Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Exact name of registrant as specified in its charter _______________________________________________________________ FORM 10-Q ________________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For ...

Kforce, Inc. (NYSE:KFRC) Q3 2022 Earnings Conference Call October 31, 2022 5:00 PM ET Company Participants Joseph Liberatore - CEO, President & Director Kye Mitchell - EVP & COO David Kelly - EVP, Chief Financial & Administrative Officer and Corporate Secretary Conference Call Participants Timothy Mulrooney - William Blair & Company Marc Riddick - Sidoti & Company Kartik Mehta - Northcoast Research Partners Tobey Sommer - Truist Securities Mark Marcon - Robert W. Baird & Co. Operator Ladies and gentlemen, t ...

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This part presents Kforce Inc.'s unaudited condensed consolidated financial statements and related disclosures [ITEM 1. FINANCIAL STATEMENTS.](index=3&type=section&id=Item%201.%20Financial%20Statements.) This section presents Kforce Inc.'s unaudited condensed consolidated financial statements and detailed notes [UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME](index=3&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME) This section provides Kforce Inc.'s unaudited condensed consolidated statements of operations and comprehensive income **Three Months Ended June 30, 2022 vs. 2021 (in thousands):** | Metric | 2022 | 2021 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Revenue | $436,516 | $403,614 | $32,902 | 8.2% | | Gross profit | $131,072 | $118,931 | $12,141 | 10.2% | | Income from operations | $33,849 | $33,123 | $726 | 2.2% | | Net income | $26,916 | $21,188 | $5,728 | 27.0% | | Diluted EPS | $1.30 | $1.00 | $0.30 | 30.0% | **Six Months Ended June 30, 2022 vs. 2021 (in thousands):** | Metric | 2022 | 2021 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Revenue | $853,483 | $766,839 | $86,644 | 11.3% | | Gross profit | $254,958 | $217,613 | $37,345 | 17.2% | | Income from operations | $61,593 | $52,574 | $9,019 | 17.2% | | Net income | $46,097 | $34,449 | $11,648 | 33.8% | | Diluted EPS | $2.22 | $1.61 | $0.61 | 37.9% | [UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS](index=4&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section presents Kforce Inc.'s unaudited condensed consolidated balance sheets as of June 30, 2022, and December 31, 2021 **Balance Sheet Highlights (in thousands):** | Metric | June 30, 2022 | December 31, 2021 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Cash and cash equivalents | $29,974 | $96,989 | $(67,015) | | Total current assets | $326,293 | $372,111 | $(45,818) | | Total assets | $442,052 | $503,401 | $(61,349) | | Total current liabilities | $189,516 | $160,431 | $29,085 | | Long-term debt – credit facility | $0 | $100,000 | $(100,000) | | Total liabilities | $231,519 | $314,995 | $(83,476) | | Total stockholders' equity | $210,533 | $188,406 | $22,127 | [UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY](index=5&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) This section details changes in Kforce Inc.'s stockholders' equity for the six months ended June 30, 2022 - Total stockholders' equity **increased** from **$188,406 thousand** at December 31, 2021, to **$210,533 thousand** at June 30, 2022, driven by net income of **$46,097 thousand**, stock-based compensation expense, and employee stock purchase plan contributions, partially offset by dividends paid and common stock repurchases[20](index=20&type=chunk) **Key Changes in Stockholders' Equity (Six Months Ended June 30, 2022, in thousands):** | Item | Amount | | :------------------------------------ | :------- | | Balance, December 31, 2021 | $188,406 | | Net income | $46,097 | | Stock-based compensation expense | $8,847 | | Employee stock purchase plan | $537 | | Dividends paid | $(12,187) | | Repurchases of common stock | $(20,553) | | Balance, June 30, 2022 | $210,533 | [UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=7&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section outlines Kforce Inc.'s unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021 **Cash Flow Summary (Six Months Ended June 30, in thousands):** | Activity | 2022 | 2021 | | :-------------------------------- | :----- | :----- | | Cash provided by operating activities | $70,760 | $36,574 | | Cash used in investing activities | $(5,958) | $16,323 | | Cash used in financing activities | $(131,817) | $(39,104) | | Change in cash and cash equivalents | $(67,015) | $13,793 | | Cash and cash equivalents, end of period | $29,974 | $117,279 | - Operating cash flow **significantly increased** in H1 2022 to **$70.8 million** from **$36.6 million** in H1 2021. Investing activities shifted from providing cash in 2021 (due to asset sales) to using cash in 2022. Financing activities saw a **substantial increase** in cash usage, primarily due to the repayment of **$100 million** on the credit facility[23](index=23&type=chunk) [Note A - Summary of Significant Accounting Policies](index=9&type=section&id=Note%20A%20-%20Summary%20of%20Significant%20Accounting%20Policies) This note summarizes Kforce Inc.'s significant accounting policies and the basis of financial statement preparation - The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules for interim financial reporting, condensing or omitting certain GAAP information. Management believes disclosures are adequate and reflect all necessary adjustments for fair presentation. Quarterly results are affected by billing days, client seasonality, and increased holiday/vacation days, with **higher costs** typically in Q1 due to employment tax resets[27](index=27&type=chunk)[28](index=28&type=chunk) - Kforce retains **significant risk** for health insurance claims, up to **$600,000** per participant annually, and an aggregate annual loss of **$200,000** for claims exceeding **$600,000**. Accruals for health insurance costs are based on historical claims, actuarial completion factors, and qualitative review[31](index=31&type=chunk) - No new accounting standards adopted during the twenty-six weeks ended June 26, 2022, had an impact on financial statements, and no unadopted standards are expected to have a **significant impact**[34](index=34&type=chunk)[35](index=35&type=chunk) [Note B - Reportable Segments](index=11&type=section&id=Note%20B%20-%20Reportable%20Segments) This note provides financial information for Kforce Inc.'s Technology and Finance and Accounting reportable segments **Segment Performance (Three Months Ended June 30, in thousands):** | Metric | Technology (2022) | Technology (2021) | FA (2022) | FA (2021) | | :---------------- | :------------------ | :------------------ | :-------- | :-------- | | Revenue | $384,595 | $310,728 | $51,921 | $92,886 | | Gross profit | $109,917 | $88,235 | $21,155 | $30,696 | **Segment Performance (Six Months Ended June 30, in thousands):** | Metric | Technology (2022) | Technology (2021) | FA (2022) | FA (2021) | | :---------------- | :------------------ | :------------------ | :-------- | :-------- | | Revenue | $744,500 | $590,288 | $108,983 | $176,551 | | Gross profit | $212,367 | $162,515 | $42,591 | $55,098 | - Kforce operates through Technology and Finance and Accounting (FA) segments. Technology revenue and gross profit saw **significant increases**, while FA experienced **declines**, primarily due to the planned reduction in COVID-19 related business and repositioning efforts[37](index=37&type=chunk) [Note C - Disaggregation of Revenue](index=12&type=section&id=Note%20C%20-%20Disaggregation%20of%20Revenue) This note disaggregates Kforce Inc.'s revenue by service type (Flex and Direct Hire) and reportable segment **Revenue Disaggregation by Type (Three Months Ended June 30, in thousands):** | Revenue Type | Technology (2022) | Technology (2021) | FA (2022) | FA (2021) | Total (2022) | Total (2021) | | :------------- | :------------------ | :------------------ | :-------- | :-------- | :----------- | :----------- | | Flex revenue | $375,507 | $304,645 | $44,193 | $86,717 | $419,700 | $391,362 | | Direct Hire revenue | $9,088 | $6,083 | $7,728 | $6,169 | $16,816 | $12,252 | **Revenue Disaggregation by Type (Six Months Ended June 30, in thousands):** | Revenue Type | Technology (2022) | Technology (2021) | FA (2022) | FA (2021) | Total (2022) | Total (2021) | | :------------- | :------------------ | :------------------ | :-------- | :-------- | :----------- | :----------- | | Flex revenue | $727,223 | $579,429 | $94,343 | $165,780 | $821,566 | $745,209 | | Direct Hire revenue | $17,277 | $10,859 | $14,640 | $10,771 | $31,917 | $21,630 | - Flex revenue remains the **dominant revenue type**, with Technology Flex revenue showing **strong growth** (**25.5%** YoY for six months), while FA Flex revenue **declined significantly** (**-43.1%** YoY for six months). Direct Hire revenue showed **robust growth** across both segments (**47.6%** YoY total for six months)[39](index=39&type=chunk) [Note D - Allowance for Credit Losses](index=12&type=section&id=Note%20D%20-%20Allowance%20for%20Credit%20Losses) This note details Kforce Inc.'s accounting policy and activity for the allowance for credit losses on trade receivables - The allowance for credit losses on trade receivables is determined by factors such as write-off and delinquency trends, specific analysis of past-due balances, client concentration, and the U.S. economy. Credit loss rates are applied by aging category, and quarterly credit reviews are performed for certain clients[40](index=40&type=chunk) **Allowance for Credit Losses Activity (Six Months Ended June 30, 2022, in thousands):** | Item | Amount | | :---------------------------------------------------------- | :----- | | Allowance for credit losses, January 1, 2022 | $1,729 | | Current period provision (credit) | $(172) | | Write-offs charged against the allowance, net of recoveries | $(201) | | Allowance for credit losses, June 30, 2022 | $1,356 | [Note E - Other Assets, Net](index=13&type=section&id=Note%20E%20-%20Other%20Assets,%20Net) This note provides a breakdown of Kforce Inc.'s other assets, net, including investments and capitalized software **Other Assets, Net (in thousands):** | Asset Type | June 30, 2022 | December 31, 2021 | | :------------------------------------ | :------------ | :---------------- | | Assets held in Rabbi Trust | $31,874 | $41,607 | | Right-of-use assets for operating leases, net | $11,889 | $15,395 | | Capitalized software, net | $15,572 | $14,666 | | Equity method investment (WorkLLama) | $15,668 | $17,008 | | Other non-current assets | $6,686 | $2,015 | | Total Other assets, net | $82,687 | $92,629 | - The equity method investment in WorkLLama resulted in a loss of **$1.8 million** for the six months ended June 30, 2022, and Kforce contributed **$0.5 million** in capital during the same period. A promissory note receivable of **$2.0 million** was issued to WorkLLama[42](index=42&type=chunk) [Note F - Current Liabilities](index=13&type=section&id=Note%20F%20-%20Current%20Liabilities) This note details Kforce Inc.'s current liabilities, including accounts payable, accrued payroll, and other accrued liabilities **Current Liabilities (in thousands):** | Liability Type | June 30, 2022 | December 31, 2021 | | :------------------------------------ | :------------ | :---------------- | | Accounts payable and other accrued liabilities | $94,616 | $81,408 | | Accrued payroll costs | $88,454 | $71,424 | | Total current liabilities | $189,516 | $160,431 | - Accrued payroll costs include approximately **$19.3 million** in payroll tax payments related to the CARES Act 2020, expected to be repaid by December 31, 2022. The Supplemental Executive Retirement Plan (SERP) was terminated in April 2021, with **$20.0 million** in benefits fully paid in July 2022[43](index=43&type=chunk)[44](index=44&type=chunk) [Note G - Credit Facility](index=13&type=section&id=Note%20G%20-%20Credit%20Facility) This note describes Kforce Inc.'s credit facility, including borrowing capacity and outstanding balances - Kforce has an Amended and Restated Credit Facility with a maximum borrowing capacity of **$200.0 million**, maturing on October 20, 2026. The outstanding balance of **$100.0 million** was repaid in May 2022, resulting in **$0** outstanding as of June 30, 2022[45](index=45&type=chunk)[47](index=47&type=chunk) [Note H - Other Long-Term Liabilities](index=14&type=section&id=Note%20H%20-%20Other%20Long-Term%20Liabilities) This note outlines Kforce Inc.'s other long-term liabilities, such as deferred compensation and operating lease liabilities **Other Long-Term Liabilities (in thousands):** | Liability Type | June 30, 2022 | December 31, 2021 | | :-------------------------- | :------------ | :---------------- | | Deferred compensation plan | $33,030 | $42,623 | | Operating lease liabilities | $8,959 | $11,919 | | Total | $42,003 | $54,564 | [Note I - Stock Incentive Plans](index=14&type=section&id=Note%20I%20-%20Stock%20Incentive%20Plans) This note describes Kforce Inc.'s stock incentive plans and related stock-based compensation expense - The 2021 Stock Incentive Plan, approved by shareholders, reserves approximately **3.9 million** shares for various stock-based awards and terminates on April 22, 2031. Restricted stock awards vest over one to ten years[49](index=49&type=chunk)[50](index=50&type=chunk) **Stock-Based