Kforce Inc. Q1 2010 Earnings Call Transcript

Kforce Inc. Q1 2010 Earnings Call Transcript
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Kforce Inc. (KFRC)

Q1 2010 Earnings Call Transcript

May 4, 2010 5:00 pm ET

Executives

Michael Blackman – Chief Corporate Development Officer

David Dunkel – Chairman & CEO

William Sanders – President

Joe Liberatore – EVP & CFO

Analysts

Kevin McVeigh – Credit Suisse

Mark Marcon – R.W. Baird

Tobey Sommer – SunTrust Robinson Humphrey

Portuner Hue [ph] – Deutsche Bank

Jim Janesky – Stifel Nicolaus

Josh Vogel – Sidoti & Company

John Healy – Northcoast Research

Giri Krishnan – Credit Suisse

Presentation

Operator

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Previous Statements by KFRC
» Kforce Inc. Q4 2009 Earnings Call Transcript
» Kforce Inc. Q3 2009 Earnings Call Transcript
» Kforce, Inc. Q2 2009 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the Kforce Incorporated first quarter 2010 earnings conference call. One knows that today's call is being recorded. At this time, I would like to turn the conference over to Mr. Michael Blackman, Chief Corporate Development Officer. Please go ahead, sir.

Michael Blackman

Right, thank you. Good afternoon and welcome to the Q1 Kforce conference call. Before we get started, I would like to remind you that this call may contain statements that are forward-looking.

These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results may differ materially because of factors listed in Kforce's public filings and other reports and filings with the Securities and Exchange Commission. We cannot undertake any duty to update any forward-looking statements.

I would now like to turn this call over to David Dunkel, Chairman and Chief Executive Officer. Dave?

David Dunkel

Thank you, Michael. You can find additional information about Kforce in our 10-Q, 10-K, and 8-K filings with the SEC. We provide substantial disclosure in our release and our hope is that this will improve the dissemination of information about our performance and the quality of this call.

We are pleased with our Firm’s performance for the first quarter of 2010. As the quarter unfolded, we experienced a good start from unusual weather patterns in the middle, affecting our largest markets and then a strong finish, particularly in our technology segment. In March and April, we have seen a significant upturn in job requirements for tax that was abrupt and dramatic. The demand is across most markets and client sizes and may be the beginning of a sustained period of significant growth for our technology business.

As the quarter unfolded, we also saw stability in both our HLS business units and F&A, with KGS declining slightly this quarter as expected. As I have been doing a while now, I personally travel to multiple markets to meet with clients, our field teams and investors. It is clear that the sentiment shift is real as clients are accelerating investments in awakening the abrupt demand change intact. It is interesting to note that the severity of the downturn and the resulting cutbacks together with uncertainty about the regulatory environment have shifted client emphasis towards using Flex consultants. We may be beginning to experience the temp penetration increase some have anticipated.

In addition to permanent hiring stronger than we expected as clients rebuild lean staffs cut deeply during the downturns. Throughout the quarter, we continued our investment in our National Recruiting Center and Strategic Accounts teams and selectively added to our field delivery resources were appropriate. This in preparation for many leading economists believes maybe several years of increasing tech demand. We also made excellent progress in our back office projects aimed at improving associate performance in increasing operating efficiency throughout the upcycle.

As I mentioned on our last call, our objectives for 2010, the second year of our three-year plan are to further penetrate existing Strategic Accounts, gain additional customer share and selectively target new accounts. We have diligently planned for this period with the goal of surpassing prior peak revenue and earnings earlier in the cycle. We anticipate using cash flow for continued debt retirement, share repurchase and acquisitions that meet with a very high hurdle.

We are continuing to see opportunities presented to us, but are maintaining our discipline and standards. I will turn the call over to Bill Sanders, Kforce’s President who will provide his comments, and then Joe Liberatore, Kforce’s CFO who will provide additional insights on operating trends and expectations, and then I will conclude. William?

William Sanders

Thank you Dave and thanks to all of you for your interest in Kforce. The Firm continued its solid performance in the first quarter as we were able to balance maintenance of our revenue stream with selective investments to prepare for the upcycle. Our first quarter revenues at $226.7 million, which grew 0.9% sequentially and earnings per share of $0.07 reflect a continued strengthening of our business.

Our diversified revenue streams are concentrated in some of the areas of greatest anticipated demand, both from a cyclical standpoint as the economy recovers and from a long-term secular perspective. We believe that Kforce is well positioned to equate people and an operating platform that will deliver exceptional results both for our clients and our shareholders.

During the first quarter, we continue to invest in our centralized National Recruiting Center and our Strategic Accounts group, which coupled with selective investments in our field sales force position us to attain higher peak revenues and earnings levels than experienced during previous upcycles. Our largest business unit, Technology Flex, which represents greater than half of total Firm revenues performed well relative to the market in 2009, returning to sequential growth in Q3 2009.

Q1 2010 revenues decreased sequentially by 0.3% from Q4, impacted by weather and our early completion of a large project at a client, but were 1.3% higher than Q1 2009. Tech Flex revenues recovered in January more quickly than in previous years from annual assignment ends, but were relatively flat in February and early March, with an upward trend later in the quarter and strengthened in April. Recent trends for Tech Flex are up from March levels as leading indicators continue to gain strong momentum in April. We therefore expect Tech Flex to have strong growth in Q2 and for the foreseeable future with a sustained increase in IT spending providing a strong catalyst.

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