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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 ____________________________________________________________________________________________

 
FORM 10-Q
 ________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022March 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission File Number 000-26058

Standard Kforce Logo_Full Color (1).jpg 
Kforce Inc.
Exact name of registrant as specified in its charter
_______________________________________________________________ 
Florida59-3264661
State or other jurisdiction of incorporation or organizationIRS Employer Identification No.
1150 Assembly Drive, Suite 500, Tampa, Florida33607
Address of principal executive officesZip Code
Registrant’s telephone number, including area code: (813) 552-5000
 _______________________________________________________

1001 East Palm Avenue, Tampa, Florida 33605

(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 per shareKFRCNASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x   No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes x   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filerxAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.):    Yes    No  x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

The number of shares outstanding of the registrant’s common stock as of October 28, 2022May 5, 2023 was 20,753,646.20,341,265.


TableofContents

KFORCE INC.
TABLE OF CONTENTS
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
References in this document to the “Registrant,” “Kforce,” the “Company,” “we,” the “Firm,” “management,” “our” or “us” refer to Kforce Inc. and its subsidiaries, except where the context otherwise requires or indicates.
This report, particularly Part I, Item 2,2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and Part II, Item 1A,1A. Risk Factors 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: expectations of financial or operational performance; developments withinperformance, including our expectations regarding the staffing sector including, but not limitedfuture growth or decline in revenue of each segment of our business; the impact of the economic environment on our business; the Firm’s commitment to return significant capital to its shareholders regardless of the economic climate; the intent and ability to declare and pay quarterly dividends; growth raterates in temporary staffing,staffing; a reductionconstraint in the supply of consultants and candidates or the Firm’s ability to attract such individuals,individuals; changes in client demand for our services and our ability to adapt to such changes,changes; the entry of new competitors in the market,market; the ability of the Firm to maintain and attract clients in the face of changing economic or competitive conditions; our beliefs regarding the expected future benefits of our flexible working environment, the impact of the COVID-19 pandemic, inflationary pressures, rising interest rates and/or supply constraints on the global and U.S. macro-economic environments, and our business, customers, financial condition and results of operations;environment; our ability to maintain compliance with our credit facility's covenants; our beliefs regarding potential government actions or changes in laws and regulations, including those related to the COVID-19 pandemic;regulations; anticipated costs and benefits of acquisitions, divestitures, joint ventures and other investments; effects of interest rate variations; financing needs or plans; expected funding or payment of employee benefits; estimates concerning the effects of litigation or other disputes; the impact of our joint venture's inability to achieve its financial objectives or changes in valuation assumptions, 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.

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PART I - FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS.

KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
202220212022202120232022
RevenueRevenue$437,620 $402,725 $1,291,103 $1,169,564 Revenue$405,997 $416,967 
Direct costsDirect costs310,950 283,461 909,475 832,687 Direct costs292,021 293,081 
Gross profitGross profit126,670 119,264 381,628 336,877 Gross profit113,976 123,886 
Selling, general and administrative expensesSelling, general and administrative expenses94,306 88,972 285,502 251,617 Selling, general and administrative expenses89,339 95,049 
Depreciation and amortizationDepreciation and amortization1,045 1,026 3,214 3,420 Depreciation and amortization1,234 1,093 
Income from operationsIncome from operations31,319 29,266 92,912 81,840 Income from operations23,403 27,744 
Other expense (income), net906 1,448 (333)5,845 
Other expense, netOther expense, net1,045 1,433 
Income from operations, before income taxesIncome from operations, before income taxes30,413 27,818 93,245 75,995 Income from operations, before income taxes22,358 26,311 
Income tax expenseIncome tax expense8,151 7,650 24,886 21,378 Income tax expense6,148 7,130 
Net incomeNet income22,262 20,168 68,359 54,617 Net income16,210 19,181 
Other comprehensive income, net of tax:Other comprehensive income, net of tax:Other comprehensive income, net of tax:
Defined benefit pension plans— — — 3,103 
Change in fair value of interest rate swapsChange in fair value of interest rate swaps— 152 (615)1,101 Change in fair value of interest rate swaps— 2,302 
Comprehensive incomeComprehensive income$22,262 $20,320 $67,744 $58,821 Comprehensive income$16,210 $21,483 
Earnings per share – basicEarnings per share – basic$1.11 $0.99 $3.38 $2.64 Earnings per share – basic$0.83 $0.94 
Earnings per share – dilutedEarnings per share – diluted$1.09 $0.96 $3.31 $2.57 Earnings per share – diluted$0.82 $0.93 
Weighted average shares outstanding – basicWeighted average shares outstanding – basic20,022 20,429 20,206 20,676 Weighted average shares outstanding – basic19,455 20,319 
Weighted average shares outstanding – dilutedWeighted average shares outstanding – diluted20,450 21,098 20,634 21,260 Weighted average shares outstanding – diluted19,667 20,730 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)THOUSANDS EXCEPT PER SHARE AMOUNTS)
September 30, 2022December 31, 2021March 31, 2023December 31, 2022
ASSETSASSETSASSETS
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$5,089 $96,989 Cash and cash equivalents$171 $121 
Trade receivables, net of allowances of $1,853 and $2,342, respectively281,124 265,322 
Income tax refund receivable35 3,010 
Trade receivables, net of allowances of $1,437 and $1,575, respectivelyTrade receivables, net of allowances of $1,437 and $1,575, respectively266,525 269,496 
Prepaid expenses and other current assetsPrepaid expenses and other current assets10,019 6,790 Prepaid expenses and other current assets8,213 8,143 
Total current assetsTotal current assets296,267 372,111 Total current assets274,909 277,760 
Fixed assets, netFixed assets, net6,500 5,964 Fixed assets, net10,036 8,647 
Other assets, netOther assets, net81,758 92,629 Other assets, net71,682 75,771 
Deferred tax assets, netDeferred tax assets, net3,272 7,657 Deferred tax assets, net3,485 4,786 
GoodwillGoodwill25,040 25,040 Goodwill25,040 25,040 
Total assetsTotal assets$412,837 $503,401 Total assets$385,152 $392,004 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:Current liabilities:Current liabilities:
Accounts payable and other accrued liabilitiesAccounts payable and other accrued liabilities$73,030 $81,408 Accounts payable and other accrued liabilities$69,615 $72,792 
Accrued payroll costsAccrued payroll costs81,619 71,424 Accrued payroll costs46,893 48,369 
Current portion of operating lease liabilitiesCurrent portion of operating lease liabilities4,074 6,338 Current portion of operating lease liabilities3,800 4,576 
Income taxes payableIncome taxes payable4,241 1,239 Income taxes payable5,449 5,696 
Other current liabilities22 22 
Total current liabilitiesTotal current liabilities162,986 160,431 Total current liabilities125,757 131,433 
Long-term debt – credit facilityLong-term debt – credit facility— 100,000 Long-term debt – credit facility22,300 25,600 
Other long-term liabilitiesOther long-term liabilities40,875 54,564 Other long-term liabilities51,370 52,773 
Total liabilitiesTotal liabilities203,861 314,995 Total liabilities199,427 209,806 
Commitments and contingencies (Note L)Commitments and contingencies (Note L)Commitments and contingencies (Note L)
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
Preferred stock, $0.01 par; 15,000 shares authorized, none issued and outstanding— — 
Common stock, $0.01 par; 250,000 shares authorized, 73,006 and 72,997 issued, respectively730 730 
Preferred stock, $0.01 par value; 15,000 shares authorized, none issued and outstandingPreferred stock, $0.01 par value; 15,000 shares authorized, none issued and outstanding— — 
Common stock, $0.01 par value; 250,000 shares authorized, 73,247 and 73,242 issued, respectivelyCommon stock, $0.01 par value; 250,000 shares authorized, 73,247 and 73,242 issued, respectively732 732 
Additional paid-in capitalAdditional paid-in capital502,909 488,036 Additional paid-in capital512,572 507,734 
Accumulated other comprehensive incomeAccumulated other comprehensive income621 Accumulated other comprehensive income— 
Retained earningsRetained earnings491,856 442,596 Retained earnings501,630 492,764 
Treasury stock, at cost; 52,172 and 51,493 shares, respectively(786,525)(743,577)
Treasury stock, at cost; 52,920 and 52,744 shares, respectivelyTreasury stock, at cost; 52,920 and 52,744 shares, respectively(829,209)(819,038)
Total stockholders’ equityTotal stockholders’ equity208,976 188,406 Total stockholders’ equity185,725 182,198 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$412,837 $503,401 Total liabilities and stockholders’ equity$385,152 $392,004 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS)
 
Common StockAdditional Paid-In CapitalAccumulated Other
Comprehensive Income
Treasury StockTotal Stockholders’ EquityCommon StockAdditional Paid-In CapitalAccumulated Other
Comprehensive Income
Treasury StockTotal Stockholders’ Equity
SharesAmountRetained EarningsSharesAmountSharesAmountRetained EarningsSharesAmount
Balance, December 31, 202172,997 $730 $488,036 $621 $442,596 51,492 $(743,577)$188,406 
Balance, December 31, 2022Balance, December 31, 202273,242 $732 $507,734 $$492,764 52,744 $(819,038)$182,198 
Net incomeNet income— — — — 19,181 — — 19,181 Net income— — — — 16,210 — — 16,210 
Issuance for stock-based compensation and dividends, net of forfeituresIssuance for stock-based compensation and dividends, net of forfeitures(1)— 319 — (318)— — Issuance for stock-based compensation and dividends, net of forfeitures— 340 — (341)— — (1)
Stock-based compensation expenseStock-based compensation expense— — 4,437 — — — — 4,437 Stock-based compensation expense— — 4,326 — — — — 4,326 
Employee stock purchase planEmployee stock purchase plan— — 193 — — (3)49 242 Employee stock purchase plan— — 172 — — (5)73 245 
Dividends ($0.30 per share)— — — — (6,094)— — (6,094)
Change in fair value of interest rate swaps, net of tax benefit of $780— — — 2,302 — — — 2,302 
Dividends ($0.36 per share)Dividends ($0.36 per share)— — — — (7,003)— — (7,003)
Repurchases of common stockRepurchases of common stock— — — — — 147 (10,270)(10,270)Repurchases of common stock— — — — — 181 (10,244)(10,244)
Balance, March 31, 202272,996 $730 $492,985 $2,923 $455,365 51,636 $(753,798)$198,205 
Net income— — — — 26,916 — — 26,916 
Issuance for stock-based compensation and dividends, net of forfeitures11 298 — (298)— — — 
Stock-based compensation expense— — 4,410 — — — — 4,410 
Employee stock purchase plan— — 234 — — (4)61 295 
Dividends ($0.30 per share)— — — — (6,093)— — (6,093)
Change in fair value of interest rate swaps, net of tax expense of $989— — — (2,917)— — — (2,917)
Repurchases of common stock— — — — — 162 (10,283)(10,283)
Balance, June 30, 202273,007 730 497,927 475,890 51,794 (764,020)210,533 
Net income— — — — 22,262 — — 22,262 
Issuance for stock-based compensation and dividends, net of forfeitures(1)— 318 — (319)— — (1)
Stock-based compensation expense— — 4,445 — — — — 4,445 
Employee stock purchase plan— — 219 — — (5)75 294 
Dividends ($0.30 per share)— — — — (5,977)— — (5,977)
Repurchases of common stock— — — — — 383 (22,580)(22,580)
Balance, September 30, 202273,006 730 502,909 491,856 52,172 (786,525)208,976 
OtherOther— — — (6)— — — (6)
Balance, March 31, 2023Balance, March 31, 202373,247 $732 $512,572 $— $501,630 52,920 $(829,209)$185,725 



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Common StockAdditional Paid-In CapitalAccumulated Other
Comprehensive Income
Treasury StockTotal Stockholders’ Equity
SharesAmountRetained EarningsSharesAmount
Balance, December 31, 202172,997 $730 $488,036 $621 $442,596 51,492 $(743,577)$188,406 
Net income— — — — 19,181 — — 19,181 
Issuance for stock-based compensation and dividends, net of forfeitures(1)— 319 — (318)— — 
Stock-based compensation expense— — 4,437 — — — — 4,437 
Employee stock purchase plan— — 193 — — (3)49 242 
Dividends ($0.30 per share)— — — — (6,094)— — (6,094)
Change in fair value of interest rate swap, net of tax benefit of $780— — — 2,302 — — — 2,302 
Repurchases of common stock— — — — — 147 (10,270)(10,270)
Balance, March 31, 202272,996 $730 $492,985 $2,923 $455,365 51,636 $(753,798)$198,205 

