KFRC - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Q1 2018 Kforce Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. to Development conference Officer. like Blackman, to now Corporate Chief would turn over the Michael I Sir, may you begin.

Michael Blackman

Good afternoon.

reports forward-looking. certain any Before factors we and that that Commission. listed upon contain you to and filings Chairman and to the the to expectations Actual Dave? to like are and are current statements and in are Officer. assumptions Kforce's statements. Exchange undertake public David Executive Securities get started, like this forward-looking from We this any other cannot now results I to duty call may would filings materially update These based statements and Dunkel, risks subject remind would uncertainties. call Chief may with I vary and turn over

David Dunkel

Michael. Thank you,

information Earnings You results this about our and can SEC quarter's find Release filings. in additional our

and to will add remarks quarter have into and of our high-level guidance we first give our our published results operating Dave greater then and operating I turn addition, opening over quarter Joe will website. QX. who portion In the some results and environment then our provide first results CFO, prepared Investor on will Relations on on trends and remarks who Liberatore, color Kelly, will detail it provide President, within

benefiting earnings margins Tech and results. our stability contributed both more Flex are in pleased had basis of positively actions over on of our meeting which resulted our quarter towards broadly across The a growth points along business The to basis, year lower growth improvement year-over-year. SG&A the a XX% Flex the very margin. lower combined more Tech share sales Also, improved efforts gross anticipated, our year when with in tax portfolio margin profitability progress in increased we making our XX with clients be of was costs, per rate, Flex talent we first profit stated with FA demand both acceleration positioned operating year-over-year with environment Flex spending robust very we than expect GDP this and to are recent for slightly the to is which economists continues and and the focus very many we business We growth. quarter results, lower our continued strong of are Though especially to capitalize headline is continued and objectives. anticipated, in and delivery previously growth. rapidly first leading well significant strong than the effective on revenue believe

are To infrastructure increasingly this the and to have provide to companies partners and meet look talent that to increase tax timely compliance competitive for all industries passage spending some have secular all actually anticipate requirements. increasing investments cybersecurity, marketplace. Again, traditional forward. and business the Companies going need investments all continue virtually expect machine learning well and technology intelligence the in to this seen patterns for high will the cloud as continue since and enhance of mobility that as are but demand, will models across customer meet to stringent flexible are rapidly solutions recent sizes cyclical their demand, believe are that of digital foreseeable drivers and technology requiring in as quality may able changing We continuing experiences reform dynamics these Big We across in also transformed. this industries transcend legislation, artificial marketing. we to accelerate future. experiencing data, computing, the be

growth. to achieving look forward we first in objective improved our milestone QX, revenue and look profitability As the significantly we of to accelerating

the of organization in candidates invest productivity to Joe? to now our to and consultants increasing Joe expect details. our technology We provide President further with turn that capabilities our while to to clients, service the Liberatore, over equips improved deliver call associates. also to I'll continue exceptional

Joseph Liberatore

Dave to interest greatest first operating quarter The for of Kforce. continued model to in places of our the thanks XXXX to to bring results activities the and and Thank for and efforts align value our your of you our to clients all consistency you, reflect our consultants.

Tech of that made in increase have in from X.X%, our to an which Tech the this This is grew our Flex us business of business is third loss revenue two-thirds considering at We business, this X.X% our significant cycle. carried start of first overall the economic industry in business After year-over-year projected growth in accelerated rebound early XXXX, year-end the This rate. assignment quarter momentum due Flex in quarter. is to into revenues. the has The from last of progress quarter X.X% core roughly quarter. rate divestiture Global ends activity second allowed in the to fastest growth been which the roughly from twice rate the

and portfolio our We alignment within client diligently been of better have talent and delivery and optimizing diversifying portfolio. segmenting working sales our our the client on

XXXX technology companies be consumers flexible to Fortune the largest continue of talent.

