Good day, ladies and gentlemen, and thank you for standing by. And welcome to the Kforce Inc.'s Third Quarter 2011 Earnings Conference Call [Operator Instructions] As a reminder, this conference may be recorded. And now, I'll turn the program over to Michael Blackman, Chief Corporate Development Officer. Sir, the floor is yours.

Great. Thank you, good afternoon, and welcome to the Kforce third quarter conference call. Before we get started, I would like to remind you that this call may contain certain statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results may differ materially from the factors listed in Kforce's public filings and other reports and filings with the Securities and Exchange Commission. We cannot undertake any duty to update any forward-looking statements. I would now like to turn this call over to David Dunkel, the 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. We provide substantial disclosure in our release, and our hope is that this will improve the dissemination of information about our performance and the quality of this call. We are very pleased our record third quarter revenues of $289 million, as well as earnings per share of $0.22. These results represent year-over-year growth of 11.4% and 37.5%, respectively. All of our flexible staffing businesses grew sequentially on a billing day basis for the first time since Q4 2007, contributing to record quarterly Flex revenue of $277.1 million. Total Technology revenue of $165.5 million in Technology Flex of $160.3 million also represent high watermarks for those businesses. Staffing continues to perform differently in this cycle versus prior ones. We continue to experience solid growth in the tepid GDP environment. While the jury is still out long term on the Flex super cycle, the data increasingly supports that it really is different this time. We continue to see a recovery where a disproportionate amount of private sector hiring is being created through the temp sector, as 21% of job creation in this cycle has been through the temp sector versus just 7% in the last cycle. High skill niches and particularly technology jobs are very supply-constrained, as college-educated unemployment was just 4.2% in September. We believe these dynamics are significant contributors to the strength of our technology Flex business, which constitutes over half of our revenues. Additionally, continued uncertainty for the U.S. economy may result in clients increasingly turning to flexible staffing, which allows them to quickly adjust to this constantly shifting economic environment and the significant uncertainties surrounding regulatory, tax and health care reform. Many clients have confirmed that they are…

Thank you, Dave, and thanks to all of you for your interest in Kforce. We are very pleased to have a record revenues quarter. Kforce is committed to growing revenue and earnings. I n fact, providing exceptional synergies to our clients and consultants. During the quarter, we experienced broad-based strengthening in demand for our services. We were able to take advantage of our highly advanced sales and delivery platforms that leverages the combination of our field associates, strategic account executives and our National Recruiting Center to profitably grow revenue with both large and small clients. Tech Flex continues to have strong demand in the quarter, In Q3, we achieved record revenue in Tech Flex, which is our largest business unit, and represents 55% of total firm revenues. Q3 revenues increased 6.9% sequentially and 16.7% year-over-year. Our key performance indicators such as job orders and client visits remain the highest level, and fill ratios are improving, which reflects increased efficiency in prioritization of requisitions. The candidate pool for technology consultancy is very tight and particularly so for skill sets and demand such as Epic, Java and .NET. Maintaining a pipeline and finding candidates through passive recruiting and social media is a necessity. We expect sequential revenues for Tech Flex to increase on a billing day basis in the fourth quarter. Revenues for our Finance and Accounting Flex business, which represents 17% of our total revenues increased 1.1% sequentially and increased 8.1% year-over-year. The year-over-year growth is impacted by decline in activity and lower bill rate positioning, inclusive of the mortgage-related assignments, which constitutes approximately 18% of our F&A business and is very strong last year. This portion of our F&A business improved quarter-over-quarter, though we expect to continue to experience volatility in this area based upon changes on the housing and…

