EX-99.1 2 exhibit991-2018q210xqearni.htm EARNINGS RELEASE Exhibit


Exhibit 99.1
 
 
  
Kforce Inc.
1001 East Palm Ave.
Tampa, FL 33605
(NASDAQ: KFRC)
 
 
AT THE FIRM
Michael R. Blackman
Chief Corporate Development Officer
(813) 552-2927
KFORCE REPORTS SECOND QUARTER 2018 REVENUES OF $358.6 MILLION
NET INCOME OF $16.3 MILLION; EPS OF $0.65 PER SHARE, AN INCREASE OF 48% YEAR-OVER-YEAR
TECH FLEX ACCELERATES TO 9.8% YEAR-OVER-YEAR GROWTH
BOARD OF DIRECTORS APPROVES 50% INCREASE IN QUARTERLY DIVIDEND
TAMPA, FL, August 1, 2018 (GLOBE NEWSWIRE) — Kforce Inc. (Nasdaq: KFRC), a provider of professional staffing services and solutions, today announced results for its second quarter of 2018. Revenues for the quarter ended June 30, 2018 were $358.6 million compared to $340.3 million for the quarter ended June 30, 2017, an increase of 5.4%. Net income for the quarter ended June 30, 2018 was $16.3 million, or $0.65 per share, as compared to $11.1 million, or $0.44 per share, for the quarter ended June 30, 2017.
David L. Dunkel, Chairman and CEO, commented, “We are very pleased with our second quarter results as our year-over-year growth rate in our largest business, Tech Flex, meaningfully accelerated to 9.8% from 6.7% in the first quarter of 2018 while also improving our Tech Flex gross profit margin by 30 basis points year-over-year. We reached the first milestone in our continued objective of providing greater levels of profitability as our business grows with operating margins in the second quarter of 6.4%. We are firmly on the path of reaching our next milestone of achieving an operating margin of at least 7.5% when quarterly revenues reach $400 million. As we head into the second half of 2018, we expect continued strength in our Tech Flex business, as companies continue to invest in technology to more effectively and efficiently meet the needs of their customers and improve their profitability, and are also focused on positioning our FA Flex business for future growth. I want to thank all of our clients, consultants and core employees for making our mutual success possible."
Joseph J. Liberatore, President, said, “We believe that the broad-based growth we are experiencing in Tech Flex is a result of the actions taken and investments made over the last couple of years to better segment our client portfolio, optimize the alignment of our revenue-generating associates within our client portfolios, and improve the productivity of our associates. The productivity of our revenue-generating associates has improved approximately 14% on a year-over-year basis. We expect to further accelerate Tech Flex revenue growth in the third quarter of 2018, while also continuing to improve productivity."

Mr. Liberatore noted additional operational results for the second quarter include:
•
Flex revenues of $342.1 million in Q2 2018 increased 5.6% from $324.0 million in Q2 2017.
•
Quarterly year-over-year growth in Flex revenues for Tech and GS was 9.8% and 18.2%, respectively, while FA experienced a decrease of 9.4%.
David M. Kelly, Chief Financial Officer, said, “Our Flex gross profit margins in Tech improved 30 basis points on a year-over-year basis in the second quarter, which we believe is reflective of our focus, discipline and enhanced training around pricing as well as the mix of growth that we are experiencing within our client portfolio."
Mr. Kelly continued, "Operating cash flows were $28 million in the quarter and our profitability continues to improve as revenues grow. We are pleased to announce that our Board of Directors has approved a 50% increase in our quarterly dividend, which better aligns to our objective of efficiently and consistently returning capital to shareholders. The third quarter cash dividend of $0.18 per share, up from $0.12 per share in the second quarter, will be payable on September 21, 2018 to shareholders of record as of the close of business on September 7, 2018."




Looking forward to the third quarter of 2018, there will be 63 billing days, which is the same as the third quarter of 2017, as compared to 64 billing days in second quarter of 2018. The revenue per billing day in the second quarter of 2018 was $5.6 million. Current estimates for the third quarter of 2018 are:
•
Revenue of $359 million to $364 million
•
Earnings per share of $0.65 to $0.67
•
Gross profit margin of 29.7% to 29.9%
•
Flex gross profit margin of 26.9% to 27.1%
•
SG&A expense as a percent of revenue of 22.7% to 22.9%
•
Operating margin of 6.4% to 6.6%
•
Effective tax rate of 25.7%
On Wednesday, August 1, 2018, Kforce will host a conference call to discuss these results. The call will begin at 8:30 a.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/) under Events & Presentations.
The dial-in number is (877) 344-3890. The conference passcode is Kforce. The replay of the call will be available from 11:30 a.m. Eastern Time, Wednesday, August 1, 2018 through August 8, 2018 by dialing (855) 859-2056, passcode 1596885.
This call is being webcast by Shareholder.com and can be accessed on the Investor Relations page of the Kforce Inc. website (http://investor.kforce.com/). The webcast replay will be available until August 8, 2018.
About Kforce
Kforce (Nasdaq: KFRC) is a professional staffing services and solutions firm that specializes in the areas of Technology and Finance & Accounting. Each year, our network of over 50 offices and two national recruiting centers provide opportunities for 36,000 highly skilled professionals who work with over 4,000 clients, including 70% of the Fortune 100. At Kforce, our promise is to deliver great results through strategic partnership and knowledge sharing. For more information, please visit our Web site at http://www.kforce.com.

