Press Releases
Kforce Reports Fourth Quarter 2018 Revenue of $358.0 Million, EPS of $0.65 per Share; Tech Flex Growth of 9.0% Year-Over-Year
Fourth Quarter 2018 Financial Highlights
- Revenue for the quarter ended December 31, 2018 was
$358.0 million compared to$342.6 million for the quarter ended December 31, 2017, an increase of 2.8% on a billing day basis. - Flex revenue of
$341.6 million in the quarter ended December 31, 2018 increased 2.3%, on a billing day basis, from$328.5 million in the quarter ended December 31, 2017. - Year-over-year growth in Flex revenue for Tech was 9.0% on a billing day basis, while FA and GS experienced a decrease of 11.7% and 13.3% on a billing day basis, respectively.
- Gross profit margin decreased 20 basis points in the quarter ended December 31, 2018 as compared to 2017.
- Selling, general and administrative expense as a percentage of revenue in the quarter ended December 31, 2018 was 23.0%, which decreased 100 basis points from the quarter ended December 31, 2017.
- Net income for the quarter ended December 31, 2018 was
$16.4 million , or$0.65 per share, as compared to$6.1 million , or$0.24 per share, for the quarter ended December 31, 2017. Adjusted earnings per share for the quarter ended December 31, 2017 was$0.45 per share1. - Operating cash flows in the quarter ended December 31, 2018 were
$23.0 million compared to$23.7 million in the quarter ended December 31, 2017. - We repurchased approximately 236 thousand shares of common stock on the open market at a total cost of approximately
$7.1 million during the quarter ended December 31, 2018.
Year End 2018 Financial Highlights
- Revenue for the year ended December 31, 2018 of
$1.42 billion increased 4.0% on a billing day basis from$1.36 billion for the year ended December 31, 2017. - Net income for the year ended December 31, 2018 was
$58.0 million , or$2.30 per share, which represent increases of 74.2% and 76.9%, respectively, compared to 2017 and increases of 44.8% and 46.5%, respectively, as adjusted1, for 2017. - Operating cash flows for the year ended
December 31, 2018 were$87.7 million , which was an increase from$29.3 million for the year endedDecember 31, 2017 .
End Note:
1 A non-GAAP financial measure, refer to reconciliation in the Adjusted Financial Performance Measures section.
Management Commentary
Guidance and Outlook
Looking forward to the first quarter of 2019, there will be 63 billing days, as compared to 62 billing days in the fourth quarter of 2018, and 64 billing days in the first quarter of 2018. Current estimates for the first quarter of 2019 are:
- Revenue of
$351 million to $356 million - Earnings per share of
$0.40 to $0.42 - Gross profit margin of 28.2% to 28.4%
- Flex gross profit margin of 25.7% to 25.9%
- SG&A expense as a percent of revenue of 23.4% to 23.6%
- Operating margin of 4.1% to 4.3%
- Effective tax rate of 25.5%
Conference Call and Annual Meeting
On Wednesday, February 6, 2019,
The replay of the call will be available from
Our 2019 Annual Meeting of
About
Cautionary Note Regarding Forward-Looking Statements
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, growth in temporary staffing and the general economy; competitive factors, risks due to shifts in the market demand; a reduction in the supply of candidates 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 occurrence of unanticipated expenses; 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 and our ability to adapt to such changes; continued performance of and improvements to our enterprise information systems, and the risk factors listed from time to time in the Firm’s reports filed with the
