Kforce net income down $5.5m in Q1 2016
Kforce Inc. has announced results for its first quarter of 2016.
Revenues for the quarter ended 31st March 2016 were $322.2m compared to $327.7m for the quarter ended 31st December 2015, a decrease of 1.7%, and compared to $312.6m for the quarter ended 31st March 2015, an increase of 3.1%.
Adjusted net income, excluding the impact of severance costs and certain tax adjustments of $2.7m, for the quarter ended 31st March 2016 was $6.4m, or $0.24 per share, as compared to net income of $11.9m, or $0.43 per share, for the quarter ended 31st December 2015, and net income of $5.8m, or $0.20 per share, for the quarter ended 31st March 2015. Net income for the quarter ended 31st March 2016 was $3.7m, or $0.14 per share.
David L. Dunkel, chairman and CEO, said, "Over the past two quarters we have been aggressively taking action, particularly in our Tech Flex business, to reduce reliance on a few large customers by strengthening our position more deeply in our client portfolio and adding resources at an accelerated level. Though we are seeing signs of recent improvement from these efforts, first quarter revenue of $322.2 million was below our expectations.
"The overall demand environment remains strong. We have begun to see a gradual reacceleration of activity in those few large clients that have slowed their usage of flexible staffing due to transactions, and conversations with representatives at these clients suggest a strong pipeline of projects. Additionally, as we further deepen relationships more broadly in our portfolio, we continue to identify new opportunities, though building significant presence within these large customers will happen gradually and take some time.
"In what we believe is a significant development, during the first quarter of 2016 the United States Department of Veterans Affairs awarded KGS one of nine large business prime contract vehicles to directly support the VA, along with 12 small businesses, in areas that include information technology infrastructure improvements, cyber security, and operations and network management. The contract vehicle, known as "T4 Next Generation" has an overall program ceiling of approximately $22 billion, which is expected to be released over a period of ten years. The T4 Next Generation contract could provide KGS with an opportunity to experience exponential growth over the next several years. The fact that KGS has been supporting the VA for over 20 years, most recently as a subcontractor under the original T4 vehicle, leads us to be very optimistic about our prospects to capture a meaningful share of this significant opportunity in a prime role. KGS has had successful performance in providing solutions to the VA, supported by the centralized delivery capabilities of Kforce, which supports KGS, which we believe were key elements in KGS receiving this award."
Joseph J. Liberatore, president, said, "The disproportionate declines in a few of our largest clients have abated in the first quarter of 2016. These clients, along with many of our other largest clients, have provided significant growth over the last several years and we continue to believe that our longstanding relationships with these clients provide longer term strength to our overall revenue base as these clients continue to emerge from their recent business disruption and internal organizational challenges.
"Demand remains high and we believe our investment in revenue-generating talent and expansion of our focus to a greater number of larger clients over the last several quarters will result in greater client penetration, market share and better execution of delivery. We believe we are taking the appropriate actions to take advantage of our platform, infrastructure and client base to put our Great People in an environment where they can be successful, accelerating revenue growth while delighting our clients and consultants."
David M. Kelly, chief financial officer, said, "While our revenues in the first quarter were slightly below our expectations, we continue to demonstrate leverage with our adjusted earnings per share of $0.24. We remain very focused on the actions necessary to reaccelerate revenue growth, in particular in our Tech Flex business, as well as making the necessary investments in KGS to position us for success in capturing the significant opportunities that we expect to present themselves beginning in the second half of 2016 under the recently awarded T4 Next Generation prime contract. We believe our client relationships remain strong and our sales metrics are trending positively. We remain very confident in the demand environment within the markets and clients that we serve and still expect to meet or exceed our 7.5% operating margin target when $1.6 billion in annualized revenue is reached.
"We are also pleased to announce that our Board of Directors declared a first quarter cash dividend on Kforce common stock of $0.12 per share. The cash dividend will be payable on June 24, 2016 to shareholders of record as of the close of business on June 10, 2016."