Kforce: Tech Flex Improves To YEAR-OVER-YEAR GROWTH BILLING DAY EPS FROM CONTINUING OPERATIONS OF PER SHARE ; ADJUSTED EPS FROM CONTINUING OPERATIONS OF $0.38 PER SH TAMPA, FL,

The following excerpt is from the company's SEC filing.

May 1, 2019

— Kforce Inc. (Nasdaq: KFRC), a provider of professional staffing services and solutions, today

announced results for the

quarter of

Financial Highlights

he GS segment, consisting

KGS and

TraumaFX

businesses

been reported as discontinued operations

ended March 31, 2019 and 2018

and assets

held for sale as of March 31, 201

December 31, 2018

Revenue

from continuing operations

for the quarter ended

March 31, 2019

$326.7

million compared to

$317.4

for the quarter ended March 31, 2018

an increase

billing day

Flex revenue for the

increased

over the comparable period in

ear-over-year growth

for Tech Flex

, while

declined

per billing

ross profit margin decreased

70 basis points

in the quarter ended

from the comparable perio

SG&A as a percentage of revenue for the

decreased 40

s adjusted

, SG&A as a percentage of revenue

was 23.

, a decrease of 100 basis points from 24.8% in the comparable period in 2018.

Operating margin

. As adjusted

, operating margin was 4.2%

, which increased from 3.8% in the comparable period in 2018.

Income from continuing operations

$8.0 million

per share

. As adjusted, income from continuing operations was $9.5 million

, or $0.38 per share

Income from continuing operations

March 31, 2018

cash flows

during the

three months

$11.8 million

$10.3 million

months ended

We retur

d $19.

million of capital to our shareholders in the form of dividends of $4.4 million and stock repurchases of

during the quarter ended

Management Commentary

David L. Dunkel, Chairman and Chief Executive Officer commented, “

We are

pleased with our first quarter

, especially as it relates to the performance of our largest business, Tech Flex, which grew

year-over-year on a billing day basis. Our Tech Flex business continues to benefit from

improving bill rates and

longer

assignment

duratio

, which we believe is related to the acute labor shortage, especially with highly-skilled resources

. The pace of digital transformation continues

rapid

, forcing organizations across all industries to increase their technology investments. We believe the secular drivers of technology

transcend

traditional cyclical patterns as business models are transformed."

Mr. Dunkel continued, "

We completed the

divestiture o

effective April 1, 2019

and continue to make progress in the pursuit of strategic alternatives for our

ll of our revenue

derive

d from domestic professional and tec

hnical

staffing services and solutions.

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.

are pleased with the progress in improving associate productivity

, and also the improv

ed ret

ention of our associates

End Notes:

1 A non-GAAP financial measure, see Reconciliation of

SG&A and

Margin

in the Adjusted Financial Performance Measures section.

2 A non-GAAP financial measure, see Reconciliation of Tax Impact and Profitability in the Adjusted Financial Performance Measures section.

David M. Kelly, Chief Financial Officer, said, “

We continue to make solid progress improving our profitability as

we grow and

converting

revenue growth

and improved profitability

levels

into higher

levels of operating cash flow

uring the first quarter of 2019

, we repurchased approximately

0.4 million shares

on the open market

at a total cost of $14.

million. We expect to continue to return significant capital to our shareholders for the remainder of 2019 gi

more than $90 million in net cash proceeds from the KGS divestiture.

We are also pleased to announce that our Board of Directors approved

second

quarter cash dividend of $0.18 per share, which will be payable on

to shareholders of record as of the close of business on

7, 201

Guidance and Outlook

Looking forward to the

, there will be

billing days, as compared to

billing days in the

and 6

evenue per billing day

. Current estimates for the

related to our continuing operati

Revenue of $

million to $

Earnings per share of $

Gross profit margin of

Flex gross profit margin of

SG&A expense as a percent of revenue of

Operating margin of

Effective tax rate of

Conference Call

On Wednesday,

, Kforce will host a conference call at 8:30 a.m. E.T. to discuss these results. The dial-in number is

(877) 344-3890

and the conference passcode is Kforce. The prepared remarks for this call and webcast are available on the Investor Relations page of the Kforce Inc. website (http://investor.kforce.com/) in the Events & Presentations section.

The replay of the call will be available from 11:30 a.m. E.T., Wednesday,

through

May 8, 2019

by dialing

(855) 859-2056

, passcode

4523869

About Kforce, Inc.

