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What changed in KFORCE INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of KFORCE INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+244 added−262 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-23)

Top changes in KFORCE INC's 2024 10-K

244 paragraphs added · 262 removed · 179 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

46 edited+27 added−33 removed9 unchanged
Biggest changeIn addition, the college-level unemployment rate, which we believe serves as a better proxy for professional employment, and therefore aligns well with the consultant and candidate population that Kforce most typically serves, increased to 2.1% in December 2023, from 1.9% in December 2022. 3 Table of Contents Business Strategies Our primary business strategies are driving long-term shareholder value by achieving above-market revenue growth within the domestic technology solutions space, making prudent investments to enhance our efficiency and effectiveness within our consistent operating model, and significantly improving our profitability as we progress towards double digit operating margins.
Biggest changeIn addition, the college-level unemployment rate, which we believe serves as a better proxy for professional employment, and therefore aligns well with the consultant and candidate population that Kforce most typically serves, increased to 2.4% in December 2024, from 2.1% in December 2023.
Insurance Kforce maintains a number of insurance policies, including general liability, automobile liability, workers’ compensation and employers’ liability, liability for certain foreign exposure, umbrella and excess liability, property, crime, fiduciary, directors and officers, employment practices liability, cybersecurity, professional liability and excess health insurance coverage.
Insurance Kforce maintains a number of insurance policies, including directors and officers, cybersecurity, professional liability, employment practices liability, general liability, umbrella and excess liability, excess health insurance coverage, workers’ compensation and employers’ liability, crime, property, fiduciary, automobile liability, and liability for certain foreign exposure.
VMS’ are also offered through independent providers. Typically, MSPs, VMOs and/or VMS providers charge staffing firms administrative fees ranging from 1% to 4% of revenue. In addition, the aggregation of services by MSPs for their clients into a single program can result in significant buying power and, thus, pricing power.
VMS providers are also offered through independent providers. MSPs, VMOs and/or VMS providers charge staffing firms administrative fees typically ranging from 1% to 4% of revenue. In addition, the aggregation of services by MSPs for their clients into a single program can result in significant buying power and, thus, pricing power.
Over the last decade, we have driven significant, strategic change at Kforce, including but not limited to, streamlining the focus of our business on providing technology talent solutions. In alignment with this goal, since 2008, we have completed various divestitures of businesses that did not relate to our core business.
Over the last decade, we have driven significant, strategic change at Kforce, including streamlining the focus of our business on providing technology talent solutions. In alignment with this goal, since 2008, we have completed various divestitures of businesses that did not relate to our core business.
The talent solutions we offer our clients in our FA business include traditional finance and accounting roles, such as: finance, planning and analysis; business intelligence analysis; general accounting; transactional accounting (e.g., payables, billing, cash applications, receivables, etc.); business and cost analysis; and taxation and treasury.
The talent solutions we offer our clients in our FA business generally include traditional finance and accounting roles, such as: financial planning and analysis; business intelligence analysis; general accounting; transactional accounting (e.g., payables, billing, cash applications, receivables, etc.); business and cost analysis; and taxation and treasury.
ITEM 1. BUSINESS. COMPANY OVERVIEW Kforce Inc., along with its subsidiaries (collectively, “Kforce”), is a solutions firm specializing in technology and finance and accounting professional staffing services. Our KNOWLEDGEforce ® empowers industry-leading companies to achieve their digital transformation goals. We curate teams of technical experts who build solutions custom-tailored to each client's needs.
ITEM 1. BUSINESS. COMPANY OVERVIEW Kforce Inc., along with its subsidiaries (collectively, “Kforce”), is a solutions firm specializing in technology, finance and accounting, and other professional staffing services. Our KNOWLEDGEforce ® empowers industry-leading companies to achieve their digital transformation goals. We curate teams of technical experts who deliver solutions custom-tailored to each of our client's needs.
Regulatory Environment Staffing and solutions firms are generally subject to one or more of the following types of government regulations: (1) regulation of the employer/employee relationship, such as wage and hour regulations, payroll tax withholding and reporting, immigration/visa regulations, as well as social security and other retirement, anti-discrimination, employee benefits and workers’ compensation regulations; (2) registration, licensing, recordkeeping and reporting requirements; and (3) worker classification regulations.
Regulatory Environment Staffing and solutions firms are generally subject to the following types of government regulations and enforcement: (1) regulation of the employer/employee relationship, such as wage and hour regulations, payroll tax withholding and reporting, immigration / visa regulations, as well as social security and other retirement, anti-discrimination, employee benefits and workers’ compensation regulations; (2) registration, licensing, recordkeeping and reporting requirements; and (3) worker classification regulations.
We will continue to support certain clients with whom we have long-standing relationships and that are strategically important to our overall success by providing consultants in lower skill roles (i.e. loan servicing; customer and call center support; data entry; and other administrative roles).
We will selectively continue to support certain clients with whom we have long-standing relationships and that are strategically important to our overall success by providing consultants in lower skill roles (i.e. mortgage servicing; customer and call center support; data entry; and other lower skilled administrative roles).
Bureau of Labor Statistics and SIA, temporary employment figures and trends are important indicators of staffing demand from an economic standpoint. The penetration rate (the percentage of temporary staffing to total employment) decreased to 1.8% in December 2023, from 2.0% in December 2022, while the unemployment rate, increased to 3.7% in December 2023 from 3.5% in December 2022.
Bureau of Labor Statistics and SIA, temporary employment figures and trends are important indicators of staffing demand from an economic standpoint. The penetration rate (the percentage of temporary staffing to total employment) decreased to 1.7% in December 2024, from 1.8% in December 2023, while the unemployment rate, increased to 4.1% in December 2024 from 3.7% in December 2023.
According to the September 2023 SIA report, the technology temporary staffing industry and finance and accounting temporary staffing industry are expected to generate projected revenues of $43 billion and $9 billion, respectively, in 2024. Based on these projected revenues, our current market share is nearly 3%.
