kfrc-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________________________________________________________________________

FORM 10-Q

________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-42104

_________________________________________________________________

Kforce Inc.

Exact name of registrant as specified in its charter

_______________________________________________________________


Florida						59-3264661
State or other jurisdiction of incorporation or organization						IRS Employer Identification No.


1150 Assembly Drive, Suite 500, Tampa, Florida						33607
Address of principal executive offices						Zip Code

Registrant’s telephone number, including area code: (813) 552-5000

_______________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	KFRC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.): Yes ☐ No ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

The number of shares outstanding (in thousands) of the registrant’s common stock as of October 23, 2024 was 19,080.

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KFORCE INC.

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	24
Item 4.	Controls and Procedures.	24
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings.	24
Item 1A.	Risk Factors.	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	25
Item 3.	Defaults Upon Senior Securities.	25
Item 4.	Mine Safety Disclosures.	25
Item 5.	Other Information.	25
Item 6.	Exhibits.	26
SIGNATURES		27

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

References in this document to the “Registrant,” “Kforce,” the “Company,” the “Firm,” “management,” “we,” “our” or “us” refer to Kforce Inc. and its subsidiaries, except where the context otherwise requires or indicates.

This report, particularly Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), and Part II, Item 1A. Risk Factors, and the documents we incorporate into this report contain certain statements that are, or may be deemed to be, forward-looking statements 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 (the “Exchange Act”), and are made in reliance upon the protections provided by such acts for forward-looking statements. Such statements may include, but may not be limited to: expectations of financial or operational performance, including the possibility and potential effects of the stabilization of the economy on the Firm’s business; the impacts of revenue and gross profit levels on SG&A expenses; our expectations regarding the effects of our strategic investments on operating margins and our position to achieve long-term goals; our expectations regarding the future changes in revenue and gross profit margins of each segment of our business; the impact of the macroeconomic environment on our business; our ability to control discretionary spending and decrease operating costs; the Firm’s commitment and ability to return significant capital to its shareholders; our ability to meet capital expenditure and working capital requirements of our operations; the intent and ability to declare and pay quarterly dividends; growth rates in temporary staffing; a constraint in the supply of consultants and candidates, or the Firm’s ability to attract or retain talented associates for a higher demand environment in the future; changes in client demand for our services and our ability to adapt to such changes; anticipated stock-based compensation expenses; the ability of the Firm to maintain and attract clients in the face of changing economic or competitive conditions; our ability to maintain compliance with our credit facility's covenants; potential government actions or changes in laws and regulations; anticipated costs and benefits of acquisitions, divestitures, joint ventures and other investments; effects of interest rate variations and inflation, including anticipated interest rate cuts and other related changes in government policies; financing needs or plans; estimates concerning the effects of litigation or other disputes; the occurrence of unanticipated expenses; as well as assumptions as to any of the foregoing and all statements that are not based on historical fact, but rather reflect our current expectations concerning future results and events. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, refer to the MD&A and Risk Factors sections. In addition, when used in this discussion, the terms “anticipate,” “assume,” “estimate,” “expect,” “intend,” “plan,” “believe,” “will,” “may,” “likely,” “could,” “should,” “future” and variations thereof and similar expressions are intended to identify forward-looking statements.

Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted. Future events and actual results could differ materially from those set forth in or underlying the forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements contained in this report, which speak only as of the date of this report. Kforce undertakes no obligation to update any forward-looking statements.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue	$	353,319	$	373,122	$	1,061,526	$	1,168,309
Direct costs	254,752		269,661		768,736		840,606
Gross profit	98,567		103,461		292,790		327,703
Selling, general and administrative expenses	78,308		86,226		234,216		258,558
Depreciation and amortization	1,543		1,202		4,431		3,776
Income from operations	18,716		16,033		54,143		65,369
Other expense, net	429		181		1,589		1,539
Income from operations, before income taxes	18,287		15,852		52,554		63,830
Income tax expense	4,078		5,277		13,201		18,471
Net income	$	14,209	$	10,575	$	39,353	$	45,359




