Good day, ladies and gentlemen, and welcome to the Kforce Inc. First Quarter 2014 Earnings Conference Call. [Operator Instructions] Please note that today's conference is being recorded. I would like to hand the conference over to Michael Blackman, Chief Corporate Development Officer. Sir, please go ahead.

Good afternoon and welcome to the Kforce Q1 2014 Earnings 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 upon current assumptions and expectations, and are subject to risks and uncertainties. Actual results may vary materially from the factors listed in Kforce's public filings and other reports and filings with the SEC. We can not undertake any duty to update any forward-looking statements. I would now like to turn this call over to David Dunkel, 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 also provide substantial disclosure in our release to assist in better understanding our performance and to improve the quality of this call. We are very pleased with our performance in the first quarter, as both revenue and earnings per share exceeded our expectations. Quarterly revenues were $305.3 million, as revenue growth accelerated to 14.9% year-over-year from 12.3% last quarter. Earnings per share of $0.19 more than doubled from $0.09 per share in Q1 of last year. These results are driven largely from accelerating growth in all of our Flex staffing businesses, which collectively have grown 18% year-over-year. Demand for our flexible staffing services is very strong. Temp penetration rate continues to reach all-time highs, now at 2.06% as of March, surpassing the previous peak of 2.03%. Professional staffing is now 54% of the overall U.S. staffing market, which is up significantly from 36% in 1995, the year Kforce went public, according to the latest update from staffing industry analysts. The SIA data reports that the domestic professional staffing sector has grown from $16.1 billion in 1995 to $56.4 billion in 2013. Technology staffing is now the largest component of domestic professional staffing. There was a significant scarcity of talent in this space as development cycles increase, skill set obsolescence accelerates and mobility drives further rapid change and the lack of immigration reform further constrains talent supply. Compliance requirements in financial services and healthcare are also contributing to the resource scarcity, resulting in technology staffing now being the largest component of domestic professional staffing. Our quarterly results also benefited from the accelerating growth in both our F&A and HIM Flex staffing businesses. We continue to improve our execution in our…

Thank you, Dave, and thanks to all of you for your interest in Kforce. I'm very pleased to see another strong quarter from our team, particularly one with success as broad-based as this one. With double-digit year-over-year revenue growth rates in Tech Flex, FA Flex and HIM Flex, collectively contributing Flex staffing revenues year-over-year increase of 18%. Our actions in this new era of Kforce are continuing to drive results, and I'm proud of the team's execution in meeting the needs of our clients, consultants and employees in our newly aligned and agile infrastructure. Tech Flex is our largest business unit, representing 63% of total firm revenues. Tech Flex revenues have grown 18.2% year-over-year. Overall, our key performance indicators for technology remain at high levels for job orders, external submittals and send-outs and starts have improved in April from Q1 levels. Candidate supply remains tight, particularly in skill sets such as Java, Epic, .NET, project and program management. We continue to see strong demand in our 2 largest industry verticals of financial services due to increasing regulatory and compliance needs, coupled with health care, our largest industry vertical, as hospitals and health care organizations implement systems and transition their platforms to more of a shared services model. However, the demand is broad-based as we've experienced recent gains in telecom, insurance and the computer services industries in particular. Inter-quarter trends for Tech Flex revenue showed typical declines in January from year-end assignment ends followed by improvement in February and a strong March as headcount recovered to December averages by late Q1. Tech Flex revenue in headcount trends are well above levels from last year and improving starts volumes suggest we can expect Q2 Tech Flex revenues to be up on a billing day basis sequentially, and year-over-year growth to remain above…

