Resources Connection, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Resources Connection, Inc. conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference call, please press the star key followed by the zero button on your touchstone telephone, and you will be connected to an operator who will assist you. As a reminder, this conference call is being recorded. At this time, I would like to remind everyone that management will be commenting on results for the fourth quarter ended May 29, 2021. They will also refer to non-GAAP financial measures. An explanation and reconciliation of these measures to the most comparable GAAP financial measures is included in the press release issued today. Today's press release can be viewed in the investor relations section of RGP's website and was also filed today with the SEC. Also during this call, management may make forward-looking statements regarding plans, initiatives, and strategies and the anticipated financial performance of the company. Such statements are predictions and actual events or results may differ materially. Please see the risk factors section in RGP's report on Form 10-K for the year ended May 30, 2020 for a discussion of risk, uncertainties, and other factors that may cause the company's business results of operations, and financial condition to differ materially from what is expressed or implied by forward-looking statements made during this call. Such discussion will also be included in the risk factors section in RGP's report on Form 10-K for the year ended May 29, 2021, which will be filed on or around July 23, 2021. I'll now turn the call over to RGP CEO, Kate Duchesne.

Thank you, Operator, and welcome to our quarter four fiscal 21 earnings call. Thanks for joining us today. I'll cover three topics during my remarks, starting with a quick review of fourth quarter performance. I'll then outline our enterprise objectives for fiscal 22 to position the company against market opportunity and improve shareholder value. And lastly, I'll comment on positive macro trends that we're watching as the economic recovery unfolds. As we discussed last quarter, we expected Q4 to strengthen, and it did. Q4 revenue came in at $172.3 million, reflecting a sequential improvement of 10%. This improvement returned RGP to year-over-year growth and exceeded the high end of revenue guidance. In analyzing our results, please keep the following important timing comparison in mind. Our GP's fiscal year is June to May. We will not see the full impact of COVID-related recovery in our results until we report performance in Q1 of the current fiscal year. In other words, we did not experience the negative impact of COVID until well into Q4 last year. And that quarter also had an extra week of revenue, which covered some of the impact. Thus, RGP's double-digit revenue bounce back will really be seen when we report on results for the current quarter. One further highlight from the financial results before I move on, we're especially pleased with the improved adjusted EBITDA performance at 20.7 million, or a 12 percent margin in the quarter. That's up 600 basis points sequentially and 160 basis points year over year. We've worked hard to improve the profitability of the business and will continue to do so. We exceeded gross margin guidance and SG&A performance was better than guided. Today, given what we're currently tracking in pipeline and committed revenue, we believe Q1 fiscal 22 will be another strong quarter. especially given the easier comparisons. While COVID numbers seem to be creeping back up in parts of the world, we are better positioned today to execute remotely and virtually than we were 18 months ago. Clients trust us and know we have the quality tools and process to deliver in a disrupted environment. Now I'll outline our enterprise objectives for fiscal 22. These are the main priority items for the management team to accomplish, and they align everyone in our organization for the year. There are five enterprise objectives, and I'll briefly comment on each. First, we've launched a project to elevate the technology infrastructure of our GP globally. This means we're upgrading our core ERP system and our core talent acquisition and management system. This technology initiative will accelerate our efficiency goals and data-led decision-making capabilities. We're eager to accelerate optimized process flow and automation. As a second enterprise objective, we'll be focused on further commercializing our digital strategies. The two areas of activity are driving more digital transformation revenue through our GP channels, both for Veracity and Digital Asia, and the launch of Hugo, RGP's digital engagement platform. In fiscal 21, we grew the Veracity digital consulting business by 