Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kforce Q1 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question again, press star one. It is now my pleasure to turn today's call over to Mr. Joe Liberatore, President and CEO. Sir, please go ahead.
Good afternoon. 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 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. You can find additional information about our results in our earnings release and our SEC filings. In addition, we have published our prepared remarks within our investor relations portion of our website. We delivered another quarter of exceptional performance in the first quarter as both revenue and earnings per share meaningfully exceeded the top end of our guidance. It has been widely publicized that the COVID pandemic accelerated many years of technology adoption and advancement.
This has resulted in corresponding acceleration and demand for highly skilled talent to assist companies across every industry to rapidly digitize business models. The strength in our financial performance continues to be led by strong growth in our technology business. As our business continues to become more highly concentrated in technology, it is also driving significant increases in profitability levels, which meaningfully accelerated and were at firm record levels in the first quarter. Kye Mitchell and Dave Kelly will speak to our results in greater detail. Since growth resumed shortly after the onset of the pandemic, we have quarter after quarter improved our performance and raised our own internal expectations of what is possible. The improvement in our performance starts with our strategic positioning over the past 10 years.
My thanks go out to our leadership team and associates for continuing to stay true to our strategic vision and for their relentless execution. Strategy without execution matters very little, and I'm proud of our team's consistent execution and unwavering commitment to serving our clients and candidates. We are clearly capturing market share and growing at over triple the market rate in our technology business in the strongest demand environment I have ever experienced in my 34 years at Kforce. Our team continues to have a meaningful impact on all the lives that we serve and achieve success through lasting personal relationships, and this is translating into our superior results. The tumultuous macro environment continues to be shaped by the highest level of inflation that we've seen in over 40 years.
The tragic and senseless humanitarian crisis occurring in Ukraine and further challenges to supply chain that is already strained by the pandemic. This has raised concern as to the sustainability of growth in our economy as well. In terms of the impact of inflation, while we are certainly experiencing wage and cost pressure, it has thus far provided a further tailwind to our business. Bill rates continue to rise in tandem with pay increases as our clients continue to understand the need for the critical resources we provide. As to the risk of a U.S. recession, technology is core to all business strategies, regardless of industry. This secular shift began coming out of the dot-com era and was further accelerated by mobility and the digital age, resulting in our business demonstrating remarkable resilience in not only navigating the most recent recession brought on by COVID, but also the Great Recession.
During challenging and uncertain times like these, we are truly fortunate to have a footprint that is 100% domestic-focused, with greater than 85% of our revenue concentrated in highly skilled technology talent solutions. The war for talent is real, with far more open jobs than available skilled talent. Our recruiting core competency, focused service offering, and freedom from distractions of acquisition, integration, or any non-complementary businesses has been a true differentiator to our consistent out-performance over the past few years. We have a pristine balance sheet which allows us the ability to both invest in accelerating organic growth and advance our technology platform while also returning capital to our shareholders. We are executing and delivering record levels of performance and are significantly outpacing industry benchmarks. We cannot be more excited about our future prospects regardless of the state of the macroeconomic environment.
As the business environment continues to open up, so are we. With the opening of our field offices to a new way of doing work, which we call Office Occasional, our unique environment provides our people with maximum flexibility and choice in designing their workday that is grounded in our trust in them, supported by technology. We have a remote-first approach to support the life-work balance our team has become accustomed to as we've moved through the pandemic. We're an industry leader in talent solution space, delivering superior financial results, and are offering maximum flexibility to current and future top talent in designing their workdays. We believe these factors, among others, will position Kforce as the destination for top talent in a time where there is great disruption in the labor markets.
Our path forward is clear, and we will remain consistent with the principles under which we've been operating so successfully. In servicing our customers, there is simply no other market we want to be focused on other than a domestic technology talent solution space as it has, in our view, the greatest prospect for sustained growth. We have the right team in place to capture additional market share within what we believe will be a continued extraordinarily strong demand environment for our services. Kye Mitchell, our Chief Operations Officer, will now give insights into our performance and recent operating trends. Dave Kelly, Kforce's CFO, will then provide greater detail on our financial results as well as our future financial expectations. Kye?
Thank you, Joe. I am incredibly proud of our team's hard work and dedication, which led to our exceptional results. Total revenues grew 13% year-over-year with all lines of business showing stronger than expected results. This overall growth rate was negatively impacted by the planned runoff of COVID-related project work we accepted during the pandemic. Excluding the impact of that COVID business, our ongoing business grew more than 21% year-over-year. We continued to deliver exceptional organic growth fueled by our technology business and complemented by our F&A business. In technology, we delivered another excellent quarter of organic year-over-year revenue growth of nearly 27% off a more difficult prior year comp.
