KFRC - Earnings call transcript Q2 2019

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Operator

Good morning. My name is Summer, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2019 Kforce Inc. Earnings Conference Call. [Operator Instructions]. call recorded. today's that note is being Please Thank you.

over will Please Blackman, Michael turn go conference now the to Chief Mr. I ahead. Corporate Development Officer.

Michael Blackman

Good morning.

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

I would Officer. David Executive Dave? to now over like turn call Chairman Chief the Dunkel, and to

David Dunkel

you, Thank Michael.

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

remarks website. Investor our we portion Relations addition, our published have In within the prepared of

The to marked can provider provider and solving strategy most top as talent of position dedicated critical focus the a technical a information the solutions and second multiyear domestic the our and FA, a driven staffing both Tech society. in technology professional we, of as quarter and on completion where in needs firm X

continued Tech businesses per finalized our growth we of also prime above-market Flex share. our delivered federal quarter, As in business divestitures and we earnings contracting the this strong

believe of firmly of sustainable growth revenues We are and we've the in our market the divested XX% Technology provides strategy, now, and this solutions segment. nearly our deep Over revenue. derived course over technology prospects. $XXX And extremely million domestic staffing from that

industry experience. being to and with changing and secular improve and business competitors strong drivers models is the experience its rapidly the confronted invest in space. to customer continue Every adapt technology We imperative new to organization

greater companies and firms target understands the a Virtually every with These flexible they that to the of of these a up compliance for projects significant technology are flexible revenues. to role of value resources. services our managed their clients, services a majority in execute complex with we infrastructure engagements These of resources. XXX both companies they're workforce the speak assume more indicate Kforce as targeting are of us percentage overall and also our Many company to to necessary that to utilizing Fortune make scale solutions. necessary critical to on resources the with and and greater partner that breadth require provide looking such now

clients have larger-scale complement us Our alternative expressed as or to the increasingly a with to engage desire viable their to serve integrators.

part continues us provide is and grow service While the and to business expand to it is our to believe differentiated a small, still opportunity an strategy. this size We capabilities for relatively our of significant important of exists clients. our

a With Kforce's on that are change, executing fit technology, focus stated by We technologies as acquisition delivering to have to disciplined clearly they speed exceptional strategy that service relationships rapidly necessitate open customers. new and and innovation with architecture an our tools providers the introduced. we're we addition, technology of our respect believe strategy niche In solutions that offerings. to our for is internal enabling embrace

addition In in capital no our cash that which financial capabilities, debt, serve to net ways strong position, best us deploy available flexibility service our our includes our to maximum flows gives shareholders. and

dividend to shareholders our acquisitions sustain technology share capital to solutions through the are priorities space return Our and yield, pursue within repurchases.

million exhausted. have were our to until of been continue from cash the to $XXX net divestitures able and $XX proceeds we in During deploy these being and expect repurchases share generated the aggressive quarter, million

investments make may actions comfortably and that We are able undertake to arise. capabilities reducing flexibility and other improve to our without make that our these acquisitions strategic offerings

able Kforce an important on and growing positioned have to taken we've dedicate market. focus steps to The be our

Dave about of add excited QX. valued to partner becoming And into provide the results trends. and who proceeds CFO, and Kelly, well-positioned our future guidance now call in over I'll are with operating will use more President, cash Joe even an the greater to further will our prospects. Liberatore, invest growth Joe? We our and I'm to turn results, color give on detail then our on intentions second-quarter clients,

Joe Liberatore

Kforce. majority rates X.X% Thank and year of Flex in our stabilized modestly Dave, for increase quarter revenues this by your interest thanks our share of you continued Tech you, Flex year. assignment being all as over QX FA as consultants operations X.X% and by second levels. fell The market bill revenues improved of within Tech is gain last in from continuing to in range growth over Overall at grew the an billable Flex year. driven on guidance

to growth is best efforts services. model our align reflective to above-market purchase service operating and our of fit clients our with offerings how The

We industry enhanced concerted drive intimacy. to size have made to effort a customer our teams align relationship by of and

