Financial Performance - Revenue for Q3 2025 was $332,645, a decrease of 5.8% compared to $353,319 in Q3 2024[14] - Gross profit for Q3 2025 was $92,257, down 6.5% from $98,567 in Q3 2024[14] - Net income for the nine months ended September 30, 2025, was $29,662, a decline of 24.7% from $39,353 in the same period of 2024[20] - Earnings per share (EPS) for Q3 2025 was $0.63, compared to $0.76 in Q3 2024, reflecting a decrease of 17.1%[14] - Revenue for the nine months ended September 30, 2025, decreased 6.1% to nearly $1.00 billion from $1.06 billion in the comparable period in 2024[55] - Flex revenue for the nine months ended September 30, 2025, decreased 6.0% to $0.98 billion from $1.04 billion in the comparable period in 2024[55] - Direct Hire revenue for the nine months ended September 30, 2025, decreased 11.0% to $19.7 million from $22.2 million in the comparable period in 2024[55] - Net income for the nine months ended September 30, 2025, decreased 24.6% to $29.7 million, or $1.66 diluted earnings per share, from $39.4 million, or $2.08 diluted earnings per share, for the nine months ended September 30, 2024[55] - Free Cash Flow for the nine months ended September 30, 2025, was $30.1 million, down from $56.6 million in 2024[79] - Adjusted EBITDA for the nine months ended September 30, 2025, was $56.0 million, compared to $69.1 million in 2024[81] Assets and Liabilities - Total assets increased to $374,152 as of September 30, 2025, up from $357,834 at the end of 2024[16] - Cash and cash equivalents rose to $1,252 as of September 30, 2025, compared to $349 at the end of 2024[16] - Long-term debt increased significantly to $65,000 from $32,700 at the end of 2024, indicating a rise in leverage[16] - The company had $65.0 million outstanding under the Amended and Restated Credit Facility as of September 30, 2025, up from $32.7 million at December 31, 2024[43] - As of September 30, 2025, the company had $65.0 million outstanding under its Amended and Restated Credit Facility, with $134.0 million available for borrowing[82] Cash Flow and Dividends - Cash provided by operating activities for the nine months ended September 30, 2025, was $41,937, down from $65,084 in 2024[20] - The company declared and paid quarterly dividends totaling $20.8 million for the nine months ended September 30, 2025, representing a 3% increase per share[87] - Dividends paid in Q3 2025 amounted to $20,778, slightly lower than $21,282 in Q3 2024[20] - The Firm returned $61.9 million of capital to shareholders in the form of open market repurchases totaling $41.1 million and quarterly dividends totaling $20.8 million during the nine months ended September 30, 2025[55] Stock Repurchase and Authorization - The company repurchased $41,450 worth of common stock during the nine months ended September 30, 2025[20] - The total authorization for the stock repurchase program was increased to $100.0 million in October 2025[32] - The company repurchased approximately 950 thousand shares of common stock at a total cost of approximately $41.1 million during the nine months ended September 30, 2025[32] - The company repurchased a total of 295,374 shares of common stock during the three months ended September 30, 2025, at an average price of $32.02 per share[105] - The total dollar value of shares that may yet be purchased under the repurchase plan is $22,347,693[105] Operational Performance - Selling, general and administrative expenses for the three months ended September 30, 2025, were $75.884 million, compared to $78.308 million for the same period in 2024[36] - The company reported income before income taxes of $14.244 million for the three months ended September 30, 2025, down from $18.287 million in the same period of 2024[36] - Total gross profit percentage decreased by 20 basis points for the three months and 40 basis points for the nine months ended September 30, 2025, compared to the same periods in 2024[67] - Technology Flex revenue decreased by 5.2% year-over-year for the nine months ended September 30, 2025[77] - FA Flex revenue saw a significant decline of 16.0% year-over-year for the nine months ended September 30, 2025[77] - Total Flex revenue experienced a year-over-year decrease of 6.0% for the nine months ended September 30, 2025[77] Credit Facilities and Financial Controls - The Firm entered into a senior secured credit facility with a maximum borrowing capacity of $200.0 million on November 5, 2025[50] - The company has a maximum borrowing capacity of $200 million under a new senior secured credit facility, with a maturity date of November 5, 2030[108] - The new credit facility includes a $10 million sublimit for standby and commercial letters and a $10 million sublimit for swingline loans[108] - The company maintains a fixed charge coverage ratio of not less than 1.25 to 1.00 and a total leverage ratio of no greater than 3.50 to 1.00 under the new credit facility[111] - The applicable margin for Term SOFR loans ranges from 1.250% to 1.625% based on the firm's total leverage ratio[110] Internal Controls and Risk Factors - As of September 30, 2025, the CEO and CFO concluded that the design and operation of the company's Disclosure Controls were effective[97] - No changes in internal control over financial reporting have materially affected the company's internal control during the last fiscal quarter[98] - The company has made accruals for certain legal proceedings, but does not expect these to have a material effect on its financial statements[102] - There have been no material changes in the risk factors previously disclosed in the 2024 Annual Report[103] Strategic Initiatives - The company continues to prioritize investments in strategic initiatives, including the implementation of Workday and leveraging AI capabilities[73]

Core Insights - Premarket trading is showing notable activity with significant price movements indicating potential trading opportunities before the market opens [1] Premarket Gainers - Denny's Corporation (DENN) is up 49% at $6.16 [3] - Cambium Networks Corporation (CMBM) is up 25% at $2.55 [3] - Tactile Systems Technology, Inc. (TCMD) is up 22% at $19.35 [3] - Upwork Inc. (UPWK) is up 19% at $18.60 [3] - Kforce Inc. (KFRC) is up 12% at $27.50 [3] - Super Group (SGHC) Limited (SGHC) is up 12% at $11.91 [3] - Innovex International, Inc. (INVX) is up 10% at $22.62 [3] - Sanmina Corporation (SANM) is up 9% at $154.03 [3] - Exact Sciences Corporation (EXAS) is up 8% at $72.69 [3] - OTG Acquisition Corp. I Class A Ordinary Share (OTGA) is up 7% at $10.77 [3] Premarket Losers - Sarepta Therapeutics, Inc. (SRPT) is down 40% at $14.44 [4] - JELD-WEN Holding, Inc. (JELD) is down 32% at $2.81 [4] - Ichor Holdings, Ltd. (ICHR) is down 29% at $16.05 [4] - Insperity, Inc. (NSP) is down 27% at $32.50 [4] - Prelude Therapeutics Incorporated (PRLD) is down 22% at $3.08 [4] - Forward Industries, Inc. (FORD) is down 20% at $11.11 [4] - Navitas Semiconductor Corporation (NVTS) is down 18% at $10.03 [4] - Diginex Limited (DGNX) is down 17% at $19.51 [4] - Atlas Energy Solutions Inc. (AESI) is down 16% at $10.58 [4] - Chijet Motor Company, Inc. (CJET) is down 15% at $3.24 [4]