Common StockAdditional Paid-In CapitalAccumulated Other
Comprehensive (Loss) Income
Treasury StockTotal Stockholders’ Equity
SharesAmountRetained EarningsSharesAmount
Balance, December 31, 202072,600 $726 $472,378 $(4,423)$388,645 50,427 $(677,391)$179,935 
Net income— — — — 13,261 — — 13,261 
Issuance for stock-based compensation and dividends, net of forfeitures15 — 271 — (271)— — — 
Stock-based compensation expense— — 3,403 — — — — 3,403 
Employee stock purchase plan— — 113 — — (4)57 170 
Dividends ($0.23 per share)— — — — (4,786)— — (4,786)
Defined benefit pension plan, no tax benefit— — — 47 — — — 47 
Change in fair value of interest rate swap, net of tax benefit of $319— — — 939 — — — 939 
Repurchases of common stock— — — — — 317 (16,313)(16,313)
Balance, March 31, 202172,615 $726 $476,165 $(3,437)$396,849 50,740 $(693,647)$176,656 
Net income— — — — 21,188 — — 21,188 
Issuance for stock-based compensation and dividends, net of forfeitures40 274 — (273)— — 
Stock-based compensation expense— — 3,532 — — — — 3,532 
Employee stock purchase plan— — 143 — — (4)52 195 
Dividends ($0.23 per share)— — — — (4,746)— — (4,746)
Defined benefit pension plan, net of tax provision of $283— — — 3,056 — — — 3,056 
Change in fair value of interest rate swap, net of tax benefit of $3— — — 10 — — — 10 
Repurchases of common stock— — — — — 225 (13,614)(13,614)
Balance, June 30, 202172,655 727 480,114 (371)413,018 50,961 (707,209)186,279 
Net income— — — — 20,168 — — 20,168 
Issuance for stock-based compensation and dividends, net of forfeitures(15)(1)260 — (260)— — (1)
Stock-based compensation expense— — 3,512 — — — — 3,512 
Employee stock purchase plan— — 148 — — (3)45 193 
Dividends ($0.26 per share)— — — — (5,304)— — (5,304)
Change in fair value of interest rate swap, net of tax benefit of $55— — — 152 — — — 152 
Repurchases of common stock— — — — — 249 (15,030)(15,030)
Balance, September 30, 202172,640 726 484,034 (219)427,622 51,207 (722,194)189,969 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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KFORCE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Nine Months Ended September 30,Three Months Ended March 31,
2022202120232022
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net incomeNet income$68,359 $54,617 Net income$16,210 $19,181 
Adjustments to reconcile net income to cash provided by operating activities:Adjustments to reconcile net income to cash provided by operating activities:Adjustments to reconcile net income to cash provided by operating activities:
Deferred income tax provision, netDeferred income tax provision, net4,386 302 Deferred income tax provision, net1,301 8,321 
Provision for credit lossesProvision for credit losses(231)(139)Provision for credit losses371 172 
Depreciation and amortizationDepreciation and amortization3,214 3,420 Depreciation and amortization1,234 1,093 
Stock-based compensation expenseStock-based compensation expense13,293 10,448 Stock-based compensation expense4,326 4,437 
Defined benefit pension plan expense— 2,157 
Loss (gain) on disposal or impairment of assets155 (1,979)
Noncash lease expenseNoncash lease expense4,313 3,992 Noncash lease expense1,130 1,502 
Loss on equity method investmentLoss on equity method investment2,737 1,709 Loss on equity method investment750 825 
OtherOther(322)681 Other50 358 
Increase in operating assets
(Increase) decrease in operating assets(Increase) decrease in operating assets
Trade receivables, netTrade receivables, net(15,571)(41,397)Trade receivables, net2,601 (12,914)
Other assetsOther assets(1,989)(6,384)Other assets243 (2,577)
Increase (decrease) in operating liabilitiesIncrease (decrease) in operating liabilitiesIncrease (decrease) in operating liabilities
Accrued payroll costsAccrued payroll costs11,025 7,715 Accrued payroll costs(1,230)15,447 
Payment of benefit under terminated pension plan(19,965)— 
Other liabilitiesOther liabilities8,659 24,801 Other liabilities(7,930)2,897 
Cash provided by operating activitiesCash provided by operating activities78,063 59,943 Cash provided by operating activities19,056 38,742 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Capital expendituresCapital expenditures(4,656)(5,026)Capital expenditures(1,872)(2,221)
Contributions to WorkLLama joint venture(500)(7,000)
Proceeds from the sale of our joint venture interestProceeds from the sale of our joint venture interest5,059 — 
Note receivable issued to our joint ventureNote receivable issued to our joint venture(750)— 
Equity method investmentEquity method investment— (500)
Note receivable issued to WorkLLama joint venture(4,500)— 
Net proceeds from the sale of assets— 23,742 
Cash (used in) provided by investing activities(9,656)11,716 
Cash provided by (used) in investing activitiesCash provided by (used) in investing activities2,437 (2,721)
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Proceeds from credit facilityProceeds from credit facility174,200 — 
Payments on credit facilityPayments on credit facility(100,000)— Payments on credit facility(177,500)— 
Repurchases of common stockRepurchases of common stock(42,103)(44,407)Repurchases of common stock(11,126)(10,270)
Cash dividendsCash dividends(18,164)(14,836)Cash dividends(7,003)(6,094)
Payments on other financing arrangementsPayments on other financing arrangements(40)(271)Payments on other financing arrangements(14)(19)
Cash used in financing activitiesCash used in financing activities(160,307)(59,514)Cash used in financing activities(21,443)(16,383)
Change in cash and cash equivalentsChange in cash and cash equivalents(91,900)12,145 Change in cash and cash equivalents50 19,638 
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period96,989 103,486 Cash and cash equivalents, beginning of period121 96,989 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$5,089 $115,631 Cash and cash equivalents, end of period$171 $116,627 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Nine Months Ended September 30,Three Months Ended March 31,
Supplemental Disclosure of Cash Flow InformationSupplemental Disclosure of Cash Flow Information20222021Supplemental Disclosure of Cash Flow Information20232022
Cash Paid During the Period For:Cash Paid During the Period For:Cash Paid During the Period For:
Income taxesIncome taxes$14,348 $17,845 Income taxes$5,108 $314 
Operating lease liabilitiesOperating lease liabilities5,413 5,591 Operating lease liabilities1,303 1,812 
Interest, netInterest, net918 1,934 Interest, net248 547 
Non-Cash Investing and Financing Transactions:Non-Cash Investing and Financing Transactions:Non-Cash Investing and Financing Transactions:
ROU assets obtained from operating leasesROU assets obtained from operating leases$274 $4,053 ROU assets obtained from operating leases$566 $446 
Employee stock purchase planEmployee stock purchase plan831 558 Employee stock purchase plan245 242 
Unsettled repurchases of common stock1,030 — 
Equipment and software additions included in accounts payable and other accrued liabilitiesEquipment and software additions included in accounts payable and other accrued liabilities957 — 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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KFORCE INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies
Unless otherwise noted below, there have been no material changes to the accounting policies presented in Note 1 - “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of the 20212022 Annual Report on Form 10-K.
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and footnotes normally required by GAAP for complete financial statements have been condensed or omitted pursuant to those rules and regulations, although management believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 20212022 Annual Report on Form 10-K. In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation. The Unaudited Condensed Consolidated Balance Sheet as of December 31, 2021,2022, was derived from our audited Consolidated Balance Sheet as of December 31, 2021,2022, as presented in our 20212022 Annual Report on Form 10-K.
Our quarterly operating results are affected by the number of billing days in a particular quarter, the seasonality of our clients’ businesses and increased holiday and vacation days taken. In addition, we typically experience higher costs in the first quarter of each fiscal year as a result of certain U.S. state and federal employment tax resets, which adversely affects our gross profit and overall profitability relative to the remainder of the fiscal year. As such, the results of operations for any interim period may be impacted by these factors, among others, and are not necessarily indicative of, nor comparable to, the results of operations for a full year.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of Kforce Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. References in this document to “Kforce,” the “Company,” “we,” the “Firm,” “management,” “our” or “us” refer to Kforce Inc. and its subsidiaries, except where the context indicates otherwise.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most critical of these estimates and assumptions relate to the following: allowance for credit losses; income taxes; self-insured liabilities for health insurance; and the impairment of goodwill and other long-lived assets and the equity method investment.assets. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates. In addition, the potential economic consequences of the COVID-19 pandemic, inflationary pressures, and supply constraints, among others, have been and may continue to be uncertain, rapidly changing and difficult to predict. Therefore, our accounting estimates and assumptions might change materially in future periods.
Health Insurance
Except for certain fully insured health insurance lines of coverage, Kforce retains the risk of loss per participant for each health insurance claim up to $600 thousand in claims annually. Additionally, for all claim amounts exceeding $600 thousand, Kforce retains the risk of loss up to an aggregate annual loss of those claims of $200$280 thousand. For its partially self-insured lines of coverage, health insurance costs are accrued using estimates to approximate the liability for reported claims and incurred but not reported claims, which are primarily based upon an evaluation of historical claims experience, completion factors determined by an actuary and a qualitative review of our health insurance exposure including the extent of outstanding claims and expected changes in health insurance costs.
Earnings per Share
Basic earnings per share is computed as net income divided by the weighted average number of common shares outstanding (“WASO”) during the period. WASO excludes unvested shares of restricted stock. Diluted earnings per share is computed by dividing net income by diluted WASO. Diluted WASO includes the dilutive effect of potentially dilutive securities such as unvested shares of restricted stock using the treasury stock method, except where the effect of including potential common shares would be anti-dilutive.
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For the three and nine months ended September 30,March 31, 2023 and 2022, 428212 thousand and 428411 thousand common stock equivalents were included in the diluted WASO, respectively. For the three and nine months ended September 30, 2021, 669 thousandMarch 31, 2023 and 584 thousand common stock equivalents were included in the diluted WASO, respectively. For the three and nine months ended September 30, 2022, there were 304264 thousand and 301305 thousand anti-dilutive common stock equivalents, respectively.
Equity Method Investment and Note Receivable
In June 2019, we entered into a joint venture whereby Kforce obtained a 50% noncontrolling interest in WorkLLama, which was accounted for as an equity method investment. As of December 31, 2022, the equity method investment was fully impaired. We recorded a loss related to our equity method investment of $0.8 million for each of the three months ended March 31, 2023 and 2022. During the year ended December 31, 2022, Kforce executed a series of promissory notes (the “Note Receivable”) to our joint venture for a total of $6.8 million and recorded a credit loss of $1.9 million, resulting in a balance of $4.8 million at December 31, 2022. There were no payments received on the Note Receivable during the year ended December 31, 2022.
On February 23, 2023, Kforce received $6.0 million in exchange for the sale of our 50% noncontrolling interest in WorkLLama to an unaffiliated third party and in full settlement of the outstanding balance of the Note Receivable. These proceeds, net of customary transaction costs, amounted to $5.1 million and is presented in the investing section of the Unaudited Condensed Consolidated Statements of Cash Flows.
Excise Tax
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into Federal law. The IRA provides for, among other things, a new U.S. Federal 1% nondeductible excise tax on certain repurchases of stock by publicly-traded U.S. domestic corporations occurring after December 31, 2022. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain stock issuances against the fair market value of stock repurchases during the same taxable year, with certain exceptions. For the three and nine months ended September 30, 2021, thereMarch 31, 2023, we recorded $0.1 million in excise tax related to the IRA, which was an insignificant amount of anti-dilutive commonincluded in Treasury stock equivalents.in the unaudited condensed consolidated financial statements.
New Accounting Standards
Recently Adopted Accounting Standards
There were no newIn March 2020, the FASB issued guidance for reference rate reform, which provided temporary optional guidance to ease the potential burden in accounting standardsfor reference rate reform in contracts and other transactions that reference LIBOR, or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. The FASB has since issued subsequent updates to the initial guidance in December 2022, which extends the final sunset date for reference rate reform from December 31, 2022 to December 31, 2024. We adopted during the nine months ended September 30, 2022 that hadthis standard as of January 1, 2023 and do not expect it to have a significantmaterial impact on our financial statements.
Recently Issued Accounting Standards Not Yet Adopted
There are no accounting standards that have not yet been adopted that are expected to have a significant impact on ourconsolidated financial statements and related disclosures.

