Kforce reports record Q1 revenues of $305.3m
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. Net income and earnings per share for the first quarter of 2014 increased 102% and 111%, respectively, versus net income of $3.1 million, or $0.09 per share, for the first quarter of 2013.
David L. Dunkel, Chairman and CEO, said, "We are very pleased with our performance in the first quarter of 2014, as Kforce achieved record quarterly revenues of $305.3 million and earnings per share of 19 cents. Our first quarter growth was broadly driven by the strong growth rates for our Flex staffing businesses in Tech, FA and HIM, which had year-over-year increases of 18.2%, 14.5% and 25.3%, respectively. We believe these growth rates continue to demonstrate the fruits of our relentless pursuit of gaining customer share."
Dunkel continued, "We believe that professional staffing has entered a new age with growth being driven by clients increasingly utilizing a flexible staffing solution to mitigate employment and regulatory risk, as well as the ubiquitous nature of technology today across our clients' business platforms. Against a backdrop of tempered GDP growth, we continue to see a disproportionate share of job growth coming from the temporary staffing sector. The temporary penetration rate is now at 2.06%, surpassing the prior all time high of 2.03%. Knowledge workers are in high demand as the unemployment rate among college-degreed workers is currently 3.4%, about half of the overall U.S. rate of unemployment, and is substantially lower in several of the skill sets Kforce specializes in, particularly in technology. We believe that these secular shifts in the labor market, along with our domestic revenue footprint, have positioned the Firm for even greater future success. I want to thank all of our clients, consultants and employees for making the first quarter of 2014 a very successful quarter for Kforce."
Joseph J. Liberatore, president said, "I am very pleased to see another strong quarter from our team particularly one with success as broad based as this one, with double digit year-over-year revenue growth rates in Tech Flex, FA Flex and HIM Flex, collectively contributing a Flex staffing revenue year-over-year increase of 18%. Our actions in this New Era of Kforce are continuing to drive results and I am proud of the team's execution in meeting the needs of our clients, consultants and employees in our newly aligned and agile infrastructure."
Liberatore noted additional operational results for the first quarter include:
Flex revenues of $295.6 million in Q1 '14 increased 1.5% from $291.2 million in Q4 '13, and increased 16.3% from $254.1 million in Q1 '13.
Search revenues of $9.7 million in Q1 '14 decreased 17.1% from $11.8 million in Q4 '13 and decreased 15.7% from $11.6 million in Q1 '13.
Revenue-generating headcount increased 7.2% year-over-year and remained flat sequentially. The Firm expects to make continued investments in revenue-generating headcount during the remainder of 2014.
David M. Kelly, Chief Financial Officer, said, "The Firm continued to perform well in Q1 '14 which contained 63 billing days, while Q1 '13 contained 63 billing days and Q4 '13 contained 62 billing days." Mr. Kelly continued, "The Firm has achieved historical high quarterly revenues. We believe that we are on track to exceed prior peak 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 18 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 first quarter include:
Selling, general and administrative expense as a percentage of revenues was 25.6% in Q1 '14 as compared to 25.9%, excluding an $11.9 million realignment charge, for Q4 '13, and as compared to 28.5% in Q1 '13.
Flex gross profit decreased 150 basis points to 27.5% in Q1 '14 from 29.0% in Q4 '13 and decreased 80 basis points from 28.3% in Q1 '13.
Operating margin of 3.4% in Q1 '14 increased 140 basis points from 2.0% in Q1 '13.
Adjusted EBITDA of $13.7 million, or $0.41 per share, for Q1 '14 increased 87.2%, or 86.4% per share, from $7.3 million, or $0.22 per share, for Q4 '13, and increased 73.3%, or 78.3% per share, from $7.9 million, or $0.23 per share, for Q1 '13.
Kelly stated, "In addition, looking forward to the second quarter of 2014, we expect revenues may be in the $323.0 million to $328.0 million range and earnings per share in the range of $0.30 to $0.33. The second quarter of 2014 has 64 billing days, as compared to 63 billing days in the first quarter of 2014."