Financial Data and Key Metrics Changes - Total revenues for Q3 2025 were $332.6 million, exceeding expectations, with earnings per share of $0.63, surpassing the high end of guidance [2][19] - Overall gross margins improved to 27.7%, up 60 basis points sequentially, while flex margins in the technology business increased by 50 basis points [19][20] - SG&A expenses as a percentage of revenue increased to 22.8%, primarily due to lower revenue and gross profit levels [20] Business Line Data and Key Metrics Changes - Technology business revenues declined 1.1% sequentially and 5.6% year-over-year, while finance and accounting business grew approximately 7% sequentially but declined slightly more than 8% year-over-year [11][19] - Consultants on assignment grew roughly 4% from early third quarter lows, indicating a positive trend in staffing [11][12] - Flex revenues in the finance and accounting business, which currently represent about 7% of total revenues, declined 7.3% year-over-year but saw 6.9% sequential growth [16] Market Data and Key Metrics Changes - The labor market remains weak, with prolonged stagnation in job gains, but internal KPIs improved throughout Q3, leading to an increase in consultants on assignment [4][11] - Demand for services is broad-based across various industries, with no specific industry driving growth, indicating a stable market environment [56][58] Company Strategy and Development Direction - The company is focused on organic growth strategies, emphasizing partnerships with clients to address critical business challenges [9][24] - There is a strong commitment to investing in AI readiness and evolving skill sets to meet growing client demands [9][15] - The company aims to achieve double-digit operating margins and approximately 8% profitability when annual revenues return to $1.7 billion [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic position and ability to deliver above-market results despite macroeconomic uncertainties [26] - The ongoing federal government shutdown and global trade negotiations create a challenging near-term outlook, but there is optimism for sequential growth in Q4 [3][4] - The company anticipates a sequential billing day increase in the technology business during Q4, supported by momentum from new engagements [15][19] Other Important Information - The company returned $16.2 million to shareholders through dividends and share repurchases, maintaining a strong balance sheet with conservative leverage [22][24] - The board approved an increase in share authorization to $100 million, reaffirming the company's commitment to returning capital to shareholders [23] Q&A Session Summary Question: Can you provide a sense of typical July through September performance compared to this year? - Management noted a 4% increase in consultants on assignment, indicating a healthy growth rate compared to pre-pandemic levels, though slightly lower than historical highs [28][29] Question: What contributed to the improvement in gross margins? - The increase in flex gross margins was attributed to lower healthcare costs and a favorable mix shift towards consulting engagements, which typically carry higher margins [30][32] Question: What is the company's exposure to H1B visa changes? - The company has minimal exposure as it does not sponsor new H1B visas, focusing instead on transitioning existing employees, thus expecting no immediate impact on talent access [34][36] Question: What types of AI-related projects are driving demand? - The majority of work involves foundational readiness, data modernization, and operational AI use cases, with a focus on measurable returns [42][44] Question: How close is the company to a staffing revenue bottom? - Management indicated promising signs of stabilization in staffing revenue, with growth observed in both staff augmentation and consulting services [49][50]

Revenue Performance - Revenue for Q3 2025 was $332.6 million, a decrease of 0.5% sequentially and 5.9% year over year[3]. - Technology Flex revenue decreased 1.2% sequentially and 5.5% year over year, while FA Flex revenue increased 6.9% sequentially but decreased 7.3% year over year[3]. - Total Flex revenue showed a year-over-year decline of 5.7% in Q3 2025[17]. - FA Flex revenue experienced a significant decline of 23.2% year-over-year in Q1 2025[17]. Profitability Metrics - Gross profit margin for the quarter was 27.7%, an increase of 60 basis points sequentially but a decrease of 20 basis points year over year[3]. - Diluted earnings per share for Q3 2025 was $0.63, an increase of 6.8% sequentially but a decrease of 16.0% year over year[3]. - The operating margin for Q3 2025 was 4.5%, remaining flat sequentially but decreasing by 80 basis points year over year[3]. - Adjusted EBITDA for Q3 2025 was $19,407,000, compared to $23,808,000 in Q3 2024, reflecting a decline in core profitability[22]. Shareholder Returns - The Board approved a fourth quarter cash dividend of $0.39 per share, payable on December 19, 2025[3]. - The company returned $16.2 million to shareholders through share repurchases and dividends in Q3 2025[3]. Guidance and Expectations - Guidance for Q4 2025 includes revenue estimates of $326 million to $334 million and earnings per share of $0.43 to $0.51[6]. - The company expects sequential billing day growth in both Technology and FA businesses in Q4 2025[2]. Cash Flow and Assets - Free Cash Flow for the nine months ended September 30, 2025, was $30,139,000, down from $56,583,000 in the same period of 2024[19]. - Net cash provided by operating activities for the nine months ended September 30, 2025, was $41,937,000, down from $65,084,000 in 2024[19]. - Total assets as of September 30, 2025, were $374.2 million, an increase from $357.8 million at the end of 2024[11]. - The change in cash and cash equivalents for the nine months ended September 30, 2025, was $903,000, compared to $8,000 in 2024[19]. Expenses - Capital expenditures for the nine months ended September 30, 2025, were $11,798,000, compared to $8,501,000 in 2024[19]. - The company incurred stock-based compensation expense of $3,034,000 in Q3 2025, which may affect future shareholder ownership[21]. - Interest expense, net for Q3 2025 was $758,000, an increase from $429,000 in Q3 2024[22].

