Press Releases
Kforce Reports Second Quarter 2019 Revenue From Continuing Operations of $338.9 Million; EPS From Continuing Operations of $0.66 Per Share; Repurchased 1.0 Million Shares of Stock for $36.7 Million During the Quarter
Financial Highlights
- During the three months ended
June 30, 2019 ,Kforce completed the sale of our Government Solutions ("GS") segment, consisting of our KGS and TraumaFX® businesses. The results of the GS segment has been reported as a discontinued operation for all periods presented and the assets and liabilities have been reflected separately as held for sale atDecember 31, 2018 . - Revenue from continuing operations for the quarter ended June 30, 2019 was
$338.9 million compared to$329.5 million for the quarter ended June 30, 2018, an increase of 2.8%. - Year-over-year growth for Tech Flex and Direct Hire revenue was 6.2% and 7.7%, respectively, while FA Flex declined 9.4%.
- Gross profit margin decreased 60 basis points in the quarter ended June 30, 2019 from the comparable period in 2018.
- SG&A as a percentage of revenue for the quarter ended June 30, 2019 of 23.0% decreased 30 basis points from the comparable period in 2018.
- Operating margin for the quarter ended June 30, 2019 was 6.3%.
- Income from continuing operations for the quarter ended June 30, 2019 was
$16.1 million , or$0.66 per share, versus$15.2 million , or$0.60 per share, in the comparable period in 2018. - Operating cash flows during the quarter ended June 30, 2019 were
$10.5 million compared to$28.0 million for the quarter ended June 30, 2018. - We returned
$41.0 million of capital to our shareholders in the form of dividends of$4.3 million and stock repurchases of$36.7 million during the quarter ended June 30, 2019.
Management Commentary
Second quarter results for our largest business, Tech Flex, experienced growth of 6.2% year-over-year. Tech Flex continues to benefit from improving bill rates and longer assignment durations, which we believe is related to the acute labor shortage, especially with highly-skilled resources. The pace of digital transformation continues to be rapid, forcing organizations across all industries to increase their technology investments. We believe the secular drivers of technology are transcending traditional cyclical patterns as business models are transformed."
During the second quarter of 2019, we repurchased approximately 1.0 million shares on the open market at a total cost of approximately
Guidance and Outlook
Looking forward to the third quarter of 2019, there will be 64 billing days, as compared to 64 billing days in the second quarter of 2019 and 63 billing days in third quarter of 2018. Revenue per billing day from continuing operations in the second quarter of 2019 was
- Revenue of
$337 million to $341 million - Earnings per share of
$0.65 to $0.67 - Gross profit margin of 29.3% to 29.5%
- Flex gross profit margin of 26.8% to 27.0%
- SG&A expense as a percent of revenue of 22.5% to 22.7%
- Operating margin of 6.2% to 6.4%
- Effective tax rate of 24.5%
Conference Call
On Wednesday, July 31, 2019,
The replay of the call will be available from
About
(813) 552-2927
Cautionary Note Regarding Forward-Looking Statements
Certain of the above statements contained in this press release, including the return of significant capital to our shareholders for the remainder of 2019 and estimated financial performance for the third quarter, 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 new assignments or contracts, 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 | ||||||||||||
June 30, 2019 | Mar. 31, 2019 | June 30, 2018 | ||||||||||
Revenue by segment: | ||||||||||||