issues result clients enable and Our largely other diversification to quarters craft deeper understand facing has have of and revenue a last several efforts into broader with us clients whom to are we Fortune established solutions. customers This XXXX relationships, beyond they on the established over we growth our our have focus been technology where the better relationships. few largest

technology increase field engagements at United the and work As of experienced us allows our strategy of all application broad-based. productivity under also allowed centralized growth we so a with in This us focus capability, our growth standpoint, execution improved to the has was of offices, within continue delivery area be a key an across in by to mature scale this industries, again platform, and consultants supported our This From virtually statements is well structured industry result, portfolio. quarter. States. combined which levels deliver to focus our

are with believe additional productivity pleased capacity certainly we While the we gains, exists.

grow revenues sequentially Tech and QX accelerate for the growth XXXX, Flex levels. quarter to we of year-over-year to rates For second expect from

declined represents revenues, overall which Our X.X% of FA year-over-year. Flex business, XX%

While project larger to certain ends than the in ends first present these headwinds quarter, we we were greater anticipated anticipated.

market lower strong on were and trends. in activity FA anticipated. result for improving in starts accelerating focused the remains should believe than We also levels are we that Flex assignment Flex FA New

this continues as a representing call common award a is first have revenue our quarter be expect quarter stable services KGS We competitive driven which however, revenues forward. to focus seen this as for that and the third XXXX. successful this strategic in to KGS' it volatile put quarter We margins last our and this levels. first XXXX. XX% XX% subcontractor, improvements re-compete the referenced pressure in in increase significant KGS expected a inherently second being prime protested of cost year-over-year. grew expect than slightly were in business, second be the were quarter and the two operate year-over-year, environment re-compete, business, declines and product the awarded revenues, XX.X% is of declined going on KGS scheduled resolved the already which from by base, we in more We in of approximate due are down that to to in services contracts its in was protest primarily to year-over-year to winning re-compete currently revenues is revenues quarter. was to

as growth Hire expect an product double at first QX are revenues quarter, rate quarter overall double a exceeds declined X% which represents revenues, in year-over-year. primarily result roughly to expected X% second revenues, increase the a roughly levels. basis KGS the we that on to grow the digits For Direct of a low which year-over-year of and revenues

means in capability important an is that of business prefer. they needs talent the Hire through Direct whatever can clients ensuring Our meet we our

We expect increase in the a on a basis. second quarter, decline year-over-year but a seasonal expect

that make our the experience improved consultants directed towards intelligence that we as we of continue training, talent revenue. in investments the believe To as of and XX% We continue other our our clients to improving capacity the end, of by year-over-year exists growing significant productivity business have well approximately targeted revenue-generating improving and technology to people. productivity are tools and

year-over-year. slightly declined quarter Associate headcount but the sequentially, has in grew X.X%

levels in revenue We expect to as stable growth. associate with accelerate headcount further we first be the quarter quarter second levels

Our and will the them expectations. ability Kelly, Dave tied operating productivity consistently Financial trends are improve the who I engaging ensuring call Chief with to now is tools and to turn the success with Kforce's associate right will insights provide they arming Officer, and over to on best leadership. our by customers additional

David Kelly

Revenues million of year-over-year per $XXX.X share earnings of X.X% year-over-year. grew XX% and $X.XX improved

the gross profit KGS Our quarter staffing The in product XX.X% was gross year-over-year, profit Direct percentage percentage last year. a driven flex and revenues in of points decline basis versus lower have by XX QX margins though Hire margins of improved. declined

which basis both offset driven point in XX.X% improved XX basis Tech our gross FA year-over-year, XX Flex and service margins, profit a business. of point Flex by basis which in KGS improvement XX decline Our percentage a was points

quarters sequential a our staffing spreads further improvement higher our seen in success bill last three now and and accounts. which in of penetrating four discipline pay in have demand reflects strong pricing We margin both in business, the

