KFRC - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Kforce Q1 2019 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Chief Corporate Development Officer, Mr. Michael Blackman.

begin. make You

Michael Blackman

Good morning.

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

David Dunkel

Michael. you, Thank

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

our within the clarity to release which adjusted portion we provided is remarks give We've website. provided addition, with Investor greater in our our additional the table into our In an to results, underlying business. GAAP trends results of published the on Relations reconcile press prepared you

announced, Finalizing is of Firm this on focus critical successfully a the ago strategic and on our business, that our these executed focused a we the in federal in unlock needs talent on our are the most maximize information- prime team. of we sale and areas our concentrate our us TraumaFX staffing capital technology-driven disciplined to the assets closed divestiture of business to return commercial We've plan began within contracting KGS, X on manner, the patient and our business. good society. for are our of of progress and allowing government alternatives and making the pursuing culmination the KGS April years previously journey As in

is are shift to look are nearly exclusively to revenues important the derived future XX% of technology. more focused this about our completed strategic are we even our excited future, prospects. from now excited and U.S. Kforce As have and we

business new evolved, imperative every is rapidly and models is confronted market talent technology changing industry with organization the and competitors. invest to to the As and adapt

staffing foundation growth. an to talent excellent domestic focused driver meet near-term our and technical clients' and professional for Our our platform flexible to will continue be needs provides the to

looking Kforce, a However, in require such managed clients to complex firms, and to assume engagements as more greater are these services role solutions. same that

resources, our capture to share $XX-plus not us to the but as a but will Our only and quickly evolve sizeable and to expressed continue been should our pace envision stringent these this portion believe portfolio. repurchasing strategy also of This consider the stock ability shareholders, complement space segment compliance capabilities we requirements. are in on stock. and our domestic of proceeds billion have of best our significant clients the the to allow to aggressively have to to our a This suggests in all our with activities close client clients increasingly We expand to this sale long-term years. enhance only $XXX-plus particular, the our our alternative desire from integrators. our climates. KGS this serve help IT reach of until the our continue of the We've At continue technology to that lead with enhanced that derived existing change, future solutions. a companies XX% from services better rates skilled highly or need we being which access serve prospects levels, and to sale at I engage and complex manage for exhausted. our exists the regardless qualified technological also us the sustain revenues investments capabilities larger-scale expect viable cash demand subsequent to firm in our repurchase working their proceeds In anticipation believe backdrop, of talent and grow billion the of success. serves will the for for economic and leverages technology expand for to in not that economic and of attractive been can X and markets divestiture, to will will to delivery shape we identify invest The opportunity of staffing the technology repurchase

other reducing our flows. able cash are investments strong these undertake our comfortably We make strategic to due flexibility to without operating actions to very

the First quarter our within range and revenues operations expectations. were continuing earnings of from per share

meaningful make as progress clients, level technology in our our service to to enable consultants and capabilities better grows, continue while our improving improve firm associates the profitability in candidates. We to also investing and

shortages, trusted data, as Officer, XXXX Given continue on as the of including is our in I'll in enhanced sourcing relationships. and our call President, that labor for and machine provide available. platforms. guidance engagement the acute further facilitate the technical to to and well are Joe Dave transaction, Kelly, to marketing. over staffing add will now Kforce, focus will associates give Liberatore, the Financial share impacts our KGS and technology the repurchase Joe? have and focused embrace At operating color improved rapidly new to computing, mobility QX. professional investments high and further results and sophisticated be the outlook and continue These We of is be as well into serving quarter technologies changing impacting first greater our the world customers of and in productivity candidate been and complex activities, environment technology as detail become customer believe provide results tools details on enable positive. who to very with also turn demand, on trends, strategy will and Big be will then our continues our as on digital advanced service learning Chief and technologies constructive, to remainder artificial demand algorithms, cybersecurity, intelligence cloud staffing retention attraction, matching and areas, The screening

