 million in the third quarter. We made a conscious decision not to pursue business beyond our existing commitments in support of our longstanding client relationships once it became clear that the recovery was well underway. This will allow us to focus our efforts on forward-looking FAA strategy. Our non-COVID FAA flex business declined 7.1% sequentially per billing day, but grew 5.3% year-over-year. As we mentioned previously, We are transitioning our F8 business towards more highly skilled assignments, such as analytics and decision support roles, that are less susceptible to technological change and automation and more synergistic with our technology footprint. We will continue to support lower-end skill sets for certain clients where we have long-standing relationships that are strategically important to K-Force's ongoing success in our technology business. We have seen natural assignment ends of our lower-scaled FA roles in the first half of 2021 where strategic client relationships do not exist and expect that to continue in the third quarter and be completed by the end of the year. We expect our non-COVID FA revenues to be down in the mid-single digits on a year-over-year basis in the third quarter due to the repositioning activities. When combined with the expected COVID revenue decline, Total FAPlex may be down nearly 50% on a year-over-year in the third quarter. Direct hire revenues in the second quarter increased almost 30% sequentially per billing day and approximately 85% year-over-year. Direct hire remains an important part of our service offering, though we have not allocated significant investments here, and it now represents approximately 3% of total revenues. Against this backdrop, our second quarter results demonstrate the depth of high-quality, long-standing relationships this credible and capable team possess. We expect direct higher revenues, may see a sequential decline, which is typical during the summer months, and increase nearly 30% year-over-year in the third quarter as clients demonstrate a high degree of confidence in the recovery through the addition of full-time staff. We are continuing to invest in strategic initiatives to better position our firm for long-term, sustainable, profitable growth. Our most recent significant investment is in our talent relationship management system, which went live in the first quarter. Our fully integrated CRM-TRM systems are cloud-based and seamlessly integrate with other Microsoft product offerings. As Dave highlighted, Investments to further develop these tools, along with enhancing capabilities in other areas, such as our managed teams and solutions offerings, are continuing. We believe great opportunities still exist to further enhance productivity, which will drive future profitable growth. We have made tremendous progress advancing K-Force towards a fully integrated, technology-enabled hybrid operating model to enhance the experience and life-work balance of our internal teams and the interaction with our clients, candidates, and consultants. We refer to this initiative launched in May 2020 as K-Force Reimagine. Early into the pandemic, it was clear to us, work is something we do, not a place we go. Our future work environment in this new age we are entering will be what we are referring to as office occasional, whereby our people can have maximum flexibility driven through trust in technology with a remote-first approach, along with the opportunity to leverage our collaborative physical office design when desirable for activities such as training and team building, and for activities that are best done through in-person, active collaboration, inclusive of client and candidate face-to-face interaction. Productivity metrics continue to improve across our tenured associate base. Given the tremendous growth trend we are experiencing, most notably in our technology business, We have begun making selective investments to increase the number of associates in our technology business, especially in our managed teams and solutions capability. Overall capacity remains sufficient to support our well above market growth rates and should improve due to our continued investments in technology and greater enablement of communication and collaboration tools and processes that have been so successful for us since we transitioned to remote work last March. We have supported and retained our best people, structurally reduced our fixed costs, and refined a more scalable model that we expect will result in positive leverage as accelerated growth continues to compound and we reimagine the future of how we work, resulting in further improving retention of our most talented associates. Our customer and employee satisfaction levels continue to be at an all-time high. We continue to carry the highest Glassdoor rating among our peers and maintain a world-class net promoter score from our clients and consultants and are the most recognized firm by technology consultants per SIA. I greatly appreciate the trust our clients, consultants, and candidates have placed in K-Force. Our teams continue to inspire me daily. as we work together creating something beyond special for tomorrow and into the future to position K-Force as the most desirable destination for top professionals in our industry. I will now turn the call over to Dave Kelly, K-Force's Chief Financial Officer. Dave. Thank you, Joe. We are very pleased that second quarter revenues of $403.6 million exceeded the high end of our guidance. as we experienced record organic sequential and year-over-year growth in our technology business. Profitability levels also exceeded the high end of our guidance, with record earnings per share of $1 in the second quarter, which represents an increase of nearly 113% year-over-year. Our gross profit percentage in the quarter of 29.5% increased 110 basis points year over year as a result of a greater mix of direct higher revenues and an increase in overall flex gross profit margins, which improved 30 basis points year over