This report, particularly Item 1. Business, Item 1A. Risk Factors and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and the documents we incorporate into this report contain certain statements that are, or may be deemed to be, forward-looking statements 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 (the “Exchange Act”), and are made in reliance upon the protections provided by such acts for forward-looking statements. Such statements may include, but may not be limited to, projectionsto: expectations of financial or operational performance, including our beliefsexpectations regarding potential government actionsthe future growth or changesdecline in laws and regulations, anticipated costs and benefitsrevenue of proposed acquisitions, divestitures and investments, effectseach segment of interest rate variations, financing needs or plans, funding of employee benefit plans, estimates concerning the effects of litigation or other disputes, the occurrence of unanticipated expenses,our business; developments within the staffing sector including, but not limited to, the penetration rate (the percentage of temporary staffing to total employment) and growth rate in temporary staffing, a reductionconstraint in the supply of consultants and candidates or the Firm’s ability to attract such individuals, changes in client demand for our services and our ability to adapt to such changes, the entry of new competitors in the market, the ability of the Firm to maintain and attract clients in the face of changing economic or competitive conditions,conditions; our beliefs regarding the expected future benefits of our flexible working environment; our ability to maintain compliance with our credit facility's covenants; potential government actions or changes in laws and regulations; anticipated costs and benefits of acquisitions, divestitures, joint ventures and other investments; effects of interest rate variations; financing needs or plans; estimates concerning the effects of litigation or other disputes; the occurrence of unanticipated expenses; as well as assumptions as to any of the foregoing and all statements that are not based on historical fact but rather reflect our current expectations concerning future results and events. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, refer to the Risk Factors and MD&A sections. In addition, when used in this discussion, the terms “anticipate,” “assume,” “estimate,” “expect,” “intend,” “plan,” “believe,” “will,” “may,” “likely,” “could,” “should,” “future” and variations thereof and similar expressions are intended to identify forward-looking statements.

Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted. Future events and actual results could differ materially from those set forth in or underlying the forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements contained in this report, which speak only as of the date of this report. Kforce undertakes no obligation to update any forward-looking statements.

Kforce Inc. and, along with its subsidiaries (collectively, “Kforce”) provide professional staffing services, is a leading domestic provider of technology and finance and accounting talent solutions primarily to our clients on both a temporary (“Flex”)many innovative and permanent (“Direct Hire”) basis through our Technology (“Tech”) and Finance and Accounting (“FA”) segments.industry-leading companies. While our workforce has been working remotely since March 2020 due to the COVID-19 pandemic, our physical worksites include our corporate headquarters in Tampa, Florida and approximately 40 field offices located throughout the U.S. Kforce was incorporated in 1994 and completed its Initial Public Offeringinitial public offering in August 1995, but its predecessor companieswe have been providing domestic staffing services through our predecessor companies since 1962.

Kforce serves clients across manya diverse set of industries and geographies as well as organizations of all sizes, withbut we place a particular focus on serving Fortune 1000500 and other large companies. We believe that our portfolio of service offerings is a key contributor to our long-term financial stability. Our 10 largest clients represented approximately 28%25% of revenue for the year ended December 31, 2020.

Our quarterly operating results can be affected by:

We provide talent solutions by striving to comprehensively understand our clients’ requirements and Direct Hire servicesmatch their requirements with qualified candidates in highly skilled areas including, but not limited to, our clients, focusing primarily on areas of information technology such as systems/applications architecture and development (mobility and/or web), data management and analytics, business and artificial intelligence, machine learning, project and program management, and network architecture and security. One

Driven by a shift in the breadth of service offerings our clients were looking for from Kforce, one of our strategies over the last several years has been to invest in organically building our managed teams and project solutions capabilities in order to provide a higher-value, differentiated offering to our clients. We believe Kforce has been successfully winning these more complex technology projectsengagements due to we believe, the strong, long-standing partnerships we have built with our clients, and our reputation for delivering quality services. Withinservices and our Tech segment,capability in identifying quality technology talent. Going forward, we expect to further integrate this capability into our Technology business as we continue to solve increasingly complex challenges for our clients.

