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Kforce's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Stocks in this article: KFRC

We are very pleased our record third quarter revenues of $289 million, as well as earnings per share of $0.22. These results represent year-over-year growth of 11.4% and 37.5%, respectively. All of our flexible staffing businesses grew sequentially on a billing day basis for the first time since Q4 2007, contributing to record quarterly Flex revenue of $277.1 million. Total Technology revenue of $165.5 million in Technology Flex of $160.3 million also represent high watermarks for those businesses.

Staffing continues to perform differently in this cycle versus prior ones. We continued to experience solid growth in the tepid GDP environment. While the jury is still out long term on the Flex super cycle, the data increasingly supports that it really is different this time.

We continue to see a recovery where a disproportionate amount of private sector hiring is being created through the temp sector, as 21% of job creation in this cycle has been through the temp sector versus just 7% in the last cycle.

High skill niches and particularly technology jobs are very supply-constrained, as college-educated unemployment was just 4.2% in September.

We believe these dynamics are significant contributors to the strength of our technology Flex business, which constitutes over half of our revenues.

Additionally, continued uncertainty for the U.S. economy may result in clients increasingly turning to flexible staffing, which allows them to quickly adjust to this constantly shifting economic environment and the significant uncertainties surrounding regulatory, tax and health care reform. Many clients have confirmed that they are reluctant to go on in human capital against this macro backdrop.

We remain confident in our belief that there is a sustained secular shift towards a flexible staffing model, and the temporary staffing penetration of the workforce may achieve historic highs in the U.S.

As demand strengthens, we are seeing improvements, not only an increased volume but also improvements in the rate that we are able to bill for our services. The improvement in bill/pay spreads and in particular, bill rate increases drove the 50 basis points sequential increase in Flex gross margin. This spread improvement and the leverage that exists on our operating platform allowed us to make continued investments in associate headcount, while still delivering strong bottom line results.

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