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TAMPA, Fla., Feb. 06, 2023 (GLOBE NEWSWIRE) -- Kforce Inc. (Nasdaq: KFRC), a solutions firm that specializes in technology and other professional staffing services, today announced results for the fourth quarter and full year 2022. There are references to “as reported” and “as adjusted” figures within this press release, which pertain to GAAP and non-GAAP measures that are more fully described in the Adjusted Financial Performance Measures section of this press release.
Fourth Quarter 2022 Financial Highlights
Full Year 2022 Financial Highlights
Management Commentary
Joseph J. Liberatore, President and Chief Executive Officer, commented, “We are pleased with our performance in 2022, which was an extremely successful year for Kforce. We met the financial objectives we outlined at the beginning of the year, despite the softening in demand we began to experience in the second half of 2022. We organically grew revenues in our Technology business by approximately 18% after growing more than 22% in 2021 and further improved profitability levels. Strategically, we advanced our integrated sales strategy to further integrate our managed teams and project solutions capability within our Technology business. Our team made significant progress advancing the multi-year effort to transform our back office and fully transitioned to our hybrid Office OccasionalSM work environment across all of our markets, including the opening of our new state-of-the-art headquarters in Tampa. As we look ahead to 2023, we expect to continue to make the necessary investments in our business to further advance our integrated sales strategy and the transformation of our back office to sustain our long-term growth ambitions, and to make additional progress towards double-digit operating margins. We have a solid, highly tenured leadership team in place with the expectation of continuing to capture additional market share and are prepared for the long-term, whatever the near-term macro-economic environment may bring.”
Kye Mitchell, Chief Operations Officer, said, “Our Technology business continues to be the primary driver to our success, with year-over-year growth of 7.6% and nearly 18% growth for the full year of 2022. Another strong signal is that we experienced continued acceleration in our average bill rates, which improved 1.7% sequentially to approximately $90 per hour. We believe the continued increase in bill rates reflects the continued demand environment for highly skilled talent and the criticality of these resources to our clients' strategic priorities. We believe this is strong evidence that the secular demand drivers in the technology talent solutions space are more tightly correlated to our long-term success than fluctuations in the macro-economic environment.”
David M. Kelly, Chief Financial Officer, said, “We are pleased with our financial performance in 2022 and excited about our future prospects. We continued to be active in returning capital to our shareholders as we repurchased $25 million of stock in the fourth quarter and nearly $68 million of stock in the open market for the full year. We returned approximately 100% of operating cash flows through dividends and share repurchases to our shareholders in 2022. As an additional signal of our belief in the strength of our operating trends and financial strength going into 2023, our Board of Directors approved an increase of approximately 20% in our annual dividend from $1.20 per share to $1.44 per share. Our first quarter dividend of $0.36 per share will be payable on March 24, 2023, to shareholders of record as of the close of business on March 10, 2023.
Since 2007, we have returned in excess of $830 million in capital to our shareholders, which has represented approximately 75% of the cash our business has generated. We believe our financial performance has put us in an excellent position to continue to make incremental investments in our business even in an uncertain environment, which we believe will benefit our shareholders in the long term and are important drivers to our attainment of double-digit operating margins. Overall, we believe our strategy has put us in an exceptional place and are fully prepared for the various economic possibilities that may lie ahead.”
First Quarter 2023 - Guidance
Looking forward to the first quarter of 2023, there will be 64 billing days compared to 61 billing days in the fourth quarter of 2022 and 64 billing days in the first quarter of 2022.
Current estimates for the first quarter of 2023 are:
Conference Call and Annual Meeting
On Monday, February 6, 2023, Kforce will host a conference call at 5:00 p.m. E.T. to discuss these results. The dial-in number is (888) 550-5417 and the conference passcode is "Kforce". The prepared remarks for this call and webcast are available on the Investor Relations page of the Kforce Inc. website in the Events & Presentations section.
The replay of the call can be accessed at http://investor.kforce.com from 8:00 p.m. on Monday, February 6, 2023 until February 6, 2024.
Our 2023 Annual Meeting of Kforce Inc. Shareholders will be held on Thursday, April 20, 2023 at 1150 Assembly Drive, Suite 500, Tampa, Florida 33607, commencing at 8:00 a.m. E.T.