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Note B - Reportable Segments
Kforce provides services through our Technology and Finance and Accounting (“FA”) segments. Historically, and for the three and nine months ended September 30, 2022,March 31, 2023, we have reported sales and gross profit information on a segment basis. Total assets, liabilities and operating expenses are not reported separately by segment as our operations are largely combined.
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The following table provides information on the operations of our segments (in thousands):
TechnologyFATotalTechnologyFATotal
Three Months Ended September 30,
Three Months Ended March 31,Three Months Ended March 31,
20232023
RevenueRevenue$364,844 $41,153 $405,997 
Gross profitGross profit$98,411 $15,565 $113,976 
Operating and other expensesOperating and other expenses$91,618 
Income from operations, before income taxesIncome from operations, before income taxes$22,358 
202220222022
RevenueRevenue$390,496 $47,124 $437,620 Revenue$359,905 $57,062 $416,967 
Gross profitGross profit$107,793 $18,877 $126,670 Gross profit$102,450 $21,436 $123,886 
Operating and other expensesOperating and other expenses$96,257 Operating and other expenses$97,575 
Income from operations, before income taxesIncome from operations, before income taxes$30,413 Income from operations, before income taxes$26,311 
2021
Revenue$337,230 $65,495 $402,725 
Gross profit$95,934 $23,330 $119,264 
Operating and other expenses$91,446 
Income from operations, before income taxes$27,818 
Nine Months Ended September 30,
2022
Revenue$1,134,996 $156,107 $1,291,103 
Gross profit$320,160 $61,468 $381,628 
Operating and other expenses$288,383 
Income from operations, before income taxes$93,245 
2021
Revenue$927,518 $242,046 $1,169,564 
Gross profit$258,449 $78,428 $336,877 
Operating and other expenses$260,882 
Income from operations, before income taxes$75,995 

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Note C - Disaggregation of Revenue
The following table provides the disaggregation of revenue by segment and type (in thousands):
TechnologyFATotalTechnologyFATotal
Three Months Ended September 30,
Three Months Ended March 31,Three Months Ended March 31,
20232023
Revenue by type:Revenue by type:
Flex revenueFlex revenue$359,524 $36,008 $395,532 
Direct Hire revenueDirect Hire revenue5,320 5,145 10,465 
Total RevenueTotal Revenue$364,844 $41,153 $405,997 
202220222022
Revenue by type:Revenue by type:Revenue by type:
Flex revenueFlex revenue$382,072 $40,896 $422,968 Flex revenue$351,716 $50,150 $401,866 
Direct Hire revenueDirect Hire revenue8,424 6,228 14,652 Direct Hire revenue8,189 6,912 15,101 
Total RevenueTotal Revenue$390,496 $47,124 $437,620 Total Revenue$359,905 $57,062 $416,967 
2021
Revenue by type:
Flex revenue$330,170 $59,003 $389,173 
Direct Hire revenue7,060 6,492 13,552 
Total Revenue$337,230 $65,495 $402,725 
Nine Months Ended September 30,
2022
Revenue by type:
Flex revenue$1,109,294 $135,239 $1,244,533 
Direct Hire revenue25,702 20,868 46,570 
Total Revenue$1,134,996 $156,107 $1,291,103 
2021
Revenue by type:
Flex revenue$909,599 $224,783 $1,134,382 
Direct Hire revenue17,919 17,263 35,182 
Total Revenue$927,518 $242,046 $1,169,564 

Note D - Allowance for Credit Losses
The allowance for credit losses on trade receivables is determined based on a numberby estimating and recognizing lifetime expected losses, rather than incurred losses, which results in the earlier recognition of factors such as recent and historical write-off and delinquency trends, a specific analysiscredit losses even if the expected risk of significant receivable balances that are past due, the concentration of trade receivables among clients and the current state of the U.S. economy.credit loss is remote. As part of our analysis, we apply credit loss rates to outstanding receivables by aging category. For certain clients, we perform a quarterly credit review, which considers the client’s credit rating and financial position as well as our total credit loss exposure. Trade receivables are written off after all reasonable collection efforts have been exhausted. Recoveries of trade receivables previously written off are recorded when received and are immaterial for the three and nine months ended September 30, 2022.March 31, 2023.
The following table presents the activity within the allowance for credit losses on trade receivables for the ninethree months ended September 30, 2022March 31, 2023 (in thousands):
Allowance for credit losses, January 1, 20222023$1,7291,006 
Current period provision (credit)(231)371 
Write-offs charged against the allowance, net of recoveries of amounts previously written off(240)(442)
Allowance for credit losses, September 30, 2022March 31, 2023$1,258935 
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The allowances on trade receivables presented in the Unaudited Condensed Consolidated Balance Sheets include $0.6$0.5 million and $0.6 million at September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively, for reserves unrelated to credit losses.
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Note E - Other Assets, NetNet
Other assets, net consisted of the following (in thousands):
September 30, 2022December 31, 2021March 31, 2023December 31, 2022
Assets held in Rabbi TrustAssets held in Rabbi Trust$30,199 $41,607 Assets held in Rabbi Trust$34,323 $31,976 
Right-of-use assets for operating leases, netRight-of-use assets for operating leases, net10,331 15,395 Right-of-use assets for operating leases, net16,538 17,102 
Capitalized software, net (1)Capitalized software, net (1)16,404 14,666 Capitalized software, net (1)14,845 16,149 
Equity method investment (2)14,772 17,008 
Deferred loan costs, netDeferred loan costs, net939 1,115 Deferred loan costs, net822 881 
Notes receivable (3)4,500 — 
Notes receivable, net (2)Notes receivable, net (2)— 4,825 
Other non-current assetsOther non-current assets4,613 2,838 Other non-current assets5,154 4,838 
Total Other assets, netTotal Other assets, net$81,758 $92,629 Total Other assets, net$71,682 $75,771 
(1) Accumulated amortization of capitalized software was $36.3$37.0 million and $35.5$36.6 million as of September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively.
(2) In June 2019, Kforce entered into a joint venture resulting in a 50% noncontrolling interest in WorkLLama, LLC (“WorkLLama”), which is accounted for as an equity method investment. The loss on this WorkLLama investment was $0.9 million and $2.7 million for the three months and nine months ended September 30, 2022, respectively. In addition, Kforce contributed $0.5 million and $9.0 million of capital during the nine months ended September 30, 2022 and the year ended December 31, 2021, respectively. Refer to Note LA - “Commitments and Contingencies”“Summary of Significant Accounting Policies” for more informationdetails on contingencies related to WorkLLama.
(3) In the three months ended June 30, 2022, Kforce loaned WorkLLama LLC $2.0 million, pursuant to a secured promissory note. Insale of our joint venture and the three months ended September 30, 2022, Kforce amended the secured promissory note and increased the total amount available to loan to WorkLLama by an additional $4.0 million, of which an additional $2.5 million was extended, resulting in an outstanding balance of $4.5 million at September 30, 2022. Allsettlement of the notes have the same terms, bearing interest at 7% annually with principal and accrued interest payable in a single payment in June 2025.Note Receivable.

Note F - Current Liabilities
The following table provides information on certain current liabilities (in thousands):
September 30, 2022December 31, 2021March 31, 2023December 31, 2022
Accounts payable and other accrued liabilities:Accounts payable and other accrued liabilities:Accounts payable and other accrued liabilities:
Accounts payableAccounts payable$52,032 $40,241 Accounts payable$47,967 $49,600 
Accrued liabilitiesAccrued liabilities20,998 41,167 Accrued liabilities21,648 23,192 
Total Accounts payable and other accrued liabilitiesTotal Accounts payable and other accrued liabilities$73,030 $81,408 Total Accounts payable and other accrued liabilities$69,615 $72,792 
Accrued payroll costs:Accrued payroll costs:Accrued payroll costs:
Payroll and benefitsPayroll and benefits$54,470 $43,738 Payroll and benefits$37,178 $41,506 
Payroll taxesPayroll taxes22,432 22,466 Payroll taxes5,138 2,633 
Health insurance liabilitiesHealth insurance liabilities3,895 4,474 Health insurance liabilities3,805 3,481 
Workers’ compensation liabilitiesWorkers’ compensation liabilities822 746 Workers’ compensation liabilities772 749 
Total Accrued payroll costsTotal Accrued payroll costs$81,619 $71,424 Total Accrued payroll costs$46,893 $48,369 
Our accounts payable balance includes vendor and third party payables. Our accrued liabilities balance includes the current portion of our deferred compensation plans liability, contract liabilities from contracts with customers (such as customer rebates), and other accrued liabilities and amounts owed under the Supplemental Executive Retirement Plan (‘SERP ”). Effective April 30, 2021, Kforce’s Board of Directors irrevocably terminated the SERP. The benefits owed to the two participants under the SERP, as of June 30, 2022 and December 31, 2021, was $20.0 million in the aggregate. In July 2022, the amount owed was fully paid thereby reducing accrued liabilities and relieving us of any future obligation related to the SERP.
Our payroll taxes as of September 30, 2022 and December 31, 2021 include approximately $19.3 million in payroll tax payments as a result of the application of the CARES Act 2020, which is anticipated to be repaid no later than December 31, 2022.
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liabilities.

Note G - Credit Facility
On October 20, 2021, the Firm entered into an amended and restated credit agreement with Wells Fargo Bank, National Association, as administrative agent, Wells Fargo Securities, LLC, as lead arranger and bookrunner, Bank of America, N.A., as syndication agent, BMO Harris Bank, N.A., as documentation agent, and the lenders referred to therein (the “Amended and Restated Credit Facility”). Under the Amended and Restated Credit Facility, the Firm has a maximum borrowing capacity of $200.0 million, which may, subject to certain conditions and the participation of the lenders, be increased up to an aggregate additional amount of $150.0 million. The maturity date of the Amended and Restated Credit Facility is October 20, 2026.
In May 2022, the Firm repaid the outstanding balance of $100.0 million in connection with the termination of its Swap B (as defined in Note J - “Derivative Instruments and Hedging Activity” to these financial statements) with a notional amount of $100.0 million. As of September 30, 2022March 31, 2023, we are in compliance with all of our financial covenants contained in the Amended and Restated Credit Facility.
As of March 31, 2023 and December 31, 2021, $02022, $22.3 million and $100.0$25.6 million was outstanding under the Amended and Restated Credit Facility.Facility, respectively.
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Note H - Other Long-Term Liabilities
Other long-term liabilities consisted of the following (in thousands):
September 30, 2022December 31, 2021March 31, 2023December 31, 2022
Deferred compensation planDeferred compensation plan$32,990 $42,623 Deferred compensation plan$36,839 $36,390 
Operating lease liabilitiesOperating lease liabilities7,877 11,919 Operating lease liabilities14,498 16,380 
Other long-term liabilitiesOther long-term liabilities22 Other long-term liabilities33 
Total Other long-term liabilitiesTotal Other long-term liabilities$40,875 $54,564 Total Other long-term liabilities$51,370 $52,773 

Note I - Stock Incentive PlansStock-based Compensation
On April 22, 2021,20, 2023, Kforce’s shareholders approved the 20212023 Stock Incentive Plan (the “2021“2023 Plan”). The 20212023 Plan allows for the issuance of stock options, stock appreciation rights (“SAR”), stock awards (including restricted stock awards (“RSAs”) and restricted stock units (“RSUs”)) and other stock-based awards. The aggregate number of shares reserved under the 20212023 Plan is approximately 3.93.2 million. Grants of an option or SAR reduce the reserve by one share, while a restricted stock award reduces the reserve by 2.72 shares. The 20212023 Plan terminates on April 22, 2031.20, 2033.
Restricted stock (including RSAs and RSUs) is granted to directors, executives and management either for awards related to Kforce’s annual long-term incentive program or as part of a compensation package for attraction and retention purposes. Restricted stock granted during the nine months ended September 30, 2022 will vest over a period of one to ten years, with vesting occurring in equal annual installments.
During the three and nine months ended September 30, 2022, stock-based compensation expense was $4.5 million and $13.3 million, respectively. During the three and nine months ended September 30, 2021, stock-based compensation expense was $3.5 million and $10.5 million, respectively, and is included in Selling, general and administrative expenses.
The following table presents the restricted stock activity for the ninethree months ended September 30, 2022March 31, 2023 (in thousands, except per share amounts):
Number of 
Restricted Stock
Weighted-Average
Grant Date
Fair Value
Total Intrinsic
Value of Restricted
Stock Vested
Number of 
Restricted Stock
Weighted-Average
Grant Date
Fair Value
Total Intrinsic
Value of Restricted
Stock Vested
Outstanding at December 31, 20211,083 $48.86 
Outstanding at December 31, 2022Outstanding at December 31, 2022911 $54.42 
GrantedGranted42 $61.38 Granted$54.92 
ForfeitedForfeited(33)$51.24 Forfeited(1)$75.22 
VestedVested(43)$45.69 $2,831 Vested(8)$25.71 $467 
Outstanding at September 30, 20221,049 $49.65 
Outstanding at March 31, 2023Outstanding at March 31, 2023908 $54.64 
As of September 30, 2022,March 31, 2023, total unrecognized stock-based compensation expense related to restricted stock was $37.2$41.2 million, which will be recognized over a weighted-average remaining period of 4.34.1 years.
During the three months ended March 31, 2023 and 2022, stock-based compensation expense was $4.3 million and $4.4 million, respectively, and is included in Selling, general and administrative expenses (“SG&A”) in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