According to the September 2024 SIA report, the technology temporary staffing industry and finance and accounting temporary staffing industry are expected to generate projected revenues of $40 billion and $9 billion, respectively, in 2025. Based on these projected revenues, our current market share is approximately 3%.
Although we experienced a decline in 2023, our Technology business grew 18% in 2022 on a year-over-year billing day basis after growing more than 22% in 2021 on a year-over-year billing day basis. The average bill rate in the fourth quarter of 2023 was approximately $90 per hour, which remained stable as compared to the fourth quarter of 2022.
Although we experienced declines in 2024 and 2023, our Technology business grew 18% in 2022 and more than 22% in 2021, on a year-over-year billing day basis. The average bill rate in the fourth quarter of 2024 was approximately $90 per hour, which remained flat as compared to the fourth quarter of 2023.
Human Capital Management and Environmental, Social and Governance (“ESG”) Matters For over 60 years, Kforce has been rooted in stewardship, integrity and compassion. As a human capital solutions business, we are driven by the desire to serve others, provide meaningful work and opportunities to a diverse workforce, strengthen our communities and shape a more sustainable world.
Human Capital Management For over 60 years, Kforce has been rooted in stewardship, integrity and compassion. As a human capital solutions business, we are driven by the desire to serve others, provide meaningful work and opportunities to a diverse workforce, strengthen our communities and shape a more sustainable world. Our work environment is shaped by our people.
A report based on revenues published by SIA in 2023 indicated that, in the United States, Kforce is one of the largest publicly-traded specialty staffing firms, the sixth largest technology temporary staffing firm and the eleventh largest finance and accounting temporary staffing firm.
A report based on revenues published by SIA in 2024 indicated that, in the United States, Kforce is among the largest publicly-traded specialty staffing firms, the sixth largest technology temporary staffing firm and the tenth largest finance and accounting temporary staffing firm.
The strength of the secular drivers of demand in technology accelerated significantly coming out of both the Great Recession, with advancements in mobility and cloud computing, among many others, and the 2020 COVID-19 Pandemic, with further digitalization of businesses and the continued headlines around Generative AI technologies.
The strength of the secular drivers of demand for technology accelerated significantly exiting both the Great Recession, with among many others, advancements in mobility and cloud computing, and the 2020 COVID-19 Pandemic, with further digitalization of businesses and the continued focus on Generative AI technologies.
The content on any website referred to in this Form 10-K is not incorporated by reference in this Form 10-K unless expressly noted.
The content on any website referred to in this Form 10-K (including our 2024 Sustainability Report) is not incorporated by reference in this Form 10-K unless expressly noted.
Our business strategies are focused on continuing to penetrate our share of the U.S. temporary staffing industry and continue investing in our capability to provide higher level technology services and solutions while also integrating that capability within our overall Technology business.
We are intensely focused on continuing to expand our market share of the U.S. technology temporary staffing industry and to further invest in our capability to provide higher level technology services and solutions while also integrating that capability within our overall Technology business.
These programs are part of our thoughtful and comprehensive response to support the physical and mental health of our employees by providing tools and resources that each employee can use to improve or maintain their health.
We provide our associates and consultants, and their families, with access to a variety of flexible and convenient health and wellness programs. These programs are part of our thoughtful and comprehensive response to support the physical and mental health of our employees by providing tools and resources that each employee can use to improve or maintain their health.
We believe the following strategic priorities will help us achieve our objectives. Back-Office Transformation . Over the last five to ten years, we have been investing in high quality technologies that have significantly bolstered our associates’ productivity and enhanced our ability to effectively and efficiently support our clients, consultants and candidates.
Over the last five to ten years, we have been meaningfully investing in high quality technologies that have significantly bolstered our associates’ productivity and enhanced our ability to effectively and efficiently support our clients, consultants and candidates.
Our Consultants The majority of our consultants are directly employed by Kforce, including domestic workers and foreign workers whose visas are sponsored by Kforce. As the employer of the vast majority of our consultants, Kforce is responsible for the employer’s share of applicable payroll taxes (“FICA”), federal and state unemployment taxes, workers’ compensation insurance and other direct labor costs.
As the employer of the vast majority of our consultants, Kforce is responsible for the employer’s share of applicable payroll taxes (“FICA”); federal and state unemployment taxes; workers’ compensation insurance; health, welfare and retirement benefits and other direct labor costs.
We provide services to clients across virtually every industry with a diversified footprint in, among others, financial and business services, communications, insurance, retail and technology. We have continued to broaden our service offerings beyond traditional staffing to include managed teams and project solutions.
We provide services to clients across virtually every industry with a diversified footprint in, among others, financial and business services, communications, insurance, retail and technology.
This multi-year effort was initiated following a comprehensive assessment of our current state, and this assessment confirmed our belief that we have a tremendous opportunity to fundamentally transform and create advancements in our back office functions.
Overall, we believe the benefits of streamlining our processes will create a positive impact resulting in increased client satisfaction and improved associate productivity. This multi-year effort was initiated following a comprehensive assessment of our current technological position, which confirmed our belief that we have a tremendous opportunity to fundamentally transform and create advancements in our back-office functions.
We believe these initiatives are a testament to how much we value and invest in our people. Well-Being, Flexibility and Balance - The success of our business is fundamentally connected to the well-being of our people. We provide our associates and consultants, and their families, with access to a variety of flexible and convenient health and wellness programs.
We maintain a commitment to our employees’ well-being, flexibility and balance; learning and development; and diversity, equity and inclusion. We believe these initiatives are a testament to how much we value and invest in our people. Well-Being, Flexibility and Balance The success of our business is fundamentally connected to the well-being of our people.
Our Technology Business We provide talent solutions to our clients in highly skilled areas including, but not limited to, systems/applications architecture and development (mobility and/or web); data management and analytics; cloud architects and engineers; business and artificial intelligence (“AI”); machine learning; project and program management; and network architecture and security.
