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Kforce Reports First Quarter Revenues of $322.2 Million

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First Quarter Adjusted Net Income of $6.4 Million, or $0.24 Per Share

Kforce Government Solutions ("KGS") Awarded T4 Next Generation Prime Contract

TAMPA, Fla., May 03, 2016 (GLOBE NEWSWIRE) -- Kforce Inc. (Nasdaq:KFRC), a provider of professional staffing services and solutions, today announced results for its first quarter of 2016. Revenues for the quarter ended March 31, 2016 were $322.2 million compared to $327.7 million for the quarter ended December 31, 2015, a decrease of 1.7%, and compared to $312.6 million for the quarter ended March 31, 2015, an increase of 3.1%. Adjusted net income, excluding the impact of severance costs and certain tax adjustments of $2.7 million, for the quarter ended March 31, 2016 was $6.4 million, or $0.24 per share, as compared to net income of $11.9 million, or $0.43 per share, for the quarter ended December 31, 2015, and net income of $5.8 million, or $0.20 per share, for the quarter ended March 31, 2015. Net income for the quarter ended March 31, 2016 was $3.7 million, or $0.14 per share.

David L. Dunkel, Chairman and CEO, said, "Over the past two quarters we have been aggressively taking action, particularly in our Tech Flex business, to reduce reliance on a few large customers by strengthening our position more deeply in our client portfolio and adding resources at an accelerated level. Though we are seeing signs of recent improvement from these efforts, first quarter revenue of $322.2 million was below our expectations.

"The overall demand environment remains strong. We have begun to see a gradual reacceleration of activity in those few large clients that have slowed their usage of flexible staffing due to transactions, and conversations with representatives at these clients suggest a strong pipeline of projects. Additionally, as we further deepen relationships more broadly in our portfolio, we continue to identify new opportunities, though building significant presence within these large customers will happen gradually and take some time."

Mr. Dunkel continued, "In what we believe is a significant development, during the first quarter of 2016 the United States Department of Veterans Affairs awarded KGS one of nine large business prime contract vehicles to directly support the VA, along with 12 small businesses, in areas that include information technology infrastructure improvements, cyber security, and operations and network management. The contract vehicle, known as "T4 Next Generation" has an overall program ceiling of approximately $22 billion, which is expected to be released over a period of 10 years. The T4 Next Generation contract could provide KGS with an opportunity to experience exponential growth over the next several years. The fact that KGS has been supporting the VA for over 20 years, most recently as a subcontractor under the original T4 vehicle, leads us to be very optimistic about our prospects to capture a meaningful share of this significant opportunity in a prime role. KGS has had successful performance in providing solutions to the VA, supported by the centralized delivery capabilities of Kforce, which supports KGS, which we believe were key elements in KGS receiving this award."

Joseph J. Liberatore, President, said, "The disproportionate declines in a few of our largest clients have abated in the first quarter of 2016. These clients, along with many of our other largest clients, have provided significant growth over the last several years and we continue to believe that our longstanding relationships with these clients provide longer term strength to our overall revenue base as these clients continue to emerge from their recent business disruption and internal organizational challenges."

Mr. Liberatore continued, "Demand remains high and we believe our investment in revenue-generating talent and expansion of our focus to a greater number of larger clients over the last several quarters will result in greater client penetration, market share and better execution of delivery. We believe we are taking the appropriate actions to take advantage of our platform, infrastructure and client base to put our Great People in an environment where they can be successful, accelerating revenue growth while delighting our clients and consultants."

Mr. Liberatore noted additional operational results for the first quarter include:

David M. Kelly, Chief Financial Officer, said, "While our revenues in the first quarter were slightly below our expectations, we continue to demonstrate leverage with our adjusted earnings per share of $0.24. We remain very focused on the actions necessary to reaccelerate revenue growth, in particular in our Tech Flex business, as well as making the necessary investments in KGS to position us for success in capturing the significant opportunities that we expect to present themselves beginning in the second half of 2016 under the recently awarded T4 Next Generation prime contract. We believe our client relationships remain strong and our sales metrics are trending positively. We remain very confident in the demand environment within the markets and clients that we serve and still expect to meet or exceed our 7.5% operating margin target when $1.6 billion in annualized revenue is reached."

