Financial Data and Key Metrics Changes - Total revenues for Q4 2025 were $332 million, representing a 3% sequential improvement per billing day [10] - Fiscal 2025 revenues were approximately $1.33 billion, a decrease of roughly 5% year-over-year [21] - GAAP earnings per share for Q4 2025 was $0.30, while adjusted earnings per share was $0.43, falling below guidance due to higher healthcare costs [22] - Overall gross margins were 27.2%, down 50 basis points sequentially but up 20 basis points year-over-year [22][23] Business Line Data and Key Metrics Changes - Flex revenues in the technology business grew sequentially by 3% and in the finance and accounting (F&A) business by 5.7% in Q4 [10] - Flex revenues in the F&A business declined 2.4% year-over-year but saw 5.7% sequential growth in Q4 [16] - The average bill rate in the technology business remained steady at approximately $90 per hour over the past three years [14] Market Data and Key Metrics Changes - Sequential growth was observed in eight of the top ten industries served by the company [11] - The company noted a significant increase in demand for consulting-oriented engagements, which typically command higher bill rates [15] Company Strategy and Development Direction - The company is focusing on strategic initiatives such as the implementation of Workday for HCM and Financials, and enhancing offshore delivery capabilities in India [4] - The integrated approach to service delivery across various technologies and skill sets is a key driver of success [12] - The company aims to achieve approximately 8% operating margin when annual revenues return to $1.7 billion, which is more than 100 basis points higher than in 2022 [28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recent operating trends, suggesting a return to more typical cyclicality in demand for flexible talent solutions [5][6] - The company anticipates that clients may increasingly pursue flexible talent models due to economic uncertainty and the evolving landscape of AI [7] - Management highlighted the importance of change management in successfully implementing AI initiatives, noting that many organizations are still in the early stages of adapting to these technologies [34] Other Important Information - The company announced further refinements in headcount and organizational structure to align with current revenue levels [18] - Operating cash flows were $19.7 million, and the return on equity remains at approximately 30% [26] Q&A Session Summary Question: Can you elaborate on the sequential improvement in revenue per billing day and the impact of AI? - Management noted that the positive trend in temporary and contract employment began in August 2025, coinciding with the company's sequential improvements [31] Question: What were the end-of-year dynamics observed from clients? - Clients maintained more consultants on staff towards the end of the year, leading to a stronger start in Q1 2026 compared to previous years [38] Question: How do you expect margins to hold up in 2026? - Management expects operating margins to improve in 2026 even without significant revenue growth, driven by cost efficiencies and a favorable mix of business [66]

Kforce (NYSE:KFRC) Q4 2025 Earnings call February 02, 2026 05:00 PM ET Company ParticipantsDave Kelly - COOJeff Hackman - CFOJoe Liberatore - President and CEOKartik Mehta - Executive Managing Director and Director of ResearchTyler Barishaw - Equity Research AssociateConference Call ParticipantsJosh Chan - Executive Director and Equity Research AnalystMark Marcon - Senior Research AnalystTrevor Romeo - Global Services Research AnalystOperatorWell, good day everyone and welcome to the Kforce Q4 2025 earnings ...

Financial Data and Key Metrics Changes - Total revenues for Q4 2025 were $332 million, representing a 3% sequential improvement per billing day [9] - Fiscal 2025 revenues were approximately $1.33 billion, a decrease of roughly 5% year-over-year [18] - GAAP earnings per share for Q4 2025 was $0.30, while adjusted earnings per share was $0.43, falling below guidance due to higher healthcare costs [19][20] - Overall gross margins were 27.2%, down 50 basis points sequentially but up 20 basis points year-over-year [20][21] Business Line Data and Key Metrics Changes - Flex revenues in the technology business grew sequentially by 3% and in the finance and accounting (F&A) business by 5.7% in Q4 [9] - Flex revenues in the F&A business declined 2.4% year-over-year but saw a 5.7% sequential growth in Q4 [14] - The average bill rate in the technology business remained steady at approximately $90 per hour over the past three years [12] Market Data and Key Metrics Changes - Sequential growth was observed in eight of the top ten industries served by the company [10] - The company noted a significant increase in demand for consulting solutions, particularly in data and digital practices, which are growing at double-digit rates [50] Company Strategy and Development Direction - The company is focusing on a domestic organic growth strategy, minimizing distractions and enhancing client partnerships [7] - Strategic initiatives include the implementation of Workday for HCM and financials, and the evolution of offshore delivery capabilities in India [4] - The company aims to achieve approximately 8% operating margin when annual revenues return to $1.7 billion, which is over 100 basis points higher than in 2022 [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recent operating trends, suggesting a potential return to typical cyclicality in client demand [5] - The company anticipates that clients are increasingly prioritizing flexible talent solutions amid economic uncertainty [6] - There is a belief that the returns from AI investments may take longer to realize and will be more specific to unique business problems [3] Other Important Information - The company announced further refinements in headcount and organizational structure to align with current revenue levels [16] - Operating cash flows were $19.7 million, and the return on equity remains at approximately 30% [24] Q&A Session Summary Question: Can you elaborate on the sequential improvement in revenue per billing day and the impact of AI? - Management noted that the positive trend began in August 2025, coinciding with a positive turn in the American Staffing Association Index, and emphasized the complexity of executing corporate AI initiatives [30][31] Question: What are the dynamics of client demand and project execution? - Management indicated that clients are increasingly unable to wait to execute technology projects due to the foundational work required for AI and modernization efforts [47][48] Question: How do you see the direct hire business evolving in 2026? - Management expressed optimism for small to mid-sized businesses in direct hire, while large enterprises have slowed their hiring [80]

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