KFRC 10-K & 10-Q changes, risk factors and insider trading
Kforce Inc. · NYSE · Services-Help Supply Services · CIK 930420 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Our business depends on client demand for our solutions and services, including evolving our solutions and services in response to continued changes in technology.”
Largest changes
“Our business depends on client demand for our solutions and services, including evolving our solutions and services in response to continued changes in technology.”see in full comparison
“As a result, we may be unable to anticipate these incidents or techniques, timely discover them or implement adequate preventative measures. …”see in full comparison
We are continuously exposed to unauthorized attempts to compromise sensitive information from network or information technology used by our associates and consultants. Attacks on information technology systems continue to grow in frequency and sophistication. These attacks include, but are not limited to, attempts to gain unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data or causing operational disruption. While we have policies, procedures and systems in place to prevent, deter and detect cyberattacks or security incidents, and, although, to our knowledge we have not experienced a material data breachsee in full comparisonas ofat the date of this report, we remain vulnerable to sophisticated techniques used to obtain unauthorized access, or cause system interruption, that change frequently and may not produce immediate signs of intrusion.As a result, we may be unable to anticipate these incidents or techniques, timely discover them or implement adequate preventative measures. Any cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, corruption of data, misuse or theft of private or other sensitive information, or inadvertent acts by our associates, consultants or third-party independent contractors, could result in the disclosure or misuse of confidential or proprietary information, and could adversely impact our systems, services, operations, financial results and reputation with clients and potential clients.
“Our financial results depend, at least in part, on the level of demand for our solutions and services, which could be negatively affected by numerous factors. Our success depends, at least in part, on our ability to evolve our solutions and services in response to rapid and continuing changes in technologies and addressing the impact of those changes on client demand. …”see in full comparison
“While historic evolutions of technologies, such as those described above, have created incremental demand, significant declines in demand, or our inability to address the evolving nature of technology, could materially affect our results of operations.”see in full comparison
Kforce is subject to periodic federal, state and local tax audits for various tax years. We are also required to comply with new, evolving or revised tax laws and regulations. The Tax Cuts and Jobssee in full comparisonAct,Act (the “TCJA”), enacted in December 2017, provided a significant reduction in the corporate tax rate. Although many provisions of thecurrentTCJAadministrationweremay extend these tax cuts, there is no assurance that these tax cuts will bepermanently extendedandby the One Big Beautiful Bill Act, other key aspects of the tax code may be modified, which could have a material adverse effect on our tax obligations and effective tax rate. Although Kforce attempts to comply with all taxing authority regulations, adverse findings or assessments made by taxing authorities as the result of an audit could have a material adverse effect on Kforce.
Full comparison: every changed paragraph (19)
Our business depends on client demand for our solutions and services, including evolving our solutions and services in response to continued changes in technology.
Our financial results depend, at least in part, on the level of demand for our solutions and services, which could be negatively affected by numerous factors. Our success depends, at least in part, on our ability to evolve our solutions and services in response to rapid and continuing changes in technologies and addressing the impact of those changes on client demand. Examples of areas of significant technological change have included the migration from mainframe to distributed processing, the emergence of the internet, the mobile revolution, the move to cloud computing, and more recently, advanced AI, which includes derivative offshoots such as generative, agentic and physical AI, among others.
While historic evolutions of technologies, such as those described above, have created incremental demand, significant declines in demand, or our inability to address the evolving nature of technology, could materially affect our results of operations.
We primarily provide services to Fortune 500 and other similarly sized companies, whichand this strategy is intended to provide relative durability to our revenue stream during adverse economic environments and enable us to grow our revenues more profitably. However, it also creates the potential for concentrating a significant portion of our revenues among our largest clients and exposes us to increased risks arising from decreases in the volume of business from, the pricing of business with, or the possible loss of business,business with these clients. Organizational changes occurring within those clients, a deterioration of their financial condition or business prospects, or a change in their business strategies could reduce their need for our services and result in a significant decrease in the revenues we derive from those clients, which could have a material adverse effect on our financial results.
The staffing servicesand marketsolutions ismarkets are highly competitive with limited barriers to entry. The competition among staffing and solutions companies is intense and we face significant competition in the markets we serve. We compete in national, regional and local markets with full-service and specialized temporary staffing and consulting companies. Additionally, the emergence and popularity of online staffing platforms as well as internal recruiting functions used by some clients as an alternative, may pose a competitive threat to our services. Some of our competitors possess substantially greater resources than we do and others may develop new and unique technologies, which may better position these competitors in certain markets. As a result, we may face increased competitive pricing pressures. We also face the risk that certain of our current and prospective clients will decide to provide similar services internally. Furthermore, many clients are retaining third parties to provide vendor management services, which may subject us to greater risks or lower margins. Decreases in market share could have a material adverse effect on our business, financial condition and operating results.
We have been and expect to continue allocating significant investments (and the attention of executive management and many of our leaders and associates) towards our strategic priorities, including our back-officetechnological transformation programand involvingefforts theto implementation ofimplement Workday, integrated strategy, driving our strategy through leverage of AI, and the evolution of our nearshore and offshore capability, including the establishment and maturity of our India development center in Pune, India. These strategic priorities are expected to enhance the support and experience of our clients, consultants and candidates, contribute to the attainment of our long-termlonger-term profitability objectives and generate significant shareholder value.
New business strategies and initiatives, such as these, can be distracting to our management team and associates, and can also be disruptive to our operations. New business initiatives could also involve significant unanticipated challenges and risks, including, but not limited to: not advancing our business strategy; not realizing the expected return on the investment; experiencing difficulty in implementing initiatives, new processes and internal controls; or diverting management’s attention from our other businesses.business. New business initiatives and strategic changes in the composition of our business mix could be disruptive to our operations, which could have a material adverse effect on our business, financial condition and operating results.
We continue to evolve our nearshore and offshore capabilities to further enhance our service offerings to our clients by engaging with nearshore and offshore third-party suppliers. We are reliant upon our third-party suppliers’ compliance with applicable laws and contractual obligations. We also recently expanded our offshore capabilities to include aKnowledgeforce development centerIndia in Pune, India to enhance our service offerings to our clients. Additional risks related to our nearshore and offshore capabilities include: difficulties staffing and managing foreign operations; exposure to changes in economic and geopolitical and business conditions; compliance with foreign laws and regulations; foreign tax rates; and fluctuations in foreign currency exchange rates and tax compliance. If we are unable to successfully control or predict these risks, it could have a material adverse effect on our business, financial condition and operating results.
Kforce depends upon its ability to attract and retain consultants and candidates, particularly in technology disciplines, who possess the skills and experience necessary to meet the requirements of our clients. We must continually evaluate and upgrade our methods of attracting highly qualified consultants and candidates to keep pace with changing client needs and emergingevolutions in technologies. We expect significant competition for individuals with proven technical or professional skills to continue or increase for the foreseeable future given the scarcity of highly skilled consultants and candidates, especially in our Technology business. If qualified individuals are not available to us in sufficient numbers and upon economic terms acceptable to us, it could have a material adverse effect on our business.