We have been successful at driving high levels of compounded growth in our technology business, as indicated by our organic growth of 35% over the first quarter of 2020, which was the last quarter not materially impacted by the pandemic. Our business performed exceptionally well leading up to and throughout the challenging macroeconomic environment caused by the pandemic. We believe this is unmistakable evidence that our secular demand drivers in the technology talent solutions space are more important to our long-term success than any of the changes to the economic environment. Our growth has meaningfully exceeded the industry growth benchmarks over the last 15 years. Furthermore, we believe our growth rates have been consistently near or at the top of the industry since the pandemic began. Understandably, our clients are reluctant to lose key resources even during challenging macroeconomic environments because our highly skilled consultants work on mission-critical projects.
The operating trends we are seeing in our technology business have remained strong. Our front-end KPIs and new assignment starts are at historically high levels. The average assignment duration continued to expand and consistent with what we saw in Q1 2021, we again experienced much lower seasonal year-end assignment ends than we have historically seen. These indicators show our ability to sustain elevated year-over-year growth rates even with increasingly difficult comps. As Joe alluded to in his remarks, we saw acceleration of our average bill rates, which grew nearly 4% sequentially and just over 6% year-over-year to approximately $85 per hour. In addition, the average bill rates on our new assignments in the first quarter improved nearly 7% compared to the fourth quarter of 2021, which is a good indicator of what we should expect in the future as older assignments end.
More importantly, the elevated bill rates have not impacted the strength in the demand environment for highly skilled talent, which we believe supports the criticality of these resources to our clients' strategic priorities. With the environment moving to less geographic boundaries, our talent pool of candidates is increasing, which is also a positive for our business. We continue to see acceleration of critical technology initiatives with our clients in areas such as cloud, digital, UI/UX, data analytics, project and program management. Our clients are leaning into digitization, not just for the consumer experience, but also to improve the employee experience. Our conversations suggest that clients must and will continue to make significant technology investments to remain competitive. Technology and business strategy are continuing to intertwine.
A continued accelerant for our overall technology growth has been the investments we continue to make in our managed teams and solutions capabilities to meet the evolving client demand. We have continued to add talented resources to our team to support the growth that we are experiencing. We expect second quarter revenues in our technology business may continue to grow in the mid-20% range on a year-over-year basis, despite increasingly challenging prior year comps and in the mid- to high-single digits sequentially. Our overall F&A business, which declined 33% year-over-year, also exceeded our expectations. The growth rate was negatively impacted, as expected, by the falloff of our support of initiatives tied to the COVID-19 pandemic.
These revenues contributed a negligible amount of revenue in the first quarter of 2022 and $24 million in the first quarter of 2021. Excluding the $24 million impact, our overall F&A business declined 5.8% year-over-year because of our strategic repositioning efforts. Our teams have embraced and executed our F&A strategic repositioning, moving us to more highly skilled assignments. These assignments are less susceptible to automation and fit better with our technology footprint. Our strategy has contributed to the success of the firm, including F&A average bill rates increasing approximately 8% sequentially and 21% year-over-year to over $43 per hour, excluding any impacts from COVID-related project work.
While we continue to refine the positioning of our F&A business, non-COVID growth rates will be negatively impacted by the assignment falloff of business we no longer support but contributed to revenues last year. As of the second quarter, the falloff is essentially complete and the remaining business is providing stable revenue. When combined, we expect our overall F&A revenues to decline in the low- to mid-single digits sequentially and may be down approximately 45% year-over-year in the second quarter. As a reminder, the second quarter of 2021 included $34.8 million of COVID-related project revenue. We are continuing to invest in strategic initiatives and technologies that best position our firm for long-term, sustainable, profitable growth. From a technology perspective, our fully integrated CRM and TRM systems are cloud-based and seamlessly integrate with other Microsoft products.
Investments to further develop these tools and enhance capabilities continue. We have made measured investments in adding talent to areas with the greatest expected return with a concentrated focus in our technology business, and we'll continue to take a similar approach in the near term. We maintain sufficient capacity to sustain our current growth rates and believe opportunities still exist to further enhance productivity. We have supported and retained our best people and, as Joe mentioned, have made meaningful changes to provide our employees flexibility and choice in our new Office Occasional work environment. Our Glassdoor rating continues to be the highest among our peers, indicating our people love this new model. We have continued to maintain a world-class Net Promoter Score from our clients and consultants. I am grateful for the trust our clients, consultants, candidates have in Kforce.
Our teams continue to inspire me every day as we work together to make Kforce the destination employer in the talent solutions space. I will now turn the call over to Dave Kelly, Kforce's Chief Financial Officer. Dave?
Thank you, Kye. I'm pleased to provide some additional color on our excellent results and prospects. First quarter revenues of $417 million, a Kforce record, grew 13% year-over-year and were 24% higher than the pre-pandemic levels of Q1 in 2020. Earnings per share of $0.93 in the first quarter improved 50% year-over-year and reflects the improving quality of our revenue stream and concentration of technology revenues. We saw sequential improvements in both flex margins and overall gross margins in the first quarter as a result of both stronger than anticipated direct hire revenues and higher flex revenues in both our technology and F&A businesses. Gross margins increased 250 basis points year-over-year to 29.7% in the first quarter.