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Note J - Derivative InstrumentsInstrument and Hedging Activity
As of September 30, 2022, theThe Firm did not have any outstanding derivative instruments. On April 21, 2017, Kforce entered into a forward-starting interest ratemaintained two swap agreement with Wells Fargo Bank, N.A (“Swap A”).instruments, Swap A was effective on May 31, 2017 and matured on April 29, 2022. Other information related to Swap A is as follows: Notional amount - $25.0 million; and Fixed interest rate - 1.81%.
On March 12, 2020, Kforce entered into a forward-starting interest rate swap agreement with Wells Fargo Bank, N.A (“Swap B”, together with Swap A, the "Swaps"). Swap B, was effective on March 17, 2020. Other information related to Swap B iswhich were designated as follows: Scheduled maturity date - May 30, 2025; Fixed interest rate - 0.61%;cash flow hedges and Notional amount - $100.0 million.
The Firmwere used the Swaps as an interest rate risk management tooltools to mitigate the potential impact of rising interest rates on variable rate debt. The fixed interest rate for each Swap plus the applicable interest margin under our credit facility, was included in interest expense and recorded in Other (income) expense, net in the accompanying Unaudited Condensed Consolidated Financial Statements of Operations and Comprehensive Income.
In Swap A matured on April 29, 2022 and Swap B was terminated in May 2022,2022. As of March 31, 2023, the Firm terminated Swap B in anticipation of paying thedid not have any outstanding amount on its credit facility, which was $100.0 million. At the termination of Swap B, the amount recorded in Accumulated other comprehensive income was recognized. The Firm received $4.1 million in income, which represented the gain and fair value of Swap B at the time of termination, and is included in other income in the accompanying Consolidated Financial Statements of Operations and Comprehensive Income.
Both Swap A and B were designated as cash flow hedges. The change in the fair value of the Swaps was previously recorded as a component of Accumulated other comprehensive income (loss) in the unaudited consolidated financial statements.derivative instruments.
The following table sets forth the activity in the accumulated derivative instrument activity (in thousands):
Nine Months Ended September 30,
20222021
Accumulated derivative instrument gain (loss), beginning of period$823 $(1,774)
Net change associated with current period hedging transactions (1)(823)1,478 
Accumulated derivative instrument gain (loss), end of period$— $(296)
Three Months Ended March 31,
20232022
Accumulated derivative instrument gain, beginning of period$— $823 
Net change associated with current period hedging transactions— 3,082 
Accumulated derivative instrument gain, end of period$— $3,905 
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(1) The accumulated derivative instrument activity as of the end the nine month period ending September 30, 2022, includes the beginning balance of $823 thousand, a change in fair value of $3.1 million and a reversal due to termination of $3.9 million resulting in an ending balance of zero.

Note K - Fair Value Measurements
Our interest rate swaps were previously measured at fair value using readily observable inputs, which are considered to be Level 2 inputs and were recorded in Other long-term liabilities within the accompanying Unaudited Condensed Consolidated Balance Sheets.inputs. In April 2022, Swap A matured and in May 2022, we terminated Swap B. At September 30, 2022, Kforce had no interest rate swaps. Refer to Note J - “Derivative InstrumentsInstrument and Hedging Activity” for a complete discussion of ourthe interest rate swaps.swap derivative instruments.
There were no transfers into or out of Level 1, 2 or 3 assets or liabilities during the ninethree months ended September 30, 2022. The fair value of the interest rate swap derivative instrument asset at DecemberMarch 31, 2021 was $823 thousand and was classified as a Level 2 instrument.2023.

Note L - Commitments and Contingencies
Employment Agreements
Kforce has employment agreements with certain executives that provide for certain post-employment benefits under certain circumstances. At September 30, 2022,March 31, 2023, our liability would be approximately $38.2$40.4 million if, following a change in control, all of the executives under contract were terminated without cause by the employer or if the executives resigned for good reason and $13.7$17.4 million if, in the absence of a change in control, all of the executives under contract were terminated by Kforce without cause or if the executives resigned for good reason.
Litigation and Loss Contingencies
Except as stated below, there have been no material developments with regard to the legal proceedings previously disclosed in our 2021 Annual Report on Form 10-K or in our Form 10-Q for the quarter ending June 30, 2022.
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On December 17, 2019, Kforce Inc., et al. was served with a complaint brought in Superior Court of the State of California, Alameda County. Kathleen Wahrer, et al. v. Kforce Inc., et al., Case Number: RG19047269. The former employee purports to bring a representative action on her own behalf and on behalf of other allegedly aggrieved employees pursuant to California Private Attorneys General Act of 2004, California Labor Code Section 2968, et seq. (“PAGA”) alleging violations of the California Labor Code, §201, et seq. (“Labor Code”). The plaintiff seeks civil penalties, interest, attorneys’ fees, and costs under the Labor Code for alleged failure to: provide and pay for work performed during meal and rest periods; properly calculate and pay all earned minimum and overtime wages; provide compliant wage statements; timely pay wages during employment and upon termination; and reimburse business expenses. At this stage in the litigation, it is not feasible to predict the outcome of this matter or reasonably estimate a range of loss, should a loss occur, from this proceeding. We intend to continue to vigorously defend the claims.
On November 18, 2020, Kforce Inc., et al. was served with a complaint brought in the Superior Court of the State of California, San Diego County, which was subsequently amended on January 21, 2021, to add Kforce Flexible Solutions as a party. Bernardo Buchsbaum, et al. v. Kforce Inc., et al., Case Number: 37-2020-00030994-CU-OE-CTL. The former employee purports to bring a representative action on his own behalf and on behalf of other allegedly aggrieved employees pursuant to PAGA alleging violations of the Labor Code. The plaintiff seeks civil penalties, interest, attorney’s fees, and costs under the Labor Code for alleged failure to: properly calculate and pay all earned minimum and overtime wages; provide and pay for work performed during meal and rest periods; reimburse business expenses; provide compliant wage statements; and provide unused vacation wages upon termination. The parties reached a preliminary settlement agreement to resolve this matter along with Elliott-Brand, et al. v. Kforce Inc., et al., and the Court granted preliminary approval on September 21, 2022. The settlement agreement is subject to final approval by the Court. Plaintiff Buchsbaum has been added as a plaintiff to the Elliott-Brand lawsuit, and this lawsuit will be dismissed after the Court’s final approval of the settlement. We believe that this matter is unlikely to have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.
On December 11, 2020, a complaint was filed against Kforce and its client, Verity Health System of California (Verity) in the Superior Court of California, County of Los Angeles, which was subsequently amended on February 19, 2021. Ramona Webb v. Kforce Flexible Solutions, LLC, et al., Case Number: 20STCV47529. Former consultant Ramona Webb has sued both Kforce and Verity alleging certain individual claims in addition to a PAGA claim based on alleged violations of various provisions of the Labor Code. With respect to the PAGA claim, Plaintiff seeks to recover on her behalf, on behalf of the State of California, and on behalf of all allegedly aggrieved employees, the civil penalties provided by PAGA, attorney’s fees and costs. At this stage in the litigation, it is not feasible to predict the outcome of this matter or reasonably estimate a range of loss, should a loss occur, from this proceeding. We intend to continue to vigorously defend the claims.
On December 24, 2020, a complaint was filed against Kforce Inc., et al. in Superior Court of the State of California, Los Angeles County. Sydney Elliott-Brand, et al. v. Kforce Inc., et al., Case Number: 20STCV49193. On January 7, 2022, the lawsuit was amended to add Bernardo Buchsbaum and Josie Meister as plaintiffs and to add claims under PAGA and the Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq. On behalf of themselves and a putative class and collective of talent recruiters and allegedly aggrieved employees in California and nationwide, the plaintiffs purport to bring a class action for alleged violations of the Labor Code, Industrial Welfare Commission Wage Orders, and the California Business and Professions Code, §17200, et seq., a collective action for alleged violations of FLSA, and a PAGA action for alleged violations of the Labor Code. The plaintiffs seek payment to recover unpaid wages and benefits, interest, attorneys’ fees, costs and expenses, penalties, and liquidated damages for alleged failure to: properly calculate and pay all earned minimum and overtime wages; provide meal and rest periods or provide compensation in lieu thereof; provide accurate itemized wage statements; reimburse for all business expenses; pay wages due upon separation; and pay for all hours worked over forty hours in one or more workweeks. Plaintiffs also seek an order requiring defendants to restore and disgorge all funds acquired by means of unfair competition under the California Business and Professions Code. The parties reached an agreement to resolve this matter along with Lewis, et al. v. Kforce Inc. and Buchsbaum, et al. v. Kforce Inc., et al., which was preliminarily approved by the Court on September 21, 2022, and we have set reserves accordingly. The settlement agreement is subject to final approval by the Court. We believe that this matter is unlikely to have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.
On January 6, 2022, a complaint was filed against Kforce Inc. in the Superior Court of the State of California for the County of Los Angeles and was served on January 21, 2022. Jessica Cook and Brianna Pratt, et al. v. Kforce Inc., Case Number: 22STCV00602. On behalf of themselves and others similarly situated, plaintiffs purport to bring a class action alleging violations of Labor Code and the California Business and Professional Code and challenging the exempt classification of a select class of recruiters. Plaintiffs and class members seek damages for all earned wages, statutory penalties, injunctive relief, attorney’s fees, and interest for alleged failure to: properly classify certain recruiters as nonexempt from overtime; timely pay all wages earned, including overtime premium pay; provide
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accurate wage statements; provide meal and rest periods; and comply with California's Unfair Competition Law. Kforce anticipated this action would be filed as a result of failed early resolution attempts in the previously disclosed Jessica Cook v. Kforce, et al. lawsuit. At this stage in the litigation, it is not feasible to predict the outcome of this matter or reasonably estimate a range of loss, should a loss occur, from this proceeding. We intend to vigorously defend the claims.
On January 6, 2022, a complaint was filed against Kforce Inc. in the United States District Court for the Middle District of Florida and was served on February 4, 2022. Sam Whiteman, et al. v. Kforce Inc., Case Number: 8:22-cv-00056. On behalf of himself and all others similarly situated, the plaintiff brings a one-count collective action complaint for alleged violations of the FLSA by failing to pay overtime wages. Plaintiff, on behalf of himself and the putative collective, seeks to recover unpaid wages, liquidated damages, attorneys’ fees and costs, and prejudgment interest for alleged failure to properly classify specified recruiters as nonexempt from overtime and properly compensate for all hours worked over 40 hours in one or more workweeks. At this stage in the litigation, it is not feasible to predict the outcome of this matter or reasonably estimate a range of loss, should a loss occur, from this proceeding. We intend to vigorously defend the claims.
We are involved in legal proceedings, claims, and administrative matters from time to time, and may also be exposed to loss contingencies, that arise in the ordinary course of business. We have made accruals with respect to certain of these matters, where appropriate, that are reflected in our consolidated financial statements but are not, individually or in the aggregate, considered material. For other matters for which an accrual has not been made, we have not yet determined that a loss is probable, or the amount of loss cannot be reasonably estimated. While the ultimate outcome of the matters cannot be determined, we currently do not expect that these proceedings and claims, individually or in the aggregate, will have a material effect on our financial position, results of operations or cash flows. The outcome of any litigation is inherently uncertain, however, and if decided adversely to us, or if we determine that settlement of particular litigation is appropriate, we may be subject to liability that could have a material adverse effect on our financial position, results of operations or cash flows. Kforce maintains liability insurance in amounts and with such coverage and deductibles as management believes is reasonable. The principal liability risks that Kforce insures against are workers’ compensation, personal injury, bodily injury, property damage, directors’ and officers’ liability, errors and omissions, cyber liability, employment practices liability and fidelity losses. There can be no assurance that Kforce’s liability insurance will cover all events or that the limits of coverage will be sufficient to fully cover all liabilities.