Thank you, Joe. Total revenues for the quarter of $305.3 million increased 0.8% sequentially and 14.9% year-over-year. Quarterly revenues for Flex were $295.6 million, which represented an increase of 1.5% sequentially and 16.3% year-over-year. Our Flex staffing revenues collectively were 18% year-over-year and our Government business declined 0.3% year-over-year. Search revenues of $9.7 million decreased 17.1% sequentially, and 15.7% year-over-year. For the first 3 weeks of Q2, on a year-over-year basis, Tech Flex is up 19.7%; Finance and Accounting Flex is up 16.2%; and HIM Flex is up 43.2%. Search revenues are down 3.8% year-over-year for the first 4 weeks of Q2. Though revenue growth remains strong early in the quarter, we don't expect to sustain these year-over-year growth rates as the quarter progresses, but the ramp in activity in late Q2 last year will impact comparisons and has been considered in our guidance. First quarter net income and earnings per share were $6.2 million and $0.19, respectively, compared to adjusted net income of $9.1 million or $0.28 per share in Q4 2013, excluding realignment in noncash impairment charges, and $3.1 million and $0.09 per share in Q1 2013. Net income and earnings per share have more than doubled on a year-over-year basis, reflecting the success of our realignment and the operating leverage in our infrastructure. Our overall gross profit percentage of 29.8% decreased 190 basis points sequentially and 160 basis points year-over-year. The decline in the percentage of revenues, generated by our Search business, is impacting overall margins by 70 basis points sequentially and 110 basis points year-over-year. The remainder of the decline is the result of reduction in Flex margins. Flex gross profit percentage of 27.5% in Q1 decreased 150 basis points sequentially and 80 basis points year-over-year. Increased payroll taxes impacted margins approximately 130 basis points sequentially,…

[Operator Instructions] Our first question comes from the line of Kevin McVeigh from Macquarie.

Hey, I wonder, just given the amount of men in [ph] the business, how much of that is kind of the cultural impact to the actions you've taken to kind of free up some of the revenue, if you will, as opposed to just fundamentals, and it really seems like you powered through the weather, so weather really wasn't any impact, but just how much of it is just culturally the adjustments you made and just better fundamentals, I guess, is it execution and a better environment or just the environment overall, just any thoughts on that.

Kevin, this is Joe. It's a couple of things. I mean, this is 14 years of work. There's a lot of work done by many of the people who are still here and some people who aren't here any longer. And I feel as we've gone through our transformation into the new era, we've gotten all the right people in the right seats at the right time. And it's execution. So this is about keeping things simple, having a high degree of focus and driving great accountability throughout the firm and that's really the net of it. We're blessed at this point in time. We don't have any distractions. All those are behind us. We haven't done a staffing acquisition in 8 years. Our teams are set, our operating model is set, we've now taken all the noise out of the system where we had some matrixing going on in the organization. We're not fighting with business rules from one unit to another unit. So we are just hitting on all cylinders, so it's the team that's delivering the results.

This is Dave, Joe. I wanted to add something to that. We did experience a weather impact. So we didn't -- our Government unit was able to recover throughout the quarter, but our staffing business probably had about a $2 million to $3 million impact, so. But I wanted to make sure that, that was clear for you.

No, that's helpful. And then just any sense, Dave or Joe or anybody on, peak margins were north of 8% last cycle, and I'm not kind of asking when, but any thought on how we're thinking about peak this cycle and just what would kind of the components of that just directionally, any thoughts on that would be helpful too.

Kevin, this is Dave Kelly. Yes, we've said and obviously, the investments that we're making in revenue-generating headcount and the productivity that Joe mentioned, we think is going to be key as well as some of the operating efficiencies that we're going to gain with [indiscernible] and some of the changes that we've made. And as we've continued to say, we've set out on the path to attain operating margins of 7.5% as we approach $1.6 billion in revenue. I think you're probably referring to EBITDA margins which were higher than that. And so, for us, it's a continued march to continue to grow revenue, to continue to wring out the operating efficiencies and we're certainly on track to do that and we think there's more opportunity as we move forward.

And our next question comes from the line of Mark Marcon from Robert W. Baird.

Can you talk a little bit about the potential to accelerate the headcount growth in the areas where you're seeing the opportunities, would you do that primarily out in the field, would it be primarily on the account management side, or the recruiting side, what are the areas where you could see potentially adding?