Joseph Liberatore

in of Thank of first billing the business, you, largest for our growth you to expectations. Dave which met were continuing day year-over-year in thanks growth our Tech XX% our Kforce. approximately with environment portfolios. of revenues. delivery overall from quarter we're now interest X.X% and Tech in of pleased experiencing We Flex, operations Overall all the in your believe sales represents reflective averages, We success talent revenues optimize which the significantly from well efforts within Flex, the continued the continues our to demand as growth and market published strong is exceed to client alignment our a as

regarding starts the impacts weather than expectations business, our has government was lingering are quarter indicated integrators. with begun taking trending longer normalize in the though activity efforts to As Activity QX. in which KGS, combination across clearances usual, government shutdown we below affects the our last slightly on the the still experienced to in month within the due sale of call effects staffing

towards bill and retain as However, consistent of slightly clients' are evolution of technology well an these our rate initiatives and billable continuous our agile attrition talent skilled lower scarce environment. indications achieve lengthened with quarter higher at expectations. increases the the headcount us improvement than at has We attrition our as highly rates believe allowed end desire of of to consultants levels assignments and to lower inflation continuation rates rate

to talent to alignment our within rates and revenue contributing necessary productivity. adjustments of We delivery continue sales which and to the our is client portfolios, growth above-market associate the make

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

successful other over into diversification our efforts XXXX Fortune among augmentation, providing growth a largest deeper of we established managed growing quarters greater accounts, offerings. and in revenue to a also where beyond both by XX Our result the last clients deep a remain level which and relationships been of relationships. have staff and largest been has ability these largely our very and several of through our their traditional through We've our solutions services craft customers, solutions understanding needs

seen no financial services While Flex single business. which do for client services. industry more growth, were vertical constitutes Top of than growth well revenues. in as growth us growth virtually we services, new X.X% Tech health this professional business and experienced we every as industries across in We've have

the despite above-market high expect in rates comps. remain continued Flex second Tech Year-over-year We digits year-over-year in business in difficult quarter. should growth more single growth our

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

We continue skilled in this highly advancements. technology by positions disrupted make being to business more progress, to susceptible that repositioning are less

our We basis. are year-over-year the progress FA bill see performance within to market The this business to believe improving as in should a continues average enter area beginning FA of efforts Flex as strong, year. the rates half we we second X.X% on and our have to be lead for increased

in digits. that business the our our will represent this strategic shift have may revenues, recede Direct of year-over-year. slightly longer in means to an quarter, positive which turn permanent high sequentially realization trends single from year-over-year our the prefer. talent internal The for X% and than business Hire Flex to talent, be FA suggest through needs our declines to important While results second of continues overall market revenues, increased they anticipated, in roughly can particularly Hire of meet Tech, capability strong that be quite Direct and we ensuring clients continues whatever X.X% taken

in be our We in business. line investments to this selective of continue

second this We in expect for to increase year-over-year. a quarter seasonal be the and stable in sequential rates business growth

expectations of significant has as associate we of will on we now continue drive overall due productivity Direct built improvements. improved each talent, which XX% should to revenue-generating percentage term, productivity order have the in continue years. retention, and additional the continue Hire our lines our growth model process had greater revenues the a has With which business. our to in other investments than X of respect positive long the with past make to Over impact productivity, belief Improving decline technology associate that to a also improve to to

our head have additions where made levels. additions associate levels believe to revenue warrant we capacity those to material grow to significant count We continue beyond as targeted productivity at not areas exists

long-term to trends additional on Our to turn expectations. growth. Dave? Dave Kelly, well has us operating model simplified I now positioned the Officer, over Kforce's I'll forward. call in our driving for Chief and efforts teams' firm the appreciate the business provide insights Financial

David Kelly

XXXX approximately benefit The The total sale discontinued for of recognized reflected required $X.XX business gain and as on The quarter. is of first to operations our statements. the quarter tax results the been KGS or million Thanks, Joe. income held was financial per be consolidated in share KGS as and TraumaFX million. $XX $XX.X first in of sale our have assets

gain as in $XXX.X recognized April earnings the the million. recognized from to be a result quarter sale in day the continuing negatively $X.XX of be share will portion Net quarter. GAAP Revenue our the per KGS severance in approximately $XX of year-over-year the million other billing will basis. remaining operations by of from from second divestiture. proceeds X million were structure operations impacted support transaction, X.X% on business cash costs, continuing the Given actions of of closing grew from the $XX.X of anticipation the a simplify and $X.XX of the

Excluding were these nearly XX% share year-over-year costs, $X.XX, which earnings basis. improved per on

of of result Our gross our points of year-over-year XX.X% gross Flex the basis declined declined percentage. a points decline primarily Tech margins in profit year-over-year. XX.X% XX as XX profit basis Flex

a quarter, As we've mix experienced in as lower margin larger a have in the result of growth noted of compression last spread profile. of clients, our which Tech some slightly Flex

at discounts to As more strategies penetrate our for slight structures create deeply tiered be largest This future, volume more continue typically include existing we our to as to to clients. greater pricing expect the clients. pressure look margin may our we --