Kforce Inc. Summary of Operations (In Thousands, Except Per Share Amounts) (Unaudited) |
||||||||||||
Three Months Ended | ||||||||||||
Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 | ||||||||||
Revenue by segment: | ||||||||||||
Technology | $ | 252,750 | $ | 251,079 | $ | 227,816 | ||||||
Finance and accounting | 77,627 | 75,505 | 85,349 | |||||||||
Government solutions | 27,607 | 28,868 | 29,421 | |||||||||
Total Revenue | 357,984 | 355,452 | 342,586 | |||||||||
Direct costs | 251,428 | 251,071 | 239,959 | |||||||||
Gross profit | 106,556 | 104,381 | 102,627 | |||||||||
GP % | 29.8 | % | 29.4 | % | 30.0 | % | ||||||
Flex GP % (1) | 27.0 | % | 26.7 | % | 27.3 | % | ||||||
Selling, general and administrative expenses | 82,315 | 79,771 | 82,067 | |||||||||
Depreciation and amortization | 1,939 | 1,947 | 2,042 | |||||||||
Income from operations | 22,302 | 22,663 | 18,518 | |||||||||
Other expense, net | 859 | 1,044 | 629 | |||||||||
Income before income taxes | 21,443 | 21,619 | 17,889 | |||||||||
Income tax expense | 5,087 | 5,442 | 11,749 | |||||||||
Net income | $ | 16,356 | $ | 16,177 | $ | 6,140 | ||||||
Earnings per share - diluted | $ | 0.65 | $ | 0.64 | $ | 0.24 | ||||||
Weighted average shares outstanding - diluted | 25,257 | 25,366 | 25,462 | |||||||||
Adjusted EBITDA | $ | 26,588 | $ | 26,733 | $ | 23,183 | ||||||
Billing days | 62 | 63 | 61 | |||||||||
(1) Beginning in Q1 2018, Flex GP% excludes GS Product; prior quarters have been adjusted to align with this presentation.
Summary of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
Year Ended | ||||||||
Dec. 31, 2018 | Dec. 31, 2017 | |||||||
Revenue by segment: | ||||||||
Technology | $ | 990,089 | $ | 907,511 | ||||
Finance and accounting | 313,848 | 346,135 | ||||||
Government solutions | 114,416 | 104,294 | ||||||
Total Revenue | 1,418,353 | 1,357,940 | ||||||
Direct costs | 999,745 | 949,884 | ||||||
Gross profit | 418,608 | 408,056 | ||||||
GP % | 29.5 | % | 30.0 | % | ||||
Flex GP % (1) | 26.8 | % | 27.2 | % | ||||
Selling, general and administrative expenses | 329,126 | 331,172 | ||||||
Depreciation and amortization | 7,831 | 8,255 | ||||||
Income from operations | 81,651 | 68,629 | ||||||
Other expense, net | 4,498 | 4,535 | ||||||
Income before income taxes | 77,153 | 64,094 | ||||||
Income tax expense | 19,173 | 30,809 | ||||||
Net income | $ | 57,980 | $ | 33,285 | ||||
Earnings per share - diluted | $ | 2.30 | $ | 1.30 | ||||
Weighted average shares outstanding - diluted | 25,251 | 25,586 | ||||||
Adjusted EBITDA | $ | 98,670 | $ | 85,241 | ||||
Billing days | 253 | 252 |
(1) Beginning in Q1 2018, Flex GP% excludes GS Product; prior quarters have been adjusted to align with this presentation.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
December 31, | ||||||||
2018 | 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 112 | $ | 379 | ||||
Trade receivables, net of allowances | 234,895 | 225,865 | ||||||
Income tax refund receivable | 319 | 7,116 | ||||||
Prepaid expenses and other current assets | 13,136 | 12,085 | ||||||
Total current assets | 248,462 | 245,445 | ||||||
