Kforce reports Q4 & full year 2013 results
Revenues for the quarter ended December 31, 2013 were $302.9 million compared to $299.7 million for the quarter ended September 30, 2013, an increase of 4.4% on a billing day basis, and compared to $269.8 million for the quarter ended December 31, 2012, an increase of 12.3%. Adjusted net income, which is defined as net income before realignment-related and non-cash goodwill impairment charges, for the quarter ended December 31, 2013 was $9.1 million, or $0.28 per share, versus $9.0 million, or $0.27 per share, for the quarter ended September 30, 2013. Adjusted net income and earnings per share for the fourth quarter of 2013 increased 6.6% and 16.7%, respectively, versus adjusted net income of $8.6 million, or $0.24 per share, for the fourth quarter of 2012. On a GAAP basis, Kforce reported a net loss of $8.2 million, or a loss of $0.25 per share, for the quarter ended December 31, 2013 and net income for the quarter ended December 31, 2012 of $6.1 million, or $0.17 per share.
During the quarter ended December 31, 2013, the Firm executed a plan to streamline its leadership and revenue enablement support structure to better align a higher percentage of roles closer to the customer. As a result of this realignment, the Firm incurred pre-tax charges related to severance, benefits, bonus, and other related costs of $11.9 million during the fourth quarter of 2013. Additionally, during the quarter ended December 31, 2013, Kforce recorded a pre-tax impairment charge in its Government Solutions reporting unit of $14.5 million due to management's decision during the quarter to narrow the scope of offerings and focus on prime solutions-based services.
Kforce reported total revenue from continuing operations for the year ended December 31, 2013 of $1.15 billion as compared to $1.08 billion for 2012, an increase of 6.4%. Adjusted net income for the year ended December 31, 2013 was $28.2 million or $0.84 per share, versus adjusted net income of $30.8 million, or $0.85 per share for 2012. On a GAAP basis, Kforce reported net income of $10.8 million, or $0.32 per share, for the year ended December 31, 2013 and a net loss of $13.7 million, or a loss of $0.38 per share for the year ended December 31, 2012.
David L. Dunkel, Chairman and CEO, said, "We are very pleased with our performance in 2013, and the fourth quarter in particular, as Kforce achieved record quarterly revenues of $302.9 million and adjusted earnings per share of 28 cents. Our fourth quarter growth was driven by Tech Flex, our largest business segment, where growth accelerated to 18.3% year-over-year. We will continue to invest in our growing Tech Flex business given the positive dynamics that we see going forward. Our Tech, FA, and HIM businesses all grew sequentially for the third consecutive quarter driving year-over-year total Firm revenue growth above 12%. I want to thank all of our clients, consultants and employees for making 2013 a very successful year for Kforce. We believe the strategic actions we took in 2013 have positioned the Firm for even greater success in 2014 for all of our stakeholders."
Joseph J. Liberatore, President said, "I am pleased with our strong performance in the fourth quarter, and feel confident that we have built a solid foundation that we can capitalize on for further success. We will continue to evolve our premier partnerships with our clients, strive to be the Employer of Choice for our consultants and core employees as well as continue to evolve our revenue enablement support functions around an agile customer centric infrastructure."
Mr. Liberatore noted additional operational results for the fourth quarter include:
Flex revenues per billing day of $4.7 million in Q4 '13 increased 4.6% from $4.5 million in Q3 '13 and increased 12.5% from $4.2 million in Q4 '12.
Sequential percentage changes in Flex revenues on a billing day basis by segment were: 8.8% increase for HIM, 5.6% increase for Tech, 4.7% increase for FA, and a 7.2% decrease for Government Solutions.
Year-over-year changes in Flex revenue were an 18.3% increase in Tech, 7.0% increase in FA, 7.0% increase in HIM, and a 10.3% decrease in Government Solutions.
Search revenues of $11.8 million in Q4 '13 decreased 4.0% from $12.2 million in Q3 '13 and increased 5.9% from $11.1 million in Q4 '12.
David M. Kelly, Chief Financial Officer, said, "The Firm continued to perform well in Q4 '13 which contained 62 billing days, while Q3 '12 contained 64 billing days and Q4 '12 contained 62 billing days." Mr. Kelly continued, "The Firm has achieved historical highs in revenue for the quarter and full year. We are on track to exceed prior peak operating margin of 7.4% operating margins as annualized revenues approach $1.6 billion through a combination of several factors, including positive secular drivers in the economic environment, a high proportion of our business in the fast growing technology sector, increasing productivity from the investments we have made over the past 15 months in revenue generating headcount and our streamlined revenue enabling support structure. We believe we have set the stage for further revenue acceleration and operating leverage growth, which will ultimately drive increased value to our shareholders."
Financial highlights for the fourth quarter and 2013 include:
Flex gross profit decreased 60 basis points to 29.0% in Q4 '13 from 29.6% in Q3 '13 and decreased 90 basis points from 29.9% in Q4 '12.
Flex gross profit increased 10 basis points to 29.1% for fiscal 2013 from 29.0% for fiscal 2012.
Selling, general and administrative expense as a percentage of revenues, exclusive of the $11.9 million realignment charge, for Q4 '13 was 25.9% compared to 26.5% for Q3 '13 and 26.9% for Q4 '12.
Bank debt under the Credit Facility increased to $62.6 million at the end of Q4 '13 as compared to $53.4 million at the end of Q3 '13, which is primarily attributable to the settlement of certain realignment charges during the fourth quarter and the dividend issued in December 2013.
The Firm repurchased 1.8 million shares for $27.3 million during 2013.
The Firm amended its Credit Facility to increase borrowing capacity by $35 million to $135 million
Adjusted earnings per share decreased 1.2% in fiscal 2013 to $0.84 as compared to $0.85 per share in fiscal 2012.
Mr. Kelly stated, "As has been widely discussed this quarter, the substantial number of widespread winter storms to date in the quarter has had a greater than normal seasonal impact on our revenues. Thus, we have elected to give a broader range in our guidance. Looking forward to the first quarter of 2014, we expect revenues may be in the $298 million to $304 million range and earnings per share in the range of $0.15 to $0.18. Implicit in the first quarter's guidance is approximately an $0.11 sequential impact from payroll taxes. The first quarter of 2014 has 63 billing days."