Kforce Inc. (NASDAQ:KFRC) reported robust third quarter results, surpassing expectations, despite a decline in revenues in its technology and financial services businesses. The company, which specializes in professional staffing services and solutions, noted significant improvements in consultant retention and an upward trend in new assignment starts in October. While acknowledging uncertainties in the macroeconomic landscape, including the potential for a recession in early 2024, Kforce remains focused on organic growth in the technology talent solutions space.
Key takeaways from the earnings call include:
- Kforce reported a year-over-year decline in Q3 revenues by 13.4% to $373.1 million, while adjusted earnings per share of $0.90 were at the high end of expectations.
- The company anticipates Q4 revenues to be between $359 million and $367 million, with earnings per share ranging from $0.74 to $0.82.
- Despite a decline in revenues, Kforce's technology business saw stable average bill rates, which are expected to continue trending higher.
- The company's financial services business also experienced a decline, but flex margins improved due to repositioning efforts.
- Kforce is investing in its managed teams and project solutions capabilities to position itself for future growth.
CEO Joe Liberatore expressed optimism for Q4 and beyond, based on historical patterns and the current stabilization in demand for technology flex services. He noted that while assignments had been delayed in the past, existing customers were now showing increased confidence and spending more.
The company also highlighted industry drivers and client behavior. Kforce expects flat or slight sequential growth in the Technology sector, despite two fewer billing days in Q4 and clients enforcing shutdowns or soft closes around the holidays. The company also pointed to opportunities in application development, cloud, data, and digital, indicating a strong market position compared to competitors.
Addressing concerns about a potential recession, Liberatore stated that Kforce is prepared to navigate through any scenario. CFO David Kelly added that the softening of Tech Direct Hire was due to the macro environment and the volatility that comes with economic cycles.
In terms of long-term trends, the management team discussed the potential impact of AI on the company's business. Liberatore noted that clients are currently in the early stages of preparing and experimenting with AI, and substantial investments are yet to be made. He emphasized the importance of addressing data aspects before implementing AI.
The company also confirmed its commitment to achieving $14 million in annual cost savings, regardless of the economic environment in 2024. The call concluded with the management team expressing gratitude to their employees, consultants, and clients, and looking forward to the next earnings call after the fourth quarter of 2023.
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