Thank you, Bill. Total revenues for the quarter of $289 million increased 5.5% sequentially and increased 11.4% year-over-year, driven by broad-based growth in our flexible staffing and government businesses. Quarterly revenues reflect the $277.1 million, increased 5.8% sequentially and increased 11.3% year-over-year. Search revenues of $11.9 million decreased by 2.6% sequentially and increased 12.4% year-over-year. Overall revenue trends in Q3 showed modest improvement in July followed by a flat August and a considerably stronger September. Sequential monthly revenues for Tech Flex improved each months throughout the quarter. Sequential revenue trends for FA Flex and HLS Flex were up in July, down in August, and then rebounded strongly in September. Search was slow in July but strengthened in August and September. Flex revenue trends for the beginning of the fourth quarter 2011 are up slightly from September. For the first 3 weeks of October, Tech Flex is up 16.1% year-over-year. Finance and Accounting Flex is up 8.9% year-over-year. And HLS is up 13.4% year-over-year. Search revenues are down 26.2% year-over-year for the first 4 weeks of Q4 2011. We caution that early quarter trends don't necessarily accurately reflect potential full quarter results. Net income of $8.4 million and earnings per share of $0.22 in Q3 2011 increased sequentially 24.5% and 29.4%, respectively, compared to Q2 of 2011. Year-over-year net income and earnings per share increased 31.1% and 37.5% from $6.4 million and $0.16 in Q3 of 2010. Our strong bottom line results are the result of a combination of revenue growth, gross margin improvement and SG&A leverage as scale increases. EPS in the quarter benefited by approximately $0.01 from the reduction in weighted shares outstanding from the prior quarter due to our significant stock repurchases during the quarter. Our overall gross profit percentage of 31.8% increased 20 basis points sequentially but…

[Operator Instructions] Our first questioner in queue is Paul Ginocchio with Deutsche Bank.

Just on the Tech Flex gross margin, can you talk about the q-on-q trends looking at both your VMS clients and your non-VMS clients just within Tech Flex, what are the gross margin trends? Is there any divergence? And if you could just remind us of the mix again in Tech, Flex between VMS and non-VMS?

Paul, relative to what we saw in the sequential trends, we saw that our spot market continues to improve probably a little bit more than what we're seeing in strategic accounts. We saw a sequential growth in both the strategic account base as well as the stock market. And overall, our largest customers, our firm's sponsor customers actually showed the greatest increase in sequential margin improvement.

Is that because of repricing in contracts, or what's driving that? Is it contract renewals?

Yes. It's really more driven -- the larger customers are no different than the stock market, I mean in their price to market for the most part. So what ultimately is taking place because we do higher volumes in those customers whenever we see movement, we're going to see a little bit more disproportional in those lines.

And what's the mix of business in Tech between the strategic and nonstrategic, or smaller, I should say?

In Tech -- overall, it's about 27%. In Tech, it's approximately 30%.

Great. If I could just sneak one more in on headcount growth, it was 7.5% sequentially versus revenue growth of 5.5%. Just maybe talk about why headcount at this point of the cycle is growing faster than revenue growth and sort of what you're doing now that I guess is it -- why are you growing headcount quicker than revenue?

This is Bill. We certainly have increased our revenue and therefore, there is capacity issues. We monitor productivity very closely, and that's how we grow. Now the nice thing is the increase during the quarter was approximately even throughout the quarter, and so the math will suggest to you because it usually takes 6 months, 9 months, 12 months to ramp up to minimum levels, and you do a couple of years to be really profitable for us. And when you think in terms when you are able to add that many people and that we still can improve productivity per person. We're very pleased with that. And we will continue to add as long as the profit metrics are there to allow us to do that and we continue to grow, but steady growth is important.

Our next questioner in queue is Kevin McVeigh with Macquarie.

Dave, I wonder if you can give us some color in just, obviously there's been a lot of concern in the market, and your trends are clearly outperforming significantly, but just are we going to go back to an '08, '09 type of scenario? And just as you look at key performance indicators internally, how are things trending today relative to back then? I mean obviously the results are very, very strong, and you know the buyback was very well executed. And just any thoughts around that from a market perspective and client sentiment?

