KFORCE INC

Previous wording

The following is an executive summary of what Kforce believes are highlights as of and for the three months ended March 31, 2025, which should be considered in the context of the additional discussions herein and in conjunction with the unaudited condensed consolidated financial statements and notes thereto.

Current wording

The following is an executive summary of what Kforce believes are highlights as of and for the six months ended June 30, 2025, which should be considered in the context of the additional discussions herein and in conjunction with the unaudited condensed consolidated financial statements and notes thereto.

Previous wording

•Revenue for the three months ended March 31, 2025 decreased 6.2% (4.7% on a billing day basis) to $330.0 million from $351.9 million in the comparable period in 2024. Revenue decreased 4.9% (3.4% on a billing day basis) and 20.3% (19.1% on a billing day basis) for Technology and FA, respectively, primarily driven by the ongoing macroeconomic uncertainty.

Current wording

•Revenue for the six months ended June 30, 2025 decreased 6.2% (5.5% on a billing day basis) to $664.3 million from $708.2 million in the comparable period in 2024. Revenue decreased 5.1% (4.4% on a billing day basis) and 18.4% (17.8% on a billing day basis) for Technology and FA, respectively, primarily driven by decreases in consultants on assignment, which we believe is related to macroeconomic uncertainties.

Previous wording

•Flex revenue for the three months ended March 31, 2025 decreased 6.4% (4.9% on a billing day basis) to $322.6 million from $344.7 million in the comparable period in 2024. Flex revenue decreased 5.0% (3.5% on a billing day basis) for Technology and decreased 23.2% (22.0% on a billing day basis) for FA.

Current wording

•Flex revenue for the six months ended June 30, 2025 decreased 6.1% (5.4% on a billing day basis) to $651.0 million from $693.5 million in the comparable period in 2024. Flex revenue decreased 5.0% (4.3% on a billing day basis) for Technology and 20.1% (19.5% on a billing day basis) for FA. Flex revenue for both Technology and FA improved slightly in the second quarter of 2025 on a sequential billing day basis.

Previous wording

•Gross profit margin for the three months ended March 31, 2025 decreased 40 basis points to 26.7% from 27.1% in the comparable period in 2024 as a result of a decline in Flex gross profit margins.

Current wording

•Gross profit margin for the six months ended June 30, 2025 decreased 50 basis points to 26.9% from 27.4% in the comparable period in 2024 primarily driven by declines in the mix of Direct Hire revenue and Flex gross profit margins.

Previous wording

•Flex gross profit margin for the three months ended March 31, 2025 decreased 60 basis points to 25.0% from 25.6% in the comparable period in 2024 primarily driven by higher healthcare costs, which was partially offset by improvements in the spread between bill and pay rates.

Current wording

•Flex gross profit margin for the six months ended June 30, 2025 decreased 50 basis points to 25.4% from 25.9% in the comparable period in 2024 primarily driven by higher healthcare costs.

Previous wording

•SG&A expenses as a percentage of revenue for the three months ended March 31, 2025 increased to 22.8% from 22.2% in the comparable period in 2024.

Current wording

•SG&A expenses as a percentage of revenue for the six months ended June 30, 2025 increased to 22.5% from 22.0% in the comparable period in 2024 primarily driven by the declines in revenue.

Previous wording

•Net income for the three months ended March 31, 2025 decreased 25.9% to $8.1 million, or $0.45 per share, from $11.0 million, or $0.58 per share, for the three months ended March 31, 2024.

Current wording

•Net income for the six months ended June 30, 2025 decreased 26.0% to $18.6 million, or $1.03 diluted earnings per share, from $25.1 million, or $1.33 per share, for the six months ended June 30, 2024.

Previous wording

•The Firm returned $28.3 million of capital to our shareholders in the form of open market repurchases totaling $21.2 million and quarterly dividends totaling $7.1 million during the three months ended March 31, 2025.

Current wording

•The Firm returned $45.7 million of capital to our shareholders in the form of open market repurchases totaling $31.7 million and quarterly dividends totaling $14.0 million during the six months ended June 30, 2025.

Previous wording

•Cash provided by operating activities was $0.2 million during the three months ended March 31, 2025, as compared to $13.2 million for the three months ended March 31, 2024. The decrease was primarily related to the payment of 2024 federal income taxes that were deferred pursuant to IRS guidance, elevated distributions from our non-qualified deferred compensation plan and the timing of cash receipts from our clients.