Fixed assets, net | 35,818 | 39,680 | ||||||
Other assets, net | 36,957 | 38,598 | ||||||
Deferred tax asset, net | 9,751 | 11,316 | ||||||
Intangible assets, net | 2,952 | 3,297 | ||||||
Goodwill | 45,968 | 45,968 | ||||||
Total assets | $ | 379,908 | $ | 384,304 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and other accrued liabilities | $ | 38,606 | $ | 34,873 | ||||
Accrued payroll costs | 45,262 | 46,886 | ||||||
Other current liabilities | 1,632 | 1,960 | ||||||
Income taxes payable | 4,858 | — | ||||||
Total current liabilities | 90,358 | 83,719 | ||||||
Long-term debt - credit facility | 71,800 | 116,523 | ||||||
Long-term debt - other | 1,359 | 2,597 | ||||||
Other long-term liabilities | 48,060 | 47,188 | ||||||
Total liabilities | 211,577 | 250,027 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock | — | — | ||||||
Common stock | 719 | 715 | ||||||
Additional paid-in capital | 447,337 | 437,394 | ||||||
Accumulated other comprehensive income | 1,296 | 100 | ||||||
Retained earnings | 237,308 | 195,143 | ||||||
Treasury stock, at cost | (518,329 | ) | (499,075 | ) | ||||
Total stockholders’ equity | 168,331 | 134,277 | ||||||
Total liabilities and stockholders’ equity | $ | 379,908 | $ | 384,304 | ||||
Key Statistics
(Unaudited)
Q4 2018 | Q3 2018 | Q4 2017 | ||||||||||
Total Firm | ||||||||||||
Total Revenue | $ | 357,984 | $ | 355,452 | $ | 342,586 | ||||||
GP % | 29.8 | % | 29.4 | % | 30.0 | % | ||||||
Flex revenue (000’s) (1) | $ | 341,604 | $ | 339,937 | $ | 328,526 | ||||||
Flex GP % (1) | 27.0 | % | 26.7 | % | 27.3 | % | ||||||
Direct Hire revenue (000’s) | $ | 11,275 | $ | 10,482 | $ | 10,170 | ||||||
Placements | 695 | 721 | 816 | |||||||||
Average fee | $ | 16,227 | $ | 14,525 | $ | 12,469 | ||||||
Product revenue | $ | 5,105 | $ | 5,033 | $ | 3,890 | ||||||
Billing days | 62 | 63 | 61 | |||||||||
Technology | ||||||||||||
Total Revenue (000's) | $ | 252,750 | $ | 251,079 | $ | 227,816 | ||||||
GP % | 28.0 | % | 27.7 | % | 28.5 | % | ||||||
Flex revenue (000’s) | $ | 248,151 | $ | 247,154 | $ | 223,897 | ||||||
Hours (000’s) | 3,354 | 3,319 | 3,101 | |||||||||
Flex GP % | 26.6 | % | 26.5 | % | 27.2 | % | ||||||
Direct Hire revenue (000’s) | $ | 4,599 | $ | 3,925 | $ | 3,919 | ||||||
Placements | 245 | 234 | 225 | |||||||||
Average fee | $ | 18,744 | $ | 16,742 | $ | 17,423 | ||||||
Finance and Accounting | ||||||||||||
Total Revenue (000's) | $ | 77,627 | $ | 75,505 | $ | 85,349 | ||||||
GP % | 34.8 | % | 35.1 | % | 33.8 | % | ||||||
Flex revenue (000’s) | $ | 70,951 | $ | 68,948 | $ | 79,098 | ||||||
Hours (000’s) | 2,026 | 1,942 | 2,382 | |||||||||
Flex GP % | 28.7 | % | 29.0 | % | 28.5 | % | ||||||
Direct Hire revenue (000’s) | $ | 6,676 | $ | 6,557 | $ | 6,251 | ||||||
Placements | 450 | 487 | 591 | |||||||||
Average fee | $ | 14,854 | $ | 13,458 | $ | 10,583 | ||||||
Government Solutions | ||||||||||||
Total Revenue (000's) | $ | 27,607 | $ | 28,868 | $ | 29,421 | ||||||
GP% | 32.0 | % | 28.9 | % | 30.3 | % | ||||||
Flex revenue (000’s) (1) | $ | 22,502 | $ | 23,835 | $ | 25,531 | ||||||
Flex GP % (1) | 25.2 | % | 21.6 | % | 24.7 | % | ||||||
Product revenue | $ | 5,105 | $ | 5,033 | $ | 3,890 | ||||||
Product GP% | 62.2 | % | 63.5 | % | 67.2 | % |
(1) Beginning in Q1 2018, Flex Revenue and GP% excludes GS Product; prior quarters have been adjusted to align with this presentation.
