Kforce Inc (KFRC) 2005 Q2 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Second Quarter Kforce, Inc. Earnings Conference Call. [OPERATOR INSTRUCTIONS.] I would now like to turn the presentation over to your host for today’s conference, Michael Blackman, Vice-President of Investor Relations.

Thank you. Good afternoon, and welcome to the call. Before we get started, I would like to remind you that this call may contain statements that are forward-looking. These statements are based on current expectations and assumptions, and are subject to risks and uncertainties.

Actual results may differ materially, because of factors listed on Kforce’s Form 10-K, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements. I would now like to turn the call over to David Dunkel, our Chairman and Chief Executive Officer. Dave?

Thank you Michael. You can find additional information about Kforce in our 10-Q, 10-K and 8-K filings with the SEC. And welcome to all of you, and thank you for your interest in Kforce. Joe Liberatore, our Chief Financial Officer, will provide insight into our financial results and guidance for the third quarter. Bill will provide his insight and comments. And then I will conclude. Joe?

Thank you Dave, and thanks to all of you for your interest in Kforce. Positive operating trends for the firm continued in Q2, as total revenues, search revenues, gross margins, and operating expenses as a percentage of revenue all again improved.

We believe these continued improvements and corresponding strengthening of our revenue generating capabilities were flat, a return on the investments we’ve made over the last few years, and our focused approach to specialty staffing in our areas of expertise. We believe we’ve built a firm that is nimble, and very responsive to this rapidly changing business and economic climate.

Net income for the quarter was $5.7 million or $0.14 per share, which exceeded our guidance of $0.11 to $0.13. The system in comparison with prior quarters, as a result of the firm beginning to book income tax expense in the first quarter of 2005, is useful to look at EBITDA, an indication of cash earnings per share. EBITDA for the second quarter was $12 million or $0.30 per share, versus $8.1 million or $0.20 per share in Q1 2005, and $1.8 million or $0.05 per share in the second quarter of 2004.

We are very pleased with EBITDA sequential growth of 48%, and year over year growth of over 500%, and believe it is an indication of improving operating leverage. Total revenues of $198.5 million were up $46.3 million, or 30.4% over Q2 2004, and $5.6 million or 2.9% sequentially.

The firm continues to make progress improving its gross profit percentage. Our gross profit percentage of 32.3% improved 120 basis points from 31.1% in both Q1 2005 and Q2 2004. Our flex gross profit percentage of up 27.2% in Q2, improved from 25.9% in Q1. The improvement was driven by the reduction in payroll related taxes, and an improving spread between bill rates and pay rates in all three business segments. We attribute this improvement to our continued focus on pricing, client mix, and business mix.

Flex GP percentage is not 90 basis points higher than a year ago. Our highly profitable search business, which increased for the seventh straight quarter, and is now 7% of revenues, also contributed to the improvement of our gross profit percentage. We continue to see improvements in the spread between bill rates and pay rates, and we are optimistic that the improvements will continue.

The firm also continues to exhibit operating leverage through declining operating costs as a percentage of revenue. Operating expenses decreased 60 basis points, to 27.4% in Q2 2005, from 28% in Q1 2005, and decreased 320 basis points year over year. This decrease is attributable to continued scrutiny of all controllable costs, including the management of our accounts receivable portfolio, which had only 4.4% of all receivables past due more than 60 days, and a DSO of 31.8 days.

Our expectation of continued improvements in operating efficiency, coupled with careful management of sales performance metrics, will allow us to increase hiring of sales and sales support personnel, and continue to make significant investments in our internal front and back office IP systems.

We expect these investments to drive productivity and exceptional customer service, with minimal impact on profitability. We expect operating expenses to remain below 28% of revenues through 2005. Productivity levels in our sales force reached an all-time high in the firm’s history. In addition, revenue per employee is increased 20.5% from a year ago. The quality of the revenue stream also continues to improve, as gross profit per person has improved more than 25.3% in the same period.

We continue to maintain a conservative balance sheet, and build liquidity. Our strong cash flow funded $5.9 million of repurchased owned stock during the quarter, and $3.9 million in capital expenditures during the quarter, while still reducing the outstanding balance on our credit facility by $5.5 million.

At the end of Q2, bank debt was $30 million, compared to $35.5 million at the end of Q1 2005. The firm repurchased 751,000 shares during the quarter. This brings our total share repurchase to 20,368,096 for Q1 1999 through Q2 2005. The firm’s total stock repurchase through Q2 2005 of $114.9 million, for an average price of $5.64 per share, has created $85.2 million of shareholder equity, and market closing price today of $9.82.