Current wording

•Cash provided by operating activities was $18.6 million during the six months ended June 30, 2025, as compared to $34.1 million for the six months ended June 30, 2024. The decrease was primarily related to lower profitability levels, higher capitalized costs related to cloud computing arrangements for our Workday implementation, and the payment of 2024 federal income taxes that were deferred pursuant to IRS guidance.

Previous wording

Kforce is a leading domestic provider of technology and finance and accounting talent solutions to innovative and industry-leading companies. As of March 31, 2025, Kforce employed approximately 1,700 associates and had approximately 7,500 consultants on assignment. Kforce serves clients across a diverse set of industries and organizations of all sizes, but we place a particular focus on serving Fortune 500 and other leading companies.

Current wording

Kforce is a leading domestic provider of technology and finance and accounting talent solutions to innovative and industry-leading companies. At June 30, 2025, Kforce employed over 1,600 associates and had approximately 7,500 consultants on assignment. Kforce serves clients across a diverse set of industries and organizations of all sizes, but we place a particular focus on serving Fortune 500 and other leading companies.

Previous wording

Based on data published by the U.S. Bureau of Labor Statistics and Staffing Industry Analysts (“SIA”), temporary employment figures and trends are important indicators of staffing demand from an economic standpoint. The national U.S. unemployment rate increased slightly to 4.2% in March 2025 as compared to 4.1% in December 2024. In the latest U.S. staffing industry forecast published by SIA in March 2025, the technology temporary staffing industry is estimated to grow 2% in 2025, which is down from the earlier forecast of 5%.

Current wording

Based on data published by the U.S. Bureau of Labor Statistics and Staffing Industry Analysts (“SIA”), temporary employment figures and trends are important indicators of staffing demand from an economic standpoint. The national U.S. unemployment rate remained flat at 4.1% in June 2025 as compared to December 2024. In the latest U.S. staffing industry forecast published by SIA in March 2025, the technology temporary staffing industry is estimated to grow 2% in 2025, which is down from the earlier forecast of 5%. We would expect a downward adjustment in SIA’s expectations of growth in their next update, which is expected to be released in September 2025.

Previous wording

Operating Results - Three Months Ended March 31, 2025 and 2024

Current wording

Operating Results - Three and Six Months Ended June 30, 2025 and 2024

Previous wording

Flex revenue for our Technology business decreased 5.0% (3.5% on a billing day basis) during the three months ended March 31, 2025, as compared to the same period in 2024, primarily driven by a decrease in consultants on assignment because of the ongoing macroeconomic uncertainties. Our average Technology bill rates improved by 1.1% for the three months ended March 31, 2025, as compared to the same period in 2024. In the second quarter, we expect Technology Flex revenue to improve slightly on a billing day basis sequentially and decrease in the low-to-mid single digits year over year.

Current wording

Flex revenue for our Technology business decreased 5.0% during each of the three and six months ended June 30, 2025 and 4.3% on a billing day basis for the six months ended June 30, 2025, as compared to the same periods in 2024. These changes are primarily driven by a decrease in consultants on assignment, which we believe is related to macroeconomic uncertainties. Technology Flex revenue improved 1.8% (0.2% on a billing day basis) sequentially in the second quarter. Our average Technology bill rates remained stable for the three and six months ended June 30, 2025, as compared to the same periods in 2024. In the third quarter, we expect Technology Flex revenue to decline in the low single digits on a sequential basis and mid single digits year over year.

Previous wording

Our FA business experienced a decrease in Flex revenue of 23.2% (22.0% on a billing day basis) during the three months ended March 31, 2025, as compared to the same period in 2024, primarily driven by a decrease in consultants on assignment because of the ongoing macroeconomic uncertainties. In the second quarter, we expect FA Flex revenue to decrease in the mid-single digits sequentially.

Current wording

Our FA business experienced a decrease in Flex revenue of 16.8% and 20.1% during the three and six months ended June 30, 2025, respectively, and 19.5% on a billing day basis for the six months ended June 30, 2025, as compared to the same periods in 2024. These changes are primarily driven by a decrease in consultants on assignment. FA Flex revenue improved 2.1% (0.5% on a billing day basis) in the second quarter of 2025 on a sequential billing day basis, which was the first sequential improvement in FA Flex since the second quarter of 2022. Our average FA bill rates improved by 4.7% and 3.0% for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024, which is reflective of the higher-skilled assignments that we are strategically pursuing. In the third quarter, we expect FA Flex revenue to improve in the mid single digits sequentially and decline in the high single digits year over year.

