Press Releases
Kforce Reports Third Quarter 2018 Revenues of $355.5 Million, EPS of $0.64 per Share; Tech Flex Improves to 10.3% Year-Over-Year Growth; Board of Directors Approves Increase in Share Buy-Back Authorization to $100.0 Million
Financial Highlights
- Revenues for the quarter ended September 30, 2018 were
$355.5 million compared to$341.1 million , an increase of 4.2%, and compared to$342.1 million 1 adjusted revenues for the quarter ended September 30, 2017. - Net income for the quarter ended September 30, 2018 was
$16.2 million , or$0.64 per share, as compared to$10.1 million , or$0.40 per share, and adjusted net income of$11.5 million , or$0.45 per share2, for the quarter ended September 30, 2017. This is a year-over-year increase of 60.0%, or 42.2% as adjusted2. - Quarterly year-over-year growth in Flex revenue for Tech was 10.3%, or 9.9% as adjusted1, while FA and GS experienced a decrease of 11.8%, or 12.2% as adjusted1, and 0.6%, respectively.
Management Commentary
Mr. Dunkel continued, "Although KGS revenue was lower than anticipated in the third quarter, our management team has done a nice job building a strong pipeline of new business pursuits. During the third quarter and beginning of the fourth quarter, KGS was awarded business having an aggregate estimated contract value of
End Notes:
1 A non-GAAP financial measure, see Reconciliation of Revenue and Gross Profit in the Adjusted Financial Performance Measures section.
2 A non-GAAP financial measure, see Reconciliation of Tax Impact and Profitability in the Adjusted Financial Performance Measures section.
Guidance and Outlook
Looking forward to the fourth quarter of 2018, there will be 62 billing days, as compared to 63 billing days in the third quarter of 2018 and 61 billing days in fourth quarter of 2017. The revenue per billing day in the third quarter of 2018 was
- Revenue of
$349 million to $354 million - Earnings per share of
$0.56 to $0.58 - Gross profit margin of 28.8% to 29.0%
- Flex gross profit margin of 26.4% to 26.6%
- SG&A expense as a percent of revenue of 22.6% to 22.8%
- Operating margin of 5.6% to 5.8%
- Effective tax rate of 25.5%
Conference Call
On Wednesday, October 31, 2018,
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 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
Summary of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended | ||||||||||||
Sept. 30, 2018 | June 30, 2018 | Sept. 30, 2017 | ||||||||||
Revenue by segment: | ||||||||||||
Technology | $ | 251,079 | $ | 249,763 | $ | 229,281 | ||||||
Finance and accounting | 75,505 | 79,772 | 85,225 | |||||||||
Government solutions | 28,868 | 29,089 | 26,547 | |||||||||
Total Revenue | 355,452 | 358,624 | 341,053 | |||||||||
Direct costs | 251,071 | 251,141 | 236,678 | |||||||||
Gross profit | 104,381 | 107,483 | 104,375 | |||||||||
GP % | 29.4 | % | 30.0 | % | 30.6 | % | ||||||
Flex GP % (1) | 26.7 | % | 27.1 | % | 27.8 | % | ||||||
Selling, general and administrative expenses | 79,771 | 82,448 | 81,921 | |||||||||
Depreciation and amortization | 1,947 | 1,937 | 2,110 | |||||||||
Income from operations | 22,663 | 23,098 | 20,344 | |||||||||
Other expense, net | 1,044 | 1,256 | 1,364 | |||||||||
Income before income taxes | 21,619 | 21,842 | 18,980 | |||||||||
Income tax expense | 5,442 | 5,570 | 8,881 | |||||||||
Net income | $ | 16,177 | $ | 16,272 | $ | 10,099 | ||||||
Earnings per share - diluted | $ | 0.64 | $ | 0.65 | $ | 0.40 | ||||||
Weighted average shares outstanding - diluted | 25,366 | 25,178 | 25,535 | |||||||||
Adjusted EBITDA | $ | 26,733 | $ | 27,428 | $ | 24,238 | ||||||