Earnings per share – basic	$	0.76	$	0.55	$	2.11	$	2.35
Earnings per share – diluted	$	0.75	$	0.54	$	2.08	$	2.31

Weighted average shares outstanding – basic	18,578		19,158		18,666		19,317
Weighted average shares outstanding – diluted	18,823		19,518		18,878		19,621

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	127	$	119
Trade receivables, net of allowances of $1,579 and $1,643, respectively	229,259		233,428

Prepaid expenses and other current assets	10,553		10,912
Total current assets	239,939		244,459
Fixed assets, net	8,267		9,418
Other assets, net	90,614		75,924
Deferred tax assets, net	5,990		3,138
Goodwill	25,040		25,040
Total assets	$	369,850	$	357,979
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$	60,265	$	64,795
Accrued payroll costs	46,442		33,968
Current portion of operating lease liabilities	3,325		3,589
Income taxes payable	6,491		623
Total current liabilities	116,523		102,975
Long-term debt – credit facility	26,900		41,600

Other long-term liabilities	59,053		54,324
Total liabilities	202,476		198,899
Commitments and contingencies (Note J)
Stockholders’ equity:
Preferred stock, $0.01 par value; 15,000 shares authorized, none issued and outstanding	—		—
Common stock, $0.01 par value; 250,000 shares authorized, 73,484 and 73,462 issued, respectively	735		734
Additional paid-in capital	539,169		527,288
Retained earnings	542,410		525,222
Treasury stock, at cost; 54,261 and 53,941 shares, respectively	(914,940)		(894,164)
Total stockholders’ equity	167,374		159,080
Total liabilities and stockholders’ equity	$	369,850	$	357,979

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(IN THOUSANDS)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income				Treasury Stock			Total Stockholders’ Equity
	Shares	Amount						Retained Earnings		Shares	Amount
Balance, December 31, 2023	73,462	$	734	$	527,288	$	—	$	525,222	53,941	$	(894,164)	$	159,080
Net income	—	—		—		—		10,987		—	—		10,987
Issuance for stock-based compensation and dividends, net of forfeitures	(7)	1		285		—		(286)		—	—		—
Stock-based compensation expense	—	—		3,501		—		—		—	—		3,501
Employee stock purchase plan	—	—		152		—		—		(3)	52		204
Dividends ($0.38 per share)	—	—		—		—		(7,128)		—	—		(7,128)
Repurchases of common stock	—	—		—		—		—		30	(2,139)		(2,139)

Balance, March 31, 2024	73,455	735		531,226		—		528,795		53,968	(896,251)		164,505
Net income	—	—		—		—		14,157		—	—		14,157
Issuance for stock-based compensation and dividends, net of forfeitures	24	—		286		—		(286)		—	—		—
Stock-based compensation expense	—	—		3,498		—		—		—	—		3,498
Employee stock purchase plan	—	—		151		—		—		(3)	51		202
Dividends ($0.38 per share)	—	—		—		—		(7,101)		—	—		(7,101)
Repurchases of common stock	—	—		—		—		—		139	(8,641)		(8,641)
Balance, June 30, 2024	73,479	735		535,161		—		535,565		54,104	(904,841)		166,620
Net income	—	—		—		—		14,209		—	—		14,209
Issuance for stock-based compensation and dividends, net of forfeitures	5	—		311		—		(311)		—	—		—
Stock-based compensation expense	—	—		3,549		—		—		—	—		3,549
Employee stock purchase plan	—	—		148		—		—		(4)	58		206
Dividends ($0.38 per share)	—	—		—		—		(7,053)		—	—		(7,053)
Repurchases of common stock	—	—		—		—		—		161	(10,157)		(10,157)
Balance, September 30, 2024	73,484	$	735	$	539,169	$	—	$	542,410	54,261	$	(914,940)	$	167,374