Compensation Expense (in thousands):** | Period | 2022 | 2021 | | :-------------------------------- | :----- | :----- | | Three Months Ended June 30, | $4,410 | $3,532 | | Six Months Ended June 30, | $8,848 | $6,936 | - As of June 30, 2022, total unrecognized stock-based compensation expense related to restricted stock was **$42.0 million**, to be recognized over a weighted-average remaining period of **4.3 years**[51](index=51&type=chunk) [Note J - Derivative Instruments and Hedging Activity](index=14&type=section&id=Note%20J%20-%20Derivative%20Instruments%20and%20Hedging%20Activity) This note details Kforce Inc.'s use of derivative instruments and hedging activities to manage interest rate risk - Kforce terminated Swap B in May 2022, receiving a **$4.1 million** gain, which is included in other income. As of June 30, 2022, the Firm had no outstanding derivative instruments, having used interest rate swaps (Swap A and Swap B) to mitigate rising interest rate risks on variable rate debt[52](index=52&type=chunk)[53](index=53&type=chunk)[55](index=55&type=chunk) [Note K - Fair Value Measurements](index=15&type=section&id=Note%20K%20-%20Fair%20Value%20Measurements) This note provides information on Kforce Inc.'s fair value measurements, particularly for derivative instruments - Interest rate swaps were measured at fair value using Level 2 inputs. Swap A matured in April 2022, and Swap B was terminated in May 2022. There were no transfers into or out of Level 1, 2, or 3 assets or liabilities during the six months ended June 30, 2022[57](index=57&type=chunk)[58](index=58&type=chunk) [Note L - Commitments and Contingencies](index=15&type=section&id=Note%20L%20-%20Commitments%20and%20Contingencies) This note outlines Kforce Inc.'s various commitments and contingencies, including legal proceedings and equity investments - Kforce has employment agreements with executives that provide for post-employment benefits, with potential liabilities of approximately **$38.2 million** following a change in control or **$13.7 million** without a change in control[59](index=59&type=chunk) - The company is involved in several legal proceedings, primarily class action and PAGA lawsuits in California related to alleged labor code violations (e.g., meal/rest periods, wage statements, overtime). While some settlements have been reached, others are ongoing, and outcomes are uncertain, though Kforce does not currently expect a **material adverse effect** on its financial position[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - Kforce holds a **50%** noncontrolling equity method investment in WorkLLama, a joint venture. Despite not achieving operational and financial milestones, Kforce contributed the full **$22.5 million** maximum potential capital as of June 30, 2022. An impairment test as of June 30, 2022, concluded the carrying value was **not impaired**, but **future impairment is possible** if financial projections are not met or valuation assumptions change[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section discusses Kforce's financial condition and operating results for the three and six months ended June 30, 2022 [EXECUTIVE SUMMARY](index=19&type=section&id=EXECUTIVE%20SUMMARY) This summary highlights Kforce's key financial performance and capital allocation for the six months ended June 30, 2022 **Key Financial Highlights (Six Months Ended June 30, 2022 vs. 2021, in millions):** | Metric | 2022 | 2021 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Total Revenue | $853.5 | $766.8 | $86.7 | 11.3% | | Technology Revenue | $744.5 | $590.3 | $154.2 | 26.1% | | FA Revenue | $109.0 | $176.5 | $(67.5) | -38.2% | | Flex Revenue | $821.6 | $745.2 | $76.4 | 10.2% | | Direct Hire Revenue | $31.9 | $21.6 | $10.3 | 47.7% | | Gross Profit Margin | 29.9% | 28.4% | 1.5 pp | - | | Income from operations | $61.6 | $52.6 | $9.0 | 17.1% | | Net income | $46.1 | $34.4 | $11.7 | 34.0% | | Diluted EPS | $2.22 | $1.61 | $0.61 | 37.9% | | Cash provided by operating activities | $70.8 | $36.6 | $34.2 | 93.4% | - Kforce returned **$32.3 million** to shareholders in H1 2022 through **$20.1 million** in open market repurchases and **$12.2 million** in quarterly dividends[78](index=78&type=chunk) [RESULTS OF OPERATIONS](index=20&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes Kforce's operating results, including revenue, gross profit, and expenses, for the reporting periods [Business Overview](index=20&type=section&id=Business%20Overview) This section provides an overview of Kforce's business, market position, and industry outlook for talent solutions - Kforce is a leading domestic provider of technology and finance and accounting talent solutions, with a focus on Fortune 1000 and large companies. Technology talent solutions represent nearly **88%** of overall revenues[79](index=79&type=chunk) - As of June 30, 2022, Kforce employed approximately **2,100** associates and had about **10,300** consultants on assignment. The U.S. staffing industry forecast by SIA in May 2022 estimates technology temporary staffing to grow **12%** in 2022 and **6%** in 2023, while finance and accounting temporary staffing is estimated to grow **8%** in 2022 and **5%** in 2023[79](index=79&type=chunk)[80](index=80&type=chunk) [Operating Results - Three and Six Months Ended June 30, 2022 and 2021](index=20&type=section&id=Operating%20Results%20-%20Three%20and%20Six%20Months%20Ended%20June%2030,%202022%20and%202021) This section compares Kforce's operating results for the three and six months ended June 30, 2022 and 2021 **Revenue Mix by Segment and Type (as % of Total Revenue):** | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :---------------- | :------ | :------ | :------ | :------ | | Technology Revenue | 88.1% | 77.0% | 87.2% | 77.0% | | FA Revenue | 11.9% | 23.0% | 12.8% | 23.0% | | Flex Revenue | 96.1% | 97.0% | 96.3% | 97.2% | | Direct Hire Revenue | 3.9% | 3.0% | 3.7% | 2.8% | | Gross profit | 30.0% | 29.5% | 29.9% | 28.4% | | SG&A expenses | 22.0% | 21.0% | 22.4% | 21.2% | | Net income | 6.2% | 5.2% | 5.4% | 4.5% | [Revenue](index=21&type=section&id=Revenue) This section analyzes Kforce's total revenue growth and segment-specific performance for the reporting periods **Total Revenue Growth by Segment (YoY % Change):** | Segment | Q2 2022 | H1 2022 | | :-------- | :------ | :------ | | Technology | 23.8% | 26.1% | | FA | (44.1)% | (38.3)% | | Total Revenue | 8.2% | 11.3% | **Revenue Growth Rates (Per Billing Day, YoY):** | Segment | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | | :-------- | :------ | :------ | :------ | :------ | :------ | | Technology | 23.3% | 26.0% | 31.0% | 28.9% | 20.9% | | FA | (49.0)% | (37.6)% | (28.9)% | (41.3)% | 2.7% | | Total Flex | 7.2% | 11.8% | 16.6% | 9.1% | 16.3% | [Flex Revenue](index=21&type=section&id=Flex%20Revenue) This section details the performance and key drivers of Kforce's Flex revenue by segment - Technology Flex revenue **increased** **23.3%** (Q2) and **24.5%** (H1) YoY, driven by growth in consultants and **higher average bill rates** (up **8.1%** YoY in Q2). FA Flex revenue **decreased** **49.0%** (Q2) and **43.5%** (H1) YoY, primarily due to the anticipated decline in COVID-19 related business and repositioning efforts, despite average bill rates **improving** **33.1%** YoY in Q2[83](index=83&type=chunk)[84](index=84&type=chunk) **Key Drivers for Change in Flex Revenue (Six Months Ended June 30, 2022 vs. 2021, in thousands):** | Driver | Technology | FA | | :---------------- | :--------- | :------- | | Volume - hours billed | $97,888 | $(94,021) | | Bill rate | $48,620 | $22,572 | | Billable expenses | $1,286 | $12 | | Total change | $147,794 | $(71,437) | **Total Flex Hours Billed (Six Months Ended June 30, in thousands):** | Segment | 2022 | 2021 | % Change | | :-------- | :----- | :----- | :------- | | Technology | 8,414 | 7,194 | 17.0% | | FA | 2,088 | 4,825 | (56.7)% | | Total | 10,502 | 12,019 | (12.6)% | [Direct Hire Revenue](index=22&type=section&id=Direct%20Hire%20Revenue) This section analyzes the growth and key drivers of Kforce's Direct Hire revenue by segment - Direct Hire revenue **increased significantly** by **37.3%** (Q2) and **47.6%** (H1) YoY, driven by a **substantial increase** in both the number of placements and associated fees, reflecting an improved economic environment and increased competition for talent[87](index=87&type=chunk) **Key Drivers for Change in Direct Hire Revenue (Six Months Ended June 30, 2022 vs. 2021, in thousands):** | Driver | Technology | FA | | :------------------------ | :--------- | :------- | | Volume - number of placements | $4,343 | $2,593 | | Placement fee | $2,075 | $1,276 | | Total change | $6,418 | $3,869 | **Total Number of Placements (Six Months Ended June 30):** | Segment | 2022 | 2021 | % Change | | :-------- | :--- | :--- | :------- | | Technology | 757 | 541 | 39.9% | | FA | 860 | 693 | 24.1% | | Total | 1,617 | 1,234 | 31.0% | **Average Placement Fee (Six Months Ended June 30):** | Segment | 2022 | 2021 | % Change | | :-------- | :------- | :------- | :------- | | Technology | $22,826 | $20,084 | 13.7% | | FA | $17,033 | $15,548 | 9.6% | | Total | $19,746 | $17,537 | 12.6% | [Gross Profit](index=23&type=section&id=Gross%20Profit) This section discusses Kforce's gross profit and gross profit percentage, highlighting segment-specific trends **Gross Profit Percentage (YoY % Change):** | Segment | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :------------------------ | :------ | :------ | :------ | :------ | | Technology | 28.6% | 28.4% | 28.5% | 27.5% | | FA | 40.7% | 33.0% | 39.1% | 31.2% | | Total gross profit percentage | 30.0% | 29.5% | 29.9% | 28.4% | - Total gross profit percentage **increased** by **50 basis points** (Q2) and **150 basis points** (H1) YoY, primarily due to an increased mix of higher-margin Direct Hire revenue[89](index=89&type=chunk) - FA Flex gross profit margins **increased significantly** (**210 bps** in Q2, **290 bps** in H1) due to the reduction of lower-margin COVID-19 related business and successful repositioning efforts, along with **lower healthcare and payroll costs**. Technology Flex margins remained **stable** or **slightly improved**[91](index=91&type=chunk) [SG&A Expenses](index=23&type=section&id=SG%26A%20Expenses) This section analyzes Kforce's selling, general, and administrative expenses and their impact on profitability **SG&A Expenses as % of Revenue:** | Component | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Compensation, commissions, payroll taxes and benefits costs | 18.9% | 18.3% | 19.1% | 18.4% | | Other SG&A | 3.2% | 2.7% | 3.4% | 2.9% | | Total SG&A | 22.0% | 21.0% | 22.4% | 21.2% | - SG&A as a percentage of revenue **increased** by **100 basis points** (Q2) and **120 basis points** (H1) YoY. This increase was attributed to a gain on the sale of corporate headquarters in Q2 2021 (which lowered the prior year's percentage), **higher performance-based compensation**, and other business investments[92](index=92&type=chunk) [Depreciation and Amortization](index=24&type=section&id=Depreciation%20and%20Amortization) This section details Kforce's depreciation and amortization expenses for fixed assets and capitalized software **Depreciation and Amortization Expense (Six Months Ended June 30, in thousands):** | Category | 2022 | 2021 | % Change | | :------------------------------------ | :----- | :----- | :------- | | Fixed asset depreciation | $1,305 | $1,554 | (16.0)% | | Capitalized software amortization | $864 | $840 | 2.9% | | Total Depreciation and amortization | $2,169 | $2,394 | (9.4)% | [Other (Income) Expense, Net](index=24&type=section&id=Other%20(Income)%20Expense,%20Net) This section explains the components of Kforce's other (income) expense, net, including gains from derivative terminations - Other (income) expense, net, shifted from an expense of **$3.1 million** (Q2 2021) to income of **$2.7 million** (Q2 2022), primarily due to a **$4.1 million** gain from the termination of Swap B in May 2022. This line item also includes interest expense, interest income, and Kforce's proportionate share of the loss from WorkLLama (**$1.8 million** for H1 2022)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) [Income Tax Expense](index=24&type=section&id=Income%20Tax%20Expense) This section provides information on Kforce's income tax expense and effective tax rate for the reporting periods - The effective tax rate for the six months ended June 30, 2022, was **26.6%**, down from **28.5%** in the comparable period of 2021[96](index=96&type=chunk) [Non-GAAP Financial Measures](index=24&type=section&id=Non-GAAP%20Financial%20Measures) This section presents and reconciles Kforce's non-GAAP financial measures, including Free Cash Flow and Adjusted EBITDA [Free Cash Flow](index=24&type=section&id=Free%20Cash%20Flow) This section defines and reconciles Kforce's Free Cash Flow, a key non-GAAP liquidity measure - Free Cash Flow, a non-GAAP measure, is defined as net cash provided by operating activities less capital expenditures. It **increased significantly** to **$67.3 million** for the six months ended June 30, 2022, from **$33.7 million** in the prior year[97](index=97&type=chunk)[98](index=98&type=chunk) **Free Cash Flow (Six Months Ended June 30, in thousands):** | Metric | 2022 | 2021 | | :-------------------------------- | :----- | :----- | | Net cash provided