We provide services to clients in a variety of industries with a diversified footprint in, among others, financial and business services, communications, insurance, retail and technology. Revenue forNo single industry represents more than approximately 16% of our Tech segment decreased 0.8% to $1.0 billionoverall Technology revenues in 2020 on a year-over-year basis. The average bill rate for Tech Flex in 2020 was approximately $79 per hour, which increased 4.3%, as compared to 2019. Our average assignment duration for Tech Flex is nearly 10 months, which has steadily increased over the last several years. Tech Flex continues to benefit from improving bill rates and longer assignment durations, which we believe is related to the acute labor shortage, particularly the shortage of labor for highly-skilled positions.2022. In addition, to our capability to source highly qualified U.S. domestic technology talent, we believe an important differentiatorno single client comprised more than 5% of overall Firm revenues in a candidate-constrained environment is our capability to source highly qualified foreign-born talent working domestically in the U.S. in higher-end technology roles. We operate this capability on a centralized basis, which allows us to operate consistently with a keen focus on ensuring compliance in this highly regulated space.2022.

The September 20202022 report published by Staffing Industry Analysts (“SIA”) stated that temporary technology staffing is expectedforecasted to experience growth of 7%16% and 8%, respectively, in 2021.2022 and 2023. While we believe the evolving macro-economic environment may result in SIA lowering their expectations of growth for 2023, we expect the technology staffing market to be more resilient than the overall macro-economic environment to adverse economic climates. Digital transformation, as a general trend, is driving organizations across all industries to increase their technology investments as competition and the speed of change intensifies. Nontraditional competitors are also entering new emerging technologies and markets. This development puts increased pressure on companies to invest in innovation and the evolution of their business models. We believe the secular drivers of technology spend generally remain intact withis driving many companies becomingto become increasingly dependent on the efficiencies provided

by technology and the need for innovation to support business strategies and sustain relevancy in today’s rapidly changing marketplace. At the macro level, demand is also being driven by an ever-changing and complex regulatory and employment law environment, which increases the overall cost of employment for many companies. We believe that these factors, among others, are continuing to drive companies to look to temporary staffing and solutions providers, such as Kforce, to meet their human capital needs.

We are pleased withbelieve the performance of our above-market performance in our TechTechnology business in 2020 and remain2022 was very excited about our strategic position and abilitysolid as revenues improved 18% on a billing day basis, year-over-year to execute$1.5 billion after growing more than 22% in 2021 on a billing day basis, year-over-year. We did experience a degree of moderation in whatdemand in the second half of 2022 given the deterioration in the macro-economic environment. In the fourth quarter of 2022, our Technology business grew approximately 8% on a year-over-year basis. The average bill rate in the fourth quarter of 2022 was approximately $90 per hour, which increased approximately 10%, as compared to the fourth quarter of 2021. Our average assignment duration is approximately 11 months, which has continued to increase over the last several years. We continue to benefit from an improving bill rate environment and longer assignment durations, which we believe will beis related to the acute labor shortage, particularly in the highly-skilled positions. In addition to our capability to source highly qualified U.S. domestic technology talent, we believe an important differentiator in a strong demandcandidate-constrained environment foris our services.

Our FA segment provides bothTechnology Flex and Direct Hire servicesofferings improved 18% and 20%, respectively, on a year-over-year basis for 2022 compared to 2021.

The talent solutions we offer our clients in areasour FA business include consultants in traditional finance and accounting roles such asas: finance, planning and analysis; business intelligence analysis; general accounting; transactional accounting transactional finance (e.g., payables, receivables,billing, cash applications, receivables); business and cost analysis), financial analysisanalysis; and reporting, taxation budgeting,and treasury. We have historically also provided our clients with consultants in lower skilled areas such as: loan servicing professional administration, audit services and systemssupport; customer and controls analysiscall center support; data entry; and documentation. Withinother administrative roles. Lower skilled roles have recently become a significantly reduced proportion of our FA segment,business given our change in strategic focus.

Over the last few years, we have been strategically repositioning our FA business to focus on more highly skilled assignments that are less susceptible to technological change and automation and more closely aligned with our Technology business. We will continue to support certain clients, where we have long-standing relationships and that are strategically important to our overall success, by providing consultants in lower skilled roles. We believe we have made solid progress in this transition as is evidenced by our overall average bill rate in FA, which has improved from $37 per hour to $51 per hour (excluding the Hurricane Ian support project in the fourth quarter of 2022), or approximately 38%, in the fourth quarter of 2022 compared to the fourth quarter of 2019.

