00:04 Good afternoon, ladies and gentlemen, and welcome to the Resources Connection Inc. Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. 00:27 At this time, I'd like to remind everyone that management will be commenting on results for the first quarter ended August twenty twenty one. They will also refer to certain non-GAAP financial measures. An explanation and reconciliation of the measures to the most comparable GAAP financial measures is included in the press release issued today. Today's press release can be viewed in Investor Relations section of RGP's website and was also filed today with the SEC. 00:52 Also during this call, management may make forward-looking statements regarding plans, initiatives, and strategies, and the anticipated financial performance of the company. Predictions and actual events or results may differ materially. Please see the Risk Factors section in the RGP's report on Form 10-K for the year ended May twenty eight, twenty twenty one for a discussion of risks, uncertainties, and other factors that may cause the company's business, results of operations, and financial condition to differ materially from what is expressed or implied by forward-looking statements made during this call. 01:27 I'll now turn the call over to RGP's CEO.

01:32 Thank you, operator. Welcome to our Q1 earnings call, and thank you for joining us today. I'll cover three topics, starting with a quick review of our strong first quarter performance. I'll then discuss progress against our digital agenda, followed by comments relevant to macro trends and original research we just completed within our current and target client base. 01:56 On our Q4 call, we previewed stronger growth coming in Q1 and it did. Revenue was the highest achieved in over ten years during a fiscal first quarter, and that one hundred and eighty three point one million dollars exceeded our guidance and represented twenty five percent growth year-over-year. We also grew sequentially by eight point five percent. We're pleased by the strength across many markets and industry verticals, driven by sustained improvement in operational execution and delivery and macro trends such as workforce agility and digital transformation. 02:35 Revenue in every major market was up double-digits and our strategic client accounts delivered twenty six percent growth. Disciplined account planning and client centricity are paying dividends. 02:50 Adjusted EBITDA performance is a further highlight from Q1 results. As we expected, adjusted EBITDA margin improved to twelve point two percent, up five thirty basis points from first quarter last year. This accomplishment is a result of operating with an improved fixed cost structure and strong gross margin performance. We've worked hard to increase the profitability of the business by achieving top line growth, lowering headcount and real estate expense and driving efficiency with technology and digital tools. We'll continue to do so. 03:36 We're also focused on pricing the value and increasing bill rates appropriately. Consistent with our fiscal-year goal, this is the second quarter in a row we've achieved twelve percent plus adjusted EBITDA margin. The management team set this trajectory when we began working together three years ago. While COVID sidetracked our progress as clients put new projects on hold for a time, we have more than fully recovered to exceed Q1 fiscal twenty nineteen levels and remain optimistic about to path forward. 04:07 This optimism is fueled by two fundamental macro trends. The first centers on digital transformation, both internally and throughout our client base. The second is a tangible and meaningful shift toward organizational agility and specifically, how work gets done. This trend equally impacts client strategy and talent preference. 04:29 As I've shared many times, RGP's digital transformation is both internal and external. First, we are transforming how we deliver our services to clients and our gig opportunities to consultants through digital transformation initiatives. The best current example of this effort is HUGO, our soon to be launched digital engagement platform to allow clients and talent to interact through a self-service marketplace for finance and accounting talent. 