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Kforce Reports Second Quarter Revenues of $335.0 Million

Second Quarter Net Income of $10.9 Million, or $0.41 Per Share

Board of Directors Increases Share Repurchase Authorization to $75 Million

TAMPA, Fla., Aug. 02, 2016 (GLOBE NEWSWIRE) -- Kforce Inc. (Nasdaq:KFRC), a provider of professional staffing services and solutions, today announced results for its second quarter of 2016. Revenues for the quarter ended June 30, 2016 were $335.0 million compared to $322.2 million for the quarter ended March 31, 2016, an increase of 4.0%, and compared to $337.4 million for the quarter ended June 30, 2015, a decrease of 0.7%. Net income for the quarter ended June 30, 2016 was $10.9 million, or $0.41 per share, as compared to $3.7 million, or $0.14 per share, for the quarter ended March 31, 2016, and compared to $11.6 million, or $0.41 per share, for the quarter ended June 30, 2015. Adjusted net income, a non-GAAP measure, for the quarter ended March 31, 2016 was $6.4 million, or $0.24 per share.

David L. Dunkel, Chairman and CEO, said, "Revenues in the second quarter improved to $335.0 million and were in line with our guidance. The improvement from Q1 was primarily due to 3.9% sequential growth in our Tech Flex business where we saw the reversal of prior period revenue declines in certain large clients to contribute positively to our sequential growth. Earnings per share of $0.41 was slightly higher than the midpoint of our expectations. The overall demand environment in both Tech and Finance and Accounting remains solid. Against an uncertain macro-economic backdrop, we continue to experience many secular drivers, particularly in our Tech Flex business."

Mr. Dunkel continued, "We continue to believe that the T4 Next Gen contract vehicle could provide KGS with an opportunity to experience significant growth beginning in Q4 of 2016 with momentum going into 2017. We expect that the longer-term growth enabled by this contract vehicle will yield higher gross profit and operating margins than we are currently experiencing and provide a stable and more predictable revenue stream over the 10-year life of the contract vehicle.

We continue to make progress on several significant initiatives for supporting future growth. These include optimizing the alignment of our sales and delivery talent between Tech and FA, allocating our investments in talent toward markets, products, industries and clients that present us with the greatest opportunity for profitable revenue growth, and diversifying our client portfolio. We are also upgrading existing technology systems and implementing new technologies that will allow us to more effectively and efficiently serve our clients and candidates and improve the productivity and scalability of our organization."

Joseph J. Liberatore, President, said, "Over the past three quarters, we have made significant strides in diversifying our business to mitigate risk and take advantage of the strength of our client portfolio. We believe these efforts are showing promising signs as clients outside our top 25 grew sequentially at twice the pace of our top 25 clients and should continue to provide additional opportunities to grow our business. We also remain dedicated to providing exceptional service to our largest customers with whom we have long-term relationships. We believe we are pursuing the mix of business that will lead to the greatest long-term success."

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

David M. Kelly, Chief Financial Officer, said, "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 under the recently awarded T4 Next Gen contract. 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, "The Board of Directors recently approved an increase in our share repurchase authorization, which brings the currently available authorization to $75 million. We expect to continue balancing the allocation of our capital, after capital expenditures and dividends, between share repurchases and debt retirement as conditions warrant. We are also pleased to announce that our Board of Directors declared a third quarter cash dividend on Kforce common stock of $0.12 per share. The cash dividend will be payable on September 23, 2016 to shareholders of record as of the close of business on September 9, 2016."

Highlights for the second quarter include:

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

On Tuesday, August 2, 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/) in the Download Library under Shareholder Tools.

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, August 2, 2016 through August 9, 2016 by dialing (855) 859-2056, passcode 99434196.

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 August 9, 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 11,400 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; 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; 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; changes in client demand for our services such as the resulting impact of any significant organizational changes within our largest clients; 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
  Jun. 30, 2016  Mar. 31, 2016 Jun. 30, 2015
Revenue by function:      
Technology $224,558  $216,588  $232,164 
Finance & accounting 85,197   82,492  80,925 
Government solutions 25,292  23,121  24,264 
Total revenue 335,047  322,201  337,353 
Direct costs of services 228,765  225,012  231,315 
Gross profit 106,282  97,189  106,038 
GP % 31.7% 30.2% 31.4%
Flex GP % 28.8% 27.3% 28.4%
Selling, general & administrative expenses 85,587  85,568  83,195 
Depreciation & amortization 2,252  2,327   2,426 
Income from operations 18,443  9,294  20,417 
Other expense, net 718  555  991 
Income before income taxes 17,725  8,739  19,426 
Income tax expense 6,861  5,089  7,833 
Net income $10,864  $ 3,650  $11,593 
       
Earnings per share - diluted $0.41  $0.14  $0.41 
       
Weighted average shares outstanding - diluted 26,335  26,842  28,337 
Adjusted EBITDA $22,478  $13,599  $23,986 
       
