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Kforce's CEO Discusses Q1 2011 Results - Earnings Call Transcript

Joe and I will be providing remarks and answering questions on today's call. Bill Sanders will not be participating today as he is working from home after having a voluntary planned procedure performed. We pray for and anticipate his speedy recovery.

We are pleased with our first quarter results as we move into the second year of this tenuous economic recovery. We are on track to meet our 2011 financial targets of 15% revenue growth and 50% EBIT growth. We are particularly pleased with the performance of Our Tech Flex, F&A Flex and HIM businesses in the leverage we are seeing from our investments in the National Recruiting Center in back-office platform, which are contributing to the improving trend in operating expenses.

Entering 2011, we anticipate an increase statutory payroll costs, and thus, have been extremely focused on margins and pricing. Our actual statutory cost increases was significantly higher than expected and we were unable to completely pass these costs through during the quarter. The sequential impact of the increased costs was approximately $0.08, including billable and core employees versus the $0.05 originally anticipated.

We are continuing to focus on margins and pricing and expect improvement throughout the rest of the year. We believe Kforce is well-positioned to service our clients increasing desire for a more flexible workforce during this unique, temporary employment leg recovery, which we believe may contribute to a sustained, secular shift towards a flexible staffing model. We believe temporary staffing penetration of the workforce may achieve historic highs in the U.S. in this cycle. We continue to see recovery or a disproportionate amount of private sector hiring is being created through the temp sector.

Additionally, many economists recently tempered their GDP expectation for the U.S. economy, which may result in client turning increasingly to flexible staffing, which allows them to quickly adjust to this constantly-shifting economic environment and the significant uncertainties surrounding regulatory, PAC and Healthcare reform.

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