Our Technology Business We provide talent solutions to our clients in highly skilled areas including, but not limited to, systems/applications architecture and development (mobility and/or web); data management and analytics; cloud architecture and engineering; business and artificial intelligence (“AI”); machine learning; project and program management; and network architecture and security. 3 Table of Contents Our service offerings have evolved over the years beyond traditional staffing assignments to include solutions-oriented engagements; this evolution was based on the demand we were seeing from our clients.
We provide services to clients in a variety of industries with a diversified footprint in, among others, the financial services, business services, healthcare and manufacturing sectors.
We provide services to clients in a variety of industries with a diversified footprint in, among others, the financial services, business services, healthcare and manufacturing sectors. Our overall average bill rate in the fourth quarter of 2024 was approximately $51 per hour, which remained flat as compared to the fourth quarter of 2023.
Within our managed teams and project solutions offerings, we also face competition from global, national and regional accounting, consulting and advisory firms, as well as national and regional strategic consulting and systems implementation firms.
The local firms are typically operator-owned, and generally each geographic market has at least one significant competitor. Within our solutions offerings, we also face competition from global, national and regional accounting, consulting and advisory firms, as well as national and regional strategic consulting and systems implementation firms.
As the employer, Kforce is responsible for the employer’s share of FICA, federal and state unemployment taxes, workers’ compensation insurance and other direct labor costs relating to our employees. The more pertinent health, welfare and retirement benefits provided to employees and consultants employed directly by us include: comprehensive health insurance, workers’ compensation benefits and retirement plan options.
As the employer, Kforce is responsible for the employer’s share of FICA, federal and state unemployment taxes, workers’ compensation insurance, providing healthcare and retirement plan options, and other direct labor costs relating to our employees. We also provide paid leave for our associates and certain consultants. We have no collective bargaining agreements covering any of our employees.
For our Flex services, we provide our clients with qualified individuals (“consultants”), or teams of consultants, on a finite basis when the consultant's set of skills and experience is the right match for our clients. For our Direct Hire services, we identify qualified individuals (“candidates”) for permanent placement with our clients. We further describe our two operating segments below.
Our Technology business comprises 92% of our overall revenues, and the remainder is generated by our FA business. For our Flex services, we provide our clients with qualified individuals (“consultants”), or teams of consultants, on a finite basis when the skills and experience of the consultants are the right match for our clients.
To attract consultants and candidates, we emphasize our ability to provide competitive compensation and benefits; quality and varied assignments; scheduling flexibility and permanent placement opportunities, all of which are important to Kforce being the employer of choice.
Kforce does not currently provide MSP or VMO services directly to our clients; rather, our strategy has been to work with MSPs, VMOs and VMS providers that enable us to better extend our services to current and prospective clients. 6 Table of Contents To attract consultants and candidates, we emphasize our ability to provide: competitive compensation and benefits; quality and varied assignments; scheduling flexibility and permanent placement opportunities, all of which are important to Kforce being the employer of choice.
We also provide paid leave for our associates and certain consultants. We have no collective bargaining agreements covering any of our employees, have never experienced any material labor disruption and are unaware of any current efforts or plans of our employees to organize. Because we operate in a complex regulatory environment, one of our top priorities is compliance.
We have not experienced any material labor disruption and are unaware of any current efforts or plans of our employees to organize. Because we operate in a complex regulatory environment, one of our top priorities is compliance. For more discussion of the potential impact that the regulatory environment could have on Kforce’s financial results, refer to Item 1A. Risk Factors.
Learning and Development - To turn a job into a career, we believe people need clear and attainable paths to grow. We are committed to investing in the tools, resources and trainings necessary for our people to excel in all stages of their career.
We are committed to investing in the tools, resources and trainings necessary for our people to excel in all stages of their career. We believe our leadership development programs help people grow their skills from the moment they join our Firm through the most senior level of their careers.
We believe that the organic investments that we have made in our managed teams and project solutions capabilities over the last several years continues to expand Kforce’s total addressable market into the information technology solutions space. While reports differ in the size of the information technology solutions addressable market, IBIS World has indicated it is greater than $500 billion.
We believe that the organic investments that we have made in our solutions capabilities over the last several years has meaningfully expanded Kforce’s total addressable market into the technology solutions space.
We are continuing to make investments in these technologies, and others, to enhance our capabilities and processes in ways we believe will allow us to better evaluate and shape business opportunities with our clients and more seamlessly match candidates to assignments and projects.
We continue to make investments in our technologies and enhance our sales and delivery capabilities and processes in ways we believe will allow us to better evaluate and shape business opportunities with our clients and more seamlessly match candidates to assignments and projects. 5 Table of Contents Our last significant investment in back-office technologies was more than 15 years ago, despite the complexities of our business and client requirements having increased significantly.
While our Technology business is not immune to economic turbulence, we believe there is a critical need for innovation to support business strategies and sustain relevancy in today’s rapidly changing marketplace. 2 Table of Contents Our FA Business Over the last several years, we have been strategically repositioning our FA business to focus on more highly skilled assignments that are less susceptible to technological change and automation and that more closely aligned with our Technology business.
Our FA Business Over the last several years, we have repositioned our FA business to focus on more highly skilled assignments that are less susceptible to technological change and automation and more closely aligned with our Technology business.
We measure the quality of our service to and support of our consultants using staffing industry benchmarks and net promoter score (“NPS”) surveys conducted by a specialized, independent third-party provider. Additionally, we continually seek direct feedback from our consultants to help us identify opportunities to refine our services.
A key ingredient to our overall success in attracting and retaining our consultants is fostering a positive experience for our consultants and offering rewarding assignments with world-class companies. We measure the quality of our service to and support of our consultants using staffing industry benchmarks and net promoter score (“NPS”) surveys conducted by a specialized, independent third-party provider.
We continue to believe that technology is at the epicenter of how business is conducted and investments in technology are simply not optional in today’s competitive and disruptive business climate.
Our Industry Overview and Addressable Market Opportunity We assist our clients, which are principally market-leading companies in their respective industries, in solving their complex business challenges and digitally transforming their businesses. We continue to believe that technology is at the epicenter of how business is conducted and investments in technology are necessary in today’s competitive and disruptive business climate.
