Kforce Reports Fourth Quarter 2021 Revenue of $410.4 Million, Up Nearly 18% Year-Over-Year, Per Billing Day; Technology Revenues Up 32% Year-Over-Year, Per Billing Day; EPS of $0.98, Up 14.0% Year-Over-Year; Board of Directors Approves a 15% Increase in Dividend and Increase in Share Repurchase Authorization
Kforce Inc. (Nasdaq: KFRC) reported a strong performance in Q4 and full-year 2021, with revenues reaching $410.4 million for Q4, marking a 17.8% year-over-year increase. Technology revenue surged by 32%, while FA revenue fell 25.5% due to declining COVID revenues. Full-year revenue reached $1.6 billion, a 13.9% rise, with EPS increasing by 35% to $3.54. The company announced a $100 million share repurchase program and a 15% dividend increase. For Q1 2022, revenue guidance is set at $403-$411 million, with EPS estimated between $0.72-$0.80.
- Q4 2021 revenue increased by 17.8% year-over-year.
- Technology revenue rose by 32% year-over-year.
- Full-year 2021 revenue reached approximately $1.6 billion, up 13.9%.
- Earnings per share for 2021 increased by 35%, reaching $3.54.
- Announced a $100 million share repurchase program.
- Increased quarterly dividend by 15%, from $0.26 to $0.30.
- FA revenue decreased by 25.5% year-over-year.
- Payroll tax resets impacting Q1 2022 operating margins by ~150 basis points.
TAMPA, Fla., Feb. 07, 2022 (GLOBE NEWSWIRE) -- Kforce Inc. (Nasdaq: KFRC), a provider of professional staffing services and solutions, today announced results for its fourth quarter and full year 2021.
Fourth Quarter 2021 Financial Highlights
- Revenue for the quarter ended December 31, 2021 was
$410.4 million compared to$354.0 million for the quarter ended December 31, 2020, an increase of17.8% , per billing day. - Technology revenue increased
32.0% year-over-year and7.8% sequentially, per billing day. - FA revenue decreased
25.5% year-over-year, per billing day, due to the expected decline in COVID revenues, but grew2.4% sequentially, per billing day. - Gross profit margins increased 80 basis points year-over-year in the quarter ended December 31, 2021 due to a greater mix of Direct Hire revenue and a slight expansion in Flex gross profit margins.
- Selling, general and administrative expenses as a percentage of revenue in the quarter ended December 31, 2021 was
22.9% , which increased 170 basis points from the quarter ended December 31, 2020. - Net income for the quarter ended December 31, 2021 was
$20.6 million , or$0.98 per share, as compared to$18.3 million , or$0.86 per share, for the quarter ended December 31, 2020. These represent increases of12.4% and14.0% , respectively.
Full Year 2021 Financial Highlights
- Revenue for the year ended December 31, 2021 of approximately
$1.6 billion increased13.9% year-over-year, per billing day. - Technology revenue increased approximately
22% year-over-year, per billing day. - Operating margins of
6.7% increased 100 basis points on a year-over-year basis due to an increase in gross profit margins of 60 basis points and improved leverage from our revenue growth. - Earnings per share of
$3.54 per share increased approximately35% year-over-year. - We returned
$74.5 million of capital to our shareholders in the form of open market repurchases totaling$54.4 million and quarterly dividends totaling$20.1 million during the year ended December 31, 2021.
Management Commentary
Joseph J. Liberatore, President and Chief Executive Officer, commented, “Fourth quarter results put a solid exclamation point on a tremendous 2021 for Kforce. For the full year, we were successful in delivering record revenues of nearly
David M. Kelly, Chief Financial Officer, commented, ”We are extremely pleased with our performance in 2021 and believe that our strategic position and the momentum we are carrying into 2022 has positioned us well to continue delivering significantly above-market revenue growth. As revenues have meaningfully expanded, we have also enhanced our profitability as demonstrated by achieving record earnings per share of
Ralph Struzziero, currently serving as the lead independent director, has notified the Board that he will not stand for re-election at the 2022 Annual Meeting of Shareholders. David L. Dunkel, Chairman, said, "On behalf of the entire Board, I want to thank Ralph for his dedicated service and the wisdom and guidance he has provided for more than 40 years. Ralph has been instrumental in shaping Kforce to be a leading provider of technology and finance & accounting talent solutions.”
