Kforce's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Kforce (KFRC)

Q4 2011 Earnings Call

February 07, 2012 5:00 pm ET


Michael Blackman - Chief Corporate Development Officer

David L. Dunkel - Chairman, Chief Executive Officer and Chairman of Executive Committee

William L. Sanders - President

Joseph J. Liberatore - Chief Financial Officer, Executive Vice President and Secretary


Kevin D. McVeigh - Macquarie Research

Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division

Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division

Giridhar Krishnan - Crédit Suisse AG, Research Division

Paul Ginocchio - Deutsche Bank AG, Research Division

John M. Healy - Northcoast Research

Morris Ajzenman - Griffin Securities, Inc., Research Division



Good day, ladies and gentlemen, and welcome to the Kforce Q4 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Michael Blackman, Chief Corporate Development Officer. Sir, you may begin.

Michael Blackman

Thank you. Good afternoon, and welcome to the Kforce Fourth Quarter and Year End 2011 Conference Call. Before we get started, I would like to remind you that this call may contain certain statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results may differ materially from the factors listed in Kforce 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 L. 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 very pleased with both Q4 and full year 2011 results. Fourth quarter revenues of $285.6 million and earnings per share of $0.20 were both at the top end of our guidance.

In the quarter, the firm also achieved several milestones, establishing record quarterly revenue per billing day marks for total revenue, Flex revenue, total Tech revenue and Tech Flex revenue. Kforce recorded revenue for the year ended December 31, 2011, of $1.1 billion, an increase of 12.1%. Net income was $27.2 million, which represents a year-over-year increase of 31.6%, and EPS was $0.70, a 37.3% increase.

Total Technology revenue of $624 million and Tech Flex revenue of $606.2 million represent historical high watermarks for that business unit.

We are optimistic about the firm's prospects in what we believe continues to be a secular shift towards a greater use of flexible staffing in an environment of high demand for skilled professionals.

Looking back on 2011, we believe that the staffing industry performance has been significantly different than in previous economic cycles, further supporting the secular shift in super cycle theory.

The unemployment rate among college degree workers is currently 4.2%, about half that of the overall U.S. rate of unemployment, and is substantially lower in several of the specialized skill sets Kforce specializes in, particularly in Technology.

Our revenue footprint and domestic platform are focused in the areas of greatest demand in today's economy. We continue to benefit from our clients' desire for a flexible workforce during the slow economic recovery, combined with significant uncertainty in regulatory, tax and health care reform. All of this bodes well for the future of our firm.

The objectives that we established for 2011 were to further penetrate existing Strategic Accounts, capture additional client share and selectively target new accounts while our service offerings and business model add value to our clients.

Our Strategic Accounts program, supported by the National Recruiting Center, has continued its steady growth. At the same time, the growing needs for flexible staffing at small- and medium-sized customers, particularly in the second half of the year, has allowed us to sequentially improve the bill-pay spreads in our Technology Flex business, more typical of what we have seen in past more traditional economic recoveries.

And looking back on 2011, we also believe that the staffing industry performance has been significantly different -- oops, I'm sorry. I had 2 pages stuck together.

We believe that the uncertain economic outlook in 2011 negatively impacted the valuation of Kforce and other staffing stocks disproportionately. The firm was aggressive in response and was able to repurchase 5.7 million shares of stock during the year, which represented 13.8% of outstanding shares for a total of 59.6 million.

Looking forward to 2012, we remain committed in our belief the temporary staffing penetration, which has improved from 1.34% at the beginning of this economic cycle and is currently 1.82% of the workforce, will achieve historic highs in the U.S. during this economic expansion.

We believe the strengthening demand for our services as a result of this trend will only be enhanced if economic growth accelerates. Our strategic -- our strategy remains intact as we believe there remained significant opportunity for continued strong growth in our Tech and FA businesses, as well as our Health Information Management business, which is well positioned for continued success through the implementation of ICD-10 and electronic medical records. We expect our Clinical Research business to perform reasonably well as we navigate the rapidly changing environment in the pharmaceutical and biotech industries, as blockbuster drugs come off patent.

Our Government business is expected to continue to face a challenging environment, although our team is competing effectively. Overall, the demand for our services continues to improve, and we expect continued strong revenue growth.

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