Kforce Inc. is a professional staffing services and solutions firm that specializes in the areas of Technology and Finance

Accounting. Each year, our network of over 50 offices and two national recruiting centers provide opportunities for 3

,000 highly skilled professionals who work with over 4,000 clients, including 70% of the Fortune 100. At Kforce, our promise is to deliver great results through strategic partnership and knowledge sharing. For more information, please visit our Web site at

http://www.kforce.com

Michael R. Blackman, Chief Corporate Development Officer

(813) 552-2927

Cautionary Note Regarding Forward-Looking Statements

Certain of the above statements contained in this press release, including

the return of sign

ificant capital to our shareholders for the remainder of 2019 and e

stimated financial performance for the second quarter,

are forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Factors that could cause actual results to differ materially include the following: business conditions, growth in temporary staffing and the general economy; competitive factors, risks due to shifts in the market demand; a reduction in the supply of candidates or the Firm's ability to attract such candidates; the success of the Firm in attracting and retaining revenue-generating talent; changes in the service mix; ability of the Firm to repurchase shares; the occurrence of unanticipated expenses; the effect of adverse weather conditions; changes in our effective tax rate; changes in government regulations, laws and policies that are adverse to our businesses;

risk of contract performance, delays

or termination or the f

ailure to obtain new assign

ments or contracts

, or funding under contracts;

changes in client demand and our ability to adapt to such changes; continued performance of and improvements to our enterprise information systems, and the risk factors listed from time to time in the Firm’s reports filed with the Securities and Exchange Commission, including the Firm’s Form 10-K for the fiscal year ending December 31, 201

, as well as assumptions regarding the foregoing. In particular, the Firm makes no assurances that the estimates of continuing operations will be achieved or that we will continue to increase our market share, successfully manage risks to our revenue stream, successfully put into place the people and processes that will create future success or further accelerate our revenue. The terms “should,” “believe,” “estimate,” “expect,” “intend,” “anticipate,” “foresee,” “plan” and similar expressions and variations thereof contained in this press release identify certain of such forward-looking statements, which speak only as of the date of this press release. As a result, such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Future events and actual results may differ materially from those indicated in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements and the Firm undertakes no obligation to update any forward-looking statements.

Summary of

Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)

Three Months Ended

Mar. 31, 2019

Dec. 31, 2018

Mar. 31, 2018

Revenue by segment:

255,643 

252,750 

236,497 

Finance and accounting

71,095 

77,627 

80,944 

Total Revenue

326,738 

330,377 

317,441 

Direct costs

233,562 

232,656 

224,904 

93,176 

97,721 

92,537 

Flex GP %

Selling, general and administrative expenses

79,813 

77,154 

78,797 

Depreciation and amortization

1,650 

1,692 

1,751 

Income from operations

11,713 

18,875 

11,989 

Other expense, net

1,344 

Income from continuing operations, before income taxes

10,790 

18,007 

10,645 

Income tax expense

2,816 

4,409 

2,660 

7,974 

13,598 

7,985 

Income from discontinued operations, net of tax

18,881 

2,758 

1,190 

Net income

26,855 

16,356 

9,175 

Earnings per share – diluted:

Continuing operations

Discontinued operations

Weighted average shares outstanding - diluted

25,019 

25,257 

25,094 

Adjusted EBITDA

15,897 

22,750 

15,877 

Billing days

Consolidated Balance Sheets

(In Thousands)

ASSETS

Current assets:

Cash and cash equivalents

Trade receivables, net of allowances

220,520 

210,559 

Income tax refund receivable

Prepaid expenses and other current assets

7,956 

7,699 

Current assets held for sale

26,688 

29,773 

Total current assets

255,536 

248,462 

Fixed assets, net

28,940 

34,322 

Other assets, net

56,429 

36,664 

Deferred tax assets, net

7,642 

7,147 

Goodwill

25,040 

Noncurrent assets held for sale

51,025 

28,273 

Total assets

424,612 

379,908 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and other accrued liabilities

32,151 

32,542 

Accrued payroll costs

40,311 

39,384 

Current portion of operating lease liabilities

5,861 

Other current liabilities

1,398 

1,616 

Income taxes payable

7,809 

4,553 

Current liabilities held for sale

17,609 

12,263 

Total current liabilities

105,139 

90,358 

Long-term debt – credit facility

82,500 

71,800 

Long-term debt – other

1,092 

1,359 

Other long-term liabilities

55,339 

43,509 

Noncurrent liabilities held for sale

1,970 

4,551 

Total liabilities

246,040 

211,577 

Commitments and contingencies

Stockholders’ equity:

Preferred stock

Common stock

Additional paid-in capital

450,276 

447,337 

Accumulated other comprehensive income

1,184 

1,296 

Retained earnings

259,356 

237,308 

Treasury stock, at cost

(532,963)

(518,329)

Total stockholders’ equity

178,572 

168,331 

Total liabilities and stockholders’ equity

Key Statistics

Q1 2019

Q4 2018

Q1 2018

Total Firm

Total Revenue (000’s)

Flex revenue (000’s)

314,981 

319,102 

306,046 

Direct Hire revenue (000’s)

11,757 

11,275 

11,395 

Placements

Average fee

15,260 

16,227 

13,362 

250,216 

248,151 

231,496 

Hours (000’s)

