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Kforce Reports Fourth Quarter Revenues of $326.0 Million and EPS of $0.36

TAMPA, Fla., Feb. 07, 2017 (GLOBE NEWSWIRE) -- Kforce Inc. (Nasdaq:KFRC), a provider of professional staffing services and solutions, today announced results for its fourth quarter and full year 2016. Revenues for the quarter ended December 31, 2016 were $326.0 million compared to $336.5 million for the quarter ended September 30, 2016, an increase of 1.7% on a billing day basis, and compared to $327.7 million for the quarter ended December 31, 2015, an increase of 1.1% on a billing day basis. Net income for the quarter ended December 31, 2016 was $9.2 million, or $0.36 per share, as compared to $9.0 million, or $0.34 per share, for the quarter ended September 30, 2016, and $11.9 million, or $0.43 per share, for the quarter ended December 31, 2015.

Kforce reported total revenues for the year ended December 31, 2016 of $1.32 billion, which was flat with 2015. Net income for the year ended December 31, 2016 was $32.8 million, or $1.25 per share, which is a decrease of 23.5%, or 17.8% per share, compared to net income for the year ended December 31, 2015 of $42.8 million, or $1.52 per share.

David L. Dunkel, Chairman and CEO, said, "As anticipated, revenue in the fourth quarter returned to year-over-year billing day growth. Our intra-quarter trends as well as the momentum we have carried into the beginning of the first quarter are providing encouraging signs about our ability to continue accelerating revenue growth in 2017. We are confident in the structure and strength of our organization and believe that the actions taken during 2016 position us well to maximize our market opportunities. Our bias continues to be to invest in our business to generate long-term shareholder value. These investments include measured and balanced additions to our revenue-generating talent and enhancing and sustaining sales and delivery training and tools. We also plan to continue our technology-related investments while taking appropriate care to monitor opportunities that technological advancements might provide us to enhance our operating model. We continue to see clients seek flexible resources as they invest in technology to more effectively meet the needs of their customers.

We are very pleased to welcome Randall Mehl to the Kforce Board of Directors. Mr. Mehl has served as a lead investor and director for other companies in the areas of digital marketing, IT services, analytics, and workforce management as well as having prior experience as a sell-side equity analyst in business services. I also want to thank all of our employees and consultants for your continued hard work and dedication, particularly throughout 2016 where we experienced many organizational changes, as well as express our continued gratitude to our clients for allowing us the privilege of serving you."

Joseph J. Liberatore, President said, "We are pleased to have returned to year-over-year revenue growth on a billing day basis in Tech Flex and FA Flex. The improvements we experienced during the fourth quarter in both of these businesses is also translating into a solid start to our first quarter of 2017.

We have been focused throughout 2016 on positioning our sales and delivery teams to operate with greater consistency and discipline to improve the intimacy with our clients, candidates and consultants. This included rebalancing our revenue-generating talent between sales and delivery, which has allowed us to reaccelerate our client facing activities and diversify our client portfolio over a broader range of our largest clients. We believe these efforts and our intense focus on our ongoing sales transformation initiative have laid a solid foundation for continued acceleration of revenue growth."

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

David M. Kelly, Chief Financial Officer, said, "We remain confident that we will meet or exceed our 7.5% operating margin target when $1.6 billion in annualized revenue is reached and still expect to achieve an operating margin of at least 6.3% at $1.4 billion in annualized revenue, which we may see as early as the second quarter of 2017. We returned a significant amount of capital to our shareholders in the form of dividends and open market share repurchases, which amounted to approximately $56 million in 2016, and is further confirmation of our belief in the strength of our business. 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 March 24, 2017 to shareholders of record as of the close of business on March 10, 2017."

Highlights for the fourth quarter include:

Looking forward to the first quarter of 2017, there will be 64 billing days, as compared to 61 billing days in the fourth quarter of 2016, and 64 billing days in the first quarter of 2016. Current estimates for the first quarter of 2017 are:

On Tuesday, February 7, 2017, 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. EST, Tuesday, February 7, 2017 through February 14, 2017 by dialing (855) 859-2056, passcode 99439598.