First Quarter 2022 - Guidance
Looking forward to the first quarter of 2022, there will be 64 billing days, as compared to 61 billing days in the fourth quarter of 2021, and 63 billing days in the first quarter of 2021. Relative to the fourth quarter of 2021, operating margins are impacted by payroll tax resets by approximately 150 basis points and earnings per share is negatively impacted by approximately 21 cents.
Current estimates for the first quarter of 2022 are:
- Revenue of
$403 million to$411 million - Earnings per share of
$0.72 t o$0.80 - Gross profit margin of
28.1% to28.3% - Flex gross profit margin of
25.7% to25.9% - SG&A expense as a percent of revenue of
22.2% to22.4% - Operating margin of
5.4% to5.8% - WASO 20,700
- Effective tax rate of
26.5%
Full Year 2022 – Financial Expectations
The information below reflects our 2022 financial expectations, which contemplates: (a) solid continued growth in our Technology business of at least
- Revenue of at least
$1.7 billion - Earnings per share of at least
$4.20 - Operating margins of at least
7.0%
For 2022, there will be 253 billing days as compared to 252 billing days in 2021. There is one more billing day in the first quarter of 2022 compared to 2021.
Conference Call and Annual Meeting
On Monday, February 7, 2022, Kforce will host a conference call at 5:00 p.m. E.T. to discuss these results. The dial-in number is (866) 211-4958 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 (http://investor.kforce.com) in the Events & Presentations section. The replay of the call can be accessed at http://investor.kforce.com from 8:00 p.m. on Monday, February 7, 2022 until February 6, 2023.
Our 2022 Annual Meeting of Kforce Inc. Shareholders will be held on Monday, April 18, 2022 at 1001 East Palm Avenue, Tampa, Florida 33605, commencing at 8:00 a.m. E.T.
About Kforce
Kforce Inc. is a solutions firm that specializes in technology and other professional staffing services. Each year, we provide meaningful opportunities for over 30,000 highly skilled professionals who work with approximately 3,000 clients, including a significant majority of the Fortune 500. At Kforce, our promise is to deliver great results through strategic partnership and knowledge sharing. For more information, please visit our website at https://www.kforce.com.
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, the Firm's guidance for the first quarter of 2022, its financial expectations for the year ended December 31, 2022, and statements regarding the performance of technology-focused businesses, the secular drivers of technology demand, the pace of digital transformation, the Firm’s positioning to continue providing exceptional results and returns, the Firm’s opportunity to continue investing in its future growth, returning capital to its shareholders including the intent and ability to declare and pay quarterly dividends. 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; a reduction 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; the impacts (direct and indirect) of COVID-19 on our business, our consultants and employees, and the overall economy; the migration of our FA business towards more highly skilled assignments; changes in the service mix; ability of the Firm to repurchase shares; the occurrence of unanticipated expenses; the effect of adverse weather conditions; changes in our effective tax rate; changes in government regulations, laws and policies that impact our business and our ability to comply with the same; risk of contract performance, delays or termination or the failure to obtain new assignments or contracts, or funding under contracts; changes in client demand and our ability to adapt to such changes; our ability to continue to perform under the government-sponsored COVID-19 related initiatives; continued performance of and improvements to our enterprise information systems; impacts of outstanding litigation or other legal matters, 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 ending December 31, 2020, as well as assumptions regarding the foregoing. The terms “should,” “believe,” “estimate,” “expect,” “intend,” “anticipate,” “foresee,” “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 | ||||||||||||
| Dec. 31, 2021 | Sept. 30, 2021 | Dec. 31, 2020 | ||||||||||
| Revenue | $ | 410,358 | $ | 402,725 | $ | 354,048 | ||||||
| Direct costs | 290,371 | 283,461 | 253,587 | |||||||||
| Gross profit | 119,987 | 119,264 | 100,461 | |||||||||
| Selling, general and administrative expenses | 94,104 | 88,972 | 75,099 | |||||||||
| Depreciation and amortization | 1,080 | 1,026 | 1,174 | |||||||||
| Income from operations | 24,803 | 29,266 | 24,188 | |||||||||
| Other expense, net | 1,532 | 1,448 | 1,298 | |||||||||
| Income from continuing operations, before income taxes | 23,271 | 27,818 | 22,890 | |||||||||
| Income tax expense | 2,711 | 7,650 | 4,605 | |||||||||
| Net income | $ | 20,560 | $ | 20,168 | $ | 18,285 | ||||||
| Earnings per share - diluted | $ | 0.98 | $ | 0.96 | $ | 0.86 | ||||||
| Weighted average shares outstanding - diluted | 21,036 | 21,098 | 21,377 | |||||||||
| Adjusted EBITDA | $ | 31,783 | $ | 34,793 | $ | 28,259 | ||||||
| Billing days | 61 | 64 | 62 | |||||||||
Kforce Inc.
