KFRC Kforce Inc

Kforce Inc. (Nasdaq: KFRC), a solutions firm that specializes in technology and other professional staffing services, today announced results for the first quarter of 2024.

Joseph J. Liberatore, President and Chief Executive Officer, said, “Our first quarter performance was generally consistent with our expectations, and we were encouraged by March trends in our Technology business. Operating trends over the past two quarters and discussions with our clients indicate to us that the current operating environment is more stable and constructive than it was throughout most of 2023. As we look beyond the current uncertainties, we continue to be encouraged by the backlog of strategically imperative investments that we expect to be high priorities for our clients once the macro uncertainties begin to clear.”

Mr. Liberatore continued, “While all economic cycles behave a bit differently, what remains clear to me is that the broad and strategic uses of technology, including the most recent technology secular shift associated with AI, will continue to evolve and play an increasingly instrumental role in powering businesses. Over the long term we believe that AI and other technologies will continue to drive demand for, rather than replace, technology resources, and that the pace of change will only accelerate. Our decision to grow our business organically with a consistent, refined business model tailored to provide highly skilled technology talent solutions to world-class companies has been critical to our success over many years, and we remain confident that we are positioned well for improving market conditions. I am tremendously proud of our team as they continue to execute with incredible passion to serve our clients, candidates and consultants cohesively as one Kforce. I remain confident and excited about the future of Kforce.”

Quarterly Financial Highlights

• Revenue for the quarter ended March 31, 2024 was $351.9 million compared to $406.0 million for the quarter ended March 31, 2023, a decrease of 3.2% sequentially (7.7% on a sequential billing day basis) and 13.3% year-over-year.
• Technology Flex revenue decreased 2.3% sequentially (6.9% on a sequential billing day basis) and 11.4% year-over-year. FA Flex revenue decreased 11.5% sequentially (15.7% on a sequential billing day basis) and 27.2% year-over-year.
• Gross profit margins of 27.1% decreased 20 basis points sequentially and 100 basis points year-over-year. Flex gross profit margins of 25.6% decreased 10 basis points sequentially and 60 basis points year-over-year.
• SG&A expenses as a percentage of revenue was 22.2% for the quarter ended March 31, 2024, which increased 120 basis points sequentially and 20 basis points year-over-year.
• Operating margins were 4.5% for the quarter ended March 31, 2024, which decreased 150 basis points sequentially and 130 basis points year-over-year.
• Diluted earnings per share for the quarter ended March 31, 2024 were $0.58, a decrease of 29.3% year-over-year.
• We returned $9.1 million in capital to our shareholders in the form of open market repurchases and quarterly dividends for the three months ended March 31, 2024.
• Our Board of Directors approved a second quarter cash dividend of $0.38 per share to shareholders of record as of the close of business on June 14, 2024, which will be payable on June 28, 2024.

Second Quarter 2024 - Guidance

Looking forward to the second quarter of 2024, there will be 64 billing days, which is the same as the first quarter of 2024 and the second quarter of 2023. Current estimates for the second quarter of 2024 are:

• Revenue of $352 million to $360 million
• Earnings per share of $0.68 to $0.76
• Gross profit margin of 27.4% to 27.6%
• Flex gross profit margin of 25.8% to 26.0%
• SG&A expenses as a percent of revenue of 21.6% to 21.8%
• Operating margin of 5.2% to 5.6%
• WASO of 18.9 million
• Effective tax rate of 26.2%

Conference Call

On Monday, April 29, 2024, Kforce will host a conference call at 5:00 p.m. E.T. to discuss these results. The dial-in number is (888) 550-5417 and the conference passcode is "Kforce." The prepared remarks for this call and webcast are available on the Investor Relations page of the Kforce Inc. website in the News and Events section. The replay of the call can be accessed at http://investor.kforce.com.

About Kforce Inc.

Kforce Inc. (the "Firm") is a solutions firm specializing in technology and other professional staffing services. Each year, we provide career opportunities for approximately 20,000 highly skilled professionals on a temporary, consulting or direct-hire basis. These professionals work with approximately 2,500 clients, including a significant majority of the Fortune 500, helping them conquer challenges and meet their digital transformation goals. Together, we reimagine how business gets done. For more than 60 years, we have achieved our clients’ objectives by combining a KNOWLEDGEforce®—our namesake—with flexibility and an unmatched drive for excellence.