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 February 14, 2017.

Our 2017 Annual Meeting of Kforce Inc. Shareholders will be held on Tuesday, April 18, 2017 at 1001 East Palm Avenue, Tampa, Florida 33605, commencing at 8:00 a.m., eastern time.

About Kforce

Kforce (Nasdaq:KFRC) is a professional staffing and solutions firm providing temporary and permanent staffing solutions in the skill areas of technology and finance & accounting. Backed by nearly 2,800 associates and more than 11,800 consultants on assignment, Kforce is committed to "Great People = Great Results" for our valued clients and candidates. Kforce operates with 62 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
  Dec. 31, 2016 Sept. 30, 2016 Dec. 31, 2015
Revenue by function:      
 Technology $216,807  $225,524  $218,026 
 Finance & accounting 85,794  84,118  86,816 
 Government solutions 23,397  26,818  22,857 
Total revenue 325,998  336,460  327,699 
Direct costs of services 226,350  231,080  224,184 
Gross profit 99,648  105,380  103,515 
GP % 30.6% 31.3% 31.6%
Flex GP % 28.1% 28.6% 28.7%
Selling, general & administrative expenses 82,123  87,918  80,702 
Depreciation & amortization 2,047  2,075  2,429 
Income from operations  15,478  15,387  20,384 
Other expense, net 711  663  288 
Income before income taxes 14,767  14,724  20,096 
Income tax expense 5,528  5,704  8,195 
Net income $9,239  $9,020  $11,901 
       
Earnings per share - diluted $0.36  $0.34  $0.43 
       
Weighted average shares outstanding - diluted 25,821  26,173  27,793 
Adjusted EBITDA $19,169  $18,806  $24,556 
       
Billing days 61  64  62 


Kforce Inc.
Summary of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
   
  Twelve Months Ended
  Dec. 31, 2016 Dec. 31, 2015
Revenue by function:    
Technology $883,477  $895,942 
Finance & accounting 337,601  325,924 
Government solutions 98,628  97,372 
Total revenue 1,319,706  1,319,238 
Direct costs of services 911,207  905,124 
Gross profit 408,499  414,114 
GP % 31.0% 31.4%
Flex GP % 28.2% 28.5%
Selling, general & administrative expenses  341,196  330,416 
Depreciation & amortization 8,701  9,831 
Income from operations 58,602  73,867 
Other expense, net 2,647  2,195 
Income before income taxes 55,955  71,672 
Income tax expense 23,182  28,848 
Net income $32,773  $42,824 
     
Earnings per share - diluted $1.25  $1.52 
     
Weighted average shares outstanding - diluted 26,274  28,190 
Adjusted EBITDA $74,052  $89,282 
     
Billing days 253  253 


Kforce Inc.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
   
   DECEMBER 31,
  2016 2015
ASSETS    
Current Assets:    
Cash and cash equivalents $1,482  $1,497 
Trade receivables, net of allowances 206,361  198,933 
Income tax refund receivable 172  526 
Deferred tax asset, net 4,799  4,518 
Prepaid expenses and other current assets 10,691  9,060 
Total current assets 223,505  214,534 
Fixed assets, net 43,145  37,476 
Other assets, net 30,511  28,671 
Deferred tax asset, net 18,650  20,938 
Intangible assets, net 3,642  4,235 
Goodwill 45,968  45,968 
Total assets $365,421  $351,822  
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current Liabilities:    
Accounts payable and other accrued liabilities $37,230  $39,227 
Accrued payroll costs 44,137  46,125 
Other current liabilities 1,765  1,287 
Income taxes payable 221  1,107 
Total current liabilities 83,353  87,746 
Long-term debt - credit facility 111,547  80,472 
Long-term debt - other 3,984  3,351 
Other long-term liabilities 44,801  40,626 
Total liabilities 243,685  212,195 
Commitments and contingencies    
Stockholders' Equity:    
Preferred stock    
Common stock 713  705 
Additional paid-in capital 428,212  420,276 
Accumulated other comprehensive income (loss) 184  318 
Retained earnings 174,967  155,096 
Treasury stock, at cost (482,340) (436,768)
Total stockholders' equity 121,736  139,627 
Total liabilities and stockholders' equity $365,421  $351,822 