36% Q4 21 over Q4 20, despite dealing with a global pandemic. Today, we have improved process and structure to drive that opportunity forward even more in fiscal 22. Hugo represents an accretive source of revenue, given it's both a new digital engagement channel as well as a service category we haven't capitalized on yet. As a reminder, Hugo empowers clients and gig workers to engage digitally for project work with a focus on early to mid-career level finance and accounting professionals. Powerfully combining digital with RGP's employment model and tradition of exceptional service, Hugo will continue to put humans first. We're completing soft launch development and will introduce the platform in New York City in the fall. The exact timing will be communicated during Q2 to ensure that the New York marketplace is healthy and is open sufficiently for a successful introduction. Third, we'll grow top-line revenue, leveraging these key strategies among others. For starters, we're broadening the strategic client program, moving 22 additional accounts into the program for fiscal 22 with dedicated client service personnel. We're also adding capability to the healthcare practice in the areas of revenue integrity, clinical trial support, and supply chain optimization. In addition, we're adding personnel to our fast-growing COUNCY business. COUNCY is a finance and HR as a service offering for startup and divested entities that choose strategically to outsource these functions. Finance as a service is a growing opportunity, and we have a bespoke approach built on the NetSuite Oracle platform, proprietary IP, and exceptional fractional CFO talent. As a fourth enterprise objective, we'll continue to improve our adjusted EBITDA performance to deliver even more shareholder value through disciplined management of headcount, business expense, and real estate costs. In fiscal 21, we reduced our cost structure by 26 million or 12% and will continue to eliminate expense in an increasingly digital virtual world. We're also focused on improving both utilization and pricing of salaried consultants in our APS group and other high value segments like Veracity. For example, Veracity increased bill rates by 6% year over year. The competition for talent is heating up and we'll continue to adjust our pricing to keep pace and reflect value delivered. Fifth, we'll strengthen the RGP brand. Our brand is built on the power of human and the world is moving in this direction. This year, we'll focus even more on our human first brand to improve consultant experience. This means creating more digital connection, providing opportunities for upskilling and professional community, and delivering care and wellbeing to our consultants. We can deliver what talent wants today, which is radical flexibility, work with a purpose, and a connection to an employer who cares about them personally and professionally. We're a business model built for the new realities of work. The encouraging signs in the macro client environment also indicate that the time is now for RGP. This month, for example, Chief Executive Magazine issued its July polling. CEO confidence in current business conditions has rebounded to a three-year high. CEOs are forecasting increases in transformation projects and CapEx for the year ahead and anticipate talent needs growing double digits. Simply put, big deals are back, and at the same time, companies are engaged in workforce strategies built for flexibility, speed, and resiliency. Ceridian, a human capital software firm, reported just yesterday in its future of work study that 62% of the 2,000 senior global executives polled during the spring believe that gig workers will substantially replace full-time employees within the next five years. Agile talent needs are rising, whether it's categorized as staffing or project-based work, and business leaders plan to leverage gig workers to increase the size of their teams. All of these factors are converging to make work more modular and time-boxed. RGP is built to deliver on modular work, whether it's onsite, remote, or outsourced. We partner with clients every day to fill skills gaps, and we do so with speed and flexibility. We find the right skills and deploy those skills for the right period. To close my remarks, I'm pleased to invite you to learn more about the macro trends impacting our business and progress against the fiscal 22 objectives during our upcoming investor day to be held at NASDAQ on October 13th in New York City. We've not hosted a Live Investor Day in many, many years, and we're excited to share more during that event. It is an inflection point for RGP. The world has turned in our direction. I'll now turn the call over to Tim for an update on operational trends, initiatives, and opportunities.