Core Viewpoint - Kforce Inc. is set to release its third quarter results on November 3, 2025, after market hours, followed by a conference call to discuss the results [1] Company Information - Kforce Inc. is a provider of professional staffing services and solutions [1] - The conference call will take place at 5:00 pm ET, with a dial-in number provided for participants [1] - A replay of the conference call will be available on the company's investor relations website for one year following the call [1]

Core Insights - The commentary on Kforce Inc. (NYSE: KFRC) reaffirms a bullish outlook on the professional staffing services company, indicating confidence in its performance and market position [1]. Company Overview - Kforce Inc. specializes in professional tech staffing solutions, positioning itself as a key player in the staffing industry [1]. Investment Strategy - The investment approach focuses on acquiring undervalued, profitable stocks with strong balance sheets and minimal debt, suggesting a disciplined investment philosophy [1]. - The strategy includes writing calls against positions to generate additional income, highlighting a proactive income generation method [1]. Risk Management - Risk management is emphasized through position sizing and the use of trailing stop losses, indicating a structured approach to mitigating potential losses [1].

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS.](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS.) This section presents Kforce Inc.'s unaudited condensed consolidated financial statements for the periods ended June 30, 2025, and 2024, including statements of operations, balance sheets, changes in stockholders' equity, and cash flows, along with accompanying notes detailing significant accounting policies, segment information, revenue disaggregation, and other financial disclosures [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This section presents Kforce Inc.'s unaudited condensed consolidated statements of operations, detailing key financial performance metrics for the periods ended June 30, 2025 and 2024 Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $334,316 | $356,318 | $664,344 | $708,207 | | Gross profit | $90,648 | $98,973 | $178,908 | $194,223 | | Income from operations | $14,888 | $19,700 | $26,519 | $35,427 | | Net income | $10,449 | $14,157 | $18,594 | $25,144 | | Diluted EPS | $0.59 | $0.75 | $1.03 | $1.33 | - For the six months ended June 30, 2025, revenue decreased by **6.2%** to **$664.3 million**, net income decreased by **26.0%** to **$18.6 million**, and diluted EPS decreased by **22.6%** to **$1.03**, compared to the same period in 2024[15](index=15&type=chunk)[50](index=50&type=chunk) [Unaudited Condensed Consolidated Balance Sheets](index=6&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section presents Kforce Inc.'s unaudited condensed consolidated balance sheets, outlining assets, liabilities, and stockholders' equity as of June 30, 2025, and December 31, 2024 Unaudited Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total assets | $373,640 | $357,834 | | Total liabilities | $239,220 | $203,216 | | Total stockholders' equity | $134,420 | $154,618 | | Cash and cash equivalents | $2,472 | $349 | | Long-term debt – credit facility | $70,000 | $32,700 | - Total assets increased to **$373.6 million** at June 30, 2025, from **$357.8 million** at December 31, 2024, primarily driven by an increase in cash and cash equivalents and other assets, net. Total liabilities increased significantly due to higher long-term debt from the credit facility[17](index=17&type=chunk) [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) This section presents Kforce Inc.'s unaudited condensed consolidated statements of changes in stockholders' equity, detailing movements from December 31, 2024, to June 30, 2025 Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric (in thousands) | Balance, December 31, 2024 | Balance, June 30, 2025 | | :-------------------- | :------------------------- | :--------------------- | | Total Stockholders' Equity | $154,618 | $134,420 | | Net income | $18,594 (YTD) | $18,594 (YTD) | | Dividends paid | $(13,951) (YTD) | $(13,951) (YTD) | | Repurchases of common stock | $(32,243) (YTD) | $(32,243) (YTD) | - Total stockholders' equity decreased from **$154.6 million** at December 31, 2024, to **$134.4 million** at June 30, 2025, primarily due to significant common stock repurchases and dividend payments, partially offset by net income[17](index=17&type=chunk)[18](index=18&type=chunk)[82](index=82&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section presents Kforce Inc.'s unaudited condensed consolidated statements of cash flows, detailing operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $18,614 | $34,105 | | Net cash used in investing activities | $(7,593) | $(3,752) | | Net cash used in financing activities | $(8,898) | $(30,362) | | Change in cash and cash equivalents | $2,123 | $(9) | - Cash provided by operating activities decreased by **45.4%** to **$18.6 million** for the six months ended June 30, 2025, compared to **$34.1 million** in the prior year, mainly due to lower profitability, higher capitalized costs for Workday implementation, and deferred income tax payments[21](index=21&type=chunk)[80](index=80&type=chunk) - Cash used in investing activities increased to **$7.6 million** in 2025 from **$3.8 million** in 2024, primarily due to higher capital expenditures[21](index=21&type=chunk)[81](index=81&type=chunk) - Cash used in financing activities significantly decreased from **$30.4 million** in 2024 to **$8.9 million** in 2025, driven by net proceeds from the credit facility, partially offset by increased common stock repurchases[21](index=21&type=chunk)[82](index=82&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed notes accompanying the unaudited condensed consolidated financial statements, covering significant accounting policies, segment information, revenue disaggregation, and other financial disclosures [Note A - Summary of Significant Accounting Policies](index=11&type=section&id=Note%20A%20-%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the significant accounting policies used in preparing the unaudited condensed consolidated financial statements, including SEC reporting rules and recent accounting pronouncements - The unaudited condensed consolidated financial statements are prepared in accordance with SEC interim financial reporting rules, condensing or omitting certain GAAP information. They should be read with the 2024 Annual Report on Form 10-K[26](index=26&type=chunk) - Quarterly operating results are affected by client business seasonality and holiday/vacation days, with higher costs typically in Q1 due to employment tax resets[27](index=27&type=chunk) - The recently enacted One Big Beautiful Bill Act (OBBBA) on July 4, 2025, includes significant tax provisions with multiple effective dates, but Kforce does not expect a material effect on its consolidated financial statements[30](index=30&type=chunk) - New FASB guidance for income tax disclosure improvements, effective for Kforce's 2025 annual disclosures, will modify disclosures but