Q3 2023 Resources Connection Inc Earnings Call
[music].
Yeah.
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'll conduct a question and answer session and instructions will follow at that time joining.
Joining from management are Kate McShane, Chief Executive Officer, Tim Brackney, President and Chief Operating Officer, and Jim Rowe, Jennifer <unk>, Chief Financial Officer. As a reminder, today's conference call is being recorded.
At this time, I would like to remind everyone that management will be commenting on it.
For the third quarter ending February 25, 2023.
They will also refer to certain non-GAAP financial measures. An explanation and reconciliation of these measures to the most comparable GAAP financial measures are included in the press release issued today.
Today's press release can be viewed in the Investor Relations section of our G. P's website and also filed today with the SEC.
Also during this call, management may make forward-looking statements regarding plans, initiatives, and strategies, as well as 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 our G.P.'s report on Form 10-K for the year ended May 28, 2022, for a discussion of risks, uncertainties, and other factors that may cause the company's business results, operations, and financial conditions to differ materially from what is expressed or implied by forward-looking statements made during this call. I would now.
I'll turn the call over to Archie P., CEO Kate McShane.
Yeah.
Thank you, operator. Good afternoon, everyone. Thanks for being with us.
We are pleased to report solid financial performance in Q3, despite the macro environment.
We exceeded the high end of our guidance on top-line revenue, and the gross margin was towards the high end of our guidance range, achieving a 10-year high for the third quarter.
Our SG&A cost containment efforts surpassed guidance expectations, and we remain focused on delivering value for our shareholders.
Taking a closer look, Q3 revenue was almost $187 million, with our digital consulting business Ferocity delivering year-over-year and sequential growth.
Margin improved 80 basis points over the prior year to 38.3% as we continue to roll out our value-based pricing unless you do this.
This improvement represents our strongest third-quarter performance since 2010.
Given that the talent crisis, particularly in the professional arena, remains acute, we see this pricing initiative as a continuing opportunity to improve both the top line and gross margin.
With respect to run rate SG&A, we spent less than our guidance anticipated as we remain disciplined on cost control adjust.
Adjusted EBITDA margin was nearly 9% this quarter, which is a strong performance for the typically seasonally-impacted third quarter.
As we enter Q4, our revenue pipeline remains sizable. This leading indicator means that we have earned a seat at the table as a valued partner for mission-critical work. We are keenly focused on execution and confident in our relevance and value to the market.
We will be all the more ready to execute when the macro environment strengthens and buyers gain a sense of economic stability.
As we shared on our last call, we are not experiencing project cancellations, but rather project delays, and while the start of net new projects softened somewhat in the quarter, clients are extending current engagements at a record pace.
This indicates that our consultants are providing exceptional value, which clients do not want to lose even when faced with restructurings, layoffs, and traditional talent pools within their organizations.
Strategically, we are confident in the moves we are making to support an economy in transition.
In short, we're focused on the following three areas.
<unk>, our core white-glove, on-demand talent platform, expands the capability and reach of our digital consulting business and builds more tech-enabled revenue delivery with Hugo and broader technology transformation.
Provide further color on each of why they represent growth levers for business.
First, we continue to build the premier global, on-demand talent platform for professionals to engage in operational and transformational work on a project basis.
We give professional talent access to on trend interesting work with top global brands and Fortune 500 clients as they engage to co deliver strategic imperative.
Clients are increasingly evolving their workforce strategies to become more agile, project-focused, and skill set-oriented.
Wanted: Trusted partner to deliver with them as they take back responsibility from traditional professional services firm for strategic execution.
One of our key clients at a global healthcare company recently expressed they want to engage with a trusted firm that is adjacent to the big four to help them shape their scope and skill sets needed and project execution, but allows them to remain in control.
This type of client knows that in an increasingly disrupted world, they do not need to hand over the reins for execution to an outside firm. They also don't want or need to staff up in a traditional sense to own all the skills they need, as you can see.
