Kforce Reports Fourth Quarter and Full Year 2012 Results
Kforce Reports Fourth Quarter and Full Year 2012 Results
Fourth Quarter Revenues of $269.8 Million
Fourth Quarter Net Income of $8.6 Million, or $0.24 Per Share, Excluding Non-Cash Impairment Charge
Kforce Inc., a provider of professional staffing services and solutions, today announced results for its fourth quarter of 2012. Revenue from continuing operations for the quarter ended December 31, 2012 was $269.8 million compared to $270.2 million for the quarter ended September 30, 2012, a decrease of 0.1% and compared to $259.3 million for the quarter ended December 31, 2011, an increase of 4.0%. Excluding the after-tax non-cash impairment charge of $2.5 million related to the completion of the Q2 '12 impairment test for our Government Solutions reporting unit, which was recorded during the quarter ended December 31, 2012, Kforce reported net income of $8.6 million, or $0.24 per share, versus $9.3 million, or $0.26 per share, for the quarter ended September 30, 2012. Excluding the impairment charge, net income and earnings per share for the fourth quarter of 2012 increased 21.0% and 20.0%, respectively, versus the fourth quarter of 2011, which had net income of $7.1 million, or $0.20 per share.
Kforce reported total revenue from continuing operations for the year ended December 31, 2012 of $1.08 billion as compared to $1.00 billion for 2011, an increase of 7.7%. Excluding the after-tax non-cash goodwill impairment charge of $44.5 million recorded during the year ended December 31, 2012 related to our Government Solutions reporting unit, Kforce reported net income of $30.8 million, or $0.85 per share, for the year ended December 31, 2012, versus net income of $27.2 million, or $0.70 per share, for 2011, which represents an increase of 13.4% in net income and 21.4% in earnings per share.
David L. Dunkel, Chairman and CEO, said, "The Firm continued to perform well in the fourth quarter. We have continued to see consistent demand for our services and have been able to capitalize on this demand through both increases in revenue and improvements in operating margins. Total Tech revenue for 2012 of $675.6 million represents historically high revenues for that business unit. We also experienced a sequential revenue increase during Q4 in all our Flex business lines on a billing day basis. During the fourth quarter, we significantly intensified our focus on accelerating future revenue growth by adding a significant number of sales associates as a result of our view that we will remain in a positive environment for professional temporary staffing for the foreseeable future. I want to thank all of our employees, consultants and clients for making 2012 another successful year for Kforce."
Joseph J. Liberatore, President, said, "Our foundation of great people, processes and flexible operating model along with our tenured leadership and sales teams, drove revenues from continuing operations of $1.08 billion in 2012 while setting annual revenue records for Tech and HIM. In the fourth quarter of 2012, the Firm continued its solid performance driving year-over-year Flex margin increases across all segments, which aggregated to a 100 basis point improvement on a total Firm basis, primarily driven by the increase in the spread between our bill and pay rates. We were able to profitably grow revenues with both large and small clients. Discussions with our clients and certain key performance indicators indicate consistent demand for our service offerings, particularly in Technology. With a renewed emphasis on Focus, Simplicity and Accountability, Kforce intends to continue to aggressively pursue business opportunities with the goal of gaining significant client and market share."
Mr. Liberatore noted additional operational results for the fourth quarter include:
Flex revenue per billing day of $4.2 million in Q4 '12 increased 2.0% from $4.1 million in Q3 '12 and increased 2.2% from $4.1 million in Q4 '11.
Sequential percentage changes in Flex revenue on a billing day basis by segment were: 8.7% increase for HIM, 8.3% increase for Government Solutions, 2.1% increase for FA, and a 0.3% increase for Tech.
Year-over-year changes in Flex revenue on a billing day basis were a 3.3% increase in HIM, 2.7% increase in Tech, 2.1% increase in Government Solutions, and a 0.2% increase in FA.
Search revenue of $11.1 million in Q4 '12 decreased 10.3% from $12.4 million in Q3 '12 and increased 9.2% from $10.2 million in Q4 '11.
David M. Kelly, Chief Financial Officer, said, "The Firm continued to perform well in Q4 '12. Q4 '12 contained 62 billing days while Q3 '12 contained 63 billing days and Q4 '11 contained 61 billing days." Mr. Kelly continued, "In 2012, the Firm took advantage of our flexibility and capacity to gain market share while protecting our strong balance sheet and delivering solid financial results. Cash flow and EBITDA continued to be strong in 2012. During 2012, the Firm repurchased approximately 3.4 million shares of Kforce common stock which represented 8.9% of outstanding shares at December 31, 2011. We will continue to be opportunistic in future repurchases as cash flow and market conditions warrant. On February 1, 2013, the Kforce Board of Directors increased the outstanding stock repurchase authorization by $50.0 million to $89.9 million. The Firm also issued a special dividend of $1.00 per share during December 2012, which we believe provided a significant return to our shareholders. We believe we are well positioned to take advantage of available opportunities in 2013 and grow revenues and profitability."
Financial highlights for the fourth quarter and 2012 include:
Flex gross profit increased 30 basis points to 29.9% in Q4 '12 from 29.6% in Q3 '12 and increased 100 basis points from 28.9% in Q4 '11.
Selling, general and administrative expenses as a percentage of revenues for Q4 '12 was 26.9% compared to 27.3% for Q4 '11.
At the end of Q4 '12, the Firm had bank debt of $21.0 million, which was a result of the special dividend issued in December 2012 of $35.2 million and $19.0 million of open market repurchases of Kforce common stock during Q4 '12. There was no bank debt at the end of Q3 '12.
Net income from continuing operations in Q4 '12 before the impact of the impairment charge was $8.4 million, or $0.24 per share, an increase of 64.6% and 71.4%, respectively, from Q4 '11 which had net income of $5.1 million, or $0.14 per share.
Mr. Kelly stated, "In addition, looking forward to the first quarter of 2013, we expect revenues may be in the $268 million to $274 million range and earnings per share in the range of $0.09 to $0.12. The first quarter of 2013 has 63 billing days, one more than the fourth quarter of 2012. Implicit in the first quarter's guidance is a $0.09-$0.10 sequential impact from payroll taxes and a $0.03-$0.04 impact from human capital investments."