Billing days | 63 | 64 | 63 |
(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)
September 30, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 466 | $ | 379 | |||
Trade receivables, net of allowances | 237,613 | 225,865 | |||||
Income tax refund receivable | 305 | 7,116 | |||||
Prepaid expenses and other current assets | 13,620 | 12,085 | |||||
Total current assets | 252,004 | 245,445 | |||||
Fixed assets, net | 37,011 | 39,680 | |||||
Other assets, net | 41,565 | 38,598 | |||||
Deferred tax assets, net | 12,066 | 11,316 | |||||
Intangible assets, net | 3,038 | 3,297 | |||||
Goodwill | 45,968 | 45,968 | |||||
Total assets | $ | 391,652 | $ | 384,304 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and other accrued liabilities | $ | 37,766 | $ | 34,873 | |||
Accrued payroll costs | 48,863 | 46,886 | |||||
Other current liabilities | 1,766 | 1,960 | |||||
Income taxes payable | 6,445 | — | |||||
Total current liabilities | 94,840 | 83,719 | |||||
Long-term debt – credit facility | 79,300 | 116,523 | |||||
Long-term debt – other | 1,752 | 2,597 | |||||
Other long-term liabilities | 51,813 | 47,188 | |||||
Total liabilities | 227,705 | 250,027 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock | — | — | |||||
Common stock | 716 | 715 | |||||
Additional paid-in capital | 444,762 | 437,394 | |||||
Accumulated other comprehensive income | 907 | 100 | |||||
Retained earnings | 225,658 | 195,143 | |||||
Treasury stock, at cost | (508,096 | ) | (499,075 | ) | |||
Total stockholders’ equity | 163,947 | 134,277 | |||||
Total liabilities and stockholders’ equity | $ | 391,652 | $ | 384,304 |
Key Statistics
(Unaudited)
Q3 2018 | Q2 2018 | Q3 2017 | ||||||||||
Total Firm | ||||||||||||
Total Revenue (000’s) | $ | 355,452 | $ | 358,624 | $ | 341,053 | ||||||
GP % | 29.4 | % | 30.0 | % | 30.6 | % | ||||||
Flex revenue (000’s) (1) | $ | 339,937 | $ | 342,105 | $ | 326,335 | ||||||
Flex GP % (1) | 26.7 | % | 27.1 | % | 27.8 | % | ||||||
Direct Hire revenue (000’s) | $ | 10,482 | $ | 12,536 | $ | 12,149 | ||||||
Placements | 721 | 847 | 881 | |||||||||
Average fee | $ | 14,525 | $ | 14,802 | $ | 13,784 | ||||||
Product revenue (000's) | $ | 5,033 | $ | 3,983 | $ | 2,569 | ||||||
Billing days | 63 | 64 | 63 | |||||||||
Technology | ||||||||||||
Flex revenue (000’s) | $ | 247,154 | $ | 244,509 | $ | 224,148 | ||||||
Hours (000’s) | 3,319 | 3,294 | 3,299 | |||||||||
Flex GP % | 26.5 | % | 27.2 | % | 27.0 | % | ||||||
Direct Hire revenue (000’s) | $ | 3,925 | $ | 5,254 | $ | 5,133 | ||||||
Placements | 234 | 282 | 303 | |||||||||
Average fee | $ | 16,742 | $ | 18,635 | $ | 16,917 | ||||||
Finance and Accounting | ||||||||||||
Flex revenue (000’s) | $ | 68,948 | $ | 72,490 | $ | 78,209 | ||||||
Hours (000’s) | 1,942 | 2,076 | 2,347 | |||||||||
Flex GP % | 29.0 | % | 29.1 | % | 29.0 | % | ||||||
Direct Hire revenue (000’s) | $ | 6,557 | $ | 7,282 | $ | 7,016 | ||||||
Placements | 487 | 565 | 578 | |||||||||
Average fee | $ | 13,458 | $ | 12,889 | $ | 12,139 | ||||||
Government Solutions | ||||||||||||
Total Revenue (000's) | $ | 28,868 | $ | 29,089 | $ | 26,547 | ||||||
GP % | 28.9 | % | 25.0 | % | 34.3 | % | ||||||
Flex revenue (000’s) (1) | $ | 23,835 | $ | 25,106 | $ | 23,978 | ||||||
Flex GP% (1) | 21.6 | % | 19.8 | % | 31.4 | % | ||||||
Product revenue (000's) | $ | 5,033 | $ | 3,983 | $ | 2,569 | ||||||
Product GP % | 63.5 | % | 57.2 | % | 61.5 | % |
(1) Beginning in Q1 2018, Flex revenue and Flex GP% exclude 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) | ||||||||||||||||||