While we don't expect continued growth at this pace in direct hire revenues, which constitutes less than 4% of total revenues, the benefit in a greater percentage of technology revenues is notable and provides significant margin stability, given that both our ability to manage bill-pay spreads and the increasing desire by our clients to engage our firm for project-based work. Flex margins in our technology business improved 150 basis points year-over-year, and bill-pay spreads have been stable while wages have accelerated. We are also benefiting from a lower percentage of overall payroll taxes and health insurance costs than we've seen historically, due to technology being a higher percentage of overall revenues.
Our ability to drive more revenue on average from each billable consultant through higher bill rates and longer assignment duration continues to contribute to the reduced percentage of these costs and results in a structurally higher quality revenue stream that we expect to continue going forward. Flex margins in our F&A business expanded 400 basis points year-over-year, due primarily to a decline in the lower margin COVID project work and improved bill rates and spreads resulting from the strategic shift to higher skilled roles. As we look forward to Q2, we expect spreads in our technology business to be stable with first quarter levels, coupled with seasonal improvements from payroll tax resets.
In FA, spreads are expected to expand slightly due to the runoff of lower margin opportunities in the first quarter of 2022. Overall flex margins will be positively impacted in the second quarter from reduced payroll taxes by approximately 50 basis points relative to the first quarter. Overall, SG&A expenses increased as a percentage of revenue by 130 basis points year-over-year, principally due to higher levels of performance-based compensation as a result of our exceptional financial performance. We expect SG&A expenses as a percentage of revenue to decline in the second quarter relative to the first quarter as a result of increased leverage from our revenue growth and lower payroll taxes from the seasonal annual first quarter resets.
Our first quarter operating margin was 6.7%, which significantly exceeded the high end of our guidance as a result of the better-than-anticipated gross profit margins. Our effective tax rate in the first quarter was 27.1%. Our business continues to generate significant operating cash flows, which were nearly $39 million in the first quarter, and our accounts receivable portfolio continues to perform exceptionally well. We returned $16.2 million in capital to our shareholders through $6.1 million in dividends and $10.1 million in share repurchases. Our return on invested capital was approximately 48% in the first quarter. The strength in our balance sheet and availability under our $200 million credit facility allows us to be opportunistic in returning significant additional capital to our shareholders while continuing to evaluate potential tuck-in acquisitions.
With that said, our belief is, and our results suggest, that a focus on organic growth provides us the best opportunity for long-term success. Thus, we will continue to apply a very stringent cultural and financial filter on any transaction. Given our confidence in our future growth prospects, we expect to remain active in repurchasing our shares. We've consistently returned greater than 75% of operating cash flows annually to our shareholders over the past decade. The strength and predictability of our platform allows us to do so while still providing ample capital to invest in the growth of our organic revenue stream. With respect to guidance, the second quarter has 64 billing days, which is the same number as the first quarter of 2022 and the second quarter of 2021.
We expect Q2 revenues to be in the range of $436 million to $444 million and earnings per share to be between $1.15 and $1.23. Gross margins are expected to be between 30.4% and 30.6%, while flex margins are expected to be between 27.6% and 27.8%. SG&A as a percent of revenue is expected to be between 22.2% and 22.4%, and operating margins should be between 7.7% and 8.1%. Second quarter operating margins are projected to benefit approximately 70 basis points sequentially from reductions in payroll taxes. This translates into a sequential earnings per share benefit of approximately 11 cents.
Weighted average diluted shares outstanding are expected to be approximately 20.7 million, and our effective tax rate is expected to be 26%. Our guidance does not consider the potential negative impact on the demand environment from a significant increase in COVID-19 variant cases, the effect, if any, of charges related to any one-time costs or charges related to any pending tax or legal matters, the impact on revenues of any disruption in government funding, or the firm's response towards regulatory, legal, or future tax law changes. We are tremendously excited about our future prospects, given the momentum that we've continued to build.
We expect our continued significantly above-market growth will also result in continued expansion in our operating margins and significant increases in earnings per share, while allowing continued investments in technology and our people, both of which we believe benefit our shareholders in the long term. Last quarter, during our earnings release, we indicated that we expected the 2022 revenues would be at least $1.7 billion and that earnings per share would be at least $4.20. Should the demand environment remain strong and full year trends remain stable with first quarter results and second quarter guidance, we would expect to significantly exceed those levels for the full year. Overall, we believe we are in an exceptional place. We believe the strategic decision to focus our business in providing domestic technology talent solutions is paying huge dividends.
We couldn't be more excited about our future prospects. Our shareholders continue to benefit from our strong performance and efficient capital allocation. On behalf of our entire management team, I'd like to extend a sincere thank you to our teams for their efforts in continuing to outperform market expectations. Operator, we'd now like to open up the call for questions.