While the portion that is addressable by Kforce is debatable, what is clear to us is that our addressable market is significantly greater than the $43 billion and $9 billion for the technology and finance and accounting temporary staffing industries, respectively. Based on data published by the U.S.
While reports differ in the size of the technology solutions addressable market, IBIS World has indicated it is greater than $700 billion. While the portion that is addressable by Kforce is debatable, we believe that our addressable market is many times greater than the $40 billion for the technology temporary staffing industry. Based on data published by the U.S.
People As of December 31, 2023, Kforce employed approximately 1,800 associates and had 8,600 consultants on assignment with our clients, of which a significant majority of these consultants are employed directly by Kforce. Our work environment is shaped by our people. We maintain a commitment to well-being, flexibility and balance; learning and development; and diversity, equity and inclusion.
As of December 31, 2024, Kforce employed approximately 1,700 associates and had 8,000 consultants on assignment with our clients, of which a significant majority of these consultants are employed directly by Kforce. 7 Table of Contents Availability of Reports and Other Information Our internet address is www.kforce.com.
Evolving our Nearshore and Offshore Delivery Strategy . Virtually all of our revenues are generated by helping our clients solve their most complex technology challenges through our onshore delivery model. Thus, the predominant worksite for our consultants is within the U.S.
Evolving our Nearshore and Offshore Delivery Strategy. Historically, the overwhelming majority of our revenues were generated by helping our clients solve their most complex technology challenges through our onshore delivery model. This onshore delivery capability was complemented by a high-quality vendor network where our clients required a multi-shore delivery model (onshore, nearshore and offshore).
The September 2023 report published by Staffing Industry Analysts (“SIA”) stated that temporary technology staffing was forecasted to decline by 3% in 2023 and grow by 5% in 2024. Technology, as a discipline, continues to be project driven, even amidst generational changes like AI.
We are continuing to further integrate and prioritize this capability into our Technology business. The September 2024 report published by Staffing Industry Analysts (“SIA”) stated that temporary technology staffing was forecasted to decline by 7% in 2024 and grow by 5% in 2025.
These scalable, flexible outcomes are shaped by deep market knowledge, thought leadership and our multi-industry expertise. Our integrated approach is rooted in 60 years of proven success deploying highly skilled professionals on a temporary (“Flex”) and permanent (“Direct Hire”) basis.
These scalable, flexible outcomes are shaped by deep market knowledge, thought leadership and our multi-industry expertise.
We have not made meaningful investments in our back-office technologies in more than 15 years while the complexities of our business and client requirements have increased significantly. We have been meeting these complexities and requirements by adding dedicated Firm resources, which is not a scalable solution as we continue to grow.
We have been primarily meeting these complexities and requirements by incrementally adding internal resources, which is not a scalable solution as we continue to grow and have a greater mix of solutions-oriented engagements. We believe our multi-year transformation program for our back-office technology will enhance the support to our Firm, including our clients, candidates and consultants.
Revenue for our FA business decreased 27.5% to $147.2 million in 2023 compared to 2022, which was primarily driven by the repositioning efforts of our business towards higher skill roles and the continued uncertainty in the macroeconomic environment.
Revenue for our FA business decreased 23.5% to $112.6 million in 2024 compared to 2023, which was primarily driven by the ongoing uncertainty in the macroeconomic environment. 4 Table of Contents Our Consultants The majority of our consultants are directly employed by Kforce, including domestic workers and foreign workers whose visas are sponsored by Kforce.
What remains clear to us is that the broad and strategic uses of technology, including AI technologies, will continue to evolve and play an increasingly instrumental role in powering businesses. Over the long term, we believe that AI and other technologies will continue to drive demand for, rather than replace technology resources, and that the pace of change will accelerate.
While all economic cycles behave a bit differently, we believe that the broad and strategic uses of technology, including the early-stage technology evolution associated with AI, will continue to play an increasingly instrumental role in powering businesses.
The shift in strategy to Office Occasional ® has allowed us to introduce a new design and streamline our overall physical footprint, which has led to a decline in overall square footage compared to pre-pandemic periods. We believe that our Office Occasional ® model allows our associates to design their workdays; thus, additionally contributing to their health and well-being.
We believe that our Office Occasional® model allows our associates to design their workdays; thus, additionally contributing to their health and well-being. Learning and Development To turn a job into a career, we believe people need clear and attainable paths to grow.
There are a multitude of technology projects that need to be addressed to remain competitive, irrespective of economic performance. Our Technology revenues declined 8.2% year-over-year (7.8% per billing day), to $1.4 billion in 2023.
We believe there are a multitude of technology projects that need to be addressed by our clients in order for them to remain competitive and to effectively change how they operate and deliver value to their customers, irrespective of economic performance.
We believe we have made solid progress in this repositioning effort as evidenced by our overall average bill rate in our FA business of $51 per hour in the fourth quarter of 2023, which improved from $46 per hour, or 9.8%, as compared to the fourth quarter of 2022 and from $37 per hour, or 37.8%, as compared to the fourth quarter of 2019.
Notably, our average bill rate in the fourth quarter of 2019, which prior to the repositioning, was approximately $37 per hour.
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Kforce serves clients across a diverse set of industries and organizations of all sizes, but we place a particular focus on serving Fortune 500 and other large companies. Each year, over 20,000 talented consultants provide services to a significant majority of the Fortune 500. Together, we deliver Great Results Through Strategic Partnership and Knowledge Sharing ® .
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Our integrated approach is rooted in more than 60 years of proven success deploying highly skilled professionals on traditional staffing assignments or as part of a team of professionals who are responsible for delivering solutions to our clients, both of which are considered temporary (“Flex”) in nature.
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Our Technology and Finance and Accounting (“FA”) businesses represent our two operating segments. Our Technology business comprises 90% of our overall revenues, and the remainder is generated by our FA business.