Except as stated below, there have been no material developments with regard to the legal proceedings previously disclosed in our 2022 Annual Report on Form 10-K.
Equity Method InvestmentOn November 18, 2020, Kforce Inc., et al. was served with a complaint brought in the Superior Court of the State of California, San Diego County, which was subsequently amended on January 21, 2021, to add Kforce Flexible Solutions as a party. Bernardo Buchsbaum, et al. v. Kforce Inc., et al., Case Number: 37-2020-00030994-CU-OE-CTL. The former employee purportedly brought a representative action on his own behalf and on behalf of other allegedly aggrieved employees pursuant to PAGA alleging violations of the Labor Code. The plaintiff sought civil penalties, interest, attorney’s fees, and costs under the Labor Code for alleged failure to: properly calculate and pay all earned minimum and overtime wages; provide and pay for work performed during meal and rest periods; reimburse business expenses; provide compliant wage statements; and provide unused vacation wages upon termination. The Court entered a written order granting final approval of the parties’ settlement agreement in March 2023, and the case has been dismissed. This matter did not have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.
In June 2019, we entered intoOn December 11, 2020, a joint venture wherebycomplaint was filed against Kforce obtainedand its client, Verity Health System of California (Verity) in the Superior Court of California, County of Los Angeles, which was subsequently amended on February 19, 2021. Ramona Webb v. Kforce Flexible Solutions, LLC, et al., Case Number: 20STCV47529. Former consultant Ramona Webb sued both Kforce and Verity alleging certain individual claims in addition to a 50% noncontrolling interest in WorkLLama. We determined,PAGA claim based on alleged violations of various provisions of the corporate structure and governance, that WorkLLama is a variable interest entity and not subject to consolidation, as we are not the primary beneficiary of WorkLLama because we do not have the power to direct the activities that most significantly impact WorkLLama’s economic performance. As a result, WorkLLama is accounted for as an equity method investment.
Under the joint venture operating agreement for WorkLLama, Kforce was originally obligated to make additional cash contributions subsequentLabor Code. With respect to the initial contribution, contingentPAGA claim, Plaintiff sought to recover on WorkLLama's achievementher behalf, on behalf of certain operationalthe State of California, and financial milestones. Underon behalf of all allegedly aggrieved employees, the operating agreement, our maximum potential capital contributions were $22.5 million. Although the operationalcivil penalties provided by PAGA, attorney’s fees and financial milestones were not achieved, we contributed the full $22.5 million as of September 30, 2022. We contributed $0.5 million and $9.0 million of capital during the nine months ended September 30, 2022costs. The parties resolved Webb’s individual claims and the year ended December 31, 2021, respectively.
We review the equity method investment for impairment whenever events or changes in circumstances indicate that the carrying amountrepresentative PAGA claim will be dismissed without prejudice following completion of the investment maysettlement. This matter is not be recoverable. An impairment loss is recognized in the event that an other-than-temporary decline in the fair value of the investment occurs. Management’s estimate of the fair value of an investment is based on the income approach and market approach. Like most developing business enterprises, WorkLLama was impacted by the COVID-19 pandemic over the last two years. Additionally, in 2021, WorkLLama also strategically repositioned its business to focus its platform on providing its clients with an ability to directly source and engage talent. While WorkLLama is seeing demand for its platform, it was taking longer than expected to achieve its originalhave a material adverse effect on our business, consolidated financial expectations. Given this, Kforce management determined that an indicatorposition, results of impairment had occurred in the second quarter of 2022. Thus, we performed an impairment test as of June 30, 2022, utilizing the market and income approaches. For the income approach, we utilized estimated discounted futureoperations, or cash flows expected to be generated by WorkLLama. For the market approach, we utilized market multiples of revenue and earnings derived from comparable publicly-traded companies. These types of analyses contain uncertainties because they require management to make significant assumptions and judgments, including: (1) an appropriate rate to discount the expected future cash flows; (2) the inherent risk in achieving forecasted operating results; (3) long-term growth rates; (4) expectations for future economic cycles; (5) market comparable companiesflows.
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and appropriate adjustments thereto; and (6) market multiples. The fair value determinedOn December 24, 2020, a complaint was filed against Kforce Inc., et al. in our impairment test is highly sensitive to changes in key assumptions, including but not limited to the discount rate that is applied to the financial projections. As a resultSuperior Court of the impairment test, we concluded thatState of California, Los Angeles County. Sydney Elliott-Brand, et al. v. Kforce Inc., et al., Case Number: 20STCV49193. On January 7, 2022, the carrying valuelawsuit was amended to add Bernardo Buchsbaum and Josie Meister as plaintiffs and to add claims under PAGA and the Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq. On behalf of themselves and a putative class and collective of talent recruiters and allegedly aggrieved employees in California and nationwide, the plaintiffs purportedly brought a class action for alleged violations of the equity method investment was not impaired. At June 30, 2022,Labor Code, Industrial Welfare Commission Wage Orders, and the fair valueCalifornia Business and Professions Code, §17200, et seq., a collective action for alleged violations of FLSA, and a PAGA action for alleged violations of the equity investment, determinedLabor Code. The plaintiffs sought payment to recover unpaid wages and benefits, interest, attorneys’ fees, costs and expenses, penalties, and liquidated damages for alleged failure to: properly calculate and pay all earned minimum and overtime wages; provide meal and rest periods or provide compensation in lieu thereof; provide accurate itemized wage statements; reimburse for all business expenses; pay wages due upon separation; and pay for all hours worked over forty in one or more workweeks. Plaintiffs also sought an order requiring defendants to restore and disgorge all funds acquired by means of unfair competition under the California Business and Professions Code. The Court entered a written order granting final approval of the parties’ settlement agreement in March 2023, and the case has been dismissed. This matter did not have a material adverse effect on our impairment test, exceeded the carrying value by less than ten percent.business, consolidated financial position, results of operations, or cash flows.
We have not identified any indicators that an other than temporary impairment has occurredOn January 6, 2022, a complaint was filed against Kforce Inc. in the three months ended September 30, 2022 that would require further analysis. We will continue to monitor potential indicatorsSuperior Court of the State of California for the County of Los Angeles and was served on January 21, 2022. Jessica Cook and Brianna Pratt, et al. v. Kforce Inc., Case Number: 22STCV00602. On behalf of themselves and others similarly situated, plaintiffs purportedly brought a class action alleging violations of Labor Code and the California Business and Professional Code and challenging the exempt classification of a select class of recruiters. Plaintiffs and class members sought damages for all earned wages, statutory penalties, injunctive relief, attorney’s fees, and interest for alleged failure to: properly classify certain recruiters as nonexempt from overtime; timely pay all wages earned, including overtime premium pay; provide accurate wage statements; provide meal and rest periods; and comply with California's Unfair Competition Law. The Court entered a written order granting final approval of the parties’ settlement agreement in future quarters that mayMarch 2023, and the case has been dismissed. This matter did not have a bearingmaterial adverse effect on our business, consolidated financial position, results of operations, or cash flows.
On January 6, 2022, a complaint was filed against Kforce Inc. in the recoverabilityUnited States District Court for the Middle District of Florida and was served on February 4, 2022. Sam Whiteman, et al. v. Kforce Inc., Case Number: 8:22-cv-00056. On behalf of himself and all others similarly situated, the plaintiff brought a one-count collective action complaint for alleged violations of the carrying valueFLSA by failing to pay overtime wages. Plaintiff, on behalf of our investment.
Lease commitments
We lease office spacehimself and certain equipment under operating leases that expire between 2022the putative collective, sought to recover unpaid wages, liquidated damages, attorneys’ fees and 2033.costs, and prejudgment interest for alleged failure to properly classify specified recruiters as nonexempt from overtime and properly compensate for all hours worked over 40 hours in one or more workweeks. The termsCourt granted final approval of the leases provide for rental paymentsparties’ settlement agreement and the case was dismissed in February 2023. This matter did not have a material adverse effect on a graduated scale, options to renew the leases (one to five years), landlord incentivesour business, consolidated financial position, results of operations, or allowances, and periods of free rent.
During the year ended December 31, 2021, we entered into a lease agreement for office space in Tampa, Florida, that will become our new corporate headquarters. This new lease for office space is intended to replace our current headquarters, also in Tampa, Florida, the lease for which expires November 2022. Lease payments will be required beginning July 1, 2023. During October 2022, we began occupying the facility, which also signified the start of the accounting lease commencement date for financial reporting purposes. The new lease requires aggregate future lease payments of approximately $10.9 million over the entire lease term, which includes annual upward adjustments, and has a non-cancellable lease term of 129 months, excluding renewal options.cash flows.
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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
EXECUTIVE SUMMARY
The following is an executive summary of what Kforce believes are highlights as of and for the ninethree months ended September 30, 2022,March 31, 2023, 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.
Revenue for the ninethree months ended September 30, 2022, increased 9.8%March 31, 2023, decreased 2.6%, on a billing day basis, to $1,291.1$406.0 million from $1,169.6$417.0 million in the comparable period in 2021.2022. Revenue increased 21.7%1.4% for Technology and decreased 35.8%27.9% for FA, onprimarily driven by a billing day basis. The decreasesoftening in FA is primarily athe demand environment and the result of the planned decrease in COVID-19 related business andour repositioning efforts. There was a minimal amount of COVID-19 related business in the first nine months of 2022 compared to $66.3 million in the first nine months of 2021.
Flex revenue for the ninethree months ended September 30, 2022 increased 9.1%March 31, 2023 decreased 1.6%, on a billing day basis, to $1,244.5$395.5 million from $1,134.4$401.9 million in the comparable period in 2021.2022. Flex revenue increased 21.3%2.2% and decreased 40.1%28.2% for Technology and FA, respectively, on a billing day basis..respectively.
Direct Hire revenue for the ninethree months ended September 30, 2022 increased 32.4%March 31, 2023 decreased 30.7% to $46.6$10.5 million from $35.2$15.1 million in the comparable period in 2021.2022.
Gross profit margin for the ninethree months ended September 30, 2022, increased 80March 31, 2023, decreased 160 basis points to 29.6%28.1%, compared to the same period in 2021 primarilyMarch 31, 2022, as a result of a higher mix ofdecline in the Direct Hire businessrevenue mix and improveda decline in our Flex gross profit margins.margin.
Flex gross profit margin for the ninethree months ended September 30, 2022, increased 30March 31, 2023, decreased 90 basis points to 26.9%26.2%, compared to September 30, 2021. Technology Flex gross profit margin increased 10 basis points for the nine months ended September 30,March 31, 2022, as compared to the same period in 2021. FA Flex gross profit margin increased280 basis points for the nine months ended September 30, 2022, respectively, as compared to the same period in 2021. The increase for the nine months ended September 30, 2022 was primarily attributabledue to a decrease in COVID-19 relatedtighter pricing environment and business and the repositioning of the business.mix changes within our portfolio.
SG&A expenses as a percentage of revenue for the ninethree months ended September 30, 2022, increasedMarch 31, 2023, decreased to 22.1%22.0% from 21.5%22.8% in the comparable period in 20212022 primarily as a result of decreases in performance-based compensation given lower growth rates, lease expense due to the salestreamlining of our corporate headquarters that occurred in the second quarter of 2021, which offset SG&A expensesreal estate portfolio and resulted in the recognition of a gain, higher performance-based compensation given the strength in our performance, and other investments in our business.professional fees.
Income from operationsNet income for the ninethree months ended September 30, 2022, increased 25.2%March 31, 2023, decreased 15.5% to $68.4$16.2 million, or $3.31$0.82 per share, from $54.6$19.2 million, or $2.57$0.93 per share, in the comparable period in 2021.March 31, 2022.
The Firm returned $60.8$17.0 million of capital to our shareholders in the form of open market repurchases totaling $42.6$10.0 million and quarterly dividends totaling $18.2$7.0 million during the ninethree months ending September 30, 2022.ended March 31, 2023.
Cash provided by operating activities was $78.1$19.1 million during the ninethree months ended September 30, 2022,March 31, 2023, as compared to $59.9$38.7 million for the ninethree months ended September 30, 2021.
Cash and cash equivalents was $5.1 million as of September 30,March 31, 2022.