Yes. I'll comment and then Bill can jump in as well. One of the -- we look at several factors. As you know, we have a very sophisticated front-end system that we call AMP!, which tracks KPIs and is very accurate, because it's coming directly out of our CRM system. What we have seen is, as Bill mentioned in his comments, is the KPIs are still at a very high level. And we've seen no indication of drop-offs in demand, and we've combined that with conversations with clients, which we get from our sales force and then also direct conversations with clients that we are having. As you know we are out often in the field, and we'll be out again on the second week of November to meet with a substantial number of clients across section of our markets in the U.S. But I would say at this point in the game with the super cycle theory would appear to have validity. Because clearly, the GDP metrics do not support this kind of growth and by the way it's been not only at Kforce, but also our peers and competitors. So clearly there's a dramatic shift in the way that people are hiring, with 20-plus percent coming through the temp space. So I would say that we're relatively confident that the uncertainty and then all of the other drivers are going to continue as we go through the next year with the presidential election, which should work to our advantage, particularly in the Tech area. Bill, do you want to add any comment?

I would add to Joe -- Dave that as you -- as Joe mentioned, September was a very strong month for us. And KPI was strong in tech point as well. And through the beginning of October, the KPI talent remained at or very near those benchmarks between the particular segment you're talking about.

And Dave, just want to comment real quick. What type of GDP growth do you think -- because obviously the numbers have been very, very healthy but just on a go-forward basis, what type of GDP growth do you think you need to sustain this type of growth?

It can stay right where it is as far as I'm concerned. It seems to be working pretty well for us, historically 3% to 4% would be double-digit staffing growth. We're in the 1% to 2%. And we've seen consistency. So I think that, coupled with the regulatory environment, is probably what's going to -- that uncertainty is probably what's going to benefit us this time around, as clients again seek greater flexibility, and they're laying off employment risk on firms like ourselves. They don't want to go wrong and make a commitment to human capital.

I agree. And then just real quick, Joe, for my own purposes, what's share counts should we use in Q4?

35.5.

35.5.

Our next questioner in queue is Mark Marcon with Robert W. Baird. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: I wanted to go back to the fire question, in terms of the super cycle and your sense that you're continuing to see strength, to what degree do you think it's a function of the market as opposed to all the improvements that you've made with regards to your processes and gaining share within your client base?

I would say, Mark, judging by the performance of our competitors and peers that it's broad-based. I think we've certainly benefited from our model change and our NRC delivery capability and the flexibility that it's given us. As we've said in the past, we're still refining that. It worked very well for us in 2008 and '09 during a declining market. We've made adjustments as we're in a more of a growth market now, and we're starting to see the impact of some of those adjustments that we've made because we really haven't experienced an up-cycle and had to leverage the NRC. So we're shifting resources, refocusing, reprioritizing. So those things are benefiting Kforce specifically. But certainly I would acknowledge the performance of our competitors, and I would suggest that it's fairly broad-based. And certainly the drivers in Tech today with the investment in the Tech cycle and the shortages in those skill areas, coupled with all of the uncertainty. And again, I think the presidential election year is just going to keep a cloud over all of this stuff and should continue to benefit us regardless really of the GDP growth. Unless it goes negative, unless we see something that turns it negative at which point, we've already pretty much demonstrated without a function in that environment as well. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Sure. And then can you talk a little bit about talent shortages particularly as it relates to IT? Are you able to fill the same percentage of positions as you were able to before? Do you have flexibility with regards to bill rates relative to pay rates? How should we think about that?

This is Bill. I would say to you that as we look at the skill sets and how that particular segment of our business is growing, it is -- I would say that there's very high demand for those people with those particular skill sets. It's a -- certainly, there's a difference between large clients and small clients with the demand. And the skill sets that are available to people, to our clients is tightening. It's tightening in basically in all of our needs, not as much and there's certainly more in Tech, KCR, HIM. It is a very tight labor market. And as that continues, we will continue to improve upon our ability to execute.