year to 27.3%. Flex margins in our technology business were essentially flat as growth in our higher margin managed teams and solutions business has largely offset the slight spread compression we experienced in our traditional technology staffing business due to the strong relative growth we are seeing in our largest clients, which carry a slightly lower margin. Overall, average bill rates and pay rates continue to modestly increase. Sequentially, Spreads in our technology business expanded slightly from Q1, while overall margins improved due to seasonal taxes and lower healthcare costs compared to Q1. Flex margins in FA expanded 180 basis points year-over-year, primarily as a result of a higher margin, short-term COVID project that ended in June. When looking at the underlying FA business, we are migrating towards, we are seeing early indications of improvements in flex margins and overall average bill rates. As we look forward to Q3, we expect spreads in our technology business to be stable with second quarter levels, while FA will improve sequentially from our repositioning efforts and the decline of lower margin COVID projects. Should we begin seeing wage inflation within our consultant population, which we have not yet experienced in any meaningful way, we are confident in our ability to work with our clients to appropriately align bill rates so that they can retain the valuable technology resources needed to complete their critical projects. We believe the continued rise in wages is a sign of strengthening demand for technology resources, and it's a long-term net positive for our business. We also continue to experience success in growing our managed teams and solutions business at a growth rate that significantly exceeds our overall technology business. This offering carries an approximately 400 basis point higher margin profile than the rest of our technology staffing business, which helps stabilize overall technology spreads and over the longer term creates an opportunity to increase margins and overall profitability. Overall SG&A expenses decreased as a percentage of revenue by 250 basis points year over year due to operating leverage provided by our revenue growth, significantly improved associate productivity, the gain on the sale of our corporate headquarters facility, and lower costs in areas such as lease and office expenses. Due to our strong growth, increases in performance-based pay have partially offset these reductions and are expected to continue to do so for the rest of the year. Our second quarter operating margin was 8.2%, which is an increase of 370 basis points from 4.5% in the second quarter of 2020. The sale of our corporate headquarters in the second quarter of 2021 benefited our operating margin by 50 basis points. We believe the improving quality of our revenue stream, continued productivity improvements, and ongoing lower structural operating costs will collectively allow us to continue to invest aggressively in our business to drive sustained above-market growth rates while continuing to drive improvements in profitability levels. As previously noted, the COVID project revenue streams will significantly decline in the second half of the year. The revenue and profitability that resulted from the COVID projects allowed us to not only sustain critical infrastructure and talent needed to maintain the growth of our business during the pandemic, but to also accelerate certain other investments, which we believe will enhance future growth. These investments have been primarily focused in our technology business and specifically in support of further improving overall productivity and building our managed teams and solutions capabilities. Despite the fall-off of these COVID revenues, we plan to sustain and potentially accelerate this investment in talent and tools, which we believe is critical to both take advantage of the existing market conditions and to enhance our longer-term growth prospects. Third-quarter operating margins of between 6.6% and 7% reflect a decline from Q2 levels due to the non-recurring gain from the sale of our headquarters, which benefited Q2 by 50 basis points. a 10 basis point impact from the leaseback of our headquarters, and 40 to 50 basis points from the accelerated investments in tools and talent. These investments are primarily targeted for our technology and managed service offerings. The impact from the incremental investments is expected to last for the first quarter of 2022, while additional leaseback costs end in January 2023. We previously stated that as revenues reach $400 million quarterly, that operating margin would be at least 7.8%. We expect to return to this margin trajectory by Q2 2022 and also to derive annual savings of $1 million to $1.5 million as we transition to our new Tampa headquarters with the expiration of the leaseback. We will also continue to investigate additional opportunities to improve our operating model to drive additional future profitability improvements. We've had great success in rebuilding our front office technology processes and tools over the past five years, and we believe equal opportunity exists to drive efficiencies in the back office. We've recently begun assessing the opportunities in this area, which we believe could benefit operating margins by 60 basis points or more and dramatically improve how our back office supports the firm once this multi-year program is complete. This transformation will be planned in phases and could take up to five years to complete. It may involve some upfront costs in each phase. Once complete, this investment, along with the accelerated investments in our managed services capabilities, will enhance our ability to generate double-digit operating margins as we grow. We look forward to sharing further details in future calls. Our effective tax rate in the second quarter was 29.4%, which was consistent with our expectations. This included a negative impact of 280 basis points as a result of the previously announced termination