RiskRisks Related to Cybersecurity and Technology
We are continuously exposed to unauthorized attempts to compromise sensitive information from network or information technology used by our associates and consultants. Attacks on information technology systems continue to grow in frequency and sophistication. These attacks include, but are not limited to, attempts to gain unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data or causing operational disruption. While we have policies, procedures and systems in place to prevent, deter and detect cyberattacks or security incidents, and, although, to our knowledge we have not experienced a material data breach as ofat the date of this report, we remain vulnerable to sophisticated techniques used to obtain unauthorized access, or cause system interruption, that change frequently and may not produce immediate signs of intrusion. As a result, we may be unable to anticipate these incidents or techniques, timely discover them or implement adequate preventative measures. Any cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, corruption of data, misuse or theft of private or other sensitive information, or inadvertent acts by our associates, consultants or third-party independent contractors, could result in the disclosure or misuse of confidential or proprietary information, and could adversely impact our systems, services, operations, financial results and reputation with clients and potential clients.
As a result, we may be unable to anticipate these incidents or techniques, timely discover them or implement adequate preventative measures. Any cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, corruption of data, misuse or theft of private or other sensitive information, or inadvertent acts by our associates, consultants or third-party independent contractors, could result in the disclosure or misuse of confidential or proprietary information, and could adversely impact our systems, services, operations, financial results and reputation with clients and potential clients.
The collection, possession and use of personal information and data in conducting our business subjects us to legislative and regulatory burdens and compliance risk. Other results of these incidents could include, but are not limited to, increased cybersecurity protection costs, litigation, regulatory penalties, monetary damages and reputational damage adversely affecting client or investor confidence. We may be required to incur significant expenses to comply with mandatory privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations. We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses suffered as a result of a breach of our systems or information. Our information technology may not provide sufficient protection, and as a result we may lose significant information about us, our employees, candidates, consultants, vendors,vendors or clients.
Our Technology business utilizes a significant number of foreign nationals (that are already working in the U.S.) employed by us on work visas, primarily under the H-1B visa classification. While Kforce engages persons with multiple types of legal work authorizations and visas, the H-1B visa is of particular use in our industry and enables U.S. employers to hire qualified foreign nationals, subject to legislative and administrative changes, as well as changes in the application of standards and enforcement. Immigration laws and regulations can be significantly affected by changes in administration (including the most recent change), other political developments and levels of economic activity. Current and future restrictions on the availability of such work visas or escalating costs of utilizing foreign nationals could restrain our ability to employ the skilled professionals we need to meet our clients’ needs, which could have a material adverse effect on our business.
Kforce is subject to periodic federal, state and local tax audits for various tax years. We are also required to comply with new, evolving or revised tax laws and regulations. The Tax Cuts and Jobs Act,Act (the “TCJA”), enacted in December 2017, provided a significant reduction in the corporate tax rate. Although many provisions of the currentTCJA administrationwere may extend these tax cuts, there is no assurance that these tax cuts will bepermanently extended andby the One Big Beautiful Bill Act, other key aspects of the tax code may be modified, which could have a material adverse effect on our tax obligations and effective tax rate. Although Kforce attempts to comply with all taxing authority regulations, adverse findings or assessments made by taxing authorities as the result of an audit could have a material adverse effect on Kforce.
Kforce’s articles of incorporation and bylaws and Florida law contain provisions that may have the effect of inhibiting a non-negotiated merger or other business combination. In particular, our articles of incorporation provide for staggered Board of Directors (the “Board”) terms and permit the removal of directors only for cause. Additionally, the Board may issue up to 15 million shares of preferred stock, and fix the rights and preferences thereof, without a further vote of the shareholders. In addition, certain of our officers and managers have employment agreements containing certain provisions that call for substantial payments to be made to such employees in certain circumstances after a change in control. Some or all of these provisions may discourage a future acquisition of Kforce, including an acquisition in which shareholders might otherwise receive a premium for their shares. As a result, shareholders who might desire to participate in such a transaction may not have the opportunity to do so. Moreover, the existence of these provisions could negatively impact the market price of our common stock.
The market price of our stock has fluctuated substantially in the past and could fluctuate substantially in the future based on a variety of factors, including our operating results, changes in general conditions in the economy, the financial markets, the staffing industry,and solutions industries, belief by investors in the disruptive nature of technology on our business, a decrease in our outstanding shares or other developments affecting us, our clients, or our competitors; some of which may be unrelated to our performance.
In addition, the stock market in general, along with market prices for staffing and solutions companies, has experienced historical volatility that has often been unrelated to the operating performance of these companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating results.
Companies across many industries are facing increasing scrutiny related to their ESG practices. Investor advocacy groups, certain institutional investors and other influential investors and regulators suchcontinue asto the SEC, among others, are increasinglybe focused on ESG practices and, in recent years,and have placed increasingincreased importance on the non-financial impacts of their investments. The increased scrutiny by these constituencies has also resulted in several of our clients requiring us to adhere to their internal corporate commitments regarding ESG matters. Furthermore, increased public awareness and concern regarding environmental risks, including global climate change, may result in increased public scrutiny of our business and our industry. If environmental laws or regulations, industry standards or client requirements are either changed or adopted and impose significant operational and compliance requirements on our operations, our business, results of operations, financial condition and competitive position could be negatively impacted. Additionally, uncharacteristic or significant weather conditions may increase in frequency or severity due to climate change and can affect travel and the ability of businesses to remain open, which could lead to decreased ability to offer our services and negatively affect our results of operations.
Management's Discussion & Analysis (MD&A)
Largest changes
“The political landscape in the U.S. remains unclear, particularly in relation to the impacts of the potential policy changes from the new administration. Geopolitical risks persist, including uncertainty in the Middle East and global supply chain disruptions. Despite these challenges, the U.S. economy demonstrated consistent growth in 2024, with real GDP expanding at 2.8%, largely driven by increased government spending and a healthy consumer. …”see in full comparison
“While early 2025 began with optimism around U.S. economic growth and increased investment in technology initiatives, the macro environment remained challenging throughout the year, with significant disruption beginning in April 2025 as a result of global trade policy negotiations and the labor market data continuing to reflect a persistently weak and largely frozen hiring landscape characterized by prolonged stagnation in job gains. …”see in full comparison
Adjusted EBITDA. “Adjustedsee in full comparisonEBITDAEBITDA,”,a non-GAAP financial measure, is defined by Kforce as net income before depreciation and amortization; stock-based compensation expense; interest expense, net; income tax expense; organizational realignment activities; legal settlement expense; loss from equity method investment;reserve associated with the note receivable issued to our joint venture; impairment of equity method investment;andgainotherfromnon-recurringtermination of interest rate swap.expenses. 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.
Onsee in full comparisonOctoberNovember20,5,2021,2025, the Firm entered intoanaAmendedsenior secured credit facility with Bank of America, N.A., as administrative andRestatedcollateral agent, BofA Securities, Inc. and PNC Capital Markets LLC as joint lead arrangers, BofA Securities, Inc. as bookrunner and the lenders referred to therein (the “Credit Facility”). Under the Credit Facility,whichthe Firm has a maximum borrowing capacity of $200.0 million, which includes a $10.0 million sublimit for the issuance of standby and commercial letters and $10.0 million sublimit for swingline loans, and may, subject to certain conditions and the participation of the lenders,maybe increased up to an aggregate additional amount of $150.0 million.As ofAt December 31,2024,2025,$32.7$66.4 million was outstanding and$166.3$132.5 million, net of$1.0$1.1 million in letters of credit outstanding, was available underthe Amended and Restatedour Credit Facility.As ofAt December 31, 2024, $32.7 million was outstanding under our prior credit facility. At December 31, 2025, we were in compliance with all of our financialcovenants.covenants under the Credit Facility. Refer to Note 12 – “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data for further details on the Credit Facility.