Mr. Kelly continued, "We are also pleased to announce that our Board of Directors declared a first quarter cash dividend on Kforce common stock of $0.12 per share. The cash dividend will be payable on June 24, 2016 to shareholders of record as of the close of business on June 10, 2016."

Highlights for the first quarter include:

Looking forward to the second quarter of 2016, there will be 64 billing days, which is the same as the preceding and prior year quarters. Current estimates for the second quarter of 2016 are:

On Tuesday, May 3, 2016, Kforce will host a conference call to discuss these results. The call will begin at 5:00 p.m. Eastern Time. The prepared remarks for this call are available on the Investor Relations page of the Kforce Inc. website (http://investor.kforce.com/).  

The dial-in number is (877) 344-3890. The conference passcode is Kforce. The replay of the call will be available from 8:00 p.m. EDT, Tuesday, May 3, 2016 through May 10, 2016 by dialing (855) 859-2056, passcode 99318532.

This call is being webcast by Shareholder.com and can be accessed at Kforce's web site at www.kforce.com (select "Investor Relations"). The webcast replay will be available until May 10, 2016

About Kforce

Kforce (Nasdaq:KFRC) is a professional staffing and solutions firm providing flexible and permanent staffing solutions in the skill areas of technology and finance & accounting. Backed by more than 2,900 associates and more than 11,200 consultants on assignment, Kforce is committed to "Great People = Great Results" for our valued clients and candidates. Kforce operates with 63 offices located throughout the United States and one office in the Philippines. For more information, please visit our Web site at http://www.kforce.com

The Kforce Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3749.  

Certain of the above statements contained in this press release, including earnings projections, are forward-looking statements that involve a number of risks and uncertainties. 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 and growth in the staffing industry and general economy; competitive factors, risks due to shifts in the market demand, including, without limitation, shifts in demand for our Technology, Finance and Accounting and Government Solutions segments, as well as the market for direct hire and flexible staffing assignments; a reduction in the supply of candidates for temporary employment or the Firm's ability to attract such candidates; the success of the Firm in attracting and retaining revenue-generating talent; changes in the service mix; ability of the Firm to repurchase shares; ability of the Firm to complete and integrate acquisitions; the effect of adverse weather conditions; changes in our effective tax rate; changes in government regulations, laws and policies that are adverse to our businesses; risk of contract performance, delays or termination or the failure to obtain awards, task orders or funding under contracts; and the risk factors listed from time to time in the Firm's reports filed with the Securities and Exchange Commission, including the Firm's Form 10-K for the fiscal year ending December 31, 2015, as well as assumptions regarding the foregoing. In particular, the Firm makes no assurances that the estimates of continuing operations will be achieved or that we will continue to increase our market share, successfully manage risks to our revenue stream, successfully put into place the people and processes that will create future success or further accelerate our revenue. The words "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. The Firm undertakes no obligation to publicly update or revise any forward-looking statements. As a result, such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements.


Kforce Inc.
Summary of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
 
  Three Months Ended
  Mar. 31, 2016 Dec. 31, 2015 Mar. 31, 2015
Revenue by function:      
Technology $216,588  $218,026  $213,639 
Finance & accounting 82,492  86,816  73,072 
Government solutions 23,121  22,857  25,900 
Total revenue 322,201  327,699  312,611 
Direct costs of services 225,012  224,184  217,871 
Gross profit 97,189  103,515  94,740  
GP % 30.2% 31.6% 30.3%
Flex GP % 27.3% 28.7% 27.5%
Selling, general & administrative expenses 85,568  80,702   82,352 
Depreciation & amortization 2,327  2,429  2,397 
Income from operations 9,294  20,384  9,991 
Other expense, net 555  288  453 
Income before income taxes 8,739  20,096  9,538 
Income tax expense 5,089  8,195  3,753 
Net income  $3,650  $11,901  $5,785 
       
Earnings per share - diluted $0.14  $0.43  $0.20 
       
Weighted average shares outstanding - diluted 26,842  27,793  28,475 
Adjusted EBITDA per share $0.51  $0.88  $0.48 
Adjusted EBITDA $13,599  $24,556  $13,742 
       