Yes Mark, it's obviously, it's still a war for talent out there. So, much of the hiring that we've done over the course of the last 18 months, has been on the delivery side. It's really the way that I look at our delivery model as a hub-and-spoke model, so think it would be NRC as a hub and then the spokes are all of our field operations. Because it's not an either/or, it's a blended model and to get the most efficiencies so that we can attract the talent. So we'll continue that, we'll continue to add headcount where productivity warrants. That's really the model that we've deployed. We don't hire into a marketplace and hope that we're going to turn it around. We're getting people headcount that are delivering results and demonstrating that they can do things with that headcount because what we're finding is people who are ramping a little bit faster because of that, because we have all the client inertia and demands within the marketplace. So that's how we're going to continue to add headcount as we're going to assess how we stay on track for the amount of headcount that we have to add to be able to sustain these type of revenue levels and if we start to accelerate revenue at a greater pace than this, we're probably going to ramp up our headcount that much more so that we can stay ahead of that curve, although we won't be adding headcount at a greater rate than what revenues growing. So I want to assure you of that. We crossed over that point, there's no need to go back in the other direction because of where we're balanced today.

So we should continue to see SG&A leverage as long as the cycle continues?

Yes, well, that's what Dave spent a lot of time last quarter as we were talking about the realignment that we went through at the beginning of Q4 and putting together our roadmap as we march to the 7.5% operating margin at revenues of $1.6 million at a much lower search mix than what historically was there.

Mark, this is Dave Kelly. I'll just add a little more to that. So in Joe's prepared remarks, he had established, he'd mentioned the target headcount growth rate of about 10% on a year-over-year basis and we've talked a lot about a sustained revenue growth rate of 50% as a target. So as we think about headcount adds and the productivity that remains in our model, part of the way we're thinking about maintaining that, we think we can grow revenue and the delta between revenue growth and headcount growth as we move forward should be in about that 5% range as we move forward. So kind of in that range, so we talked about 7% year-over-year growth in the first quarter. We expect we're going to grow headcount a little bit more heavily in the second quarter, it's going to get us to that 10% number and as we move forward, that additional hiring is going to enhance productivity inherent in the model and allow us to sustain revenue growth rates.

And on a seasonally adjusted basis, so I'm not talking about year-over-year, but just taking a look at the typical seasonal pattern relative to Q1, should we anticipate any sort of diminution with regards to the gross margins in Tech Flex or in F&A just due to client size?

No. I think as we look forward, we think and they have been at the transaction level, margins have been very stable. I think both Dave and Joe referenced that we've had a lot of success in large clients recently, but that mix was impacting margins. But as we look forward, we expect pretty stable growth amongst those client sizes, so stable margins as a result in both Tech and in FA.

Great. And then last question then I'll jump in the queue. How should we think about Search longer term? I mean, aside from the next few quarters, do you think that, that's just a less attractive area? Or how are we thinking about that given that it typically ends up being later cycle and can do well at this point in the cycle?

Yes. Relative to Search, because I think we kind of look at Search in the 2 service lines, whether it's FA or whether it's Technology because we manage those Search practices very different, Mark, because in Technology and, again, I started in this business 26 years ago as a Technology Search person, Rookie of the Year here and performer. So we understand the Search business. We've been around the Search business for, me personally, 26 years, Dave, 30-plus years. And it's our roots from 50 years, 50-plus years ago when this firm started. What's happened in technology, the technology search landscape has changed drastically over the course of the last, especially 10 years. With the intervention of technology, the lower-end skills are -- you're not getting those opportunities. They're all in-sourced at this point in time. Likewise, because of how rapidly technology is changing and what's happening with development cycles and especially as organizations are moving away from waterfall environment more to agile-type environments, we're hearing a lot from the end-users, meaning the managers who are hiring people that, one, they're having trouble attracting people. Their processes are too slow with the demand that's in the marketplace for talent. So they've really been looking at bringing people on from a flexible standpoint. And then if it's the right environment, the right fit, the right technical skill set for that client and for the person, we are seeing conversions have remained for the last 8 quarters at a pretty healthy level in Technology Flex, which we love. We love when our Tech Flex people convert into a customer because they turn into future hiring managers. So the Tech Search business is really changing quite a bit. So that's why we made a strategic decision as part of our new era transformation…

Our next question comes from the line of Tobey Sommer from SunTrust.

