Kforce (KFRC) Tops Q4 EPS by 8c, Revenues Beat; Offers Q1 EPS Guidance Below Consensus

Kforce (NASDAQ: KFRC) reported Q4 EPS of $0.65, $0.08 better than the analyst estimate of $0.57. Revenue for the quarter came in at $358 million versus the consensus estimate of $351.78 million.

• Revenue for the quarter ended December 31, 2018 was $358.0 million compared to $342.6 million for the quarter ended December 31, 2017, an increase of 2.8% on a billing day basis.
• Flex revenue of $341.6 million in the quarter ended December 31, 2018 increased 2.3%, on a billing day basis, from $328.5 million in the quarter ended December 31, 2017.
• Year-over-year growth in Flex revenue for Tech was 9.0% on a billing day basis, while FA and GS experienced a decrease of 11.7% and 13.3% on a billing day basis, respectively.
• Gross profit margin decreased 20 basis points in the quarter ended December 31, 2018 as compared to 2017.
• Selling, general and administrative expense as a percentage of revenue in the quarter ended December 31, 2018 was 23.0%, which decreased 100 basis points from the quarter ended December 31, 2017.
• Net income for the quarter ended December 31, 2018 was $16.4 million, or $0.65 per share, as compared to $6.1 million, or $0.24 per share, for the quarter ended December 31, 2017. Adjusted earnings per share for the quarter ended December 31, 2017 was $0.45 per share1.
• Operating cash flows in the quarter ended December 31, 2018 were $23.0 million compared to $23.7 million in the quarter ended December 31, 2017.
• We repurchased approximately 236 thousand shares of common stock on the open market at a total cost of approximately $7.1 million during the quarter ended December 31, 2018.

David L. Dunkel, Chairman and Chief Executive Officer commented, “We are very pleased with our fourth quarter performance as our largest business, Tech Flex, grew 9.0% year-over-year on a billing day basis. Tech Flex revenue accelerated meaningfully towards the end of the quarter due to fewer assignment ends and stronger new assignment starts than anticipated. We believe this is related to the acute labor shortage, especially with highly-skilled resources. The pace of digital transformation continues at a rapid pace, forcing organizations across all industries to increase their technology investments. We believe the secular drivers of technology will transcend traditional cyclical patterns as business models are transformed."

Joseph J. Liberatore, President, said, “We believe that the broad-based growth we are experiencing in Tech Flex is a result of the actions taken and investments made over the last several years to better segment our client portfolio and optimize the alignment of our associates within the portfolio. We are encouraged with the strong finish to 2018 within our Tech Flex business and are pleased with the progress in improving associate productivity.”

David M. Kelly, Chief Financial Officer, said, “We continue to make solid progress improving our profitability as operating margin in the fourth quarter of 6.2% increased 80 basis points year-over-year. In addition, we are converting our revenue growth and improved profitability into higher levels of operating cash flow, which was $23.0 million in the fourth quarter and $87.7 million for the full year. This allowed us to not only decrease outstanding borrowings under our Credit Facility by nearly $45 million, but also return more than $30 million of our free cash flow to our shareholders. We are also pleased to announce that our Board of Directors approved a first quarter cash dividend of $0.18 per share, which will be payable on March 22, 2019 to shareholders of record as of the close of business on March 8, 2019."

GUIDANCE:

Kforce sees Q1 EPS of $0.40-$0.42, versus the consensus of $0.44. Kforce sees Q1 revenue of $351-356 million, versus the consensus of $355.35 million.

For earnings history and earnings-related data on Kforce (KFRC) click here.

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