by operating activities | $70,760 | $36,574 | | Capital expenditures | $(3,458) | $(2,919) | | Free cash flow | $67,302 | $33,655 | [Adjusted EBITDA](index=25&type=section&id=Adjusted%20EBITDA) This section defines and reconciles Kforce's Adjusted EBITDA, a key non-GAAP profitability measure - Adjusted EBITDA, a non-GAAP measure, is used by management to assess operations and core profitability. It **increased** to **$72.6 million** for the six months ended June 30, 2022, from **$59.9 million** in the prior year[98](index=98&type=chunk)[101](index=101&type=chunk) **Adjusted EBITDA Reconciliation (Six Months Ended June 30, in thousands):** | Metric | 2022 | 2021 | | :-------------------------------- | :----- | :----- | | Net income | $46,097 | $34,449 | | Depreciation and amortization | $2,169 | $2,394 | | Stock-based compensation expense | $8,848 | $6,935 | | Interest expense, net | $979 | $1,562 | | Gain from swap termination | $(4,059) | $0 | | Income tax expense | $16,735 | $13,728 | | Loss from equity method investment | $1,840 | $1,022 | | Adjusted EBITDA | $72,609 | $59,860 | [LIQUIDITY AND CAPITAL RESOURCES](index=27&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses Kforce's liquidity position, cash flows, credit facility, and capital allocation strategies [Cash Flows](index=27&type=section&id=Cash%20Flows) This section analyzes Kforce's cash flows from operating, investing, and financing activities - Cash and cash equivalents **decreased** to **$30.0 million** at June 30, 2022, from **$97.0 million** at December 31, 2021. The company repaid **$100.0 million** outstanding on its credit facility in May 2022[102](index=102&type=chunk)[103](index=103&type=chunk) - Cash provided by operating activities **increased** to **$70.8 million** in H1 2022 from **$36.6 million** in H1 2021, driven by profitable revenue growth, proceeds from Swap B termination, and working capital management. Cash used in financing activities **significantly increased** to **$131.8 million** in H1 2022, primarily due to credit facility repayment and increased dividend payments[106](index=106&type=chunk)[108](index=108&type=chunk) **Common Stock Repurchase Activity (Six Months Ended June 30, in thousands):** | Item | 2022 | 2021 | | :---------------------------------------------------------- | :----- | :----- | | Open market repurchases | $19,136 | $29,591 | | Repurchase of shares related to tax withholding requirements | $464 | $336 | | Total cash flow impact of common stock repurchases | $19,600 | $29,927 | - Quarterly dividends **increased** by **30%** YoY, totaling **$12.2 million** (**$0.60** per share) in H1 2022 compared to **$9.5 million** (**$0.46** per share) in H1 2021[108](index=108&type=chunk) [Credit Facility](index=28&type=section&id=Credit%20Facility) This section details Kforce's credit facility, including borrowing availability and compliance with covenants - Kforce has **$198.6 million** of borrowing availability under its Amended and Restated Credit Facility as of June 30, 2022, with no outstanding balance. The company is in compliance with all credit facility covenants[111](index=111&type=chunk) [Stock Repurchases](index=28&type=section&id=Stock%20Repurchases) This section outlines Kforce's common stock repurchase program and activity during the period - The Board approved an increase in stock repurchase authorization to **$100.0 million** in February 2022. During H1 2022, Kforce repurchased approximately **303,000** shares for **$20.1 million**, leaving **$88.8 million** available for further repurchases[113](index=113&type=chunk) [Contractual Obligations and Commitments](index=28&type=section&id=Contractual%20Obligations%20and%20Commitments) This section addresses Kforce's contractual obligations and commitments, noting no material changes - No **material changes** to contractual obligations were reported during the period, other than those described elsewhere in the report[114](index=114&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=28&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) This section discusses Kforce's critical accounting estimates, particularly regarding its equity method investment [Equity Method Investment](index=28&type=section&id=Equity%20Method%20Investment) This section details the accounting and impairment assessment for Kforce's equity method investment in WorkLLama - Kforce's **50%** noncontrolling interest in WorkLLama is accounted for as an equity method investment. An impairment test was performed as of June 30, 2022, due to WorkLLama taking longer than expected to achieve financial expectations, but concluded the carrying value was **not impaired**. However, the fair value exceeded the carrying value by less than **ten percent**, indicating a **potential for future impairment** if projections are not met[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) [NEW ACCOUNTING STANDARDS](index=29&type=section&id=NEW%20ACCOUNTING%20STANDARDS) This section addresses the impact of new accounting standards on Kforce's financial statements - No new accounting standards adopted or issued are expected to have a **significant impact** on Kforce's financial statements[119](index=119&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section confirms no material changes to Kforce's market risk disclosures since the prior annual report - No **material changes** to market risk disclosures since the 2021 Annual Report on Form 10-K[120](index=120&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES.](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures.) This section details the evaluation of Kforce's disclosure controls and internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=29&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, 2022 - As of June 30, 2022, Kforce's CEO and CFO concluded that the design and operation of the company's disclosure controls and procedures were **effective**[121](index=121&type=chunk) [Changes in Internal Control over Financial Reporting](index=29&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section states that no material changes occurred in Kforce's internal control over financial reporting - Management, with CEO and CFO participation, concluded that no **material changes** in internal control over financial reporting occurred during the last fiscal quarter[122](index=122&type=chunk) [Inherent Limitations of Internal Control Over Financial Reporting](index=29&type=section&id=Inherent%20Limitations%20of%20Internal%20Control%20Over%20Financial%20Reporting) This section acknowledges the inherent limitations of internal controls in preventing or detecting all misstatements - The report acknowledges that internal controls have inherent limitations, meaning material misstatements due to error or fraud may not always be prevented or detected on a timely basis[123](index=123&type=chunk) [CEO and CFO Certifications](index=30&type=section&id=CEO%20and%20CFO%20Certifications) This section confirms the inclusion of CEO and CFO certifications as required by the Sarbanes-Oxley Act - CEO and CFO certifications (Exhibits 31.1 and 31.2) are included as required by Section 302 of the Sarbanes-Oxley Act of 2002[125](index=125&type=chunk) [PART II - OTHER INFORMATION](index=30&type=section&id=PART%20II%20OTHER%20INFORMATION) This part presents other information required in the Form 10-Q, including legal proceedings and risk factors [ITEM 1. LEGAL PROCEEDINGS.](index=30&type=section&id=Item%201.