Kforce Inc.
Key Statistics
(Unaudited)
 
  Q4 2016 Q3 2016 Q4 2015
Total Firm      
Flex revenue (000's) $314,714  $323,484  $314,286 
Hours (000's) 5,598  5,597  5,603 
Flex GP % 28.1% 28.6% 28.7%
Direct Hire revenue (000's) $11,284  $12,976  $13,413 
Placements 876  940  995 
Average fee $12,891  $13,802  $13,484 
Billing days 61  64  62 
Technology      
Flex revenue (000's) $212,437  $220,376  $212,917 
Hours (000's) 3,152  3,254  3,158 
Flex GP % 27.5% 27.2% 27.5%
Direct Hire revenue (000's) $4,370  $5,148  $5,109 
Placements 260  297  323 
Average fee $16,831  $17,343  $15,822 
Finance & Accounting       
Flex revenue (000's) $78,880  $76,290  $78,512 
Hours (000's) 2,446  2,343  2,445 
Flex GP % 29.1% 29.6% 29.9%
Direct Hire revenue (000's) $6,914  $7,828  $8,304 
Placements 616  643  672 
Average fee $11,230  $12,169  $12,360 
Government Solutions      
Flex revenue (000's) $23,397  $26,818  $22,857 
Flex GP % 30.3% 36.4% 34.9%


Kforce Inc.
Revenue Growth Rates
(Unaudited)
   
  Year-Over-Year Growth Rates
  (Per Billing Day)
  Q4 2016 Q3 2016 Q2 2016 Q1 2016 Q4 2015
Tech Flex 1.4% (2.7)% (2.9)% (0.3)% 0.2%
Tech Direct Hire (13.1)% (10.2)% (18.2)% 1.8% 7.8%
Total Tech 1.1% (2.8)% (3.3)% (0.2)% 0.4%
FA Flex 2.1% (0.5)% 5.5% 12.0% 15.7%
FA Direct Hire (15.4)% (6.9)% 3.4% 2.8% 15.7%
Total FA 0.4% (1.2)% 5.3% 11.1% 15.7%
Total Staffing 0.9% (2.4)% (1.1)% 2.7% 4.3%
GS 4.0% 10.1% 4.2% (12.1)% (13.9)%
Total Firm 1.1% (1.5)%  (0.7)% 1.5% 2.8%

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 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, net 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 operations including 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
  Dec. 31, 2016  Sept. 30, 2016 Dec. 31, 2015
  $ $ $
Net income $9,239  $9,020  $11,901 
Depreciation & amortization 2,094  2,102  2,429 
Stock-based compensation expense 1,663  1,336  1,558 
Interest expense, net 645  644  473 
Income tax expense 5,528  5,704  8,195 
Adjusted EBITDA $19,169  $18,806  $24,556 


  Twelve Months Ended
   Dec. 31, 2016 Dec. 31, 2015
  $ $
Net income $32,773  $42,824 
Depreciation & amortization 8,796  9,831 
Stock-based compensation expense 6,705  5,819 
Interest expense, net 2,596  1,960 
Income tax expense 23,182  28,848 
Adjusted EBITDA $74,052  $89,282 

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 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 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.

  Twelve Months Ended
   Dec. 31, 2016 Dec. 31, 2015
Net income $32,773  $42,824 
Non-cash provisions and other 20,717  21,602 
Changes in operating assets/liabilities (14,043)  5,754 
Net cash provided by operating activities 39,447  70,180 
Capital expenditures  (12,420) (8,328)
Free cash flow 27,027  61,852 
Change in debt  31,075  (12,861)
Repurchases of common stock (46,013) (38,471)
Cash dividend (12,447) (12,545)
Other 343  2,284 
Change in cash (15) 259 
AT THE FIRM



Michael R. Blackman

Chief Corporate Development Officer

(813) 552-2927

Primary Logo

Source: Kforce Inc.

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