The key drivers of Flex revenue areWe measure the number of consultants on assignment, billable hours, the bill rate per hour and, to a limited extent, the amount of billable expenses incurred by Kforce. Our Flex gross profit is determined by deducting related costs of employment for consultants, including compensation, payroll taxes, certain fringe benefits and independent contractor costs from Flex revenue. Associate and management commissions, compensation, payroll taxes and other fringe benefits are included in selling, general and administrative expenses (“SG&A”), along with other customary costs such as administrative and corporate costs.

We operate in a highly competitive environment. The professional staffing industry is made up of thousands of companies, most of which are small local firms providing limited service offerings to a relatively small local client base. A report published by SIA in 20202022 indicated that, in the U.S.,United States, Kforce is one of the 15 largest publicly-traded specialty staffing firms, the fifthseventh largest technology temporary staffing firm and the fifthfourth largest finance and accounting temporary staffing firm.

From an economic standpoint, temporary employment figures and trends are important indicators of staffing demand, based on data published by the Bureau of Labor Statistics and SIA. TheIn December 2022, the penetration rate (the percentage of temporary staffing to total employment) andincreased slightly to 2.0% from 1.9% in December 2021, while the unemployment rate, were 1.9% and 6.7%at 3.5%, respectively,was down from 3.9% in December 2020, down from 2.0% (penetration) and up from 3.5% (unemployment), respectively, in December 2019. Temporary help employment was down 7.6% year-over-year as of December 2020, and total non-farm employment was down 6.2% year-over-year.2021. In addition, the college-level unemployment rate, which we believe serves as a better proxy for professional employment and therefore aligns well with the consultant and candidate population that Kforce most typically serves, was 3.8%1.9% in December 2020, which represented an

Our primary objectives are driving long-term shareholder value by achieving above-market revenue growth, making prudent investments to enhance our efficiency and effectiveness within our operating model and significantly improving levels ofour profitability as we progress towards double digit operating profitability.margins. We believe the following strategies will help us achieve our objectives.

We are also continuing to make significant headcount investments in defined practiceenhance the focus on higher-value skill areas and our delivery assurance capabilities to grow this offering organically. We also believe there may be inorganic growth opportunities to supplement our existing business.

We operate in a highly competitive and fragmented staffing industry comprised of large national and local staffing and solutions firms. The local firms are typically operator-owned, and each market generally has one or more significant competitors. Within our managed teams and project solutions business,offerings, we also face competition from global, national and regional accounting, consulting and advisory firms and national and regional strategic consulting and systems implementation firms. We believe that our boundaryless reach within the U.S., physical presence in larger markets, concentration of service offerings in areas of greatest demand (especially technology), national delivery teams, centralized delivery channels for foreign consultants, including those obtained via the H-1B visa program which optimizesprograms that optimize distribution and strengthens compliance, longevity of our brand and reputation in the market, along with our dedicated compliance and regulatory infrastructure, all provide a competitive advantage.

Many clients utilize Managed Service Providers (“MSP”) or Vendor Management Organizations (“VMO”) for the management and procurement of staffingour services. Generally, MSPs and VMOs standardize processes through the use of Vendor Management Systems (“VMS”), which are tools used to aggregate spend and measure supplier performance. VMSs are also offered through independent providers. Typically, MSPs, VMOs and/or VMS providers charge staffing firms administrative fees ranging from 1% to 4% of revenue. In addition, the aggregation of services by MSPs for their clients into a single program can result in significant buying power and, thus, pricing power. Therefore, the use of MSPs by our clients has, in certain instances, resulted in margin compression, but has also led to incremental client share through our client’s vendor consolidation efforts. Kforce does not currently provide MSP or VMO services directly to our clients; rather, our strategy has been to work with MSPs, VMOs and VMS providers that enable us to better extend our services to current and prospective clients.