05:01 Our differentiator is launching a technology platform with the trust, quality and high-touch experience of RGP and the safety net of employment benefits in community, which we believe professional talent wants. As evidenced by discussion and research shared at the SIA Conference on collaboration in the gig economy. Platforms are coming to all corners of this industry. While we've seen such marketplaces like Aya Healthcare, Upwork and JobStack for nursing creative, coding, light industrial and hospitality gig work we've not seen a dominant player in the professional gig arena. We intend to be the dominant player for knowledge workers engaging with enterprise business. 05:49 I'm very pleased to share that HUGO will go live the week of October eighteen in the tri-state market of New York, New Jersey and Connecticut. We're launching with a pilot for a designated set of clients and finance and accounting rules. The team is ready, the product is ready for MVP launch and we believe the macro environment is now conducive. Following our launch in tri-state, we will extend the capabilities to the Dallas market and in Northern California within the next fiscal year. 06:21 We'd hope to share more about the functionality of the product during an in-person Investor Day at NASDAQ on October thirteen. However, given continued restrictions at NASDAQ due to the COVID delta variant, we've decided to move the Investor Day to April twelve, twenty twenty two. We look forward to engaging in person in sharing client experience with HUGO at that time. 06:48 Externally the trend toward digital transformation in our client base continues to accelerate. We added Veracity's capabilities to our suite of services at just the right time two years ago. Clients continue to fund the projects to digitize core processes for automation and collaboration and create digital tools to drive growth. The need spans our client base from healthcare providers to technology to big pharma. We know this concrete shifting corporate priorities is real as Veracity grew by an impressive forty five percent year-over-year with nice growth in revenue and pipeline coming from RGP's core client base. Please review our updated investor deck for new case studies and further color around Veracity's project work. 07:40 As an important tailwind for our business, the macro trends creating today's opportunity rich environment come from both the demand and supply side. These trends have been confirmed by original research we've recently gathered from our current and target client base. We will be releasing the human agility research this month prominently on our website as it confirms how post-pandemic behavior is favorable to our business model are here to stay. 08:09 On the demand side, clients are committed to operating in a different paradigm with agility at the core. This means companies are building more distributed leadership, nimble finances and new workforce strategy centered on agile talent. We're increasingly engaged with clients who want RGP formally on the org chart as a talent provider to match critical project based skill set to business imperatives. Decisions can then be made throughout the business to achieve speed and resiliency. 08:44 On the talent side, our research confirms that control, choice and diversity of experience matter more in a changed world. Where to work, when to work and on what to work are increasingly vital considerations for professionals. Talent also wants to align with organization on shared values, empathy and flexibility. Our business model beautifully meets the preferences of today's modern professional. While other firms are facing the harsh realities of the great resignation, we are increasingly an employer of choice. 09:24 In closing, I want to express my enthusiasm about a new executive appointment we announced this week. Bhadresh Patel has been named our new Chief Digital Officer effective immediately. As the CEO of Veracity, Bhadresh has been consulting on our digital and technology transformation efforts informally. We're now ready to formalize his role and remit. During the next year, he will stay close to Veracity's sales and strategy, while developing his leadership role over our enterprise digital roadmap, priorities and alignment. We're delighted to welcome him into the C-suite and further bond Veracity and RGP as we pursue digital transformation work in all corners of the business. 10:08 I'll now turn the call over to Tim for an update on operations.