During the quarter, the Board of Directors authorized an additional $20 million under our share repurchase plan, which leaves $20.1 million remaining authorized under our share repurchase plan. At the end of the second quarter, 38,329,000 shares were outstanding. We expect the level of capital expenditures to decline to approximately $2 million in Q3. Total year expenditures may be $8-10 million, as we continue capital investments focused on improving the order to cash infrastructure, including implementation of our back office upgrade project.

Looking forward to the third quarter, we expect to continue to realize the benefits of the leverage in our operating platform. We believe revenues may be in the $200 million to $205 million range, and earnings per share for Q3 up $0.14 to $0.16, which reflects approximately 40 million weighted average diluted shares outstanding.

In summary, our balance sheet remains strong. And we are actively managing our operating platform, to optimize results. We believe we have assembled a talented team of great people, that will continue to deliver great results. I would like to now turn the call over to Bill Sanders, our President. Bill?

Thank you Joe. We continue to see sustained broad-based success in revenue growth and profitability, and remain optimistic about the quality in market demand drivers of our revenue stream. The success of our business is also dependent on our ability to attract qualified candidates. We see the supply/demand curve as shifting back to the advantage of the candidates in most of our business units.

We provide the skilled professionals our clients demand in technology, which represents 47% of revenues; finance and accounting, which is 30%; and health and life sciences, which accounts for 23% of second quarter revenues.

As we look at our flex business, we are pleased to note that all business segments experienced both sequential and year over year revenue growth in the quarter, led by our HLS segment, which grew 4.2% sequentially, followed by technology at 3.5%, and finance and accounting at .7%. The HLS growth was fueled by another strong quarter of growth in our clinical research, nursing and non-nursing businesses. On a year-over-year basis, technology flex grew 30%, F&A flex reported 2.9%, and HLS grew 16.8%. End of quarter billable (FTEs) (ph) were up sequentially, and up 8.6% from Q2 2004.

Search revenues increased for the seventh straight quarter. And they were up 3% sequentially, and 40.8% year over year. Search revenues continued to gradually improve, and represent 7% of total revenues. We remain positive for our continued ramp in search, and continue to strive for a mix between 10-15% of total revenues during this cycle. The summer months are traditionally a slower quarter for search, as a result of vacations in many of our largest search markets. And thus, we are cautiously optimistic for the third quarter.

Now I’d like to provide you some additional insight on a business unit basis. Total revenues for technology, which is our largest business unit, comprising 37% of firm revenues, increased 3% sequentially. Gross billable hours were up 2.8% sequentially. Bill rate was up, and flex margins increased from 24.4% to 25.9%, primarily as a result of less Q2 payroll related taxes, and bill and pay rate improvements.

On a year over year basis, hours were up 21.2%, and flex margins improved 110 basis points. We see the market for technology staffing continuing to improve, especially in the higher end roles, which should continue to drive margin improvements. We expect technology revenues in Q3 to improve over Q2. We also expect the spread between bill rate and pay rate to be stable to improving, and for margin to also be stable to slightly improving.

Total revenue for finance and accounting, which comprises 30% of firm revenues, improved 1.5% sequentially, and has increased 41.1% year over year. F&A flex increased 7/10 of a percent sequentially, and increased 42.9% year over year. Flex margins were up sequentially by 130 basis points.

Finance and accounting search continued its positive trend, and grew 7.1% sequentially, and 30.5% year over year. The demand for F&A staffing remains strong. And cyclical trends remain positive. We expect F&A to be up in Q3 as a result. And we expect positive momentum in the third and fourth quarters as a result of Sarbanes-Oxley and its ripple effect on our clients.

Our third business segment is health and life sciences, which represents 23% of revenues, and has been our most consistent revenue grower, growing sequentially for the past seven quarters. Clinical research staffing or CRS is now almost 40% of the HLS segment, and is well positioned for growth. CRS is a highly project-based business, that provides solution to the clinical research areas of the FDA approval process, to pharm, bio-pharm and medical device clients.

CRS exhibited sequential growth of flex revenue in Q2 of 4.2%, and year over year growth of 26.7%, and is expected to grow once again in Q3, as we continue to penetrate existing clients, and successfully on-board new clients.

Revenues for our healthcare nursing unit improved 3% sequentially in Q2, and had increased five of the last six quarters, despite the difficult conditions currently being experienced in the staffing space. We continue to focus our nursing business towards long-term contract assignments, with placement of RNs to primary healthcare facilities.