In Tech, I would say that you're looking at -- you got java.net, Epic, some of the high demand areas, we're seeing significant shortages. We've also seen, in the F&A area, a shift towards the higher skilled workers as well. When you look at the mortgage related activity, I think the refinancing part has slowed, but the restructuring, and the reworking of the portfolio seems to be getting traction and attention now as well. So it's pretty broad-based and pretty balanced across skills and geography.

And if I would take it back to the metrics, what we saw throughout the quarter and then here into the early part of Q4, is we saw all the metrics left pretty much slightly across the board and all the ratios are pretty much holding constant. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Great and what about your conversations with the clients in terms of -- now, if you do want to improve your fill rates, you need to increase the bill rates, I know you had a few of those, what's the response been?

Obviously getting some traction there, and the market's speaking. I mean we can tell them, but when their people start vanishing, or the people that they're making offers to are taking competing offers, the markets really doing the job for us. So the cycle in our industry generally intact, runs about 6 months, which is the assignment length. So as those refresh, they kind of tend to get repriced, and we're certainly seeing that. And as Bill mentioned earlier I mean one of the issues that we ran into earlier in the year was the deluge of demand. And we really overwhelmed a lot of our field people, and in particular the NRC. So we've gone through a forced prioritization, and actually used some of the new technology to drive that prioritization, which in turn is giving us data that we can give back to the clients for pricing on. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Great. And one thing that we've always wondered about is how the NRC would hold up as demand continued to ramp? How effective have they been in terms of filling positions now that there are multiple offers, in some cases there are local competitors with recruiters on the ground, how's that going?

Actually, speed and quality are the drivers today. And I would say that geographically neutral doesn't matter where they’re located with the technology and the resources that are available, the NRC is filling positions all over the United States, across time zones, across skill sets, across geographies, really not an issue relative to the on the ground folks. The issue really comes back to client buying models and prioritization again. So as we look at the efficiency that we're starting to gain from refining our approach in the NRC, we're seeing improvements in fill rates, we're seeing improvements in the ratios and we're not where we want to be, but certainly, we're making real progress there.

Yes, and I think at a high-level that's demonstrated by from Q1 to Q2, the NRC contributed a higher percentage of revenue as well as that continued into Q3.

With no additional hires.

Correct.

Our next questioner in queue is Tobey Sommer with SunTrust.

I wanted to follow-up on the NRC question. I think I gathered from your prepared remarks that, while you've seen an increased proportion of revenue over the last few quarters that over the next few it might be sort of a stable percentage of revenue, I was wondering if you could give us some more color as to why we may be plateauing here for a moment?

Well, as we just mentioned, we haven't -- we haven't continued to increase that capacity, but the prioritization process has elevated the productivity of this view and continued improvement in tenure, continues to suggest that productivity is going to be significantly higher. So what we're actually seeing is higher productivity with the same number of people, at the same time, our overall revenues are increasing. So we're obviously -- we use people in the field and passive recruiting, and social media, and a variety of other approaches. So from our standpoint, we want steady -- at the moment, we have the capacity. So we want steady productivity -- we want steady headcount, with an improved productivity. And we want them to continue to do at least the same percentage of total revenues as they were before.

And Tobey, the field base performance is improving as well, we've seen, as Joe mentioned, the smaller mid-sized clients demand is picking up. So as a result because of the base that, that's coming off of, that we're seeing that grow and because it's a larger percentage of the overall revenue, then it's kind of masking the effectiveness that we're having with the NRC. But overall, we're pleased with both.

And given the kind of improving growth out of those smaller and medium-sized clients, do you have a kind of a bias that would suggest that gross margin should be going up on that kind of mix shift?

