Kforce reports record revenues
Highlights of Q3 results
Tech Flex Revenue Up 7.8% Sequentially and 14.2% Year-Over-Year
Total Firm Revenues Up 5.6% Sequentially and 10.9% Year-Over-Year
Firm Announces Operational Streamlining Expected to Improve EPS 3 to 5 cents quarterly
Kforce, a provider of professional staffing services and solutions, today announced results for its third quarter of 2013. Revenues for the quarter ended September 30, 2013 were $299.7 million compared to $283.7 million for the quarter ended June 30, 2013, an increase of 5.6%, and compared to $270.2 million for the quarter ended September 30, 2012, an increase of 10.9%. For the quarter ended September 30, 2013, Kforce reported net income of $9.0 million, or $0.27 per share, versus $6.9 million, or $0.21 per share, for the quarter ended June 30, 2013, an increase of 29.2% in net income and 28.6% in earnings per share. Net income and earnings per share for the third quarter of 2013 decreased 3.1% and increased 3.8%, respectively, versus net income of $9.3 million, or $0.26 per share, for the third quarter of 2012.
Additionally, during October 2013, the Firm commenced a plan to streamline its leadership and support structure to better align a higher percentage of roles closer to the customer. As a result of this realignment, the Firm is expected to incur one-time pre-tax charges related to severance, benefits and related costs in the range of $6 to $7 million during the fourth quarter. Additionally, the Firm expects these actions to improve quarterly earnings per share in the range of $0.03 to $0.05 per share from a reduction in Selling, General and Administrative expenses once all actions are complete.
David L. Dunkel, Chairman and Chief Executive Officer commented, "We are very pleased with our performance in the third quarter, as Kforce achieved record high quarterly revenues of $299.7 million and earnings per share of 27 cents driven by Tech Flex, our largest business segment, whose growth accelerated to 14.2% year-over-year. Given the many positive growth characteristics driving Tech Flex, we continue to invest in this service line. All of our businesses grew sequentially for the second consecutive quarter, driving year-over-year total revenue growth above 10%. The talent investments we have made are taking hold, demand is strong, and we expect an acceleration of year-over-year growth in Q4."
Continued Mr. Dunkel, "We believe this new organizational design will provide improved accountability and will enable the Firm to move at an accelerated pace in our efforts to service our clients, consultants and core personnel. These changes, coupled with our excellent operating platform, should allow us to accelerate operating margin improvements and continue to fuel our revenue growth, allowing Kforce to more quickly achieve prior peak earnings levels.
As demonstrated by our Q3 '13 results and Q4 '13 guidance, we believe we are building meaningful momentum in a very positive operating environment for the Firm, particularly in Tech Flex. Technology demand remains strong as we continue to see a secular shift where our clients are increasingly utilizing staffing to meet their requirements, particularly in this highly project driven environment. We remain confident in our strategic direction and believe there are significant opportunities in a growing domestic professional staffing market as Kforce has only a three percent market share. Thank you to all of our employees and consultants for their hard work and dedication in striving to achieve the goals of the Firm."
Joseph J. Liberatore, President, said, "I am excited about this New Era for Kforce, as we continue to strategically align our focus to better meet the needs of our customers. I believe that we have the opportunity to accelerate revenue growth by expanding within our existing clients and selectively adding new clients. We continue to evolve our processes and tools to simplify and improve how we do business with our clients and consultants. We believe this focus was critical to the widespread productivity gains of our associates at all tenure levels and was the key to our success in the quarter."
Mr. Liberatore noted additional operational results for the third quarter include:
-- Flex revenue of $287.4 million in Q3 '13 increased 6.3% from $270.4
million in Q2 '13 and increased 11.5% from $257.8 million in Q3 '12.
-- Search revenues of $12.2 million in Q3 '13 decreased 8.0% from $13.3
million in Q2 '13 and decreased 1.0% from $12.4 million in Q3 '12.
-- Sequential increases in Flex revenues on a billing day basis by segment
were: 7.8% for Tech, 3.5% for FA, 3.6% for HIM and 3.6% for Government
-- Year-over-year increases in Flex revenues by segment were: 14.2% in Tech,
6.1% in FA, 8.4% in HIM, and a 6.3% Government Solutions.
-- Revenue-responsible headcount increased 21% year-over-year.
David M. Kelly, Chief Financial Officer, said, "Third quarter revenue and earnings represent historical highs for the Firm. As we look forward, we believe sustained revenue growth along with the operating leverage in our recently realigned operating platform and our significantly productive revenue responsible team will allow us to exceed prior peak operating margins more quickly." Kforce is scheduled to present at the JPMC Business Services Conference, a Regulation FD compliant event, on November 13, 2013 at 10:45 am (ET) at which point management is expected to provide additional information on the realignment. Financial highlights for the third quarter include:
-- Flex gross profit increased 20 basis points to 29.6% in Q3 '13 from 29.4%
in Q2 '13 and was flat as compared to Q2 '12.
-- Selling, general and administrative expenses as a percentage of revenues
was 26.5% in Q3 '13 as compared to 27.7% in Q2 '13 and 26.0% in Q3 '12.
-- In the third quarter of 2013, the Firm repurchased 0.3 million shares for
$5.8 million $63.3 million remains available for future repurchases
under the Board authorization.
-- Bank debt under the Credit Facility increased to $53.4 million at the end
of Q3 '13 as compared to $50.1 million at the end of Q2 '13, which was
primarily attributable to the common stock repurchases.
Kelly stated, "In addition, looking forward to the fourth quarter of 2013, we expect revenues may be in the $300 million to $304 million range and earnings per share in the range of $0.27 to $0.29, excluding one-time charges related to the realignment. The fourth quarter of 2013 has 62 billing days, versus 64 days in the third quarter of 2013."