Previous wording

Direct Hire revenue increased 4.1% during the three months ended March 31, 2025, as compared to the same period in 2024, which was primarily driven by an increase in placement fees. In the second quarter, we expect Direct Hire Revenue to decrease slightly year over year.

Current wording

Direct Hire revenue decreased 21.6% and 9.1% during the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024, which was primarily driven by decreases in placements, partially offset by an increase in placement fees. In the third quarter, we expect Direct Hire Revenue to remain flat sequentially and decrease in the mid 20% range year over year.

Previous wording

The total gross profit percentage decreased 40 basis points for the three months ended March 31, 2025, as compared to the same period in 2024, primarily as a result of a decline in Flex gross profit margins.

Current wording

The total gross profit percentage decreased 70 and 50 basis points for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024, primarily driven by declines in the mix of Direct Hire revenue and Flex gross profit margins.

Previous wording

Our Flex gross profit percentage decreased 60 basis points for the three months ended March 31, 2025, as compared to the same period in 2024.

Current wording

Our Flex gross profit percentage decreased 40 and 50 basis points for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024.

Previous wording

•Technology Flex gross profit margins decreased 40 basis points for the three months ended March 31, 2025, as compared to the same period in 2024, primarily driven by higher healthcare costs. The impact of higher healthcare costs was partially offset by an improvement in the spread between bill and pay rates. In the second quarter, we expect Technology Flex gross profit margins to increase sequentially due to lower seasonal payroll taxes.

Current wording

•Technology Flex gross profit margins decreased 30 basis points for each of the three and six months ended June 30, 2025, as compared to the same periods in 2024, which was primarily driven by higher healthcare costs and partially offset by slightly improved bill and pay spreads. In the third quarter, we expect Technology Flex gross profit margins to remain stable sequentially.

Previous wording

•FA Flex gross profit margins decreased 190 basis points for the three months ended March 31, 2025, as compared to the same period in 2024, primarily driven by a tighter pricing environment, higher healthcare costs and slightly higher payroll taxes. In the second quarter, we expect FA Flex gross profit margins to increase sequentially due to lower seasonal payroll taxes.

Current wording

•FA Flex gross profit margins decreased 120 and 160 basis points for the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024, which was primarily driven by a tighter pricing environment and higher healthcare costs. In the third quarter, we expect FA Flex gross profit margins to remain stable sequentially.

Previous wording

SG&A Expenses. Total compensation, commissions, payroll taxes and benefit costs as a percentage of SG&A represented 84.4% for the three months ended March 31, 2025, as compared to 83.9% for the comparable period in 2024. Commissions and other bonus incentives are variable costs driven primarily by revenue and gross profit levels. Therefore, as those levels change, these expenses would also generally be anticipated to change.

Current wording

SG&A Expenses. Total compensation, commissions, payroll taxes and benefit costs as a percentage of SG&A represented 84.6% and 84.5% for the three and six months ended June 30, 2025, respectively, as compared to 84.2% and 84.0% for the comparable periods in 2024, respectively. Commissions and other bonus incentives are variable costs driven primarily by revenue and gross profit levels. Therefore, as those levels change, these expenses would also generally be anticipated to change.

Previous wording

SG&A as a percentage of revenue increased 60 basis points for the three months ended March 31, 2025, as compared to the same period in 2024. We continue to experience a degree of SG&A deleverage as we continue to make investments in our strategic priorities and to retain our most productive associates to strategically position the Firm to capture an increased market share when the demand environment eventually improves. To mitigate the pressure on our profitability levels from the revenue and gross profit declines, we continue to take certain actions to align our costs.

Current wording

For compensation and related expenses, we continue to experience a degree of SG&A deleverage as we continue to make investments in our strategic priorities and retain our most productive associates to strategically position the Firm to capture an increased market share when the demand environment improves. We also experienced an increase in healthcare costs during the three and six months ended June 30, 2025, as compared to the same periods in 2024. To mitigate the pressure on our profitability levels from the revenue and gross profit declines, we continue to take certain actions to align our costs such as tight discretionary spend control.

Previous wording

We continue to prioritize investments in our strategic initiatives, including the implementation of Workday as part of our back-office transformation program, which is expected to go live in early 2026; integrated strategy efforts; and the evolution of our nearshore and offshore delivery capabilities.