This is Frank in for Tobey. I wanted to ask a little bit about Government Solutions. That line did fairly well this quarter. What visibility do you have there? And is it just an improvement in the environment in general or are there targeted areas that you could highlight?

Yes, it's certainly -- this is Dave Kelly. It remains a very difficult environment. Now we've had a leadership change there. Pat Moneymaker, who was on our board, is now the CEO of that business. He's done a great job really invigorating the culture there, focusing their efforts and really done a nice job. He's a big driver to that.

Frank, what I would add is, so when we look at our KGS business, slightly over 40% of our KGS business is wrapped up in health care in some manner. So we're still continuing to see progress in making momentum on some of our VA contracts there. From the other side of the equation, our pipelines are building, and so our backlog has continued to improve. So things are healthy from that standpoint, it's just that we're still experiencing all the same dynamics that have been going on for quite some time with the government, with the contracting offices, with delays, with tightening of budgets and all those dynamics. So that's why we provided the guidance that we see stability there, and we believe that business is going to continue to be stable to slightly growing as we move into Q2 here, and we have a good pipeline. And if a couple of those contracts come through, then obviously we'll be communicating. But in today's environment, you can't bank on any of those things taking place. The good news is, is we don't have a lot of business up for recompete here in 2014, so we feel pretty confident in that business remaining stable.

Okay, great. And you mentioned it, but I wonder if you could provide any additional color on ICD-10 and what impact that may have going forward, and really how you think about that as it relates to your business?

Yes, I think part of what the ICD-10 delay is, what we're hearing from clients right now is most of them are pretty much, at this point in time, anticipating that it's going to be a 2015 date. So until that changes, that's kind of the headset that we've been hearing more recently since this announcement was made, that people are marching toward. So we saw that a little bit of front-end impact with a couple of clients really winding down their parallel of running ICD-10 and ICD-9 coders in parallel to work through this. But the majority of what we're hearing from the clients, at this point in time, is that they're going to continue to move forward with their ICD-10 and bringing on ICD-10 coders, and they're going to use this extension as an opportunity for more time to work through the coding aspect and identify where their gaps and their problems are, as well as work on some of their clinical documentation, which happens to be an area where we have a lot of expertise on as well. So what they're really saying is, they're not going to crunch through this, through massive hiring like they were planning. So they're going to probably hire fewer people per organization, but have them for a longer period of time. So we believe the demand is intact. In fact, the ICD-10 people that we had set to start assignments or some that had started, which is why we mentioned that we were going to see a near-term impact here, but virtually all those people have been redeployed to other clients. So we are seeing the demand out there.

Our next question comes from the line of Hamzah Mazari from Crédit Suisse.

This is Anj Singh dialing in for Hamzah Mazari. My first question is just regarding the associates being sourced from the NRC. I was wondering if you can give us any insight into the positive impact that you might be seeing in their turnover rates or if you can speak to the productivity increases from those associates? Or is it too early to really discern a difference in those metrics for those associates?

Yes, no, I mean, we've created the pathway for individuals to migrate from the NRC into our field operations as we've articulated. Actually, as well as what we've done is we've put together some career pathing within the NRC. So there's not a force that somebody has to leave the NRC to be able to make a good living in this business. If they're right for the NRC, and those that are the dynamics, and they want a long-term career path there, we have those opportunities available for them as well. So when we look at productivity differential, of a -- when we have somebody transition from the NRC out to our field operations, what it really does for us is it cuts out all the front-end learning curve and the risk and the -- have to hire multiple people to get one of those people to stick in the business. So I'd say the biggest benefit through the NRC channel isn't necessarily that when we drop the NRC person into a marketplace that they're more productive than when we make a local hire, assuming that local hire has staffing experience. What really the benefit is, is when we move that NRC person into the marketplace, we have a much higher retention rate of that individual, so that we don't have to hire 3 people in the marketplace to find the one that's right for us and we're right for them.