We believe we continue to make progress in this business, particularly through the utilization of international nurses. We expect the nursing unit to continue to outperform its peers in this industry, although we may be affected by seasonal slowdowns in Q3.

Our largest sequential revenue growth in Q2 was in our non-nursing or health information management group. HIM increased 9% sequentially, and is up 27.4% year over year. The demand for those services is steady and promising. HIM revenue is expected to grow sequentially in the third quarter.

The scientific staffing group revenue declined sequentially, as we shed some low margin business, and was flat on a year over year basis. We continue to maintain a cautiously positive outlook for this business unit, as a result of improving scientific and lab professional demand. However, growth may be choppy.

Sales associate productivity is at record high levels. The actions taken in the second half of 2004 to recruit sales associates has borne fruit, as exhibited by the increasing search activity. We believe that ample demand exists in the market for our services in both search and flex. We plan to continue to add and reinvest in our sales associates, with an eye toward calibrating our profitable revenue growth.

We also plan to provide them state of the art systems and sales support, to ensure that they can offer the best candidate in the shortest time possible. Our formula is to hire and retain great people, and provide them the highest quality training and tools, in order for us to maximize our productivity.

I would also like to take note of a significant operational achievement. After more than a year of preparation, on April 18, we rolled out a new state of the art sales automation tool that is now a front-end system for the entire firm. It has been well received, and the rollout was very well done.

As for revenue trends, the first two months of the second quarter were flat from March levels. But activity started to ramp in June. July weekly activity has continued to accelerate with the week ended July 24 being the strongest week for flex revenue in the firm’s history. This strength was exhibited across all business segments. We have also seen a promising start in our search business, but remain cautious as this revenue stream is typically weaker in Q3.

In conclusion, over the last 18-24 months, we have witnessed a number of revenue growth fits and starts. We have seen higher revenue highs, and higher lows with each movement. We anticipate this strong beginning to the third quarter will provide momentum at least through the fourth quarter. We believe the trend is our trend. And we remain optimistic about our near-term performance, and look forward to continued long-term revenue growth and margin expansion, as our talented field team utilizes state of the art tools that promote quality execution.

We will continue to manage the business with a focus on improved profitability, and making appropriate investment to continue revenue growth. Thank you very much for your continued interest in Kforce. And now I will turn it over to our CEO, Dave Dunkel.

Thank you Bill. Second quarter was a very good quarter for Kforce. I also know that many of the people listening are with Kforce. So therefore, on a personal note, many of you know that yesterday was my 25th anniversary with the firm. It has been my privilege to have served during this time with such great people. To watch us grow to this point today, reporting almost 185 million in flex revenue, the best ever, is awesome.

And then, to top it, this last week being the best flex week ever, is inspiring. Our firm has never had more talented people. My thanks go out to our leadership teams, and field associates. I believe we are poised to out-perform, both in the short-term and the long-term. We’d now like to open the call up to questions.

[OPERATOR INSTRUCTIONS.] Mark Marcon of R.W. Baird.

Good afternoon, and congratulations on a nice quarter.

Thanks Mark.

I was wondering if you could comment with regards to the bill rate trends. In particular, in F&A in flex, you had a fairly significant increase in terms of the average bill rate. I was wondering if you could talk about what’s driving that, particularly in a quarter that’s supposed to be seasonally weak.

Yeah, there’s several things in that question Mark. One, overall, the firm had a $0.95 rate per hour bill rate increase, (and were paid with that) (ph). We’re doing a number of different things. We’re making sure that we are servicing those clients that value our proposition. And therefore those clients where there’s very low margin, and we do not believe there’s proper valuation to our services, we are no longer doing business with those types of clients.

Secondly, there are a number of projects that have come along -- finance and accounting in particular -- where we are doing higher rate work, and therefore not only the mix of clients, but also the productivity and the business mix is working out such that it’s favorable for us. But I will tell you, this is a firm wide proposition that we are working very hard to make sure that we are getting the appropriate people that, in our particular class/expertise out there. And it’s a higher value right now.

Great. And as a follow-up to that, can you mention or talk about how much business you may have walked away from in order to accomplish that?

Well, it’s very difficult to put an exact number on that. I will tell you there are some larger clients that had low GP margins, that is less than 20%, that we have walked away from. There’s a couple of them that are quite substantial.

Great. And then can you talk about the monthly trends? You had talked about the overall monthly trend. I was wondering, on the IT side, if you could comment with regards to the monthly trends.