“•Selling, General and Administrative (“SG&A”) expenses as a percentage of revenue for the year ended December 31, 2025, increased to 23.0% from 22.0% in 2024, primarily driven by the declines in revenue and gross profit. In the fourth quarter of 2025, we recognized charges of $3.4 million related to refinements in our organizational structure and other non-recurring costs, which negatively impacted earnings per share for the fourth quarter of 2025 and fiscal 2025 by $0.13, net of the related tax effect.”see in full comparison
To meet our capital and liquidity requirements, we primarily rely on operating cashsee in full comparisonflow,flows, as well as borrowings under ourcreditCreditfacility.Facility (as defined below). At December 31,20242025 and2023,2024, we had$32.7$66.4 million and$41.6$32.7 million outstanding under ourAmended and RestatedCredit Facility, respectively, and the borrowing availability was$166.3$132.5 million and$157.2$166.3 million, respectively, subject to certain covenants. At December 31,2024,2025, Kforce had$112.9$88.5 million in working capital compared to$141.5$112.9 million at December 31,2023.2024.
Full comparison: every changed paragraph (60)
The following is an executive summary of what Kforce believes are highlights for 2024,the year ended December 31, 2025, which should be considered in the context of the additional discussions herein and in conjunction with the consolidated financial statements and notes thereto.
•Revenue for the year ended December 31, 2025 decreased 5.4% (5.1% on a billing day basis) to $1.33 billion in 2025 from $1.41 billion in 2024. Revenue decreased 4.8% (4.5% on a billing day basis) and 12.3% (11.9% on a billing day basis) for Technology and FA, respectively, in 2025, primarily driven by decreases in consultants on assignment. We believe these decreases are primarily related to macroeconomic uncertainties and the natural impacts of the early phases of significant technology evolutions (such as AI) as companies assess the implications on their businesses and their investment strategies.
•Flex revenue decreased 5.3% (4.9% on a billing day basis) to $1.30 billion in 2025 from $1.38 billion in 2024. In 2025, Flex revenue decreased 4.7% (4.4% on a billing day basis) for Technology and 12.8% (12.5% on a billing day basis) for FA. Notably, Tech Flex revenue decreased 0.2% sequentially (increased 3.0% on a billing day basis), and FA Flex revenue improved sequentially 2.4% (5.7% on a billing day basis) in the fourth quarter 2025. For our FA business, this represented the third consecutive quarter of sequential improvement, primarily due to, in our opinion, the benefits of a realignment in early 2025 intended to bring a greater intensity and focus on our FA business.
•Revenue for the year ended December 31, 2024 decreased 8.3% to $1.41 billion in 2024 from $1.53 billion in 2023. Revenue decreased 6.6% and 23.5% for Technology and FA, respectively, in 2024, primarily driven by the ongoing macroeconomic uncertainty.
•Flex revenue decreased 7.9% to $1.38 billion (8.6% on a billing day basis) in 2024 from $1.49 billion in 2023. In 2024, Flex revenue decreased 6.4% for Technology (7.1% on a billing day basis) and decreased 23.5% for FA (24.1% on a billing day basis). These decreases were driven by a decline in the number of consultants on assignment.
•Gross profit margin decreased 5020 basis points to 27.2% in 2025 from 27.4% in 2024 from 27.9% in 2023,2024, primarily asdriven a result ofby a decline in the mix of Direct Hire revenue.
•Flex gross profit margin decreased 10 basis points to 25.9%25.8% for 20242025 from 26.0%25.9% in 2023.2024. Flex gross profit margin remaineddecreased flat10 basis points for Technology and decreased 80 basis points for FA in 20242025 as compared to 2023.2024. TheNotably, decreaseour Flex gross profit margin increased 40 basis points in FAour wasTechnology primarilybusiness drivenin bythe afourth greater mixquarter of lower2025 marginas projects.compared to the same period in 2024.
•Selling, General and Administrative (“SG&A”) expenses as a percentage of revenue for the year ended December 31, 2025, increased to 23.0% from 22.0% in 2024, primarily driven by the declines in revenue and gross profit. In the fourth quarter of 2025, we recognized charges of $3.4 million related to refinements in our organizational structure and other non-recurring costs, which negatively impacted earnings per share for the fourth quarter of 2025 and fiscal 2025 by $0.13, net of the related tax effect.
•Selling, General and Administrative (“SG&A”) expenses as a percentage of revenue for the year ended December 31, 2024, increased slightly to 22.0% from 21.9% in 2023.
•Net income for the year ended December 31, 2024,2025, decreased 17.5%30.9% to $34.8 million, or $1.96 diluted earnings per share, from $50.4 million, or $2.68 perdiluted share, from $61.1 million, or $3.13earnings per share, in 2023.2024.
•The Firm returned $64.7$76.0 million of capital to our shareholders in the form of open market repurchases totaling $36.5$48.5 million, or 0.61.2 million shares, and quarterly dividends totaling $28.2$27.5 million during the year ended December 31, 2024.2025. The total capital returned to shareholders in 20242025 represented approximatelyover 75%100% of operating cash flows.
•Cash provided by operating activities was $61.6 million during the year ended December 31, 2025, as compared to $86.9 million for 2024. The decrease was primarily related to lower profitability levels, higher capitalized implementation costs related to cloud computing arrangements for Workday, and the payment of 2024 federal income taxes that were deferred pursuant to IRS guidance.
•Cash provided by operating activities was $86.9 million during the year ended December 31, 2024, as compared to $91.5 million for 2023.
While early 2025 began with optimism around U.S. economic growth and increased investment in technology initiatives, the macro environment remained challenging throughout the year, with significant disruption beginning in April 2025 as a result of global trade policy negotiations and the labor market data continuing to reflect a persistently weak and largely frozen hiring landscape characterized by prolonged stagnation in job gains. We believe the relative impact of AI on revenue trends and the effects of a fairly soft economy and weak labor market has created uncertainty, leading many organizations to proceed cautiously in their strategic planning and near‑term technology investments. Despite these conditions, our recent operating trends, combined with our historical experience, give us confidence that companies typically turn to flexible talent solutions as an initial step prior to making permanent hires while they assess the durability of the macro environment. The potential use of flexible talent solutions may be further influenced by the growing belief that the returns that will be generated from continuing AI investments may take longer to realize and may be more specific in nature to unique business problems rather than an overarching solution to all technology challenges. Although client conversations and broader market signals reaffirm that we are still operating in a demand‑constrained environment, our results in the fourth quarter of 2025 and the relatively stronger start to 2026 suggest greater confidence in the operating environment heading into 2026. We believe clients have maintained a meaningful backlog of strategically essential technology initiatives that they expect to advance once confidence in the macroeconomic outlook improves and their technology roadmaps are better defined.