At this time, I'd like to remind everyone, in order to ask a question, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Your first question comes from the line of Mark Marcon with Baird. Your line is open.
Hey, good afternoon, everybody, and congratulations on the strong results. Wondering, Kye, you mentioned, you know, the strength in IT Flex that you're seeing, and I was wondering if you could give a little bit more detail with regard to the verticals in terms of, like, how broad-based the strength was. I imagine it was broad-based, but love to get some confirmation there. If you saw any sort of particular client activity that really stood out. One thing that you mentioned in your prepared remarks was, you know, companies not only putting in place digital transformation efforts for the benefit of their clients to involve their consumers, but also to better engage with their own employees. I was wondering if you could give a little bit more color there.
Sure. Thank you for the question. We are seeing broad-based growth across all the industries. You know, it's interesting, we've really focused in on industry diversification, what industries do we want to play in over the last several years, and no single industry is more than 20% of our business. We saw every industry we support up in double -digits. Great growth across the board. We're seeing a lot of growth in continuing, as you said, in digital. In regards to the comments I made, clients are spending a lot of money on digital transformation. Everybody knows everything today is being done digitally. You know, I think 80% of transactions are now going through digital platforms. They're also investing in that employee experience.
With the Great Resignation that's been going on, it's more important than ever that employees are supported, that they can communicate with employees quickly, that the onboarding experience is good, that they have different tools necessary to do their job. They're all taking a digital approach to that too, to make it a better experience for those employees to be able to retain them long term. We're seeing a lot of growth in that area as well. I expect that to continue as we move forward. We're also seeing a lot in cloud, and cloud is another area where clients are definitely continuing to make those investments. It's not an optional thing for most of them, with today in cybersecurity and everything else. Cloud is the way our clients are going, and we're continuing to benefit from that work.
That's terrific. Can you talk a little bit about on the F&A side, do you expect the second quarter to kind of , assuming that the economic environment stays steady, would you expect the second quarter to kind be the low water mark for F&A or there still be some runoff in terms of some of the areas that you're supporting to a lesser degree as we start going, you know, beyond the second quarter?
You know, the biggest impact for us as we go into Q2, as I mentioned in my comments, is that we do have $35 million of COVID business that was in Q2 of 2021 coming off. That will be, we've now hit, for the most part, all of our COVID business has run out, so it's very minimal. We did have it last year in each of our quarters, and we're not going to be able to outrun that year-over-year impact for the rest of the year. However, it will be to a much less degree from a sequential basis. We're seeing a lot of pickup right now from our bill rates.
As I mentioned, our bill rates have gone up over 20% in F&A, so we're continuing to see benefit from that move and transition into the higher level jobs that won't be automated as easily. It fits much better into what we're seeing on the technology side too. We're really excited about where we're going in this transformation with our F&A business. However, it will continue as technology is continuing to grow at the pace it's at. That's gonna be really where our big story is.
Oh, sure. I appreciate.
In our investment.
I was just wondering whether or not on a sequential basis, we would see an improvement in F&A?
I think F&A is gonna continue to trend down just slightly because we have moved a lot of those F&A associates over to our technology teams. The levels we're at right now, I think you'll see it start to level off, but, you know, I would anticipate a little bit of sequential decline next quarter.
Great. Hey, Mark, this is.
Mark, this is Joe. I was gonna give you a little bit more flavor there because I think the way that you should look at our F&A business. Our F&A business is about the quality of the F&A business and how it aligns with our technology footprint. I wouldn't get as hung up on what's happening with it sequentially. I mean, look at what's happening with bill rates, as Kye mentioned in her comments. I mean, we're really going upstream here in those roles, and they're much more synergistic with tech. Because again, I would take you back to, especially with the COVID that we're going to be dealing with here through Q2.
You know, when we went into the recession and we gave the market the indication we were going to go after that business, it was by design when no one knew where the world was going so that we could support our business, you know, back in the early part of 2020, when that started to become a big revenue stream. We basically said that, you know, we're gonna run that business out and then basically transcend from that business into tech, and I think we've accomplished that. If you look at our tech business up 35% over that two-year period, we pretty much have more than outrun what we brought on from that business.
Great. Can you talk a little bit more about on the tech side, you know, what percentage of the placements are now for virtual positions? In other words, you know, not necessarily working in the office. You know, how far along do you think we are in terms of that progression, in terms of the acceptance, you know, of work from home, you know, being completely adapted, you know, even in a post-COVID environment? To what extent does that give you competitive advantages, you know, to be able to continue to grow above market, particularly relative to regional players that just don't have the same level of capabilities that you do?