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We also place highly skilled professionals in a permanent (“Direct Hire”) role with our clients. Each year, approximately 18,000 talented experts work with Fortune 500 and other leading companies. Together, we deliver Great Results Through Strategic Partnership and Knowledge Sharing ® .
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We believe our clients consider access to the right talent to be essential to their success and see our services as a cost-effective solution for their project requirements as demonstrated by more than 90% of our managed teams and project solutions being executed within existing clients.
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During 2024, we established a development center in Pune, India, one of the leading technology cities in India. Following its formation, our India development center began supporting project engagements with our U.S.-based clients in January 2025.
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Kforce has been successfully winning more complex engagements due to the strong, long-standing partnerships we have built with our clients, our capability in identifying quality technology talent, and our reputation for delivering quality services. We are continuing to further integrate this capability into our Technology business.
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We believe this development center, when combined with a strong U.S. sales and delivery capability and a high-quality vendor network, will help us to more fully address the evolving needs of our clients, whether onshore, nearshore or offshore. $1 Billion Total Capital Returned to Shareholders Since 2007 92% Revenue Concentrated in Technology Staffing and Solutions #1 Recognized Brand by Technology Consultants per Staffing Industry Analysts 1962 Year Founded KFRC Listed on New York Stock Exchange 18,000 Consultants Placed Annually Our Technology and Finance and Accounting (“FA”) businesses represent our two reportable segments.
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Our average assignment duration has been steadily increasing over the last several years and is currently 10 months.
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For our Direct Hire services, we identify qualified individuals (“candidates”) for permanent placement with our clients. We further describe our two reportable segments below.
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The more significant health, welfare and retirement benefits include comprehensive health insurance, workers’ compensation benefits, and retirement plan options. A key ingredient to our overall success in attracting and retaining our consultants is fostering a positive experience for our consultants and offering rewarding assignments with world-class companies.
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Clients continue to prioritize efficient access to highly skilled talent and view our solutions offering as a cost-effective solution to meet their technology project requirements.
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Our 2023 consultant NPS are well above current industry averages and near the world class designation. Industry Overview and Addressable Market Opportunity We assist our clients, which are principally market-leading companies in their respective industries, in solving their complex business challenges and digitally transform their businesses.
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This offering has continued to be a positive contributor and catalyst to our Technology business over the last several years and we expect this offering to continue to represent a growing mix of our overall Technology revenue footprint.
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Our customer relationship management (“CRM”) and talent relationship management (“TRM”) capabilities are now on the Microsoft Dynamics platform, which went live in March 2017 and June 2020, respectively.
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The demand for our solutions engagements contributed positively to the results of our Technology business in 2024, while our traditional staff augmentation offering has been the driver of our overall Technology revenue declines year over year.
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Our multi-year transformation program for our back-office technology will enhance the support to our Firm, including our clients, candidates and consultants. Overall, the benefits of streamlining our processes will create a positive impact resulting in increased client satisfaction and improved consultant productivity.
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Our integrated strategy efforts capitalize on the strong relationships we have with world-class companies by utilizing our existing sales teams, recruiters, consulting solutions professionals, technology practice experts, among other teams within the Firm, to provide higher value engagements that effectively and cost efficiently address our clients’ challenges.
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In 2023, we made tremendous progress advancing this program by selecting Workday as our future state enterprise cloud application for human capital management and financial reporting, and also selected our systems integrator to support us in the design, configuration and implementation of these solutions.
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In the next update from SIA, which would typically be released in the April 2025, we would expect growth expectations to come down. Technology, as a discipline, continues to be project driven, even amidst generational changes like AI.
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In 2024, we expect to continue allocating significant investments towards this initiative as we initiate detailed design and implementation steps. We are incredibly fortunate to be partnering with Workday and Microsoft, two companies at the forefront of investing in AI, which puts us in an ideal position to take advantage of these technologies as they become available. Integrated Strategy.
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Our Technology revenues declined 6.6% year over year to $1.3 billion in 2024 (7.4% on a billing day basis), which was primarily driven by the ongoing uncertainty in the macroeconomic environment that has largely persisted since the second half of 2022.
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Our clients are increasingly looking to us to deliver services across a spectrum from traditional staff augmentation to managed project solutions. We have been organically investing in our managed teams and project solutions capabilities over the last five years, and this offering has been positively contributing to our financial results.
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Our average assignment duration was 10 months in 2024, which is consistent with the prior period.
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We expect to continue to make investments in advancing our capabilities in this service offering and further integrating this capability within our overall Technology business. Our integration strategy is intended to harness the longevity of our relationships, primarily with Fortune 500 companies, and execute a unified account pursuit and delivery approach that broadly leverages our capabilities across the Firm.
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As we have previously articulated, over the long term, we believe that AI and other innovative technologies will follow historic patterns where improved efficiency ultimately drives greater demand for, rather than replace technology resources, and that the pace of change will continue to accelerate. We believe we are ideally positioned to meet that demand.
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We have experienced an increasing desire by our clients in certain engagements for a blended delivery model leveraging onshore, nearshore and offshore resources to gain cost efficiencies and increase the speed of technological change. In these cases, we leverage our qualified partner network where we have long-standing relationships and proven track records.
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While our Technology business is not immune to economic turbulence, we continue to believe there is a critical need for innovation to support business strategies and sustain relevancy in today’s rapidly changing marketplace.
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In the longer-term, we believe there is a tremendous opportunity for us to develop a more scalable nearshore and offshore delivery capability. Competition We operate in a highly competitive and fragmented staffing industry comprised of large national and local staffing and solutions firms. The local firms are typically operator-owned, and generally each geographic market has at least one significant competitor.
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Additionally, we continually seek direct feedback from our consultants to help us identify opportunities to refine our services. Our 2024 consultant NPS are well above current industry averages and near the world class designation.
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We believe that our physical presence in larger markets, concentration of service offerings in areas of greatest demand (especially technology), national delivery teams, centralized delivery channels for foreign consultants (including those obtained via visa programs that optimize distribution and strengthen compliance), longevity of our brand and reputation in the market, along with our dedicated compliance and regulatory infrastructure, all provide a competitive advantage.
