PART I - FINANCIAL INFORMATION This part presents Kforce Inc.'s unaudited condensed consolidated financial statements and related disclosures ITEM 1. FINANCIAL STATEMENTS. This section presents Kforce Inc.'s unaudited condensed consolidated financial statements and detailed notes UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME 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 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 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 repurchases20 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 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 facility23 Note A - Summary of Significant Accounting Policies 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 resets2728 - 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 review31 - 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 impact3435 Note B - Reportable Segments 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 efforts37 Note C - Disaggregation of Revenue 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 Note D - Allowance for Credit Losses 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 clients40 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 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 WorkLLama42 Note F - Current Liabilities 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 20224344 Note G - Credit Facility 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, 20224547 Note H - Other Long-Term Liabilities 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 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 years4950 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 years51 Note J - Derivative Instruments and Hedging Activity 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 debt525355 Note K - Fair Value Measurements 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, 20225758 Note L - Commitments and Contingencies 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 control59 - 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 position616263646566676869 - 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 change70717273 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This section discusses Kforce's financial condition and operating results for the three and six months ended June 30, 2022 EXECUTIVE SUMMARY 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 dividends78 RESULTS OF OPERATIONS This section analyzes Kforce's operating results, including revenue, gross profit, and expenses, for the reporting periods Business Overview 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 revenues79 - 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 20237980 Operating Results - Three and Six Months Ended June 30, 2022 and 2021 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 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 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 Q28384 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 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 talent87 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 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 revenue89 - 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 improved91 SG&A Expenses 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 investments92 Depreciation and Amortization 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 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)939495 Income Tax Expense 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 202196 Non-GAAP Financial Measures This section presents and reconciles Kforce's non-GAAP financial measures, including Free Cash Flow and Adjusted EBITDA Free Cash Flow 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 year9798 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 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 year98101 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 This section discusses Kforce's liquidity position, cash flows, credit facility, and capital allocation strategies Cash Flows 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 2022102103 - 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 payments106108 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 2021108 Credit Facility 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 covenants111 Stock Repurchases 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 repurchases113 Contractual Obligations and Commitments 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 report114 CRITICAL ACCOUNTING ESTIMATES This section discusses Kforce's critical accounting estimates, particularly regarding its equity method investment Equity Method Investment 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 met115116117 NEW ACCOUNTING STANDARDS 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 statements119 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 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-K120 ITEM 4. CONTROLS AND PROCEDURES. This section details the evaluation of Kforce's disclosure controls and internal control over financial reporting Evaluation of Disclosure Controls and Procedures 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 effective121 Changes in Internal Control over Financial Reporting 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 quarter122 Inherent Limitations of Internal Control Over Financial Reporting 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 basis123 CEO and CFO Certifications 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 2002125 PART II - OTHER INFORMATION This part presents other information required in the Form 10-Q, including legal proceedings and risk factors ITEM 1. LEGAL PROCEEDINGS. 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 position127 ITEM 1A. RISK FACTORS. 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-K128 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 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 2022129 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. This section states that no defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred130 ITEM 4. MINE SAFETY DISCLOSURES. This section confirms that there are no mine safety disclosures to report for Kforce Inc - No mine safety disclosures to report131 ITEM 5. OTHER INFORMATION. This section states that there is no other information to report for Kforce Inc - No other information to report132 ITEM 6. EXHIBITS. 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 statements134 SIGNATURES This section contains the required signatures for Kforce Inc.'s Form 10-Q, certifying its submission 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 Accounting139
Kforce(KFRC) - 2022 Q2 - Quarterly Report