Our performance continued to be adversely affected by the ongoing macroeconomic uncertainty, which resulted in our clients being more cautious with the level of investment in their digital transformation efforts. With that said, our Technology business was largely stable throughout 2024 as indicated by our sequential billing day growth in both the second and fourth quarters of 2024 with a slight sequential decline in the third quarter. Against the backdrop of revenue declines, we continued to manage down our overall headcount levels, especially in our delivery roles, and tightly control spend levels in order to mitigate the pressure on profitability from the lower revenue and gross margin levels.
The political landscape in the U.S. remains unclear, particularly in relation to the impacts of the potential policy changes from the new administration. Geopolitical risks persist, including uncertainty in the Middle East and global supply chain disruptions. Despite these challenges, the U.S. economy demonstrated consistent growth in 2024, with real GDP expanding at 2.8%, largely driven by increased government spending and a healthy consumer. Although the unemployment rate rose to 4.1% in December 2024 from 3.7% in December 2023, employment grew across most sectors in the final quarter of 2024. Additionally, the Federal Reserve cut interest rates by a total of 100 basis points in late 2024, but the prospects for further interest rate cuts in 2025 appear less certain with inflation being a bit stickier and the labor markets continuing to show signs of strength.
The following table presents certain items in our Consolidated Statements of Operations and Comprehensive Income as a percentage of revenue for the years ended:
Flex revenue for our Technology business decreased 6.4%4.7% (7.1%4.4% peron a billing day basis) during the year ended December 31, 2024,2025, as compared to the same period in 2023,2024, primarily due to a decrease in the number of consultants on assignment.assignment, Thewhich we believe is primarily related to macroeconomic uncertainties. Our average Technology bill rate was approximately $90 per hour for 2024,the year ended December 31, 2025, which remained flat as compared to 2023.2024. Notably, Flex revenues in our Technology business in the fourth quarter of 2025 improved 3.0% sequentially on a billing day basis. In the first quarter of 2025,2026, we expect Technology Flex revenue to decline sequentiallydecrease on a sequential billing day basis in the low single digits due to mid-singlenormal digits, at a level that is largely consistent with pre-pandemic levelsseasonality and inslightly thedecline lowon single digitsa year over year.year basis.
Our FA business experienced a decrease in Flex revenue of 23.5%12.8% (24.1%12.5% peron a billing day basis) during the year ended December 31, 2024,2025, as compared to the same period in 2023,2024, primarily driven by a decrease in consultants on assignment, which we believe is primarily related to macroeconomic uncertainties. Notably, FA Flex revenue improved sequentially 2.4% (5.7% on a billing day basis) in the numberfourth quarter, representing the third consecutive quarter of sequential improvement, primarily due to more consultants on assignment. Our average FA bill rate ofwas $51approximately $53 per hour for the year ended December 31, 20242025, waswhich upimproved slightly3.9% onas acompared year-over-yearto basis.2024. In the first quarter of 2025,2026, we expect FA Flex revenue to decline sequentially on a billing day basis in the low doublemid-single digits followingand greaterto thanincrease expectedin year-endthe assignmentmid ends.to high single digits year over year.
Direct Hire revenue decreased 24.0%11.1% during the year ended December 31, 2024,2025, as compared to the same period in 2023,2024, primarily driven by a decrease in placements.placements, Wepartially offset by an increase in placement fees. In the first quarter of 2026, we expect Direct Hire revenue to beremain stable in the first quarter of 2025 year over year.sequentially.
The following table presents the gross profit (gross profit as a percentage of total revenue) by segment and percentage change over the prior period:
Total gross profit percentage decreased 5020 basis points for the year ended December 31, 2024,2025, as compared to the same period in 2023,2024, primarily asdriven a result ofby a decline in the mix of Direct Hire revenue.
The Flex gross profit percentage (Flex gross profit as a percentage of Flex revenue) provides management with helpful insight into the other drivers of total gross profit percentage driven by our Flex businessbusiness, 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.
•Technology Flex gross profit margins remained stable at 25.7% for the year ended December 31, 2024, as compared to the same period in 2023. The impact from a tighter pricing environment in 2023 that carried over into 2024 was offset by lower healthcare costs. Overall bill and pay spreads in our Technology business were largely stable throughout 2024 with a slight improvement in the second half of 2024. We expect Technology Flex gross profit margins for the first quarter of 2025 to remain stable year over year.
•FATechnology Flex gross profit margins decreased 8010 basis points for the year ended December 31, 2024,2025, as compared to the same period in 2023,2024. primarilyNotably, driven by a greater mix of lower margin projects, which was partially offset by lower healthcare costs. As a result of this mix, we expect FATechnology Flex gross profit margins forimproved 40 basis points in the fourth quarter of 2025 on a year-over-year basis. In the first quarter of 20252026, we expect Technology Flex gross profit margins to bedecline downsequentially onas a year-over-yearresult basis.of seasonal payroll tax resets.
•FA Flex gross profit margins decreased 80 basis points for the year ended December 31, 2025, as compared to the same period in 2024, primarily driven by changes in our client portfolio mix. In the first quarter of 2026, we expect FA Flex gross profit margins to decline sequentially as a result of seasonal payroll tax resets.
For compensation and related expenses, we have experiencedbeen experiencing a degree of SG&A deleverage as compared to 2023,deleveraging as we continuedcontinue to make investments in our strategic priorities and toalso retain our most productive associates to strategically position the Firm to capture an increased market share when the demand environment eventually improves. To mitigate the pressure on our profitability levels from the revenue and gross profit declines, we havecontinue takento certaintake actions to align our costs suchwith asrevenue levels and productivity expectations and also continue to exercise tight discretionary spend control and decreases in personnel, specifically within our delivery capabilities.control.
The decrease in Other SG&A expenses was primarily attributable to lower professional fees pertaining to the settlement of legal claims in 2023.
We continue to prioritize investments in our strategic initiatives, including the implementation of Workday as part of our back-office transformation program, integrated strategy efforts, and the evolution of our nearshore and offshore delivery capabilities. We expect to continue exercising tight discretionary spend controlcapabilities, and balancedriving productivityour levels.strategy through leverage of AI.
Other Expense, Net. Other expense, net was $2.1$3.1 million, $1.9$2.1 million and $14.4$1.9 million for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. Other expense, net consists of our proportionate share of losses for our joint venture and interest expense related to outstanding borrowings under our credit facility.
During the yearsyear ended December 31, 2024, 2023 and 2022,2023, we recognized nil, $0.8 million,million andin $3.8Other million,expense, respectively,net related to our proportionate share of losses associated withfor our equityjoint method investment.venture. Refer to Note 1 -– “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of this report, for a more detailed discussion on the sale of our equity method investment in February 2023.
Income Tax Expense. Income tax expense as a percentage of income from operations, before income taxes (our “effective tax rate”) were 25.4%,25.8%, 28.4%25.4% and 26.4%28.4% for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. The primary driver for the decrease relates to a reduction in nondeductible executive compensation, non-taxable proceeds from company-owned life insurance, and the recognition of research and development tax credits.
Free Cash Flow. “Free Cash FlowFlow,”, 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, repurchasing common stock, paying dividends or making acquisitions. Free Cash Flow has limitations due to the fact that 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 as a replacement for,of, our Consolidated Statements of Cash Flows.
