Kforce(KFRC) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. 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 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][50] Unaudited Condensed Consolidated Balance Sheets 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] Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity 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][18][82] Unaudited Condensed Consolidated Statements of Cash Flows 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][80] - 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][81] - 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][82] Notes to Unaudited Condensed Consolidated Financial Statements 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 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] - 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] - 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] - 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] Note B - Reportable Segments 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] 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] Note C - Disaggregation of Revenue 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][38] Note D - Allowance for Credit Losses 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] Note E - Other Assets, Net 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] Note F - Current Liabilities 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] Note G - Credit Facility 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] - 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] Note H - Other Long-Term Liabilities 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] Note I - Stock-Based Compensation 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] 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] Note J - Commitments and Contingencies 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] - 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] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 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 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] Results of Operations 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 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] - 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] - 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] Operating Results - Three and Six Months Ended June 30, 2025 and 2024 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 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] - 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] - 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] Gross Profit 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] - 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] - 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] SG&A Expenses 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][69] - Kforce continues to prioritize investments in strategic initiatives, including Workday implementation, integrated strategy efforts, evolution of delivery capabilities, and leveraging artificial intelligence (AI)[70] Depreciation and Amortization 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] Other Expense, Net 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] Income Tax Expense 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] Non-GAAP Financial Measures 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 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] 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 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] 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] Adjusted EBITDA 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] 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] Liquidity and Capital Resources 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][84] - Working capital increased slightly to $113.5 million at June 30, 2025, from $112.9 million at December 31, 2024[78] - 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] Cash Flows 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] - Cash used in investing activities increased to $7.6 million in 2025, mainly due to $8.3 million in capital expenditures[81] - 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] Stock Repurchases 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] - As of June 30, 2025, $31.8 million remained available for further repurchases under the Board-authorized common stock repurchase program[85] Critical Accounting Estimates 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][87] - Actual results could materially differ from these estimates due to the inherent uncertainty of future events[87] New Accounting Standards 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][88] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 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] ITEM 4. CONTROLS AND PROCEDURES. 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 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] Changes in Internal Control over Financial Reporting 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] Inherent Limitations of Internal Control Over Financial Reporting 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] CEO and CFO Certifications 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] PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. 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] ITEM 1A. RISK FACTORS. 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] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 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] ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Kforce Inc. reported no defaults upon senior securities for the period - No defaults upon senior securities were reported[98] ITEM 4. MINE SAFETY DISCLOSURES. Kforce Inc. reported no mine safety disclosures for the period - No mine safety disclosures were reported[99] ITEM 5. OTHER INFORMATION. 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] ITEM 6. EXHIBITS. 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] 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]