About Kforce
Kforce Inc. is a solutions firm that specializes in technology and other professional staffing services. Each year, we provide meaningful opportunities for approximately 30,000 highly skilled professionals who work with approximately 3,000 clients, including a significant majority of the Fortune 500. At Kforce, our promise is to deliver Great Results Through Strategic Partnership and Knowledge Sharing®. For more information, please visit our website at http://www.kforce.com.
Michael R. Blackman, Chief Corporate Development Officer
(813) 552-2927
Cautionary Note Regarding Forward-Looking Statements
All statements in this press release, other than those of a historical nature, are forward-looking statements including, but not limited to, statements regarding the Firm's investments in its business, its long-term growth ambitions, its expected progress towards double-digit operating margins, the Firm's expectation to capture additional market share and its preparation for the long-term regardless of the near-term macro-economic environment, the demand environment for highly skilled talent, the correlation of the secular demand drivers in the technology talent solutions space to our long-term success, the intent and ability to declare and pay quarterly dividends, and the Firm's guidance for the first quarter of 2023. 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 rate in temporary staffing and the general economy; competitive factors; risks due to shifts in the market demand; a reduction in the supply of consultants and candidates or the Firm’s ability to attract and retain such individuals; the success of the Firm in attracting and retaining its management team and key operating employees; changes in the service mix; ability of the Firm to repurchase shares; the occurrence of unanticipated expenses, income, gains or losses; the effect of adverse weather conditions; changes in our effective tax rate; our ability to comply with government regulations, laws, orders, guidelines and policies that impact our business; risk of contract performance, delays or termination or the failure to obtain new assignments or contracts, or funding under contracts; ability to comply with our obligations in a remote work environment; changes in client demand and our ability to adapt to such changes; continued performance of and improvements to our enterprise information systems; impacts of actual or potential litigation or other legal or regulatory matters or liabilities, including the risk factors and matters listed from time to time in the Firm’s reports filed with the Securities and Exchange Commission, including, but not limited to, the Firm’s Form 10-K for the fiscal year ending December 31, 2021, as well as assumptions regarding the foregoing. The terms “should,” “believe,” “estimate,” “expect,” “intend,” “anticipate,” “foresee,” “plan,” "in our view" 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 | |||||||||
| December 31, 2022 | September 30, 2022 | December 31, 2021 | |||||||
| Revenue | $ | 419,662 | $ | 437,620 | $ | 410,358 | |||
| Direct costs | 300,183 | 310,950 | 290,371 | ||||||
| Gross profit | 119,479 | 126,670 | 119,987 | ||||||
| Selling, general and administrative expenses | 94,313 | 94,306 | 94,104 | ||||||
| Depreciation and amortization | 1,213 | 1,045 | 1,080 | ||||||
| Income from operations | 23,953 | 31,319 | 24,803 | ||||||
| Other expense, net | 14,756 | 906 | 1,532 | ||||||
| Income from operations, before income taxes | 9,197 | 30,413 | 23,271 | ||||||
| Income tax expense | 2,125 | 8,151 | 2,711 | ||||||
| Net income | $ | 7,072 | $ | 22,262 | $ | 20,560 | |||
| Earnings per share - diluted | $ | 0.35 | $ | 1.09 | $ | 0.98 | |||
| Weighted average shares outstanding – diluted | 20,077 | 20,450 | 21,036 | ||||||
| Adjusted EBITDA | $ | 31,454 | $ | 36,808 | $ | 31,783 | |||
| Billing days | 61 | 64 | 61 | ||||||
Kforce Inc.