We believe that the principal elements of competition in our industry are differentiated offerings, reputation, ability of consultants to work on assignments with innovative and leading companies, the availability and quality of associates, consultants and candidates, level of service, effective monitoring of job performance, scope of geographic service, types of service offerings and compliance orientation. To attract consultants and candidates, we emphasize our ability to provide competitive compensation and benefits, quality and varied assignments, scheduling flexibility and permanent placement opportunities, all of which are important to Kforce being the employer of choice. Because individuals pursue other employment opportunities on a regular basis, it is important that we respond to market conditions affecting these individuals and focus on our consultant relationship objectives. Additionally, in certain markets, from time to time we have experienced significant pricing pressure as a result of our competitors’ pricing strategies, which may result in us not being able to effectively compete or choosing to not participate in certain business that does not meet our profitability standard.

Staffing and solutions firms are generally subject to one or more of the following types of government regulations: (1) regulation of the employer/employee relationship, such as wage and hour regulations, tax withholding and reporting, immigration/H-1B visa regulations, social security and other retirement, anti-discrimination, employee benefits and workers’ compensation regulations; (2) registration, licensing, recordkeeping and reporting requirements; and (3) worker classification regulations.

Because we operate in a complex regulatory environment, one of our top priorities is compliance. For more discussion of the potential impact that the regulatory environment could have on Kforce’s financial results, refer to Item 1A. Risk Factors.

Kforce maintains a number of insurance policies including general liability, automobile liability, workers’ compensation and employers’ liability, liability for certain foreign exposure, umbrella and excess liability, property, crime, fiduciary, directors and

As of December 31, 2020,2022, Kforce employed approximately 2,000 associates including roughly 1,300 supporting the revenue-generating aspects of our business and approximately 700 supporting the revenue-enabling aspects. We also had approximately 11,90010,000 consultants on assignment providing flexible staffing services and solutions towith our clients. Approximately 90%clients, of which a significant majority of these consultants are employed directly by KforceKforce.

Included in our 2022 Sustainability Report are trends related to nurture strong relationships, maintain accountabilityemployee turnover rates and enhance productivity among the leaders across Kforce;workforce demographics.

We are currently in the process of calculating our Scope 3 emissions for 2019 to 2022 and training.plan to report this measurement along with Scopes 1 and 2 in our next annual Sustainability Report.

Our talent management activities also include, butinternet address is www.kforce.com. We post our filings, free of charge, at www.investor.kforce.com the same day they are electronically filed with, or furnished to, the SEC, including our annual and quarterly reports on Forms 10-K and 10-Q and current reports on Form 8-K, our proxy statements, and any amendments to those reports or statements. The content on any website referred to in this Form 10-K is not limited to, conducting the following activities:

Demand for our services, generally speaking, can be significantly affected by the general level of economic activity and employment in the U.S. Even in a strong demand environment, without significant uncertainty and volatility, it is difficult for us to forecast future demand for our services due to the inherent challenge in forecasting the strength of economic cycles, availability of consultants and candidates and the short-term nature of many of our agreements. As economic activity slows, companies may defer or terminate projects for which they utilize our services or reduce their use of consultants. In addition, an economic downturn or recession could result in an increase in the unemployment rate and a deceleration of growth in the segments in which we and our clients operate. We may also experience more competitive pricing pressures during periods of economic downturn. Any substantial economic downturn, including an environment with significant inflationary and/or recessionary pressures, in the U.S. or global impact on the U.S. could have a material adverse effect on our business, and financial results.

Part of our business strategy includes enhancing our service offerings and relationships with larger consumers of our services, which is intended to Our Businessprovide relative durability to our revenue stream during adverse economic environments and enable us to more profitably grow our revenues. However, it also creates the potential for concentrating a significant portion of our revenues among our largest clients and exposes us to increased risks arising from decreases in the volume of business from, the pricing of business with, or the possible loss of business with these clients. Organizational changes occurring within those clients, or a deterioration of their financial condition or business prospects, or a change in their business strategies could reduce their need for our services and result in a significant decrease in the revenues we derive from those clients, which could have a material adverse effect on our financial results.

We expect to further enhancecontinue to make enhancements to our business and data intelligence as part of a multi-year effort to significantly upgrade our technology tools, including cloud-based platforms. We also expect to continue enhancing the quality of our revenue stream through the migration ofto focus on higher-value skill areas for our FA business, into higher-value skill areas and by investing in the growth of our managed teams and managedproject solutions offering. offerings. These improved capabilities are expected to help deliver exceptional service to our clients, consultants and candidates and improve the productivity of our associates and the scalability of our organization.