Thank you, Kate, and good afternoon, everyone. During the quarter, we saw good progress in our revenue and operating metrics as the economy recovers. A combination of client and prospect nurturing, coupled with the release of pent-up demand, resulted in increased momentum in revenue and pipeline growth. Lead generation and opportunity identification have reached pre-pandemic levels as new and existing buyers look to launch initiatives quickly in a competitive labor market. Enhanced outreach throughout the year is paying dividends, as closed engagements in our core business in Asia Pacific, Europe, and North America reached fiscal 2019 levels and pipeline continues to be strong. In sum, the strengthening of the economic environment combined with operational effectiveness has led to improved results. As Kate touched on, our fourth quarter results exceeded the high end of our revenue guidance. We continue to see the positive dynamic of clients resuming engagements that have been paused, initiating projects that were delayed, and generally looking at their project portfolio through a broader and longer-term lens as commercial confidence rises. This has led to increased demand for both professional staffing and project consulting, which we believe will continue as a permanent workforce shift around the use of variable workforce solutions for project co-delivery. This change predated the pandemic, but was clearly accelerated in the last 18 months as clients and talent increasingly embraced flexibility, initially out of necessity, but now by design. While there are lingering effects of the pandemic and we're not yet completely out of the woods, they do not dominate how we operate. We continue to deliver successfully using a blend of on-prem and off-site resources, a trend that plays to our strengths and will continue with increased prevalence as companies have learned to care more about resourcing based on fit for purpose versus proximity. This sets the table for better matching of supply and demand, which leads to elevated operational efficiency for RGP. While there have been some increased calls for on-prem resourcing, most companies are utilizing a hybrid workforce themselves and are comfortable engaging with us in the same manner. As an example, this quarter we began in earnest a complex financial transformation and compliance project with a financial services client that will require a large and distributed cadre of project consulting support for a number of months. Geography is important for some aspects of the project, but in other cases, mostly virtual delivery will suffice. Another illustration is engagement our healthcare practice won to stand up a project management office for an R&D transformation initiative for a top life sciences company, leading program and change management and supporting organizational redesign. The multi-year project consists of nearly a dozen work streams spanning multiple functional areas. Our delivery team for this project is delivering both on-site and remotely, working with our client in the way that is most effective for successfully delivering project outcomes. These engagements punctuate the fact that project delivery has to be more flexible and unconstrained in an environment that requires it. These are demand trends that will continue and play to our core strengths of rapid deployment, pristine delivery, and strong project and change management. Reported economic trends note a significant constriction in the labor market, and while we continually monitor for potential operational impacts, we haven't noted any material effects to date. With our broad geographic network, we're able to utilize borderless talent deployment to our advantage and as a differentiator. We work seamlessly as one RGP, and in working this way, consultants have been deployed more quickly on engagements with longer durations. In fact, given the tight labor market and the increased demand for co-delivery on strategic initiatives, we have also seen clients leaning into the concept of captive labor pools to ensure they have the ability to complete key projects while accepting, and in many cases asking for, distributed support. We have had several discussions with key clients in this arena, and this is a burgeoning trend and opportunity. Working in a more flexible fashion and maintaining control over key career decisions is the hallmark of employment choice in the new economy. This agility, combined with membership in our professional community, is an RGP core tenet, which allows us to produce an average consultant tenure of nearly three years. We believe that in the near term, as more professionals assess their career objectives and opt for more flexible work, The powerful combination of A-list clients, career control, flexible delivery, and professional community will make us an employer of choice. While we feel that trends are broadly favorable to our model, we will continue to focus on operational discipline, prioritization and resource allocation, and pricing governance. Now let me turn to our fourth quarter operations. During the quarter, we saw continued growth in the pipeline, and average daily revenue grew by approximately 6% from the first weeks of the quarter to the last. In fact, average daily revenue rates ended the quarter at the highest they have been since early FY20, and pipeline and book revenue have reached pre-pandemic levels. The majority of markets demonstrated sequential progress, while several markets, including Tri-State, Los Angeles, Chicago, UK, Cleveland, Portland, Japan, Hawaii, and Mexico demonstrated growth both sequentially and over prior year quarter. Finally, Veracity and County both grew sequentially and over prior year quarter, tenaciously ending the year as they began it, with strong growth. While we remain focused on revenue expansion, we target profitable growth through operational leverage. Throughout this year and in the quarter, we continue to make strides in controlling fixed costs and improving efficiency. We will remain balanced with respect to expense going forward, knowing the importance of in-person interaction, but heeding lessons learned during the last 18 months. To that end, we will continue to sell, deliver, and operate in a more borderless fashion, look for opportunities to reduce real estate footprint, and utilize technology to extend and strengthen our community. Before handing over to Jen, I want to provide some additional insight on early first quarter trends. The early weeks of Q1 have shown a strong continuation of positive trends in both revenue and growing pipelines. We will be watching for vacation trends this summer coming out of the pandemic, but to date, there is no unusual pattern of news. I will now turn the call over to Jen for a more detailed review of our fourth quarter results.