Revenue Growth Rates
(Unaudited)
Year-Over-Year Revenue Growth Rates | |||||||||||||||
(Per Billing Day) | |||||||||||||||
Q4 2018 | Q3 2018 | Q2 2018 | Q1 2018 | Q4 2017 | |||||||||||
Billing days | 62 | 63 | 64 | 64 | 61 | ||||||||||
Tech Flex | 9.0 | % | 10.3 | % | 9.8 | % | 6.7 | % | 5.4 | % | |||||
FA Flex | (11.7 | )% | (11.8 | )% | (9.4 | )% | (7.9 | )% | 0.3 | % | |||||
Total Tech and FA Flex | 3.6 | % | 4.5 | % | 4.7 | % | 2.8 | % | 4.0 | % | |||||
GS Flex (1) | (13.3 | )% | (0.6 | )% | 18.2 | % | 24.5 | % | 27.9 | % | |||||
Total Flex (1) | 2.3 | % | 4.2 | % | 5.6 | % | 4.2 | % | 5.5 | % | |||||
Total Firm | 2.8 | % | 4.2 | % | 5.4 | % | 3.7 | % | 5.1 | % |
(1) Beginning in Q1 2018, Flex revenue excludes GS Product; prior quarters have been adjusted to align with this presentation.
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 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
(In Thousands) | Year Ended | |||||||
Dec. 31, 2018 | Dec. 31, 2017 | |||||||
Net income | $ | 57,980 | $ | 33,285 | ||||
Non-cash provisions and other | 22,643 | 29,134 | ||||||
Changes in operating assets/liabilities | 7,100 | (33,080 | ) | |||||
Net cash provided by operating activities | 87,723 | 29,339 | ||||||
Capital expenditures | (5,170 | ) | (5,846 | ) | ||||
Free cash flow | 82,553 | 23,493 | ||||||
Proceeds from sale of Global's assets | 1,000 | 1,000 | ||||||
Change in debt | (44,723 | ) | 4,976 | |||||
Repurchases of common stock | (22,187 | ) | (14,622 | ) | ||||
Cash dividends | (14,871 | ) | (12,144 | ) | ||||
Other | (2,039 | ) | (3,806 | ) | ||||
Change in cash and cash equivalents | $ | (267 | ) | $ | (1,103 | ) |
Adjusted EBITDA
“Adjusted EBITDA”, a non-GAAP financial measure, is defined by
(In Thousands) | Three Months Ended | |||||||||||
Dec. 31, 2018 | Sept. 30, 2018 | Dec. 31, 2017 | ||||||||||
Net income | $ | 16,356 | $ | 16,177 | $ | 6,140 | ||||||
Depreciation and amortization | 2,019 | 2,074 | 2,135 | |||||||||
Stock-based compensation expense | 2,239 | 2,006 | 1,933 | |||||||||
Interest expense, net | 887 | 1,034 | 1,226 | |||||||||
Income tax expense | 5,087 | 5,442 | 11,749 | |||||||||
Adjusted EBITDA | $ | 26,588 | $ | 26,733 | $ | 23,183 | ||||||
(In Thousands) | Year Ended | |||||||
Dec. 31, 2018 | Dec. 31, 2017 | |||||||
Net income | $ | 57,980 | $ | 33,285 | ||||
Depreciation and amortization | 8,265 | 8,508 | ||||||
Stock-based compensation expense | 8,797 | 7,600 | ||||||
Interest expense, net | 4,455 | 5,039 | ||||||
Income tax expense | 19,173 | 30,809 | ||||||
Adjusted EBITDA | $ | 98,670 | $ | 85,241 | ||||
Adjusted Financial Performance Measures