Current wording

We continue to prioritize investments in our strategic initiatives, including the implementation of Workday as part of our back-office transformation program, which is expected to go live in 2026; integrated strategy efforts; the evolution of our nearshore and offshore delivery capabilities; and most recently, driving Kforce’s strategy through leverage of artificial intelligence (“AI”).

Previous wording

Other Expense, Net. Other expense, net was $0.6 million and $0.7 million for the three months ended March 31, 2025 and 2024, respectively. Other expense, net primarily includes interest expense related to outstanding borrowings under our credit facility.

Current wording

Other Expense, Net. Other expense, net was $1.0 million and $0.5 million for the three months ended June 30, 2025 and 2024, respectively. Other expense, net was $1.6 million and $1.2 million for the six months ended June 30, 2025 and 2024, respectively. Other expense, net primarily includes interest expense related to outstanding borrowings under our credit facility.

Previous wording

Income Tax Expense. Income tax expense as a percentage of income before income taxes (our “effective tax rate”) was 26.4% and 27.1% for the three months ended March 31, 2025 and 2024, respectively. The primary driver for the decrease relates to the recognition of research and development tax credits associated with the implementation of Workday.

Current wording

Income Tax Expense. Income tax expense as a percentage of income before income taxes (our “effective tax rate”) was 25.4% and 26.6% for the six months ended June 30, 2025 and 2024, respectively. The primary driver for the decrease relates to increased research and development tax credits associated with our strategic priorities.

Previous wording

Adjusted EBITDA.“Adjusted EBITDA,” a non-GAAP financial measure, is defined by Kforce as net income before 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 unaudited condensed 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.

Current wording

Adjusted EBITDA.“Adjusted EBITDA,” a non-GAAP financial measure, is defined by Kforce as net income before 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 unaudited condensed consolidated financial statements as indicators of financial performance or liquidity. Also, Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

Previous wording

The following table presents a reconciliation of net income to Adjusted EBITDA:

Current wording

The following table presents Adjusted EBITDA and includes a reconciliation of Net income to Adjusted EBITDA:

Previous wording

To meet our capital and liquidity requirements, we primarily rely on our operating cash flows, as well as borrowings under our credit facility. At March 31, 2025 and December 31, 2024, we had $65.5 million and $32.7 million outstanding under our Amended and Restated Credit Facility, respectively, and the borrowing availability was $133.4 million and $166.3 million, respectively, subject to certain covenants. At March 31, 2025, Kforce had $118.5 million in working capital compared to $112.9 million at December 31, 2024.

Current wording

To meet our capital and liquidity requirements, we primarily rely on our operating cash flows, as well as borrowings under our credit facility. At June 30, 2025 and December 31, 2024, we had $70.0 million and $32.7 million outstanding under our Amended and Restated Credit Facility, respectively, and the borrowing availability was $129.0 million and $166.3 million, respectively, subject to certain covenants. At June 30, 2025, Kforce had $113.5 million in working capital compared to $112.9 million at December 31, 2024.

Previous wording

Cash provided by operating activities was $0.2 million during the three months ended March 31, 2025, as compared to $13.2 million during the three months ended March 31, 2024. Our largest source of operating cash flows is the collection of trade receivables, and our largest use of operating cash flows is the payment of our associate and consultant compensation. The year-over-year decrease in cash provided by operating activities was primarily driven by the payment of 2024 federal income taxes that were deferred pursuant to IRS guidance, higher distributions from our non-qualified deferred compensation plan, lower profitability levels and the timing of collections on trade receivables.

Current wording

Cash provided by operating activities was $18.6 million during the six months ended June 30, 2025, as compared to $34.1 million during the six months ended June 30, 2024. Our largest source of operating cash flows is the collection of trade receivables, and our largest use of operating cash flows is the payment of our associate and consultant compensation. The year-over-year decrease in cash provided by operating activities was primarily driven by lower profitability levels, higher capitalized costs related to cloud computing arrangements for our Workday implementation, and the payment of 2024 federal income taxes that were deferred pursuant to IRS guidance.

Previous wording

Cash used in investing activitieswas $4.8 million during the three months ended March 31, 2025, and primarily consisted of cash used for capital expenditures of $4.1 million. Cash used in investing activities during the three months ended March 31, 2024 was $2.4 million and primarily consisted of cash used for capital expenditures of $1.9 million.