Understood. And as a follow-up to that, you had highlighted 18 months as the average tenure in Q1, and I believe 15 months for Q4, how should we think about your target associate tenure and how long it may take to get there?

It's not 18 months is the average tenure. Our average tenure is much higher than that. What I stated is, we have a higher percentage of our overall performer population has 18 months or less with Kforce. So what's happening because of the hiring that we've been doing is actually all of our more tenured populations are much larger today than they were a year ago, than they were 2 years ago, so actually our -- all of our tenure population, except our less than 1 year tenure populations, are higher at this point in time than they were last year. So we are holding on to people as they move through those tenure gate. So our average tenure is not 18 months. We've never provided an average tenure taking all of our population.

And the key -- this is Dave Kelly -- as Joe said, the population of 18 months being -- or less, being large is as they ramp and as they move through our system, the incremental productivity gains that we see from them allows us to hire people at a lower rate than we can sustain revenue growth. So it's all part of one big equation. So our intent here is to continue to hire into that population so that we can sustain that growth.

Yes, I mean, and that's really the dynamics of where we find ourselves today. Because we have so much historic data, and we've gone after it from business intelligence and looking at the historic data and what takes place with our people, is we mapped out where we needed to be from a hiring standpoint, which is when we came on late 2012 and informed the market that we were taking up our headcount by roughly 24% year-over-year because we knew if we could perform with that historic data, that we would find ourselves at this point in time running at 15% year-over-year growth. So that was all through financial modeling, assuming we held metrics constant, which fortunately, even with the increase in hiring, our management team is seasoned, and they put a lot of work and effort in, as well as the whole team contributed to ramping these people up. And we've been able to hold our ramp consistent even with the accelerated hiring.

Our next question comes from the line of Ato Garrett from Deutsche Bank.

Just one more quick one on some of your strengths within your end markets. I know, previously, you called out financial services and large clients as being some of the better performing end markets. I was wondering if there's any others that you'd like to highlight as where you saw some strength in this last quarter?

Yes, well, from a -- because we really look at 6 main industry verticals that we focus in. Where we saw the most sequential growth was within our health care vertical. And then right behind that was telecom. And then right behind that was the insurance vertical. So the good news is, is financial services, which also is a rather large vertical for us. It's our second-largest vertical. We didn't see as much sequential movement there, but we're hearing a lot of things coming out of that vertical, so it gives us a lot of optimism that we are performing at this level. And that vertical really hasn't even completely kicked in for us. And financial service is really being driven a lot by compliance and not mortgage-related activities.

And where would you rank financial services amongst the health care, telecom and insurance industries that you listed? Is that stronger than those or somewhere in the middle?

No, financial services is our second-largest vertical behind health care.

Got it. Got it. And then also just looking at -- you mentioned that talent constraints and scarcity still exists within the IT end market. I was wondering, have you started to see any, or are you getting a sense of any restrictions on growth as a result of having difficulty finding talent?

No, I mean, that's where we've done a lot of our hiring, and fortunately it happens to be our roots and recruiting is -- if I were to say what's the core competency of Kforce if you go back to the beginning of time, it's on the recruiting side. So we know what we're doing on that front. And I'm confident that we have the right plans in place. Now the other dynamic that I would say that's happening on that is we're starting to see some momentum with our Strategic Accounts because, really, we look at our clients in 2 big buckets. Strategic Accounts, those are large consumers of the services that we provide. And then spot market, those are more medium-sized type organizations. We've seen that we've started to see the gap close between what the spot market was paying from a bill-rate standpoint and with the Strategic Accounts. So basically, in this business, and we've stated this for years, we don't set pricing. The market sets pricing. But we've started to see the strategic customers responding to the war for talent. And what they really started to do is work on exception pricing, carving out more statement of work. Because at the end of the day, these managers need to get the people in the seats that have the capability to get their projects done, so they're finding ways to work around.

Our next question comes from the line of Randy Reece from Avondale Partners.

I just had a quick one. And I'm sorry if somebody else has answered it because I'm hopping back and forth. I was wondering if you had any comments about the strength or weakness of health care-related business in your mix?