Monthly trends, from a -- let’s see.

On the flex side.

On the flex side. Well I’m looking at, let’s see, April, May, June. April and May were flat. June was up. It’s just a little difficult. Our accounting is on a 4, 4, 5 week. So the fifth week is a little bit more anyway. But if I were to look at it on a billing day basis, we were down slightly in April from March. We were flat in May. And we were up in June. July, we are, for the first few weeks, we are up substantially.

Great. Thank you. I’ll come back with some follow-up questions.

Okay. Thanks Mark.

[OPERATOR INSTRUCTIONS.] Toby Sommer of SunTrust Robinson Humphrey.

Congratulations. Outstanding quarter. It’s great. I have a question regarding your cash flow. You’re obviously generating quite a lot, and it’s giving you opportunities to invest in both the business, and in your own stock. Could you comment on what you see the uses of cash are going forward?

Toby, this is Joe Liberatore. Yeah, we had about $14.1 million of cash from operating activities in the quarter. And we’re going to continue to look at cash from an AR perspective, as well as based upon what levels we see the stock in the market, from repurchase, as well as we start to look into the future, as well as current state, pay down debt, and potentially, from an acquisition standpoint, at some given point in the future.

Switching gears to perm, if I may, I may have missed in your prepared comments regarding what you see as the potential for perm as a percentage of revenue. But I was wondering if you could touch on that again, and maybe comment on a business segment basis, where you see the most opportunity to drive that growth.

Sure Toby. This is Bill Sanders. When you look at where perm is going, we have identified a range -- we have been as high as almost 23% back in the last cycle. We are 7% now. We believe that it is achievable in this cycle to get between 10% and 15%. We believe that is the optimum place to be.

That isn’t to say that if the cycle demands more of it, that we won’t give it more. We are building up our search practice. I think you know, we’ve mentioned that late last year we hired a significant number of search people. We have taken the time to train them and ramp them appropriately. And they are now producing, and will continue to produce as the tenure extends.

We are in the process of -- we continue to hire, and we are in the process of getting more aggressive in our hiring of search people, so that we can continue to pursue this 10-15% optimum mix that we are looking for. We had -- last quarter we had an outstanding tech search quarter. This quarter we were somewhat stable to down slightly from that outstanding production that we had last quarter.

This quarter, our finance and accounting search was up 7%. Our finance and accounting continues to be very, very strong. And we believe that will continue. The 70% year over year improvement in tech search, we believe, is where the growth really comes from, like ourselves. We have 47% tech.

Tech is getting off the ground. But it’s starting to be somewhat of a candidate shortage, that is starting to come into play. So we think there is a lot more growth in that particular area. HLS, search is a minor part of what they do. And it probably -- in the near future, we do not see it playing a more prominent role.

If I could ask one other follow-up, and then I’ll get back in the queue, regarding the head count that you have. Could you let us know how many people you’ve added relative to both your perm and flex sales forces, and maybe comment on the number of people -- excuse me, the capacity that a mature search individual would generate in terms of annualized revenue?

Well, because -- this is Bill. One, what a mature person can do certainly depends upon their training, their experience, and the tools they are provided. And so you get into a lot of different assumptions, and you get into theoretical rates can someone do. And every firm would be different, because it depends on how they look at GP. But can someone do 50,000 a week, or can someone do 25,000 a week, that’s very, very difficult. And it would be hard for you to compare apples to apples.

So we haven’t really got into those kind of numbers before, because of all the assumptions that might have to go into that. We can tell you that there are a number of factors that come into play for us when you’re looking at capacity. So it is the tenure of our people, which we stratify and look at very closely. We also look at the tools that we provide them.

For example, I just indicated to you that we just put in a new front end system, that we think is going to allow our people to be much more productive. And we are currently at record high production rates for our people.

Now how we extrapolate from our historical high rate to some theoretical performance level is difficult. But we certainly would think that, from some reasonable plate, that we would be at least, depending on turnover of people, somewhere in 75-80% of our reasonable productive performance per individual. Long winded answer. But that’s a very, very complicated question.

Thank you very much.

A follow-up question from Mark Marcon.

I was wondering, with regards to your operating expenses, you’ve done a terrific job in terms of maintaining it at a relatively flat level on a consolidated basis over the last three quarters. You mentioned that you are going to start investing again. And I’m wondering what order of magnitude should we look for in terms of an increase, in terms of SG&A?