Further, provide relationships. Consequently, relatively long-standing our demand we experiencing clients the and these has strongest we clients growth are are established continues come of been have significant reliable. and from services to that we the where consistent users from

where We to relationships prospects focus possessing have client capabilities on the portfolio. our relationships deepening while rates were and our the established to slower with existing expanding believe our stellar attributes client aligning with growth portfolio relationships also right value as selectively in is given our continued Conversely, don't fully clients path clients we continue of establishing the the quarter.

especially Our of technology value-add our to offerings, duration may consultant provide service increase average strong We we scarcity to also higher capabilities relationships of an a our the to expand the have talent quality assignments and driven to this our numerous months. almost clients of trend in initiatives and continue, technology our clients. as skilled nine execute believe and

continue talent of and the largest in consumers flexible the which the have XX% relationships XXX. companies technology be we established to Fortune do XXX of Fortune with many business with

health managed experienced in well virtually which greater significant do and to leverage of through services. across providing business deep of particular service as industry augmentation able strength services, offerings. needs by their business craft vertical level solutions We've staff we both are understanding also every and professional We our with traditional in solutions and a and growth as

vertical Our industry was weakest telecommunications.

and dynamics the However, our and relationships services be the client optimistic lead vertical within this solutions for us to provide. we long-term the of prospects about business depth

Tech the We the in and digits, single expect in Year-over-year rates our quarter third quarter. mid-single in business continued growth in be above-market in should digits. growth remain Flex growth the low the third should sequential

and X.X% Flex FA was sequentially. year-over-year Our declined flat essentially business

longer business below our this We volume more make disrupted are has repositioning susceptible that technology of taking highly new to anticipated and expectations. to been by continue progress, less the it's starts positions skilled than assignment though advancements, being in

of bill this transition, business FA our in believe were within performance in half continues Direct should Flex to improving stable QX X.X% mid-single may year. has up declines will year-over-year healthy, The efforts revenues in market the business. a Current solid Hire and digits. this rates QX be suggest performing be average been for the levels improve second year-over-year our and lead area increased trends we FA Flex With from to that and year-over-year. revenues FA to Flex X.X%

is Direct talent can through ensuring an means capability prefer, clients paying in which of dividends. business the needs important Our continues whatever be our meet that they we Hire to

growth in and the for expect business with quarter We year-over-year to seasonal this sequential a third rates decrease levels. consistent second be in quarter

revenues to continue model the order our process decline significant business. and to continue growth in expectations to overall other built investments to our our belief lines of to respect Over will the continue Direct percentage Hire long-term, With talent, technology with we that of as a associate higher productivity. due in have revenue-generating make improving we

with accelerate efforts of has through We relatively significant make matching levels capabilities the are sourcing, in of least our on relationship associates and areas as material to year. automated talent to continued number management We where The year. leverage and and engagement. don't delivery this assessment, technologies been beyond exists along focused areas those sales capacity sustain revenue particularly new growth such system remainder additions consultant believe stable at as warrant, talent the we expect intelligent productivity to

us for model, and service business simplified has portfolio Our offerings positioned long-term client well growth. focused

by recognition reputational highest Industry as and our Promoter among brand by Score as ranking Staffing yielding Glassdoor's Net from brand results, #X rating clients, consultants, world-class of is focus recognized demonstrated competitors. IT our narrowed Kforce the and most Our Analysts' a

the the and call turn candidates team's have our and in provide and in will Chief clients Kelly, operating to I insights trends our effort appreciate Kforce Dave now placed forward. over Kforce's additional trust driving expectations. Dave? who I on the will Officer, firm Financial

Dave Kelly

you, Joe. Thank

Further continuing $X.XX. and completed earnings sale will effective discontinued during the quarter, KGS from from our results per exclusively businesses. otherwise the noted. results the of quarter through gains second As operations unless in on from the these previously sale The in the focus TraumaFX transactions resulted and businesses date operating on Kforce of of the the share noted, operations second commentary

earnings $XXX.X $X.XX, of quarter and million the Revenues over increase an per year, in share X.X% over were which XX% grew year. year of is year