Keith and evolve.
As discussed during our last earnings call, our recent in-depth research established that companies are increasing their engagement with interim, on-demand, and agile professional talent by double digits to deliver better outcomes and greater efficiency.
At its Executive Forum event in March, Staffing Industry Analysts also shared two important data points regarding growth in the contingent workforce base.
In 2021, spend grew by 28%, and over the next 10 years, workforce composition will increase to nearly 30% agile versus 21% today.
Challenge is also looking for more modern ways to pursue career development and work. Gone are the days of the career employee. The global pandemic accelerated the mindset shift away from a single, lifelong employee approach. Today, what is emerging is the rise of the portfolio-based career.
Professional who has committed to betting on herself and broadening her experience as well.
While this shift first accelerated because of the global pandemic, we believe the recent increase in layoffs will only continue to reinforce these talent trends, as traditional employment models no longer equate to greater security.
In fact, in 2022, MBO Partners reported that project-based professionals are happier, healthier, and feel more secure than they did in the traditional employment model.
Second, we are prioritizing our investment in fast-growing opportunities like digital transformation.
<unk>, our digital consulting business, delivers employee, client, and workplace transformation.
Coming out of the pandemic, remote and hybrid work has forever changed the rules, timing, place, and pace of work.
Such shifts require that organizations realign how work is accomplished.
Grassley is squarely in the sweet spot, which has allowed us to increase the penetration of such services into our core GP client base this year.
For example, <unk> recently completed a significant project for a fortune 50 global pharmaceutical company to help connect employees with services path and hyper targeted communication.
By harnessing the power of Employee Center Pro in ServiceNow, ISC delivered a comprehensive set of services, including a first-of-its-kind service delivery intranet, creating a consumer-grade experience for employees.
Through a new network of connected content under a single taxonomy, employees can now self-serve first, reducing frustration, increasing productivity, and giving the call center a much-needed respite.
In addition, our subject matter experts within our GP had been working more closely with ferocity spring a deeper functional lens service now projects to automate workflows.
During the quarter for assay launch, the center of excellence in India increased the offshore talent pool, and our corporate development activities focused on building scale and reach for brass. These digital consulting platforms.
Third, we are continuing to invest in Hugo as a modern digital engagement marketplace for talent and clients to engage directly for finance and accounting needs that are highly sought after and well-defined.
We piloted Hugo and free market.
Your New Jersey, Southern California, and Texas locations are ready to pursue a more aggressive digital marketing plan to accelerate commercialization.
We believe that digitalization, flexible placement, and a well-defined talent pool will increasingly disrupt the staffing industry, and we're optimistic about our position as a first mover in these professional categories.
<unk> recently reported that in 2021, staffing platforms grew more than five times faster than traditional staffing firms, at 58% versus 11%.
Of note, we are increasingly receiving RFPs for professional staffing services from global Fortune 500 clients.
Typically attracted to our capabilities and investment plans for self-service digital engagement models.
We live in an age of relentless digital disruption and must be prepared to meet the future with investments such as Hugo and core business technology transformation.
Turning to our technology transformation project, we.
We are on track to implement a state of the art technology stack in fiscal year 'twenty for not only will this digital initiative improve experience for all of our core constituents consultants internal employees and clients, but we expect it to drive improved financial metrics through automation better data analytics and.
Faster global collaboration.
Once implemented, we will have a global view of the business and can deploy talent more effectively, efficiently, and faster on the broader stage.
Seamless execution differentiates us as a preferred partner for global transformation projects and allows us to build talent delivery with a blended financial model.
Many of our largest clients are increasing.
Moving to global services capabilities in developing markets, we will be well-positioned to support them.
In summary, we are confident that our on-demand talent platform, whether delivered traditionally or digitally, and our digital consulting capabilities are more relevant than ever in today's marketplace.
We are optimistic about the investments we are making to align with the emerging dominant trends in the world of work, and the incoming data supports our thinking.