3,335 

3,354 

3,178 

5,427 

4,599 

5,001 

18,106 

18,744 

18,021 

Finance and Accounting

64,765 

70,951 

74,550 

1,772 

2,026 

2,196 

6,330 

6,676 

6,394 

13,447 

14,854 

11,115 

Revenue Growth Rates

(Per Billing Day)

Year-Over-Year Revenue Growth Rates

Q3 2018

Q2 2018

Billing Days

FA Flex

(11.7)

(11.8)

Total Flex

Non-GAAP Financial Measures

In addition to our financial results presented in accordance U.S. GAAP, Kforce may use certain non-GAAP financial measures, which we believe provide useful information to investors in evaluating our core operating performance. The following non-GAAP financial measures presented may not provide information that is directly comparable to that provided by other companies, as other companies may calculate such financial results differently. The Company’s non-GAAP financial measures are not measurements of financial performance under GAAP and should not be considered as alternatives to amounts presented in accordance with GAAP. The Company views these non-GAAP financial measures as supplemental and they are not intended to be a substitute for, or superior to, the information provided by GAAP financial results. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below.

Free Cash Flow

“Free Cash Flow”, a non-GAAP financial measure, is defined by Kforce as net cash provided by operating activities determined in accordance with GAAP, less capital expenditures. Management believes this provides an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows and is useful information to investors as it provides a measure of the amount of cash generated from the business that can be used for strategic opportunities including investing in our business, making acquisitions, repurchasing common stock or paying dividends. Free Cash Flow

is limited, howe

ver, because

it does not represent the residual cash flow available for discretionary expenditures. Therefore, we believe it is important to view Free Cash Flow as a complement to our Unaudited Condensed Consolidated Statements of Cash Flows.

For the three months ended March 31, 2019 and 2018, Free Cash Flows includes results from discontinued operations.

Three Months Ended March 31,

Non-cash provisions and other

(9,632)

5,445 

Changes in operating assets/liabilities

(5,434)

(4,370)

Net cash provided by operating activities

11,789 

10,250 

Capital expenditures

(1,496)

(1,469)

Free cash flow

10,293 

8,781 

Change in debt

10,700 

6,677 

Repurchases of common stock

(14,875)

(12,038)

Cash dividend

(4,406)

(2,973)

(1,565)

Change in cash and cash equivalents

“Adjusted EBITDA”, a non-GAAP financial measure, is defined by Kforce as

net income before income from discontinued operations, net of taxes,

depreciation and amortization, stock-based compensation expense, interest expense, net and income tax expense. Adjusted EBITDA should not be considered a measure of financial performance under GAAP. Items excluded from Adjusted EBITDA are significant components in understanding and assessing our past and future financial performance, and this presentation should not be construed as an inference by us that our future results will be unaffected by those items excluded from Adjusted EBITDA. Adjusted EBITDA is a key measure used by management to assess our operations including our ability to generate cash flows and our ability to repay our debt obligations and management believes it provides a good metric of our core profitability in comparing our performance to our competitors, as well as our performance over different time periods. Consequently, management believes it is useful information to investors. The measure should not be considered in isolation or as an alternative to net income, cash flows or other financial statement information presented in the consolidated financial statements as indicators of financial performance or liquidity. The measure is not determined in accordance with GAAP and is thus susceptible to varying calculations. Also, Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

In addition, although we excluded amortization of stock-based compensation expense because it is a non-cash expense, we expect to continue to incur stock-based compensation in the future and the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our stockholder ownership interest. We suggest that you evaluate these items and the potential risks of excluding such items when analyzing our financial position.

Stock-based compensation expense

2,534 

2,162 

2,184 

Interest expense, net

1,297 

Adjusted EBITDA from continuing operations

for the three months ended March 31, 2019 was negatively impacted by $2.0 million

severance and other

due to actions taken as a result of the KGS divestiture.

The "Adjusted Financial Performance Measures" present non-GAAP financial information and should not be considered a measure of financial performance under generally accepted accounting principles. These measures are presented as an alternative method for assessing the Company’s operating results in a manner that is focused on the performance of our underlying operations. Each of these measures are intended to provide greater consistency, comparability and clarity of our results. Management uses this non-GAAP financial information to assess the Company's core operating results and consequently, management believes it is similarly useful information to investors.

ng the three months

31, 2018, the Firm did not have any

adjusted

financial performance measures

Reported

(GAAP)

Adjustments (1)

(Non-GAAP)

Reconciliation of SG&A and Operating Margin:

Selling, general and administrative expenses

(2,035)

77,778 

SG&A as a percentage revenue

2,035 

13,748 

Reconciliation of Tax Impact and Profitability:

12,825 

Income tax expense (2)

3,347 

1,504 

9,478 

Earnings per share from continuing operations - diluted

Includes $2.0

pre-tax ($1.5 million after

-tax)

due to actions taken as a result of the KGS divestiture.

The tax rate utilized for th

adjustments was our

quarterly effective tax rate

of 26.1%.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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