Yeah. Well, I'll give you the backdrop, and then if Kye has anything she wants to tag on. I would say, you know, I think we're really in the early innings, believe it or not, of remote work. The reason that I say that is clearly there's those companies that have adopted and accepted remote work, which really provides us a great opportunity to expand, not only the candidates that we can bring to those clients, but also from a candidate perspective, we're able to provide them to more job opportunities, which only increases that probability of fill, as well as getting to the right match.
The reason that I say it's the early innings, you know, some of the things that we're seeing from clients that have been more aggressive about trying to drive technologists, and I'm just gonna talk about technologists and not the market as a whole, given that's 85% of our footprint and growing. You know, but those that are trying to drive the technologists back into the office and basically said, "You gotta be back in five days," we've seen them now migrating to, "Okay, you only have to be in three days. You only have to be in two days." So that's why I say I still believe we're in the early innings from that standpoint. Overall, it provides a tremendous opportunity for us, especially with our national footprint and being able to be on ground with candidates and meet them.
Likewise, for you know, our clients just with our footprint across the domestic U.S. Very positive from opportunity from our standpoint. I mean, every day, you know, more and more companies are embracing remote work, and I would say part of that is out of necessity. You know, it's widely publicized, this Great Resignation and, you know, just how mobile the world is at this point in time. Those organizations that aren't reacting, they're having trouble attracting and retaining talent.
You know, it's clear if you look out there, especially from a technologist, you know, the surveys that are being done out there, seven out of ten technologists said, "If I'm forced to go in the office more than I want to go in the office, I'll find another job." When you look at where the current unemployment rates are at a macro level, and we all know it's much more severe within the technology skill set, I mean, they're in control. The opportunities are out there. End customers are gonna be adapting and adjusting.
That's great. You know, given the strong trends that you're seeing in technology, you know, barring a severe recession, you know, we would anticipate that you'd continue to see growth. How should we think about, like, the you know, the operating margins as we start approaching, you know, closer to, you know, $500 million in quarterly revenue? How should we think about that?
Hey, Mark. Dave Kelly. How are you? Clearly as obviously first quarter results suggest, and as revenues accelerate into the second quarter, we're having some nice success driving that improvement to the bottom line. The expectation as we grow the business is that, you know, clearly, as we grow, we're gonna generate additional operating margin just because of the scale, the quality of the revenue stream, right? Technology for us, you know, we talked a little bit in some of the prepared remarks about the health of the gross margin profile. Technology helps us there. You know, we've said in the past as we grow that we think we're on a path as we continue to grow to double-digit operating margins.
We haven't put a number out there and said what should it be at $500 million precisely. I can tell you, although obviously we continue to invest in our business, as we continue to grow, we think it'll expand into double digits at some point.
Great. I'll follow up with additional questions at the end of the queue.
Your next question comes from the line of Marc Riddick with Sidoti. Your line is open.
Hey, good evening, everyone.
Good evening.
I was wondering, certainly a lot of detail in the prepared remarks, and thank you for that. I was wondering if you could spend a little bit of time bringing us up to date on. I know you had the bill rate commentary. I was wondering if you could talk a little bit about what you were seeing as far as pay rates go, and then I have a couple of follow-ups there?
Yeah. This is Dave Kelly again. Mark, nice to meet you.
Thank you.
What we've seen is, quite frankly, what we've continued to see over the course of the last couple years, right? We're sitting here in an environment where both bill rates and pay rates are increasing. Joe mentioned the shortage of, you know, the supply constraints in the market and our ability to find those. Obviously, our clients understand that they have to pay more. We've been doing this for years, right? This is not an environment that's changed. Certainly bill rates are going up in tandem with pay rates. The spreads themselves have been basically stable over the course of the last couple years. Even in a very supply constrained market, our expectation as we move forward is that we continue to expect that to be the case.
I think the trajectory here for our business is improving bill rates, right? Bill rates, we think, and pay rates are gonna continue to go up. The percentage of that which is generating gross margin is gonna be about the same as what it has been historically, so more gross profit dollars obviously as well. Really pretty much what we've been experiencing, we expect to continue to expect. Yeah, Mark, this is Joe. I'd also just add to that, just kind of lifting things up a little bit.
I mean, we all know one of the biggest macro trends out there is inflation, and certain aspects of inflation are more directly related to our business, such as wage inflation, you know, which I believe, the last numbers put out there is, you know, surged about 11.7% year-over-year in March. You know, one of the things that Kye had mentioned some of this in her comments that our team has done, is a nice job on increasing the bill rates and that associated, you know, wage increase that kind of flows through to our consultants. I mean, one of the interesting dynamics is our clients understand wage inflation better in this cycle than what I've seen in any other cycle in my 34-year career, here at Kforce.
I mean, no doubt, you know, the broad-based understanding and awareness have to do with all the news. Companies are feeling this firsthand with their core populations during this Great Resignation. Point being, clients are more informed and probably more receptive than ever in working with us to make sure that we're doing everything necessary to adjust so that they can attract, you know, top technology talent. I just wanna make sure we lift this up from a bigger perspective on what's taking place.