of our supplemental executive retirement plan. EBITDA in Q2 was $35.8 million, which represents an 81.5% increase from the second quarter last year. Operating cash flows were $14.1 million in the second quarter, and we returned $18.1 million in capital to our shareholders via $13.4 million in share repurchases and $4.7 million in dividends. We ended the second quarter with $17.3 million in net cash. The number of billing days are 64 in the third quarter of 2021, which is the same number of days as the second quarter and the same number of days as the third quarter of 2020. We expect Q3 revenues to be in the range of $385 million to $393 million, and earnings per share to be between 83 and 91 cents. Gross margins are expected to be between 29% and 29.2%, while flex margins are expected to be between 26.8% and 27%. SG&A as a percent of revenue is expected to be between 21.9% and 22.1%, and operating margins, as I mentioned, should be between 6.6% and 7%. Weighted average diluted shares outstanding are expected to be approximately 21 million for Q3, and the anticipated effective tax rate is expected to be 27.5%. Our guidance does not consider the potential negative impact on the demand environment from a significant increase in COVID-19 variant cases, the effect, if any, of charges related to any one-time costs, costs or charges related to any pending tax or legal matters, the impact on revenues of any disruption in government funding, or the firm's response towards regulatory, legal, or future tax law changes. Overall, we believe we're in an exceptional place. We believe the strategic decision to focus the vast majority of our business in providing domestic technology solutions is paying dividends. The range of guidance at the midpoint implies organic growth in our technology business in the 25% range. We couldn't be more excited about our future growth prospects with 85% of our revenues focused in technology, which permeates every aspect of business and society, and an FAA business that's directly focused on complementing those technology efforts. Our shareholders continue to benefit from strong performance and efficient capital allocation as exhibited by a return on invested capital of approximately 40%. Our predictable cash flows provide significant future flexibility to make investments and continue returning capital to our shareholders. On behalf of our entire management team, I'd like to extend a sincere thank you to our teams for their efforts in outperforming market expectations through the adversity and uncertainty of the past year and a half and continuing to build on that success for the remainder of 2021 and beyond. Operator, we'd now like to open up the call for questions.
spk00: Sure, sir. As a reminder, if you have a question at this time, please press a star, then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, press the pound key. We'll pause for just a moment, compile the Q&A roster. Your first question comes from the line of Josh Vogel. Your line is now open.
spk03: Thank you. Good afternoon, everyone. Thank you. First question I had, I know there's a lot of moving parts, but when we look at this 85 to 15 target revenue split, especially entering 2020, and we think about the nature of the work being done, you know, the increasing bill rates, consultants on assignment, fine mix, direct hire, but you already have a gross margin profile
spk02: 19 levels even with nix working against you back then so what sort of margin profiles do we think that the business can get to you know latest year and in 2022 yeah josh hi uh this is dave kelly so when we think about margins uh prospectively we think about them at least in the airport term to be stable right they've been relatively stable As you pointed out, for the last couple of years, we've turned to the 2019 levels. I've mentioned sequentially that we're looking at stability in our tech margins. It's 85% of the revenue stream. I think we're doing a really nice job balancing the growth in the portfolio with appropriately pricing. So we look at this as a pretty stable environment for the foreseeable future.
spk03: All right, great. And Obviously, very impressive results with, you know, the tech staffing business. Who do you think you're taking share of from? And when we look at the 9%, you know, sequential year-over-year growth, parse out maybe what's coming from their gains versus the pent-up, and I know that may not be easy, but any sort of, you know, thoughts there.
spk02: Hey, Josh. This is Joe Liberatore. I think it's really, you know, when we look at the competitive landscape, I think, you know, you have full awareness of the publicly comps that are out there. And so I think you can say part of it's coming from there, part of it's coming from the local operators, regional operators. You know, what we're seeing is, you know, demand is broad-based across all geographies and industries. And it's also very balanced in our portfolio. So, you know, we compete with different types of companies inside different organizations. You know, the large organizations typically national scale players. When we get into local, more local-based company or regional-based companies, that's when we run into the regional and local providers. And, you know, I think it's really indicative when you look at where our growth is coming from, You know, our top 25 accounts grew at a rate of about 20.2%, and our non-top 25 accounts grew at 21.6%. So very balanced across the portfolio regardless of the size of this type of company that we're working with. And we're also, you know, capturing some solution business embedded in our overall mix. And, you know, the competitors they were up against in the solution space, you know, a lot of them are what I would consider, you know, local or regional niche players. And then also we are capturing some business from the larger, more global providers. But that's really typically carve-out type projects where we have unique expertise and relationship within the organization.