%20Legal%20Proceedings.) This section refers to Note L for legal proceedings and states no material adverse effect is currently expected - Kforce is involved in various legal proceedings in the ordinary course of business, but currently does not expect them to have a **material effect** on its financial position[127](index=127&type=chunk) [ITEM 1A. RISK FACTORS.](index=30&type=section&id=Item%201A.%20Risk%20Factors.) This section confirms no material changes to Kforce's risk factors since the prior annual report - No **material changes** in risk factors since the 2021 Annual Report on Form 10-K[128](index=128&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) This section details Kforce's common stock repurchase activity and authorization for the reporting period - The Board increased the stock repurchase authorization to **$100.0 million** in February 2022[129](index=129&type=chunk) **Common Stock Repurchases (Three Months Ended June 30, 2022):** | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining | | :-------------------------- | :--------------------- | :--------------------------- | :--------------------------------- | | April 1, 2022 to April 30, 2022 | — | $— | $98,787,598 | | May 1, 2022 to May 31, 2022 | 4,009 | $70.40 | $98,787,598 | | June 1, 2022 to June 30, 2022 | 158,783 | $62.98 | $88,786,772 | | Total | 162,792 | $63.17 | $88,786,772 | [ITEM 3. DEFAULTS UPON SENIOR SECURITIES.](index=30&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) This section states that no defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred[130](index=130&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES.](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This section confirms that there are no mine safety disclosures to report for Kforce Inc - No mine safety disclosures to report[131](index=131&type=chunk) [ITEM 5. OTHER INFORMATION.](index=30&type=section&id=Item%205.%20Other%20Information.) This section states that there is no other information to report for Kforce Inc - No other information to report[132](index=132&type=chunk) [ITEM 6. EXHIBITS.](index=31&type=section&id=Item%206.%20Exhibits.) This section lists all exhibits filed with Kforce Inc.'s Form 10-Q, including certifications and financial data - Exhibits include Amended and Restated Articles of Incorporation, Amended & Restated Bylaws, CEO and CFO Certifications (Section 302 and 906 of Sarbanes-Oxley Act), and XBRL formatted financial statements[134](index=134&type=chunk) [SIGNATURES](index=32&type=section&id=SIGNATURES) This section contains the required signatures for Kforce Inc.'s Form 10-Q, certifying its submission [SIGNATURES](index=32&type=section&id=SIGNATURES) This section contains the required signatures for Kforce Inc.'s Form 10-Q, certifying its submission - The report was signed on August 3, 2022, by David M. Kelly, Executive Vice President, Chief Financial Officer, and Jeffrey B. Hackman, Senior Vice President, Finance and Accounting[139](index=139&type=chunk)

Financial Data and Key Metrics Changes - Second quarter revenues were $436.5 million, an increase of 8.2% year-over-year, with earnings per share at $1.30, reflecting a 30% year-over-year increase [22][28] - Gross margins increased by 50 basis points year-over-year to 30.0%, primarily due to a greater mix of direct hire revenues [23] - Operating margin was 7.8%, slightly improved over the prior year after normalizing for a prior gain [27] Business Line Data and Key Metrics Changes - Technology business grew approximately 7% sequentially and 24% year-over-year, with organic growth of almost 50% over the last two years [12][13] - FA business declined 44% year-over-year, with a 10.7% decline when excluding COVID-related revenues [19][20] - Average bill rates in Technology increased by 2.4% sequentially and over 8% year-over-year to approximately $87 per hour [15] Market Data and Key Metrics Changes - Demand in technology remains strong, with clients continuing to invest in digital transformation initiatives [6][16] - Financial services, as the largest vertical, is experiencing good growth, driven by investments in technology platforms [60][62] - The overall demand environment is still above pre-pandemic levels, with strong growth across most industries supported [14][17] Company Strategy and Development Direction - The company is focused on providing domestic technology talent solutions, which is seen as having the greatest prospects for sustained growth [11][32] - A hybrid office model called "office-occasional" has been implemented to provide flexibility and attract top talent [10][59] - The strategic decision to focus on technology has positioned the company as a top performer, with plans to continue investing in technology and people [5][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning despite macroeconomic uncertainties, citing a debt-free balance sheet and improved profitability [5][32] - The company expects third quarter revenues in the Technology business to grow in the mid-teen range year-over-year [18] - Management noted that while wage inflation has moderated, it remains a factor, and the company is well-positioned to manage it [45][46] Other Important Information - The company generated significant operating cash flows of $32 million in the second quarter and prioritized returning capital to shareholders through dividends and stock repurchases [28][29] - The average length of assignments in the technology business has doubled over the last five years, indicating strong client retention [52][53] Q&A Session Summary Question: What types of activity saw a slowdown in the second quarter? - Management noted growth in all industries except for a slight dip in healthcare, which was client-specific, and overall demand remains strong [36][37] Question: How does the macro environment impact third quarter guidance? - Management indicated that while the demand environment is not at the heightened levels of