Billing days 64   62  63 



Kforce Inc.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
 
  March 31, 2016 December 31, 2015
ASSETS    
Current Assets:    
Cash and cash equivalents $920  $1,497 
Trade receivables, net of allowances 210,444  198,933 
Income tax refund receivable 67   526 
Deferred tax assets, net 3,815  4,518 
Prepaid expenses and other current assets 10,463  9,060 
Total current assets 225,709  214,534 
Fixed assets, net 37,599  37,476 
Other assets, net 28,474  28,671 
Deferred tax assets, net 18,298  20,938 
Intangible assets, net 4,043  4,235 
Goodwill 45,968  45,968 
Total assets $360,091  $351,822 
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current Liabilities:    
Accounts payable and other accrued liabilities $35,667   $39,227 
Accrued payroll costs 50,537  46,125 
Other current liabilities 1,368  1,287 
Income taxes payable 1,621  1,107 
Total current liabilities 89,193  87,746 
Long-term debt - credit facility 103,454  80,472 
Long-term debt - other 3,546  3,351 
Other long-term liabilities 42,311  40,626 
Total liabilities 238,504  212,195 
Commitments and contingencies    
Stockholders' Equity:    
Preferred stock    
Common stock 710  705 
Additional paid-in capital 422,862  420,276 
Accumulated other comprehensive income 315  318 
Retained earnings 155,456  155,096 
Treasury stock, at cost (457,756) (436,768)
Total stockholders' equity 121,587  139,627 
Total liabilities and stockholders' equity $360,091  $351,822 



Kforce Inc.
Key Statistics
(Unaudited)
 
  Q1 2016 Q4 2015 Q1 2015
Total Firm      
Flex revenue (000's) $309,636  $314,286  $300,532 
Hours (000's) 5,451  5,603  5,073 
Flex GP % 27.3% 28.7% 27.5%
Direct Hire revenue (000's) $12,565  $13,413  $12,079 
Placements 912  995  869 
Average fee $13,785  $13,484  $13,909 
Billing days 64  62  63 
Technology      
Flex revenue (000's) $211,209  $212,917  $208,438  
Hours (000's) 3,129  3,158  3,074 
Flex GP % 26.7% 27.5% 26.4%
Direct Hire revenue (000's) $5,379  $5,109   $5,201 
Placements 317  323  330 
Average fee $16,992  $15,822  $15,785 
Finance & Accounting      
Flex revenue (000's) $75,306  $78,512  $66,194 
Hours (000's) 2,322  2,445  1,999 
Flex GP %  28.7% 29.9% 28.4%
Direct Hire revenue (000's) $7,186  $8,304  $6,878 
Placements 595  672  539 
Average fee $12,078  $12,360  $12,760 
Government Solutions       
Flex revenue (000's) $23,121  $22,857  $25,900 
Flex GP % 28.4% 34.9% 34.1%



Kforce Inc.
Revenue Growth Rates
(Per Billing Day)
(Unaudited)
 
  Year-Over-Year Growth Rates
  (Per Billing Day)
  Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015
Tech Flex (0.3)% 0.2% 6.6% 9.6% 8.3%
Tech Direct Hire 1.8% 7.8% 6.7% 24.9% 29.8%
Total Tech (0.2)% 0.4% 6.6% 9.9% 8.7%
FA Flex 12.0% 15.7% 19.4% 21.2% 15.9%
FA Direct Hire 2.8% 15.7% 17.9% 7.9% 21.0%
Total FA 11.1% 15.7% 19.2% 19.7%  16.4%
Total Staffing 2.7% 4.3% 9.8% 12.3% 10.6%
GS (12.1)% (13.9)% (1.8)% 1.3% 13.7%
Total Firm 1.5% 2.8% 8.8% 11.4% 10.8%
                


Kforce Inc.
Non-GAAP Financial Measures
(In Thousands, Except Per Share Amounts)
(Unaudited)

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 does not consider these non-GAAP financial measures 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.