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

result declined XX.X% with compressed, for Flex. have basis as profile than our points Tech growing year overall spreads larger sequentially. margin success of slightly of year, Flex Tech margins have though which the year, a spreads stable XX Flex Tech primarily over a revenue Year lower over were our clients in average

This to will be expect our more include As create discounts slight likely overall we largest margins declines clients. look clients. deeply to penetrate tiered flex pricing volume we since the existing continue greater in our for structures typically future, our at to

this and scale to operating efficient infrastructure believe that is associates margins operating allows be slightly flex and lower at we support individual margins. even strategy current greater to as accretive However, profitability clients drive margins, will our benefit as more

well diversified. portfolio overall Our is

X.X% risk growth year our will the declined represent expenses percentage XX% over enterprise of not XX points by represents as unduly year. a a revenue revenues, single to revenues. of of of largest and create No clients total only SG&A Significant overall. than client basis more single total XX client

We continue to in generating expand. make leverage SG&A as revenues progress

increasing while achieved our been significantly has leverage This investments. technology also

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

quarter, at the line X.X% in with In operating of was expectations margin revenue these second our levels.

flex hire percentage cycle, has spreads. our declined basis our gross approximately due the and decline points compression in economic this a profit direct XXX by to in percentage of business During

XXX client compression, improved more infrastructure approximately efforts clients. our in our efficiency base success Despite relationships to serving by in our of while margins this deepen operating which reflects to basis optimize larger, points the these have aligning existing complex

operations effective than was which operations rate foreign sold expected tax XX.X%, was due was from taxes treatment continuing a our XXXX. the which in change to in Philippine second Our of in quarter slightly to the lower attributable

proceeds net net Our the cash flows, to from of cash allowed These with business continues the X with TraumaFX, of flows. KGS $XXX to drive approximately the us debt. the quarter in and significant repurchase million operating quarter sale of zero shares coupled stock million exit and

better our and activity balance in end and expect the repurchase we sheet, to stock. the healthy quarter strength and of us was on The strategic operating strategic the of execute tuck-in ventures substantially other than cash we remaining to flexibility aggressively year. had repurchasing maximum now credit or partnerships, The quickly flows proceeds facility the by deploy $XXX anticipated, million acquisitions provide or while even

in XX.X Actual outstanding volume. a approximately outstanding given current million I shares activity, approximately This could QX for of QX at results, expect expected stock in repurchase average we current vary weighted would the price weighted XXXX levels. in assumes of upon wanted and provide course, shares QX sense trend you Based XX.X of could price million significantly our of upon of depending to million and expectations. the QX and average how X.X QX. remainder repurchase diluted shares

XX to as respect be Our XXXX. we to billing $X.XX more than $XXX third share guidance continuing revenues of days the the is per million are is days $X.XX. third in for range quarter, X operations, for which earnings the million QX and and expect the QX quarter $XXX and in day of between same be to With to

be X.X% margins Flex are of be revenue between are to XX.X XX%. a and XX.X% while Weighted QX. And diluted percentage be to expected is margins and should XX.X% to margins be between SG&A operating as XX.X%. expected average as mentioned, in million X.X%. I and expected shares to expected Gross between are XX.X% outstanding, approximately be between XX.X%, and

is than $X.XX is and guidance our other income share, essentially a in Included XX.X%. related of in impact into quarterly we between statement the quarter. rate the anticipated lower losses joint of of line previously tax per a by of increase venture share our late of expense in an second anticipated This offset $X.XX the entered to effective

consider items, in future any or of pending any The if or or any, to guidance towards on or the legal related regulatory, revenues response onetime firm's charges matters, related government legal to changes. impact costs tax of charges funding disruption does tax law not the any effect, the

We about our our in of business committed our by operating and prospects execution in the remain successful focus improve to processes our excited to with margin and greatest are our our and teams pleased economy We objectives. need the technology. to areas

have work growth still are take a foundation rates profitability. we strong of revenue While do, and to improving our poised while advantage to market we to sustain exceptional above-market

we'll now Summer, floor for the questions. open

Operator

[Operator Instructions].

