PART I - FINANCIAL INFORMATION Financial Statements 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 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 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 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 quarter18 - Repurchased 147,000 shares of common stock for a total of $10.3 million18 Unaudited Condensed Consolidated Statements of Cash Flows 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 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 - Kforce holds a 50% noncontrolling interest in the WorkLLama, LLC joint venture, contributing $0.5 million in Q1 2022396465 - The company is involved in several legal proceedings, primarily California labor law claims, with some cases reaching preliminary settlement555657 - A lease agreement for a new corporate headquarters in Tampa, Florida, was signed, with payments commencing July 1, 202367 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights 13.0% revenue growth driven by Technology, improved gross profit margin, strong liquidity, and significant shareholder returns Executive Summary 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 basis71 - Gross profit margin increased 250 basis points to 29.7%, and Flex gross profit margin increased 190 basis points to 27.1%71 - Net income increased 44.6% to $19.2 million, or $0.93 per share71 - Returned $16.2 million to shareholders, comprising $10.1 million in stock repurchases and $6.1 million in dividends71 Results of Operations 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 hour77 - FA Flex revenue declined 37.6% (billing day basis) primarily due to the anticipated fall-off in COVID-19 related business78 - SG&A as a percentage of revenue increased 130 basis points, primarily due to higher performance-based compensation and increased credit expense85 Non-GAAP Financial Measures 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 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 facility93 - The Board increased stock repurchase authorization to $100.0 million in February 2022, with $98.8 million remaining available as of March 31, 2022103 - Quarterly dividends increased 30% to $0.30 per share compared to the prior year98 Quantitative and Qualitative Disclosures About Market Risk 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-K108 Controls and Procedures 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, 2022109 - No material changes in internal control over financial reporting occurred during the last fiscal quarter110 PART II - OTHER INFORMATION Legal Proceedings 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 Risk Factors 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-K115 Unregistered Sales of Equity Securities and Use of Proceeds 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 million116 Defaults Upon Senior Securities No defaults upon senior securities were reported - None117 Mine Safety Disclosures No mine safety disclosures were reported - None118 Other Information No other information was reported - None119 Exhibits 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 906120 Signatures - The report was signed on May 4, 2022, by David M. Kelly (EVP, CFO) and Jeffrey B. Hackman (SVP, Finance and Accounting)125
Kforce(KFRC) - 2022 Q1 - Quarterly Report