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 Securities and Exchange Commission, including the Firm’s Form 10-K for the fiscal year ending December 31, 2017, 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 terms “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. As a result, such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Future events and actual results may differ materially from those indicated in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements and the Firm undertakes no obligation to update any forward-looking statements.





Kforce Inc.
Summary of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
 
 
 
Three Months Ended
 
 
June 30, 2018
 
Mar. 31, 2018
 
June 30, 2017
Revenue by segment:
 
 
 
 
 
 
 Technology
 
$
249,763

 
$
236,497

 
$
228,369

 Finance and accounting
 
79,772

 
80,944

 
88,266

 Government solutions
 
29,089

 
28,852

 
23,674

Total Revenue
 
358,624

 
346,293

 
340,309

Direct costs
 
251,141

 
246,105

 
236,390

Gross profit
 
107,483

 
100,188

 
103,919

GP %
 
30.0
%
 
28.9
%
 
30.5
%
Flex GP % (1)
 
27.1
%
 
26.3
%
 
27.4
%
Selling, general and administrative expenses
 
82,448

 
84,592

 
82,506

Depreciation and amortization
 
1,937

 
2,008

 
2,053

Income from operations
 
23,098

 
13,588

 
19,360

Other expense, net
 
1,256

 
1,339

 
1,357

Income before income taxes
 
21,842

 
12,249

 
18,003

Income tax expense
 
5,570

 
3,074

 
6,859

Net income
 
$
16,272

 
$
9,175

 
$
11,144

 
 
 
 
 
 
 
Earnings per share - diluted
 
$
0.65

 
$
0.37

 
$
0.44

 
 
 
 
 
 
 
Weighted average shares outstanding - diluted
 
25,178

 
25,094

 
25,482

Adjusted EBITDA
 
$
27,428

 
$
17,921

 
$
23,258

 
 
 
 
 
 
 
Billing days
 
64

 
64

 
64


(1) Beginning in Q1 2018, Flex GP% excludes GS Product; prior quarters have been adjusted to align with this presentation.





Kforce Inc.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
 
June 30, 2018
 
December 31, 2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
473

 
$
379

Trade receivables, net of allowances
239,083

 
225,865

Income tax refund receivable
946

 
7,116

Prepaid expenses and other current assets
13,988

 
12,085

Total current assets
254,490

 
245,445

Fixed assets, net
38,568

 
39,680

Other assets, net
40,491

 
38,598

Deferred tax assets, net
11,578

 
11,316

Intangible assets, net
3,125

 
3,297

Goodwill
45,968

 
45,968

Total assets
$
394,220

 
$
384,304

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and other accrued liabilities
$
37,960

 
$
34,873

Accrued payroll costs
46,603

 
46,886

Other current liabilities
1,824

 
1,960

Income taxes payable
5,387

 
—

Total current liabilities
91,774

 
83,719

Long-term debt – credit facility
100,600

 
116,523

Long-term debt – other
2,114

 
2,597

Other long-term liabilities
49,426

 
47,188

Total liabilities
243,914

 
250,027

Commitments and contingencies
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock
—

 
—

Common stock
716

 
715

Additional paid-in capital
442,460

 
437,394

Accumulated other comprehensive income
797

 
100

Retained earnings
214,143

 
195,143

Treasury stock, at cost
(507,810
)
 
(499,075
)
Total stockholders’ equity
150,306

 
134,277

Total liabilities and stockholders’ equity
$
394,220

 
$
384,304







Kforce Inc.
Key Statistics
(Unaudited)
 
 
Q2 2018
 
Q1 2018
 
Q2 2017
Total Firm
 
 
 
 
 
 
Total Revenue (000’s)
 
$
358,624

 
$
346,293

 
$
340,309

GP %
 
30.0
%
 
28.9
%
 
30.5
%
Flex revenue (000’s) (1)
 
$
342,105

 
$
332,817

 
$
324,015

Flex GP % (1)
 
27.1
%
 
26.3
%
 
27.4
%
Direct Hire revenue (000’s)
 
$
12,536

 
$
11,395

 
$
13,853

Placements
 
847

 
853

 
974

Average fee
 
$
14,802

 
$
13,362

 
$
14,227

Product revenue (000's)
 