Adjusted EBITDA. “Adjusted EBITDAEBITDA,”, a non-GAAP financial measure, is defined by Kforce as net income before depreciation and amortization; stock-based compensation expense; interest expense, net; income tax expense; organizational realignment activities; legal settlement expense; loss from equity method investment; reserve associated with the note receivable issued to our joint venture; impairment of equity method investment; and gainother fromnon-recurring termination of interest rate swap.expenses. 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 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.
(1) Other includes non-recurring expenses to further streamline our operating costs, including the write-off of previously capitalized software.
To meet our capital and liquidity requirements, we primarily rely on operating cash flow,flows, as well as borrowings under our creditCredit facility.Facility (as defined below). At December 31, 20242025 and 2023,2024, we had $32.7$66.4 million and $41.6$32.7 million outstanding under our Amended and Restated Credit Facility, respectively, and the borrowing availability was $166.3$132.5 million and $157.2$166.3 million, respectively, subject to certain covenants. At December 31, 2024,2025, Kforce had $112.9$88.5 million in working capital compared to $141.5$112.9 million at December 31, 2023.2024.
Cash provided by operating activities was $61.6 million during the year ended December 31, 2025, as compared to $86.9 million during the year ended December 31, 2024, as compared to $91.5 million during the year ended December 31, 2023.2024. 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. The year-over-year decrease in cash provided by operating activities was primarily driven by lower profitability levels, lowerhigher collectionscapitalized implementation costs related to cloud computing arrangements for Workday, and the payment of trade2024 receivables,federal andincome continuedtaxes managementthat ofwere workingdeferred capitalpursuant partiallyto offsetIRS by the timing of payments.guidance.
Cash used in investing activities was $14.1 million during the year ended December 31, 2025, which primarily consisted of cash used for capital expenditures of $14.8 million. Cash used in investing activities was $7.6 million during the year ended December 31, 2024, which primarily consisted of cash used for capital expenditures of $7.6 million. The increase in capital expenditures relates to continued investments in the implementation of Workday.
Cash used in investing activities was $7.6 million during the year ended December 31, 2024, and primarily consisted of cash used for capital expenditures. Cash used in investing activities was $4.9 million during the year ended December 31, 2023, which primarily consisted of cash used for capital expenditures of $7.8 million, partially offset by the proceeds from the sale of our joint venture interest of $5.1 million.
Cash used in financing activities was $45.7 million during the year ended December 31, 2025, as compared to $79.1 million during the year ended December 31, 2024. This increase was primarily driven by the net proceeds from our Credit Facility resulting from the extent of our share repurchase activity in 2025 relative to the level of operating cash flows.
Cash used in financing activities was $79.1 million during the year ended December 31, 2024, as compared to $86.6 million during the year ended December 31, 2023. This change was primarily driven by a decrease in repurchases of common stock driven by lower operating cash flows, partially offset by the net payments made on our Amended and Restated Credit Facility.
Kforce’sThe Board declared and paid dividends of $27.5 million ($1.56 per share), $28.2 million ($1.52 per share), and $27.6 million ($1.44 per share) and $24.0 million ($1.20 per share) for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively.
In January 2025,2026, Kforce’sthe Board approved an increase to the Company's dividend from $1.52$1.56 per share to $1.56$1.60 per share, which is the sixthseventh consecutive annual increase. The declaration, payment and amount of future dividends are discretionary and will be subject to determination by Kforce’sour 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 flows and available borrowings under our Amended and Restated Credit Facility will be adequate to meet the capital expenditure and working capital requirements of our operations for at least the next 12 months, and the foreseeable future, which we believe will provide us the flexibility to continue returning significant capital to our shareholders. However, a material deterioration in the macroeconomic 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 those 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.
On OctoberNovember 20,5, 2021,2025, the Firm entered into ana Amendedsenior secured credit facility with Bank of America, N.A., as administrative and Restatedcollateral agent, BofA Securities, Inc. and PNC Capital Markets LLC as joint lead arrangers, BofA Securities, Inc. as bookrunner and the lenders referred to therein (the “Credit Facility”). Under the Credit Facility, whichthe Firm has a maximum borrowing capacity of $200.0 million, which includes a $10.0 million sublimit for the issuance of standby and commercial letters and $10.0 million sublimit for swingline loans, and may, subject to certain conditions and the participation of the lenders, may be increased up to an aggregate additional amount of $150.0 million. As ofAt December 31, 2024,2025, $32.7$66.4 million was outstanding and $166.3$132.5 million, net of $1.0$1.1 million in letters of credit outstanding, was available under the Amended and Restatedour Credit Facility. As ofAt December 31, 2024, $32.7 million was outstanding under our prior credit facility. At December 31, 2025, we were in compliance with all of our financial covenants.covenants under the Credit Facility. Refer to Note 12 – “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data for further details on the Credit Facility.
In June 2023, Kforce entered into the First Amendment to the Amended and Restated Credit Facility, by and among Wells Fargo, as administrative agent, and the lenders and financial institutions from time to time party thereto (the “First Amendment”), to replace the interest rates based on the London Inter-Bank Offered Rate (“LIBOR”) with benchmark interest rates based on the Secured Overnight Financing Rate (“SOFR”). Refer to Note 12 - “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of this report for a complete discussion of the Amended and Restated Credit Facility.
AsIn ofOctober 2025, the Board approved a change to the stock repurchase program, increasing the total authorization to $100 million. At December 31, 2024,2025, $63.5$97.2 million remained available for furtherfuture repurchases under the Board-authorized common stock repurchase program.
•The Amended and Restated Credit Facility matures on October 20, 2026, and as of December 31, 2024, our outstanding debt balance under the credit facility was $32.7 million. Total payments, however, are inherently uncertain as the interest rates related to this outstanding balance are variable and the outstanding borrowings that will occur over the remaining term of the Amended and Restated Credit Facility are unknown. Refer to Note 12 - “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data for further details on the Amended and Restated Credit Facility.
•We maintain various non-qualified deferred compensation plans pursuant to which eligible management and highly-compensated key employees may elect to defer all or part of their compensation to later years. As of December 31, 2024, the total amount of our obligations under these plans was $54.8 million. These amounts are included in the accompanying Consolidated Balance Sheets and classified as Accounts payable and other accrued liabilities and Other long-term liabilities, as appropriate, and are payable based upon the elections of the plan participants (e.g., retirement, termination of employment, change-in-control, etc.). Amounts payable upon the retirement or termination of employment may become payable during the next five years if a covered employee retires, terminates, or schedules a distribution.
•Our purchase commitments consist of agreements to purchase goods and services entered into in the ordinary course of business. As of December 31, 2024, the value of our unconditional purchase obligations with a remaining term in excess of one year was $30.7 million.
•We have employment agreements with certain executives that provide for minimum compensation, salary and continuation of certain benefits for a one-year to a three-year period after their employment ends under certain circumstances. At December 31, 2024, our liability would be approximately $27.7 million for terminations related to a change in control and $8.8 million related to terminations in the absence of cause. Refer to Note 15 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data for additional information regarding our commitments related to employment agreements.