In the meantime, we have a very resilient and profitable core business with a pristine balance sheet, allowing us to continue to strengthen the enterprise with capabilities and innovation that will accelerate growth as the economy recovers. I will now turn the call over to Jim for an update on operations.
Thank you, Katie, and good afternoon, everyone. During the third quarter, we saw solid revenue performance and operational metrics, and we were able to exceed top-line expectations.
The overall demand profile for the business continues to be healthy; however, climate uncertainty related to the overall macro environment makes it more challenging for new businesses.
The pipeline remains strong throughout the quarter, indicating a directive opportunity that involves converting opportunities to project starts, which has been slower due to various factors, including heightened approval levels and delays in proposed initiatives.
These opportunities are intact, but require increased patient care, and we believe they represent real prospects for growth as clients rapidly adjust to the new environment.
Regional performance was mix reflected increased vacation impact over prior year and the increased choppiness and client demand. Despite these two factors veracity calcium our central U S demonstrated solid growth over prior year quarter.
Additionally, our international business showed resilience, as Europe generated sequential growth on a constant currency basis, and Asia Pacific posted strong results. Despite the first fully celebrated Chinese New Year since the outset of the pandemic.
Our strategic climate accounts program was also affected by the broader trend, but it has performed well overall on a year-to-date basis, growing approximately 4% over the prior year.
Overall, we have performed solidly through the first three quarters of the year growing by about 6% exclusive of the divested task force business on a same day constant currency basis, and our gross pipeline continues to be sizeable.
Hesitation requires.
More patience and persistence with respect to the top of the funnel activity, as well as extra vigilant communication in consideration while shepherding opportunities through the sales cycle to deal closure.
The overall market opportunity remains as companies continue to transform and build workforce plans, accounting for a distinct transition in labor force mindset towards flexibility and choice.
The pace of required change and the alteration in employee mentality are significant, permanent shifts framing each company's future workforce plan.
A movement toward co delivery of important initiatives had already begun and now are resetting our plans through the lens of reductions in force will likely require many to lean in more agile partners.
Speed and flexibility are essential in order to right-size workforce planning, seamlessly run day-to-day operations,and transform for the future.
We know this provides a runway of opportunity for us once companies re-baseline their plans.
Due to upside in the future, but timelines are really driven by clients as they carefully rationalize and build for tomorrow.
There are two examples of work with Fortune 500 technology clients that help us illustrate the current mixed environment.
One of our clients long ago transitioned to a plan centered around a more fluid workforce.
<unk> transformed during the current environment, and it started to rely on us more broadly for support.
The reason for this reliance is the investment we've made in understanding their business, the organizational structure, and their culture. Key client relationships built over time, coupled with fast-moving trends we are currently seeing, have provided immediate opportunities for us both in the on-demand talent market itself and as our buyers prioritize value in their purchasing decisions.
In recent weeks, we have been invited to bid on several RFPs, enjoying a successful outcome.
This represents substantial movement in our ability to win share from larger consultancy within this longtime clients and reflects the renewed flight to value.
On-demand staffing within the client continues to grow as stakeholders work hard to fill gaps and move away from low-staff arrangements with larger companies. In fact, we are directly collaborating with our client's global procurement team to build a resourcing plan for existing and forthcoming initiatives associated with it.
Philosophy within this client is growing, and we expect to continue taking shares, planning to trust and to help them with their most important initiatives.
Other clients was agile workforce plans are less mature will have longer timelines for adjustment.
As an example, another one of our Fortune 500 technology clients has gone through multiple rounds of layoffs during their strategic reorganization.
Blackburn over higher during the tight labor markets and are now sorting through where best to utilize the remaining time COVID-19.
These periods of uncertainty attrition rises and initiatives or pause as a result, even though some projects that were won in many of the pipeline have been delayed.
Our stakeholders are extending our existing teams as they do not want this approved resources, but they will likely need a class waterfront.