New business strategies and initiatives, such as these, can be distracting to our management team and associates, and can also be disruptive to our operations. New business initiatives could also involve significant unanticipated challenges and risks, including not advancing our business strategy, not realizing our anticipatedthe expected return on the investment, experiencing difficulty in implementing initiatives, or diverting management’s attention from our other businesses. These eventsNew business initiatives and strategic changes in the composition of our business mix can be a diversion to our management’s attention from other business concerns and could be disruptive to our operations, which could cause material harmour business and results of operations to suffer materially.

The staffing services market is highly competitive with limited barriers to entry. The competition among staffing and solutions firms is intense and we face significant competition in the markets we serve. We compete in national, regional and local markets with full-service and specialized temporary staffing and consulting companies. Additionally, the emergence and popularity of online staffing platforms as well as internal recruiting functions used by some clients as a low-cost alternative, may pose a competitive threat to our business, operating resultsservices. Some of our competitors possess substantially greater resources than we do and others may develop new and unique technologies, which may better position these competitors in certain markets. Accordingly, we may face increased competitive pricing pressures. We also face the risk that certain of our current and prospective clients will decide to provide similar services internally. Furthermore, many clients are retaining third parties to provide vendor management services, which may subject us to greater risks or financial condition.lower margins.

Kforce depends upon the abilities of its staff to attract and retain consultants and candidates, particularly technical and professional individuals,in technology disciplines, who possess the skills and experience necessary to meet the staffing requirements of our clients. We must continually evaluate and upgrade our methods of attracting qualified consultants and candidates to keep pace with changing client needs and emerging technologies. We expect significant competition for individuals with proven technical or professional skills to continue or increase for the foreseeable future. The supplyfuture given the scarcity of availablehighly skilled consultants and candidates, has

Kforce employs people primarilyeither in the workplaces of our clients.clients or virtually. Inherent risks in our business include possible claims of or relating to: discrimination and harassment; wrongful termination; violations of employment rights related to employment screening or privacy issues; misclassification of workers as employees or independent contractors; violations of wage and hour requirements and other labor laws; employment of illegal aliens; criminal activity; torts; breach of contract; failure to protect confidential personal information; intentional criminal misconduct; misuse or misappropriation of client intellectual property; employee benefits; or other claims. In some cases,situations, as a practical matter, we may not be in control of the work environment. Additionally, in some circumstances, we are contractually obligated to indemnify our clients against such risks. Such claims may result in negative publicity, injunctive relief, criminal investigations and/or charges, civil litigation, payment by Kforce of defense costs, monetary damages or fines that may be significant, discontinuation of client relationships or other material adverse effects on our business. To reduce our exposure, we maintain policies, procedures and guidelines to promote compliance with laws, rules, regulations and best practices applicable to our business. Even claims without merit could cause us to incur significant expense or reputational harm. We also maintain insurance coverage for professional malpractice liability, fidelity, employment practices liability and general liability in amounts and with deductibles that we believe are appropriate for our operations. However, our insurance coverage may not cover all potential claims against us, may require us to meet a deductible or may not continue to be available to us at a reasonable cost. In this regard, we face various employment-related risks not covered by insurance, such as wage and hour laws and employment tax responsibility. U.S. courts in recent years have been receiving large numbers of wage and hour class action claims alleging misclassification of overtime-eligible workers and/or failure to pay overtime-eligible workers for all hours worked. We are a defendant in purported class actions asserting such claims.

An inherent risk of employing people internally, in the workplace of other businesses, and/or remotely from home is that many of these individualsthey may have access or may gain access to information systems and confidential information. The risks of such activity include possible acts of errors and omissions; intentional misconduct; release, misuse or misappropriation of client intellectual property, confidential information, personally identifiable information, funds, or other property; data privacy or cybersecurity breaches affecting our clients and/or us; or other acts. Misconduct by our employees could include intentional or unintentional failures to comply with federal government regulations, engaging in unauthorized activities, or improper use of our clients’ sensitive or classified information, potentially in collusion with third parties, which could result in regulatory or criminal sanctions against us and serious harm to our reputation. It is not always possible to deter employee misconduct, and precautions to prevent and detect any such misconduct may not be effective in controlling such risks or losses, which could have a material adverse effect on our business.