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As we continue to deliver on our solutions engagements with clients and further mature our capabilities in our digital, cloud, data and application engineering practice areas, we would expect our ability to capture an increasing portion of the overall technology solutions market to improve.
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Kforce does not currently provide MSP or VMO services directly to our clients; rather, our strategy has been to work with MSPs, VMOs and VMS providers that enable us to better extend our services to current and prospective clients. 4 Table of Contents We believe that the principal elements of competition in our industry are differentiated offerings; reputation; the ability of consultants to work on assignments with innovative and leading companies; the availability and quality of associates, consultants and candidates; the level of service provided; effective monitoring of job performance; scope of geographic service; the types of service offerings; and compliance orientation.
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Our Strategic Priorities Our strategic priorities are centered around driving greater long-term shareholder value by achieving above-market revenue growth, making prudent investments to enhance our efficiency and effectiveness, and significantly improving our profitability as we progress towards double digit operating margins. We believe the following strategic priorities will help us achieve our objectives. Back-Office Transformation.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may be required to incur significant expenses to comply with mandatory privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations. We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses suffered as a result of a breach of our systems or information.
Biggest changeWe maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses suffered as a result of a breach of our systems or information. Our information technology may not provide sufficient protection, and as a result we may lose significant information about us, our employees, candidates, consultants, vendors, or clients.
Even in a strong demand environment, without significant uncertainty and volatility, it is difficult for us to forecast future demand for our services due to the inherent challenge in forecasting the strength of economic cycles, availability of consultants and candidates and the short-term nature of many of our agreements.
Even in a strong demand environment, without significant uncertainty and volatility, it is difficult for us to forecast future demand for our services due to the inherent challenge in forecasting the strength of economic cycles, availability of candidates and consultants and the short-term nature of many of our agreements.
Any issues or downtime experienced by the provider may impact our operations and productivity. Third-party software solutions may not always fully align with our specific business requirements or workflows. Customization options might be limited, making it challenging to tailor the software to our exact needs, which may hinder our ability to optimize processes and achieve maximum efficiency.
Any issues or downtime experienced by the provider may impact our operations and productivity. Third-party software solutions may not always fully align with our specific business requirements or workflows. Customization options might be limited, making it challenging to tailor the software to meet our exact needs, which may hinder our ability to optimize processes and achieve maximum efficiency.
Due to the substantial number of state and local jurisdictions in which we operate and the disparity among state and local laws that continues to accelerate, there also is a risk that we may be unaware of, or unable to adequately monitor, actual or proposed changes in, or the interpretation of, the laws or governmental regulations of such states and localities.
Due to the substantial number of state, local and international jurisdictions in which we operate and the disparity among state and local laws that continues to accelerate, there also is a risk that we may be unaware of, or unable to adequately monitor, actual or proposed changes in, or the interpretation of, the laws or governmental regulations of such states and localities.
The competition among staffing and solutions firms is intense and we face significant competition in the markets we serve. We compete in national, regional and local markets with full-service and specialized temporary staffing and consulting companies.
The competition among staffing and solutions companies is intense and we face significant competition in the markets we serve. We compete in national, regional and local markets with full-service and specialized temporary staffing and consulting companies.
Kforce’s information systems may not perform as expected and are vulnerable to damage or interruption, including natural disasters, fire or casualty, theft, technical failures, terrorist acts, cybersecurity breaches, power outages, telecommunications failures, physical or software intrusions, computer viruses, employee errors or other events. While many of our systems are cloud-based, certain of our systems are still on location.
Kforce’s information systems may not perform as expected and are vulnerable to damage or interruption, including natural disasters, fire or casualty, theft, technical failures, terrorist acts, cybersecurity breaches, power outages, telecommunications failures, physical or software intrusions, computer viruses, employee errors or other events. While many of our systems are cloud-based, certain of our systems are still on premise.
Kforce depends on the proper functioning of its information systems. Kforce is dependent on the proper functioning of information systems in operating our business. Critical information systems are used in every aspect of our daily operations, perhaps most significantly, in the identification and matching of resources to client assignments and in the client billing and consultant or vendor payment functions.
Kforce is dependent on the proper functioning of information systems in operating our business. Critical information systems are used in every aspect of our daily operations, perhaps most significantly, in the identification and matching of resources to client assignments and in the client billing and consultant or vendor payment functions.
In addition, the stock market in general, especially NASDAQ, along with market prices for staffing companies, has experienced historical volatility that has often been unrelated to the operating performance of these companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating results.
In addition, the stock market in general, along with market prices for staffing companies, has experienced historical volatility that has often been unrelated to the operating performance of these companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating results.
In addition, our insurance coverage may not cover all potential claims against us, may require us to meet a deductible or may not continue to be available to us at a reasonable cost. 8 Table of Contents Kforce’s success depends upon retaining the services of its management team and key operating employees.
In addition, our insurance coverage may not cover all potential claims against us, may require us to meet a deductible or may not continue to be available to us at a reasonable cost. Kforce’s success depends upon retaining the services of its management team and key operating employees.
In addition, a security breach by us could cause serious harm to our business, damage our reputation and prevent us from being eligible for further work on sensitive or classified systems for federal government clients. 10 Table of Contents General Risk Factors Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting.
In addition, a security breach by us could cause serious harm to our business, damage our reputation and prevent us from being eligible for further work on sensitive or classified systems for federal government clients. General Risk Factors Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting.
Misconduct by our employees could include intentional or unintentional failures to comply with federal government regulations, engaging in unauthorized activities, or improper use of our clients’ sensitive or classified information, potentially in collusion with third parties, which could result in regulatory or criminal sanctions against us and serious harm to our reputation.
Misconduct by our employees or consultants could include intentional or unintentional failures to comply with federal government regulations, engaging in unauthorized or fraudulent activities, or improper use of our clients’ sensitive or classified information, potentially in collusion with third parties, which could result in regulatory or criminal sanctions against us and serious harm to us and our clients.