increased low in in footnote, divesture, which resulted a as to which levels in Technology more gross Joe normalized operations bill a in average higher higher has from grow. help flex the product the the Flex $XX of at Not business As rate but and the drive hire X% our of core has initially sequentially lower Global $XX. Global bill sale rates, operations, of improvement half slightly rate, margins margins Gross Tech grown quarter, direct is XXXX will from have offset substantial year-over-year. will excluding approximately resulting as for shared Global rate, faster mentioned, second will Flex dollars rates margin we bill benefit last our KGS. a only our Tech growing revenues,

businesses XXX further Second from after be SG&A of as the revenues business and are our in compression of percent see Flex basis of in QX quarter a in re-compete. seasonal the full result quarter XXXX. QX Government our under as XX.X% payroll Tech to expenses account declined recent services stable year-over-year into will margins taxes. quarter FA expected Flex taking first revenue a margins to the improvement in a Flex of points of

in make significantly We has operating and our to SG&A to increase to technology leverage while continuing This improve productivity significantly margins. progress us improving investments by controlling expenses. allowed continue generating in

should on year-over-year QX, greater flat essentially into dollars SG&A forward spent be significantly Looking revenues.

experience capabilities. a and candidate business to expanding consultant the continue make further our in focus intelligence improving with will and additional on technology, We investments

While these to up-front productivity are will directly investments generating improvements. costs, additional have linked they

experience opportunities with that firms technology We customer leading and enhance our applications to relationships. are also embrace pursuing aggressively partner and improve productivity to

First quarter improved basis XXXX operating margins XX of points X.X%, year-over-year.

quarter had awards. tax the and anticipated was XX.X% as effective lower the tax in result share-based anticipated first of a slightly compensation of credits rate higher than of Our we vesting

$XX.X XXXX. of a income expect our respect flows, were balance million during to were for cash remainder dividends. effective quarter cash our was debt cash relates the Capital repurchased we our rate to March will XX% our quarter, it track is in thousand the tax paid million. for first $X at We million. and of typically under $X.X Facility As to Credit end this which quarter, Expenditures operating flow the on With million Long sheet in go-forward closer shares XXX flows quarter $XXX.X approximately the roughly lowest in Term million. the and basis, first $X.X

technology We to strategic returning in strategic utilization cash tuck-in debt the business of and reducing capital partnerships, and available through of in investing investments balance acquisitions, our long-term will investments, continue shareholders. to growth capital other the and this levels our between potential

XX% QX days, billing earnings expected be to of of quarter per be be share SG&A in million and $X.XX to With revenue second are XX.X%, for XX expect expected expected The while percent XX.X%. to of are a to $XXX to has is to which XX.X%. XXXX and be XX% QX be XX% to between to flex revenues and and we Gross XXXX. and is between respect between $XXX QX margins margins range as the $X.XX. XXXX between million and guidance, equal of of

Flex in quarter, margins between XX%. effect, exceed if expected are XX Tech first for guidance not expectation charges are reflects outstanding to million to of related intangible X.X%. and QX. approaching to diluted average does X.X% Dave future our we be profitability. assets, noted second the Guidance rates expect XX%. the of costs be Firm's achieve in any costs, in tax In or shares our impairment million milestone the This approximately any consider revenues an year-over-year the commitment Weighted onetime legal As law any, our forecasted tax his $XXX second tax or quarter the impact rate high to of guidance the legal response contemplates assumes that related to on to and growth opening regulatory, improve of pending The changes. matters, or funding, towards end effective any in government revenues for our disruption to guidance are of remarks, operating the also

in benefit profitability. Sequentially, is pleased a we solid We business our believe foundation have and growth are with the sustained improvements continued in from improved for and revenues, leverage Direct taxes, Flex discipline. revenue lower acceleration to from our of Tech expected growth, continued revenue margin KGS levels expense profitable operating and productivity Product Hire and the associate continued greater gained seasonal payroll SG&A more

to expect in reach impacts, our a meeting seasonality in without milestone continued X.X% make We where incremental improvements quarter, $XXX revenues of next million.

our remain demand future believe businesses Victor, that We in questions. excited about take we prospects. are in now will are to continue we'll significant and