Excellent. That actually leads me to the next part of the question. I was sort of thinking about when you think through the digital transformation that you're seeing your customers sort of embark upon and sort of what stage they're in that process. I was wondering if you talk a little bit about maybe what that does for you on two fronts. One, how that sort of adjusted or changed, if at all, the level of visibility that you have in working with your customers and sort of the you know the projects that they have in mind. How has that maybe changed your level of visibility for your own results?
Maybe you could touch a little bit on the competitive advantages and how those have either expanded with, you know, with your clients heading in that direction. Thank you.
I think from a visibility perspective, it hasn't changed that much, although we do see long range on this. This is not just coming in and doing one project. This is long range, full enterprise transformation. When you think about our customer base, 70% of our clients are in the Fortune 500, and they don't have an option on spending this money. We do see this as continuing long term and great partnerships with our companies. I mean, it ranges from everything from, you know, in the retail space, you're seeing clients who are really trying to have digital platforms now to handle shipping and returns to in insurance tech, you're seeing everything's done now over the mobile apps and those types of things. You just see it throughout every industry that we're touching.
I do think it's continuing to improve the longevity of our clients and those assignments too. We have seen our average assignment length continue to grow. We're at roughly 10 months now, and it's very sustainable. Clients don't have an option. They have to do this. I think this is a trend we're going to continue to see for a very long time.
Okay, great. Then the competitive advantage of where you stand currently and how that's expanded over time. Thank you.
I think the competitive advantage that we have, and I'll let Joe Liberatore add to that, but we've been after this. We were very early in looking and partnering with various CDOs, Chief Digital Officers across our client base. We have built out a lot of capabilities. We've hired some outstanding subject matter experts in this field. Obviously, our national footprint is a big advantage for us. In this space, most of the work can be done remotely. We're able to have access across the country to identify that top talent. We've invested in great tools that help us recognize who the best and brightest are. Our people have really become experts in recruiting this type of individual. Really proud of the progress the team has made in this space.
Focus wins, and this is a big focus for us.
Hey, Mark. Thank you very much.
I'm just gonna add quickly, Kye's talking about the competitive advantage, just kind of numerically here. Focus absolutely wins. You look at our $85 an hour bill rate business, even during the pandemic, right? That business didn't go away. One of the advantages that we have is being focused here make us a necessity in the eyes of our customers, and it led to basically, even in the worst of times, relative to the market as a whole, our revenue held up probably better than anybody's in the space.
Excellent. Thank you.
Thank you, Mark.
Your next question comes from the line of Tobey Sommer with Truist Securities. Your line is open.
Thank you. I kinda wanted to expand on that last question. Could you give us context for the assignment length in recent history and maybe describe the changes over time? Bring it home, if you could, with what those changes mean in now 10 months on average to your ability and how you manage your business as you have what seems like more visibility.
Yeah. Hi, Tobey. Dave Kelly. To put it in historical context, 10 months is compared to, I would say if you look at, maybe right after the Great Recession, it was probably five or six months. It has really doubled since that time. What you're seeing is clients holding on to our consultants more. Again, one of the things that we touched on, and Kye had mentioned in the remarks, obviously, our clients are looking for companies such as Kforce to do more project-based work. Those are obviously longer in duration. For us, it's a combination of the need to hold on to talent and the type of work that we're doing.
Really, you know, that helps us obviously deepen our relationship, as Kye said, with our clients as well. On an ongoing basis, as we look to the future, as the shape of the business that we're doing continues to move down this path, it just gives us a much more, you know, sustainable revenue stream, generally speaking.
Do you think we're topping out at 10 months? Is there room after a doubling to keep going a little bit?
Well, I mean, I think.
I'd say there's definitely room to go.
I would agree with Kye, right? As we see that project-based work increase, those are typically longer lengths of assignments. On average, it's gonna increase, right? That's just kind of the nature of how technology talent is procured these days.
Yeah. Tobey, as you're well aware, we're in the most imbalanced supply-demand in terms of resources in these key technology roles. I mean, this is more severe than it was during the peak of the dot-com. By default, you know, we are seeing clients hold on to people longer, even when it's not in and around the managed teams and solutions space, because they realize how difficult it's gonna be to find somebody else. We also are seeing clients redeploy our consultants inside their organization, meaning when one assignment's wrapping up, they're actually helping that consultant find another initiative inside that organization when they have somebody that, you know, has some of that domain knowledge now. That's also playing into this as well.
You kind of prompted a follow-up there. Does that change the way you can utilize your recruiting force to kind of be more productive hunting if to some degree you're getting you know renewals or longer assignments as a result of your clients actually redeploying talent on your behalf?