Provisions in Kforce’s articles and bylaws and Florida law may have certain anti-takeover effects. Kforce’s articles of incorporation and bylaws and Florida law contain provisions that may have the effect of inhibiting a non-negotiated merger or other business combination. In particular, our articles of incorporation provide for staggered Board terms and permit the removal of directors only for cause.
Kforce’s articles of incorporation and bylaws and Florida law contain provisions that may have the effect of inhibiting a non-negotiated merger or other business combination. In particular, our articles of incorporation provide for staggered Board terms and permit the removal of directors only for cause.
If this occurs, we may not be able to repay our debt or we may be forced to refinance on terms not acceptable to us, which could have a material adverse effect on our operating results and financial condition. ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
If this occurs, we may not be able to repay our debt or we may be forced to refinance on terms not acceptable to us, which could have a material adverse effect on our operating results and financial condition. 13 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
This lack of flexibility and adaptability can hinder the Firm’s growth potential, which could have a material adverse effect on our business. Kforce may be adversely affected by utilizing third-party software providers. An inherent risk of using a third-party software provide is dependency on their performance, reliability and availability.
This lack of flexibility and adaptability can hinder the Firm’s growth potential, which could have a material adverse effect on our business. 9 Table of Contents Kforce may be adversely affected by utilizing third-party software providers. An inherent risk of using third-party software providers is the dependence on their performance, reliability and availability.
While we have policies, procedures and systems in place to prevent, deter and detect cyberattacks or security incidents, and, although we have not experienced a material data breach, we remain vulnerable to sophisticated techniques used to obtain unauthorized access, or cause system interruption, that change frequently and may not produce immediate signs of intrusion.
While we have policies, procedures and systems in place to prevent, deter and detect cyberattacks or security incidents, and, although, to our knowledge we have not experienced a material data breach as of the date of this report, we remain vulnerable to sophisticated techniques used to obtain unauthorized access, or cause system interruption, that change frequently and may not produce immediate signs of intrusion.
New business initiatives could also involve significant unanticipated challenges and risks, including not advancing our business strategy, not realizing the expected return on the investment, experiencing difficulty in implementing initiatives, or diverting management’s attention from our other businesses.
New business initiatives could also involve significant unanticipated challenges and risks, including, but not limited to: not advancing our business strategy; not realizing the expected return on the investment; experiencing difficulty in implementing initiatives, new processes and internal controls; or diverting management’s attention from our other businesses.
Relying on third-party solutions may result in higher costs over time, due to subscription fees and licensing costs for support or upgrades, which could have a material adverse effect on our financial results. Kforce may be exposed to unforeseeable negative acts by our personnel that could have a material adverse effect on our business.
Relying on third-party solutions may result in higher costs over time due to subscription fees and licensing costs, may become unavailable for a prolonged period of time, which could have a material adverse effect on our financial results. Kforce may be exposed to unforeseeable negative acts by our personnel that could have a material adverse effect on our business.
In this regard, we face various employment-related risks not covered by insurance, such as wage and hour laws and employment tax responsibility. Kforce may not be able to utilize the services of our third-party suppliers.
In this regard, we face various employment-related risks not covered by insurance, such as wage and hour laws and employment tax responsibility. Kforce may not be able to utilize the services of our third-party suppliers. We source some of our consultants as independent contractors or through independent third-party suppliers.
Kforce is highly dependent on the efforts, expertise and abilities of its leaders to drive the Firm’s strategic objectives and achieve future success. The loss of the services of any key executive for any reason could have a material adverse effect on Kforce.
Kforce is highly dependent on the efforts, expertise and abilities of its leaders to drive the Firm’s strategic priorities, achieve its financial objectives and generate long-term shareholder returns. The loss of the services of any key executive for any reason could have a material adverse effect on Kforce.
If our management is unable to certify the effectiveness of our internal controls, including those over our third-party vendors, our independent registered public accounting firm cannot render an opinion on the effectiveness of our internal controls over financial reporting, or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence, which could cause our stock price to decline.
If our management is unable to certify the effectiveness of our internal controls, including those over our third-party vendors, our independent registered public accounting firm cannot render an opinion on the effectiveness of our internal controls over financial reporting, or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence, which could cause our stock price to decline. 12 Table of Contents Provisions in Kforce’s articles and bylaws and Florida law may have certain anti-takeover effects.
Adverse changes in credit markets, including increases in interest rates, could increase our cost of borrowing and/or make it more difficult to refinance our existing indebtedness, if necessary. Kforce is subject to certain affirmative and negative covenants under our credit facility.
Borrowings under the credit facility are secured by substantially all of the tangible and intangible assets of the Firm. Adverse changes in credit markets, including increases in interest rates, could increase our cost of borrowing and/or make it more difficult to refinance our existing indebtedness, if necessary. Kforce is subject to certain affirmative and negative covenants under our credit facility.
A large part of our business entails employing individuals on a temporary basis and placing such individuals in client workplaces. Increased government regulation of the workplace or of the employer/employee relationship could have a material adverse effect on Kforce.
The vast majority of our business entails placing consultants on a staffing assignment (or as part of a project team) on a temporary basis and placing such individuals in client workplaces. Increased government regulation of the workplace or of the employer/employee relationship could have a material adverse effect on Kforce.
Any cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, corruption of data, misuse or theft of private or other sensitive information, or inadvertent acts by our associates, consultants or third-party independent contractors, could result in the disclosure or misuse of confidential or proprietary information, and could adversely impact our systems, services, operations, financial results and reputation with clients and potential clients.
Any cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, corruption of data, misuse or theft of private or other sensitive information, or inadvertent acts by our associates, consultants or third-party independent contractors, could result in the disclosure or misuse of confidential or proprietary information, and could adversely impact our systems, services, operations, financial results and reputation with clients and potential clients. 10 Table of Contents The collection, possession and use of personal information and data in conducting our business subjects us to legislative and regulatory burdens and compliance risk.