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RESULTS OF OPERATIONS
Business Overview
Kforce is a leading domestic provider of technology and finance and accounting talent solutions to innovative and industry-leading clients. Our Technology and FA businesses represent our two operating segments.companies. Our corporate headquarters is in Tampa, Florida. As of September 30, 2022,March 31, 2023, Kforce employed approximately 2,1002,000 associates including approximately 1,400 supporting the revenue-generating aspects of our business and approximately 700 supporting the revenue-enabling aspects. We also had approximately 10,1009,500 consultants on assignment providing flexible staffing services and solutions to our clients. 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 thatconsumers of our 100% domestic U.S. focus, concentration on technology talent solutions (representing nearly 90% of overall revenues) and client portfolio comprised of world-class companies have been key contributors to our continued strong performance and will be key drivers to our future success.services.
From an economic standpoint, total and temporary employment figures and trends have historically been important indicators of staffing demand. Based on information published by the Bureau of Labor Statistics and Staffing Industry Analysts (“SIA”), these figures and trends have been trending positively since the end of the third quarter of 2020. The national unemployment rate fell toremained flat at 3.5% at the end of SeptemberMarch 2023, as compared to December 2022. In the latest U.S. staffing industry forecast published by SIAStaffing Industry Analysts (“SIA”) in September 2022,April 2023, the technology temporary staffing industry and finance and accounting temporary staffing industry are estimated to grow 16%5% and 12%,6% in 2023, respectively, in 2022, and 8% and 7%, respectively, and 5% in 2023.
The macro environment certainly became cloudier in the third quarter ended September 30, 2022, with persistently elevated levels of inflation, rapidly rising interest rates, which, among other reasons, is impacting prospects for global and domestic economic growth. While trends in the third quarter were below levels experienced in 2021 and the first half of 2022, they remain above pre-pandemic levels.2024, respectively.
Operating Results - Three and Nine Months Ended September 30,March 31, 2023 and 2022 and 2021
The following table presents certain items in our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income as a percentage of revenue:
Three Months EndedNine Months EndedThree Months Ended
September 30,September 30,March 31,
202220212022202120232022
Revenue by segment:Revenue by segment:Revenue by segment:
TechnologyTechnology89.2 %83.7 %87.9 %79.3 %Technology89.9 %86.3 %
FAFA10.8 16.3 12.1 20.7 FA10.1 13.7 
Total RevenueTotal Revenue100.0 %100.0 %100.0 %100.0 %Total Revenue100.0 %100.0 %
Revenue by type:Revenue by type:Revenue by type:
FlexFlex96.7 %96.6 %96.4 %97.0 %Flex97.4 %96.4 %
Direct HireDirect Hire3.3 3.4 3.6 3.0 Direct Hire2.6 3.6 
Total RevenueTotal Revenue100.0 %100.0 %100.0 %100.0 %Total Revenue100.0 %100.0 %
Gross profitGross profit29.0 %29.6 %29.6 %28.8 %Gross profit28.1 %29.7 %
Selling, general and administrative expensesSelling, general and administrative expenses21.6 %22.1 %22.1 %21.5 %Selling, general and administrative expenses22.0 %22.8 %
Depreciation and amortizationDepreciation and amortization0.2 %0.3 %0.2 %0.3 %Depreciation and amortization0.3 %0.3 %
Income from operationsIncome from operations7.2 %7.3 %7.2 %7.0 %Income from operations5.8 %6.7 %
Income from operations, before income taxesIncome from operations, before income taxes6.9 %6.9 %7.2 %6.5 %Income from operations, before income taxes5.5 %6.3 %
Net incomeNet income5.1 %5.0 %5.3 %4.7 %Net income4.0 %4.6 %
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Revenue. The following table presents revenue by type for each segment and the percentage change from the prior period (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
2022Increase
(Decrease)
20212022Increase
(Decrease)
20212023Increase
(Decrease)
2022
TechnologyTechnologyTechnology
Flex revenueFlex revenue$382,072 15.7 %$330,170 $1,109,294 22.0 %$909,599 Flex revenue$359,524 2.2 %$351,716 
Direct Hire revenueDirect Hire revenue8,424 19.3 %7,060 25,702 43.4 %17,919 Direct Hire revenue5,320 (35.0)%8,189 
Total Technology revenueTotal Technology revenue$390,496 15.8 %$337,230 $1,134,996 22.4 %$927,518 Total Technology revenue$364,844 1.4 %$359,905 
FAFAFA
Flex revenueFlex revenue$40,896 (30.7)%$59,003 $135,239 (39.8)%$224,783 Flex revenue$36,008 (28.2)%$50,150 
Direct Hire revenueDirect Hire revenue6,228 (4.1)%6,492 20,868 20.9 %17,263 Direct Hire revenue5,145 (25.6)%6,912 
Total FA revenueTotal FA revenue$47,124 (28.0)%$65,495 $156,107 (35.5)%$242,046 Total FA revenue$41,153 (27.9)%$57,062 
Total Flex revenueTotal Flex revenue$422,968 8.7 %$389,173 $1,244,533 9.7 %$1,134,382 Total Flex revenue$395,532 (1.6)%$401,866 
Total Direct Hire revenueTotal Direct Hire revenue14,652 8.1 %13,552 46,570 32.4 %35,182 Total Direct Hire revenue10,465 (30.7)%15,101 
Total RevenueTotal Revenue$437,620 8.7 %$402,725 $1,291,103 10.4 %$1,169,564 Total Revenue$405,997 (2.6)%$416,967 
Our quarterly operating results are affected by the number of billing days in a quarter. The following table presents the year-over-year revenue growth rates, on a billing day basis, for the last five quarters:
Year-Over-Year Flex Revenue Growth RatesYear-Over-Year Flex Revenue Growth Rates
(Per Billing Day)(Per Billing Day)
Q3 2022Q2 2022Q1 2022Q4 2021Q3 2021Q1 2023Q4 2022Q3 2022Q2 2022Q1 2022
Billing DaysBilling Days6464646164Billing Days6461646464
TechnologyTechnology15.7 %23.3 %26.0 %31.0 %28.9 %Technology2.2 %8.5 %15.7 %23.3 %26.0 %
FAFA(30.7)%(49.0)%(37.6)%(28.9)%(41.3)%FA(28.2)%(28.8)%(30.7)%(49.0)%(37.6)%
Total FlexTotal Flex8.7 %7.2 %11.8 %16.6 %9.1 %Total Flex(1.6)%3.1 %8.7 %7.2 %11.8 %
Flex Revenue. The key drivers of Flex revenue are 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.Kforce and billable to our clients.
Flex revenue for Technology increased 15.7% and 21.3%, on a billing day basis,2.2% during the three and nine months ended September 30, 2022, respectively,March 31, 2023, as compared to the same periodsperiod in 2021,2022, which was driven by a combination of significant growth in the number of consultants on assignment and higher average bill rates. Given the inflationary pressures on wages and scarcity of highly skilled technology consultants, we have continued to experience a meaningful acceleration in average bill rates, which increased 1.4% sequentially and 8.3%4.7% year-over-year, during the third quarter of 2022. We believe that the growthpartially offset by a decrease in consultants on assignment was fueled by strong secular driversassignment. Beginning in the second half of 2022, we experienced a softening in the demand environment and our clients began exercising restraint and selectively pruning resources against the strengthbackdrop of increasing economic uncertainties. As expected, our client portfolio,growth rates in our concentration in highly-skilled technology talent, and solid execution.Technology business have slowed. We expect revenue growth in our Technology business in the fourthsecond quarter to bedecline in the high singlemid-single digits on a year-over-year basis and to growdecline in the low single digits on a sequential basis.
OurFlex revenue for our FA segment experienced a decrease in Flex revenue of 30.7% and 40.1%, on a billing day basis,decreased 28.2% during the three and nine months ended September 30, 2022, respectively,March 31, 2023, as compared to the same periodsperiod in 2021,2022, primarily driven by the intended fall off in our COVID-19 related business and repositioning efforts. Excluding the decline in COVID-19 related business, FA Flex revenues declined approximately 20.6% and 14.7% in the quarter and year to date periods ending September 30, 2022, respectively, compared to the same periods in 2021, which was driven by the repositioningefforts of our FA business towards more high-skilled roles.roles and the current uncertainty in the macroeconomic environment. We have seen indicators of success in this repositioning as our average bill rates improved approximately 6.2%3.6% sequentially and 28.5%10.4% year-over-year in the thirdfirst quarter of 20222023 compared to the same period in 2021.2022. We expect the year-over-year decline in Flex revenue in our FA business to increase in the low single digits sequentially in the fourthsecond quarter primarily due to a project supporting Hurricane Ian recovery efforts.
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be comparable to first quarter levels.
The following table presents the key drivers for the change in Flex revenue by segment over the prior period (in thousands):
Three Months EndedNine Months EndedThree Months Ended
September 30, 2022 vs. September 30, 2021September 30, 2022 vs. September 30, 2021March 31, 2023 vs. March 31, 2022
TechnologyFATechnologyFATechnologyFA
Key Drivers - Increase (Decrease)Key Drivers - Increase (Decrease)Key Drivers - Increase (Decrease)
Volume - hours billedVolume - hours billed$22,544 $(27,183)$120,752 $(121,766)Volume - hours billed$(7,653)$(17,530)
Bill rateBill rate29,270 9,064 77,569 32,198 Bill rate15,954 3,397 
Billable expensesBillable expenses88 12 1,374 24 Billable expenses(493)(9)
Total change in Flex revenueTotal change in Flex revenue$51,902 $(18,107)$199,695 $(89,544)Total change in Flex revenue$7,808 $(14,142)
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The following table presents total Flex hours billed by segment and percentage change over the prior period (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
2022Increase
(Decrease)
20212022Increase
(Decrease)
20212023Increase
(Decrease)
2022
TechnologyTechnology4,308 6.9 %4,031 12,722 13.3 %11,226 Technology4,032 (2.2)%4,122 
FAFA816 (46.1)%1,515 2,904 (54.2)%6,339 FA748 (35.0)%1,150 
Total Flex hours billedTotal Flex hours billed5,124 (7.6)%5,546 15,626 (11.0)%17,565 Total Flex hours billed4,780 (9.3)%5,272 
Direct Hire Revenue. The key drivers of Direct Hire revenue are the number of placements and the associated placement fee. Direct Hire revenue also includes conversion revenue, which may occur when a consultant initially assigned to a client on a temporary basis is later converted to a permanent placement for a fee.
Direct Hire revenue increased 8.1% and 32.4%decreased 30.7% during the three and nine months ended September 30, 2022, respectively,March 31, 2023, as compared to the same period in 2021. The increase during the three month period was primarily driven by higher placement fees. The increase during the nine month period2022, which was primarily driven by a significant increasedecrease in both the number of placements and placement fees, though there has been a moderation in the performance of this more cyclically sensitive business in the second half of 2022 given macro-economic concerns.
The following table presents the key drivers for the change in Direct Hire revenue by segment over the prior period (in thousands):
Three Months EndedNine Months Ended
September 30, 2022 vs. September 30, 2021September 30, 2022 vs. September 30, 2021
TechnologyFATechnologyFA
Key Drivers - Increase (Decrease)
Volume - number of placements$1,254 $(976)$5,777 $1,680 
Placement fee110 712 2,006 1,925 
Total change in Direct Hire revenue$1,364 $(264)$7,783 $3,605 
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The following table presents the total number of placements by segment and percentage change over the prior period:
Three Months Ended September 30,Nine Months Ended September 30,
2022Increase
(Decrease)
20212022Increase
(Decrease)
2021
Technology341 17.6 %290 1,098 32.1 %831 
FA341 (15.0)%401 1,201 9.8 %1,094 
Total number of placements682 (1.3)%691 2,299 19.4 %1,925 
The following table presents the average placement fee by segment and percentage change over the prior period:
Three Months Ended September 30,Nine Months Ended September 30,
2022Increase
(Decrease)
20212022Increase
(Decrease)
2021
Technology$24,683 1.3 %$24,360 $23,403 8.5 %$21,576 
FA18,269 12.9 %16,181 17,384 10.2 %15,780 
Total average placement fee$21,478 9.5 %$19,611 $20,260 10.8 %$18,282 
placements.
Gross Profit. Gross profit is calculated by deducting direct costs (primarily consultant compensation, payroll taxes, payroll-related insurance and certain fringe benefits, as well as third party compliance costs) from total revenue. There are no consultant payroll costs associated with Direct Hire placements, accordingly all Direct Hire revenue increases gross profit by the full amount of the placement fee.
The following table presents the gross profit percentage (gross profit as a percentage of total revenue) by segment and percentage change over the prior period:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
2022Increase
(Decrease)
20212022Increase
(Decrease)
20212023Increase
(Decrease)
2022
TechnologyTechnology27.6 %(2.8)%28.4 %28.2 %1.1 %27.9 %Technology27.0 %(5.3)%28.5 %
FAFA40.1 %12.6 %35.6 %39.4 %21.6 %32.4 %FA37.8 %0.5 %37.6 %
Total gross profit percentageTotal gross profit percentage29.0 %(2.2)%29.6 %29.6 %2.8 %28.8 %Total gross profit percentage28.1 %(5.4)%29.7��%
The total gross profit percentage for the three months ended September 30, 2022,March 31, 2023, decreased 60160 basis points as compared to the same period in 2021,2022, primarily due to higher utilization of paid time off by our consultantsa decline in Direct Hire mix and slight spread compressiona decline in our Technology Flex business. Total gross profit percentage for the nine months ended September 30, 2022 increased 80 basis points as compared to the same period in 2021, primarily as a result of an increased mix of Direct Hire revenue and the run off of the COVID-19 related business.margin.
Flex gross profit percentage (Flex gross profit as a percentage of Flex revenue) provides management with helpful insights into the other drivers of total gross profit percentage driven by our Flex business, such as changes in the spread between the consultants’ bill rate and pay rate, changes in payroll tax rates or benefits costs, as well as the impact of billable expenses, which provide no profit margin.
The following table presents the Flex gross profit percentage by segment and percentage change over the prior period:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
2022Increase
(Decrease)
20212022Increase
(Decrease)
20212023Increase
(Decrease)
2022
TechnologyTechnology26.0 %(3.3)%26.9 %26.5 %0.4 %26.4 %Technology25.9 %(3.4)%26.8 %
FAFA30.9 %8.4 %28.5 %30.0 %10.3 %27.2 %FA28.9 %(0.3)%29.0 %
Total Flex gross profit percentageTotal Flex gross profit percentage26.5 %(2.6)%27.2 %26.9 %1.1 %26.6 %Total Flex gross profit percentage26.2 %(3.3)%27.1 %
Overall, our Flex gross profit percentage decreased 70 basis points for the three months ended September 30, 2022, and increased 30 basis points for the nine months ended September 30, 2022, as compared to the same periods in 2021. The notable changes within our segments were as follows:
Flex margins in our Technology business decreased 90 basis points for the three months ended September 30, 2022 and increased 10 basis points for the nine months ended September 30, 2022,March 31, 2023, as compared to the same periodsperiod in 2021. The decrease for the three months ended September 30, 2022, was primarily due to expected higher utilization of paid time off bya tighter pricing environment and business mix changes within our consultants and slight compressionclient portfolio in spreads, which was slightly offset by lower payroll taxes.
FA Flex gross profit margins increased240 basis points for the three months ended September 30, 2022 and increased 280 basis points for the nine months ended September 30, 2022, as compared to the same periods in 2021. The
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increase in both periods was primarily due to the intended falloff of lower margin COVID-19 related business and our repositioning efforts as well as lower healthcare and payroll costs.Technology business.
The following table presents the key drivers for the change in Flex gross profit by segment over the prior period (in thousands):
Three Months EndedNine Months EndedThree Months Ended
September 30, 2022 vs. September 30, 2021September 30, 2022 vs. September 30, 2021March 31, 2023 vs. March 31, 2022
TechnologyFATechnologyFATechnologyFA
Key Drivers - Increase (Decrease)Key Drivers - Increase (Decrease)Key Drivers - Increase (Decrease)
Revenue impactRevenue impact$13,971 $(5,168)$52,806 $(24,366)Revenue impact$2,092 $(4,096)
Profitability impactProfitability impact(3,476)979 1,122 3,801 Profitability impact(3,262)(8)
Total change in Flex gross profitTotal change in Flex gross profit$10,495 $(4,189)$53,928 $(20,565)Total change in Flex gross profit$(1,170)$(4,104)
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SG&A Expenses. Total compensation, commissions, payroll taxes and benefit costs as a percentage of SG&A represented 85.3% and 85.1%84.6% for the three and nine months ended September 30, 2022,March 31, 2023, compared to 84.9% and 86.0%84.4% for the comparable periodssame period in 2021.2022. Commissions and 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.
The following table presents components of SG&A expenses, and expressed as a percentage of revenue (in thousands):
2022% of Revenue2021% of Revenue2023% of Revenue2022% of Revenue
Three Months Ended September 30,
Three Months Ended March 31,Three Months Ended March 31,
Compensation, commissions, payroll taxes and benefits costsCompensation, commissions, payroll taxes and benefits costs$80,425 18.4 %$75,537 18.8 %Compensation, commissions, payroll taxes and benefits costs$75,615 18.6 %$80,224 19.2 %
Other (1)Other (1)13,881 3.2 %13,435 3.3 %Other (1)13,724 3.4 %14,825 3.6 %
Total SG&ATotal SG&A$94,306 21.6 %$88,972 22.1 %Total SG&A$89,339 22.0 %$95,049 22.8 %
Nine Months Ended September 30,
Compensation, commissions, payroll taxes and benefits costs$243,017 18.8 %$216,324 18.5 %
Other (1)42,485 3.3 %35,293 3.0 %
Total SG&A$285,502 22.1 %$251,617 21.5 %
(1) Includes credit loss expense, lease expense, professional fees, travel, telephone, computer, and certain other expenses.
SG&A as a percentage of revenue decreased 6080 basis points for the three months ended September 30, 2022, and increased 60 basis points for the nine months ended September 30, 2022,March 31, 2023, compared to the same periodsperiod in 2021, respectively.2022. The decrease in the three month period was mostly driven by lower performance basedperformance-based compensation costs as a resultgiven lower overall revenue growth rates, cost efficiencies gained by reducing the overall square footage of the lower Flex gross marginsleased space in the third quarterour Office OccasionalSM work environment, and lower professional fees. The increase
Due to the softening in the nine month period was primarily driven by (a) higher performance based compensation costs, (b) a gain on the sale of our corporate headquarters that occurred in the second quarter of 2021; and (c) otherdemand environment, we are prioritizing continued investments in our business.
The Firm continuesstrategic initiatives, including our integrated strategy and multi-year efforts to focus ontransform our back office, and are exercising tighter discretionary spend control and generating increased operating leverage through solid revenue growth, improved productivity of our associates, structural reductions in operating costs and continuing to exercise solid expense discipline. We are also continuing to make investments in our business, even with some moderation in our revenue growth in the second half of 2022, with a particular focus on improving our back-office productivity.other cost efficiencies, where appropriate.
Depreciation and Amortization. The following table presents depreciation and amortization expense and percentage change over the prior period by major category (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
2022Increase
(Decrease)
20212022Increase
(Decrease)
20212023Increase
(Decrease)
2022
Fixed asset depreciation (includes finance leases)Fixed asset depreciation (includes finance leases)$597 (2.0)%$609 $1,902 (12.1)%$2,164 Fixed asset depreciation (includes finance leases)$634 (6.4)%$677 
Capitalized software amortizationCapitalized software amortization448 7.4 %417 1,312 4.5 %1,256 Capitalized software amortization600 44.2 %416 
Total Depreciation and amortizationTotal Depreciation and amortization$1,045 1.9 %$1,026 $3,214 (6.0)%$3,420 Total Depreciation and amortization$1,234 12.9 %$1,093 
Other Expense, (Income), Net. Other expense (income), net for the three and nine months ended September 30, 2022, was expense of $0.9 million and income of $0.3 million, respectively. Other (income) expense, net for the three and nine months ended September 30, 2021March 31, 2023 and 2022, was expense of $1.4$1.0 million and $5.8$1.4 million, respectively. This line item primarily includes interest expense related to outstanding borrowings under our credit facility which is partially offset by the interest income on cash held in government money market funds, and our proportionate share of the loss from WorkLLama.
During the nine months ended September 30, 2022, Other expense (income), net also includes $4.1 millionlosses related to a gain recognized as a result of the termination of Swap B.
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During the three and nine months ended September 30, 2022, ourOur proportionate share of the loss from WorkLLama,losses related to our equity method investment was $0.9$0.8 million and $2.7 million, respectively, and duringfor each of the three and nine months ended September 30, 2021, $0.7 millionMarch 31, 2023 and $1.7 million, respectively. In addition, during2022. On February 23, 2023, Kforce sold its 50% noncontrolling interest in WorkLLama to an unaffiliated third party. Refer to Note A - “Summary of Significant Accounting Policies” in the nine month ended September 30, 2021, Other (income) expense, net alsoNotes to Unaudited Condensed Consolidated Financial Statements, included an expensein Item 1 of $1.8 million related to the termination of our SERP.this report, for more details.
Income Tax Expense. Income tax expense as a percentage of income from continuing operations, before income taxes (our “effective tax rate” from continuing operations)) for the ninethree months ended September 30,March 31, 2023 and 2022 was 27.5% and 2021 was 26.7% and 28.1%27.1%, respectively.
Non-GAAP Financial Measures
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, however, 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 (but not a replacement of) our Unaudited Condensed Consolidated Statements of Cash Flows.
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The following table presents Free Cash Flow (in thousands):
Nine Months Ended September 30,Three Months Ended March 31,
2022202120232022
Net cash provided by operating activitiesNet cash provided by operating activities$78,063 $59,943 Net cash provided by operating activities$19,056 $38,742 
Capital expendituresCapital expenditures(4,656)(5,026)Capital expenditures(1,872)(2,221)
Free cash flowFree cash flow73,407 54,917 Free cash flow17,184 36,521 
Payments on credit facility(100,000)— 
Proceeds from the sale of our joint venture interestProceeds from the sale of our joint venture interest5,059 — 
Note receivable issued to our joint ventureNote receivable issued to our joint venture(750)— 
Equity method investmentEquity method investment— (500)
Change in debtChange in debt(3,300)— 
Repurchases of common stockRepurchases of common stock(42,103)(44,407)Repurchases of common stock(11,126)(10,270)
Cash dividendsCash dividends(18,164)(14,836)Cash dividends(7,003)(6,094)
Contributions to WorkLLama joint venture(500)(7,000)
Net proceeds from the sale of assets— 23,742 
Note receivable issued to WorkLLama joint venture(4,500)— 
OtherOther(40)(271)Other(14)(19)
Change in cash and cash equivalentsChange in cash and cash equivalents$(91,900)$12,145 Change in cash and cash equivalents$50 $19,638 
Adjusted EBITDA. “Adjusted EBITDA”,EBITDA,” a non-GAAP financial measure, is defined by Kforce as net income before depreciation and amortization, stock-based compensation expense, interest expense, net, income from termination of Swap B, gain on the sale of the corporate headquarters, SERP termination expense, income tax expense, and loss from equity method investment.investment and certain other items as specified in the table below. 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 shareholder ownership interest. We suggest that you evaluate these items and the potential risks of excluding such items when analyzing our financial position.