Thank you, Tim, and good afternoon, everyone. During our fourth quarter, demand in the business propelled revenue acceleration, resulting in meaningful growth, both from the sequential quarter and the fourth quarter a year ago. Growth margin rebounded from the third quarter as we continue to focus on the bill pay spread. Our restructuring efforts, coupled with the virtual operating model, continue to yield favorable SG&A results. Executing it on all three fronts enabled us to deliver a notable 12% adjusted EBITDA margin, a 160 basis point expansion from the same period last year. Now let me provide more color on our operating results starting with revenue. With quarterly revenue of 172.3 million, we well exceeded the high end of our revenue guidance of 167 million. After adjusting for business day and currency impact, our Q4 revenue represents a 4.7% improvement sequentially and 1.2% growth year over year. As Kate stated, given the timing of our fiscal period and the latent impact of COVID in the fourth quarter of the previous fiscal year, we did not yet see the full impact of top-line recovery from COVID. Revenue growth in the fourth quarter was driven by the combination of pent-up client demand, as well as new demand in areas such as digital transformation, as clients accelerate their digital agendas. In addition, macro trends accelerated by the pandemic, including increased use of contingent talent and the shift towards a more agile workforce model also drove healthy momentum in professional staffing revenue. Professional staffing revenue has achieved an increasing sequential growth rate of 4.4%, 5.5% and 14.4% over the last three quarters. And we expect this trend to continue. In North America, revenue improved sequentially by 3.8% on a same-day constant currency basis and 0.8% year-over-year. Growth in the fourth quarter was across the majority of our solutions, core markets, and industry verticals. Most notably, veracity grew 15% sequentially and 36% year-over-year on a same-day basis, furthering our progress in growing our mix of technology and digital solutions. As employee experience and digital technologies continue to increase in importance, we see strong opportunity for digital to drive collaboration, automation, and self-service. We also experienced strong growth in the financial services industry and our strategic client accounts with 10% and 3% sequential revenue improvement, respectively. In Europe, our strategy to adopt an integrated global go-to-market approach to focus on serving our tier one multinational clients in the region has proven to be successful. On the same day, constant currency basis, Europe revenue improved by 11.1% sequentially and 4% year over year. Both UK and our task force business contributed significantly. More importantly, not only did we expand our top line, the restructuring initiative took significant fixed costs out of the business and positioned us for profitable growth in the future. Asia-Pacific experienced sporadic COVID outbreaks in certain geographic pockets throughout the quarter. However, revenue was back to pre-COVID level by the end of the fourth quarter. And on a same-day constant currency basis, Asia-Pac's revenue improved 4.5% sequentially and 1% from a year ago. Our fourth quarter gross margin was 39.6% compared to 40.4% a year ago. Pay bill ratio is up 85 basis points year over year due to some lingering impact of pricing concessions provided earlier in the fiscal year. Compared to the third quarter, we improved our pay bill ratio by 58 basis points, primarily as a result of better pricing governance. To alleviate any pressure the tightening labor market may impose on our gross margin, We're taking a disciplined approach to price our engagements to market appropriately. We also see opportunities in achieving higher bill rates across certain solution sets, such as digital transformation services. As an example, average bill rate in Q4 for Veracity was 153, up from 150 in Q3 and 144 a year ago. Run rate SG&A expenses for the quarter were $47.8 million after excluding non-cash stock compensation, contingent consideration expense, and restructuring charges, representing 27.8% of revenue, a meaningful improvement of $5.9 million or 230 basis points compared to the same period a year ago. Turning to other components of our financial statements, We had an income tax benefit of $7.8 million for the fourth quarter, representing an effective tax benefit rate of 50.6%, compared to $2.9 million of income tax expense, or an effective tax rate of 42% in the prior year quarter. As part of our tax planning strategy, we made changes to the capitalization of certain fixed assets, which resulted in an NOL carryback permitted under the CARES Act, contributing to the income tax benefit for the quarter and for the full fiscal year. Adjusted diluted EPS for Q4, which excludes the net of tax impact of restructuring charges, stock compensation, and contingent consideration, rose significantly to 80 cents per share compared to 33 cents per share in Q4 fiscal 20. The current quarter's adjusted EPS includes a favorable impact of 39 cents per share related to the NOI carryback. Our balance sheet remains strong, and we continue to generate positive cash flow from operations. paying down $45 million of outstanding debt under our credit facility in the course of the fiscal year. As we head into fiscal 22, assuming the macro environment remains stable, we're regularly evaluating our long-term capital allocation strategy, taking a balanced approach between investing in the business and returning value to our shareholders. I'll close with our first quarter outlook and an update on client statistics. We're optimistic about the sustained improvements in sales and pipeline metrics. including win percentage, closed engagement, and average deal size, as well as the continued recovery of the average bill rate. We expect revenue in Q1 to be in the range of 173 to 177 million, an estimated 20% increase compared to Q1 of fiscal 21. Gross margin is expected to be in the range of 38 to 38.5%, reflecting seasonal impact of summer vacation. we expect run rate SG&A to be in the range of 50 to 53 million. Finally, RGP's client continuity was outstanding this quarter, and we believe our retention statistics demonstrate the value add we bring to clients every day. During Q4, we served 49 of our top 50 clients from fiscal 20 and 45 of the top 50 from 2019. This strong retention has remained consistent year over year despite the global pandemic. With that, now we are happy to take questions.

Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Josh Vogel with Sudoti. You may proceed with your question.

Thank you. Good afternoon, everyone. Hope you're all doing well. And certainly nice to see the business recovering at such a fast clip here. A couple questions. Looking at the bill pay spread, you know, improvement year over year, maybe this is for you, Jen. I know you brushed on it in your prepared remarks, but can you just give some more broad strokes on what you think the pricing environment will look like in fiscal 22? I know you said that there's higher bill rates on the digital transformation work. And I may have asked this before, but is there any difference in how a consultant is paid, whether they're fully remote or in a hybrid position?

Hi, Josh. Yeah, no, I'll answer that question first. I mean, there is no difference between a remote consultant and an off-site consultant in the way they're paid. From a bill pay spread standpoint, I mean, bill pay spread is still down compared to year over year, if you compare Q4 to Q4, but we did see sequential improvement from Q3. So the bill rate environment, you know, such that we, you know, we are seeing some opportunities in the digital transformation services area, as well as, you know, our healthcare industry vertical. And pay rate, you know, we talked about in our prepared remarks, We are expecting maybe some constriction on the supply side of things, but so far we haven't really noted any pervasive pay rate increase in the business. And so going forward in fiscal 22, we're monitoring that very closely. And while we want to pay competitive rates to our consultants so that we can attract and retain the right talent, It's really on the bill rate side that we need to get ahead of the trend so that we don't get squeezed in terms of our margin.

All right, great. Thank you for those insights. You mentioned about a nice traction and rebound in the staffing side of the business. I was curious if you could break down results between project consulting versus professional staffing. Is it still kind of like a 60-40 split? And then what's implied there? in that 20% growth guidance in Q1 between the two?

Yeah, sure. Yeah, our historical project consulting versus professional staffing, it is roughly about a 60-30 split, and the remaining 10% is our managed services business. County, we talked about that, and executive search. And so this year, the mix between the two has shifted a little bit because professional staffing revenue did continue to grow throughout the year. So we're seeing that that mix is shifting by about 2%. So, you know, professional staffing is up to about 33% now and consulting is down slightly. Going into, you know, going into this next year, 22, I mean, you know, while we want the, you know, we think this trend is going to continue with professional staffing revenue continue to increase, but we're also working really hard on growing our consulting side to it. So I think the whole pie is going to grow in revenue. It just depends on which side of the business outpaces the other. So I do expect the mix to stay relatively consistent because we do expect both sides of the business to grow.

All right, great. And maybe one for Tim. Is it possible to quantify how much the pipeline grew over the past six months and, you know, what percent of that that you think will get converted to revenue over the next 12 months?

Hey, Josh. You know, I don't want to – I would just tell you this, that we had pretty significant growth in pipeline from the beginning of the fiscal to where we are now, such that we're pretty close to where we were in pre-pandemic levels. In terms of conversion, our conversion rate has stayed very consistent and actually increased a little bit in the latter half of this year as demand kind of came back online. So I guess the easiest way to think about it is this, that from Q2, from the latter part of Q2 to where we ended up Q4, pipeline was up over 20%. and conversion rates stayed about the same.

