Kforce Reports Second Quarter 2024 Revenue of $356.3 Million and EPS of $0.75

Rhea-AI Summary

Kforce Inc. (NYSE: KFRC) reported second quarter 2024 results with revenue of $356.3 million, down 8.4% year-over-year but up 1.3% sequentially. Earnings per share were $0.75, a 21.1% decrease from the previous year. Technology Flex revenue increased 1.7% sequentially but decreased 6.4% year-over-year. The company's gross profit margins improved to 27.8%, up 70 basis points sequentially.

CEO Joseph J. Liberatore noted a more stable and constructive operating environment compared to 2023, with steady demand for technology resources. Kforce remains confident in its position for improving market conditions and the long-term impact of AI on technology resource demand. The company provided third quarter 2024 guidance with expected revenue between $347-355 million and EPS of $0.65-$0.73.

Positive

• Revenue increased 1.3% sequentially to $356.3 million
• Technology Flex revenue grew 1.7% sequentially
• Gross profit margins improved to 27.8%, up 70 basis points sequentially
• Operating margins increased 100 basis points sequentially to 5.5%
• Returned $15.4 million to shareholders through repurchases and dividends
• Board approved a Q3 cash dividend of $0.38 per share

Negative

• Revenue decreased 8.4% year-over-year
• Earnings per share decreased 21.1% year-over-year to $0.75
• Technology Flex revenue decreased 6.4% year-over-year
• FA Flex revenue decreased 5.7% sequentially and 23.1% year-over-year
• Operating margins decreased 120 basis points year-over-year
• Q3 guidance suggests potential revenue and EPS decline compared to Q2

Insights

Financial Analyst

Kforce's Q2 2024 results present a mixed picture, with some positive signs amid ongoing challenges. The revenue of $356.3 million represents a slight sequential increase of 1.3%, but a year-over-year decline of 8.4%. This suggests the company is stabilizing after a difficult 2023, but hasn't yet returned to growth.

The Technology Flex segment, Kforce's core business, showed resilience with a 1.7% sequential increase. However, the 6.4% year-over-year decrease indicates ongoing headwinds in the tech staffing market. The FA Flex segment's steeper declines (5.7% sequentially, 23.1% year-over-year) are concerning and may require strategic attention.

Positively, gross profit margins improved sequentially, rising 70 basis points to 27.8%. This, combined with controlled SG&A expenses, led to a 100 basis point sequential improvement in operating margins to 5.5%. However, the year-over-year decline in operating margins suggests there's still work to do on profitability.

The EPS of $0.75 represents a significant 21.1% year-over-year decrease, reflecting the challenging environment. However, the company's continued share repurchases and dividend payments ($15.4 million returned to shareholders) demonstrate confidence in its financial position.

Looking ahead, the Q3 2024 guidance suggests caution, with revenue expected to decline sequentially. The projected EPS range of $0.65 to $0.73 indicates potential further pressure on profitability. Investors should closely monitor Kforce's ability to navigate the evolving tech staffing landscape and capitalize on AI-driven opportunities mentioned by management.

Tech Industry Analyst

Kforce's Q2 results and management commentary provide valuable insights into the current state of the technology staffing market. The stabilization in demand for technology resources over the past three quarters, as noted by CEO Joseph Liberatore, suggests a potential bottoming out after the challenges of 2023. This aligns with broader industry trends, where many tech companies have completed major layoffs and are cautiously resuming hiring.

The company's emphasis on AI's potential impact is particularly noteworthy. Liberatore's assertion that AI will likely drive demand for technology resources, rather than replace them, echoes a growing sentiment in the industry. This view is supported by historical patterns where new technologies have often created more jobs than they eliminated. However, the nature of these jobs may shift, requiring staffing firms like Kforce to adapt their talent pools.

The 1.7% sequential growth in Technology Flex revenue is a positive sign, but the 6.4% year-over-year decline indicates the recovery is still in its early stages. This mirrors the broader tech industry, where many companies are still cautious about large-scale hiring or project initiations.