•We lease certain facilities and other properties under non-cancellable operating lease arrangements that expire at various dates through 2033. As ofAt December 31, 2024,2025, the total amount of our obligations under operating leases was $17.0$18.5 million. Refer to Note 10 -– “Operating Leases” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data for additional information regarding our lease obligations and the timing of expected future payments, including a five-year maturity schedule.
•We maintain various non-qualified deferred compensation plans pursuant to which eligible management and highly-compensated key employees may elect to defer all or part of their compensation to later years. At December 31, 2025, the total amount of our obligations under these plans was $57.7 million. These amounts are included in the accompanying Consolidated Balance Sheets and classified as Accounts payable and other accrued liabilities and Other long-term liabilities, as appropriate, and are payable based upon the elections of the plan participants (e.g., retirement, termination of employment, change-in-control, etc.). Amounts may become payable during the next five years if a covered employee retires, terminates, or schedules an in-service distribution. Kforce maintains a Rabbi Trust and holds life insurance policies on certain individuals to assist in the funding of the deferred compensation liability. Refer to Note 11 – “Employee Benefit Plans” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data for additional information on our deferred compensation plans.
•The Credit Facility matures on November 5, 2030, and at December 31, 2025, our outstanding debt balance under the credit facility was $66.4 million. Total payments, however, are inherently uncertain as the interest rates related to this outstanding balance are variable and the outstanding borrowings that will occur over the remaining term of the Credit Facility are unknown. Refer to Note 12 – “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data for further details on the Credit Facility.
•Our purchase commitments consist of agreements to purchase goods and services entered into in the ordinary course of business. At December 31, 2025, the value of our unconditional purchase obligations with a remaining term in excess of one year was $33.7 million. Refer to Note 15 – “Commitments and Contingencies” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data for additional information regarding our purchase commitments.
•We have employment agreements with certain executives that provide for minimum compensation, salary and continuation of certain benefits for a one-year to a three-year period after their employment ends under certain circumstances. At December 31, 2025, our liability would be approximately $29.6 million for terminations related to a change in control and $11.1 million related to terminations in the absence of cause. Refer to Note 15 – “Commitments and Contingencies” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data for additional information regarding our commitments related to employment agreements.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Management believes that the following accounting policies and estimates are critical to understanding and evaluating our financial results. Management uses significant judgment and complexity related to these estimates and are required to make assumptions related to inherently uncertain factors that could have a material impact on reported amounts.
Our consolidated financial statements are prepared in accordance with GAAP, and our significant accounting policies are discussed in Note 1 – “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of this report. In connection with the preparation of our 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. Our assumptions, estimates and judgments are based on our historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. Management regularly reviews the accounting policies, estimates, assumptions and judgments to ensure that our 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. Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. We have not made any material changes in our accounting methodologies used in prior years.
Refer to Note 7 – “Income Taxes” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of this report, for a complete discussion of the components of our income tax expense, as well as the temporary differences that exist as ofat December 31, 2024.2025.
What changed in the latest 10-Q
Risk Factors
There have been no material changes in the risk factors previously disclosed in our 2025 Annual Report on Form 10-K.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
Largest changes
“There has been considerable discussion about whether our Firm and the broader sector can continue to deliver revenue growth given the much-speculated negative demand impact of AI tools and technologies. We are pleased to report that we have delivered three consecutive quarters of financial performance that have exceeded pre-pandemic and pre-AI averages. The revenue improvment that we have experienced in our business in the first half of 2026 is consistent with the improving macro demand environment for talent. …”see in full comparison
“We believe our results reflect disciplined execution and a meaningful shift in client behavior. We further believe that organizations are increasingly turning to flexible talent models to advance large backlogs of high-priority technology initiatives, particularly as AI accelerates transformation and CEOs remain measured in adding permanent headcount. Broader uncertainty, including geopolitical tensions and related volatility in global energy markets, has further reinforced the need for agility. …”see in full comparison
“Recent economic data continues to point to a softer labor market, particularly in professionally oriented roles. Heightened geopolitical uncertainty, including the conflict involving Iran, has contributed to significant volatility in global energy markets, resulting in sharp increases across oil, gasoline, natural gas and electricity. In this environment, discussions with our clients indicate they are focused on agility. …”see in full comparison
“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. …”see in full comparison
“Against this backdrop, we experienced year‑over‑year revenue growth in the first quarter of 2026 for the first time in over three years, which we expect to further improve in the second quarter of 2026. Supported by our integrated go‑to‑market approach and the continued focus of our teams operating as One Kforce - our integrated operating model where our teams work together across service lines - we believe we are well positioned to support clients as they advance their technology roadmaps amid an evolving economic environment.”see in full comparison
Our FA business experienced an increase in Flex revenue ofsee in full comparison5.7%6.0% and 5.8% during the three and six months endedMarchJune31,30, 2026, respectively, as compared to the sameperiodperiods in 2025, primarily driven by an increase in consultants on assignment.Additionally, our average FA bill rates improved by nearly 1% for the three months ended March 31, 2026, as compared to the same period in 2025, which continues to reflect the higher-skilled assignments that we have been strategically pursuing.In thesecondthird quarter, we expect FA Flex revenue to increase in themid to highlow single digitssequentially, on a billing day basis,sequentially andincrease in the high single digitsyear over year.
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The following is an executive summary of what Kforce believes are highlights as of and for the threesix months ended MarchJune 31,30, 2026, 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 three months ended March 31, 2026 increased 0.1% to nearly $330.4 million from $330.0 million in the comparable period in 2025. Revenue decreased 0.1% for Technology and increased 2.8% for FA.
•Flex revenueRevenue for the threesix months ended MarchJune 31,30, 2026 increased 0.5%2.3% to $324.2$679.7 million from $322.6$664.3 million in the comparable period in 2025. Flex revenueRevenue increased 0.2%2.1% and 5.7%4.9% for Technology and FA, respectively, primarily driven by an increaseincreases in consultants on assignment.
•Direct HireFlex revenue for the threesix months ended MarchJune 31,30, 2026 decreasedincreased 17.7%2.3% to $6.1$666.1 million from $7.5$651.0 million in the comparable period in 2025. Flex revenue increased 2.1% and 5.8% for Technology and FA, respectively.
•Gross profit margin for the three months ended March 31, 2026 increased 60 basis points to 27.3% from 26.7% in the comparable period in 2025 primarily driven by an increase in Flex gross profit margins, which was partially offset by a decline in Direct Hire revenue.
•Flex gross profit margin for the three months ended March 31, 2026 increased 90 basis points to 25.9% from 25.0% in the comparable period in 2025 primarily driven by improved bill and pay spreads and lower healthcare costs.
•SG&A expenses as a percentage of revenue for the three months ended March 31, 2026 increased to 23.2% from 22.8% in the comparable period in 2025 primarily driven by higher performance-based compensation costs due to improved financial performance.
•NetDirect incomeHire revenue for the threesix months ended MarchJune 31,30, 2026 decreasedincreased 2.7%2.1% to $7.9$13.6 million, or $0.46 diluted earnings per share,million from $8.1$13.4 million,million or $0.45 diluted earnings per share, forin the threecomparable monthsperiod ended March 31,in 2025.
•Gross profit margin for the six months ended June 30, 2026 increased 100 basis points to 27.9% from 26.9% in the comparable period in 2025 primarily driven by an increase in Flex gross profit margins and a greater percentage of Direct Hire revenue.
