KFORCE INC Q4 FY2024 earnings call

• Operated in an uncertain macro environment for over two years, with tech services demand stabilizing in 2024.
• Made progress on Workday implementation, opened India Development Center in January 2025, and integrated as One Kforce.
• Fourth quarter revenues exceeded expectations, with technology business having sequential billing day growth but year-over-year decline.
• Priorities include investing in back office transformation, integrated strategy, and nearshore/offshore capabilities.
• Board approved sixth consecutive dividend increase.

Total revenues for Q4 were $343.8 million, exceeding the midpoint of expectations. The technology business saw revenues grow 0.6% sequentially but decline 5.2% year-over-year per billing day. Average bill rate in the technology business was $90, stable for over two years. Flex margins in the technology business decreased 80 basis points year-over-year due to higher healthcare costs and seasonal factors. The FA business, making up 8% of revenues, had revenues down in the low double-digits sequentially in Q1 expectations, with flex margins decreasing 120 basis points sequentially driven by higher healthcare costs.

• Q1 2025 revenue expected to be in the range of $330 million to $338 million, with earnings per share between $0.44 and $0.52.
• Expect 100 basis points or more of enhanced operating leverage when returning to $1.7 billion in annual revenues.
• 2025 is the final year of significant net investment in strategic initiatives, with expectations of returns starting in 2026.

• Political uncertainty and potential policy changes with unclear impact.
• Fed rate cuts less certain due to sticky inflation and strong labor markets.
• Clients delaying tech investments due to anticipation of recession, leading to a backlog.
• Competition from local/regional entities not well capitalized.

Q: About data cleanup and AI initiatives, what's the outlook?

A: Dave Kelly mentions data rationalization and AI as a growing business opportunity, though not a majority of current business.

Q: How are clients showing confidence to pull trigger on projects?

A: Joe Liberatore says sentiment is more positive, clients are looking for predictability and stability.

Q: What's the client response to the Pune facility?

A: Dave Kelly and Joe Liberatore discuss client demand for blended teams, flexibility, and positive policy outlook on immigration.

Q: What drives the 100 basis point operating margin improvement?

A: Jeff Hackman cites Workday implementation, back office transformation, and solutions offering margin as key drivers.

Q: Thoughts on financial services vertical demand?

A: Dave Kelly says it's a broad spectrum of tech work, no specific new focus area.

Q: Demand from systems integrators?

A: Dave Kelly states integrators are less than 10% of business, with diversified portfolio.

Q: Tech direct hire market status?

A: Joe Liberatore says it's stable, with some conversions but no acceleration/deceleration.

Q: Cash usage, share repurchase, M&A?

A: Jeff Hackman talks about continued share repurchase, tight M&A filter, and sixth consecutive dividend increase.

Q: Hurricane disruptions impact?

A: Joe Liberatore and Jeff Hackman say minimal revenue impact, with team's fortitude keeping initiatives on track.