In addition, any such misconduct may give rise to litigation, which could be time-consuming and expensive. To reduce our exposure, we maintain policies, procedures and insurance coverage for types and amounts we believe are appropriate in light of the aforementioned potential exposures. There can be no assurance that the corporate policies and practices we have in place to help reduce our exposure to these risks will be effective or that we will not experience losses as a result of these risks. In addition, our insurance coverage may not cover all potential claims against us, may require us to meet a deductible or may not continue to be available to us at a reasonable cost.

Kforce is highly dependent on its management team and expects that continued success will depend largely upon theirthe efforts, expertise and abilities.abilities of its leaders to drive the Firm’s strategic objectives and achieve future success. The loss of the services of any key executive for any reason could have a material adverse effect on Kforce. To attract and retain executives and other key employees (particularly management, client servicing, and consultant and candidate recruiting employees) in a competitive marketplace, we must provide a competitive compensation package, including

a mix of cash-based and equity-based compensation. Kforce expends significant resources in the recruiting and training of its employees, as the pool of available applicants for these positions is limited. The loss or any sustained attrition of our key operating employees could have a material adverse effect on our business, including our ability to establish and maintain client, consultant and candidate, professional and technical relationships.

Kforce is dependent on the proper functioning of information systems in operating our business. Critical information systems are used in every aspect of Kforce’sour daily operations, perhaps most significantly, in the identification and matching of staffing resources to client assignments and in the client billing and consultant or vendor payment functions. Kforce’s information systems may not perform as expected and are vulnerable to damage or interruption, including natural disasters, fire or casualty, theft, technical failures, terrorist acts, cybersecurity breaches, power outages, telecommunications failures, physical or software intrusions, computer viruses, employee errors or other events. While many of our systems are cloud-based, certain of our systems are still on location. Our corporate headquarters and data center are located in a hurricane-prone area. Although we have disaster recovery systems for most key information systems, this makes us reliant on third party providers for the restoration of these systems. Failure or interruption of our critical information systems may require significant additional capital and management resources to resolve, which could have a material adverse effect on our business.

Additionally, many of our information technology systems and networks are cloud-based or managed by third parties, whose future performance and reliability we cannot control. The risk of a cyberattack or security breach on a third party carries the same risks to Kforce as those associated with our internal systems. We seek to reduce these risks by performing vendor due diligence procedures prior to engaging with any third partythird-party vendor who will have access to sensitive data. Additionally, we require audits of the relevantcertain third parties’ information technology processes on an annual basis. However, there can be no assurance that such parties will not experience cybersecurity breachesincidents that could adversely affect our employees, consultants, customers and businesses, or that our audit or diligence processes will successfully deter or prevent such breach.

Our future success is likely to depend in part on our ability to successfully keep pace with technological changes and advances occurring across our industry. Our business is reliant on a variety of systems and technologies, including those that support consultant and candidate searching and matching, hiring and tracking, order management, billing and client data analytics. Our success depends in part on our ability to keep pace with rapid technological changes in the development and implementation of these services. If our systems become outdated, or if our investments in technology fail to provide the expected results, then we may decrease as a result of limited barriersbe unable to entry for newmaintain our technological capabilities relative to our competitors and discontinuation of clients outsourcing their staffing needs.

Our Tech segmentTechnology business utilizes a significant number of foreign nationals employed by us on work visas, primarily under the H-1B visa classification. The H-1B visa classification that enables U.S. employers to hire qualified foreign nationals is subject to

Citizenship and Immigration Service (“USCIS”) continues to closely scrutinize companies seeking to sponsor, renew or transfer H-1B status, including Kforce and Kforce’s subcontractors, and has issued internal guidance to its field offices that appears to narrow the eligibility criteria for H-1B status in the context of staffing services. In addition to USCIS restrictions, certain aspects of the H-1B program are also subject to regulation and review by the U.S. Department of Labor and U.S. Department of State, which have recently increased enforcement activities in the program. Vigorous enforcement and/or legislative or executive action relating to immigration could adversely affect our ability to recruit or retain foreign national consultants, and consequently, reduce our supply of skilled consultants and candidates and subject us to fines, penalties and sanctions, or result in increased labor and compliance costs.