Summary of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
| Year Ended | ||||||||
| Dec. 31, 2021 | Dec. 31, 2020 | |||||||
| Revenue | $ | 1,579,922 | $ | 1,397,700 | ||||
| Direct costs | 1,123,058 | 1,001,476 | ||||||
| Gross profit | 456,864 | 396,224 | ||||||
| Selling, general and administrative expenses | 345,721 | 310,713 | ||||||
| Depreciation and amortization | 4,500 | 5,255 | ||||||
| Income from operations | 106,643 | 80,256 | ||||||
| Other expense, net | 7,376 | 5,044 | ||||||
| Income from continuing operations, before income taxes | 99,267 | 75,212 | ||||||
| Net income | $ | 75,177 | $ | 56,039 | ||||
| Earnings per share - diluted | $ | 3.54 | $ | 2.62 | ||||
| Weighted average shares outstanding - diluted | 21,212 | 21,395 | ||||||
| Adjusted EBITDA | $ | 126,439 | $ | 97,139 | ||||
| Billing days | 252 | 254 | ||||||
Kforce Inc.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 96,989 | $ | 103,486 | ||||
| Trade receivables, net of allowances | 265,322 | 228,373 | ||||||
| Income tax refund receivable | 3,010 | — | ||||||
| Prepaid expenses and other current assets | 6,790 | 7,033 | ||||||
| Total current assets | 372,111 | 338,892 | ||||||
| Fixed assets, net | 5,964 | 26,804 | ||||||
| Other assets, net | 92,629 | 77,575 | ||||||
| Deferred tax asset, net | 7,657 | 10,738 | ||||||
| Goodwill | 25,040 | 25,040 | ||||||
| Total assets | $ | 503,401 | $ | 479,049 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and other accrued liabilities | $ | 81,408 | $ | 35,533 | ||||
| Accrued payroll costs | 71,424 | 65,849 | ||||||
| Current portion of operating lease liabilities | 6,338 | 5,520 | ||||||
| Other current liabilities | 22 | 300 | ||||||
| Income taxes payable | 1,239 | 964 | ||||||
| Total current liabilities | 160,431 | 108,166 | ||||||
| Long-term debt - credit facility | 100,000 | 100,000 | ||||||
| Other long-term liabilities | 54,564 | 90,948 | ||||||
| Total liabilities | 314,995 | 299,114 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock | 730 | 726 | ||||||
| Additional paid-in capital | 488,036 | 472,378 | ||||||
| Accumulated other comprehensive loss | 621 | (4,423 | ) | |||||
| Retained earnings | 442,596 | 388,645 | ||||||
| Treasury stock, at cost | (743,577 | ) | (677,391 | ) | ||||
| Total stockholders’ equity | 188,406 | 179,935 | ||||||
| Total liabilities and stockholders’ equity | $ | 503,401 | $ | 479,049 | ||||
Kforce Inc.