All right, that's helpful. Thank you. And just one more, and I'll jump back in the queue. Obviously, it's very buzzy these days, anything related to digital transformation, and clearly you're seeing traction there. I'm curious, what exactly are the nature of the engagements you're winning or vying for, or another way to put it, You know, what are clients' primary digital agendas today? And then knowing that this is a broad category, are there any specific gaps in the portfolio with regard to your capabilities in digital transformation, you know, specifically in areas where you're seeing outside demand in the marketplace? Thank you.

Yeah. Josh, it's Kate. Thank you, and hope you're well, too. So our digital transformation business is largely with our Veracity subsidiary. And when you think about the kind of work they're doing and the kind that we're starting to pull from our RGP client base, it's to accelerate the ability to collaborate and automate process and workflows, especially growing, and this is also tied to a gap, is the work we're doing with ServiceNow with the ServiceNow software platform and also Acumina. Those are two technology providers that we see growing opportunity with. And if Veracity had a gap, they would say we need more ServiceNow certified personnel. in order to keep growing. So we're looking for them. I think everybody you talk to will say that technical talent is the hardest to find right now. And so we're also looking at some offshore strategies in order to help that team build more quickly. And that's also the power of our footprint and network at RGP that we can go to places like Mexico City or India and look for the kind of qualified, talented resources that they need.

All right, great. Well, I appreciate all the insights, and thank you for taking my questions. Look forward to chatting soon.

Thanks, Josh.

Thank you. Our next question comes from Andrew Steinerman with J.P. Morgan. You may proceed with your question.

Hi, Kate. Once you fully recover from pandemics and get back to the revenue base, what do you think the medium-term organic revenue growth profile will be, and what do you think the margin associated with that organic revenue growth profile will be?

Yeah, I mean, we're looking, Andrew, at a growth kind of range between 8% and 14%. as you look over the next two to four years, and that's what we're focused on. I think the gross margin, we're still very focused on 40%, but the mix is going to come differently than it has in the past as we strengthen pricing for our APS services, which are more of our management consulting services. And Hugo we're expecting because it's in the adjacent market, that's a little lower level earlier career that will be competing in an arena with a lower margin profile. So you'll see our mix shift a bit.

Right. And I'm sure you realize to grow 18 to 14%, that would be much faster than the big four accounting firms will likely be growing. And so it's just been a while in my observation. since the time when resources very regularly was able to outpace the big four firms. My question to you is, don't you think the big four firms will start to notice again if you're able to grow at that growth rate, or is it really not really as competitively close with the big four firms as you're asking about?

Well, Andrew, I think we're not apples to apples. And that's a really important comment that I just made. So if you believe like I do that talent wants something different in their careers moving forward, it won't be to align with the professional partnerships in the future. It will be to align with employers and consulting firms like ours, which are offering career paths that are more flexible, more agile, and more directed. And I think that's going to be the winning workforce strategy in the future. You know, in my prepared remarks, I highlighted a study I read that came out of Ceridian produced by a research firm. And, you know, in talking to the clients that we have every day, they really are finally starting to shift their workforce strategies in ways that are not aligned with the partnership track of the past. I'd also tell you some of our recent wins in the financial services industry is because that industry is recognizing their over-reliance on the big four, and COVID has given them both the courage and the cover to make different decisions. So you're right. My remarks are more optimistic than we've been in the past, but I think for good reason and tied to both research and trending information that we see in the macro environment.

Well said. Thank you.

Thank you. Our next question comes from . You may proceed with your question.

Okay, Tim and Jim. Really nice to hear the improvement that's occurring, and it sounds like it's really broad-based. The first question is for Tim, perhaps, is just, you know, you went through a list of the offices that seem like they're improving. It sounds like it's really broad-based. How would you assess the leadership across the office footprint? How many offices or what percentage of the offices do you feel like are optimized from that perspective?