Yeah, thank you Mark. This is Joe Liberatore. As we stated the last several quarters, our intent is to continue to operate at 28% or below. Here in the last several quarters, we demonstrated some of the leverage.

And some of that’s going to be driven by what happens in terms of mix, meaning if search were to start to pick up as a percentage of overall mix, we incur a little bit of additional comp cost there, as well as we’d obviously then want to take some of those profits being derived from that exponential growth, and drive that back into the front end of the cycle in terms of hiring.

So the best guidance that we can provide you is the guidance that we’ve really been putting out for the course of this year, which is our intent is to continue to operate through 2005 at below 28%.

Mark, Joe’s just being modest.

It seems like you’re well below 28%.

It’s our outstanding CFO. He’s just doing a killer job in keeping tight reigns on the finances of the firm, and driving operating leverage. He’s trying to be modest. But I’m not going to let him.

Okay. With regards to the IT trends that you saw in June, and continuing into July, in terms of things picking up, is it your sense that the overall market picked up? Or did your salespeople just kind of redirect their efforts into more approachable and receptive markets?

Those are hard to decipher that. I will tell you there has been no large projects that play into creating that particular situation. Whether it’s the overall market, or whether it’s simply our pipeline, and we’re executing well, or it’s timing, that’s difficult to say. Our general feel is that the market is picking up. We do have a solid pipeline, with now searching out the appropriate candidates.

So a lot of things are going well in tech, and finance and accounting, by the way. All of our segments -- to hit a record high not only for the quarter, and then to have the last reporting week, as I haven’t seen last week, but it’s the week before that, to be at a record high, we are hitting on all cylinders our productivity for the big OEM (and place) (ph). That’s for sure.

Okay. And then what should we use as the tax rate for the balance of the year? I thought we were supposed to be at 43% for this quarter.

Yeah, this is Joe. Where we were through Q2 is about 40.1%. That’s a rate that is our estimate at this point in time. Based on Generally Accepted Accounting Principles, we’re required to true up that estimate on a quarterly basis. And we had a pretty significant true up here in Q2, mainly attributed to -- we had, in our proxy, had an executive incentive bonus plan, which allows us to take advantage of 162(m) related to that. So that’s what’s causing that true up here in Q2. But on a move-forward basis, 40.1 is the best estimate we have.

That would be for Q3 and Q4.

Correct.

Right. And what do you think it will be for next year?

At this point in time, based upon what we see, we would assume it would be in the same range.

And share count that we should use for the third quarter?

Yeah, for the third quarter, 40 million. We were a little bit lighter in Q2. That was really driven by the dilution, because this stock price was at a lower level.

Sure.

But at the rates that we -- at the price ranges that we’ve started to move back up into, 40 would be the best estimate at this point.

Great. I’ll jump back in the queue.

A follow-up question from the line of Toby Sommer.

Two questions. If I could start with IT again, you mentioned exiting some of the less profitable large accounts in recent months. I’m just curious. Historically, and I’m sure that’s been a process where kind of the cycle starts to turn. You may exit some of the less profitable relationships. Do those accounts then turn around, because they have difficulty getting the services they require? And then does that -- ? Has that historically helped gross margins, kind of later on in the business cycle. I’m wondering if you could give us that historical perspective on how that works.

Toby, this is Joe Liberatore. We see customers cycle through stages all the time. Here recently, we haven’t seen many of the low margin customers really start to move on their margins that they’re willing to pay. I don’t believe the supply/demand has gotten to the point yet where we’re really starting to feel the pain, and not getting the quality candidates in.

So, but as that supply/demand continues to become constrained, at some point something has to give. So when we exit those accounts, we exit those accounts under good terms with those customers. For example, one that we exited out of last year, we transitioned all the consultants to a vendor that was continuing to work with that customer. And we handled that transition from a benefit, covering the gaps in the people’s benefits, so that it’s very transparent for the customer.

But again, we place a lot of emphasis on quality business, which I believe is reflected in our DSO, as well as the continued margin improvement that we’ve seen over the course of the last several quarters, actually going back several years, because at the end of the day, our sales associates only have a certain degree of capacity, which is really driven by the amount of head count that they’re supporting. And so the larger we can get those margins on each individual transaction, it increases our capacity, which obviously has a major ramification on the overall SG&A of the firm.

Thank you. And I’m wondering if you could give us the additions to the sales force, and what the base of the sales force was at the beginning of the quarter.

Let’s see. The total sales force is -- well, I’d rather not give you the total number. The total sales force is about flat end of Q1 to end of Q2.