However, overall mitigate should our this management impact. efforts of in much continued portfolio

targets points SG&A allows growth of divestiture expenses resulting is other greater XXX that margins. clients million to importantly, basis severance individual the be by at of accretive adjusted drive KGS, as to the efficient at our of revenue scale As margin a from lower slightly even from profitability and infrastructure our support associates declined and and operating for these clients $X costs percentage year-over-year. more

as our make to continue SG&A progress achieved, while technology increasing generating in significantly expand. This been leverage revenues We investments. also leverage has

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

margin, costs, other which and our points quarter severance XX improved expectations. met excluding X.X%, operating has basis year-over-year first and Our was

declined basis than During basis by operating margin this points. more points. economic XXX percentage Despite this have by has cycle, our margins approximately XXX improved compression, gross

of year, in quarter rate first in our were shares the continued XXX,XXX active We Operating flows could proceeds quarter, which shares and from operations to the repurchasing subsequent typically quarter upon in XX.X%. quarter. XXXX total sale million, any $XX.X our and flows the reach at excluding to cash tax million. have lowest effective cost the Based a repurchased first from million end during operating KGS of approximately is of trends current $XX quarter our TraumaFX in be the was of cash continuing of stock Our businesses. $XX.X the the

continue We exhausted. activities the KGS net proceeds these expect divestiture the from of have to until been

million. of was yesterday, were net yet $XX remaining XX. under of $XX.X million Long-term the as facility As debt be deployed our proceeds credit March to

million, to at We XXXX. of expect to remainder be notional pace the for upon maintain for position of Depending a remainder which interest of attractive debt cash amount $XX our a net repurchases, stock of levels in rate flows XXXX operating of cash our we expect and is the extent hedge. the

in partnerships stock tuck-in Based or facility strategic of how QX, or $XX.X average minimal average vary trend trends. provide I $XX of $XX.X able provide sense Our debt shares while cash us would price quarter. million CapEx collectively to stock. repurchasing could repurchase in QX XXXX, QX upon maximum ventures in million healthy in result in flows, cash other diluted wanted our million low This weighted per to of quickly million Actual given depending could and activity, outstanding and weighted $XXX and current outstanding million $XX even and you the we QX. shares deploy strategic credit results, flexibility execute for remainder course, upon million aggressively significantly and requirements, acquisitions between volume. approximately $XX.X on of forecast to being a levels

expected in are $XXX which $X.XX an for expect be improvement revenues be basis is XXXX. in range of Flex quarter, quarter the XX% per margin any legal charges pending towards includes of respect expected are rate QX as to to guidance XXX effective any continuing assumes operating Guidance costs, percentage XX.X%, outstanding, to to Weighted any effect, costs and for million and on earnings share days Our between any, guidance of be million XX.X% between to and changes. should diluted points. second between payroll as SG&A matters, This expected XX%. between be of or the expected between is $X.XX. revenue X.X% mentioned, an to I expected be the response equal and if to are of second XX.X% margins of X.X%. XX to days or the impact be tax operations, disruption charges does be the billing and With in and tax funding we $XXX the Gross million average and consider approximately of not from to related seasonal XX%, XX.X%. to onetime $XX.X while a taxes in or sequential are This to margins related tax shares future firms government or revenues regulatory, legal QX. law

Subsequent we a Tech revenues We as Flex focused in better previously Flex occur pleased X.X% our now seasonality as effects performance FA quarter discussed. of business KGS, we be to above-market $XXX continued expect or business margins our the repositioning which as quarter. to early in operating without where could the are on are third million, are with and sale

seasonality to expect levels levels to provided the approximately prior basis a quarter. points X.X% by X.X% a and revenue $XXX basis and points, KGS. continue in to We quarters to the respectively. basis improve XX of at improvement This impact X.X% profitability to first each related from same and XXX point models fourth is Costs the in million XX year divestiture our

which foundation to continue sustained for and for built in Demetrius, for and the remain continued revenue we'll and open remain that now profitability. be call strong remain improvements in solid -- we excited prospects the services, quite a confident growth our market we We about questions. our up

Operator

our [Operator from comes Instructions]. first Sommer Tobey And question with SunTrust.