Absolutely. That really gives us some good opportunities to continue to expand the business. We are really rethinking about how we think about redeployment. We're looking at how do we continue to infiltrate within clients? How do we redeploy with other clients? We recently had, for example, a project that ended. It had about 30 people on it, and we redeployed 28 of them. It's definitely something that's working for us. With this type of demand, we'll continue to. Obviously, the people that have worked for us and proven themselves are the ones that we wanna continue to place time and time again.
If I could just ask you to touch on sort of the consulting value-added side of the services in contrast to staff augmentation. What does the assignment length look like there? Are you comfortable that you can still build that at scale on a pure organic basis?
Yeah, Tobey,
Can you clarify that? Yeah, go ahead. Joe, go ahead.
Yeah, Tobey, I would say from a standpoint of the progress we've made with our managed teams and solutions efforts, we're very comfortable that we can go this you know organically if need be. We're remaining active in the market and looking for you know that potential right fit that would bring value added services to our team that we could take across our broad base of customers. We haven't found that right fit. To what Kye had mentioned, you know, we're bringing on a lot of skilled individuals that are coming out of solutions organizations that have really allowed us to build a strong team.
We continue to outpace our growth within this area versus our overall tech growth, you know, roughly 27%. We're growing at a faster rate in these areas.
Yeah. I even would add to that, it's nice not to have the distraction, too. I think that, again, is why we're accelerating so quickly.
Thank you for that. How would you think that the Technology Flex business would perform in a longer recession in 2020? 'Cause in fact, that was severe and swift, but quite brief. A la sort of the Great Recession, and I can't recall if you had any unique factors, either beneficial or that worked against the business at that time to consider, in sort of evaluating what it would look like this go around should there be one.
I would say, you know, probably the best parallel even versus the financial crisis is when you go back to the dot-com, because I believe that cycle was very tech-centric. This cycle is very tech-centric. However, they're tech-centric in very different areas. Dot-com, as we all know, as the internet came about, everybody was scrambling to get websites up. Everybody was worried about disruptive business models that are out there. It was very hypothetical. That's what drove a lot of the bubbles during the dot-com. This cycle is structurally sound. Everything that's happening is, as we've said, to digitize individuals' business, whether it be on the consumer front, whether it be on the employee front.
I mean, these are non-optional for organizations to not move forward their digital efforts. I think that plays a lot into how the business would perform in a longer recessionary period. Again, let's go back to even the Great Recession. I mean, the financial crisis. That was a much longer, and the business performed extremely well in that cycle. When we look at the dynamics that are going on, we're no longer in the 1980s or 1990s where technology was the first place where people went to cut expenses. I mean, everything has to do with that experience, and now with data on top of that.
I mean, we're in the right areas on everything that we're focused on with the end clients in terms of the competitive opportunity and the strategic approach that we've taken to the overall business.
Thank you. Last question for me. Some investors have been focused on customer concentration after another company had a large project. Could you remind us what does the largest customer represent or maybe the top ten customers, if that's how you'd like to slice it, and give us a comparison for how that's changed in recent history, maybe pre-pandemic? Thank you.
Yeah. Hey, Tobey. Dave Kelly. I can tell you that pre-pandemic, post-pandemic, we've always been extremely well diversified from an industry standpoint. Kye touched on it that no industry as a whole is. I mean, everything is great, less than 20% from an individual customer. You know, we don't have any customer concentration of any note, right? Probably less than 5%. You know, we're not reliant upon any one industry, nor are we any one customer. That, I would say, by the way, Tobey, has been the case for a long time. That dynamic has not really changed over time.
Tobey, we're a little bit different type business, meaning, to Dave's point, even when we talk customer concentration, realize we have many different initiatives going on within customers. I mean, any one given project is, you know, a percentage of whatever revenue we're deriving from a specific client. I mean, I think it's also important to, you know, put a footnote on that.
Right. Good point. Thank you very much.
Sure.
Sure.
Your next question comes from the line of Kartik Mehta with Northcoast Research. Your line is open.
Hi, good afternoon. I think you've talked about obviously what wage inflation has been so far. I'm wondering, you know, as you look forward to the rest of 2022, what your expectations are for wage inflation. Are we kinda at the peak, or do you think that there's still greater pressure that will occur on wages?
Yeah, I think, you know, obviously we're.
Yeah, I think the simple.
Please go ahead, Joe.
Yeah. I think the simple answer is, in the technology space, we've been seeing wage pressure for the last number of years, and I don't think we have any expectation that that is going to change. What I can tell you is, we've been dealing with this for a long time, and we are very confident that, and I think Joe touched on it, our customers really understand it as well. Our ability to pass that through to our customers, we feel very strongly about as well. Frankly, rising wage is really the tailwind to our business. I don't know that that changes, and I quite frankly think it's a good thing for us.
And then-
Believe it or not.
Go ahead, I apologize.
No, go ahead.
Well, I was gonna say, you know, I think you talked a little bit about remote work, and we're kinda in the early innings. I'm wondering if that opens up your ability to recruit people maybe internationally and the ability to do that or maybe if there are hurdles in doing that, especially with your customers.