Hi, Mark. Thanks for the question. Yeah, it is broad-based. We do have a lot of markets, so of course we're not going to have every market hitting the going full speed at the same time. But what I would tell you is that both from a performance standpoint, I listed off markets that grew sequentially and year over year, but we had a much broader base that actually grew sequentially. And then when I look at forward-looking metrics around pipeline and closed business, probably even a more positive picture. And it goes directly to what you were talking about. I feel like our leadership structure is as broad and as deep as it's been in a while. We have some pockets where we're involved in probably doing more turnaround. There's some pieces of the country where we're still working through both from a personnel standpoint and a go-to-market standpoint of getting to an optimal level. But those pieces are a smaller group than they've been in the past.

That's great to hear. And then the Kate, the 8% to 14% growth that you talked about, what do you think price is going to be within that as opposed to volume? Because it would seem like bill rates should be continuing to pace up as well as pay rates.

Yeah, I think of it more. I don't have a specific breakdown. You know, Jen might because we've been doing our five-year planning. And so... I think of it more as increasing our share in the consulting marketplace than pricing, strictly from the standpoint that we are launching Hugo. We will see some new revenue streams with a lower margin profile. And so I think there will be a tradeoff in how we're growing the overall business and growing shareholder value. Jen, do you have anything you want to add there?

Yeah, I mean, I think we definitely have additional push in our ceiling in terms of our bill rate, without a doubt.

Great. And Kate, can you elaborate with what you meant by with regards to Hugo in terms of, you know, how that would end up impacting the pricing?

Well, I think that we should expect... slightly lower margin in that business than are more experienced project-based or even management consulting-based resources. So if you think about it, we're going to launch in an adjacent space where some of the other staffing companies are probably more dominant and will be competing against those margin profiles, which have generally been lower than RGP. And so we expect that. I think that the product that we're developing or the pathway, if you think about, Hugo is really a service delivery pathway for us that's new, more efficient, and therefore can operate with just as strong profitability with lower margins. And so if we're talking about, say, a payroll manager, The marketplace is telling us that that probably isn't a 40% margin piece of business. It's something lower. But it's incumbent on us to create the experience that's so delightful for our clients that that's the pathway they want to use. And oh, by the way, we're building it with lower cost of sales so we can deliver bottom line profitability within our financial metrics. So I hope that helps.

That does. Thank you. And then can you talk a little bit about what you're seeing from a pipeline perspective and even during the most recent quarter in terms of the amount of work that's coming from financial transactions, whether it's de-SPACing situations, companies going public. Just things along those lines where things are obviously perking up quite a bit.

Yeah, Mark, just a comment on overall pipeline and bookings. I would say this was, you know, from a bookings perspective, one of the strongest quarters we've had in recent memory. And our pipeline has tracked, you know, the end of the last quarter to a very consistent level, so it's still very strong. looking out on sort of a two-quarter vantage point. In terms of the things that are happening from transactions, I would say that we are getting a lot of stack work. I don't know that it, I think that some of the larger engagements that we're working on really are more transformative in nature versus transactional in nature, but both sides of that business are tracking up. you know, so there are a number of, um, mergers and acquisitions that are occurring. We're in the mix for helping with integration and doing some of the front end diligence on some of that. Um, but I would tell you that the sort of the larger, larger engagements that we're getting and the things that are kind of, that are filling up our pipeline right now have more to do with companies that have had started transformations and maybe slowed them down a little bit and realizing now that it's kind of come out into normalcy that they need to speed up again really quickly. And, um, That piece of the pipeline is speeding up probably at the fastest rate.

That's great to hear. And then in terms of Europe, you know, despite the restructuring, it sounds like things are really going well over there. Can you talk a little bit about what you're seeing across the various countries? And to what extent have you seen any sort of impact, you know, from Delta on your London operations?

Not much impact from Delta yet, and you can't see, but I'm knocking on wood for sure on that. And I would tell you that our UK practice has been very strong. It's been one of our strongest practices, if not the strongest practice in Europe. I think, you know, our German practice has been strong all year with Task Force involved, you know, with the Task Force business and the German RGP business operating under the same leadership. They actually had year-over-year growth. on a, on a year to date basis. So a very strong performance there. And I, you know, the, we shrank our footprint there. So, you know, we don't do business or we don't have physical presence in, in Italy and France anymore. We, and we don't have business in the Nordic and our Netherlands practice, which was, is probably is down a little bit year over year, but it's really focused on, on, on our key clients there. So overall for me, from an operational leverage standpoint, doing well. But from a top line standpoint, the UK is really sort of leading the charge. Great.