Key Statistics
(Unaudited)
| Q4 2021 | Q3 2021 | Q4 2020 | ||||||||||
| Total Firm | ||||||||||||
| Total Revenue (000's) | $ | 410,358 | $ | 402,725 | $ | 354,048 | ||||||
| GP % | 29.2 | % | 29.6 | % | 28.4 | % | ||||||
| Flex revenue (000’s) | $ | 395,776 | $ | 389,173 | $ | 344,884 | ||||||
| Hours (000’s) | 5,531 | 5,546 | 5,697 | |||||||||
| Flex GP % | 26.6 | % | 27.2 | % | 26.5 | % | ||||||
| Direct Hire revenue (000’s) | $ | 14,582 | $ | 13,552 | $ | 9,164 | ||||||
| Placements | 787 | 691 | 537 | |||||||||
| Average fee | $ | 18,538 | $ | 19,611 | $ | 17,065 | ||||||
| Billing days | 61 | 64 | 62 | |||||||||
| Technology | ||||||||||||
| Total Revenue (000's) | $ | 346,424 | $ | 337,230 | $ | 266,843 | ||||||
| GP % | 28.2 | % | 28.4 | % | 27.4 | % | ||||||
| Flex revenue (000’s) | $ | 337,962 | $ | 330,170 | $ | 262,266 | ||||||
| Hours (000’s) | 4,103 | 4,031 | 3,312 | |||||||||
| Flex GP % | 26.4 | % | 26.9 | % | 26.1 | % | ||||||
| Direct Hire revenue (000’s) | $ | 8,462 | $ | 7,060 | $ | 4,577 | ||||||
| Placements | 389 | 290 | 232 | |||||||||
| Average fee | $ | 21,781 | $ | 24,360 | $ | 19,701 | ||||||
| Finance and Accounting | ||||||||||||
| Total Revenue (000's) | $ | 63,934 | $ | 65,495 | $ | 87,205 | ||||||
| GP % | 35.1 | % | 35.6 | % | 31.4 | % | ||||||
| Flex revenue (000’s) | $ | 57,814 | $ | 59,003 | $ | 82,618 | ||||||
| Hours (000’s) | 1,428 | 1,515 | 2,385 | |||||||||
| Flex GP % | 28.3 | % | 28.5 | % | 27.5 | % | ||||||
| Direct Hire revenue (000’s) | $ | 6,120 | $ | 6,492 | $ | 4,587 | ||||||
| Placements | 398 | 401 | 305 | |||||||||
| Average fee | $ | 15,373 | $ | 16,181 | $ | 15,055 | ||||||
Kforce Inc.
Revenue Growth Rates
(Unaudited)
| Year-Over-Year Revenue Growth Rates | |||||||||||||||
| (Per Billing Day) | |||||||||||||||
| Q4 2021 | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | |||||||||||
| Billing days | 61 | 64 | 64 | 63 | 62 | ||||||||||
| Technology Flex | 31.0 | % | 28.9 | % | 20.9 | % | 6.3 | % | 0.8 | % | |||||
| FA Flex | (28.9 | )% | (41.3 | )% | 2.7 | % | 26.4 | % | 26.0 | % | |||||
| Total Flex | 16.6 | % | 9.1 | % | 16.3 | % | 10.2 | % | 5.9 | % | |||||
Kforce Inc.
Supplemental FA Flex Information
(Unaudited)
Beginning in the second quarter of 2020, Kforce secured large contracts to support government-sponsored COVID-19 related initiatives, which materially positively impacted our FA segment and specifically our FA Flex business. Given the contribution of the COVID-19 business, we are providing this supplemental information to better understand the performance of our FA Flex business.