10:13 Thank you, Kate, and good afternoon, everyone. During the first quarter, we saw continued strong progress in our revenue and operating metrics despite pandemic flare ups and vacation effect, typical of the summer months. Larger deal size and longer project durations exemplified the commercial environment as clients continue to take on significant and transformational initiatives. 10:34 The momentum noted at the end of Q4 relative to revenue and pipeline continue. Enterprise revenue increased by twenty five percent over the prior year quarter and eight point five percent sequentially, while top of the funnel activity was strong, leading to increases in qualified opportunity and ultimately to the highest level of closed deals since twenty nineteen. 10:55 Revenue growth and pipeline strength was consistent across our core business in Asia Pacific, Europe, North America, Veracity and Countsy. Operational effectiveness, our strengthening economy and macroeconomic trends favoring co-delivery provide a powerful combination for growth. 11:13 As Kate noted, our first quarter results exceeded the high end of our revenue guidance. We have seen growth in both project staffing and professional consulting that is part of a broader market shift away from a fixed traditional workforce to a more liquid workforce that can be marshalled quickly and molded instantly in the fit for purpose solutions. 11:32 As companies start new initiatives or resume and accelerate existing ones, the utilization of agile core delivery is becoming a potent force. Clients are prioritizing flexibility and labor is demanding it. While elements of this dynamic started before the outset of COVID, the last eighteen months have provided a significant and meaningful acceleration, leading to a palpable tightening of the traditional labor market and a high reliance on a more fluid -- on more fluid workforce solutions. 12:00 We continue to see more candidates seeking non-traditional employment and have seen declines in attrition rates and increases in hiring in our variable employee base over the last three quarters. As opportunities rise, project durations lengthen and the ability to work unconstrained by locality becomes more prevalent. We are seeing more talent attracted to our platform. 12:20 We continue to work seamlessly as one RGP, providing a diverse portfolio of experience for our consultants and demonstrating a durability in employment opportunities for new applicants. While we recognize that a tight labor market could impact us more broadly in the future, we believe that as more professional assess their career objectives and opt for more flexible work, our ability to offer a blue chip client roster, career control, borderless delivery and professional community will continue to be an attractive proposition for a more mobile workforce. 12:52 As an example, a new West Coast consultant wanted an opportunity to lead strategic projects as his traditional role was not providing challenging growth opportunities. He chose to come to RGP as a project lead for one of our premier healthcare client. His positive experience with us proved to be the impetus to refer his sister to RGP. He was enduring a reorganization and felt like her current employer have misaligned values from her own. After hearing about RGP's model and culture, she came aboard and is now also working remotely in project management transformation at another healthcare client. 13:26 Over time, we see workforce desires and our ability to meet them leading to more employment stickiness to RGP and an upward trend to our existing tenure of approximately three years, which is a strong statistic given industry trends and our flexible employment model. While we feel that general workforce shifts are already favorable to our model, we will continue to focus on operational discipline and providing an excellent consulting experience. 13:50 As we've noted in previous quarters, a hybrid return to work continues with companies embracing distributed employee bases and utilizing a blend of on-site and virtual teams to drive projects. This shift is very much in line with RGP's value proposition of fasting the right composition skillset within teams to deliver successful outcomes. 14:09 In fact, the blend of on-prem and off-site resources allows for better matching of supply and demand and improved operational efficiencies when responding to client opportunity. The pandemic has educated the market about the virtues of remote delivery and a tight labor market with distributed workforces means that hybrid and modular resourcing is likely a permanent shift. 14:31 We see some increased call for on-prem engagement, but significantly less requiring a full time on-site presence, as most companies are utilizing a hybrid workforce themselves and are comfortable engaging with us in the same manner. As an example, we are currently engaged with a technology company that is working on a number of initiatives concurrently as the rapid growth has begun to strain their infrastructure. They recognized early on that the scope of work contemplated would require a high reliance on external talent to help deliver the desired outcome. 15:00 Noting the difficulty attracting traditional employees and recognizing the competition for variable resources they made a significant commitment to ring fence RGP talent knowing they have both immediate and future gap to fill. Our team will work on-prem and remotely as required and will be staffed for multiple locations. We are in discussions with other clients who are interested in ensuring they have access to capture talent pool for immediate and future initiatives. 15:25 Now let me turn back to our first quarter operations. During the quarter we saw continued strength in pipeline and top of the funnel activity. Average weekly revenue grew by approximately four percent from the first -- first weeks of the quarter to the last. In fact, average daily revenue rates ended the quarter at the highest they've been since FY twenty nineteen and pipeline and booked revenue continue to demonstrate pre-pandemic quality. The majority of markets demonstrated growth over prior year quarter, while several markets, strategic client account, healthcare, Veracity and Countsy demonstrated growth, both sequentially and over prior year quarter. 15:59 Lead generation and opportunity identification continues to be strong into Q2 as client grappled with the pace of change coupled with the tight labor market. The early weeks of Q2 have shown a strong continuation of positive trends in both revenue and pipeline. In fact the early-quarter revenue trends or some of the highest we've seen in twenty nineteen. 16:17 While the holiday starting this quarter, we don't expect to be inordinately impacted. Revenue expansion in a core objective. However, we continue to target profitable growth through increased operational leverage. As in prior quarters, in Q1 we've continued to make strides in controlling fixed costs and focusing on efficiency yielding an over five hundred basis point improvement in enterprise EBITDA margin. We understand the importance of in-person meetings and will not shy away from face-to-face interaction. 16:42 However, the lessons learned during the last eighteen months stayed with us as we transition into a new normal. To that end, we will continue to sell, deliver and operate in a more hybrid fashion, look for opportunities to reduce real estate and utilize technology to extend and strengthen the experience of our clients and consultants and our quest to increase shareholder value. I will now turn the call over to Jenn for a more detailed review of our first quarter result.