is not expected to materially affect consolidated financial statements[33](index=33&type=chunk) [Note B - Reportable Segments](index=12&type=section&id=Note%20B%20-%20Reportable%20Segments) This note describes Kforce's two reportable segments, Technology and Finance and Accounting (FA), and how the Chief Operating Decision-Maker evaluates their performance - Kforce operates in two reportable segments: Technology and Finance and Accounting (FA), providing highly skilled professionals on Flex and Direct Hire bases, and increasingly solutions engagements within Technology[34](index=34&type=chunk) Segment Revenue (in thousands) | Segment (in thousands) | Three Months Ended June 30, 2025 Revenue | Three Months Ended June 30, 2024 Revenue | Six Months Ended June 30, 2025 Revenue | Six Months Ended June 30, 2024 Revenue | | :--------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Technology | $310,527 | $327,874 | $616,811 | $649,958 | | FA | $23,789 | $28,444 | $47,533 | $58,249 | - The Chief Operating Decision-Maker (CODM) evaluates segment performance based on revenue trends, segment gross profit, and key leading indicators like client visits and job order trends[34](index=34&type=chunk) [Note C - Disaggregation of Revenue](index=13&type=section&id=Note%20C%20-%20Disaggregation%20of%20Revenue) This note disaggregates Kforce's total revenue by service type, Flex and Direct Hire, for the three and six months ended June 30, 2025 and 2024 Revenue by Type (in thousands) | Revenue Type (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Flex revenue | $328,411 | $348,784 | $650,981 | $693,508 | | Direct Hire revenue | $5,905 | $7,534 | $13,363 | $14,699 | | Total Revenue | $334,316 | $356,318 | $664,344 | $708,207 | - Flex revenue decreased by **5.8%** for the three months and **6.1%** for the six months ended June 30, 2025, compared to the prior year, while Direct Hire revenue decreased by **21.6%** and **9.1%** respectively[37](index=37&type=chunk)[38](index=38&type=chunk) [Note D - Allowance for Credit Losses](index=14&type=section&id=Note%20D%20-%20Allowance%20for%20Credit%20Losses) This note details the changes in the allowance for credit losses on trade receivables from December 31, 2024, to June 30, 2025 Allowance for Credit Losses (in thousands) | Metric (in thousands) | Amount | | :-------------------- | :----- | | Allowance for credit losses, December 31, 2024 | $916 | | Current period provision | $62 | | Write-offs, net of recoveries | $(76) | | Allowance for credit losses, June 30, 2025 | $902 | - The allowance for credit losses on trade receivables decreased slightly from **$916 thousand** at December 31, 2024, to **$902 thousand** at June 30, 2025, with a current period provision of **$62 thousand** and net write-offs of **$76 thousand**[39](index=39&type=chunk) [Note E - Other Assets, Net](index=14&type=section&id=Note%20E%20-%20Other%20Assets,%20Net) This note provides a breakdown of other assets, net, including assets held in Rabbi Trust, capitalized software, and ROU assets for operating leases Other Assets, Net (in thousands) | Other Assets, Net (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Assets held in Rabbi Trust | $52,939 | $49,356 | | Capitalized software, net | $40,108 | $29,090 | | ROU assets for operating leases, net | $15,320 | $13,764 | | Total Other assets, net | $112,416 | $94,656 | - Other assets, net increased to **$112.4 million** at June 30, 2025, from **$94.7 million** at December 31, 2024, primarily due to an increase in capitalized software, net, which includes **$11.6 million** related to cloud computing arrangements[40](index=40&type=chunk) [Note F - Current Liabilities](index=15&type=section&id=Note%20F%20-%20Current%20Liabilities) This note details Kforce's current liabilities, including accounts payable, deferred compensation, customer rebates, and accrued payroll costs Current Liabilities (in thousands) | Current Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Accounts payable | $45,625 | $38,315 | | Deferred compensation payable | $8,526 | $8,602 | | Customer rebates payable | $4,918 | $6,556 | | Accrued payroll costs | $39,668 | $38,823 | | Total Accounts payable and other accrued liabilities | $63,293 | $61,753 | - Accounts payable increased to **$45.6 million** at June 30, 2025, from **$38.3 million** at December 31, 2024, while customer rebates payable decreased[41](index=41&type=chunk) [Note G - Credit Facility](index=15&type=section&id=Note%20G%20-%20Credit%20Facility) This note outlines Kforce's Amended and Restated Credit Facility, including its maximum borrowing capacity, maturity date, and outstanding borrowings - Kforce has an Amended and Restated Credit Facility with a maximum borrowing capacity of **$200.0 million**, maturing on October 20, 2026[42](index=42&type=chunk) - Outstanding borrowings under the credit facility increased to **$70.0 million** at June 30, 2025, from **$32.7 million** at December 31, 2024. The company was in compliance with all covenants at June 30, 2025[43](index=43&type=chunk) [Note H - Other Long-Term Liabilities](index=15&type=section&id=Note%20H%20-%20Other%20Long-Term%20Liabilities) This note details Kforce's other long-term liabilities, including deferred compensation payable and operating lease liabilities Other Long-Term Liabilities (in thousands) | Other Long-Term Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Deferred compensation payable - long term | $46,466 | $46,183 | | Operating lease liabilities | $13,410 | $11,858 | | Total Other long-term liabilities | $59,888 | $58,059 | - Total other long-term liabilities increased to **$59.9 million** at June 30, 2025, from **$58.1 million** at December 31, 2024, primarily due to an increase in operating lease liabilities[44](index=44&type=chunk) [Note I - Stock-Based Compensation](index=15&type=section&id=Note%20I%20-%20Stock-Based%20Compensation) This note discusses Kforce's stock-based compensation plans, including the 2025 Stock Incentive Plan and unrecognized compensation expense - Shareholders approved the 2025 Stock Incentive Plan on April 23, 2025, reserving approximately **2.7 million** shares for various stock-based awards[45](index=45&type=chunk) Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Stock-based compensation expense | $7,274 | $6,999 | - Total unrecognized stock-based compensation expense related to restricted stock was **$37.7 million** at June 30, 2025, expected to be recognized over a weighted-average remaining period of **4.3 years**[46](index=46&type=chunk) [Note J - Commitments and Contingencies](index=16&type=section&id=Note%20J%20-%20Commitments%20and%20Contingencies) This note outlines Kforce's commitments and contingencies, including executive employment agreements and ordinary course legal proceedings - Kforce has employment agreements with executives that could result in liabilities of approximately **$28.2 million** if terminated without cause following a change in control, or **$9.1 million** without a change in control[48](index=48&type=chunk) - The company is involved in ordinary course legal proceedings and claims, with accruals made where appropriate, and does not expect a material effect on financial statements, though