•Flex gross profit margin for the six months ended June 30, 2026 increased 100 basis points to 26.4% from 25.4% in the comparable period in 2025 primarily driven by improved bill and pay spreads.
•SG&A expenses as a percentage of revenue for the six months ended June 30, 2026 increased to 23.0% from 22.5% in the comparable period in 2025 primarily driven by higher performance-based compensation costs due to improved financial performance.
•Net income for the six months ended June 30, 2026 increased 8.9% to $20.2 million, or $1.19 diluted earnings per share, from $18.6 million, or $1.03 diluted earnings per share, for the six months ended June 30, 2025.
•The Firm returned $18.6$28.2 million of capital to our shareholders in the form of open market repurchases totaling $11.8$14.7 million and quarterly dividends totaling $6.8$13.5 million during the threesix months ended MarchJune 31,30, 2026.
•Cash used in operating activities was $4.1$6.7 million during the threesix months ended MarchJune 31,30, 2026, as compared to cash provided by operating activities of $0.2$18.6 million for the threesix months ended MarchJune 31,30, 2025. The change was primarily driven by loweran collectionsincrease onin trade receivables,receivables partially offset bygiven the timingimprovement ofin payments.revenue trends.
Kforce is a leading domestic provider of technology and finance and accounting talent solutions to innovative and industry-leading companies. At MarchJune 31,30, 2026, Kforce employed over 1,600 associates and had nearlymore than 8,000 consultants on assignment. Kforce serves clients across a diverse set of industries and organizations of all sizes, but we place a particular focus on serving Fortune 500 and other leading companies.
There has been considerable discussion about whether our Firm and the broader sector can continue to deliver revenue growth given the much-speculated negative demand impact of AI tools and technologies. We are pleased to report that we have delivered three consecutive quarters of financial performance that have exceeded pre-pandemic and pre-AI averages. The revenue improvment that we have experienced in our business in the first half of 2026 is consistent with the improving macro demand environment for talent. Key indicators including the Institute for Supply Management (“ISM”) Services Purchasing Managers’ Index (“PMI”), American Staffing Association’s (“ASA”) Staffing Index and the Staffing Industry Analysts (“SIA”) Bullhorn Staffing Indicator have strengthened over the last several months. In addition, while overall U.S. job growth has moderated in recent months, recent gains have been increasingly concentrated in professional and business services, which are far more aligned to Kforce’s end markets than the growth drivers over the past couple of years.
We believe our results reflect disciplined execution and a meaningful shift in client behavior. We further believe that organizations are increasingly turning to flexible talent models to advance large backlogs of high-priority technology initiatives, particularly as AI accelerates transformation and CEOs remain measured in adding permanent headcount. Broader uncertainty, including geopolitical tensions and related volatility in global energy markets, has further reinforced the need for agility. We believe these dynamics highlight the value of flexible workforce solutions as clients adapt to near-term uncertainty while assessing the longer-term implications of emerging technologies on their businesses and talent strategies. We believe our go-to-market approach, shaped by our integrated strategy efforts, is gaining traction. Across Kforce, we see our people are operating more fully as One Kforce, bringing the full breadth of our capabilities to bear across our service offerings.
Recent economic data continues to point to a softer labor market, particularly in professionally oriented roles. Heightened geopolitical uncertainty, including the conflict involving Iran, has contributed to significant volatility in global energy markets, resulting in sharp increases across oil, gasoline, natural gas and electricity. In this environment, discussions with our clients indicate they are focused on agility. We believe uncertainty is reinforcing the value of flexible workforce solutions as organizations seek to advance a significant backlog of high-priority technology initiatives while they gain greater clarity around geopolitical developments and the longer-term impact of emerging technologies on their businesses and talent strategies.
Against this backdrop, we experienced year‑over‑year revenue growth in the first quarter of 2026 for the first time in over three years, which we expect to further improve in the second quarter of 2026. Supported by our integrated go‑to‑market approach and the continued focus of our teams operating as One Kforce - our integrated operating model where our teams work together across service lines - we believe we are well positioned to support clients as they advance their technology roadmaps amid an evolving economic environment.
Based on data published by the Staffing Industry Analysts (“SIA”),SIA, temporary employment figures and trends are important indicators of staffing demand from an economic standpoint. The national U.S. unemployment rate declined to 4.3%4.2% in MarchJune 2026 as compared to 4.4% in December 2025. In the latest U.S. staffing industry forecast published by SIA in March 2026, the technology temporary staffing industry is estimated to grow 1% in 2026.
Operating Results - Three and Six Months Ended MarchJune 31,30, 2026 and 2025
Flex revenue for our Technology business increased 0.2%4.0% and 2.1% during the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the same periodperiods in 2025, primarily driven by an increase in consultants on assignment, which was partially offset by a slight decrease in our average bill rate.assignment. In the secondthird quarter, we expect Technology Flex revenue to increase in the low tosingle digits sequentially and mid single digits sequentially, on a billing day basis, and year over year.
Our FA business experienced an increase in Flex revenue of 5.7%6.0% and 5.8% during the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the same periodperiods in 2025, primarily driven by an increase in consultants on assignment. Additionally, our average FA bill rates improved by nearly 1% for the three months ended March 31, 2026, as compared to the same period in 2025, which continues to reflect the higher-skilled assignments that we have been strategically pursuing. In the secondthird quarter, we expect FA Flex revenue to increase in the mid to highlow single digits sequentially, on a billing day basis,sequentially and increase in the high single digits year over year.
Direct Hire revenue decreasedincreased 17.7%27.0% and 2.1% during the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the same periodperiods in 2025, which was primarily driven by aan increase in placements. We expect Direct Hire to decrease in placements.the third quarter due to seasonal impacts.
Total gross profit percentage increased 60140 and 100 basis points for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the same periodperiods in 2025, primarily driven by an increase in Flex gross profit margins,margins offsettingand a declinegreater inpercentage of Direct Hire revenue.
Our Flex gross profit percentage increased 90110 and 100 basis points for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the same periodperiods in 2025.
•Technology Flex gross profit margins increased 80120 and 100 basis points for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the same periodperiods in 2025.2025, The increase for the three months ended March 31, 2026which was primarily driven by improved bill and pay spreads and lower healthcare costs.spreads. In the secondthird quarter, we expect Technology Flex gross profit margins to increaseremain fairly stable sequentially duebut to lowerincrease seasonalyear payrollover taxes and for bill and pay spreads to be stable sequentially.year.
•FA Flex gross profit margins increased 60 and 70 basis points for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the same periodperiods in 2025.2025, The increase for the three months ended March 31, 2026which was primarily driven by improved bill and pay spreads and lower healthcare costs. In the secondthird quarter, we expect FA Flex gross profit margins to increaseremain fairly stable sequentially due to lower seasonal payroll taxes and foryear billover and pay spreads to be stable sequentially.year.
SG&A Expenses. Total compensation, commissions, payroll taxes and benefit costs as a percentage of SG&A represented 83.8%83.6% and 83.7% for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to 84.4%84.6% and 84.5% for the comparable periodperiods in 2025. Commissions and other 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.
SG&A as a percentage of revenue increased 4050 basis points for the three and six months ended MarchJune 31,30, 2026, as compared to the same periodperiods in 2025, which is primarily driven by higher performance-based compensation costs due to improved financial performance.
