Kforce Inc. Q2 FY2025 earnings call

• Macro environment has heightened uncertainty, but clients continue to prioritize mission-critical technology investments. - Consulting-oriented solutions have driven growth in the Technology business, with strong demand for such offerings. - Generative AI is in early phases, with opportunities in assisting clients in their genAI journey, and the firm is well-positioned to meet demand in AI foundational readiness work. - FA business has seen repositioning to higher skill sets, with sequential growth in Q2 and expected further growth in Q3. - The firm is investing in enterprise initiatives like Workday implementation, which will contribute to long-term financial objectives.

Total revenues of $334.3 million declined 6.2% year-over-year. Flex revenues in Technology and Finance and Accounting businesses both improved slightly sequentially in the second quarter. Direct Hire revenues were more challenged due to macro conditions and came in below expectations. FA Flex revenues, currently about 6% of revenues, declined 16.8% year-over-year but saw sequential growth in Q2, with an expected mid-single digits sequential increase in Q3 FA. Direct Hire, representing approximately 2% of overall revenues, is expected to be relatively flat sequentially in Q3.

• Expect Q3 revenues to be in the range of $324 million to $332 million and earnings per share to be between $0.53 and $0.61. - Anticipate benefits from Workday implementation towards the end of 2026 and significant annualized benefits in 2027. - Intend to maintain net debt levels relatively consistent with the end of Q2 2025 and return excess cash to shareholders through share repurchases.

• Macro uncertainties such as global trade negotiations and potential retaliatory measures remain, with negative effects on the U.S. economy uncertain. - Unanticipated project ends in the Technology business due to client spend reallocation. - Health care costs and Direct Hire mix issues can impact gross margins.

Q: Impact of nearshore/offshore on margin?

A: It's a small part of the business, relatively neutral to margin currently but has been slightly accretive so far.