17:05 Thank you, Tim, and good afternoon, everyone. During the first quarter, continued rise in demand coupled with successful go to market execution fueled substantial growth in revenue, reaching the highest level in any first quarter in the last ten years. We also improved average fill rates, driving above guidance gross margin. Furthermore, we remain disciplined in SG&A spend, increasing leverage significantly and enabling us to deliver twenty two point four million dollars of adjusted EBITDA or a twelve point two percent adjusted EBITDA margin, which is also the highest margin in any first quarter in last decade. 17:44 Now, let me provide more color on our operating results starting with revenue. With quarterly revenue of one hundred and eighty three point one million dollars, we well exceeded the high end of our revenue guidance of one hundred and seventy seven million dollars. After adjusting for business day and currency impact, Q1 revenue represents growth of twenty five percent year-over-year and five percent and two percent over the pre-pandemic first quarter periods of fiscal twenty twenty and twenty nineteen, respectively. In addition, notwithstanding summer vacation impact, our performance in Q1 exceeded the sequential quarter by eight point five percent on a same day constant currency basis. 18:23 Revenue growth in the first quarter was across most of our core markets, key client accounts solution areas as well as industry. Strategic client accounts grew twenty six percent year-over-year and nine percent sequentially. In addition, macro trends accelerated by the pandemic, including increased use of contingent talent and a shift towards a more agile workforce model continue to be a tailwind in driving topline growth. Professional staffing revenue grew thirty six percent year-over-year and eight percent sequentially. 18:56 In North America, revenue improved twenty eight percent year-over-year and eleven percent sequentially on a same day constant currency based. Most core markets in North America experienced double digit growth year-over-year with tri-state and California leading the growth at forty one percent and thirty percent. In addition, Veracity grew forty five percent year over year, which continues to evidence increased demand in projects that enhance employee experience through digitization and automation of processes, a trend we believe is likely permanent. 19:30 Europe continue to perform well, achieving ten percent growth compared to the first quarter of fiscal twenty twenty one on the same day constant currency basis. Excluding revenues from markets we exited as part of the restructuring initiative year-over-year revenue growth was eighteen percent. Sequentially, revenue was down seven percent in Europe due to more summer vacation taken in the first fiscal quarter and relatively stable in Q1 of last year. 19:56 Asia Pac also experienced broad based expansion in revenue across most markets. First quarter revenue grew seventeen percent year-over-year and eight percent sequentially on a same day constant currency basis. 20:09 Gross margin in the first quarter was essentially flat to prior year, thirty nine percent compared to thirty nine point three percent a year ago. We effectively elevated our average bill rate and held pay/bill ratio flat from last year. There was one additional holiday in the U.S. and the impact of heavier summer vacation as COVID related restrictions eased in some parts of the world. Compared to the fourth quarter, we improved our pay/bill ratio by seventy basis points as a result of achieving higher average bill rate. 20:40 The tight labor market has not yet had a significant impact on our pay rate. However, we intend to be a step ahead of any impending rise in pay rate by pricing our engagements to market appropriately. We continue to see opportunities to achieve higher bill rates across several solution sets, including digital transformation services. 21:01 Emerging from our restructuring initiatives and positions with a more nimble cost structure, run rate SG&A expenses for the quarter were forty nine point four million dollars after excluding non-cash stock compensation, contingent consideration expense and restructuring charges, representing twenty seven percent of revenue, a five seventy basis point improvement compared to the same period a year ago. 21:24 Now, turning to the other components of our financial statement. Effective tax rate was twenty nine percent compared to forty six percent in the prior year quarter. The improvement in effective tax rate resulted primarily from better operating results in the European entities, enabling us to utilize the benefit from historical NOLs. We expect the improved profitability in Europe will continue to cause future effective tax rates to be more favorable. 21:50 Adjusted diluted EPS for Q1 rose significantly to zero point four three dollars per share compared to zero point one four dollars in Q1 of fiscal twenty one. We generated positive cash flow from operations in the first quarter, which is typically cash flow negative due to our annual bonus payout. Our balance sheet remains strong and we paid down an additional ten million dollars of outstanding debt under our credit facility in the first quarter. 22:16 As we look ahead, assuming the macro environment remains stable, we plan to invest in new ERP and talent management systems that will allow us to achieve more efficiency in our back office operations and position us to scale as we continue to grow our top line. As a result, the CapEx is expected to be elevated beginning in the second half of the fiscal year. 22:37 We're currently assessing the scope and cost of such investment. We regularly evaluate our capital allocation strategy, taking a balanced approach between investing in the business and returning value to our shareholders through a combination of dividends and share buybacks. At the end of Q1, eighty five million dollars remained available under our share buyback program. 22:58 I'll close with our second quarter outlook. We remain optimistic and anticipate continued growth in the business. Revenue in Q2 is expected to be in the range of one eighty six million dollars to one ninety million dollars, which at the high end of the range would be an estimated twenty four percent increase compared to Q2 of last year. We expect gross margin to be within the range of thirty eight percent to thirty eight point five percent, reflecting the impact of Thanksgiving holidays in the U.S. We expect run rate SG&A to be in the range of fifty million dollars to fifty three million dollars. 23:30 Now, we're happy to take questions.