Other Expense, Net. Other expense, net was $0.7 million and $0.6$1.0 million for the three months ended MarchJune 31,30, 2026 and 2025,2025. respectively.Other expense, net was $1.6 million for the six months ended June 30, 2026 and 2025. Other expense, net primarily includes interest expense related to outstanding borrowings under our credit facility.
Income Tax Expense. Income tax expense as a percentage of income before income taxes (our “effective tax rate”) was 30.2%30.5% and 26.4%25.4% for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The increase in our effective tax rate iswas relatedprimarily attributable to higher nondeductible itemscompensation suchexpense asunder Internal Revenue Code Section 162(m), limitations.the expiration of the Work Opportunity Tax Credits program in 2025, and lower research and development tax credits associated with our strategic priorities.
The following table presents a reconciliation of Cash (Used in) Provided by Operating Activities to Free Cash Flow:
The following table presents Adjusted EBITDA and includes a reconciliation of Net income to Adjusted EBITDA:
To meet our capital and liquidity requirements, we primarily rely on our operating cash flows, as well as borrowings under our Credit Facility (as defined below). At MarchJune 31,30, 2026 and December 31, 2025, we had $91.5$107.1 million and $66.4 million outstanding under our Credit Facility, respectively, and the borrowing availability was $107.4$91.8 million and $132.5 million, respectively, subject to certain covenants. At MarchJune 31,30, 2026, Kforce had $95.8$111.5 million in working capital compared to $88.5 million at December 31, 2025.
Cash used in operating activities was $4.1$6.7 million during the threesix months ended MarchJune 31,30, 2026, as compared to cash provided by operating activities of $0.2$18.6 million during the threesix months ended MarchJune 31,30, 2025. 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. The year-over-year decrease was primarily driven by lower collections onhigher trade receivables,receivables partially offset bygiven the timingimprovement ofin payments.revenue trends.
Cash used in investing activities was $3.3$7.2 million during the threesix months ended MarchJune 31,30, 2026, and primarily consisted of cash used for capital expenditures. Cash used in investing activities during the threesix months ended MarchJune 31,30, 2025 was $4.8$7.6 million and primarily consisted of cash used for capital expenditures of $4.1 million.expenditures.
Cash provided by financing activities was $6.6$12.1 million during the threesix months ended MarchJune 31,30, 2026, as compared to $4.7$8.9 million of cash used in financing activities during the threesix months ended MarchJune 31,30, 2025. This change was primarily driven by decreases in repurchases of common stock and higher net proceeds on our Credit Facility.
During the threesix months ended MarchJune 31,30, 2026 and 2025, Kforce’s Board of Directors (the “Board”) declared and paid quarterly dividends of $6.8$13.5 million ($0.40$0.80 per share) and $7.1$14.0 million ($0.39$0.78 per share), respectively, which represents a 3% increase on a per share basis. While the Board has declared and paid quarterly dividends since the fourth quarter of 2014, 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.
On November 5, 2025, the Firm entered into a senior secured credit facility with Bank of America, N.A., as administrative and collateral agent, BofA Securities, Inc. and PNC Capital Markets LLC as joint lead arrangers, BofA Securities, Inc. as bookrunner and the lenders referred to therein (the “Credit Facility”). Under the Credit Facility, the Firm has a maximum borrowing capacity of $200.0 million, which includes a $10.0 million sublimit for the issuance of standby and commercial letters and $10.0 million sublimit for swingline loans, and may, subject to certain conditions and the participation of the lenders, be increased up to an aggregate additional amount of $150.0 million. At MarchJune 31,30, 2026, $91.5$107.1 million was outstanding and $107.4$91.8 million was available on our Credit Facility, and at December 31, 2025, $66.4 million was outstanding. At MarchJune 31,30, 2026, we are in compliance with all of the covenants contained in the Credit Facility as described in our 2025 Annual Report on Form 10-K, and we currently expect that we will be able to maintain compliance with these covenants.
In October 2025, the Board approved an increase in our stock repurchase authorization, bringing the total authorization to $100.0 million. During the threesix months ended MarchJune 31,30, 2026, Kforce repurchased approximately 428527 thousand shares of common stock on the open market at a total cost of approximately $11.8$14.7 million. In addition, $85.4$82.5 million remained available for further repurchases under the Board-authorized common stock repurchase program at MarchJune 31,30, 2026.
There have been no material changes to our Critical Accounting Estimates previously disclosed in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 Annual Report on Form 10-K.
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. Our assumptions, estimates and judgments are based 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. Management regularly 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.
KFRC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 1 filing (1 insider, 1 trade date, 2,000 shares, about $109.8K). Net open-market shares: -2,000 (purchases minus sales); net value about -$109.8K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-25 | Dunwoody Ann E. |
Small acquisition | 150 | $50.58 | $7.6K |
| 2026-09-11 | Furlong Mark F |
Other | 38 | — | — |
| 2026-09-11 | Brooks Derrick Dewan |
Other | 38 | — | — |
| 2026-09-11 | Liberatore Joseph J |
Other | 1,728 | — | — |
| 2026-09-11 | Thomas Andrew G |
Other | 338 | — | — |
| 2026-09-11 | Simmons N John |
Other | 38 | — | — |
| 2026-09-11 | Kelly David M |
Other | 659 | — | — |
| 2026-09-11 | Hackman Jeffrey B. |
Other | 470 | — | — |
| 2026-07-31 | Simmons N John |
Open-market sale | 2,000 | $54.90 | $109.8K |
| 2026-06-26 | Dunwoody Ann E. |
Small acquisition | 160 | $47.02 | $7.5K |
| 2026-06-12 | Brooks Derrick Dewan |
Other | 38 | — | — |
| 2026-06-12 | Simmons N John |
Other | 38 | — | — |
| 2026-06-12 | Thomas Andrew G |
Other | 342 | — | — |
| 2026-06-12 | Kelly David M |
Other | 672 | — | — |
| 2026-06-12 | Liberatore Joseph J |
Other | 1,755 | — | — |
| 2026-06-12 | Furlong Mark F |
Other | 38 | — | — |
| 2026-06-12 | Hackman Jeffrey B. |
Other | 478 | — | — |
| 2026-04-24 | Simmons N John |
Grant/award | 4,782 | — | — |
| 2026-04-24 | Brooks Derrick Dewan |
Grant/award | 4,782 | — | — |
| 2026-04-24 | Furlong Mark F |
Grant/award | 4,782 | — | — |
Well-known investors holding KFRC (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 303,091 | $14.2M | 0.0% | Reduced 24% |
| Two Sigma Investments | 2026-06-30 | 225,767 | $10.6M | 0.01% | Reduced 2% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 165,012 | $7.7M | 0.01% | Reduced 53% |
| Renaissance Technologies | 2026-06-30 | 88,949 | $4.2M | 0.01% | Reduced 23% |
| D. E. Shaw & Co. | 2026-06-30 | 78,750 | $3.7M | 0.0% | Reduced 41% |
| Millennium Management (Israel Englander) | 2026-06-30 | 42,143 | $2.0M | 0.0% | Reduced 35% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 36,226 | $1.7M | 0.0% | Reduced 63% |