The "Adjusted Financial Performance Measures" present non-GAAP financial information and should not be considered a measure of financial performance under generally accepted accounting principles. These measures are presented as an alternative method for assessing the Company’s operating results by adjusting for the impact of certain non-recurring, infrequent or unusual items in a manner that is focused on the performance of our underlying operations. Each of these measures are intended to provide greater consistency, comparability and clarity of our results. Management uses this non-GAAP financial information to assess the Company's core operating results and consequently, management believes it is similarly useful information to investors. During the three months and year ended
(In Thousands, Except Per Share Amounts) |
Three Months Ended December 31, |
|||||||||||||||
2017 | 2018 | |||||||||||||||
Reported (GAAP) |
Adjustments (1) | Adjusted (Non-GAAP) |
Reported (GAAP) (2) |
|||||||||||||
Reconciliation of Tax Impact and Profitability: | ||||||||||||||||
Income before income taxes | $ | 17,889 | $ | — | $ | 17,889 | $ | 21,443 | ||||||||
Income tax expense | $ | 11,749 | $ | (5,360 | ) | $ | 6,389 | $ | 5,087 | |||||||
Effective tax rate | 65.7 | % | (30.0 | )% | 35.7 | % | 23.7 | % | ||||||||
Net income | $ | 6,140 | $ | 5,360 | $ | 11,500 | $ | 16,356 | ||||||||
Earnings per share - diluted | $ | 0.24 | $ | 0.21 | $ | 0.45 | $ | 0.65 |
(1) The
(2) For the three months ended
(In Thousands, Except Per Share Amounts) |
Year Ended December 31, | |||||||||||||||
2017 | 2018 | |||||||||||||||
Reported (GAAP) |
Adjustments | Adjusted (Non-GAAP) |
Reported (GAAP) (7) |
|||||||||||||
Reconciliation of Revenue and Gross Profit: | ||||||||||||||||
Revenue (3) | $ | 1,357,940 | $ | 1,000 | $ | 1,358,940 | $ | 1,418,353 | ||||||||
Gross profit (3) | $ | 408,056 | $ | 713 | $ | 408,769 | $ | 418,608 | ||||||||
GP % | 30.0 | % | 0.1 | % | 30.1 | % | 29.5 | % | ||||||||
Flex GP % (4) | 27.2 | % | — | % | 27.2 | % | 26.8 | % | ||||||||
Reconciliation of SG&A and Operating Margin: | ||||||||||||||||
Selling, general & administrative expenses (5) | $ | 331,172 | $ | 1,156 | $ | 332,328 | $ | 329,126 | ||||||||
SG&A as a percentage of revenue | 24.4 | % | 0.1 | % | 24.5 | % | 23.2 | % | ||||||||
Income from operations | $ | 68,629 | $ | (443 | ) | $ | 68,186 | $ | 81,651 | |||||||
Operating margin | 5.1 | % | (0.1 | )% | 5.0 | % | 5.8 | % | ||||||||
Reconciliation of Tax Impact and Profitability: | ||||||||||||||||
Income before income taxes | $ | 64,094 | $ | (443 | ) | $ | 63,651 | $ | 77,153 | |||||||
Income tax expense (6) | $ | 30,809 | $ | (7,200 | ) | $ | 23,609 | $ | 19,173 | |||||||
Effective tax rate | 48.1 | % | (11.0 | )% | 37.1 | % | 24.9 | % | ||||||||
Net income | $ | 33,285 | $ | 6,757 | $ | 40,042 | $ | 57,980 | ||||||||
Earnings per share - diluted | $ | 1.30 | $ | 0.27 | $ | 1.57 | $ | 2.30 |
(3) For the year ended
(4) Beginning in Q1 2018, Flex GP% excludes GS Product; prior quarters have been adjusted to align with this presentation.
(5) For the year ended
(6) For the year ended
(7) For the year ended
Source: Kforce, Inc.