Your of first Sommer question SunTrust. comes from Tobey

Tobey Sommer

core of use What of staff your of customers mentioned is customers? room penetration increased sort your something Dave, among you within you you to think target kind there increased of about. for do flexible talking they're

Joe Liberatore

I'm Yes, days past, of then unlike of I what's a very to consistently it they flexibility variety meet out is think challenging driving Tobey, for obviously, Joe. demand, it a higher provides say, you I lot being targeted are changes, that do clients, I'd the handled. I standpoint. to and find with just being population the of hear percentage how projects flex the the reasons. One, with the And workforce this technology of this a overall and the a resources lot has full-time clients for of is for a them really mean want. a from And of lot

thing, And help conversion we've second into a the have organizations. getting people people much where we're good our gives the as organization. credit us or the for seen historically match with been half they're making along. talent So were to least projects cycle the inside get better versus this moving cycle again, the consistently we're higher, that view which I in on of the part at bringing of because It they rates

from increased demand So, that standpoint. we're only seeing

Tobey Sommer

Great.

you're How lengthening. You that mentioned historic of versus orders in assignment also from so tendency norms? customers could getting there further? sort frame durations is And would duration elongate new you a that the

David Dunkel

something of Yes. even in It was performing But mentioned what log, comments I at the with on look has to type work we we're if the my the of part of do another pure nature staff just shift duration. fundamental limits years so the XXX side. tech at for and business last what is heard tenure I'm standpoint I've on flexible large, reevaluating are seen I've co-employment never around the Fortune XX companies, from that being many the a talking their

organizations expand So we've that. seen

company tenure I fact, a was that Fortune In XXX has a XX-month limit. just out with

somebody so And that exit them. to evaluating XX to they're to they going if the they're months. process having by in take the of or And time they're get ramped up, XX

So think that's big I of a piece playing it.

that talent exists. to because isn't talent slowing comes of back versus great imbalance are all down. to people And perform this still when side to work on of they're getting talent the the that the demand wanting duties, hold that mean, I the can the

Tobey Sommer

queue. bit expense? in you little as get give you a question the Last me, back cited other I'll from that Could on of color the bit and us of a incurring JV little Okay.

Dave Kelly

Sure, a This Dave we've Kelly level, at business just Yes. our talked to proposition. high technology our Tobey. expand opportunities investments and so and is enhance looking about at and

staffing the in staffing applicant-facing that products broad overall is pretty venture from briefly the so nice entity and an joint within to the industry engagement, spectrum, mobile a through again technology provides aspects critical from aid to a just So tool, tool. identification really really process

Tobey Sommer

much. very you Thank

Operator

of next McHugh William comes from Your Blair. question Tim

Trevor Romeo

morning. Good

for Tim You've in got actually today. Trevor Romeo

a relationships to know compared well-entrenched that, have that may ones don't you slower bit have caused growth for you I where on established was quarter this the relationships. thoughts that? First, fully any clients that have Do said you have what

Joe Liberatore

I Industry think, Yes. year. Supply it's Joe. Really market in I demand the entered what's of space, is This last think it driving have competitors mean, amount balance, I Staffing is, that reported forces. the the Analysts being that

doubled come And very larger relationships, shops, have many typically also these deep. competitive local While relationships their would size, very are those has of the competitors that out in so consider landscape the and has have started they who organizations the doubled. own organizations narrowed space we of but

we're highly business, retail more the market there really consider fight. when would the competitive. or So in It's it's nice one local what a