23:51 [Operator Instructions] Our first question comes from the line of Andrew Steinerman of JP Morgan. Your line is open.

23:57 Just one quick clarification and then a question. So, Jenn, what did you just mean when you said fifty million dollars to fifty three million dollars of run rate SG&A? Do you mean SG&A for the quarter? I just didn't know what SG&A run rate meant. 24:11 My other question is about HUGO and the launch. How much is this going to affect SG&A? And when do you feel like HUGO could be contributory to revenues and profits?

24:26 Sure. Hi, Andrew. When I talk about run rate SG&A, I'm really talking about SG&A excluding stock compensation, restructuring cost and contingent consideration. So SG&A that is as part of our run rate business, that's what I meant by that, fifty million dollars to fifty three million dollars.

24:44 Got it. Okay. And then about HUGO?

24:46 With respect to HUGO. Yes, with respect to HUGO. So after we launch HUGO in the next couple of weeks, we do expect level of capitalization to decrease. So it is going to add additional SG&A to our results if you think about the rest of the year. From a -- I think that we're going to start to see return with respect to HUGO. But I think that it's still too early to really predict what that revenue is going to look like until we pilot this in the tri-state area.

25:22 And just to be clear that fifty million dollars to fifty three million dollars of run rate, SG&A includes the HUGO launch, right?

25:29 That's right. Yes.

25:31 Okay. Thank you.

25:34 Thank you. Our next question comes from Mark Marcon of Baird. Your line is open.

25:42 Hi. Good afternoon, everybody. I'm wondering -- first of all, nice job on the quarter, nice to see. Can you talk a little bit about for Veracity, obviously, it was up quite strongly. Can you remind us how big Veracity is?

26:00 Yes. Hi, Mark. Veracity is roughly about five percent of our overall enterprise -- their revenue is about five percent of our overall enterprise revenue currently.

26:12 Great. And then it sounds like across North America you ended up seeing really strong growth, particularly strong growth in the tri-state area of over forty percent. To what extent do you think it's being driven in part by increased deal flow, deal activity, whether it's IPOs specs or private equity transactions?

26:43 Hey, Mark, it's Tim. I think -- first of all, I’ll trying to say yes, we're really excited about tri-state and a number of other markets in our core that grew this quarter. I think broadly, we are seeing some tailwind from transaction deal flow, particularly related to M&A and some spec stuff, we saw probably more spec activity in the end of the fourth quarter in the early part of the summer and then it sort of tailed off a little bit, but that doesn't mean that transactions themselves have -- I mean, there's all kinds of things going on. Tri-state has participated in that a fair amount as well, but I think a lot of it kind of comes down to sort of the work that's been done over the last three or four quarters, we have a new leader in place and a new team and they have been doing a lot of work relative to penetration generally back into the financial services market and to diversify outside of it. So, while I think that some of the transaction stuff contributed to it, it wasn't solely due to that.