Michael R. Blackman, Chief Corporate Development Officer(813) 552-2927

Cautionary Note Regarding Forward-Looking Statements

All statements in this press release, other than those of a historical nature, are forward-looking statements including, but not limited to, statements regarding the backlog of desired investments that are expected to be high priorities once the macro uncertainties begin to clear, the evolution and increasingly instrumental role of technology in driving businesses, demand drivers of technology spend, the acceleration of technological change, the Firm’s confidence in being well positioned for improving market conditions, and the Firm's guidance for the second quarter of 2024. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Factors that could cause actual results to differ materially include the following: business conditions; growth rate in temporary staffing and the general economy; competitive factors; risks due to shifts in the market demand; changes in client demand or our ability to adapt to such changes; a constraint in the supply of consultants and candidates or the Firm’s ability to attract and retain such individuals; the success of the Firm in attracting and retaining its management team and key operating employees; changes in business or service mix; the ability of the Firm to repurchase shares; the occurrence of unanticipated expenses, income, gains or losses; the effect of adverse weather conditions; changes in our effective tax rate; our ability to comply with government regulations, laws, orders, guidelines and policies that impact our business; risk of contract performance, delays, termination or the failure to obtain new assignments or contracts, or funding under contracts; ability to comply with our obligations in a remote work environment; continued performance and security of, and improvements to, our enterprise information systems; impacts of actual or potential litigation or other legal or regulatory matters or liabilities, including the risk factors and matters listed from time to time in the Firm’s reports filed with the Securities and Exchange Commission, including, but not limited to, the Firm’s Form 10-K for the fiscal year ended December 31, 2023, as well as assumptions regarding the foregoing. The terms “should,” “believe,” “estimate,” “expect,” “intend,” “anticipate,” “plan” and similar expressions and variations thereof contained in this press release identify certain of such forward-looking statements, which speak only as of the date of this press release. As a result, such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Future events and actual results may differ materially from those indicated in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements and the Firm undertakes no obligation to update any forward-looking statements.

Kforce Inc.
Summary of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
	Three Months Ended
	March 31, 2024				December 31, 2023				March 31, 2023
Revenue	$	351,889			$	363,447			$	405,997
Direct costs		256,639				264,084				292,021
Gross profit		95,250				99,363				113,976
Selling, general and administrative expenses		78,190				76,375				89,339
Depreciation and amortization		1,333				1,236				1,234
Income from operations		15,727				21,752				23,403
Other expense, net		656				332				1,045
Income from operations, before income taxes		15,071				21,420				22,358
Income tax expense		4,084				5,704				6,148
Net income	$	10,987			$	15,716			$	16,210
Earnings per share – diluted	$	0.58			$	0.82			$	0.82
Weighted average shares outstanding – diluted		18,932				19,194				19,667
Adjusted EBITDA	$	20,560			$	26,134			$	28,729
Billing days		64				61				64

Kforce Inc.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
	March 31, 2024				December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	106			$	119
Trade receivables, net of allowances		236,923				233,428
Prepaid expenses and other current assets		9,146				10,912
Total current assets		246,175				244,459
Fixed assets, net		8,936				9,418
Other assets, net		82,800				75,924
Deferred tax assets, net		3,382				3,138
Goodwill		25,040				25,040
Total assets	$	366,333			$	357,979
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$	59,415			$	64,795
Accrued payroll costs		39,746				33,968
Current portion of operating lease liabilities		3,423				3,589
Income taxes payable		3,520				623
Total current liabilities		106,104				102,975
Long-term debt – credit facility		40,800				41,600
Other long-term liabilities		54,924				54,324
Total liabilities		201,828				198,899
Commitments and contingencies
Stockholders’ equity:
Preferred stock		—				—
Common stock		735				734
Additional paid-in capital		531,226				527,288
Retained earnings		528,795				525,222
Treasury stock, at cost		(896,251	)			(894,164	)
Total stockholders’ equity		164,505				159,080
Total liabilities and stockholders’ equity	$	366,333			$	357,979

Kforce Inc.
Key Statistics
(Unaudited)
	Q1 2024					Q4 2023					Q1 2023
Total Firm
Total Revenue (000’s)	$	351,889				$	363,447				$	405,997
GP %		27.1		%			27.3		%			28.1		%
Flex revenue (000’s)	$	344,724				$	355,611				$	395,532
Hours (000's)		4,067					4,208					4,780
Flex GP %		25.6		%			25.7		%			26.2		%
Direct Hire revenue (000’s)	$	7,165				$	7,836				$	10,465
Placements		349					378					512
Average fee	$	20,506				$	20,727				$	20,452
Billing days		64					61					64
Technology
Total Revenue (000’s)	$	322,084				$	329,395				$	364,844
GP %		26.1		%			26.1		%			27.0		%
Flex revenue (000’s)	$	318,514				$	325,992				$	359,524
Hours (000’s)		3,555					3,628					4,032
Flex GP %		25.3		%			25.4		%			25.9		%
Direct Hire revenue (000’s)	$	3,570				$	3,403				$	5,320
Placements		168					179					232
Average fee	$	21,276				$	19,051				$	22,951
Finance and Accounting
Total Revenue (000’s)	$	29,805				$	34,052				$	41,153
GP %		37.6		%			39.0		%			37.8		%
Flex revenue (000’s)	$	26,210				$	29,619				$	36,008
Hours (000’s)		512					580					748
Flex GP %		29.1		%			29.8		%			28.9		%
Direct Hire revenue (000’s)	$	3,595				$	4,433				$	5,145
Placements		181					199					280
Average fee	$	19,794				$	22,228				$	18,382

Kforce Inc.