Billing days 64  64  64 
          


Kforce Inc.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
 
    June 30, 2016  December 31, 2015
ASSETS   
Current Assets:      
Cash and cash equivalents   $1,043  $1,497 
Trade receivables, net of allowances   215,657  198,933 
Income tax refund receivable   966  526 
Deferred tax assets, net   3,990  4,518 
Prepaid expenses and other current assets   12,754  9,060 
Total current assets   234,410  214,534 
Fixed assets, net   37,726  37,476 
Other assets, net   28,629  28,671 
Deferred tax assets, net   19,266  20,938 
Intangible assets, net   3,850  4,235 
Goodwill   45,968  45,968 
Total assets   $369,849  $351,822 
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current Liabilities:       
Accounts payable and other accrued liabilities   $39,312  $39,227 
Accrued payroll costs   54,361  46,125 
Other current liabilities   1,513  1,287 
Income taxes payable   1,993  1,107 
Total current liabilities   97,179  87,746 
Long-term debt - credit facility   95,785  80,472 
Long-term debt - other    3,894  3,351 
Other long-term liabilities   41,825  40,626 
Total liabilities   238,683  212,195 
Commitments and contingencies      
Stockholders' Equity:      
Preferred stock      
Common stock   710  705 
Additional paid-in capital   424,888  420,276 
Accumulated other comprehensive income   313  318 
Retained earnings   163,004  155,096 
Treasury stock, at cost   (457,749) (436,768)
Total stockholders' equity   131,166  139,627 
Total liabilities and stockholders' equity   $369,849  $351,822 
           


Kforce Inc.
Key Statistics
(Unaudited)
 
    Q2 2016 Q1 2016 Q2 2015
Total Firm
     
Flex revenue (000's)    $321,473  $309,636  $322,910 
Hours (000's)   5,563  5,451  5,535 
Flex GP %   28.8% 27.3% 28.4%
Direct Hire revenue (000's)   $13,574  $12,565  $14,443 
Placements   994  912  1,028 
Average fee   $13,651  $13,785  $14,047 
Billing days   64  64  64 
Technology
     
Flex revenue (000's)   $219,412  $211,209   $225,873 
Hours (000's)   3,200  3,129  3,320 
Flex GP %   27.8% 26.7% 27.6%
Direct Hire revenue (000's)   $5,146  $5,379  $6,291 
Placements   317  317  389 
Average fee   $16,209   $16,992  $16,155 
Finance & Accounting
     
Flex revenue (000's)   $76,769  $75,306  $72,773 
Hours (000's)   2,363  2,322  2,215 
Flex GP %   30.0% 28.7% 29.8%
Direct Hire revenue (000's)   $8,428  $7,186  $8,152 
Placements   677  595  639 
Average fee   $12,451  $12,078  $12,763 
Government Solutions
     
Flex revenue (000's)   $25,292  $23,121  $24,264 
Flex GP %   34.3% 28.4% 31.2%
            


Kforce Inc.
Revenue Growth Rates
(Per Billing Day)
(Unaudited)
 
    Year-Over-Year Growth Rates
    (Per Billing Day)
    Q2 2016 Q1 2016 Q4 2015 Q3 2015  Q2 2015
Tech Flex   (2.9)% (0.3)% 0.2% 6.6% 9.6%
Tech Direct Hire   (18.2)% 1.8% 7.8% 6.7% 24.9%
Total Tech   (3.3)% (0.2)% 0.4% 6.6% 9.9%
FA Flex   5.5% 12.0% 15.7% 19.4% 21.2%
FA Direct Hire   3.4% 2.8%  15.7% 17.9% 7.9%
Total FA   5.3% 11.1% 15.7% 19.2% 19.7%
Total Staffing   (1.1)% 2.7% 4.3 % 9.8% 12.3%
GS   4.2% (12.1)% (13.9)% (1.8)% 1.3%
Total Firm    (0.7)% 1.5% 2.8% 8.8% 11.4%
                  

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 enhanced consistency and comparability. Adjusted Net Income and Adjusted Net Income Per Share are key performance 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, and consequently, management believes they are useful information to investors.


  Three Months Ended
  Jun. 30, 2016 Mar. 31, 2016 Jun. 30, 2015
  $ Per
share
 $ Per
share
 $ Per
share
Net income $10,864  $0.41  $3,650  $0.14  $11,593  $0.41 
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 $10,864  $0.41  $6,366  $0.24  $11,593  $0.41 
             
Weighted average shares outstanding -
basic
 26,180    26,693    28,134   
Weighted average shares outstanding -
diluted
  26,335    26,842     28,337   
                

* 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 for the first quarter, excluding the impact of the severance costs and certain tax adjustments, of 39.3%.

Adjusted EBITDA

"Adjusted EBITDA", a non-GAAP financial measure, is defined by Kforce, and consistent with the definition included in our credit facility, as net income before depreciation and amortization, stock-based compensation expense, interest expense and other and income tax expense and is a key metric in our covenant calculations. 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 ability to generate cash flows and our ability to repay our debt obligations and provides a good metric of our core profitability in comparing our performance to our competitors. Consequently, management believes it is useful information to investors.


  Three Months Ended
  Jun. 30, 2016 Mar. 31, 2016 Jun. 30, 2015
  $ $ $
Net income $10,864  $3,650  $11,593 
Depreciation & amortization 2,263  2,337  2,426 
Stock-based compensation expense 1,762  1,944  1,622 
Interest expense and other 728  579  512 
Income tax expense 6,861  5,089  7,833 
Adjusted EBITDA $22,478  $13,599  $23,986 
             

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 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. Free cash flow has limitations due to the fact that 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 our financial statements.


 Six Months Ended
 June 30,
  2016 2015
Net income$14,514  $17,378 
Non-cash provisions and other 12,366  11,854 
Changes in operating assets/liabilities(11,223) (3,229)
Capital expenditures(3,182) (3,604)
Free cash flow12,475  22,399 
Change in debt15,313  288 
Repurchases of common stock(22,185) (17,678)
Cash dividend(6,298) (6,201)
Other241  1,605 
Change in cash$(454) $413 
        

 

AT THE FIRM



Michael R. Blackman

Chief Corporate Development Officer

(813) 552-2927

Primary Logo

Source: Kforce Inc.

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