Mackenzie, on this side of our business in the third quarter, we continued to attract and retain exceptional talent to our platform. It is viewed as an increasingly appealing option because of worker sentiment and economic.
As companies announce restructurings and lay off more people, they begin to realize that there is very little difference in stability when comparing agile and traditional employment.
In fact, the strength of community and Hugo-first culture has always been at the center of the Argentine value proposition, and it does not waver during turbulent times, unlike many traditional insurers. We have numerous examples of impacted workers seeking to work with us, including alumni and a large cadre new to our platform, bringing new skill sets and experience to our already diverse team.
Deep employee.
The labor market remains tight, and project start dates are fluid, which impacts engagement timing - an interesting dynamic that our talent must manage.
Through it all, the consultant attrition rate has remained relatively consistent, which speaks to the excellent performance of our team and the strength of our employment brand.
We believe that the unique current conditions will only accelerate recent employment trends and make RCP the premier destination for talent that is starting to work differently.
In the past, I've spoken of Boomerang alumni who have left our GPU over time and returned, realizing that in reality, the graph does not get greater and that the experience of working within our community is hard to replicate.
We worked hard to stay very close to our consulting and alumni, and it is apparent that many people want to return after seeking the allure of traditional employment.
Some of it impacted by restructuring, but many return once because of the experience we provide.
Just one example, we have three consultants working together on a project for a financial services client left separately to pursue different traditional opportunity.
All three returned during the quarter, largely because of the royalty left. We're not as rich in terms of experience and culture, and they miss working with our go-to-market team.
All of them, all of them are engaged in different projects and are happy to be back with our GP.
Now, let me turn back to our third quarter operations. In addition to the gross pipeline remaining at a high level, we were able to make continued progress in pricing, excluding divested task force operations. Bill rates increased by 3.1% on a constant currency basis compared to the prior year quarter.
Pricing leverage continues to be an opportunity across the enterprise, as clients trust our consultants, and that trust is at a premium.
Project timing will continue to be a challenge, and it is impacting weekly revenue in the early fourth quarter. However, we believe there is revenue upside based on the deals in the pipeline.
Finally, let me touch on operational leverage in Q3. We continue to focus on controlling fixed costs and operating efficiently, resulting in a strong EBITDA margin, particularly given the economic environment. We will remain especially vigilant about discretionary spending through the fourth quarter and beyond. I will now turn the call over to Jim for a more detailed review of our third-quarter results.
Thank you, Tim, and good afternoon, everyone.
In this quarter, we achieved revenue performance exceeding the high end of our outlook range. We also attained the highest third-quarter gross margin in over a decade and remained disciplined with our costs, performing better than the favorable end of our new run rate SG&A outlook range.
We outperformed our top-line outlook range provided in January compared to the prior fiscal year, which had elevated revenues as claims emerged from the pandemic. Revenue of $186.8 million for the third quarter was down 4% year over year on a same-day constant currency basis, excluding the task force. However.
Year-to-date revenues grew by 6% year over year on the same basis.
As Tim mentioned, our pipeline remained strong throughout the quarter, and we've experienced cancellations.
We continue to make good progress on improving bill rates align our pricing with the value we deliver.
Our US average bill rate rose by 4.7% compared to the third quarter of fiscal 2022, with Europe and Asia-Pacific driving an 8.4% and 6.3% improvement on a constant currency basis.
Regionally, on the same day and constant currency basis, North America revenue decreased by 7% compared to an extraordinarily strong prior fiscal quarter, while APAC grew by 8% and Europe, excluding task force, grew by 3%.
Bright spots in North America included Gravity and Kelsey both growing year over year.
Part of the region grew primarily due to strong demand from our strategic client account in Southeast Asia, as well as excellent revenue performance in Japan.
After experiencing a softer first half of this fiscal year, exhibited better stability following the onset of the Russia-Ukraine conflict a year ago.