It's the where majority the the exist, then of and entrenched local competitors they're market. in well

two instances, have So to of our in people And in XX people many have to that that competing we'll business. this or with maybe people work have that harder industry years. XX a experience, lot industry and been for they're win XX, years have

our and brand of exposure. our our in just internally experience differential to people think terms that capabilities I So balance help and

yield bit same outcome But QX. at little ala a been the more higher, yield placement. We market always really to a our a saw meaning it level has that in effort the little requires expand bit

just it's wanted It wouldn't we just out as could say time, a recover to a that be trend quarter. in blip, call at in we this but point that I the

David Dunkel

would Joe's Yes. add to I comment.

that As we very look sustain but those growing at when the favorable rate, clients large segmentation, we do our overall clients average those just demand, business the levels. growth really excess to in of very, that see ratios well we continue think we for the demand, about client at with,

terms So of this those our is a of I dynamic, the relationship size in think, and clients.

Trevor Romeo

mentioned sense. technology makes fit That then acquisitions that you looking it. offerings. you're that niche providers for got your also at And Okay, solution

on types consulting you guess? of services Or for for there types managed primarily staff just augmentation I of those of So provide solutions? companies, are are or more can sort looking you focused staff that

Joe Liberatore

what are advanced where plug can the for is. organizations our really client into value demand up chain really focus services ladders really the that is, Yes. we more our Trevor, our are that offerings these those

Operator

Instructions]. [Operator

John comes of from Research. Northcoast Healy question next Your

John Healy

ask that's to Just F&A there. was wanted could that little the more to Or maybe business being And And the just like not that business. into be green could the to maybe you some turns understand again? something F&A the that, growth something business of that's we see, we would cycle understand but next a of about not before pressures Clearly, occur for get bit think framework? mode. what done waiting are to can we done do what kind that likely hoping in current

Joe Liberatore

coming spent we've think a to prior really It mean some Yes. unique other we footprint centers. the that be our you Kforce-specific And got through look I that of recruiting because amount dynamic. are a and And announced a market volume, changes is This deliver happens rev was the at has of things just those of in been marketplaces. our balance this a on national in of the shifted those there's see out into of other happened number space. to those centers, where revenue lot lower of of have time terms on skilled This out dynamic. roles when I can some And is publicly our cycle call and that of not areas, calls. in competitors how that to high that FA capability you performing various

some of of has of of disintermediation changed Some some of technology and dynamics. it, that the it, certain with competitive just space the replacement of then skills,

us what It's is and business right would just on going skills It's doing upstream into I one time. the space strategy of I to going The there. on just core nice So job our the back team of, repositioning strategy. believe not more us take is away. focusing our consider FA a moving is those

John Healy

out wanted you from to. the of And And try level? XX% little the and and to do maybe get of developments laid you managed M&A any to topic to opportunity. that know kind over next the in years maybe important of Do a that need the quarter? process few to to ascribe happened about last kind that call, you. bogey have on I Got I ask bit services

Dave Kelly

a at existing mostly when But, so have Dave a within pretty No. said to have pretty, as believe where when really as our more that get little yes, I had five-year that mentioned, upstream presented When front. pretty just of bit so models, ourselves. that what we had out, I and much organically. clear, we're we're was, five-year years, was mean, couple ahead wins, relationships don't think now continuing objective to that run that we go objective, the strong that to clients because opportunity to on put of we I a we can David we we want you accomplish ourselves our look

Kforce, that of will within and opportunities bring maybe fit the right a look we're the that strategic, selective some But will for breadth fit service and within doing. things offerings we accelerate greater

I fall an into for lot dovetail So we're pieces strategically. and fishing to going a of narrow make fit very it or the because pond just to really a it is We're acquisition should in sense. small a have place not where acquisition's say going we're going to do to in that make have It's to sake.

John Healy

Great. Thank you, guys.

Operator

I'll time, turn further questions. no At there this it for closing remarks. over are

Michael Blackman

clients Well, the thank we to for privilege Kforce. And very field always much. and say corporate for you thank support would and interest of and our every serving I our and have while each our to more like us and allowing member to to consultants you Thank do, of much it. teams of your you

Operator

today’s conference. This concludes

disconnect. may You now

Kforce (KFRC) 3 Aug 192019 Q2 Earnings call transcript