the past year, it remains strong and above pre-pandemic levels [38][39] Question: What is the outlook on wage inflation? - Wage inflation has moderated compared to the previous year, but remains a factor, with stable margins expected [44][46] Question: How competitive is the talent market? - The technology talent market remains extremely competitive, with negative unemployment, but the company is confident in its recruitment capabilities [48][49] Question: What is the visibility on assignment duration? - Assignment duration continues to expand as clients retain talent for critical projects, with conversions of consultants to full-time roles up 37% year-over-year [52][54] Question: What is the company's stance on acquisitions? - The company has not made an acquisition in over a dozen years, focusing instead on organic growth in technology, with a high bar for any potential acquisitions [56][57] Question: How is the office-occasional model performing? - The office-occasional strategy has exceeded expectations, with positive feedback from employees and successful technology integration [59] Question: What is the outlook for the financial services segment? - Demand in financial services remains strong, driven by technology investments, with no expected changes in growth [60][62] Question: What is the expected trend for the repositioned FA business? - The FA business is expected to continue declining in the short term as resources are focused on technology, but this is seen as a strategic long-term decision [63][64]

Kforce Overview - Kforce's market capitalization is $1.5 billion [5] - Kforce generates 100% of its revenue domestically with approximately 2,000 associates across the U S [6] - Kforce serves approximately 70% of Fortune-ranked companies [7, 12] - Technology constitutes 86% of Kforce's focus today, compared to 50% in 2007 [8] Financial Performance - Q1 2022 TTM revenues grew 14.6% year-over-year to $1.63 billion [9, 13] - Q1 2022 revenues increased 13% year-over-year to $417 million [9, 13] - Technology revenues grew 26.7% year-over-year in Q1 2022 and 35% over Q1 2020 [9, 13] - Kforce returned $16.2 million in capital to shareholders in Q1 2022 [16] Future Expectations - Kforce anticipates Q2 2022 revenues between $436 million and $444 million [24] - Kforce expects full-year 2022 revenue of at least $1.7 billion [27]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Kforce reported strong Q1 2022 financial results with increased revenues, net income, assets, and operating cash flow, while returning capital to shareholders [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Kforce's Q1 2022 operations saw revenues rise to $417.0 million, driving net income to $19.2 million and diluted EPS to $0.93 Consolidated Statements of Operations (Q1 2022 vs Q1 2021) | Financial Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--- | :--- | :--- | | **Revenue** | $416,967 | $363,225 | | Gross profit | $123,886 | $98,682 | | Income from operations | $27,744 | $19,451 | | **Net income** | $19,181 | $13,261 | | **Earnings per share – diluted** | $0.93 | $0.62 | [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Kforce's balance sheet as of March 31, 2022, shows total assets increased to $529.5 million, with stockholders' equity rising to $198.2 million Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | **Total current assets** | $405,454 | $372,111 | | **Total assets** | $529,494 | $503,401 | | **Total current liabilities** | $183,198 | $160,431 | | Long-term debt – credit facility | $100,000 | $100,000 | | **Total liabilities** | $331,289 | $314,995 | | **Total stockholders' equity** | $198,205 | $188,406 | [Unaudited Condensed Consolidated Statement of Changes in Stockholders' Equity](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity increased to $198.2 million in Q1 2022, driven by net income, partially offset by stock repurchases and dividends - Paid dividends of **$0.30 per share**, totaling **$6.1 million** for the quarter[18](index=18&type=chunk) - Repurchased **147,000 shares** of common stock for a total of **$10.3 million**[18](index=18&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2022 saw cash from operations increase to $38.7 million, with a net cash increase of $19.6 million after investing and financing activities Condensed Statements of Cash Flows (Q1 2022 vs Q1 2021) | Cash Flow Item | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--- | :--- | :--- | | **Cash provided by operating activities** | $38,742 | $22,426 | | Cash used in investing activities | ($2,721) | ($3,350) | | Cash used in financing activities | ($16,383) | ($21,221) | | **Change in cash and cash equivalents** | $19,638 | ($2,145) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, segment performance with Technology growth and FA decline, legal proceedings, and a new corporate headquarters lease - The company's two reportable segments are **Technology** and **Finance and Accounting (FA)**[35](index=35&type=chunk) - Kforce holds a **50% noncontrolling interest** in the WorkLLama, LLC joint venture, contributing **$0.5 million** in Q1 2022[39](index=39&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - The company is involved in several legal proceedings, primarily California labor law claims, with some cases reaching preliminary settlement[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - A lease agreement for a new corporate headquarters in Tampa, Florida, was signed, with payments commencing July 1, 2023[67](index=67&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=16&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A highlights 13.0% revenue growth driven by Technology, improved gross profit margin, strong liquidity, and significant shareholder returns [Executive Summary](index=16&type=section&id=Executive%20Summary) Q1 2022 saw Kforce's revenue increase 13.0% to $417.0 million, driven by Technology growth, with improved margins and diluted EPS - Revenue increased **13.0%** to **$417.0 million**, with Technology up **26.7%** and FA down **32.9%** on a billing day basis[71](index=71&type=chunk) - Gross profit margin increased **250 basis points** to **29.7%**, and Flex gross profit margin increased **190 basis points** to **27.1%**[71](index=71&type=chunk) - Net income increased **44.6%** to **$19.2 million**, or **$0.93 per share**[71](index=71&type=chunk) - Returned **$16.2 million** to shareholders, comprising **$10.1 million** in stock repurchases and **$6.1 million** in dividends[71](index=71&type=chunk) [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Q1 2022 total revenue grew 14.8% to $417.0 million, driven by Technology segment growth, while FA declined and gross profit