Gross margin in the quarter was 38.3%, an expansion of 80 basis points over the same quarter a year ago, driven by an improvement in the pay bill ratio of 190 basis points, partially offset by an increase in consultant benefits.
Excluding path for enterprise average bill rate for the quarter was $131 constant currency.
Mm $127, a year ago, while average pay rate remained flat at $62.
Turning to SG&A.
We remain disciplined in cost management and investment oversight in the business.
Run rate SG&A expense for the quarter was $55 million compared to $54.4 million a year ago, better than the favorable end of our $56 million to $58 million outlook range.
As a reminder, primary SG&A excludes non-cash stock compensation, restructuring charges, contingent consideration, and technology transformation costs.
With stronger pricing leverage and disciplined cost management, we delivered a solid 9% adjusted EBIT margin for the quarter.
Turning to liquidity, we continue to demonstrate our ability to generate robust free cash flow from operations. Through the first three quarters of the fiscal year, cash was $64 million.
Free cash flow conversion was 100% of EBITDA, equating to $63 million.
We ended the fiscal quarter with $104 million in cash and cash equivalents after fully paying down the $20 million remaining outstanding debt.
<unk> $4 $7 million of dividends and spending $5 $2 million in share repurchases.
With total available financial liquidity of $278 million.
We plan to invest in the most critical areas of the business to drive long-term growth, while continuing to return cash to shareholders through dividends and by opportunistically buying back stock through our share repurchase program, which had $549 million available at the end of the quarter.
Investment in our multi-year technology transformation projects continues to progress.
<unk> on track.
We incurred $39 million of costs in the quarter, of which $22 million was capitalized, and the remaining $17 million was included as non-run-rate operating expenses for the quarter.
Estimated cash outlay for the tree.
The transformation project in the fourth quarter is expected to be in the range of $4 million to $6 million.
Of which approximately $2 million to $3 million will be capitalized.
Upon going live, we anticipate that the new technology platform will drive long-term value for the business by elevating our operating efficiency, enabling scale, and enhancing the stickiness of our talent platform.
And I'll close with our fourth-quarter outlook.
Early fourth-quarter revenue trends have been modest compared to Q3. We expect the fourth quarter to be impacted by the general slowdown in the economy and estimate revenues to be in the range of $178 million to $183 million.
While clients sort out their own internal initiatives and budgets and look for better economic visibility, we will continue to maintain a robust sales motion and strengthen our position to close opportunities in the pipeline.
Fourth quarter gross margin is expected to remain strong in the range of 40% to 41%.
On the SG&A front, we expect our run-rate SG&A expense to be in the range of $56 million to $58 million.
The non-run rate of non-cash expenses for the fourth quarter will consist of $2 million to $3 million of technology transformation costs and approximately $3 million.
Compensation expense.
As we approach the end of fiscal 2023, we expect our full year results for the second year in a row to be one of the best years in over a decade, notwithstanding what has been an uncertain and challenging environment.
This is a testament to our deep client relationships.
Back to talent platform and a laser focus on execution.
We're excited about our business fundamentals and opportunities ahead.
With a resilient variable cost model, a pristine balance sheet with zero debt, and ample liquidity, we believe we are well-positioned to continue driving long-term value for our shareholders.
That concludes our prepared remarks, and we will now open up the call for Q&A.
Thank you, ladies and gentlemen. If you'd like to ask a question, please press star one on your telephone. To ask a question, please press star one. One moment, please.
Our first question comes from the line of Mark Marcon of Baird. Your line is open.
Hey, good afternoon.
Thanks for all the details on the call today. I'm wondering, can you talk a little bit about what you're seeing just in terms of the client delays?
And to what extent do you feel like there.
Either concentrated on the coasts.
Partially due to what we're seeing on the on the credit side wondering if you or do you have any commentary there.
Hi, Mark it's Tim.
Yes, I would say.
There has been some concentration related to delays on the coast because the coasts are largest businesses generally.