Tobey Sommer

you started? now? goals through need your of, sort in years. for you kind and talked get XX% XX% do of fully And about to more a to you order have target be to managed in some percentage could that into, that acquisition organically able We add X or expanding to What capabilities get services

Joseph Liberatore

below Joe this Liberatore. Yes. can currently, get Yes, organically. We is believe do Tobey, there we're X%. we

key is been strategic probably alternatives. that where the area we've exploring However,

we could So standpoint we we'll balance not for do from very the XX%-plus. we're opportunity, we sheet obtain the believe something. find continue confident to we are going explore. with required support And right But that, that's be if where that us to doing to that

Tobey Sommer

one what within you would seasonalities you Okay. referenced the quarter And that as without to then in goals, your could, of, your year with kind margin hit respect bogey. the

David Kelly

is this Tobey, Yes. Kelly. Dave

I and X, categorize as clean would So Qs X quarters.

got you slight payroll days, then as some QX to Obviously, that we as color. significantly give and obviously. I taxes impact well a we QX, billing tried got So impact on

Qs X the So are quarters and X about. think clean to

Tobey Sommer

with handle That do for your slight a largest has, do because over But margin annually? relationship we customers, trends think gross how of, makes script on, by When think as to far, headwind deepening kind trend try we that? about how noted, sense. in operating you a your get from about expansion here multiple we contractions, margin out the years, despite the the margin

David Kelly

Yes.

So Tobey, Kelly, Dave again.

driving have couple here; volume, undertaken we've you for impact it's in the year, business at of to A give really clients with we've last Flex, clients, our largest. couple those you as a seen large on the slight continues things as obviously, driving lot an been of compression very our focus portfolio them if that: So on but but Tech us helped management greater beyond and that; discounts that minor. saw, we look activities be

that quite bias. down does And of line would frankly it's it's expect the as made very I'd line these the actually a slightly of reiterate well, bias It's was there if probably I larger this terms us comment minor to clients for for bottom in the So I negative. accretive productivity a but bottom on a firm what grow not basis. for a down,

Tobey Sommer

you drivers points where about and maybe of give it's it might what is the us couple a historically elongation have a duration And could talk and versus the for reference then of assignment durations of where trending? been now

Joseph Liberatore

say, X we for We've average X-month Yes. cycles, of expand back to continue historically, cycle. Flex. in time. at to that duration pushing X- in this closer the probably mean, probably go to I type window seen I'd Tech was to It's months prior if this throughout our point

have mean, ongoing throughout quarter. changed little that cycle. entire this a been us So the I just room this headcount we quarter of targets the anything this allowed quarter. didn't of we the at that those meet has bit particular gained materially We had end that to

David Kelly

Yes. match helping these think well. we're just, duration drive the reiterate It's us rates, the assignment, it's bill I in to longer going of would as us. that continues for grow I of, to work even assignment us those. doing, helps and services That again, to but higher that managed help add kind point, Dave's this at space, lengths with

how think I has it's business the part of So evolved.

Operator

comes Blair. our William [Operator next And from Instructions]. with Tim McHugh question

Trevor Romeo

Trevor you actually in taking for Thank for Tim. Romeo is This our call.

undertaking So increase each forward? productivity it you more just similar can three internal at rates the wanted think going ask been efforts has you I And in in future? you XX% continue specific to past mentioned of of that to what do the that productivity improving sort continue up associate are to years. than

Joseph Liberatore

with efforts doing alignment after the that how all focused think the I productivity Yes. that I'd portfolio more that enhancements you we're of say, we're and enhancement you around are front. methodologies I into from market, narrowed. with really overall from started training, then our on come when on and those ramping, how couple mean, getting apply things technology just in it standpoint, stages to we're people getting the we we're onboarding, things and the early And how things different a all we're while the to on go play how and the alignment,

more grow the to to traction, confident continue very we're that business. technology to gain adequate we continues as have the So capacity

Trevor Romeo

still as Okay. a Flex. good the well growth Tech now? the the growth or then in is seeing the of number just assignments of follow-up the assignments on of from Are most coming assignments Great. you lengthening And longer for

Joseph Liberatore

The seeing came additions, headcount majority assignments. then that of as coming as of you're extended is the some from growth well from expansion and the bill-rate growth actually

