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Kforce Inc. Reports Operating Results (10-Q)

November 06, 2012 | About:

10qk

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Kforce Inc. (KFRC) filed Quarterly Report for the period ended 2012-09-30.

Kforce, Inc. has a market cap of $435.7 million; its shares were traded at around $12.27 with a P/E ratio of 79 and P/S ratio of 0.4.

Highlight of Business Operations:

Net service revenues for the three and nine months ended September 30, 2012 were $270.2 million and $812.6 million, respectively, which represents an increase of 3.5% and 9.0%, respectively, over the comparable periods in 2011. These increases were primarily due to our Tech (which represents approximately 63% of our total net service revenues) and FA segments (which represents approximately 22% of our net service revenues), which had year-over-year increases in net service revenues for the three months ended September 30, 2012 of 3.1% and 8.2%, respectively, and 9.7% and 10.4%, respectively, for the nine months ended September 30, 2012, respectively. For the three and nine months ended September 30, 2012, net service revenues for HIM increased 4.5% and 14.9%, respectively, while our GS segment declined 5.0% and 2.8%, respectively, in net service revenues over the comparable periods in 2011. For the three and nine months ended September 30, 2012, Search revenues increased 6.6% and 9.7%, respectively, over the comparable periods in 2011.

Flex gross profit margin increased 40 basis points to 29.6% for the three months ended September 30, 2012 as compared to 29.2% for the comparable period in 2011, and increased 30 basis points to 28.7% for the nine months ended September 30, 2012 as compared to 28.4% for the comparable period in 2011. These increases in flex gross profit margins were primarily driven by an increase in the spread between bill rates and pay rates. Flex gross profit margin increased sequentially 30 basis points for the three months ended September 30, 2012 primarily as a result of an improvement in the spread between our bill and pay rates primarily in our Tech segment and a decrease in statutory payroll taxes. SG&A expenses as a percentage of net service revenues were 26.0% and 30.8% for the three and nine months ended September 30, 2012, respectively, as compared to 27.3% for both the three and nine months ended September 30, 2011. The increase in SG&A expenses as a percentage of net service revenues during the nine months ended September 30, 2012 was primarily the result of the acceleration of substantially all of the outstanding and unvested PARS, RS and ALTI awards on March 31, 2012, which resulted in the recognition of incremental compensation expense during the three months ended March 31, 2012 of $31.3 million, including payroll taxes.

Our FA segment experienced an increase in Flex revenues of 7.5% and 11.5% during the three and nine months ended September 30, 2012, respectively, compared to same periods in 2011. According to a Staffing Industry Analysts report, the overall finance and accounting segment is expected to experience a deceleration of growth to 8% in 2012 from 10% in 2011. Consistent with Tech, we believe that the success of our FA segment has been enabled by our NRC, which has been particularly effective in meeting the demand of our Strategic Accounts. Year-over-year growth rates in Tech have decelerated each quarter during 2012, which we believe reflects the uncertain economic outlook. We believe the demand for Tech going into 2013 continues to be good. As such, we anticipate continuing to selectively invest in the headcount necessary to capture this demand. Additionally, within our FA segment, we expect to see continued growth for the remainder of 2012 on a sequential billing day basis.

The increase in Search gross profit for the three months ended September 30, 2012, compared to the same period in 2011, was $0.8 million, composed of a $0.2 million decrease in volume and a $1.0 million increase in rate. The increase in Search gross profit for the nine months ended September 30, 2012, compared to the same period in 2011, was $3.2 million, composed of a $1.2 million increase in volume and a $2.0 million increase in rate.

The increase in Flex gross profit for the three months ended September 30, 2012, compared to the same period in 2011, was $3.5 million, composed of a $2.4 million increase in volume and a $1.1 million increase in rate. The increase in Flex gross profit for the nine months ended September 30, 2012, compared to the same period in 2011, was $20.6 million, composed of an $18.2 million increase in volume and a $2.4 million increase in rate.

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