Yes, well, I just -- actually, I did just answer that, Randy. And basically it was our #1 sequential grower from the 6 major verticals that we focus on. Does that answer your question?

He seems to have stepped away from his phone. We can move on. Our next question comes from the line of Gary Bisbee from RBC Capital Markets.

This is actually Jon Lanterman on for Gary Bisbee. I just had 2 quick questions. Your F&A grew pretty rapidly in the quarter, can you just give some additional commentary on some of the drivers behind that?

Yes, well, from an F&A, it was really the comments that I mentioned in my opening comment. We're seeing growth in project-related business. We really started seeing that about mid-2013. And that business plays very well because of our model with our National Recruiting Center, because of our ability to service high-volume needs in a very short period of time. So we've been capturing business there. And as I mentioned, most of that, we've really seen our mortgage business has really cut in half since the beginning of last year to now. So that business has really tailed off, and we've replaced that with more compliance business, with a lot of -- with some collection business and some credit-oriented business. So I'd say that's one piece of it. Tied into that is we've really had a lot of energy around diversifying the clients that we're working with. So for example, we build 6% of additional client sequentially. So we've been diversifying our footprint. And then really, the third aspect has been, we have a capability because of our health care lineage in and around the rev cycle aspect, really from the billing side and the patient access. And so we've been starting to tap into opportunities on that front. And then just really the umbrella over the top of all that is for the better part of the last 2 years, we've been investing in leadership and our model. And I think some of those are starting to pay dividends at this point in time. The team's just done a great job.

Okay. And then I know you gave some monthly commentary, but for F&A specifically, can you just comment on how the quarter played out and maybe how April has gone so far?

Yes. April, momentum has continued to improve into April. I guess the one -- the best indicators that I could give you is, our job order flow sequentially was up about almost 25% coming out of Q4. And our 4-week trend, which would kind of give you the newer trend on that, has continued to move up another 14.2% off of those levels. And we're also seeing our starts accelerate. So just a lot of positive indicators.

[Operator Instructions] Our next question comes from the line of Morris Ajzenman from Griffin Securities.

Taking another stab, a few questions I'm going to ask you about the tenure of your sales force. I know at the previous call, you discussed that when the sales moves from 1 year to 2 years experience, you get the highest productivity gains. And I think the previous quarter you said that slightly under 50% of Kforce population sales force has less than 1 year experience. How has that changed over this -- into this current quarter and how do you see that movement over the next couple of quarters to what percent of that sales force will be under 1 year? Would that be declining further as things mature or help your productivity, any spin you can put on that?

So Morris, this is Dave Kelly. I think -- so 2 questions. When we talk about productivity gains, we see productivity gain not only as they get from 0 to 1, but from 1 to 2, but from 2 to 4 and from 4-plus. It's really -- it's geometric gains. So just kind of as a thumbnail, I think Joe gave some precise numbers last quarter, but they are more than twice as productive at 2 to 4 as they are from 1 to 2. And twice again as productive on average over a longer period of time. And as they get to 4, from where they were between 2 and 4. So you've got it throughout the spectrum of tenure. In terms of the tenure mix, we had headcount growth year-over-year of 7% this quarter. So that percentage of people who are 2 years or more is down slightly, but it is still a very high percentage. I think our 2 plus 2, and 2-year and less associate population, is between 65% -- I think about 65% of our total population right now.

And just do you think, taking that as an example, do you expect that to rise over the next year?

I think as we look forward, we're talking about -- now we've at this hiring for about 6 or 7 quarters. The intent here is to hire on a sustained basis every quarter. So no, I don't expect that the proportion of associates in the lower tenures will increase. Actually, it will normalize to a more evenly distributed, although certainly it will be weighted in the lower tenure category because you have higher turnover there. But it will normalize around these levels and maybe plug the -- get a little bit more tenure as we wring out some productivity. But no, we're not going to see gains in the -- as a percentage in the lower population category.