Also on the West Coast, where we work with the tech sector, we've seen probably more delays there this year than we've seen historically.
But I would say that it is.
Broadly speaking.
Delayed projects.
Number of reasons around Covid.
Once we have numerator the scripts are or not.
Not just on the coast, we're seeing it more broadly, but because of that, like I said, due to the concentration of work that we have on the coast, we probably see a slightly heavier concentration there.
Tim, what's the commentary from the clients just with regards to?
Is there uncertainty in terms of?
Financing levels, particularly be interested just in terms of what percentage of the business is currently being done with.
Relatively.
Younger tech companies.
It might have been funded by SPP as an example.
Yes, I mean, most of our business has a heavy concentration of our business with bigger clients in the Fortune 500. So, we do work with some earlier stages.
Didn't have a lot of impact, so delays weren't really affected by FCB, other than, I think, some periods of uncertainty, when everybody was concerned about the broader economy.
I think the reason for delay.
Yes.
Ed.
But I think.
I would put it in a couple of different camps. One is.
There is just increased scrutiny on all projects right now, generally.
And number two.
There were a lot of companies who are figuring out.
They are trying to support their workforce plans right now, many of them, and I.
I alluded to this in the script and over-hired.
Now trying to figure out what they're going to do with some of their traditional employees, either with the unknown, who have been reorganized, or with priorities that have shifted. That's really causing a lot of the delay.
Not really doesn't it doesn't have a lot to do with the.
The credit crisis-related SPV.
Really appreciate that color in terms of the delays how long I mean, it's obviously lower than our to stay but.
Do you think it's, you know, maybe a three-to-six-month process in terms of working through those delays? What are you hearing from clients, just in general?
From that perspective, in terms of when they feel like they'd be confident about proceeding with that.
Some of the many useful projects that you could help them with.
You've got a kind of mix.
And there's, I think there's, a little bit, just to be honest, some stops and starts relative to approval processes.
I would say that the.
Opportunities that kind of stay within our pipeline, where we're really ensuring that these are projects that are going to start, that we think we're going to start versus get canceled, and we've seen very, very few get canceled at all. I would expect that we would be able to start in that timeframe that you are talking about. We don't have very many that have, that are <unk>.
<unk> out to the latter end of that range.
Great, and then great job with regards to the adult Grace, but how much more room do you think you have there? It sounds pretty encouraging in terms of thinking about.
How it could end up being for the fourth quarter, although it.
Hi.
Jim, did I hear you correctly? 40% to 41% is kind of a guide for gross margin, right? 40% to 41%, correct.
Okay, so maybe slightly down relative to Q4 of 2022.
Yes, that's right, and that's, you know, look, I mean, the pay bill spread, we still expect it to be strong in Q4 compared to last year.
A look at our indirect costs just because the top line is down compared to last year. So, less discipline and unfavorable leverage are what's bringing down the overall gross margin.
Got it, but the bill rates are still expanding.
Or higher.
Great.
We believe we have more upside.
In our pricing and bill rates.
So, yes, I expect that our pay bill should be - we should be able to sustain, not included.
Terrific and then.
Okay.
You spoke about, you know.
Multiple growth levers, obviously, within the staffing industry, there's a lot of discussion with regards to these talent platforms.
And what you're doing with Hugo.
Within that can you give us.
You know, a little bit of a sense for how significant you think it could end up being over the next two to three years in terms of.
Potential revenue - I know it's early days, but just how are you thinking about it? How is the board thinking about it in terms of the investment?
Yeah. So.
With these platforms.
There is a hockey stick effect. So if you look at you know the most successful platform in the marketplace today and staffing is in health care staffing and so healthcare is one very familiar with.
Yeah, but if you look at their growth, I mean, they started small and now they're over 11 billion. So you do see that hockey stick effect. Once you get critical mass and you've driven behavioral change, and that's what I think is just ahead of us. So this next fiscal year.