Kforce's focus on organic growth and a refined business model positions it well for an eventual market upturn. However, the company will need to navigate the ongoing transformation in the tech industry, particularly the rapid advancements in AI and machine learning. Adapting to these changes while maintaining a strong talent pipeline will be important for Kforce's long-term success in the evolving technology staffing landscape.

TAMPA, Fla., July 29, 2024 (GLOBE NEWSWIRE) --  Kforce Inc. (NYSE: KFRC), a solutions firm that specializes in technology and other professional staffing services, today announced results for the second quarter of 2024.

Joseph J. Liberatore, President and Chief Executive Officer, said, "We are pleased with our second quarter performance, including the sequential growth in our Technology business. Operating trends over the first half of 2024 and discussions with our clients indicate to us that the current operating environment continues to be more stable and constructive than it was throughout most of 2023. Against this backdrop, demand for technology resources and the desire for our clients to initiate new projects has remained stable over the last three quarters."

Mr. Liberatore continued, "While all economic cycles behave a bit differently, what remains clear to us is that the broad and strategic uses of technology, including the early-stage technology revolution associated with AI, will continue to evolve, and should play an increasingly instrumental role in powering businesses. Over the long term, we believe that AI and other innovative technologies will follow the historic pattern of ultimately driving demand for, rather than replacing, technology resources, and that the pace of change will continue to accelerate. Our decision to grow our business organically with a consistent, refined business model has been critical to our success over many years, and we remain confident that our Firm is positioned well for improving market conditions. I am tremendously proud of our team’s efforts as they continue to execute with incredible resilience and passion to serve our clients, candidates, and consultants cohesively as one Kforce while also meaningfully advancing our strategic enterprise priorities. I remain confident and excited about the future of Kforce."

Quarterly Financial Highlights

• Revenue for the quarter ended June 30, 2024 was $356.3 million compared to $389.2 million for the quarter ended June 30, 2023, an increase of 1.3% sequentially and a decrease of 8.4% year-over-year.
• Technology Flex revenue increased 1.7% sequentially and decreased 6.4% year-over-year. FA Flex revenue decreased 5.7% sequentially and 23.1% year-over-year.
• Gross profit margins of 27.8% increased 70 basis points sequentially and decreased 50 basis points year-over-year. Flex gross profit margins of 26.2% increased 60 basis points sequentially and decreased 10 basis points year-over-year.
• SG&A expenses as a percentage of revenue was 21.8% for the quarter ended June 30, 2024, which decreased 40 basis points sequentially and increased 50 basis points year-over-year.
• Operating margins were 5.5% for the quarter ended June 30, 2024, which increased 100 basis points sequentially and decreased 120 basis points year-over-year.
• Diluted earnings per share for the quarter ended June 30, 2024 were $0.75, a decrease of 21.1% year-over-year.
• We returned $15.4 million in capital to our shareholders in the form of open market repurchases and quarterly dividends during the second quarter of 2024.
• Our Board of Directors approved a third quarter cash dividend of $0.38 per share to shareholders of record as of the close of business on September 13, 2024, which will be payable on September 27, 2024.

Third Quarter 2024 - Guidance

Looking forward to the third quarter of 2024, there will be 64 billing days, compared to 64 billing days in the second quarter of 2024 and 63 billing days in the third quarter of 2023. Current estimates for the third quarter of 2024 are:

• Revenue of $347 million to $355 million
• Earnings per share of $0.65 to $0.73
• Gross profit margin of 27.5% to 27.7%
• Flex gross profit margin of 26.0% to 26.2%
• SG&A expenses as a percent of revenue of 21.9% to 22.1%
• Operating margin of 5.0% to 5.4%
• WASO of 18.7 million
• Effective tax rate of 26.8%