Summary of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
| Year Ended December 31, | ||||||
| 2022 | 2021 | |||||
| Revenue | $ | 1,710,765 | $ | 1,579,922 | ||
| Direct costs | 1,209,658 | 1,123,058 | ||||
| Gross profit | 501,107 | 456,864 | ||||
| Selling, general and administrative expenses | 379,815 | 345,721 | ||||
| Depreciation and amortization | 4,427 | 4,500 | ||||
| Income from operations | 116,865 | 106,643 | ||||
| Other expense, net | 14,423 | 7,376 | ||||
| Income from operations, before income taxes | 102,442 | 99,267 | ||||
| Income tax expense | 27,011 | 24,090 | ||||
| Net income | $ | 75,431 | $ | 75,177 | ||
| Earnings per share - diluted | $ | 3.68 | $ | 3.54 | ||
| Weighted average shares outstanding – diluted | 20,503 | 21,212 | ||||
| Adjusted EBITDA | $ | 140,871 | $ | 126,439 | ||
| Billing days | 253 | 252 | ||||
Kforce Inc.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 121 | $ | 96,989 | ||||
| Trade receivables, net of allowances | 269,496 | 265,322 | ||||||
| Income tax refund receivable | 35 | 3,010 | ||||||
| Prepaid expenses and other current assets | 8,108 | 6,790 | ||||||
| Total current assets | 277,760 | 372,111 | ||||||
| Fixed assets, net | 8,647 | 5,964 | ||||||
| Other assets, net | 75,771 | 92,629 | ||||||
| Deferred tax assets, net | 4,786 | 7,657 | ||||||
| Goodwill | 25,040 | 25,040 | ||||||
| Total assets | $ | 392,004 | $ | 503,401 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and other accrued liabilities | $ | 72,792 | $ | 81,408 | ||||
| Accrued payroll costs | 48,369 | 71,424 | ||||||
| Current portion of operating lease liabilities | 4,576 | 6,338 | ||||||
| Income taxes payable | 5,696 | 1,261 | ||||||
| Total current liabilities | 131,433 | 160,431 | ||||||
| Long-term debt – credit facility | 25,600 | 100,000 | ||||||
| Other long-term liabilities | 52,773 | 54,564 | ||||||
| Total liabilities | 209,806 | 314,995 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock | — | — | ||||||
| Common stock | 732 | 730 | ||||||
| Additional paid-in capital | 507,734 | 488,036 | ||||||
| Accumulated other comprehensive income | 6 | 621 | ||||||
| Retained earnings | 492,764 | 442,596 | ||||||
| Treasury stock, at cost | (819,038 | ) | (743,577 | ) | ||||
| Total stockholders’ equity | 182,198 | 188,406 | ||||||
| Total liabilities and stockholders’ equity | $ | 392,004 | $ | 503,401 | ||||
Kforce Inc.
Key Statistics
(Unaudited)
| Q4 2022 | Q3 2022 | Q4 2021 | ||||||||||
| Total Firm | ||||||||||||
| Total Revenue (000's) | $ | 419,662 | $ | 437,620 | $ | 410,358 | ||||||
| GP % | 28.5 | % | 29.0 | % | 29.2 | % | ||||||
| Flex revenue (000’s) | $ | 407,916 | $ | 422,968 | $ | 395,776 | ||||||
| Hours (000’s) | 4,958 | 5,124 | 5,531 | |||||||||
| Flex GP % | 26.4 | % | 26.5 | % | 26.6 | % | ||||||
| Direct Hire revenue (000’s) | $ | 11,746 | $ | 14,652 | $ | 14,582 | ||||||
| Placements | 532 | 682 | 787 | |||||||||
| Average fee | $ | 22,070 | $ | 21,478 | $ | 18,538 | ||||||
| Billing days | 61 | 64 | 61 | |||||||||
| Technology | ||||||||||||
| Total Revenue (000's) | $ | 372,631 | $ | 390,496 | $ | 346,424 | ||||||
| GP % | 27.3 | % | 27.6 | % | 28.2 | % | ||||||
| Flex revenue (000’s) | $ | 366,760 | $ | 382,072 | $ | 337,962 | ||||||
| Hours (000’s) | 4,072 | 4,308 | 4,103 | |||||||||
| Flex GP % | 26.1 | % | 26.0 | % | 26.4 | % | ||||||
| Direct Hire revenue (000’s) | $ | 5,871 | $ | 8,424 | $ | 8,462 | ||||||
| Placements | 235 | 341 | 389 | |||||||||
| Average fee | $ | 25,004 | $ | 24,683 | $ | 21,781 | ||||||
| Finance and Accounting | ||||||||||||
| Total Revenue (000's) | $ | 47,031 | $ | 47,124 | $ | 63,934 | ||||||
| GP % | 37.7 | % | 40.1 | % | 35.1 | % | ||||||
| Flex revenue (000’s) | $ | 41,156 | $ | 40,896 | $ | 57,814 | ||||||
| Hours (000’s) | 886 | 816 | 1,428 | |||||||||
| Flex GP % | 28.8 | % | 30.9 | % | 28.3 | % | ||||||
| Direct Hire revenue (000’s) | $ | 5,875 | $ | 6,228 | $ | 6,120 | ||||||
| Placements | 297 | 341 | 398 | |||||||||
| Average fee | $ | 19,754 | $ | 18,269 | $ | 15,373 | ||||||
Kforce Inc.