Yeah, I think, Mark, keep in mind, sorry to jump in here, but keep in mind, we are still delivering mostly virtually and remotely, which keeps our population healthier and less risk-oriented. And we can do that given the level and the caliber of people that we are employing and then deploying to our clients.

That's great to hear. And can you talk a little bit about the increasing attractiveness of hybrid work and virtual work and what you're seeing just in terms of the candidate profiles and how easy or difficult it is to fill the positions that are coming open for you?

Yeah, let me jump in, and I'm sure Tim will have some color, too, since our head of talent reports directly to Tim. But what I see in the marketplace is really what we're calling the great reassessment. It's talent, professional-level talent, signing up for a different kind of exchange with an employer. And it's not about, as I've said before, climbing one corporate ladder or It's creating what we call a portfolio of experiences with some of the most beloved brands in the world. And that's what we can offer talent. We have longstanding client relationships with some of the most innovative, beloved brands, companies doing really interesting things, and we can offer them access in their career development to those kinds of projects. I am betting that that is the way of the future. And if you talk to younger professional talent across the board, they will tell you that's what they're looking for. So, you know, as we said before, maybe this business model was built a little too soon, but we're certainly built for now. And therefore, we have to continue to improve how we deliver our services to both our clients and consultants in order to attract the very best talent. That's what everybody is shooting for now. And the paradigm has shifted.

I think that's right. From a macro perspective, it certainly makes our platform that much more attractive, as Kate noted. And if you think about it tactically, it just opens up a bunch of different pathways for our consulting population to work with our clients when you think about hybrids. As an example, nothing is all or nothing anymore. And so that could mean anything from working across time zones. And you actually have, I may have used this example before, consultants working in Florida for clients in Washington State. Think about that. Pre-pandemic, that likely wouldn't have happened. But as we start to open up, I think the other pathways that are actually going to be very impactful as well are that you're going to have people who work onsite for part of the week and remotely for the rest of the week. And that really wasn't an option before. And if you think about just the practical elements of commuting, that opens up the filters for people who are thinking about the types of clients that would be within their sphere of consideration. It just opens it up broadly. And it does the same for for clients because it opens up a catalog of talent that they're willing to work with and engage in a different way. And we're already starting to see that.

Great. And what are you seeing in terms of fill rates? I mean, just obviously everybody's pursuing top talent, so.

Our fill rates are still very consistent. In fact, one of the things, you know, one of the things that's probably anomalous coming through the pandemic is that, you know, you had We have more supplies than demand, and as demand creeps up, we still have a very healthy form of supply. There's a lot of competition for it, and we see that to be a good thing, but our fill rates have not – we haven't seen degradation in our fill rates. And frankly, even thinking about what we just talked about with respect to hybrid and sort of being able to utilize talent that maybe wasn't accessible before, we hope to stay well ahead of that so that we don't have degradation issues even as we continue to climb the demand curve.

Great. And then, Jen, is there anything that we should factor in in terms of just the forward outlook on SG&A just in terms of a rebuild with regards to travel and entertainment or anything along those lines that have temporarily ceased?

Yeah. Yeah. You know, going into fiscal 22, our SG&A is expected to go up for a few reasons, right? One is as our revenue top line grows, the variable component of our SG&A will naturally go up. And to your point, the traveling and the business expenses will go up a bit, but we've said before that it's not going to go back to pre-COVID level, and we're holding our business expenses at about 50% of pre-COVID level. you know, really adopting that hybrid kind of virtual working model still. And, yeah, I mean, I think overall SG&A, I foresee, you know, this year SG&A, since we have made significant strides in reducing fixed costs, I think we always look at SG&A not just dollar, but also as a percentage of revenue. And so we do expect, you know, that we're going to see a meaningful improvement in our SG&A percentage as a percentage of, you know, compared to last year as a percentage of revenue.

Great. Thank you very much.

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Kate Duchesne for any further remarks.

I just want to thank you all again for attending our Q4 and year-end call, and we'll look forward to talking with you again at the end of our first quarter of fiscal 22. Thanks, everyone, and stay healthy.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.