Certainly, we're going to price to market, and it's a rate volume. Question -- and always we look at every client and say, okay does this fit our longer term customer profile. I mean clearly client selection is important there, because we're looking at clients that are going to work with us in multiple geographies, that are going to work with us in multiple functions, that are more stable, that gives us a greater demand. So many of those, by the way, become eligible to become firm sponsored to strategic accounts. And as we have defined that strategy, we actually have a pipeline of new clients that are coming through that would be possible firm sponsored accounts. So it's really working now as we're looking at the growth rates and the customer life cycle of each of these clients in the local markets all the way through that we're able to select these clients and look at them for a longer term relationship. So as we think about pricing, we think about it in that context.

And within our spot market in comparison to our strategic account, customer makeup, I mean, at any given time point in time, we've seen 100 to 300 basis point differential in pricing.

The last question I'll ask is the government services, that segment was strong sequentially. Was there a specific set of contract wins? I mean you talked about looking at the commercial sector a little bit, I think you mentioned products which I can't recall in prior quarters, just trying to get a sense of what specifically kind of drove that and what kind of visibility you have at this point?

I'll answer the last part of that question first. Visibility is extremely limited with all the uncertainty around the government. But as we have continued to build a first class business development team and improve our activities in the federal government. And so I would say to you it is the result of those activities. We have won some new contracts. We recompete this year, we're on alongside. There are additional contracts that we may win that have been protested. But there's really a lot of uncertainty in the federal government, request for proposals, for new contracts that have been delayed, existing task orders that are actually being delayed as people work out what's going to happen with this continuing resolution. And a super committee. It's a very uncertain time. If they continue to perform, we have some great people, lot of talented employees in that group. So it's primarily federal government. But they are branching out into the commercial sector and having some success.

And I would add, sequentially, from Q2 to Q3 on the products side, we saw as a percentage of revenue, that improved probably from a little below 2% of revenue to about 9% of revenue?

Our next questioner in queue is Giri Krishnan with Crédit Suisse. Giridhar Krishnan - Crédit Suisse AG, Research Division: A quick follow-up question on KGS, could you -- what percentage of contracts in KGS come up for renewal in 2012?

About approximately 30%. Giridhar Krishnan - Crédit Suisse AG, Research Division: 30%?

Yes. Giridhar Krishnan - Crédit Suisse AG, Research Division: And I wanted to also revisit what some of the longer-term targets you had prior to giving guidance to Q3, I guess given Q3 came in better than expected and what seems to be a better demand environment. Have you guys reassessed what you stated as longer-term targets prior to providing guidance for Q3, and how should we think about that?

Actually, we're going to stand pat where we are right now just due to the lack of visibility. When we originally established those targets, we did settle with an eye towards a greater visibility, what appeared to be a more predictable GDP growth and an environment that would have suggested greater visibility and clarity. Clearly, as the year has unfolded, the level of volatility in the market, the level of uncertainty and the impacts both from a geopolitical standpoint, as well as international monetary standpoint if anything, the visibility has gotten to be less than it was before. So at this point, we're going to go quarter-to-quarter, and at some point in the future, the hope would be that we'll have greater clarity over the longer horizon but not now.

Our next questioner in the queue is John Healy with Northcoast Research.

I wanted a follow-up on the government business. I was hoping you could elaborate a little bit more about the opportunities on the commercial side. I don't necessarily remember you guys calling that out specifically in the past, and I was just trying to better understand how you're kind of using the government business to maybe go after some opportunities, and maybe within what verticals do you see potential there?

This is Bill. We have approximately 600 full time employees in that group that are very high class in the technology space and the F&A space. And we believe that their activities are easily transferable into the government space. So as we -- approximately 9 months to a year ago, the difficulties that were going to occur will began to spread their influence, and their project management into our sales staff, and working with our over 3,000 clients. So they have put out a number of RFPs and they're working with a number of commercial clients and we are investing in that procedure and process. We think we can in fact grow this overall business into a project solutions group that has both federal government and commercial clients in it.