Operator

line Tobey comes from question Yes, Sommer sir. [Operator Suntrust. first Instructions] And the from our of

begin. may You

Tobey Sommer

I'm elevated improvements the rate continued staff see revenue if productivity revenue were addition to have might what mentioned kind of curious of and in but when will you to market you your you let you growth, or - headcount generating have if to of relatively opportunity that degree this you growth. question, that, are the for Revenue maybe increasing able

Joseph Liberatore

to associates through Joe. say it's we capacity. our rebalancing within those population. Tobey, realignment have the have opportunity various of productivity portfolio within ample go existing activities would delivery in our terms of also a our we think alignment and long sales Yeah, We've that we and I been

see are of half ramp through it end of significantly the to evaluate we year. the flat objective year, us keep So the the half first up We year. we'd coming back out even with the year through stated our the approach back don't we'll ramping beginning remain where we second this headcount, count if then of in the were pay but that I consistent that of up of and was

Tobey Sommer

Could the you year and maybe the as back extend it's us the a as you quarter-to-quarter far helpful. color timing? do in product the kind little as look more give that's will Okay, - of of about bit like visibility to that what at KGS business half or a have really

Joseph Liberatore

half that And Yeah, double of in we're as expecting to balance rates. say how year, I as basically just of say, revenue comments, my we look year at at the tough quarter. those out QX. that the - the the think in being remainder and it's pretty the second stated QX to opening It's would we might I in through I look second between consistent it

Tobey Sommer

any Okay quarters? improvement to or and might helped in the Tech Flex an business mind projects model were we large to the out in next or have we in that as there anything keep the several eye contribute have growth that should

Joseph Liberatore

executing. they're was widespread, I hitting cylinders within and They're incomer pure it it Yeah, our so, team so attribute its call concentration I the it geographies. - of just lot all the really just was would to A which as up across major quarter no, we what execution. mean are the portfolio, all in accounts, on

David Kelly

got part and us of it's Tech clients We and in benefit. would that Kelly. as seeing has that we've first this accounts in couple have FA to It of about seen we us providing margins add think slightly move the as and is a lift a also as so dual talks beyond that major Yeah, we've be of is lower we're that to Flex in further Dave portfolios. broadened Joe bit provided success growth margin we our the that major these clients on the gross touched which of Flex, I those distribution across about Tobey, earlier. happen lift penetrated in us

Tobey Sommer

you've quarters [ph], the rate bill momentum continue? momentum including that signs Okay, four you thank last you. the in reported the are that seen that seeing Is can

David Kelly

good on Yeah, Tobey, second we to We're the successfully the about to started. feel think here, see we're that execute executing Dave, that that, we yeah, run extent on, just a where the on further I good strategy quarter continue to has we opportunity.

we Flex margin near I stable it I bias FA gross and environment say, away take would we environment a our downer stable start now execution, to relatively is in margin that Tech that the negative comment a term. would I said said that with the right a say see maybe frankly would gross bias. in as With and we relates

Tobey Sommer

very Thank you very much, helpful.

Operator

comes our of from line question the next And Northcoast. Healey John from

You may begin.

John Healey

you. Thank

You weather have on have might we mother you, us. storms maybe maybe what headwind I might mentioned you nature as it, in might me as better against color even amount don't of was some cost guys have but harsh the material in and performance this the in the it call, the give East working far about have quarter the it earlier Coast, missed the been was have a could

David Kelly

Hey, really. not not but nominal, Kelly, any John, more the Dave we're on concentrated highly a East huge Coast, than impact, certainly year particular

John Healey

great. some of It's businesses, us about performance. could you in you that as kind terms the F&A the for a like [ph] how the talked high parts thinking organic and well government performing growth little I Flex of single backing in rate to Okay, there into bit. XQ digit if for as am of kind help And right if I'm a they're just moving way of of that business kind the the

David Kelly

business I and John, quarter the all, are say because wins would growth these of So to XX% hard have first fourth first in that rates predict the government big to the quarter. led

growth we've the in we expectation if year to step the the of government for certainly continuation and big it of those in points tends that extent our XXXX of we business up, digit 'XX contracts won contracts relative wins a - to in to business certainly. high to because had steer for service So continue the single certainly our year

David Dunkel

Dave this John, Dunkel. And

Yeah, Flex asking as of digits the mentioned high think guidance and single the of about seen is business. high result a approaching said in Tech remarks I I think and our Joe and his acceleration which prepared XX% the as we've execution. Dave earlier really disciplined level you're

a done team's great Our job.