So is it correct that you said perhaps maybe you were going to step up your hiring efforts here?

Yes, particularly in search. I think we’re going to get more aggressive in hiring. And as those markets that show that they have both the capacity and the capability and the market strength, we are going to be more aggressive in hiring in those particular markets as well.

If you were to think about the head count in search specifically, would that have been up in the quarter?

That would have been up slightly in the quarter. It was up -- I think -- I can’t remember the exact percentage. But it was up 36% or something in the second half of last year. We’ve spent a lot of time mentoring and ramping those people up, and doing just moderate hiring. And so quarter to quarter, search would not have been up. But over the late last year to now, it would be up slightly. I think we would be much more aggressive as we go into the second half of the year.

And lastly, your clinical business was up nicely. And I recall that you brought on a major pharma customer, not too long ago.

Yes.

What does the pipeline look like there? And do you think you have an opportunity to replicate that kind of deal with other customers?

Well, I wouldn’t say that there is one of those customers in the pipeline right now for us, because that was a pretty substantial improvement in that particular customer. Of course, when you do that type of volume, margins also contract somewhat. But we are on-boarding a number of relationships with other clients, that is making us very strong in this area. In fact, we believe we are the top national player in this particular staffing segment. So we have a pretty strong relationship right now, with a large number of excellent clients.

Thank you very much.

Thank you Toby.

A follow-up from the line of Mark Marcon.

I was wondering if you had the organic revenue growth by segment? Or, and also on a consolidated basis.

Well, I think the best way to answer that particular question is first, that segment is all organic, because there hasn’t been any acquisitions in there. We look, if you were to look at this, and you were to take this out of this particular quarter, for example, it would be $11.1 million that you would take out. And therefore, technology -- is this technology? Is this total firm? Total firm technology, if you were to take that out year over year, would be up 7.1%.

Great.

Search is all organic. I’m just talking flex. I’m sorry.

Right. Right. And then with regards to -- clinical research continues to do extremely well. Is there some point where you’re going to become capacity constrained in that part of the business? Or can you keep this up?

We certainly have an outstanding team here. And while we believe we are the top national player, when we talk to some of our clients and see what percentage of their total spend we have, we see that there’s room for significant growth, even among our top players. So there’s a number of strategies that the pharma companies employ to satisfy their clinical trial activities. And we believe that this group is going to continue to grow. We just have outstanding field talent. And we really are doing an outstanding job in serving those clients.

Okay. And then can you talk a little bit about the bill rates on the health care and nursing side? That was the one area where it went down a little bit. I was just wondering what happened there.

Okay. Let me make sure that I know exactly what you’re saying. So did you say nursing?

Right.

Okay. Nursing, that is made up of two different groups, basically two types of activities in nursing. We have the per diem nurses, and then we have the international nurses, that are on longer-term contracts. And that mix will affect the rate per hour. Generally speaking, the rate per hour on nursing can be somewhat smaller, if it’s a long-term contract than a per diem nurse. So it’s just basically mix. I don’t think that anything big is happening in that area, or different than from other quarters.

Okay. Thank you.

[OPERATOR INSTRUCTIONS.] [Paul Krieger] of [Situs] Investment Management.

I would like to ask you, you’ve put out some lofty forecasts for the end of this calendar year in terms of operating profits, where you can get to. Could you update us on that?

Paul, this is Dave. I think you’re referring to what I had put out as our stretch target, which we call the quest.

Yeah.

Clearly at this point, looking at where we are revenue wise, it’s going to be a stretch for us to make it. However, we never say never. The one thing that we did indicate was that we would not do an acquisition just to make that. We’ve maintained that discipline. Our focus is first and foremost in driving operating leverage and earnings. We’re not, at this point, ready to say that we won’t make our quest, which was $250 million run rate in the fourth quarter. But it’s certainly going to be a stretch.

On the earnings side, we’ve made a great deal of progress. Our goal is to be at a $1 run rate by the fourth quarter, $0.25. At this point, it’s in sight. But it will clearly be -- it would be a big stretch for us to get there. However, again, we’ll never say never. We’re going to continue to pursue that. And I think we’re going to get points for closest to the pin.

Alright. Thank you.

And at this time gentlemen, there are no further questions. I’d like to hand the call over to Mr. Dunkel for closing remarks.

Okay, well we’d like to thank all of you again for your interest in Kforce. And there are many of you that are rooting for me not to have another 25 years. I’ve got bad news. I’ll be here another 25 years. Thank you very much.