Kforce reports Q3 revenues from continuing operations of $313.8m
Revenues from continuing operations for the quarter ended September 30, 2014 were $313.8 million compared to $302.8 million for the quarter ended June 30, 2014, an increase of 3.7%, and compared to $280.0 million for the quarter ended September 30, 2013, an increase of 12.1%. Income from continuing operations for the quarter ended September 30, 2014 was $8.0 million compared to $8.0 million for the quarter ended June 30, 2014, and compared to $7.6 million for the quarter ended September 30, 2013. In the quarter ended September 30, 2014, Kforce reported net income of $65.0 million, or $2.06 per share, versus net income of $10.7 million, or $0.33 per share, for the quarter ended June 30, 2014, and net income of $9.0 million and $0.27 per share, for the third quarter of 2013. Results for the third quarter of 2014 were impacted by the $56.1 million net gain on sale of Kforce Healthcare, Inc. which is reported in discontinued operations.
During the third quarter of 2014, the Firm also incurred $2.4 million of pre-tax non-recurring charges, including settlement costs related to the termination of all post retirement health benefit obligations, severance costs related to identified operational alignment efficiencies and inventory adjustments related to our KGS product business. After adjusting for these non-recurring items, adjusted income from continuing operations for the quarter ended September 30, 2014 was $9.4 million, or $0.30 per share.
David L. Dunkel, Chairman and CEO, said, "We are pleased with our performance in the third quarter of 2014. Our third quarter growth was primarily driven by the strong growth rates in both our Tech and FA Flex staffing businesses, which had year-over-year increases of 12.4% and 17.3%, respectively. We are also very pleased with KGS, which has posted three consecutive quarters of sequential growth and has now grown 2.7% year over year. We believe these growth rates continue to demonstrate our relentless pursuit of gaining customer share coupled with a strong demand environment. Against a backdrop of tempered economic growth, we continue to see a disproportionate share of job growth coming from the temporary staffing sector as we saw another record high achieved in September with the BLS temp penetration rate moving up to 2.1%. "
Mr. Dunkel continued, "We are very excited about our prospects, particularly with recent actions to further refine our focus around our Tech and FA service lines. We remain committed to enhancing shareholder value, and have completed significant share repurchases during the third quarter of 2014. I want to thank all of our clients, consultants and employees for making the third 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 both Tech Flex and FA Flex. 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."
Mr. Liberatore noted additional operational results for the third quarter include:
• Flex revenues of $301.3 million in Q3 '14 increased 3.8% from $290.2 million in Q2 '14, and increased 12.5% from $267.8 million in Q3 '13.
• Search revenues of $12.5 million in Q3 '14 decreased 0.7% from $12.6 million in Q2 '14 and increased 2.9% from $12.2 million in Q3 '13.
• Revenue-generating headcount increased 2.6% year-over-year. The Firm expects to make accelerated investments in revenue-generating headcount during the remainder of 2014.
David M. Kelly, Chief Financial Officer, said, "We have made significant progress towards our revenue and earnings goals. Q3 '14, Q2'14, and Q3 '13 each contained 64 billing days." Mr. Kelly continued, "We believe that we are still on track to reach operating margins of 7.5% as annualized revenues approach $1.6 billion through a combination of several factors, including increasing productivity from our revenue-generating team and continuing to capitalize on additional efficiencies in our support structure. We believe we have set the stage for further revenue and operating leverage growth, which we believe will ultimately drive increased value to our shareholders."
Financial highlights for the third quarter include:
• Flex gross profit margin from continuing operations increased 30 basis points to 28.5% in Q3 '14 from 28.2% in Q2 '14 and decreased 100 basis points from 29.5% in Q3 '13.
• Selling, general and administrative expense as a percentage of revenues from continuing operations was 26.2% in Q3'14. Selling, general and administrative expense as a percentage of revenues from continuing operations, as adjusted for the non-recurring charges, was 25.5% in Q3 '14 as compared to 25.9% for Q2 '14 and 26.9% in Q3 '13.
• During the three months ended September 30, 2014, the Firm repurchased approximately 1.9 million shares of common stock at a total cost of $38.5 million.
Mr. Kelly stated, "In addition, looking forward to the fourth quarter of 2014, we expect revenues from continuing operations may be in the $316 million to $322 million range and earnings per share from continuing operations in the range of $0.30 to $0.32. The fourth quarter of 2014 has 62 billing days, as compared to 64 billing days in the third quarter of 2014. "
On Tuesday, October 28, 2014, Kforce will host a conference call to discuss these results. The call will begin at 5:00 p.m. Eastern Time.
The dial-in number is (877) 344-3890. The conference passcode is Kforce. The replay of the call will be available from 8:00 p.m. EDT, October 28, 2014 through November 4, 2014 by dialing (855) 859-2056, passcode 34070119.
This call is being webcast by Shareholder.com and can be accessed at Kforce's web site at www.kforce.com (select "Investor Relations"). The webcast replay will be available until November 4, 2014.