| Three Months Ended December 31, 2021 | ||||||||||||
| Total | COVID FA | Core FA | ||||||||||
| Supplemental FA Flex Information | ||||||||||||
| Flex revenue (000’s) | $ | 57,814 | $ | 4,661 | $ | 53,153 | ||||||
| Flex GP % | 28.3 | % | 34.5 | % | 28.6 | % | ||||||
| Hours (000’s) | 1,428 | 110 | 1,318 | |||||||||
| Three Months September 30, 2021 | ||||||||||||
| Total | COVID FA | Core FA | ||||||||||
| Supplemental FA Flex Information | ||||||||||||
| Flex revenue (000’s) | $ | 59,003 | $ | 7,525 | $ | 51,478 | ||||||
| Flex GP % | 28.5 | % | 32.8 | % | 27.9 | % | ||||||
| Hours (000’s) | 1,515 | 209 | 1,306 | |||||||||
FA Flex gross profit percentage includes estimates for payroll taxes, benefits and other costs calculated using a consistently applied allocation.
Kforce Inc.
Non-GAAP Financial Measures
(In Thousands, Except Per Share Amounts)
(Unaudited)
In addition to our financial results presented in accordance 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. The Company’s 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. The Company views 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.
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, making acquisitions, repurchasing common stock or paying dividends. 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 Consolidated Statements of Cash Flows.
| (In Thousands) | Year Ended | |||||||
| Dec. 31, 2021 | Dec. 31, 2020 | |||||||
| Net income | $ | 75,177 | $ | 56,039 | ||||
| Non-cash provisions and other | 30,188 | 27,582 | ||||||
| Changes in operating assets/liabilities | (32,467 | ) | 25,538 | |||||
| Net cash provided by operating activities | 72,898 | 109,159 | ||||||
| Capital expenditures | (6,441 | ) | (6,475 | ) | ||||
| Free cash flow | 66,457 | 102,684 | ||||||
| Equity method investment | (9,000 | ) | (4,000 | ) | ||||
| Change in debt | — | 35,000 | ||||||
| Repurchases of common stock | (66,210 | ) | (35,613 | ) | ||||
| Cash dividends | (20,120 | ) | (16,787 | ) | ||||
| Net proceeds from the sale of assets held for sale | 23,742 | 3,548 | ||||||
| Other | (1,366 | ) | (1,177 | ) | ||||
| Change in cash and cash equivalents | $ | (6,497 | ) | $ | 83,655 | |||
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, legal settlement expense, SERP termination expense and loss from equity method investment. 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. The measure is not determined in accordance with GAAP and is thus susceptible to varying calculations. Also, Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.
In addition, although we excluded amortization of stock-based compensation expense because it is a non-cash expense, we expect to continue to incur stock-based compensation 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 stockholder 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 | ||||||||||||
| (In Thousands) | Dec. 31, 2021 | Sept. 30, 2021 | Dec. 31, 2020 | |||||||||
| Net income | $ | 20,560 | $ | 20,168 | $ | 18,285 | ||||||
| Depreciation and amortization | 1,080 | 1,026 | 1,174 | |||||||||
| Stock-based compensation expense | 3,551 | 3,512 | 2,889 | |||||||||
| Interest expense, net | 761 | 750 | 862 | |||||||||
| Income tax expense | 2,711 | 7,650 | 4,605 | |||||||||
| Legal settlement expense | 2,350 | 1,000 | — | |||||||||
| Loss from equity method investment | 770 | 687 | 444 | |||||||||
| Adjusted EBITDA | $ | 31,783 | $ | 34,793 | $ | 28,259 | ||||||
| Year Ended | ||||||||
| (In Thousands) | Dec. 31, 2021 | Dec. 31, 2020 | ||||||
| Net income | $ | 75,177 | $ | 56,039 | ||||
| Depreciation and amortization | 4,500 | 5,255 | ||||||
| Gain on sale of corporate headquarters | (2,051 | ) | — | |||||
| Stock-based compensation expense | 13,999 | 11,595 | ||||||
| Interest expense, net | 3,073 | 3,396 | ||||||
| Income tax expense | 24,090 | 19,173 | ||||||
| Legal settlement expense | 3,350 | — | ||||||
| SERP termination expense | 1,821 | — | ||||||
| Loss from equity method investment | 2,480 | 1,681 | ||||||
| Adjusted EBITDA | $ | 126,439 | $ | 97,139 | ||||
FAQ
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