It will be focused on critical mass economies of scale, really delivering in the three markets where we're already focused, and that's important, Mark, because.
We're all reading about the return to the office for some roles, and we do believe it's important to have more localized talent pools for some of this work if onsite delivery is required.
But.
Overall, going to your question, what we're modeling is modest growth in the year ahead, but then continuing to.
Scale more like a hockey stick approach, especially as we invest more in digital marketing and sales support.
And how many.
Many markets - you're currently in three markets.
Many markets could you be in <unk>?
At the end of the next fiscal year, so fiscal 'twenty-four.
Well, like I really said, I think we're going to concentrate first on getting.
To critical mass in the markets we're operating in now.
It takes about three months to build a quality talent pool in a new market.
We'll share that with you, you know, we're doing it both with.
Dedicated onshore talent, but also with an offshore partner.
So if.
We can scale up pretty quickly once we establish that we've achieved critical mass in the markets we're in right now.
Great and then.
Obviously, there are all sorts of macro questions that are out there.
We want to go into a mild recession. What do you think the downside would be with regards to EBITDA margins? You've done a nice job of it.
Getting them up over the last couple of years.
How should we think about
What your flexibility is from a cost perspective, if things get a little bit worse.
Right well I mean, our model that's what we love about this model in times of transition is that it is very agile.
And that 80% of all.
70% of our cost structure.
It's variable, so keep that in mind; now the part that is not variable. We'll continue to look at very critically if we see revenue continue to decline or decline.
We're quickly because of a recession, but keep in mind. If you ask me overall, how I think about the business, I think it's a matter of timing right. Now, I think we are so well positioned with our clients.
To deliver what they need, it's a matter of timing because even in a deeper recession, as we saw coming out of the last recession, clients cut too deep.
And then they need to turn to us before full recovery in order to get work done that is non-discretionary.
So to me that the challenge to the business.
Right now its timing not opportunity.
I appreciate that, thank you.
Youre welcome. Thank you Mark.
Thank you one moment please.
Our next question comes from the line of Stephanie <unk> of J P. Morgan Your line is open.
Hi, good afternoon.
I was wondering if you can help us with the implied revenue decline in the fourth quarter guide, compared to the 1% decline in the just-reported third quarter.
Yeah, sure. Hi, Stephanie.
Fourth quarter at the top end of the guidance range of 183, we are looking at about 12% year over year decline.
And compared to the third quarter, you're looking at about an 8% decline. So let me just, again, right.
If you think back to Q4 of last year, it was an extraordinary quarter, and our revenue cadence over the two fiscal years has flipped a little compared to last year.
We're accelerating throughout the entire year, and on a year-to-date basis. If you look at where we were guiding.
Essentially flat to last year on a on a if you were to exclude task force.
Okay, great! That's super helpful.
I know Keith you just gave a bunch of color on Hugo, but we were wondering if you have any preliminary information to share on how many active user candidates are already on the platform.
Yes, so we have <unk>.
Strong adoption from the talent base.
We have.
We're not disclosing that level of detail yet, Stephanie, because it's still a growing platform. So, I don't want to set expectations while we are still learning.
We have <unk>.
Captive pools in each of the three markets that I would say are approaching critical mass.
And have proven to be very sticky in our turnaround times are really improving in terms of of matching opportunity with talent. So you know we'll continue to monitor this and then as the platform becomes more successful and stable will be sharing more detail.
Okay. Okay, great. Thank you.
Youre welcome.
One moment please.
Our next question comes from the line of Marc Riddick at Sidoti Mr. [unknown]. Your line is open.
Yeah.
Oh, hi, good afternoon.
Okay.
So it was sort of want to follow up on that last question around Hugo as far as you made mentioned on some some early learnings I was sort of curious as to maybe you know.
Could you talk a little bit about what some of those learnings are, as well as if there is much in the way of differentiation between the three markets? Is what you're experiencing in these early days similar across the board, or are you seeing any differences that are somewhat regionally based? How should we think about that?