Conference Call

On Monday, July 29, 2024, Kforce will host a conference call at 5:00 p.m. E.T. to discuss these results. The dial-in number is (800) 715-9871 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 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 third 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
		June 30, 2024			March 31, 2024			June 30, 2023
Revenue		$	356,318		$	351,889		$	389,190
Direct costs			257,345			256,639			278,924
Gross profit			98,973			95,250			110,266
Selling, general and administrative expenses			77,718			78,190			82,993
Depreciation and amortization			1,555			1,333			1,340
Income from operations			19,700			15,727			25,933
Other expense, net			504			656			313
Income from operations, before income taxes			19,196			15,071			25,620
Income tax expense			5,039			4,084			7,046
Net income		$	14,157		$	10,987		$	18,574
Earnings per share – diluted		$	0.75		$	0.58		$	0.95
Weighted average shares outstanding – diluted			18,886			18,932			19,611
Adjusted EBITDA		$	24,753		$	20,560		$	31,582
Billing days			64			64			64

 

Kforce Inc. Consolidated Balance Sheets (In Thousands) (Unaudited)
	June 30, 2024				December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	110			$	119
Trade receivables, net of allowances		230,714				233,428
Prepaid expenses and other current assets		8,310				10,912
Total current assets		239,134				244,459
Fixed assets, net		8,526				9,418
Other assets, net		85,386				75,924
Deferred tax assets, net		4,599				3,138
Goodwill		25,040				25,040
Total assets	$	362,685			$	357,979
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$	58,359			$	64,795
Accrued payroll costs		39,589				33,968
Current portion of operating lease liabilities		3,384				3,589
Income taxes payable		1,499				623
Total current liabilities		102,831				102,975
Long-term debt – credit facility		36,700				41,600
Other long-term liabilities		56,534				54,324
Total liabilities		196,065				198,899
Commitments and contingencies
Stockholders’ equity:
Preferred stock		—				—
Common stock		735				734
Additional paid-in capital		535,161				527,288
Retained earnings		535,565				525,222
Treasury stock, at cost		(904,841	)			(894,164	)
Total stockholders’ equity		166,620				159,080
Total liabilities and stockholders’ equity	$	362,685			$	357,979

 

Kforce Inc. Key Statistics (Unaudited)
		Q2 2024				Q1 2024				Q2 2023
Total Firm
Total Revenue (000’s)		$	356,318			$	351,889			$	389,190
GP %			27.8	%			27.1	%			28.3	%
Flex revenue (000’s)		$	348,784			$	344,724			$	378,470
Hours (000's)			4,057				4,067				4,462
Flex GP %			26.2	%			25.6	%			26.3	%
Direct Hire revenue (000’s)		$	7,534			$	7,165			$	10,720
Placements			374				349				535
Average fee		$	20,161			$	20,506			$	20,067
Billing days			64				64				64
Technology
Total Revenue (000’s)		$	327,874			$	322,084			$	352,025
GP %			26.8	%			26.1	%			27.1	%
Flex revenue (000’s)		$	324,064			$	318,514			$	346,326
Hours (000’s)			3,575				3,555				3,829
Flex GP %			25.9	%			25.3	%			25.9	%
Direct Hire revenue (000’s)		$	3,810			$	3,570			$	5,699
Placements			186				168				268
Average fee		$	20,441			$	21,276			$	21,305
Finance and Accounting
Total Revenue (000’s)		$	28,444			$	29,805			$	37,165
GP %			38.9	%			37.6	%			39.8	%
Flex revenue (000’s)		$	24,720			$	26,210			$	32,144
Hours (000’s)			482				512				633
Flex GP %			29.7	%			29.1	%			30.4	%
Direct Hire revenue (000’s)		$	3,724			$	3,595			$	5,021
Placements			188				181				267
Average fee		$	19,883			$	19,794			$	18,824

 

Kforce Inc. Non-GAAP Financial Measures (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, which 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 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. The impact of billing days is calculated by dividing each comparative period’s reported revenues by the number of billing days for the respective period to arrive at a per billing day amount for each quarter. Growth rates are then calculated using the per billing day amounts as a percentage change compared to the respective period. Management calculates the number of billing days for each reporting period based on the number of holidays and business days in the quarter.