spk03: I appreciate all those insights. And one more, and I'll hop back into Q, but... Knowing that we should expect COVID-related business to significantly decline and now for the strategic move that you're doing on your end, but as the pandemic lingers and the Delta variant spreads, is there potential that there could be significant upside to that business? And, you know, I guess I want to get an idea around how easily you could scale that back up if need be.
spk02: I would say, could we scale it back up? The answer is yes, because, you know, our teams did a tremendous job in surfacing, you know, tens of thousands of candidates over a very short period of time. So we still have connectivity with the candidate pool to service needs. But also, the flip side of that is, you know, as we've been very clear on, these were a byproduct of longstanding relationships we had with certain organizations. And so unless the kind of the same specific type of engagements reengaged, I would say more than likely he won't see us turning up COVID-related revenue, irrespective of what might happen with the Delta variant. And when you look at where our concentration of business was, I think it's even a lower probability that those engagements would reengage based upon conversations that we've had with our partners that we helped out during that time period.
spk03: Understood. Well, extremely impressive results, and thanks for taking my questions. Thank you, Josh. Thanks, Josh.
spk00: Your next question comes from the line of Mark Markin. Your line is now open.
spk02: Good afternoon, everybody. I was wondering, can you talk a little bit about, you know, the strong growth that you saw in Perm and just, you know, how you're thinking about that long term strategically, considering, you know, the continued labor shortages that are out there that don't seem to be abating anytime soon? Well, Mark, you know, our roots go back to Perm. We have a lot of people that are highly competent and capable, which is why I really referenced them in my opening comments. And they have a lot of deep, longstanding relationships. So I really feel Perm is very important to the offerings that we bring to our clients as we've articulated. countless times. The way we service that on the technology side, which is the bulk of the revenue that we derive, is really more in a blended model. So if the client has a perm need, we'll service that perm need if it's strategic and makes sense and it's a value add to the client. We have dedicated perm teams on the FAA side of the house. We haven't, you know, invested extensively to build those teams. However, we are selectively adding to those teams where we have a really good footprint. We have capacity, and we can use additional resources on those teams. But that's kind of how it fits within our strategy. We made this strategic move many years ago. I mean, you remember the days back during .com. uh when we saw our quarterly poem revenues go from about 42 million a quarter down to six million a quarter over a course of uh six quarters you know highly cyclical and sensitive uh for the economic drivers that are out there so we really we like how we're positioned from a pro standpoint um and that's kind of strategically uh we've been very consistent on how we've been approaching this okay yeah you you've been very consistent and the and the reasons have have been consistent over the years I was wondering if there is you know perhaps any sort of dial turn just given how strong the level of demand has been, but you answered that. And then with regards to, you know, the additional investments that you're making across the board, how soon do you think you can ramp up your new people in order to get them up to productivity levels, particularly with the new systems that you've been laying in? I would say everything we're doing is really to drive two things, which is the increased productivity capability of our proven seasoned people. And, you know, we've really started to see some of the fruits of the investments we've been making. I mean, our productivity from a technology standpoint is up over 25% year over year. And FAA is actually a little bit north of that in our core FAA business. And I think this also dovetails back into our ability to ramp up new hires. A lot of what we've been doing here over the course of the pandemic is looking at different ways that we can create more leverageable training and development platforms. And our team has done a fabulous job. And we're just getting to the point now where we're starting to to deploy some of the work that we've been pursuing for the better part of the last 16 months is part of our Capable Reimagined strategy. So I think all those things will play into our ability to more quickly ramp new hires, as well as continue to provide tools, technology, and process to further drive productivity gains of our existing people. Great. So, Mark, I think I would add to that, right? So the idea of investment, especially in technology for us, isn't particularly new, right? So we've been investing, and Joe mentioned the productivity enhancements that we've seen over the years. This is an opportunity, as we said, to accelerate this investment. It is as much long-term as it is, you know, an opportunity to take advantage of a great operating environment. Obviously, the productivity enhancements driving that you know 20 plus percent growth so this is uh technology as well as the talent as well as i think specifically as we had mentioned uh is the investments in the capabilities of highly skilled people in these managed uh teams and managed services offering so so it's it's a it's a holistic holistic look at that and continuing to evolve our model so just sort of look for on that That's great. And then just on the managed team and solution capabilities within technology and tapping into an even bigger market, who are you running into the most? What's the most common scenario that you're being brought in? And what's gone better than you expected? Where are you seeing the best opportunities? As I say, and I touched upon this a little bit earlier, we mainly run into regional and local niche solution providers. We also are capturing a number of what I would call internal projects where the client's looking to hand those off to someone with expertise in areas where we have a capability. And we also are getting some carve-out type projects where large integrators might be in there as the dominant provider on a large scope and scale project, that there's niche opportunities. And so we also, you know, we've continued to hire a lot of SMEs from large solution providers that are highly capable and competent and have been playing in the space for quite some time. And we've been very fortunate with the individuals that we've been able to bring onto our team to just continue to further build out our capabilities on that front. That's terrific. Thank you. Sure.