margin improved Revenue by Segment (Q1 2022 vs Q1 2021) | Segment | Q1 2022 Revenue (in thousands) | % Change YoY | Q1 2021 Revenue (in thousands) | | :--- | :--- | :--- | :--- | | Technology | $359,905 | 28.7% | $279,560 | | FA | $57,062 | (31.8)% | $83,665 | | **Total** | **$416,967** | **14.8%** | **$363,225** | Revenue by Type (Q1 2022 vs Q1 2021) | Revenue Type | Q1 2022 Revenue (in thousands) | % Change YoY | Q1 2021 Revenue (in thousands) | | :--- | :--- | :--- | :--- | | Flex revenue | $401,866 | 13.6% | $353,847 | | Direct Hire revenue | $15,101 | 61.0% | $9,378 | | **Total** | **$416,967** | **14.8%** | **$363,225** | - Technology Flex revenue growth was driven by increased consultants and a **6.3% YoY increase** in average bill rates to approximately **$85 per hour**[77](index=77&type=chunk) - FA Flex revenue declined **37.6%** (billing day basis) primarily due to the anticipated fall-off in COVID-19 related business[78](index=78&type=chunk) - SG&A as a percentage of revenue increased **130 basis points**, primarily due to higher performance-based compensation and increased credit expense[85](index=85&type=chunk) [Non-GAAP Financial Measures](index=22&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures show Q1 2022 Free Cash Flow at $36.5 million and Adjusted EBITDA at $33.3 million, indicating strong liquidity and core profitability Free Cash Flow Reconciliation | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $38,742 | $22,426 | | Capital expenditures | ($2,221) | ($1,350) | | **Free cash flow** | **$36,521** | **$21,076** | Adjusted EBITDA Reconciliation | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net income | $19,181 | $13,261 | | Depreciation and amortization | $1,093 | $1,202 | | Stock-based compensation expense | $4,437 | $3,403 | | Interest expense, net | $608 | $797 | | Income tax expense | $7,130 | $4,905 | | Loss from equity method investment | $825 | $491 | | **Adjusted EBITDA** | **$33,274** | **$24,059** | [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) Kforce maintains strong liquidity with $116.6 million in cash and $98.6 million available credit, while actively returning capital to shareholders - As of March 31, 2022, the company held **$116.6 million** in cash and cash equivalents, with **$100.0 million** outstanding on its credit facility[93](index=93&type=chunk) - The Board increased stock repurchase authorization to **$100.0 million** in February 2022, with **$98.8 million** remaining available as of March 31, 2022[103](index=103&type=chunk) - Quarterly dividends increased **30%** to **$0.30 per share** compared to the prior year[98](index=98&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures were reported since the 2021 Annual Report on Form 10-K - No material changes to market risk information have occurred since the 2021 Annual Report on Form 10-K[108](index=108&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[109](index=109&type=chunk) - No material changes in internal control over financial reporting occurred during the last fiscal quarter[110](index=110&type=chunk) [PART II - OTHER INFORMATION](index=26&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, with no material financial impact currently expected - The company is involved in ordinary course legal proceedings, detailed in Note K - "Commitments and Contingencies"[114](index=114&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes in risk factors were reported since the 2021 Annual Report on Form 10-K - No material changes in risk factors were reported since the 2021 Annual Report on Form 10-K[115](index=115&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Board increased stock repurchase authorization to $100.0 million in February 2022, with $98.8 million remaining after Q1 repurchases Issuer Purchases of Equity Securities (Q1 2022) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining for Purchase | | :--- | :--- | :--- | :--- | | Jan 2022 | 91,594 | $70.45 | $23,641,727 | | Feb 2022 | 55,073 | $69.32 | $98,787,598 | | Mar 2022 | 0 | $0.00 | $98,787,598 | | **Total** | **146,667** | **$70.02** | **$98,787,598** | - In February 2022, the Board increased the stock repurchase authorization to **$100.0 million**[116](index=116&type=chunk) [Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - None[117](index=117&type=chunk) [Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures were reported - None[118](index=118&type=chunk) [Other Information](index=26&type=section&id=Item%205.%20Other%20Information) No other information was reported - None[119](index=119&type=chunk) [Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents and CEO/CFO certifications - Lists filed exhibits, including CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906[120](index=120&type=chunk) [Signatures](index=28&type=section&id=SIGNATURES) - The report was signed on **May 4, 2022**, by David M. Kelly (EVP, CFO) and Jeffrey B. Hackman (SVP, Finance and Accounting)[125](index=125&type=chunk)

Kforce Inc. (NYSE:KFRC) Q1 2022 Earnings Conference Call May 2, 2022 5:00 PM ET Company Participants Joe Liberatore – President and Chief Executive Officer Kye Mitchell – Executive Vice President and Chief Operations Officer Dave Kelly – Executive Vice President, Chief Financial and Administrative Officer Conference Call Participants Mark Marcon – Baird Marc Riddick – Sidoti Tobey Sommer – Truist Securities Kartik Mehta – Northcoast Research Operator Ladies and gentlemen, thank you for standing by. My name ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _____________________________________________________________________________ FORM 10-K _____________________________________________________________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ...

KFORCE Q4 2021 INVESTOR PRESENTATION Kforce | 1 Forward Looking Statements All of the information presented that is not historical in nature should be considered to be forward-looking statements that are subject to certain risks, uncertainties or assumptions and may be affected by certain other factors, including but not limited to the specific factors discussed in the Firm's periodic filings with the SEC. Should one or more of these risks, uncertainties or other factors materialize, or should underlying as ...

Kforce Inc. (NYSE:KFRC) Q4 2021 Earnings Conference Call February 7, 2022 5:00 PM ET Company Participants Joe Liberatore - President and Chief Executive Officer Kye Mitchell - Chief Operations Officer David Kelly - Chief Financial Officer Conference Call Participants Josh Vogel - Sidoti & Company Mark Marcon - Baird Tim Mulrooney - William Blair Tobey Sommer - Truist Securities Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within ...