outcomes are inherently uncertain[49](index=49&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.](index=17&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) This section provides an overview of Kforce's financial performance and condition for the six months ended June 30, 2025, highlighting revenue declines across segments, decreased profitability, and strategic investments amidst macroeconomic uncertainties. It also discusses liquidity, capital resources, and non-GAAP financial measures [Executive Summary](index=17&type=section&id=EXECUTIVE%20SUMMARY) This executive summary provides a high-level overview of Kforce's financial performance for the six months ended June 30, 2025, highlighting key financial metrics and capital returns Executive Summary - Six Months Ended June 30, 2025 and 2024 | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :----------------------------- | :----------------------------- | :----------- | | Revenue | $664.3 million | $708.2 million | -6.2% | | Flex revenue | $651.0 million | $693.5 million | -6.1% | | Direct Hire revenue | $13.4 million | $14.7 million | -9.1% | | Gross profit margin | 26.9% | 27.4% | -50 bps | | Net income | $18.6 million | $25.1 million | -26.0% | | Diluted EPS | $1.03 | $1.33 | -22.6% | | Cash provided by operating activities | $18.6 million | $34.1 million | -45.4% | - Kforce returned **$45.7 million** of capital to shareholders through **$31.7 million** in open market repurchases and **$14.0 million** in quarterly dividends during the six months ended June 30, 2025[50](index=50&type=chunk) [Results of Operations](index=18&type=section&id=RESULTS%20OF%20OPERATIONS) This section details Kforce's operating results, including revenue, gross profit, SG&A expenses, depreciation, amortization, other expenses, and income tax expense for the periods presented [Business Overview](index=18&type=section&id=Business%20Overview) This overview describes Kforce's business as a provider of technology and finance and accounting talent solutions, noting market conditions and industry trends - Kforce is a leading domestic provider of technology and finance and accounting talent solutions, employing over **1,600 associates** and approximately **7,500 consultants** on assignment as of June 30, 2025[51](index=51&type=chunk) - Momentum softened in the first half of 2025 due to macroeconomic uncertainties, despite initial optimism. The company observed sequential Flex revenue growth in Q2 2025 for both Technology and FA segments[52](index=52&type=chunk) - The U.S. unemployment rate remained flat at **4.1%** in June 2025. The technology temporary staffing industry is estimated to grow **2%** in 2025, a downward revision from an earlier **5%** forecast[53](index=53&type=chunk) [Operating Results - Three and Six Months Ended June 30, 2025 and 2024](index=18&type=section&id=Operating%20Results%20-%20Three%20and%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section presents a summary of Kforce's operating results, including revenue mix, gross profit, SG&A expenses, and net income as a percentage of revenue Operating Results (% of Revenue) | Metric (% of Revenue) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Technology Revenue | 92.9% | 92.0% | 92.8% | 91.8% | | FA Revenue | 7.1% | 8.0% | 7.2% | 8.2% | | Flex Revenue | 98.2% | 97.9% | 98.0% | 97.9% | | Direct Hire Revenue | 1.8% | 2.1% | 2.0% | 2.1% | | Gross profit | 27.1% | 27.8% | 26.9% | 27.4% | | SG&A expenses | 22.2% | 21.8% | 22.5% | 22.0% | | Net income | 3.1% | 4.0% | 2.8% | 3.6% | [Revenue](index=19&type=section&id=Revenue) This section analyzes Kforce's revenue performance by segment and service type, including Flex and Direct Hire, for the three and six months ended June 30, 2025 and 2024 Revenue by Segment/Type (in thousands) | Segment/Type (in thousands) | 3 Months Ended June 30, 2025 | % Change (YoY) | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | % Change (YoY) | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | | Technology Flex revenue | $307,844 | (5.0)% | $324,064 | $610,279 | (5.0)% | $642,578 | | Technology Direct Hire revenue | $2,683 | (29.6)% | $3,810 | $6,532 | (11.5)% | $7,380 | | FA Flex revenue | $20,567 | (16.8)% | $24,720 | $40,702 | (20.1)% | $50,930 | | FA Direct Hire revenue | $3,222 | (13.5)% | $3,724 | $6,831 | (6.7)% | $7,319 | | Total Revenue | $334,316 | (6.2)% | $356,318 | $664,344 | (6.2)% | $708,207 | - Technology Flex revenue decreased **5.0%** for both the three and six months ended June 30, 2025, primarily due to a decrease in consultants on assignment, but improved **1.8%** sequentially in Q2 2025[56](index=56&type=chunk) - FA Flex revenue decreased **16.8%** and **20.1%** for the three and six months ended June 30, 2025, respectively, but showed a **2.1%** sequential improvement in Q2 2025, the first since Q2 2022[57](index=57&type=chunk) - Direct Hire revenue declined **21.6%** and **9.1%** for the three and six months ended June 30, 2025, respectively, driven by fewer placements, partially offset by increased placement fees[60](index=60&type=chunk) [Gross Profit](index=20&type=section&id=Gross%20Profit) This section analyzes Kforce's gross profit performance by segment and overall, including Flex gross profit margins, for the three and six months ended June 30, 2025 and 2024 Gross Profit Percentage | Gross Profit Percentage | 3 Months Ended June 30, 2025 | % Change (YoY) | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | % Change (YoY) | 6 Months Ended June 30, 2024 | | :---------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | | Technology | 26.3% | (1.9)% | 26.8% | 26.1% | (1.5)% | 26.5% | | FA | 38.1% | (2.1)% | 38.9% | 38.2% | (0.3)% | 38.3% | | Total gross profit percentage | 27.1% | (2.5)% | 27.8% | 26.9% | (1.8)% | 27.4% | | Total Flex gross profit percentage | 25.8% | (1.5)% | 26.2% | 25.4% | (1.9)% | 25.9% | - Total gross profit percentage decreased by **70 basis points** for the three months and **50 basis points** for the six months ended June 30, 2025, primarily due to declines in Direct Hire revenue mix and Flex gross profit margins[62](index=62&type=chunk) - Technology Flex gross profit margins decreased by **30 basis points** for both periods, mainly due to higher healthcare costs, partially offset by improved bill and pay spreads[66](index=66&type=chunk) - FA Flex gross profit margins decreased by **120** and **160 basis points** for the three and six months, respectively, driven by a tighter pricing environment and higher healthcare costs[66](index=66&type=chunk) [SG&A Expenses](index=22&type=section&id=SG%26A%20Expenses) This section analyzes Kforce's Selling, General, and Administrative (SG&A) expenses as a percentage of revenue, detailing compensation and other costs SG&A Component (% of Revenue) | SG&A Component (% of Revenue) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Compensation, commissions, payroll taxes and benefits costs | 18.8% | 18.4% | 19.0% | 18.5% | | Other | 3.4% | 3.4% | 3.5% | 3.5% | | Total SG&A | 22.2% | 21.8% | 22.5% | 22.0% | - SG&A as a percentage of revenue increased by **40** and **50 basis points** for the three and six months ended June 30, 2025, respectively, primarily due