27:43 Great. And then can you talk a little bit about what your expectations are with regards to pricing on a go-forward basis. You mentioned that you're going to be a little bit more proactive and obviously, it's a tight labor market and we're seeing all sorts of signs of wage inflation. So how should we think about bill rates on a go-forward basis?

28:07 Mark, I think the bill rate is a real upside for our business. I know I've said this the last couple of quarters and we've made, I think some incremental progress relative to our pricing discipline. But it's a real push for us. So in the back half of this year I expect us to be able to do extend pricing. Some of it is for incumbent engagement, it’s difficult to do that. So what we're really focusing on are the new engagements and also winding back any pricing arrangements that we had put in place for COVID, but we -- I think I've said for a long time, we -- it's an opportunity for us, we need to price the market more and when you think about tight labor market, it's -- this is the right time for us to be able to push through some of those increases and we're doing that proactively.

28:58 And how much do you think you could end up pushing through? And it would seem like almost everybody would be accepting a higher bill rate. So how much can you push through, do you think?

29:10 It's kind of a tricky question, I mean, it's hard to speculate on that, because each client is a little bit different and let me just state for the record that there is no client that's receptive anytime for a price increase if they don't have to take it. So I think -- I think what you're driving at is the the circumstances. I think people understand that it's a tight labor market, and that we have a good product, and so they're more [indiscernible] they might otherwise be, but they're not -- it still requires some delicate negotiations. So it's hard to give you an order of magnitude, but I do think that we have an opportunity here to push the -- push our prices up a few percentage points.

29:50 Okay. And Jenn I was -- in terms of the revenue guidance, can you talk a little bit about that with regards to for the second quarter. If we take a look at the historical trend between Q1 to Q2, it seems like you might be being a little conservative. Just trying to get a little bit of a feel there just in terms of what the normal sequential pattern is. I recognize you're coming off the strongest first quarter that you've had in ten years and so it might be hard to forecast off of that or maybe you're expecting some normalization, not sure exactly what the driver is?

30:29 Yes. Well, I mean we're -- compared to sequentially, we're up about six percent. And we do have a Thanksgiving holidays in Q2, and given that the world is opening up quite a bit. Right now, we did build in a little bit of conservatism in there, just not really fully grasping what the holiday impact is going to be. So that's one area. And also given we talk a lot about the labor market being tight, so if it continues to get much worse [Technical Difficulty] our growth a little bit. So those are kind of the two key factors contributing to perhaps maybe not as much of a sequential increase as we have done historically.

31:15 Great. And then you did a really nice job in terms of managing SG&A, you talked about the CapEx, but just wondering also you took down management compensation. So you had some contribution there. I'm wondering how much you could frame is being -- when we take a look at the expense reductions, ex what you talked about in terms of some increases in SG&A for your technology initiatives. How much of the rest of the expense structure is permanent versus temporary or what should we expect beyond the next quarter?

31:55 Yes. I mean, I think this year -- if I think at SG&A as a percentage of revenue, you can probably think of it anywhere between twenty eight percent to twenty nine percent for the remainder of the year. For the rest of the year, we do -- I mean, Q1 was very favorable because we expected travel to return, which increased a little bit, right? But we didn't really see that in Q1. So for the remainder of the year, as I said, as the world opens up we do you expect travel to also go up a bit. And as we grow revenue our variable comp is going to growth. So those are something to take into consideration when it comes to SG&A.

32:38 Okay. And then one other question, just -- I mean, we had a pretty big ramp in terms of the number of -- from a headcount perspective going from twenty four forty four to thirty one forty one over the last twelve months. Just wondering, how much of that is -- to what extent do you expect that sort of trajectory? How much of it was just a bounce-back? How did you scale it back quickly?

33:09 Yes, I think -- Hi, Mark, it's Kate. I think most of that is bounce-back and an uptick in consultant engagement and employment. We expect, as we've said before, the business to continue to grow and we've tried to give you some guidance there. So I would expect that to continue, but the bounce may even out a little bit, if you will.