Typically, as people move through these tenure ladders, we have a decelerating turnover number that takes place. So that's where it's really tough when -- to get hung up on what percentage is less than 2 years and what percentage is over 2 years because you have that, you have a much higher embedded turnover in the less than 2 years than you do at above the 2 years. So that kind of plays with the numbers a little bit. All I can really share with you, it's from the model that we deployed. Our model is tracking to what our historic data has told us about our model. So we haven't seen turnover in any of the populations drastically change from what we've historically experienced. We haven't seen productivity drastically change from what we've experienced in any of the tenure buckets. So we'll keep the throttle on the front end, and that's part of what Dave had mentioned in his comments, as well as I slightly mentioned in my comments, is our model tells us, to sustain 15% top line growth, we need to probably be at about 10% year-over-year from a headcount standpoint. I mean, that's the most simplistic way to look at this without drilling to China and getting into all of the model -- modeling.

A quick other question, NRC, what percent of revenues is that now of the company? And what's the year-over-year growth for NRC top line?

Yes, the NRC, I believe, they've grown 29.6% year-over-year, and they're contributing 34.1%.

Perfect. Last question and I'll hop back in queue here. You talked about earlier gross margin being under pressure year-over-year. 2/3 plainly due to Search being down and your other 1/3 of that decline, about 50 basis points, are others moved toward [indiscernible] et cetera, et cetera. How does the bill pay spread play into the gross margins currently and how does that play out over the next few quarters?

So bill pay spreads, as I think I mentioned -- this is Dave Kelly -- at the transaction level, have been pretty stable. We're in an environment where we're seeing rising pay rates and rising bill rates that are pretty much right now rising in tandem. What I mentioned, I think, and what Joe mentioned, was the fact that the larger clients typically -- which are much higher volume clients, typically have margin profiles that are -- and therefore bill pay spreads that are a little bit less than some of the smaller clients. So that's what's driving some of that compression, some of that reduction in gross margin, in addition, of course, to Search. So as we look forward, our expectation, as I said, is we're going to see client growth across the various client sizes pretty consistently, we think. And the spread, therefore, should be pretty stable in Tech and F&A.

And our next question is a follow-up from the line of Randy Reece from Avondale Partners.

As you have changed the cost structure of the business and as you look at opportunity to invest in growth and whatnot, do you have any different feelings about where you should be in terms of EBITDA as a percentage of gross profit?

Well, this is Dave Kelly, again, and then maybe Dave has a comment about this. But we -- consistent with what, I think, we've been saying, we think that there's a lot of opportunity. We think there's opportunities to enhance productivity. Certainty, a lot of the changes that we have made over the course of the last couple of quarters have unearthed other ideas that create opportunity for us. As we look forward in the near term though, we think that a steady march to the margin profile that we've established now and continued fueling of revenue growth is the right path for us at this point. So that's how we're thinking.

Yes, it seems like just operationally, it's feedback I get from your employees as well who talk to people they shouldn't, you're kind of a rolling ball of knives as far as you're having success with some ideas about improving efficiency and it just kind of spreads. Is that an accurate assessment? It seems like the future is opportunities for improving efficiency are at least going to be as big as what you've already seen, if not bigger?

Randy, this is Dave. Stop talking to people you shouldn't be talking to. You can laugh. I'm not kidding you. We've experienced people who have called in and it didn't go well for them. So I'm just going to caution you that if you're calling in to people and trying to get information from them, don't do it.

Well, I just run into them at trade shows and whatnot.

Okay. Well, I just want to give you a word of advice because we've seen it. It didn't go well for people who try to get information out of some of our folks. You know better than that. So just be careful with that.

I'm just going to make sure they know who I am when they're talking to me.

That's a good idea.

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back to David M. Kelly for closing comments.

All right. Thank you very much to all of you. And we do appreciate all of you and your interest and support for Kforce. This has been a particularly good quarter for Kforce, and we're really excited about our prospects as we go forward. And really the hats go off to each and every member of our field and corporate teams. I mean, these are the people who get it done everyday. And we get to talk with you, but these are the ones who are doing it everyday. So thanks to all of you guys. And also thanks to our consultants and also to our clients for allowing us the privilege of serving them. Thank you very much. Have a good evening. God bless you.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone have a good day.