to revenue declines and continued investments in strategic priorities[68](index=68&type=chunk)[69](index=69&type=chunk) - Kforce continues to prioritize investments in strategic initiatives, including Workday implementation, integrated strategy efforts, evolution of delivery capabilities, and leveraging artificial intelligence (AI)[70](index=70&type=chunk) [Depreciation and Amortization](index=22&type=section&id=Depreciation%20and%20Amortization) This section details Kforce's depreciation and amortization expenses, including fixed asset depreciation and capitalized software amortization Depreciation and Amortization Expense (in thousands) | Expense (in thousands) | 3 Months Ended June 30, 2025 | % Change (YoY) | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | % Change (YoY) | 6 Months Ended June 30, 2024 | | :--------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | | Fixed asset depreciation | $660 | (19.4)% | $819 | $1,373 | (15.2)% | $1,619 | | Capitalized software amortization | $730 | (0.8)% | $736 | $1,481 | 16.7% | $1,269 | | Total | $1,390 | (10.6)% | $1,555 | $2,854 | (1.2)% | $2,888 | - Capitalized software amortization increased by **16.7%** for the six months ended June 30, 2025, while fixed asset depreciation decreased by **15.2%** for the same period[71](index=71&type=chunk) [Other Expense, Net](index=22&type=section&id=Other%20Expense,%20Net) This section reports Kforce's other expense, net, primarily consisting of interest expense, for the three and six months ended June 30, 2025 and 2024 Other Expense, Net (in thousands) | Expense (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Other expense, net | $1,029 | $504 | $1,594 | $1,160 | - Other expense, net, primarily interest expense, increased to **$1.6 million** for the six months ended June 30, 2025, from **$1.2 million** in the prior year[71](index=71&type=chunk) [Income Tax Expense](index=22&type=section&id=Income%20Tax%20Expense) This section details Kforce's effective income tax rate for the six months ended June 30, 2025 and 2024, and the factors influencing it Effective Tax Rate | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | | Effective tax rate | 25.4% | 26.6% | - The effective tax rate decreased to **25.4%** for the six months ended June 30, 2025, from **26.6%** in the prior year, mainly due to increased research and development tax credits[72](index=72&type=chunk) [Non-GAAP Financial Measures](index=23&type=section&id=Non-GAAP%20Financial%20Measures) This section presents Kforce's non-GAAP financial measures, including revenue growth rates, free cash flow, and Adjusted EBITDA, providing additional insights into performance [Revenue Growth Rates](index=23&type=section&id=Revenue%20Growth%20Rates) This section presents Kforce's non-GAAP revenue growth rates, adjusted for billing days, to provide a clearer evaluation of revenue trends by segment - Non-GAAP revenue growth rates adjust for changes in billing days to provide a clearer evaluation of revenue trends[73](index=73&type=chunk) Non-GAAP Revenue Growth Rates | Metric | Q2 2025 (Non-GAAP) | Q1 2025 (Non-GAAP) | YTD 2025 (Non-GAAP) | | :---------------- | :----------------- | :----------------- | :------------------ | | Technology Flex | 0.2% | (5.2)% | (4.3)% | | FA Flex | 0.5% | (14.2)% | (19.5)% | | Total Flex revenue | 0.2% | (5.8)% | (5.4)% | [Free Cash Flow](index=23&type=section&id=Free%20Cash%20Flow) This section defines and presents Kforce's non-GAAP Free Cash Flow, used to assess liquidity and cash generation for strategic opportunities - Free Cash Flow, a non-GAAP measure, is defined as net cash provided by operating activities less capital expenditures, used to assess liquidity and cash generation for strategic opportunities[74](index=74&type=chunk) Free Cash Flow (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $18,614 | $34,105 | | Capital expenditures | $(8,290) | $(4,979) | | Free cash flow | $10,324 | $29,126 | - Free cash flow decreased significantly to **$10.3 million** for the six months ended June 30, 2025, from **$29.1 million** in the prior year, primarily due to lower operating cash flows and higher capital expenditures[75](index=75&type=chunk) [Adjusted EBITDA](index=24&type=section&id=Adjusted%20EBITDA) This section defines and presents Kforce's non-GAAP Adjusted EBITDA, a key metric used by management to assess core profitability and debt repayment ability - Adjusted EBITDA, a non-GAAP measure, is used by management to assess operations, cash flow generation, and debt repayment ability, providing a metric of core profitability[75](index=75&type=chunk) Adjusted EBITDA (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $10,449 | $14,157 | $18,594 | $25,144 | | Adjusted EBITDA | $19,885 | $24,753 | $36,635 | $45,313 | - Adjusted EBITDA decreased to **$36.6 million** for the six months ended June 30, 2025, from **$45.3 million** in the prior year, reflecting lower net income[77](index=77&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses Kforce's liquidity and capital resources, including cash flows, credit facility utilization, working capital, and stock repurchase activities - Kforce relies on operating cash flows and its credit facility to meet capital and liquidity requirements. At June 30, 2025, **$70.0 million** was outstanding under the credit facility, with **$129.0 million** available[78](index=78&type=chunk)[84](index=84&type=chunk) - Working capital increased slightly to **$113.5 million** at June 30, 2025, from **$112.9 million** at December 31, 2024[78](index=78&type=chunk) - The company believes existing cash, operating cash flows, and available credit will be adequate for at least the next 12 months and the foreseeable future, allowing for continued capital returns to shareholders[83](index=83&type=chunk) [Cash Flows](index=25&type=section&id=Cash%20Flows) This section analyzes Kforce's cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 - Cash provided by operating activities decreased to **$18.6 million** for the six months ended June 30, 2025, from **$34.1 million** in the prior year, primarily due to lower profitability and higher capitalized costs for Workday implementation[80](index=80&type=chunk) - Cash used in investing activities increased to **$7.6 million** in 2025, mainly due to **$8.3 million** in capital expenditures[81](index=81&type=chunk) - Cash provided by financing activities was **$8.9 million** in 2025, a significant change from **$30.4 million** used in 2024, driven by net proceeds from the credit facility, partially offset by increased stock repurchases[82](index=82&type=chunk) [Stock Repurchases](index=26&type=section&id=Stock%20Repurchases) This section details Kforce's common stock repurchase activities and the remaining authorization under its repurchase program - During the six months ended June 30, 2025, Kforce repurchased approximately **655 thousand** shares of common stock for **$31.7 million**[85](index=85&type=chunk) - As of June 30, 2025, **$31.8 million** remained available for further repurchases under the Board-authorized common stock repurchase program[85](index=85&type=chunk) [Critical Accounting Estimates](index=26&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) This