Trevor Romeo

it. Got on maybe me then And for more the one for just turnaround Flex. FA

the maybe think there bill you see up to guess rates that in given timing might assignments what of And imply when the does to in the about that segment. return on number encouraging growth but it's year-over-year nicely, any then I So it revenue? the of decline sense

Joseph Liberatore

made really of year-over-year was that really Well, we my continue second could opening progress, things I that's in statements, year. if positive the half Yes. turn comments were the in to which to the

But I obviously. our for bill your of Some greater way to things and seen in the declining actual rate's math, part than deterioration take simple yes. we've earlier have mean, go our revenue's going to that year-over-year your If It's place. up, the down the revenue question, growth. is headcount

to a were However, we're, as could that currently we indications to which bottom in lead of, I stabilizing that that internal are what I positive, think of terms getting seeing sequential business. also the slight a trends kind mentioned,

David Kelly

point Yes. somewhat I a add related to this. would

a thought margins business, As bit quality to do. we this bill going about little increasing Joe mentioned, what the we're rate I the of talked

this margins well. as that think really to we is So Flex helpful actually

quarter the So of quality the business, bill you margins, and second slightly even been rates with into associated higher have as beyond, too. the look higher

well. of quality as the has helped the again, business So

Operator

a we Tobey have question And follow-up Instructions]. from SunTrust. Sommer with [Operator

Tobey Sommer

to question. ask wanted I a strategic

process, area, the and streamlined this going simplified of staffing portfolio, the squarely Or course professional within down? in the kind and with yourself concentrating aiming Over more refinements is there portfolio Tech at your is it, cycle more it, the that winding Flex, learn business particularly, of current forward? you've just

David Dunkel

term, began back we retirement, strategically. the 'XX Dave. than us as that the for greatest looking Joe Sanders' in opportunities the And to businesses specifically President's technology, the with longer concluded not were moving in of process role is this and Bill This Tobey, businesses. term, were was business at whole significantly the long businesses growth really that relooked into afford which we're larger we at most those any the and going that

in past. walk eliminated quick Clinical HIM 'XX. in We 'XX. the We Global. a just exited in exited So We

course, just and process. Services, Of Trauma of in KGS we is divested

steps So all to to were allow of focus. those taken us our narrow

at entirely now, XX% technology. it's roughly of us domestic look you U.S. if So

we've concluded So the in process to really that our support We able these narrowing of believe scale to businesses. order adequate have focus. to be have you

our ability them So conclusion some businesses specifically were well invest our as related to other the to exiting in as of in scale them and opportunities. the

think Looking call focusing the on right made technology. back, I we

So applications, greater see in the of indicate focus ahead, now as We long moved term moved we seen disruptors. that are of marketing, now technology. we customer-focused for in sustainable the that technology look really even transformation, model things forefront the now kinds has opportunities at we've those to as we did, digital has that to believe time, terms business

frankly, And lot be today, just about done. not to optional. every firm there's of it's a still work for So

and with in So on opportunities they're when greater look we at clients, take responsibility. our conversations the to us asking

So all long-term of has really foundation a of the strategy. been this

divestitures, terms we're done. In yes, of

process that potential would be a very patient asking a do business have to we've on type it, a us already or something for indicated but of of that us are something, terms along our lines been you still clients the In that, it strategic being and disciplined in solutions would be see if tuck-in while. on. about We're take it acquisitions,

delivery the platforms because where of have on excited bring that leverage-able we're have these strategically, where in about is long-trusted major of and we're our really relationships. positioned clients platform one some enterprise actually working we we ability to together our teams So

spot but exposure. we're is GDP markets, now here, with attention narrowed a it's the long position. in know really of our here, With and and we're X.X% really on in with -- U.S.-domestic we're growth all I great focus really concentration a So a the great answer, domestic focused

Operator

David Chairman and Thank the This concludes over turn call remarks. Dunkel, closing Q&A today's would you, to back our and of now CEO, ladies to for conference. portion like I gentlemen. now any

David Dunkel

All thank of right. Kforce. interest support of very you Well, your for and much you, all and

While field we privilege and more would and serving allowing for and our our to us much. corporate have you Once much and say you. thank like do, consultants teams member very the to again, each I our always clients thank to you of to of every

Kforce (KFRC) 5 May 192019 Q1 Earnings call transcript