33:39 I would add just -- Mark, I would add to that. I mean, and I think both Kate and I talked about this in that the hiring trends for us during the quarter were the highest that we've seen in a while, and we think the macro forces are going to continue to push things our way even in a tight labor market. But that is a pretty big bounce-back. And as Kate said, we think that will normalize over the latter half of the year.

34:04 Okay. And then two final questions. One is, just you mentioned that retention of the consultants is picking up. Can you dimensionalize that a little bit further, just in terms of how long -- how much longer are they sticking around? And then the second question and it's probably related. What percentage of the positions that you're now selling are being sold? Were they being staffed virtually as opposed to on premise? And how do you think that trend unfolds as things normalize?

34:41 Yes, the first one is a difficult one to give you exactly, because what I would say is like, our average tenure is around three years, it ticks up and down and if you thought of three is kind of a place where you might have -- you might paying net normalized standard deviation up over. We see some flex around that through the years. What I would say is, what we've seen over the last three quarters is that, our overall attrition rate has declined, usually that happens in the first year that somebody joins our company. They're kind of really feeling out what the model is about and they like the culture and the things that we provide for them from an experience perspective. And we've seen -- that is typically the time where you might experience higher turnover. In that particular segment, that attrition level is down significantly. 35:31 So, how that will play out from a tenure perspective over time? As we go through the year, we'll start to see the average tenure continue to pick up, because we have that combination of increased hiring and lower attrition, you start to see tenure increase in time. 35:48 And the second piece is also something I -- I'm going to give you more of an order of magnitude to dimensionalize. I mean, I think, obviously, during the last eighteen months almost everything was off sight. So it was like, let's call it, ninety-ten kind of thing, we are probably closer to sixty fifty, thirty five in that range. And I don't -- because the pandemic was so unusual, I would say that, when we come back it won't be a question of what's off-site and what’s on-site, it will be how often are people on-site and how often are people working remote. That's sort of -- it's the same thing for traditional workforce, so we'll sort of mirror that. My sense is that, that's going to be two days on-site, three days off or vice versa depending on client.

36:36 Yes. Mark, I just want to add a little more color. I was just at the FIA conference, which was the collaboration in the gig economy. And at that conference they shared a McKinsey report that’s just been published, that surveyed employment working models pre-COVID and desired working models post- COVID. And what they published is that, there's been a twenty five percentage point move from -- away from on-site works and a twenty two percent growth in hybrid. So I think that really reflects pretty nicely what we're seeing in our client base. And as we said in our prepared remarks, we really believe this is a changed world. 37:24 And so, we're preparing not only how we engage with consultants and talent to prepare them for this kind of flexibility. And again, we really believe that our flexible approach will allow us to attract the best talent in the future. 37:42 I think the other thing to keep in mind as we move through fiscal twenty two is that, it's all [indiscernible] and what we mean by that is, really upping the care and feeding of our consultants. So they know that this more agile way of working is not only viable, but it's delightful. And that's really the experience we want to create in our people.

38:09 Perfect. Thank you.

38:12 Thank you. Our next question comes from Josh Vogel of Sidoti and Company. Please go ahead.

38:18 Thanks. Good afternoon, everyone. Certainly impressive results, good to see. A lot -- you covered a lot of the questions I had, but I want to kind of build-up maybe some of them. Can you just clarify for me, outside of Veracity, how much of your business in the quarter was digital transformation related services?

38:42 Hey, Josh, it's Jenn. Yes, it's about ten percent of our business beyond Veracity that is in digital and technology.

38:50 So ten percent, I'm sorry, beyond Veracity or including Veracity.

38:54 Yes. Beyond Veracity. So total, we're looking at about fourteen percent to fifteen percent. Yes.

39:00 Okay. So when we look at that fourteen percent, fifteen percent of the business, and then the margin profile of the entire enterprise, how much -- what is the margin profile on digital transformation related service relatively to the other eighty five percent?