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	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income				Treasury Stock			Total Stockholders’ Equity
	Shares	Amount						Retained Earnings		Shares	Amount
Balance, December 31, 2022	73,242	$	732	$	507,734	$	6	$	492,764	52,744	$	(819,038)	$	182,198
Net income	—	—		—		—		16,210		—	—		16,210
Issuance for stock-based compensation and dividends, net of forfeitures	5	—		340		—		(341)		—	—		(1)
Stock-based compensation expense	—	—		4,326		—		—		—	—		4,326
Employee stock purchase plan	—	—		172		—		—		(5)	73		245
Dividends ($0.36 per share)	—	—		—		—		(7,003)		—	—		(7,003)
Repurchases of common stock	—	—		—		—		—		181	(10,244)		(10,244)
Other	—	—		—		(6)		—		—	—		(6)
Balance, March 31, 2023	73,247	732		512,572		—		501,630		52,920	(829,209)		185,725
Net income	—	—		—		—		18,574		—	—		18,574
Issuance for stock-based compensation and dividends, net of forfeitures	32	—		322		—		(322)		—	—		—
Stock-based compensation expense	—	—		4,309		—		—		—	—		4,309
Employee stock purchase plan	—	—		219		—		—		(5)	77		296
Dividends ($0.36 per share)	—	—		—		—		(6,945)		—	—		(6,945)
Repurchases of common stock	—	—		—		—		—		248	(14,341)		(14,341)
Balance, June 30, 2023	73,279	732		517,422		—		512,937		53,163	(843,473)		187,618
Net income	—	—		—		—		10,575		—	—		10,575
Issuance for stock-based compensation and dividends, net of forfeitures	(55)	—		78		—		(78)		—	—		—
Stock-based compensation expense	—	—		5,967		—		—		—	—		5,967
Employee stock purchase plan	—	—		202		—		—		(4)	74		276
Dividends ($0.36 per share)	—	—		—		—		(6,894)		—	—		(6,894)
Repurchases of common stock	—	—		—		—		—		305	(18,590)		(18,590)
Balance, September 30, 2023	73,224	$	732	$	523,669	$	—	$	516,540	53,464	$	(861,989)	$	178,952

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net income	$	39,353	$	45,359
Adjustments to reconcile net income to cash provided by operating activities:
Deferred income tax provision, net	(2,852)		(757)
Provision for credit losses	136		325
Depreciation and amortization	4,431		3,776
Stock-based compensation expense	10,548		14,602
Noncash lease expense	2,765		3,111

Loss on equity method investment	—		750
Other	(685)		675
(Increase) decrease in operating assets
Trade receivables, net	4,032		20,880
Other assets	(4,072)		(289)
Increase (decrease) in operating liabilities
Accrued payroll costs	13,085		(4,812)

Other liabilities	(1,657)		(14,564)
Cash provided by operating activities	65,084		69,056
Cash flows from investing activities:
Capital expenditures	(8,501)		(6,076)
Proceeds from company-owned life insurance	2,377		—
Premiums paid for company-owned life insurance	(1,777)		(765)
Proceeds from the sale of our joint venture interest	—		5,059
Note receivable issued to our joint venture	—		(750)

Cash used in investing activities	(7,901)		(2,532)
Cash flows from financing activities:
Proceeds from credit facility	173,600		426,400
Payments on credit facility	(188,300)		(430,600)
Repurchases of common stock	(21,189)		(41,470)
Cash dividends	(21,282)		(20,842)
Other	(4)		(11)
Cash used in financing activities	(57,175)		(66,523)
Change in cash and cash equivalents	8		1
Cash and cash equivalents, beginning of period	119		121
Cash and cash equivalents, end of period	$	127	$	122

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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	Nine Months Ended September 30,
Supplemental Disclosure of Cash Flow Information	2024		2023
Cash Paid During the Period For:
Income taxes, net	$	9,085	$	19,323
Operating lease liabilities	3,609		3,937
Interest, net	1,556		623
Non-Cash Investing and Financing Transactions:
ROU assets obtained from operating leases	$	2,627	$	3,692
Employee stock purchase plan	612		817
Unsettled repurchases of common stock	500		2,292

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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KFORCE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies

Unless otherwise noted below, there have been no material changes to the accounting policies presented in Note 1 - “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of our 2023 Annual Report on Form 10-K.