section highlights Kforce's critical accounting estimates, particularly for income taxes and goodwill impairment, which involve significant management judgment and assumptions - The preparation of financial statements requires management to make assumptions and estimates, particularly for income taxes and goodwill impairment, which are based on historical experience and current trends[29](index=29&type=chunk)[87](index=87&type=chunk) - Actual results could materially differ from these estimates due to the inherent uncertainty of future events[87](index=87&type=chunk) [New Accounting Standards](index=26&type=section&id=NEW%20ACCOUNTING%20STANDARDS) This section refers to Note A for a discussion of recently adopted accounting standards and their expected impact on Kforce's financial statements - Refer to Note A - Summary of Significant Accounting Policies for a discussion of recently adopted accounting standards, including new FASB guidance for income tax disclosures, which is not expected to have a material effect on consolidated financial statements[33](index=33&type=chunk)[88](index=88&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.](index=26&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK.) There have been no material changes to the quantitative and qualitative disclosures about market risk previously reported in the company's 2024 Annual Report on Form 10-K - No material changes to market risk disclosures since the 2024 Annual Report on Form 10-K[89](index=89&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES.](index=26&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES.) This section details the evaluation of Kforce's disclosure controls and procedures, confirming their effectiveness as of June 30, 2025, and states that no material changes occurred in internal control over financial reporting during the last fiscal quarter [Evaluation of Disclosure Controls and Procedures](index=26&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of Kforce's disclosure controls and procedures as of June 30, 2025, based on evaluations by the CEO and CFO - As of June 30, 2025, the CEO and CFO concluded that Kforce's disclosure controls and procedures were effective in ensuring timely and accurate reporting of information[90](index=90&type=chunk) [Changes in Internal Control over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section states that no material changes in Kforce's internal control over financial reporting occurred during the last fiscal quarter - Management, with CEO and CFO participation, concluded that no material changes in internal control over financial reporting occurred during the last fiscal quarter[91](index=91&type=chunk) [Inherent Limitations of Internal Control Over Financial Reporting](index=27&type=section&id=Inherent%20Limitations%20of%20Internal%20Control%20Over%20Financial%20Reporting) This section acknowledges the inherent limitations of internal controls, including the risk of collusion or management override, which may affect the detection of misstatements - Internal controls have inherent limitations, including the possibility of collusion or management override, which may prevent timely detection of material misstatements[92](index=92&type=chunk) [CEO and CFO Certifications](index=27&type=section&id=CEO%20and%20CFO%20Certifications) This section notes the inclusion of CEO and CFO certifications as Exhibits 31.1 and 31.2, as mandated by the Sarbanes-Oxley Act of 2002 - Certifications by the CEO and CFO are included as Exhibits 31.1 and 31.2, as required by Section 302 of the Sarbanes-Oxley Act of 2002[93](index=93&type=chunk) [PART II - OTHER INFORMATION](index=27&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS.](index=27&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS.) Kforce is involved in routine legal proceedings and claims, for which accruals have been made where appropriate. The company does not anticipate these matters, individually or in aggregate, will materially affect its financial statements, though outcomes are uncertain - Kforce is involved in ordinary course legal proceedings and claims, with accruals made where appropriate, and does not expect a material effect on financial statements, though outcomes are inherently uncertain[95](index=95&type=chunk) [ITEM 1A. RISK FACTORS.](index=27&type=section&id=ITEM%201A.%20RISK%20FACTORS.) There have been no material changes to the risk factors previously disclosed in Kforce's 2024 Annual Report on Form 10-K - No material changes in risk factors since the 2024 Annual Report on Form 10-K[96](index=96&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.](index=27&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS.) This section details Kforce's common stock repurchase activity for the three months ended June 30, 2025, under its Board-authorized repurchase plan Common Stock Repurchase Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :-------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------- | | April 1, 2025 to April 30, 2025 | 236,878 | $44.33 | $31,773,797 | | May 1, 2025 to May 31, 2025 | 4,150 | $42.20 | $31,773,797 | | June 1, 2025 to June 30, 2025 | — | — | $31,773,797 | | Total | 241,028 | $44.30 | $31,773,797 | - During the three months ended June 30, 2025, Kforce repurchased **241,028 shares** of common stock at an average price of **$44.30** per share, with **$31.8 million** remaining available under the repurchase program[97](index=97&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES.](index=27&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES.) Kforce Inc. reported no defaults upon senior securities for the period - No defaults upon senior securities were reported[98](index=98&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES.](index=27&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES.) Kforce Inc. reported no mine safety disclosures for the period - No mine safety disclosures were reported[99](index=99&type=chunk) [ITEM 5. OTHER INFORMATION.](index=28&type=section&id=ITEM%205.%20OTHER%20INFORMATION.) This section confirms that no officers or directors adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No officers or directors adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[100](index=100&type=chunk) [ITEM 6. EXHIBITS.](index=29&type=section&id=ITEM%206.%20EXHIBITS.) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, certifications by the CEO and CFO, and XBRL formatted financial data - Exhibits include Amended and Restated Articles of Incorporation, Amended & Restated Bylaws, CEO and CFO Certifications (31.1, 31.2, 32.1, 32.2), and XBRL formatted financial statements[101](index=101&type=chunk) [SIGNATURES](index=30&type=section&id=SIGNATURES) This section contains the official signatures, certifying the accuracy and completeness of the report on behalf of Kforce Inc - The report was signed on behalf of Kforce Inc. by Jeffrey B. Hackman, Chief Financial Officer, on July 30, 2025[107](index=107&type=chunk)