Current wording

Cash used in investing activities was $7.6 million during the six months ended June 30, 2025, and primarily consisted of cash used for capital expenditures of $8.3 million, partially offset by proceeds from company-owned life insurance of $1.4 million. Cash used in investing activities during the six months ended June 30, 2024 was $3.8 million and primarily consisted of cash used for capital expenditures of $5.0 million and premiums paid on company-owned life insurance policies of $1.2 million, partially offset by proceeds from company-owned life insurance of $2.4 million.

Previous wording

Cash provided by financing activities was $4.7 million during the three months ended March 31, 2025, as compared to $10.8 million of cash used in financing activities during the three months ended March 31, 2024. This change was primarily driven by the net proceeds on our Amended and Restated Credit Facility, partially offset by an increase in repurchases of common stock.

Current wording

Cash provided by financing activities was $8.9 million during the six months ended June 30, 2025, as compared to $30.4 million of cash used in financing activities during the six months ended June 30, 2024. This change was primarily driven by the net proceeds on our Amended and Restated Credit Facility, partially offset by an increase in repurchases of common stock.

Previous wording

During the three months ended March 31, 2025 and 2024, Kforce declared and paid quarterly dividends of $7.1 million ($0.39 per share) and $7.1 million ($0.38 per share), respectively, which represents a 3% increase on a per share basis. While the Firm’s Board of Directors (the “Board”) has declared and paid quarterly dividends since the fourth quarter of 2014, and intends to in the foreseeable future, dividends will be subject to determination by our Board each quarter following its review of, among other things, the Firm’s current and expected financial performance as well as the ability to pay dividends under applicable law.

Current wording

During the six months ended June 30, 2025 and 2024, Kforce declared and paid quarterly dividends of $14.0 million ($0.78 per share) and $14.2 million ($0.76 per share), respectively, which represents a 3% increase on a per share basis. While the Firm’s Board of Directors (the “Board”) has declared and paid quarterly dividends since the fourth quarter of 2014, and intends to in the foreseeable future, dividends will be subject to determination by our Board each quarter following its review of, among other things, the Firm’s current and expected financial performance as well as the ability to pay dividends under applicable law.

Previous wording

On October 20, 2021, the Firm entered into the Amended and Restated Credit Facility, which has a maximum borrowing capacity of $200.0 million, and subject to certain conditions and the participation of the lenders, may be increased up to an aggregate additional amount of $150.0 million. As of March 31, 2025, $65.5 million was outstanding and $133.4 million was available on our Amended and Restated Credit Facility, and as of December 31, 2024, $32.7 million was outstanding. As of March 31, 2025, we were in compliance with all of the covenants contained in the Amended and Restated Credit Facility as described in our 2024 Annual Report on Form 10-K, and we currently expect that we will be able to maintain compliance with these covenants.

Current wording

On October 20, 2021, the Firm entered into the Amended and Restated Credit Facility, which has a maximum borrowing capacity of $200.0 million, and subject to certain conditions and the participation of the lenders, may be increased up to an aggregate additional amount of $150.0 million. At June 30, 2025, $70.0 million was outstanding and $129.0 million was available on our Amended and Restated Credit Facility, and at December 31, 2024, $32.7 million was outstanding. At June 30, 2025, we were in compliance with all of the covenants contained in the Amended and Restated Credit Facility as described in our 2024 Annual Report on Form 10-K, and we currently expect that we will be able to maintain compliance with these covenants.

Previous wording

During the three months ended March 31, 2025, Kforce repurchased approximately 418 thousand shares of common stock on the open market at a total cost of approximately $21.2 million. In addition, $42.3 million remained available for further repurchases under the Board-authorized common stock repurchase program at March 31, 2025.

Current wording

During the six months ended June 30, 2025, Kforce repurchased approximately 655 thousand shares of common stock on the open market at a total cost of approximately $31.7 million. In addition, $31.8 million remained available for further repurchases under the Board-authorized common stock repurchase program at June 30, 2025.

Previous wording

Other than the changes described below and elsewhere in this Quarterly Report, there have been no material changes during the period covered by this report on Form 10-Q to our contractual obligations previously disclosed in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Annual Report on Form 10-K.

Current wording

Other than the changes described elsewhere in this Quarterly Report, there have been no material changes during the period covered by this report on Form 10-Q to our contractual obligations previously disclosed in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Annual Report on Form 10-K.