Non-GAAP Financial Measures

(In Thousands, Except Per Share Amounts)

(Unaudited)

In addition to our financial results presented in accordance with GAAP, Kforce may use certain non-GAAP financial measures, which we believe provide useful information to investors in evaluating our core operating performance. The following non-GAAP financial measures presented may not provide information that is directly comparable to that provided by other companies, as other companies may calculate such financial results differently. Our non-GAAP financial measures are not measurements of financial performance under GAAP and should not be considered as alternatives to amounts presented in accordance with GAAP. We view these non-GAAP financial measures as supplemental and they are not intended to be a substitute for, or superior to, the information provided by GAAP financial results. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below.

Revenue Growth Rates

“Revenue growth rates,” a non-GAAP financial measure, is defined by Kforce as year-over-year revenue growth after removing the impacts on reported revenues from the changes in the number of billing days. Management believes this data is particularly useful because it aids in evaluating revenue trends over time. Billing days impact is calculated by dividing each comparative period’s reported revenues by the number of billing days for that period to arrive at a per billing day amount. Same billing day growth rates are then calculated based on the per billing day amounts. Management calculates the number of billing days for each reporting period based on the number of holidays and business days in the quarter.

	Year-Over-Year Growth Rates (As Reported)
	2024		2023
	Q1		Q4		Q3		Q2		Q1
Technology Flex	(11.4)%		(11.1)%		(12.5)%		(7.8)%		2.2%
FA Flex	(27.2)%		(28.0)%		(26.9)%		(27.3)%		(28.2)%
Total Flex revenue	(12.8)%		(12.8)%		(13.9)%		(9.8)%		(1.6)%
	Year-Over-Year Growth Rates (As Adjusted)
	2024		2023
	Q1		Q4		Q3		Q2		Q1
Billing Days	64		61		63		64		64
Technology Flex	(11.4)%		(11.1)%		(11.1)%		(7.8)%		2.2%
FA Flex	(27.2)%		(28.0)%		(25.7)%		(27.3)%		(28.2)%
Total Flex revenue	(12.8)%		(12.8)%		(12.5)%		(9.8)%		(1.6)%

Free Cash Flow

“Free Cash Flow,” a non-GAAP financial measure, is defined by Kforce as net cash provided by operating activities determined in accordance with GAAP, less capital expenditures. Management believes this provides an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows and is useful information to investors as it provides a measure of the amount of cash generated from the business that can be used for strategic opportunities including investing in our business, repurchasing common stock, paying dividends or making acquisitions. Free Cash Flow is limited, however, because it does not represent the residual cash flow available for discretionary expenditures. Therefore, we believe it is important to view Free Cash Flow as a complement to (but not a replacement of) our unaudited condensed consolidated statements of cash flows.

	Three Months Ended March 31,
		2024				2023
Net cash provided by operating activities	$	13,169			$	19,056
Capital expenditures		(1,875	)			(1,872	)
Free cash flow		11,294				17,184
Change in debt		(800	)			(3,300	)
Repurchases of common stock		(2,848	)			(11,126	)
Cash dividends		(7,128	)			(7,003	)
Premiums paid for company-owned life insurance		(529	)			—
Proceeds from the sale of our joint venture interest		—				5,059
Note receivable issued to our joint venture		—				(750	)
Other		(2	)			(14	)
Change in cash and cash equivalents	$	(13	)		$	50

Adjusted EBITDA

“Adjusted EBITDA,” a non-GAAP financial measure, is defined by Kforce as net income before depreciation and amortization, stock-based compensation expense, interest expense, net, income tax expense, loss from equity method investment and certain other items. Adjusted EBITDA should not be considered a measure of financial performance under GAAP. Items excluded from Adjusted EBITDA are significant components in understanding and assessing our past and future financial performance, and this presentation should not be construed as an inference by us that our future results will be unaffected by those items excluded from Adjusted EBITDA. Adjusted EBITDA is a key measure used by management to assess our operations including our ability to generate cash flows and our ability to repay our debt obligations and management believes it provides a good metric of our core profitability in comparing our performance to our competitors, as well as our performance over different time periods. Consequently, management believes it is useful information to investors. The measure should not be considered in isolation or as an alternative to net income, cash flows, or other financial statement information presented in the consolidated financial statements as indicators of financial performance or liquidity. Also, Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

In addition, although we excluded stock-based compensation expense because it is a non-cash expense, we expect to continue to incur stock-based compensation expense in the future and the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our shareholder ownership interest. We suggest that you evaluate these items and the potential risks of excluding such items when analyzing our financial position.

	Three Months Ended
	March 31, 2024				December 31, 2023				March 31, 2023
Net income	$	10,987			$	15,716			$	16,210
Depreciation and amortization		1,333				1,236				1,234
Stock-based compensation expense		3,501				3,145				4,326
Interest expense, net		655				333				296
Income tax expense		4,084				5,704				6,148
Loss from equity method investment		—				—				750
Other		—				—				(235	)
Adjusted EBITDA	$	20,560			$	26,134			$	28,729