Core Insights - Kforce reported Q2 2025 GAAP earnings per share of $0.59, slightly below estimates, with GAAP revenue of $334.3 million, marginally exceeding estimates by $0.15 million [1][2] - Year-over-year comparisons show a decline in both revenue (down 6.2%) and earnings (down 21.3%), although operating margins and expenses improved compared to the previous quarter [1][2][7] - Management described the results as consistent with expectations, indicating steady operational execution in a challenging environment [1] Financial Performance - Q2 2025 GAAP EPS was $0.59, matching estimates but down from $0.75 in Q2 2024, reflecting a 21.3% decline [2] - GAAP revenue for Q2 2025 was $334.3 million, slightly above the estimated $334.15 million but down from $356.3 million in Q2 2024, a decrease of 6.2% [2] - Operating margin improved to 4.5% from the previous quarter, while gross profit margin was 27.1%, down from 27.8% year-over-year [2][7] Business Overview - Kforce specializes in technology staffing and professional services, with approximately 92% of revenue derived from technology staffing as of fiscal year 2024 [3] - The company has focused on operational transformation, investing in cloud technologies and expanding its market share in U.S. technology staffing [4] Segment Performance - Technology Flex revenue was $307.8 million, up 1.8% from the prior quarter but down 5.0% year-over-year [5] - Finance and Accounting Flex revenue was $20.6 million, rising 2.1% from the previous quarter but falling 16.8% year-over-year [6] - Direct Hire segment revenue was $5.9 million, with placement volumes down over 25% from the prior quarter [6] Strategic Initiatives - Kforce is progressing on key investment programs, including the implementation of Workday, a cloud-based ERP system, expected to be completed in Q1 2026 [8] - The development center in India, operational since January 2025, has secured early project contracts [8] Shareholder Returns - The quarterly dividend was maintained at $0.39 per share, with $17.4 million returned to shareholders through dividends and share repurchases during Q2 2025 [9] - The company ended the quarter with $2.47 million in cash and $70.0 million in long-term debt [9] Future Guidance - For Q3 2025, management projected GAAP revenue between $324 million and $332 million and GAAP EPS of $0.53 to $0.61, both below the recently reported results [10] - Management remains cautious, indicating that short-term softness is due to specific client decisions rather than a decline in demand [10][11]

Company Performance - Kforce reported quarterly earnings of $0.59 per share, missing the Zacks Consensus Estimate of $0.60 per share, and down from $0.75 per share a year ago, representing an earnings surprise of -1.67% [1] - The company posted revenues of $334.32 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.16%, but down from $356.32 million year-over-year [2] - Over the last four quarters, Kforce has surpassed consensus EPS estimates just once, while topping consensus revenue estimates three times [2] Stock Performance - Kforce shares have declined approximately 18.1% since the beginning of the year, contrasting with the S&P 500's gain of 8.6% [3] - The current Zacks Rank for Kforce is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.61 on revenues of $331.76 million, and for the current fiscal year, it is $2.19 on revenues of $1.32 billion [7] - The outlook for the staffing industry, where Kforce operates, is currently in the top 39% of Zacks industries, suggesting potential for better performance compared to lower-ranked industries [8]

Financial Data and Key Metrics Changes - Total revenues for the second quarter were $334.3 million, a decline of 6.2% year over year, consistent with expectations [12] - Earnings per share for the quarter were $0.59, aligning with expectations [21] - Overall gross margins increased by 40 basis points sequentially to 27.1%, driven by an increase in Flex margins [21] - Operating margin for the second quarter was 4.5%, with an effective tax rate of 24.6%, slightly lower than expected due to favorable adjustments [23][24] Business Line Data and Key Metrics Changes - Flex revenues in technology and finance and accounting businesses improved slightly sequentially in Q2, while Direct Hire revenues faced challenges [12] - Flex revenues in the finance and accounting business, which represent about 6% of total revenues, declined 16.8% year over year but saw sequential growth for the first time in years [18] - Average bill rate in the technology business remained stable at approximately $90, while the finance and accounting average bill rate improved to about $54 [14][18] Market Data and Key Metrics Changes - The company operates in a demand-constrained environment, with clients maintaining significant backlogs of technology investments [4][5] - Job gains have been concentrated in sectors like healthcare, leisure, hospitality, and construction, while job creation outside these sectors has been minimal [5] - The demand for consulting-led offerings remains strong, contributing to overall technology top-line outperformance [13] Company Strategy and Development Direction - The company is focused on organic growth strategies and investing in consulting-oriented solutions to meet client needs [10][12] - There is a strategic shift towards providing flexible talent solutions as companies assess macroeconomic conditions [6][9] - The company aims to leverage AI and other innovative technologies to enhance business operations and client offerings [6][9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the stability of the technology business and the potential for growth in AI-related services [9][20] - The company anticipates a modest sequential decline in technology business revenues in Q3 due to unexpected project ends [17] - Management highlighted the importance of retaining productive associates and making targeted investments to capitalize on future market demand [19][20] Other Important Information - The company has returned approximately $1 billion in capital to shareholders since 2007, representing about 75% of cash generated [26] - The company expects Q3 revenues to be in the range of $324 million to $332 million, with earnings per share between $0.53 and $0.61 [26] Q&A Session Summary Question: Can you discuss the levels of discussion regarding AI and when the company expects to assist clients more significantly? - Management noted that most organizations are still in the preparation phase for AI, focusing on foundational readiness aspects [30][31] Question: What is the nature of the unexpected project ends mentioned? - Management clarified that these project ends were due to clients reallocating technology investments rather than budget cuts [36][37] Question: How is the pipeline looking currently? - Management indicated that the pipeline remains strong, with pent-up demand for legacy projects and increased interest in data and AI preparation [38][39] Question: Is there a common thread among the project ends impacting trends? - Management stated that the project ends were largely due to strategic reallocations of technology investments by clients [77][80] Question: What impact does the nearshore/offshore dynamic have on margins? - Management confirmed that while the nearshore/offshore business is small, it has been slightly accretive to margins [81]