Q3 2018 | Q2 2018 | Q1 2018 | Q4 2017 | Q3 2017 | ||||||||||||||
Billing days | 63 | 64 | 64 | 61 | 63 | |||||||||||||
Tech Flex | 10.3 | % | 9.8 | % | 6.7 | % | 5.4 | % | 3.3 | % | ||||||||
FA Flex | (11.8 | ) | % | (9.4 | ) | % | (7.9 | ) | % | 0.3 | % | 4.1 | % | |||||
GS Flex (1) | (0.6 | ) | % | 18.2 | % | 24.5 | % | 27.9 | % | 12.7 | % | |||||||
Total Flex (1) | 4.2 | % | 5.6 | % | 4.2 | % | 5.5 | % | 4.2 | % | ||||||||
Total Firm | 4.2 | % | 5.4 | % | 3.7 | % | 5.1 | % | 3.0 | % |
(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
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Net income | $ | 41,624 | $ | 27,145 | |||
Non-cash provisions and other | 15,321 | 15,542 | |||||
Changes in operating assets/liabilities | 7,730 | (37,038 | ) | ||||
Net cash provided by operating activities | 64,675 | 5,649 | |||||
Capital expenditures | (4,005 | ) | (5,424 | ) | |||
Free cash flow | 60,670 | 225 | |||||
Proceeds from the sale of Global's assets | 1,000 | 1,000 | |||||
Change in debt | (37,223 | ) | 14,553 | ||||
Repurchases of common stock | (12,465 | ) | (4,226 | ) | |||
Cash dividends | (10,404 | ) | (9,125 | ) | |||
Other | (1,491 | ) | (3,206 | ) | |||
Change in cash and cash equivalents | $ | 87 | $ | (779 | ) |
Adjusted EBITDA
“Adjusted EBITDA”, a non-GAAP financial measure, is defined by
Three Months Ended, | |||||||||
Sept. 30, 2018 | June 30, 2018 | Sept. 30, 2017 | |||||||
Net income | $ | 16,177 | $ | 16,272 | $ | 10,099 | |||
Depreciation and amortization | 2,074 | 2,057 | 2,165 | ||||||
Stock-based compensation expense | 2,006 | 2,292 | 1,798 | ||||||
Interest expense, net | 1,034 | 1,237 | 1,295 | ||||||
Income tax expense | 5,442 | 5,570 | 8,881 | ||||||
Adjusted EBITDA | $ | 26,733 | $ | 27,428 | $ | 24,238 |
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 and nine months ended
Three Months Ended September 30, 2017 | |||||||||||||||
Reported | Adjustments (1) | Adjusted | |||||||||||||
(GAAP) | (Non-GAAP) | ||||||||||||||
Reconciliation of Revenue and Gross Profit: | |||||||||||||||
Revenue (2) | $ | 341,053 | $ | 1,000 | $ | 342,053 | |||||||||
Gross profit | $ | 104,375 | $ | 713 | $ | 105,088 | |||||||||
GP % | 30.6 % | 0.1 % | 30.7 % | ||||||||||||
Flex GP % (3) (4) | 27.8 % | 0.2 % | 28.0 % | ||||||||||||
Reconciliation of SG&A and Operating Margin: | |||||||||||||||
Selling, general & administrative expenses (5) | $ | 81,921 | $ | 1,156 | $ | 83,077 | |||||||||
SG&A as a percentage of revenue | 24.0 % | 0.3 % | 24.3 % | ||||||||||||
Income from operations | $ | 20,344 | $ | (443) | $ | 19,901 | |||||||||
Operating margin | 6.0 % | (0.2) % | 5.8 % | ||||||||||||
Reconciliation of Tax Impact and Profitability: | |||||||||||||||
Income before income taxes | $ | 18,980 | $ | (443) | $ | 18,537 | |||||||||
Income tax expense (6) | $ | 8,881 | $ | (1,840) | $ | 7,041 | |||||||||
Effective tax rate | 46.8 % | (8.8) % | 38.0 % | ||||||||||||
Net income | $ | 10,099 | $ | 1,397 | $ | 11,496 | |||||||||
Earnings per share - diluted | $ | 0.40 | $ | 0.05 | $ | 0.45 |
(1) Adjustments include the impact from Hurricanes Harvey and Irma, charges for role eliminations related to refining how we support and service our largest strategic clients and a gain on sale of the assets of
(2) The
(3) Tech Flex GP% was 27.0% and FA Flex GP% was 29.0%. Adjusted Tech Flex GP% was 27.1% and Adjusted FA Flex GP% was 29.2%.
(4) Beginning in Q1 2018, Flex revenue and Flex GP% exclude GS Product; prior quarters have been adjusted to align with this presentation.
(5) The
(6) Adjustments to income tax expense include (i) a
Source: Kforce, Inc.