Technology | $ | 265,305 | $ | 255,643 | $ | 249,763 | ||||||
Finance and accounting | 73,556 | 71,095 | 79,772 | |||||||||
Total Revenue | 338,861 | 326,738 | 329,535 | |||||||||
Direct costs | 237,835 | 233,562 | 229,315 | |||||||||
Gross profit | 101,026 | 93,176 | 100,220 | |||||||||
GP % | 29.8% | 28.5% | 30.4% | |||||||||
Flex GP % | 26.9% | 25.8% | 27.7% | |||||||||
Selling, general and administrative expenses | 78,017 | 79,813 | 76,901 | |||||||||
Depreciation and amortization | 1,542 | 1,650 | 1,692 | |||||||||
Income from operations | 21,467 | 11,713 | 21,627 | |||||||||
Other expense, net | 403 | 923 | 1,258 | |||||||||
Income from continuing operations, before income taxes | 21,064 | 10,790 | 20,369 | |||||||||
Income tax expense | 4,988 | 2,816 | 5,196 | |||||||||
Income from continuing operations | 16,076 | 7,974 | 15,173 | |||||||||
Income from discontinued operations, net of tax | 58,783 | 18,881 | 1,099 | |||||||||
Net income | $ | 74,859 | $ | 26,855 | $ | 16,272 | ||||||
Earnings per share – diluted: | ||||||||||||
Continuing operations | $ | 0.66 | $ | 0.32 | $ | 0.60 | ||||||
Discontinued operations | 2.40 | 0.75 | 0.05 | |||||||||
Earnings per share – diluted | $ | 3.06 | $ | 1.07 | $ | 0.65 | ||||||
Weighted average shares outstanding - diluted | 24,458 | 25,019 | 25,178 | |||||||||
Adjusted EBITDA | $ | 25,445 | $ | 15,897 | $ | 25,515 | ||||||
Billing days | 64 | 63 | 64 | |||||||||
Kforce Inc. | ||||||
Consolidated Balance Sheets | ||||||
(In Thousands) | ||||||
(Unaudited) | ||||||
June 30, 2019 | December 31, 2018 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 65,047 | $ | 112 | ||
Trade receivables, net of allowances | 225,810 | 210,559 | ||||
Income tax refund receivable | 218 | 319 | ||||
Prepaid expenses and other current assets | 8,692 | 7,699 | ||||
Current assets held for sale | — | 29,773 | ||||
Total current assets | 299,767 | 248,462 | ||||
Fixed assets, net | 29,095 | 34,322 | ||||
Other assets, net | 66,045 | 36,664 | ||||
Deferred tax assets, net | 6,238 | 7,147 | ||||
Goodwill | 25,040 | 25,040 | ||||
Noncurrent assets held for sale | — | 28,273 | ||||
Total assets | $ | 426,185 | $ | 379,908 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable and other accrued liabilities | $ | 35,855 | $ | 32,542 | ||
Accrued payroll costs | 41,008 | 39,384 | ||||
Current portion of operating lease liabilities | 5,931 | — | ||||
Other current liabilities | 1,405 | 1,616 | ||||
Income taxes payable | 5,611 | 4,553 | ||||
Current liabilities held for sale | — | 12,263 | ||||
Total current liabilities | 89,810 | 90,358 | ||||
Long-term debt – credit facility | 65,000 | 71,800 | ||||
Long-term debt – other | 909 | 1,359 | ||||
Other long-term liabilities | 55,610 | 43,509 | ||||
Noncurrent liabilities held for sale | — | 4,551 | ||||
Total liabilities | 211,329 | 211,577 | ||||
Commitments and contingencies | ||||||
Stockholders’ equity: | ||||||
Preferred stock | — | — | ||||
Common stock | 719 | 719 | ||||
Additional paid-in capital | 454,071 | 447,337 | ||||
Accumulated other comprehensive income | 706 | 1,296 | ||||
Retained earnings | 329,760 | 237,308 | ||||
Treasury stock, at cost | (570,400) | (518,329) | ||||
Total stockholders’ equity | 214,856 | 168,331 | ||||
Total liabilities and stockholders’ equity | $ | 426,185 | $ | 379,908 | ||
Kforce Inc. | ||||||||||||
Key Statistics | ||||||||||||
(Unaudited) | ||||||||||||
Q2 2019 | Q1 2019 | Q2 2018 | ||||||||||
Total Firm | ||||||||||||
Total Revenue (000’s) | $ | 338,861 | $ | 326,738 | $ | 329,535 | ||||||
GP % | 29.8% | 28.5% | 30.4% | |||||||||
Flex revenue (000’s) | $ | 325,354 | $ | 314,981 | $ | 316,999 | ||||||
Hours (000's) | 5,216 | 5,107 | 5,370 | |||||||||