spk00: Once again, if you would like to ask a question, please press star 1 on your telephone and wait for your name to be announced. Again, that's star 1 to ask a question. Your next question comes from the line of Sam Kirshberg. Your line is now open.
spk02: Hey, guys. Thanks for taking the questions here. Relating to remote work, Do you have a sense for what percent of your client base was offering remote work positions prior to the pandemic? And how does that compare to the situation today? I guess I'm just trying to get a sense of how fast the market is shifting towards this new way of working and also if this has any implications to your margin structure. I would say, you know, pre-pandemic, you saw some remote work going on. It was usually much more specific to unique needs, whether it be the candidate's need and based upon what their unique skills were or certain client opportunities where maybe they didn't have adequate space or they were residing people and having them work remotely um that all got turned on its head when the pandemic hit you know virtually 100 of our technology resources were working remote outside of those that were physically working in labs on you know actual physical technology where they had to be there from a hardware standpoint uh what we've seen at this point in time We've seen the majority of our customer base is still predominantly functioning in a remote capacity. We do have a number of customers, and you read about those in the media, the large customers that are trying to bring people back on-premise. However, I will tell you what we've seen here probably in the last three weeks, We've seen people backtracking on their back-to-office programs, mainly associated because of the things that are happening with Delta. The majority of our clients are very flexible in hiring remote talent. Some prefer that talent to actually be closer in market but work remote. Others that are really truly after getting the best talent are completely flexible on having that talent be located anywhere. In fact, I would say from what we're doing on the managed team solutions front is really fantastic. I guess, showing us that because those customers are looking for the best talent in the marketplace. And when we're engaging in those type of projects, we're seeing a much higher percent of flexibility for those people to be based anywhere. They're really after the best talent. Great. Appreciate the color there. Maybe switching gears a little bit here, but, you know, labor availability, it's been a huge issue that, you know, many companies have been struggling with. I imagine in many ways this has benefited your business as these companies, you know, partner with you to help address their labor shortage. But I also wonder if there are some positions you'd like to have filled that you can't because the right labor is so scarce. Can you share your thoughts on the issue and its impact to the business right now? I would say from a labor shortage standpoint, the areas where we typically play have been labor shortage categories long before the pandemic hit. High-end technology individuals, even when unemployment was running mid to upper single digits, still running negative in terms of the amount of openings there are for the amount of people capable of performing those. So in our world, it really boils down to what is our recruiting capability to go out and identify that top talent and then secure that talent for a client. And that's really the core competency at K-Force. That's what we do for a living. If there's one thing that I would say is our core competency, it's on the recruitment side to be able to go out, identify and attract, and then retain that talent for a client. So we're not really seeing any particular openings where, you know, we can't fill the position. Some are obviously more difficult than they are, but that's all supply-demand driven. And then we're really working with the client to get the client flexible enough to open up their requirements so that we can identify the talent-based comments in the marketplace. Great. Appreciate the answers. Thanks. Sure.
spk00: We have no further question at this time. I will now turn the call over back to David Dunkel for closing remarks.
spk01: That's great. Well, thank you again for your interest and support of K-Force. And once again, I'd like to say thank you to each and every member of our field and corporate teams. Once again, just incredible efforts and incredible results. To our consultants and our clients for your trust in K-Force and partnering with you and, again, allowing us the privilege of serving you. We've delivered another quarter of exceptional results, and we look forward to speaking with you again after our third quarter. Thank you very much, and good evening.
spk00: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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