And then I just have a big picture question, your growth rates have surpassed a lot of your peers, and one of the questions I was wondering was if there was a lot of M&A in this space, with some of the specialty verticals, do you feel that you guys are winning other talented salespeople or talented recruiters from your competitors and is the M&A that we've seen in the last 18, 24 months, do you think resulting in a net benefit that Kforce is in, if so what are the areas that you're picking up some of the benefits you think?

Well, I think more of the benefit we're picking up is we've continued to have low single-digit turnover of our most tenured and seasoned workforce. And these people just have so much relationship, and there's so much more productive than when we have to hire people in green. So, yes, we've been fortunate that we've been able to acquire some proven talent, out of the competitive market place, but I, by no means say that's the main driver. I think it's really our core population, continuing to be more productive and leveraging the tools that we put in place, and then our ability to hold onto them.

Our next questioner in queue is Josh Vogel with Sidoti & Company. Josh Vogel - Sidoti & Company, LLC: Joe, I apologize, I think I may have missed what you said when you were talking about HIM, I'm just curious, you're seeing pretty tremendous growth there, and I was curious about where the growth was coming from, you made a comment about electronic medical records?

This is Bill. Electronic medical records are one of those areas, with HIM is primarily an operation with coding. It's approximately 80% of what they do and there is this new rule that's come out from the government that is taking [indiscernible] ITD 10, which is taking approximately 14,000 codes and translating that into 140,000 codes. And therefore, there is a tremendous change in both technology and a variety of other ways of managing how hospitals, Doctors, Pharmacists, all of these people operate. So it's not only the coding area, this will also be in the technology area, and other type of activities. And that is due -- that change over, if you want to be paid, you must have that in process at the beginning of October, 2013.

And those are really what I would consider more of the future prospect opportunities associated with the business. The current business we're benefiting from we've probably started talking about this going back 3 years ago, when we started to reposition that business on terms of how we were structured in attacking the marketplace, where our go-to-market strategies were. And it took some time to get that business repositioned and we deteriorated for a period of time. But what's happening today is all execution on the core business. What Bill's referencing is really what we see as the future prospects because of the opportunity. Josh Vogel - Sidoti & Company, LLC: And just one more. As we approach year-end, I was just curious about when you start planning for student[ph] increases, and can you maybe talk about visibility here, and your dialogue on the state level as well as with clients with regard to potential price increases?

Well, we never expected this question.

We felt that we started preparing about a year ago. And this is going to be a continued focus for the foreseeable future. I mean, if you read some of the newer documents that are coming out based upon the current economic data and the continued indications, we should anticipate basically higher federal and UI taxes for possibly the next 5 to 10 years, based upon what you want to believe and what people are putting out there. I mean the current state of what's taking place and what's happening in Congress and then even the federal budget proposals and what's going to happen from a UI -- there's just so many decisions that haven't been made. We really don't know what's coming at us. All we know is we're preparing. And I'd I say the good news is, with each passing quarter, our customers are demonstrating a greater awareness and appreciation regarding these escalated costs that are taking place. So I think we're out ahead of it internally, and we've been in constant communication with our customers.

A lot of clients are actually building in to contracts, a regulatory price flexibility because they're experiencing it as well. So I think of it as a fuel surcharge. But that's the sort of thing that's happening now, because these states are not only coming in and raising rates, but they're also doing it retroactively. So it doesn't look like that's going to be getting any better anytime soon.

Our next questioner in queue is Paul Ginocchio with Deutsche Bank.

Did you say Search was down 27% in October, and if so, what disciplines are driving that?