We utilize individuals to provide services in connection with our business as qualified third-party independent contractors rather than our direct employees. Heightened state and federal scrutiny of independent contractor relationships could adversely affect us given that we utilize independent contractors to perform our services. An adverse determination related to the independent contractor status of these subcontracted personnel could result in substantial taxes or other liabilities to us, which could result in a material adverse effect upon our business.

Kforce is required to pay a number of federal, state and local payroll and related costs or provide certain benefits such as paid time off, sick leave, unemployment taxes, workers’ compensation and insurance premiums and claims, FICA and Medicare, among others, related to our employees. Costs could also increase as a result of health care reforms or the possible imposition of additional requirements and restrictions related to the placement of personnel. We may not be able to increase the fees charged to our clients in a timely manner or in a sufficient amount to cover these potential cost increases.

Kforce is subject to periodic federal, state and local tax audits for various tax years. We also need to comply with new, evolving or revised tax laws and regulations. The Tax Cuts and Jobs Act, enacted in December 2017, provided a significant reduction in the corporate tax rate, but the current administration continues to require interpretation; in addition, the new administration has indicated it intends toscrutinize and could potentially modify key aspects of the tax code, which could materially affect our tax obligations and the effective tax rate. Although Kforce attempts to comply with all taxing authority regulations, adverse findings or assessments made by taxing authorities as the result of an audit could have a material adverse effect on Kforce.

Our business is subject to regulation and licensing in many states. There can be no assurance that we will be able to continue to obtain all necessary licenses or approvals or that the cost of compliance will not prove to be material. If we fail to comply, such failure could have a material adverse effect on our financial results.

A large part of our business entails employing individuals on a temporary basis and placing such individuals in clients’ workplaces. Increased government regulation of the workplace or of the employer/employee relationship could have a material adverse effect on Kforce. For example, changes to government regulations, including changes to statutory hourly wage and overtime regulations, could adversely affect the Firm’s results of operations by increasing its costs. Due to the substantial number of state and local jurisdictions in which we operate and the widening disparity among state and local laws (a trend which appearsthat continues to be accelerating),accelerate, there also is a risk that we may be unaware of, or unable to adequately monitor, actual or proposed changes in, or the interpretation of, the laws or governmental regulations of such states and localities. Any delay in our compliance with changes in such laws or governmental regulations could result in potential fines, penalties, or other sanctions for non-compliance.

The market price of our stock has fluctuated substantially in the past and could fluctuate substantially in the future, based on a variety of factors, including our operating results, changes in general conditions in the economy, the financial markets, the staffing industry, a decrease in our outstanding shares or other developments affecting us, our clients, or our competitors; some of which may be unrelated to our performance.

In addition, the stock market in general, especially NASDAQ, along with market prices for staffing companies, has experienced historical volatility that has often been unrelated to the operating performance of these companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating results.

Among other things, volatility in our stock price could mean that investors will not be able to sell their shares at or above the prices they pay. The volatility also could impair our ability in the future to offer common stock as a source of additional capital or as consideration in the acquisition of other businesses, or as compensation for our key employees.

During the years ended December 31, 2022, 2021 and 2020, we recognized $3.8 million, $2.5 million, and 2019,$1.7 million, respectively, related to our share of losses related to our equity method investment. During the year ended December 31, 2022, Other expense, net also included our proportionate shareincludes an impairment charge of the loss from WorkLLama, LLC (“WorkLLama”), equity method investment of $1.7$13.7 million and $0.8 million, respectively. Although the impact of the COVID-19 economic and health crisis remains highly uncertain, it could have a material adverse effect on the fair value offor our equity method investment in WorkLLama. If the fair value falls below the book value of the equity method investment, we would be required to evaluate whether an other-than-temporary impairment has occurred.investment. Refer to Note 1 - “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of this report, for a more detailed discussion on the impairment of our equity method investment.

During the year ended December 31, 2021, Other expense, net includes $1.8 million expense related to the termination of our SERP in 2021. Refer to Note 12 - “Employee Benefit Plans” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of this report, for a more detailed discussion.