39:16 Well, I mean, the bill rates on the digital transformation services is generally a little bit higher than -- our average bill rate -- enterprise bill rate is one hundred and twenty six dollars. And so, if you look at just the digital transformation services, it's in the mid fifty. So bill rate in general is a little bit higher. I want to say the gross margin profile, it's probably slightly higher, but it's not drastically different from the other solution family.

39:46 Okay, great. And shifting gears, I know there is a bunch of questions on SG&A. I was just curious, what would you say is the breakdown today following the restructuring initiatives and operating efficiencies that resulted, what's the breakdown today between fixed and variable cost structure of the business relative to where you're running prior to the pandemic?

40:06 Overall, our variable cost structure, full cost is still roughly about seventy percent and fixed cost is about thirty percent. And variable, when I say variable cost that includes cost of service as well.

40:18 Okay, great. And there was -- in earlier question, talking about your guidance and looking at Q1 to Q2. I just want to look at quarter further. So, should we expect to see a return to more seasonal patterns, for example, that typical step down in the third fiscal quarter. I think it was about nine percent sequential in fiscal twenty twenty, that was before the pandemic. Is that a similar trend we could expect to see or do you think there's enough pent up demand there where we should see a less pronounced step down given the pipeline and sales cycle you see today?

41:00 Hey, Josh. Well, I think it's a little bit hard to say. But what I would say is, yes, I do expect to see some seasonality because you have -- in the third quarter you have two holidays and hopefully, we're all going to have a real Christmas and real New Year this year. And if that's the case then we likely will see a little bit of a step down. That said, I do think that the market is very hot right now. And so, we could see an effect similar to summer where we kind of blasted through, people took time off but there was that much work. 41:38 I think our pipeline is strong right now. But it's kind of too early to be able to tell whether or not one is going to blunt the other. I feel -- I do feel like every quarter we talk about people returning to normalcy and I do think the holidays are the place where people are circling their calendars a little bit. So I expect to see a little bit of a dip down for everybody in our client base in that quarter, but we're still going to push hard.

42:06 Okay, great. Appreciate this insight. And last one for me. I saw the recent announcement with the Kotter alliance. I was just curious, when we look at an alliance like that, should we expect these types of partnerships going forward when you want to combine forces with someone or is this another way of not necessarily doing any M&A activity or is M&A still on the table? And then just speaking of M&A, what does that pipeline look like in the valuations you're seeing today? Thank you.

42:41 Yeah. So I'll take that. Hi, Josh. We are interested in M&A. I mean, we're really pleased with the progress we’ve made with our most recent acquisitions. I think both Taskforce in particular and Veracity has added some unique capability to help us produce the results that we're showing now in the business, and we still feel there are some gaps where we could move faster if we find the right acquisition target then doing it organically. And so think of our pipeline focused on increasing that ten percent in technology and digital and helping us elevate the kind of project where we can deliver in our client base. 43:33 Another area for opportunity is in the healthcare arena and building more capacity to help payers and providers, especially around revenue integrity initiatives. We continue to think that's an opportunity. 43:49 Valuations fluctuate given what area you're focused on. I mean, digital and technology will be more expensive multiples for us. So, we'll be looking at those businesses very carefully. The multiples go up and the risk goes up. So, we're going to be careful about that. 44:14 And I think the partnership -- going to the Kotter partnership, which is where you started your question. We have been bullish around changed management, and the need for changed management associated with the kind of transformational work we're doing in our client base. Kotter has a fabulous reputation, we feel very excited that they chose us to be their partner. It's a very natural fit, and we're going to continue to develop capability together and see if that then builds the runway to continue to strengthen that bond.

44:58 I appreciate all those insights. And thanks for taking my questions and everyone have a good night. Thank you.

45:03 Thanks, Josh.

45:04 Thank you.

45:05 Thank you. At this time, I'd like to turn the call back over to Kate Duchene for closing remarks.

45:11 Well, I want to thank everyone for listening in today. We really appreciate your support and we look forward to talking to you after Q2. Everyone have a great fall. Bye-bye.

45:23 This concludes today's conference call. Thank you for participating. You may now disconnect.