Well, I think you know, we're really focused on technology targets in the Tri-state area, as well as financial services and private equity.
The needs in terms of a skill set perspective from a role are a little different than what we'll see in Texas, for example, or Southern California, I can tell you. The most sought-after title that we're seeing on Hugo so far is staff accountant.
It shouldn't surprise anyone, especially given the fact that you know that.
That skill set is in demand in the marketplace.
But in New York, for example, we've seen a lot more around fund accounting and that's just the.
Functions of financial services, and the type of clients we're targeting there.
I think theres still in terms of the learnings Mark.
It's really about tracking.
Usage on the platform, such as identifying inflection points where someone might drop out of engagement and trying to understand why so we can draw them back in. You'll see at the start of the calendar year, we'll be launching some new land.
Landing pages that.
Our design too.
Engage with more information.
Uh-huh.
So we don't lose people at different stages.
The learnings we got from clients have been really favorable, I would say.
Very efficient.
They like the functionality they loved the $24 seven access to be.
And be able to move forward on there.
Project engagement has received some feedback on the scheduling component of the app, I mean, just all sorts of elements of the experience that we're continuing to improve.
That's really helpful. And then I wanted to go back to the prepared remarks, one of the things you had mentioned in the prepared remarks is around having a seat at the table with your customers and I'm sort of curious as to whether or not the <unk>.
Feedback and some of the areas of concern have changed much.
Maybe overload, maybe since the beginning of the year or over the last six months or so, as far as we can understand. Obviously, the delays.
Longer cycles and the like, but I was sort of curious whether things like the pace of returning to our office in person or anything like that have made an impact.
The adjustments to maybe where they thought things would be, maybe a few months ago.
Hey, Mark.
First of all.
Talk about a seat at the table, which Ken alluded to in her remarks.
I would say that.
What that meant for us in the places where we have strong relationships across our client base and they know us, we're actually being able to ladder up opportunities to be able to do more in the consulting. Ralph and I talked a little bit about that.
In terms of returning to work and some of those types of things, I don't think that has really impacted the demand environment for us.
That doesn't necessarily lead to delays. There are certain industries and certain geographies where that has been more prevalent, and we have to react to that.
But the kind of big, overwhelming factor that has led to delays and those types of things.
Pauses have cut has come just from the general uncertainty in the macro.
To deal with some of the some of the specific things around.
I think that came out of Covid.
Okay, and then last one for me and I know this is a little squishy, so I apologize in advance.
We've seen various.
Thoughts around the workforce and changes in the workforce over the last couple of years.
Are you seeing much in the way of changing demographics or changing?
Age ranges, or is there anything meaningfully different in the and sort of bigger picture demo.
Use with your client pull today than it was maybe a couple of years ago. Thanks.
I would say, let me just offer something that's different from, say, the last recession in 2008.
We're seeing I think a younger generation of talent wanting to work and this project based or agile model, whereas you know 10 or 15 years ago, there was too much uncertainty or viewed as too much uncertainty or in security in the model and I think that's completely.
<unk> today.
I shared a little bit of a survey result from MBA partner in my prepared remarks, but.
We're really seeing more of the rise of <unk>.
Part-time.
Working and also people who want to work in a more flexible way, and that's across all demographics.
There was a recent article, I think it was just this weekend or maybe Friday, in the Wall Street Journal about the rise of part-time.
Work at all levels.
Professional talent and that.
Matches our experience.
Excellent. Thank you very much.
Youre welcome Mark Thank you.
One moment please.
Our next question comes from the line of Mark [unknown] of R. W. Baird. Your line is open.
Yeah.
One moment please.
I'm showing no further questions at this time. I will now turn the call back over to Kate McShane for any closing remarks.
Thank you operator, thank you everyone for joining US today, we'll look forward to giving you a further update on the business at the close of Q4. Thank you very much.
Thank you, ladies and gentlemen. This does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.
Okay.
Okay.
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