$
3,983

 
$
2,081

 
$
2,441

Billing days
 
64

 
64

 
64

Technology
 
 
 
 
 
 
Flex revenue (000’s)
 
$
244,509

 
$
231,496

 
$
222,744

Hours (000’s)
 
3,294

 
3,178

 
3,234

Flex GP %
 
27.2
%
 
26.1
%
 
26.9
%
Direct Hire revenue (000’s)
 
$
5,254

 
$
5,001

 
$
5,625

Placements
 
282

 
278

 
317

Average fee
 
$
18,635

 
$
18,021

 
$
17,753

Finance and Accounting
 
 
 
 
 
 
Flex revenue (000’s)
 
$
72,490

 
$
74,550

 
$
80,038

Hours (000’s)
 
2,076

 
2,196

 
2,398

Flex GP %
 
29.1
%
 
27.9
%
 
28.8
%
Direct Hire revenue (000’s)
 
$
7,282

 
$
6,394

 
$
8,228

Placements
 
565

 
575

 
657

Average fee
 
$
12,889

 
$
11,115

 
$
12,526

Government Solutions
 
 
 
 
 
 
Total Revenue (000's)
 
$
29,089

 
$
28,852

 
$
23,674

GP %
 
25.0
%
 
26.6
%
 
29.8
%
Flex revenue (000’s) (1)
 
$
25,106

 
$
26,771

 
$
21,233

Flex GP% (1)
 
19.8
%
 
24.5
%
 
26.7
%
Product revenue (000's)
 
$
3,983

 
$
2,081

 
$
2,441

Product GP %
 
57.2
%
 
54.3
%
 
56.8
%
(1) Beginning in Q1 2018, Flex revenue and Flex GP% exclude GS Product; prior quarters have been adjusted to align with this presentation.




Kforce Inc.
Revenue Growth Rates
(Per Billing Day)
(Unaudited)
 
 
Year-Over-Year Revenue Growth Rates
 
 
(Per Billing Day)
 
 
Q2 2018
 
Q1 2018
 
Q4 2017
 
Q3 2017
 
Q2 2017
Billing days
 
64

 
64

 
61

 
63

 
64

Tech Flex
 
9.8
 %
 
6.7
 %
 
5.4
%
 
3.3
%
 
1.5
%
FA Flex
 
(9.4
)%
 
(7.9
)%
 
0.3
%
 
4.1
%
 
4.3
%
GS Flex (1)
 
18.2
 %
 
24.5
 %
 
27.9
%
 
12.7
%
 
1.2
%
Total Flex (1)
 
5.6
 %
 
4.2
 %
 
5.5
%
 
4.2
%
 
2.2
%
Total Firm
 
5.4
 %
 
3.7
 %
 
5.1
%
 
3.0
%
 
1.6
%
(1) Beginning in Q1 2018, Flex revenue excludes GS Product; prior quarters have been adjusted to align with this presentation.
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 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 Kforce as net cash provided by 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.
 
Six Months Ended
 
June 30,
 
2018
 
2017
Net income
$
25,447

 
$
17,046

Non-cash provisions and other
10,545

 
12,451

Changes in operating assets/liabilities
2,267

 
(23,958
)
Net cash provided by operating activities
38,259

 
5,539

Capital expenditures
(3,116
)
 
(4,344
)
Free cash flow
35,143

 
1,195

Change in debt
(15,923
)
 
12,582

Repurchases of common stock
(12,129
)
 
(2,952
)
Cash dividends
(5,943
)
 
(6,080
)
Other
(1,054
)
 
(2,695
)
Change in cash and cash equivalents
$
94

 
$
2,050





Adjusted EBITDA
“Adjusted EBITDA”, a non-GAAP financial measure, is defined by Kforce as net income before depreciation and amortization, stock-based compensation expense, interest expense, net and income tax expense. 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. Management believes it is useful information to investors as it provides a good metric of our core profitability in comparing our performance to our competitors, as well as our performance over different time periods. The measure should not be considered in isolation or as an alternative to net income, cash flows or other financial statement information presented in the consolidated financial statements as indicators of financial performance or liquidity. The measure is not determined in accordance with GAAP and is susceptible to varying calculations, and as presented, may not be comparable to similarly titled measures of other companies.
 
 
Three Months Ended,
 
 
June 30, 2018
 
Mar. 31, 2018
 
June 30, 2017
Net income
 
$
16,272

 
$
9,175

 
$
11,144

Depreciation and amortization
 
2,057

 
2,115

 
2,105

Stock-based compensation expense
 
2,292

 
2,260

 
1,805

Interest expense, net
 
1,237

 
1,297

 
1,345

Income tax expense
 
5,570

 
3,074

 
6,859

Adjusted EBITDA
 
$
27,428

 
$
17,921

 
$
23,258