Yeah, probably the biggest hurdles that you run from an international work standpoint has to come in and around some of the cyber aspects. It's very client-specific in terms of where their appetite is there. We believe, and again, this goes back to domestically, you know, we're one of the top five providers here domestically at, you know, 4% market share. There's just a tremendous talent pool here in the U.S., and it's a talent pool that, you know, we've been involved with and developing relationships with since the day we moved into technology, which I believe was back in about the 1980s, slightly before I joined Kforce. Our focus is on the domestic talent pool.
You know, those foreign workers that are on ground in the U.S., that have experiences working within the organizations. That's really where Kforce's focus is.
Then if we could just go back to wage inflation. I think, you know, you said that that obviously is a tailwind. I'm wondering, you know, have you seen any signs where maybe your clients might be pushing back because the costs are getting prohibitive or the costs are much more than they anticipated? I realize this is kind of mission-critical stuff, so maybe that doesn't apply, but I'm just wondering if there's the other part of wage inflation that could potentially have a negative impact.
I mean, we could potentially see it at some point, right? Because organizations can only assume the inflation for such a period of time until it starts to come back and impact their P&L. But again, going back to when you look at how technology is centric to every business strategy today, this is probably one of the last places that organizations go to in terms of trying to reduce expense. And so, you know, we do see wages continuing to probably increase throughout the remainder of the year. There you know there's been more economist reports coming out that you know that it could be you know we could be more at the top point, so maybe we start to see that subside to some extent.
Again, you know, the projects that we're focused on are mission-critical projects to the business. These aren't elective. I believe the organizations are gonna have to go to other areas to look at reduction of expenses or they're gonna have to cut back on the amount of things they're doing and focus on the highest priority initiatives in the firm. I mean, if you really wanna play that forward.
Thank you very much. I appreciate it.
Sure.
Your next question comes from the line of Mark Marcon with Baird. Your line is open.
I just wanted to ask a follow-up question. You know, clearly, IT Flex, you know, is mission critical, and if we go back even during 2020 when the impact of COVID was significant, you saw just minimal declines in terms of IT Flex revenue. On the other hand, there was, you know, a decline in terms of perm. Despite that, certainly in F&A to a certain degree, but you were able to preserve, you know, the margins, you know, at a very strong level. I'm just wondering what were some of the lessons that you've learned that, you know, if we go into another recession, you know, there's parts of the business that aren't gonna be impacted, there's gonna be other parts that are going to be impacted.
You know, to what extent do you think you're gonna be able to maintain profitability, you know, as well as you did back in the 2020 time period?
Yeah. Mark, you know, we war game scenarios all the time, especially, you know, as different things are evolving. You know, we have a very seasoned management team. I mean, most of us have been together for, you know, over 20 years. So we've seen different cycles. We know they all come with a little bit different flavor. I think if you go back and you look at our history, if you look at how we navigated through the financial crisis and now how we've navigated through this most recent pandemic crisis, we're gonna make the right calls, and we're gonna always preserve profitability of the firm, you know, to keep the business.
We also are gonna do and make the right calls to hold on to the talent because we also realize there's always another side to these. Again, I'll go back to today. Unlike either one of those, even with the pandemic, even more recent here, you know, 85% of our business is wrapped up in technology, and that's not with less than 4% of our total revenue stream in the permanent non-cyclical. To answer your question, we learn from every one of these cycles, and they've driven our strategic decisions going back to as far as I can remember, coming out of the dot-com. When we came out of the dot-com, what we experienced, if we weren't significant inside customers, we were being exited.
That changed our account portfolio strategy to become significant within organizations, and we're seeing the byproduct through these last two downturns of that. We also saw a permanent revenue stream go from, you know, was it $40 million a quarter down to $6 million a quarter and all the real estate overhang and everything else, and that's when we consciously made the decision to not be that exposed among the permanent side. Through this last cycle, what we learned with our people, you know, speaking in truth and transparency, that improves the trust, and that's no small part of why Kforce is performing the way it is.
Because we worked through this as a team through a lot of surveys, gathering their feedback, doing what they were asking and telling us their needs were, which has really driven, you know, where we are with our Office Occasional, which is, you know, choice and flexibility that are really empowered by trust and technology. These things don't just come out of the ether. I mean, we have a really solid team with a lot of tenure, and we're gonna make the right calls.
Terrific. Thank you.
Sure. Sure.
There are no further questions at this time. I will now turn the call back over to Mr. Liberatore for closing remarks.
Well, thank you for your interest and support of Kforce. I'd like to say thank you to every Kforcer for your extraordinary effort and to our consultants and clients for your trust in Kforce and partnering with you and allowing us the privilege to serve you. We look forward to talking with you again after second quarter 2022. Thank you.
Ladies and gentlemen, thank you for your participation. This concludes today's conference call. You may now disconnect.