Adjusted Net Income and Adjusted Net Income Per Share

"Adjusted Net Income", a non-GAAP financial measure, is defined as net income adjusted for certain non-recurring charges. "Adjusted Net Income Per Share", a non-GAAP financial measure, is Adjusted Net Income divided by the number of diluted weighted average shares outstanding. Adjusted Net Income and Adjusted Net Income Per Share should not be considered a measure of financial performance under generally accepted accounting principles and are presented as an alternative method for assessing the Company's operating results in a manner that is focused on the performance of our ongoing operations and to provide consistency and comparability. Adjusted Net Income and Adjusted Net Income Per Share are key measures used by management and provide useful information by excluding certain non-recurring charges that we believe are not indicative of the Company's core operating results, consequently, management believes they are useful information to investors.

  Three Months Ended
  Mar. 31, 2016 Dec. 31, 2015 Mar. 31, 2015
  $ Per
share
 $  Per
share
 $ Per
share
Net income $3,650  $0.14  $11,901  $0.43  $5,785  $0.20 
Non-recurring charges, pre-tax            
Severance costs 1,742  0.06         
Non-recurring charges, pre-tax 1,742  0.06         
Income tax expense * 974  0.04         
Adjusted net income 6,366  $0.24  11,901  $0.43  5,785  $0.20 
              
Weighted average shares outstanding - basic 26,693    27,430    28,276   
Weighted average shares outstanding - diluted 26,842    27,793    28,475   
                

* The income tax expense reconciling item is composed of (i) an income tax expense of $1.7 million related to certain one-time non-cash adjustments, and (ii) an income tax benefit of $0.7 million related to the severance costs, which was calculated using the effective tax rate, excluding the impact of the severance costs and certain tax adjustments, of 39.3%.

Adjusted EBITDA and Adjusted EBITDA Per Share

"Adjusted EBITDA", a non-GAAP financial measure, is defined by Kforce as net income before income from discontinued operations, net of income taxes, non-cash impairment charges, depreciation and amortization, stock-based compensation, interest and income taxes. "Adjusted EBITDA Per Share", a non-GAAP financial measure, is Adjusted EBITDA divided by the number of diluted weighted average shares outstanding. Adjusted EBITDA and Adjusted EBITDA Per Share should not be considered a measure of financial performance under GAAP. Items excluded from Adjusted EBITDA and Adjusted EBITDA Per Share 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 and Adjusted EBITDA Per Share. Adjusted EBITDA and Adjusted EBITDA Per Share are key measures used by management to evaluate our operations, including our ability to generate cash flows and our ability to repay our debt obligations, and management believes they are good measures of our core profitability, consequently, management believes they are useful information to investors.

  Three Months Ended
  Mar. 31, 2016 Dec. 31, 2015 Mar. 31, 2015
  $ Per
share
 $  Per
share
 $ Per
share
Net income $3,650  $ 0.14  $11,901  $0.43  $5,785   $0.20 
Depreciation & amortization 2,337  0.09  2,429  0.09  2,397  0.08 
Stock-based compensation expense 1,944  0.07  1,558  0.05  1,291  0.05 
Interest expense and other  579  0.02  473  0.02  516  0.02 
Income tax expense 5,089  0.19  8,195  0.29  3,753  0.13 
Adjusted EBITDA $13,599  $0.51  $24,556  $0.88  $13,742  $0.48 
             
Weighted average shares outstanding - basic 26,693    27,430    28,276   
Weighted average shares outstanding - diluted 26,842     27,793    28,475   
                

Free Cash Flow

"Free Cash Flow", a non-GAAP financial measure, is defined by Kforce as net cash provided by (used in) operating activities determined in accordance with GAAP, less capital expenditures. Management believes this provides useful information to investors about the amount of cash generated by the business that can be used for strategic opportunities, including investing in our business, repurchasing common stock, paying dividends and making strategic acquisitions.

  Three Months Ended March 31,
  2016 2015
Net income $3,650  $5,785 
Non-cash provisions and other 8,419  5,791 
Changes in operating assets/liabilities (9,013) (168)
Capital expenditures (1,294) (1,389)
Free cash flow 1,762  10,019 
Change in debt 22,982  993 
Repurchases of common stock (22,084) (8,507)
Cash dividend (3,146) (3,112)
Other (91) 1,297 
Change in cash $(577) $690 
         
AT THE FIRM



Michael R. Blackman

Chief Corporate Development Officer

(813) 552-2927

Primary Logo

Source: Kforce Inc.

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