Flex GP % | 26.9% | 25.8% | 27.7% | |||||||||
Direct Hire revenue (000’s) | $ | 13,507 | $ | 11,757 | $ | 12,536 | ||||||
Placements | 874 | 770 | 847 | |||||||||
Average fee | $ | 15,463 | $ | 15,260 | $ | 14,802 | ||||||
Billing days | 64 | 63 | 64 | |||||||||
Technology | ||||||||||||
Total Revenue (000’s) | $ | 265,305 | $ | 255,643 | $ | 249,763 | ||||||
GP % | 28.0% | 26.9% | 28.8% | |||||||||
Flex revenue (000’s) | $ | 259,707 | $ | 250,216 | $ | 244,509 | ||||||
Hours (000’s) | 3,421 | 3,335 | 3,294 | |||||||||
Flex GP % | 26.4% | 25.3% | 27.2% | |||||||||
Direct Hire revenue (000’s) | $ | 5,598 | $ | 5,427 | $ | 5,254 | ||||||
Placements | 308 | 300 | 282 | |||||||||
Average fee | $ | 18,144 | $ | 18,106 | $ | 18,635 | ||||||
Finance and Accounting | ||||||||||||
Total Revenue (000’s) | $ | 73,556 | $ | 71,095 | $ | 79,772 | ||||||
GP % | 36.5% | 34.3% | 35.6% | |||||||||
Flex revenue (000’s) | $ | 65,647 | $ | 64,765 | $ | 72,490 | ||||||
Hours (000’s) | 1,795 | 1,772 | 2,076 | |||||||||
Flex GP % | 28.9% | 27.8% | 29.1% | |||||||||
Direct Hire revenue (000’s) | $ | 7,909 | $ | 6,330 | $ | 7,282 | ||||||
Placements | 566 | 470 | 565 | |||||||||
Average fee | $ | 13,998 | $ | 13,447 | $ | 12,889 | ||||||
Kforce Inc. | |||||||||||||||||||
Revenue Growth Rates | |||||||||||||||||||
(Per Billing Day) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Year-Over-Year Revenue Growth Rates | |||||||||||||||||||
(Per Billing Day) | |||||||||||||||||||
Q2 2019 | Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | |||||||||||||||
Billing Days | 64 | 63 | 62 | 63 | 64 | ||||||||||||||
Tech Flex | 6.2% | 9.8% | 9.0% | 10.3% | 9.8% | ||||||||||||||
FA Flex | (9.4)% | (11.7)% | (11.7)% | (11.8)% | (9.4)% | ||||||||||||||
Total Flex | 2.6% | 4.6% | 3.6% | 4.5% | 4.7% | ||||||||||||||
Non-GAAP Financial Measures
(In Thousands, Except Per Share Amounts)
(Unaudited)
In addition to our financial results presented in accordance GAAP,
Free Cash Flow
“Free Cash Flow”, a non-GAAP financial measure, is defined by
Six Months Ended June 30, | ||||||
2019 | 2018 | |||||
Net income | $ | 101,714 | $ | 25,447 | ||
Non-cash provisions and other | (63,585) | 10,545 | ||||
Changes in operating assets/liabilities | (15,799) | 2,267 | ||||
Net cash provided by operating activities | 22,330 | 38,259 | ||||
Capital expenditures | (4,184) | (3,116) | ||||
Free cash flow | 18,146 | 35,143 | ||||
Change in debt | (6,800) | (15,923) | ||||
Repurchases of common stock | (51,546) | (12,129) | ||||
Cash dividends | (8,684) | (5,943) | ||||
Net proceeds from the sale of assets held for sale | 122,696 | — | ||||
Other | (8,877) | (1,054) | ||||
Change in cash and cash equivalents | $ | 64,935 | $ | 94 | ||
Adjusted EBITDA
“Adjusted EBITDA”, a non-GAAP financial measure, is defined by
In addition, although we excluded amortization of stock-based compensation expense because it is a non-cash expense, we expect to continue to incur stock-based compensation 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 stockholder 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 | |||||||||
June 30, 2019 | Mar. 31, 2019 | June 30, 2018 | |||||||
Net income | $ | 74,859 | $ | 26,855 | $ | 16,272 | |||
Income from discontinued operations, net of tax | 58,783 | 18,881 | 1,099 | ||||||
Income from continuing operations | 16,076 | 7,974 | 15,173 | ||||||
Depreciation and amortization | 1,542 | 1,650 | 1,692 | ||||||
Stock-based compensation expense | 2,429 | 2,534 | 2,215 | ||||||
Interest expense, net | 410 | 923 | 1,239 | ||||||
Income tax expense | 4,988 | 2,816 | 5,196 | ||||||
Adjusted EBITDA from continuing operations | $ | 25,445 | $ | 15,897 | $ | 25,515 | |||
Source: Kforce, Inc.