Revenue Growth Rates
(Unaudited)
| Year-Over-Year | |||||||||||||||
| (Per Billing Day) | |||||||||||||||
| Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | |||||||||||
| Billing days | 61 | 64 | 64 | 64 | 61 | ||||||||||
| Technology Flex | 8.5 | % | 15.7 | % | 23.3 | % | 26.0 | % | 31.0 | % | |||||
| FA Flex | (28.8) | % | (30.7) | % | (49.0) | % | (37.6) | % | (28.9) | % | |||||
| Total Flex | 3.1 | % | 8.7 | % | 7.2 | % | 11.8 | % | 16.6 | % | |||||
Kforce Inc.
Non-GAAP Financial Measures
(In Thousands, Except Per Share Amounts)
(Unaudited)
In addition to our financial results presented in accordance GAAP, Kforce uses certain non-GAAP financial measures, which we believe provide useful information to investors in evaluating our core operating performance. 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 is limited, however, because 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 (but not a replacement of) our Consolidated Statements of Cash Flows.
| (In Thousands) | Year Ended December 31, | |||||||
| 2022 | 2021 | |||||||
| Net income | $ | 75,431 | $ | 75,177 | ||||
| Non-cash provisions and other | 50,294 | 30,188 | ||||||
| Changes in operating assets/liabilities | (34,920 | ) | (32,467 | ) | ||||
| Net cash provided by operating activities | 90,805 | 72,898 | ||||||
| Capital expenditures | (8,109 | ) | (6,441 | ) | ||||
| Free cash flow | 82,696 | 66,457 | ||||||
| Note receivable issued to our joint venture | (6,750 | ) | — | |||||
| Cash proceeds received from Company-owned life insurance | 1,077 | — | ||||||
| Equity method investment | (500 | ) | (9,000 | ) | ||||
| Change in debt | (74,400 | ) | — | |||||
| Repurchases of common stock | (74,913 | ) | (66,210 | ) | ||||
| Cash dividends | (24,027 | ) | (20,120 | ) | ||||
| Net proceeds from the sale of assets held for sale | — | 23,742 | ||||||
| Other | (51 | ) | (1,366 | ) | ||||
| Change in cash and cash equivalents | $ | (96,868 | ) | $ | (6,497 | ) | ||
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, income tax expense, legal settlement expense, SERP termination expense, gain from termination of interest rate swap, impairment of equity method investment, reserve associated with note receivable issued to our joint venture, loss from equity method investment and gain on sale of corporate headquarters. 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 management believes 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. Consequently, management believes it is useful information to investors. 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 thus susceptible to varying calculations. Also, Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.