	Sequential Growth Rates (As Reported)
	2024							2023
		Q2			Q1			Q4			Q3			Q2
Technology Flex		1.7	%		(2.3	)%		(2.5	)%		(3.5	)%		(3.7	)%
FA Flex		(5.7	)%		(11.5	)%		(1.0	)%		(7.0	)%		(10.7	)%
Total Flex revenue		1.2	%		(3.1	)%		(2.3	)%		(3.8	)%		(4.3	)%
	Sequential Growth Rates (As Adjusted)
	2024							2023
		Q2			Q1			Q4			Q3			Q2
Billing Days		64			64			61			63			64
Technology Flex		1.7	%		(6.9	)%		0.7	%		(2.0	)%		(3.7	)%
FA Flex		(5.7	)%		(15.7	)%		2.3	%		(5.5	)%		(10.7	)%
Total Flex revenue		1.2	%		(7.6	)%		0.9	%		(2.3	)%		(4.3	)%

 

		Year-Over-Year Growth Rates (As Reported)
		2024									2023
		YTD			Q2			Q1			Q4			Q3			Q2
Technology Flex		(9.0	)%		(6.4	)%		(11.4	)%		(11.1	)%		(12.5	)%		(7.8	)%
FA Flex		(25.3	)%		(23.1	)%		(27.2	)%		(28.0	)%		(26.9	)%		(27.3	)%
Total Flex revenue		(10.4	)%		(7.8	)%		(12.8	)%		(12.8	)%		(13.9	)%		(9.8	)%
		Year-Over-Year Growth Rates (As Adjusted)
		2024									2023
		YTD			Q2			Q1			Q4			Q3			Q2
Billing Days		128			64			64			61			63			64
Technology Flex		(9.0	)%		(6.4	)%		(11.4	)%		(11.1	)%		(11.1	)%		(7.8	)%
FA Flex		(25.3	)%		(23.1	)%		(27.2	)%		(28.0	)%		(25.7	)%		(27.3	)%
Total Flex revenue		(10.4	)%		(7.8	)%		(12.8	)%		(12.8	)%		(12.5	)%		(9.8	)%

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.

	Six Months Ended June 30,
(in thousands)		2024				2023
Net cash provided by operating activities	$	34,105			$	40,431
Capital expenditures		(4,979	)			(4,950	)
Free cash flow		29,126				35,481
Change in debt		(4,900	)			(1,000	)
Repurchases of common stock		(11,229	)			(24,614	)
Cash dividends		(14,229	)			(13,947	)
Proceeds from company-owned life insurance		2,377				—
Premiums paid for company-owned life insurance		(1,150	)			(193	)
Proceeds from the sale of our joint venture interest		—				5,059
Note receivable issued to our joint venture		—				(750	)
Other		(4	)			(10	)
Change in cash and cash equivalents	$	(9	)		$	26

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 and income tax expense. 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
(in thousands)	June 30, 2024			March 31, 2024			June 30, 2023
Net income	$	14,157		$	10,987		$	18,574
Depreciation and amortization		1,555			1,333			1,340
Stock-based compensation expense		3,498			3,501			4,309
Interest expense, net		504			655			313
Income tax expense		5,039			4,084			7,046
Adjusted EBITDA	$	24,753		$	20,560		$	31,582

FAQ

What was Kforce's (KFRC) revenue for Q2 2024?

Kforce reported revenue of $356.3 million for the second quarter of 2024.

How did Kforce's (KFRC) Q2 2024 earnings compare to the previous year?

Kforce's Q2 2024 earnings per share were $0.75, a decrease of 21.1% compared to the same quarter in the previous year.

What is Kforce's (KFRC) revenue guidance for Q3 2024?

Kforce provided Q3 2024 revenue guidance of $347 million to $355 million.

How did Kforce's (KFRC) Technology Flex revenue perform in Q2 2024?

Kforce's Technology Flex revenue increased 1.7% sequentially but decreased 6.4% year-over-year in Q2 2024.

What dividend did Kforce (KFRC) declare for Q3 2024?

Kforce's Board of Directors approved a Q3 2024 cash dividend of $0.38 per share.