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The following table presents a reconciliation of net income to Adjusted EBITDA to net income (in thousands):
2022202120232022
Three Months Ended September 30,
Three Months Ended March 31,Three Months Ended March 31,
Net incomeNet income$22,262 $20,168 Net income$16,210 $19,181 
Depreciation and amortizationDepreciation and amortization1,045 1,026 Depreciation and amortization1,234 1,093 
Stock-based compensation expenseStock-based compensation expense4,445 3,512 Stock-based compensation expense4,326 4,437 
Interest expense, netInterest expense, net750 Interest expense, net296 608 
Income tax expenseIncome tax expense8,151 7,650 Income tax expense6,148 7,130 
Loss from equity method investmentLoss from equity method investment750 825 
OtherOther(235)— 
Adjusted EBITDAAdjusted EBITDA$28,729 $33,274 
Loss from equity method investment896 687 
Adjusted EBITDA$36,808 $33,793 
Nine Months Ended September 30,
Net income$68,359 $54,617 
Depreciation and amortization3,214 3,420 
Gain on sale of corporate headquarters— (2,051)
Stock-based compensation expense13,293 10,447 
Interest expense, net988 2,312 
Gain from swap termination4,059 — 
Income tax expense24,886 21,378 
SERP termination expense— 1,821 
Loss from equity method investment2,737 1,709 
Adjusted EBITDA$117,536 $93,653 