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and footnotes normally required by GAAP for complete financial statements have been condensed or omitted pursuant to those rules and regulations, although management believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2023 Annual Report on Form 10-K. In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation. The Unaudited Condensed Consolidated Balance Sheet as of December 31, 2023, was derived from our audited Consolidated Balance Sheet as of December 31, 2023, as presented in our 2023 Annual Report on Form 10-K.

Certain prior year amounts have been reclassified to conform with the current period presentation.

Our quarterly operating results are affected by the seasonality of our clients’ businesses and changes in holiday and vacation days taken. In addition, we typically experience higher costs in the first quarter of each fiscal year as a result of certain U.S. state and federal employment tax resets, which adversely affects our gross profit and overall profitability relative to the remainder of the fiscal year. As such, the results of operations for any interim period may be impacted by these factors, among others, and are not necessarily indicative of, nor comparable to, the results of operations for a full year.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Kforce Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. References in this document to “Kforce,” the “Company,” the “Firm,” “management,” “we,” “our” or “us” refer to Kforce Inc. and its subsidiaries, except where the context indicates otherwise.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most critical of these estimates and assumptions relate to the following: allowance for credit losses; income taxes; self-insured liabilities for health insurance; and the impairment of goodwill. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates. Therefore, our accounting estimates and assumptions may change materially in future periods.

Earnings per Share

Basic earnings per share is computed as net income divided by the weighted average number of common shares outstanding (“WASO”) during the period. WASO excludes unvested shares of restricted stock. Diluted earnings per share is computed by dividing net income by diluted WASO. Diluted WASO includes the effect of potentially dilutive securities, such as unvested shares of restricted stock using the treasury stock method, except where the effect of including potential common shares would be anti-dilutive.

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The following table provides information on potentially dilutive securities (shares in thousands):


	2024	2023
Three Months Ended September 30,
Common stock equivalents	245	360
Anti-dilutive shares	4	95
Nine Months Ended September 30,
Common stock equivalents	212	304
Anti-dilutive shares	4	186

New Accounting Standards

Accounting Standards Not Yet Adopted

In November 2023, the FASB issued guidance intended to improve reportable segment disclosure requirements through enhancements for significant segment expenses. These amendments clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. This guidance was effective for Kforce on January 1, 2024, and the presentation and disclosure requirements will be first applied retrospectively to our annual disclosures for the year ending December 31, 2024 and interim disclosures beginning January 1, 2025. This new guidance may modify our disclosures, but we do not expect this standard to have a material effect on our consolidated financial statements.

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Note B - Reportable Segments

The following table provides information on the operations of our segments (in thousands):


	Technology		FA		Total
Three Months Ended September 30,
2024
Revenue	$	325,511	$	27,808	$	353,319
Gross profit	$	87,493	$	11,074	$	98,567
Operating and other expenses					$	80,280
Income from operations, before income taxes					$	18,287
2023
Revenue	$	338,289	$	34,833	$	373,122
Gross profit	$	89,401	$	14,060	$	103,461
Operating and other expenses					$	87,609
Income from operations, before income taxes					$	15,852
Nine Months Ended September 30,
2024
Revenue	$	975,469	$	86,057	$	1,061,526
Gross profit	$	259,427	$	33,363	$	292,790
Operating and other expenses					$	240,236
Income from operations, before income taxes					$	52,554
2023
Revenue	$	1,055,158	$	113,151	$	1,168,309
Gross profit	$	283,297	$	44,406	$	327,703
Operating and other expenses					$	263,873
Income from operations, before income taxes					$	63,830

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Note C - Disaggregation of Revenue

The following table provides the disaggregation of revenue by segment and type (in thousands):


	Technology		FA		Total
Three Months Ended September 30,
2024
Flex revenue	$	322,118	$	23,714	$	345,832
Direct Hire revenue	3,393		4,094

SEC Form 10-Q filed by Kforce Inc.