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 | ||||||||||
| (In Thousands) | December 31, 2022 | September 30, 2022 | December 31, 2021 | |||||||
| Net income | $ | 7,072 | $ | 22,262 | $ | 20,560 | ||||
| Depreciation and amortization | 1,213 | 1,045 | 1,080 | |||||||
| Stock-based compensation expense | 4,362 | 4,445 | 3,551 | |||||||
| Interest (income) expense, net | (15 | ) | 9 | 761 | ||||||
| Income tax expense | 2,125 | 8,151 | 2,711 | |||||||
| Loss from equity method investment | 1,088 | 896 | 770 | |||||||
| Reserve associated with note receivable issued to our joint venture | 1,925 | — | — | |||||||
| Impairment of equity method investment | 13,684 | — | — | |||||||
| Legal settlement expense | — | — | 2,350 | |||||||
| Adjusted EBITDA | $ | 31,454 | $ | 36,808 | $ | 31,783 | ||||
| Year Ended December 31, | |||||||
| (In Thousands) | 2022 | 2021 | |||||
| Net income | $ | 75,431 | $ | 75,177 | |||
| Reserve associated with note receivable issued to our joint venture | 1,925 | — | |||||
| Impairment of equity method investment | 13,684 | — | |||||
| Depreciation and amortization | 4,427 | 4,500 | |||||
| Stock-based compensation expense | 17,655 | 13,999 | |||||
| Interest expense, net | 973 | 3,073 | |||||
| Income tax expense | 27,011 | 24,090 | |||||
| Gain from termination of interest rate swap | (4,059 | ) | — | ||||
| Loss from equity method investment | 3,824 | 2,480 | |||||
| Legal settlement expense | — | 3,350 | |||||
| SERP termination expense | — | 1,821 | |||||
| Gain on sale of corporate headquarters | — | (2,051 | ) | ||||
| Adjusted EBITDA | $ | 140,871 | $ | 126,439 | |||
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 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.
| Three Months Ended December 31, 2022 | ||||||||||||
| (In Thousands, Except Per Share Amounts) | Reported (GAAP) | Adjustments(1) | Adjusted (Non-GAAP) | |||||||||
| Reconciliation of SG&A and Operating Margin: | ||||||||||||
| Selling, general and administrative expenses | $ | 94,313 | $ | (1,925 | ) | $ | 92,388 | |||||
| SG&A as a percentage of revenue | 22.5 | % | (0.5 | )% | 22.0 | % | ||||||
| Income from operations | $ | 23,953 | $ | 1,925 | $ | 25,878 | ||||||
| Operating margin | 5.7 | % | 0.5 | % | 6.2 | % | ||||||
| Other expense, net | $ | 14,756 | $ | (13,684 | ) | $ | 1,072 | |||||
| Reconciliation of Tax Impact and Profitability: | ||||||||||||
| Income from operations, before income taxes | $ | 9,197 | $ | 15,609 | $ | 24,806 | ||||||
| Income tax expense | $ | 2,125 | $ | 4,002 | $ | 6,127 | ||||||
| Effective tax rate | 23.1 | % | 25.6 | % | 24.7 | % | ||||||
| Net income | $ | 7,072 | $ | 11,607 | $ | 18,679 | ||||||
| Earnings per share - diluted | $ | 0.35 | $ | 0.58 | $ | 0.93 | ||||||
| Year Ended December 31, 2022 | ||||||||||||
| (In Thousands, Except Per Share Amounts) | Reported (GAAP) | Adjustments(1) | Adjusted (Non-GAAP) | |||||||||
| Reconciliation of SG&A and Operating Margin: | ||||||||||||
| Selling, general and administrative expenses | $ | 379,815 | $ | (1,925 | ) | $ | 377,890 | |||||
| SG&A as a percentage of revenue | 22.2 | % | (0.1 | )% | 22.1 | % | ||||||
| Income from operations | $ | 116,865 | $ | 1,925 | $ | 118,790 | ||||||
| Operating margin | 6.8 | % | 0.1 | % | 6.9 | % | ||||||
| Other expense, net | $ | 14,423 | $ | (13,684 | ) | $ | 739 | |||||
| Reconciliation of Tax Impact and Profitability: | ||||||||||||
| Income from operations, before income taxes | $ | 102,442 | $ | 15,609 | $ | 118,051 | ||||||
| Income tax expense | $ | 27,011 | $ | 4,002 | $ | 31,013 | ||||||
| Effective tax rate | 26.4 | % | 25.6 | % | 26.3 | % | ||||||
| Net income | $ | 75,431 | $ | 11,607 | $ | 87,038 | ||||||
| Earnings per share - diluted | $ | 3.68 | $ | 0.57 | $ | 4.25 | ||||||
(1) Includes a $13.7 million impairment of our equity method investment and a $1.9 million reserve related to a promissory note issued to our joint venture and associated income tax effects ($11.6 million after-tax) for the three months and year ended December 31, 2022.