Joseph Liberatore

close and on is this last that. the Yeah, out Joe piece of I'll

Flex the business. FA about asking were You

very As of around standpoint as so organizing that I and gone another well. turn we will mentioned very a look back in has in is specific, the to as remarks, execution half project we're year that level, and opening the growth the to team from positive there confident

John Healey

in that. chimed for you a minutes I apologize thank Great, I late. few

Joseph Liberatore

to Not worry.

Operator

Instructions] Sommer. from a have Thank Tobey you. And follow [Operator up we

begin. You may

Tobey Sommer

different wondering Thanks. center the could national you recruiting utilizing on if update now this company I expansion, and if you us or kind versus just that it years firm of value the if and usage seven Thanks. your how could thoughts is to just was - of - that ago? of the way the you changed how at kind has see frame points value currently adding three

Joseph Liberatore

methodology the with It's question, into back of a now We've after technology a we as center part the realizing. business. national the initiatives the to of great saw going really about Dotcom byproduct been recruiting years XX being coming better our really

lessons So of a of replicate and to there's because want people what lot I to done. lot here we've little of refinement. learned bit lot a have a been we careful a be looking

have big is because lot the part that's standing alignment replication a just and as in and deeper probably teamwork it biggest the aspect changed simple just teams. in, thing it and not clients that's where of the so of we a the is now buy in cultural and adoption is the Although relationships and very as up years three very around last the specific stable the

the all focused really field with how the customers stability that So and I'd the say driver. on teams our main interacts is operations key

Tobey Sommer

outsourcing, about to customers do landscape, and do Okay, of Tech the methods. staffing maybe have is you relative losing other you IT or execute consulting, - alternative opinion other words, your of are an about of that in kind an offshore their IT opinion other that can gaining In those terms there kind performing projects. IT relative methods staffing Flex any and how Flex have to share either Tech

David Dunkel

demand couple and of is say Yeah, of would to that actually project are we're Number there's the far lots those Dave. availability things Tobey, supply this needs. seeing. that is address the different exceeding clients a ways of that one, looking so I resources at the

clients delivering Joe to an statement of purely teams and mentioned, in As projects. we're the we've substantial resources people work business, actually of benefit seen bring to increase some substantial

anything the balance. I put general you of a they're customers would lot than there's as the if of cognizant that resources But shift would mentioned. very where to say will, a using we that demand they're to it's have staffing going fact if work evaluating so out say keep I seen talent. the that of of really and IT morphing and that services indication they're in a Certainly businesses and political onshore, now it's think I a been So say, any is those of been of in mix are not into statement of would ever pressure we've many whatsoever greater I

in customers because teams are it's their us our So the of scale these bringing needs a of our our worked actually to capabilities together, and bringing advantage. as projects result there large and

Tobey Sommer

much. thank you Great, very

Operator

Thank you. Chairman the turn I'll I'm at call Dunkel, showing now And CEO. like Mr. questions this David to to further back and time. no

David Dunkel

for teams I member guys, you you allowing to say quarter the you. thank Kforce. field of thank you Thank us and to our your and interest thank much this for to again like corporate clients much. consultants Great of job very our support and for our you serving every and very and and each privilege

Operator

great and today's This Ladies may a conference. disconnect. program have you and all participating for the day. gentlemen, you thank conclude in Everyone does

Kforce (KFRC) 1 May 182018 Q1 Earnings call transcript