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LIQUIDITY AND CAPITAL RESOURCES
To meet our capital and liquidity requirements, we primarily rely on our operating cash flows and if necessary, borrowings under our credit facility. At September 30, 2022March 31, 2023 and December 31, 2021,2022, we had $5.1$22.3 million and $97.0 million in cash and cash equivalents, respectively, which consisted primarily of government money market funds. At September 30, 2022 and December 31, 2021, we had $0 and $100.0$25.6 million outstanding under our credit facility. At September 30, 2022,facility, respectively, and we had $198.7$176.5 million and $173.1 million of borrowing availability under our credit facility.
In May 2022, we terminated Swap B in connection with the payment of all outstanding borrowings under our credit facility, which was $100.0 million at the time of repayment.
Effective April 30, 2021, Kforce’s Board of Directors irrevocably terminated the SERP. The benefits owedrespectively, subject to the two participants under the SERP at the end of the second quarter of 2022 was $20.0 million in the aggregate, which represented the fair value at the date of termination. These benefits were fully paid in July 2022.certain covenants.
Cash Flows
We are principally focused on generating positive cash flow from operating activities, investing in our business to sustain our long-term growth and meet our profitability objectives and returning capital to our shareholders through our quarterly dividends and common stock repurchase program, and selectively pursuing acquisition opportunities.program.
Cash provided by operating activities was $78.1$19.1 million during the ninethree months ended September 30, 2022,March 31, 2023, as compared to $59.9$38.7 million provided during the ninethree months ended September 30, 2021.March 31, 2022. 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. Cash used in operating activities during the nine month period ended September 30, 2022 includes the payment of $20.0 million for amounts owed to two participants under the terminated SERP noted above. The year-over-year increasedecrease in cash provided by operating activities was primarily driven by profitable revenue growth,lower profitability levels, the timing of payments, and a reduction in our deferred tax liability given the sale of our joint venture.
Cash provided by investing activities during the three months ended March 31, 2023 was $2.4 million and primarily consisted of the proceeds from the terminationsale of Swap B, and continued managementour joint venture interest of working capital.
$5.1 million, partially offset by cash used for capital expenditures of $1.9 million. Cash used in investing activities during the ninethree months ended September 30,March 31, 2022, was $9.7$2.7 million and primarily consisted of cash used for capital expenditures of $4.7 million and the issuance of notes receivable from WorkLLama for $4.5 million. Cash provided by investing activities during the nine months ended September 30, 2021, was $11.7 million and included $23.7 million in net proceeds from the sale of our corporate headquarters, offset in part by cash used for capital expenditures and cash contributed to WorkLLama.expenditures.
Cash used in financing activities was $160.3$21.4 million during the ninethree months ended September 30, 2022,March 31, 2023, compared to $59.5$16.4 million during the ninethree months ended September 30, 2021.March 31, 2022. The change was primarily driven by the repayment$3.3 million of $100.0 million outstandingnet payments on our credit facility andCredit Facility, as well as an overall increase in dividend payments, offset in part by a decrease in the repurchases of common stock.stock and dividend payments.
The following table presents the cash flow impact of the common stock repurchase activity (in thousands):
Nine Months Ended September 30,Three Months Ended March 31,
2022202120232022
Open market repurchasesOpen market repurchases$41,572 $43,973 Open market repurchases$10,985 $10,088 
Repurchase of shares related to tax withholding requirements for vesting of restricted stockRepurchase of shares related to tax withholding requirements for vesting of restricted stock531 434 Repurchase of shares related to tax withholding requirements for vesting of restricted stock141 182 
Total cash flow impact of common stock repurchasesTotal cash flow impact of common stock repurchases$42,103 $44,407 Total cash flow impact of common stock repurchases$11,126 $10,270 
Cash paid in current year for settlement of prior year repurchasesCash paid in current year for settlement of prior year repurchases$974 $181 
During the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, Kforce declared and paid quarterly dividends of $18.2$7.0 million ($0.900.36 per share) and $14.8$6.1 million ($0.720.30 per share), respectively, which represents a 25% increase.on20% increase on a per share basis. While the Board has declared and paid a quarterly dividenddividends since initiation in the fourth quarter of 2013, 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.
We believe that existing cash and cash equivalents, operating cash flow from operationsflows and available borrowings under our credit facilityCredit Facility will be adequate to meet the capital expenditure and working capital requirements of our operations for at least the next 12 months.months and give us the flexibility to continue returning significant capital to our shareholders. However, a material deterioration in the economic environment or market conditions, among other things, could adversely affect operating results and liquidity, as well as the ability of our lenders to fund borrowings. Actual results could also differ materially from these indicated as a result of a number of factors, including the use of currently available resources for capital expenditures, investments, additional common stock repurchases or dividends.
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Credit Facility
On October 20, 2021, the Firm entered into an amended and restated credit agreement with Wells Fargo Bank, National Association, as administrative agent, Wells Fargo Securities, LLC, as lead arranger and bookrunner, Bank of America, N.A., as syndication agent, BMO Harris Bank, N.A., as documentation agent, and the lenders referred to therein (the “Amended and Restated Credit Facility”). Under the Amended and Restated Credit Facility, the Firm has a maximum borrowing capacity of $200.0 million, which may, subject to certain conditions and the participation of the lenders, be increased up to an aggregate additional amount of $150.0 million. The maturity date of the Amended and Restated Credit Facility is October 20, 2026. As noted above, the Firm paid theof March 31, 2023, $22.3 million was outstanding and $176.5 million, was available on our credit facility’s outstanding balance of $100.0 million resulting in an outstanding balance of $0 as of September 30, 2022, thereby resulting in $198.7 million,facility, subject to certain covenants, and as of availability under the credit facility.December 31, 2022, $25.6 million was outstanding. As of September 30, 2022,March 31, 2023, we are in compliance with our credit facility covenants as described in the 20212022 Annual Report on Form 10-K and currently expect that we will be able to maintain compliance with these covenants.
Prior to June 30, 2022,In April 2017 and March 2020, Kforce maintainedentered into two forward-starting interest rate swap agreements which were designated as cash flow hedges, to mitigate the risk of rising interest rates. In May 2022, Kforce terminated Swap B.As of March 31, 2023, the Firm did not have any outstanding interest rate swap derivative instruments. Refer to Note J - “Derivative InstrumentsInstrument and Hedging Activity” in the Notes to Unaudited Condensed Consolidated Financial Statements, included in this report, on Form 10-Q, for a complete discussion of our interest rate swaps.
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Stock Repurchases
In February 2022,2023, the Board approved an increase in our stock repurchase authorization, bringing the total authorization to $100.0 million. During the ninethree months ended September 30, 2022,March 31, 2023, Kforce repurchased approximately 684,000178 thousand shares of common stock on the open market at a total cost of approximately $42.6$10.0 million and $66.3$98.8 million remained available for further repurchases under the Board-authorized common stock repurchase program at September 30, 2022.March 31, 2023.
As a result of the newly enacted IRA, the Company recorded a 1% nondeductible excise tax on certain repurchases of stock, net of issuances. The IRA is not expected to have a material impact on our cash flows, results of operations or financial position. Refer to Note A - “Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial Statements, included in Item 1 of this report, for a complete discussion of the new excise tax related to the IRA.
Contractual Obligations and Commitments
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 7,7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 20212022 Annual Report on Form 10-K10-K.
CRITICAL ACCOUNTING ESTIMATES
Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our unaudited condensed consolidated financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amount of assets, liabilities, revenues, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our unaudited condensed consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, estimates, assumptions and judgments to ensure that our unaudited condensed consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Equity Method Investment
In June 2019, we entered into a joint venture whereby Kforce has a 50% noncontrolling interest in WorkLLama. Our noncontrolling interest in WorkLLama, a variable interest entity, is accounted for as an equity method investment. Under the equity method, our carrying value is at cost and adjusted for our proportionate share of earnings or losses. There are no basis differences between our carrying value and the underlying equity in net assets that would result in adjustments to our proportionate share of earnings or losses.
We review the equity method investment for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. An impairment loss is recognized in the event that an other-than-temporary decline in the fair value of the investment occurs. Management’s estimate of the fair value of an investment is based on the income approach and market approach. Like many developing business enterprises, WorkLLama was impacted by the COVID-19 pandemic over the last two years. Additionally, in 2021, WorkLLama also strategically repositioned its business to focus its platform on providing its clients with an ability to directly source and engage talent. While WorkLLama is seeing demand for its platform, it has taken longer than expected to achieve its financial expectations. Given this, Kforce management determined that an indicator of impairment had occurred in the second quarter of 2022. Thus, we performed an impairment test as of June 30, 2022, utilizing the market and income approaches. For the income approach, we utilized estimated discounted future cash flows expected to be generated by WorkLLama. For the market approach, we utilized market multiples of revenue and earnings derived from comparable publicly-traded companies. These types of analyses contain uncertainties because they require management to make significant assumptions and judgments, including: (1) an appropriate rate to discount the expected future cash flows; (2) the inherent risk in achieving forecasted operating results; (3) long-term growth rates; (4) expectations for future economic cycles; (5) market comparable companies and appropriate adjustments thereto; and (6) market multiples. The fair value determined in our impairment test is highly sensitive to changes in key assumptions, including but not limited to the discount rate that is applied to the financial projections. As a result of the impairment test, we concluded that the carrying value of the equity method investment was not impaired. However, if the joint venture is unable to achieve its financial projections or if there is a change in the assumptions used to value our interest in the joint venture, then it
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is reasonably possible that the carrying value of the equity investment may need to be written down to the fair value resulting in an impairment charge in a future quarter. As of June 30, 2022, the fair value of the equity investment, determined in our impairment test, exceeded the carrying value by less than ten percent.
We have not identified any indicators that an other than temporary impairment has occurred in the three months ended September 30, 2022 that would require further analysis. We will continue to monitor potential indicators in future quarters that may have a bearing on the recoverability of the carrying value of our investment.
For a more detailed discussion of our accounting policies and critical accounting estimates, refer to Note A – “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” in our 2021 Annual Report on Form 10-K.
NEW ACCOUNTING STANDARDS
Refer to Note A - “Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial Statements, included in Item 1. Financial Statements of this report for a discussion of new accounting standards.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
With respect to our quantitative and qualitative disclosures about market risk, there have been no material changes to the information included in Part II, Item 7A,7A. “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.2022.
ITEM 4.    CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
As of September 30, 2022,March 31, 2023, we carried out an evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act (the “Evaluation”) under the supervision and with the participation of our CEO and CFO, of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 and 15d-15 under the Exchange Act (“Disclosure Controls”). Based on the Evaluation, our CEO and CFO concluded that the design and operation of our Disclosure Controls were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (2) accumulated and communicated to management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding disclosure.
Changes in Internal Control over Financial Reporting
Management has evaluated, with the participation of our CEO and CFO, whether any changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, management has concluded that no such changes have occurred.
Inherent Limitations of Internal Control Over Financial Reporting
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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CEO and CFO Certifications
Exhibits 31.1 and 31.2 are the Certifications of the CEO and the CFO, respectively. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This Item of this report, which you are currently reading, issection contains the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are involved in legal proceedings, claims and administrative matters that arise in the ordinary course of business. For further information regarding legal proceedings, refer to Note L - "Commitments and Contingencies" in the Notes to Unaudited Condensed Consolidated Financial Statements in the section entitled "Litigation, and Loss Contingencies," included in Item 1. Financial Statements of this report. While the ultimate outcome of these legal proceedings cannot be determined, we currently do not expect that these matters, individually or in the aggregate, will have a material effect on our financial position.

ITEM 1A. RISK FACTORS.
There have been no material changes in the risk factors previously disclosed in our 20212022 Annual Report on Form 10-K.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Purchases of Equity Securities by the Issuer
In February 2022, the Board approved an increase in our stock repurchase authorization increasing the available authorization from $23.6 million to $100.0 million. Purchases of common stock under the Plan are subject to certain price, market, volume and timing constraints, which are specified in the plan. The following table presents information with respect to our repurchases of Kforce common stock during the three months ended September 30, 2022:March 31, 2023:
PeriodTotal Number of
Shares Purchased
(1)
Average Price Paid
per Share
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar Value 
of Shares that May Yet Be
Purchased Under the
Plans or Programs
July 1, 2022 to July 31, 202269,574 $62.49 69,574 $84,438,951 
August 1, 2022 to August 31, 2022128,530 $57.70 127,368 $77,089,873 
September 1, 2022 to September 30, 2022184,162 $58.73 184,162 $66,273,639 
Total382,266 $59.07 381,104 $66,273,639 
PeriodTotal Number of
Shares Purchased
(1)
Average Price Paid
per Share
(2)
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar Value 
of Shares that May Yet Be
Purchased Under the
Plans or Programs (2)(3)
January 1, 2023 to January 31, 2023138,318 $55.67 138,318 $33,575,414 
February 1, 2023 to February 28, 202342,248 $58.02 39,943 $98,844,888 
March 1, 2023 to March 31, 2023— $— — $98,844,888 
Total180,566 $56.22 178,261 $98,844,888 
(1) Includes 1,1622,305 shares received upon vesting of restricted stock to satisfy tax withholding requirements for the period AugustFebruary 1, 20222023 to AugustFebruary 28, 2023.
(2) The IRA imposed a 1% nondeductible excise tax on the net value of certain open market stock repurchases made after December 31, 2022. All dollar amounts presented exclude such excise tax, as applicable. Refer to Note A - “Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial Statements, included in this report, for a complete discussion of the new excise tax related to the IRA.
(3) In February 2023, the Board approved an increase in our stock repurchase authorization increasing the available authorization to $100.0 million.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6.    EXHIBITS.
Exhibit NumberDescription
3.1Amended and Restated Articles of Incorporation, incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 33-91738) filed with the SEC on April 28, 1995.
Articles of Amendment to Articles of Incorporation, incorporated by reference to the Registrant’s Registration Statement on Form S-4/A (File No. 333-111566) filed with the SEC on February 9, 2004, as amended.
Articles of Amendment to Articles of Incorporation, incorporated by reference to the Registrant’s Registration Statement on Form S-4/A (File No. 333-111566) filed with the SEC on February 9, 2004, as amended.
Articles of Amendment to Articles of Incorporation, incorporated by reference to the Registrant’s Registration Statement on Form S-4/A (File No. 333-111566) filed with the SEC on February 9, 2004, as amended.
Articles of Amendment to Articles of Incorporation, incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-26058) filed with the SEC on May 17, 2000.
Articles of Amendment to Articles of Incorporation, incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 000-26058) filed with the SEC on March 29, 2002.
Amended & Restated Bylaws, incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-26058) filed with the SEC on April 29, 2013.
Kforce Inc. 2023 Stock Incentive Plan, incorporated by reference to the Registrant’s Registration Statement on Form S-8 (File No. 333-271697) filed with the SEC on May 5, 2023.
Form of Restricted Stock Award Agreement under the 2023 Stock Incentive Plan.
Certification by the Chief Executive Officer of Kforce Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification by the Chief Financial Officer of Kforce Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification by the Chief Executive Officer of Kforce Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification by the Chief Financial Officer of Kforce Inc. pursuant to 18 U.S.C. Section 2350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1The following material from this Quarterly Report on Form 10-Q of Kforce Inc. for the period ended September 30, 2022,March 31, 2023, formatted in XBRL Part I, Item 1 of this Form 10-Q formatted in XBRL (Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income; (ii) Unaudited Condensed Consolidated Balance Sheets; (iii) Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity; (iv) Unaudited Condensed Consolidated Statements of Cash Flows; and (v) related notes to these financial statements.
104Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  
KFORCE INC.
Date:November 2, 2022May 9, 2023By:/s/ DAVID M. KELLY
David M. Kelly
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)
Date:November 2, 2022May 9, 2023By:/s/ JEFFREY B. HACKMAN
Jeffrey B. Hackman
Senior Vice President, Finance and Accounting
(Principal Accounting Officer)

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