Yes, actually, it was I think 26.2% is where it was for the first 4 weeks of the quarter. A part of that is the segmentation of Search from an FAA, from a Tech, and from an HLS standpoint. So in our HLS businesses last year, on the Search side of the house, we had a number of conversions that took place early in the quarter via contracts that we were exiting. We transitioned people to a competitor, which we have taken search fees for. So that's why I always state that when you look at just a several weeks whether it's on the Flex side or the Search side, you got to be careful in extrapolating it out. And so that dynamic's happening earlier in the quarter from a financing accounting and from a Tech standpoint, those businesses are down roughly about 20% through the first 4 weeks of the quarter.

It just sounds like on a sequential basis, Search fees will down Q-on-Q, does that sound right to you?

Well, historically, Q4 is typically a lighter search quarter then Q3.

The forward pipelines would suggest that the demand is still there, so at this point, we're still confident that we should be in good shape in Q4.

Our next questioner in queue is Mark Marcon with R.W. Baird. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: I have a follow-up on CRS, you saw really nice growth there, can you talk a little bit about that part of the business, and specifically what your take is on what's going on in with your largest client there, and how that business is going to unfold?

Well, certainly that is an issue -- this is Bill, Mark, that we've been following closely. And we continue to diversify that group. So for example, we now have 47 clients in that group, which is a 50% increase over last year and it's a 12% increase quarter-over-quarter. So that, coupled with a consultancy in very high demand, and a very, very tight labor market, the reason we have had label issues in transferring our consultants -- many of them are very long-term with us from one client to another when necessary. And our largest client, I think as I mentioned in my prepared remarks that has continued to grow this year. We believe that, that will be stable to potentially growing next year. And so we do not have, at least in a short term, a significant amount of uncertainty when it comes to that particular group. Even in the long term, because of the long-term nature of the consultants with us, and they have very high demand, and our ability to grow our client base, we're not sure what the effect will be, I don't want to start predicting today. But I also don't want to suggest that there's going to be a significant problem.

Our next questioner in queue is Morris Ajzenman with Griffin Securities.

Well, at this point in time, all the questions have been pretty well picked over. But just kind of one follow-up, just on the pricing front, talked about Flex gross profit, Flex margins and you exited the quarter at 28.9% overall, which is actually modestly up versus last year, adjusted for the tax the [indiscernible] earlier. In this environment, again, you've been asked this in different ways just throughout this call here, but GDP you talked about a 1%, 2% environment, can we really expect to see gross profits on the Flex side actually increase from this level, assuming we have a sort of modest GDP growth over the next year or 2?

Really the key answer to that question is supply, demand. We don't set the pricing in the market. No one really sets the priced in the market. So supply/demand is going to drive that. And when you look at what the professional sector is in terms of the unemployment rate, it appears we're in a healthy supply demand environment, as well as when you look at the various professional sectors and what they are growing out of sequential and year-over-year basis. So as long as those things continue, we believe we will be able to continue to drive pricing opportunities.

Let me ask you one more question on that, assuming pricing stays flat-ish, is there enough you can do controlling cost, getting better leverage throughput whereas NRC whatever, where you can still drive margins hypothetically in an environment where pricing stays flat?

Yes. We had actually, a couple of quarters back, I had shared on the call that we've run different scenarios and different models. And we believe with our current operating platform that we can drive our operating expense as a percentage of revenue south of 26%, and we believe even operating at a 4% or slightly less mixture of Search as a percentage of revenue and if you are just to take Flex margins kind of in the 30% range, which is a 110 basis points from where we are today, which is still below where we peaked last time, we believe we can exceed our prior peak operating margins.

And at this time, we have time for one final questioner. Our final question for today's event comes from Tobey Sommer with SunTrust.

My question was answered, so thank you very much.

Okay. Why don't I go ahead and close off the call and thank all of you for your interest in Kforce. And once again, thanking all of our key members and also our clients for the opportunity to serve them. I look forward to speaking with you in January. And hopefully, we don't have too many snowstorms between now and then. Thank you, and goodbye.

Thank you, sir. Ladies and gentlemen, this does conclude today's program. Thank you for your participation and have a wonderful day. Attendees, you may disconnect at this time.