New business initiatives and strategic changes may divert management’s attention from normal business operations or may not be successful, which could have an adverse effect on our performance.
Decreases in market share could have a material adverse effect on our business, financial condition and operating results. New business initiatives and strategic changes may divert management’s attention from normal business operations or may not be successful, which could have an adverse effect on our performance.
The volatility also could impair our ability in the future to offer common stock as a source of additional capital or as consideration in the acquisition of other businesses, or as compensation for our key employees. Kforce may be negatively affected by outbreaks of disease, such as epidemics or pandemics.
The volatility also could impair our ability in the future to offer common stock as a source of additional capital or as consideration in the acquisition of other businesses, or as compensation for our key employees.
Risk Related to Cybersecurity and Technology Cybersecurity risks and cyber incidents could adversely affect our business and disrupt operations. We are continuously exposed to unauthorized attempts to compromise sensitive information from network or information technology used by our associates and consultants. Attacks on information technology systems continue to grow in frequency and sophistication.
We are continuously exposed to unauthorized attempts to compromise sensitive information from network or information technology used by our associates and consultants. Attacks on information technology systems continue to grow in frequency and sophistication.
Additionally, we require audits of certain third parties’ information technology processes on an annual basis. However, there can be no assurance that such parties will not experience cybersecurity incidents that could adversely affect our employees, consultants, customers and businesses, or that our audit or diligence processes will successfully deter or prevent such breach.
However, there can be no assurance that such parties will not experience cybersecurity incidents that could adversely affect our employees, consultants, customers and businesses, or that our audit or diligence processes will successfully deter or prevent such breach. Kforce depends on the proper functioning of its information systems.
Our corporate headquarters and data center are located in a hurricane-prone area. Failure or interruption of our critical information systems may require significant additional capital and management resources to resolve, which could have a material adverse effect on our business. Our failure to keep pace with technological change in our industry could potentially place us at a competitive disadvantage.
Our corporate headquarters and data center are located in a hurricane-prone area. Failure or interruption of our critical information systems may require significant additional capital and management resources to resolve, which could have a material adverse effect on our business. Use of AI may result in operational challenges, legal liability, reputational and privacy concerns, and competitive risks.
Additionally, uncharacteristic or significant weather conditions may increase in frequency or severity due to climate change and can affect travel and the ability of businesses to remain open, which could lead to decreased ability to offer our services and negatively affect our results of operations. 11 Table of Contents Kforce may maintain levels of debt that exposes us to interest rate risk and contains restrictive covenants that could trigger prepayment of obligations or additional costs.
Additionally, uncharacteristic or significant weather conditions may increase in frequency or severity due to climate change and can affect travel and the ability of businesses to remain open, which could lead to decreased ability to offer our services and negatively affect our results of operations.
Immigration laws and regulations can be significantly affected by changes in administration, other political developments and levels of economic activity. Current and future restrictions on the availability of such work visas could restrain our ability to employ the skilled professionals we need to meet our clients’ needs, which could have a material adverse effect on our business. The U.S.
Current and future restrictions on the availability of such work visas could restrain our ability to employ the skilled professionals we need to meet our clients’ needs, which could have a material adverse effect on our business.
Vigorous enforcement and legislative or executive action relating to immigration could adversely affect our ability to recruit or retain foreign national consultants, and consequently, reduce our supply of skilled consultants and candidates, and subject us to fines, penalties and sanctions, or result in increased labor and compliance costs.
Vigorous enforcement and legislative or executive action relating to immigration could adversely affect our ability to recruit or retain foreign national consultants, and consequently, reduce our supply of skilled consultants and candidates, and subject us to fines, penalties and sanctions, or result in increased labor and compliance costs. 11 Table of Contents Reclassification of our independent contractors by tax or regulatory authorities could have a material adverse effect on our business model and/or could require us to pay significant retroactive wages, taxes and penalties.
Heightened state and federal scrutiny of independent contractor relationships could adversely affect us given that we utilize independent contractors to perform our services. An adverse determination related to the independent contractor status of these subcontracted personnel could result in substantial taxes or other liabilities to us, which could result in a material adverse effect upon our business.
An adverse determination related to the independent contractor status of these subcontracted personnel could result in substantial taxes or other liabilities to us, which could result in a material adverse effect upon our business. Significant increases in wages or payroll-related costs could have a material adverse effect on our financial results.
Kforce expends significant resources in the recruiting and training of its employees, as the pool of available applicants for these positions is limited. The loss or any sustained attrition of our key operating employees could have a material adverse effect on our business, including our ability to establish and maintain client, consultant and candidate, professional and technical relationships.
The loss or any sustained attrition of our key operating employees could have a material adverse effect on our business, including our ability to establish and maintain client, consultant and candidate, professional and technical relationships. Risk Related to Cybersecurity and Technology Cybersecurity risks and cyber incidents could adversely affect our business and disrupt operations.
Furthermore, increased public awareness and concern regarding environmental risks, including global climate change, may result in increased public scrutiny of our business and our industry.
The increased scrutiny by these constituencies has also resulted in several of our clients requiring us to adhere to their internal corporate commitments regarding ESG matters. Furthermore, increased public awareness and concern regarding environmental risks, including global climate change, may result in increased public scrutiny of our business and our industry.
To attract and retain executives and other key employees (particularly management, client servicing and consultant and candidate recruiting employees) in a competitive marketplace, we must provide a competitive compensation package, including a mix of cash-based and equity-based compensation.
To attract and retain executives and other key employees in a competitive marketplace, we must provide a competitive compensation package, including a mix of cash-based and equity-based compensation. Kforce expends significant resources in the recruiting and training of its employees, as the pool of available applicants for these positions is limited.
The risk of a cyberattack or security breach on a third party carries the same risks to Kforce as those associated with our internal systems. We seek to reduce these risks by performing vendor due diligence procedures prior to engaging with any third-party vendor who will have access to sensitive data.
We seek to reduce these risks by performing vendor due diligence procedures prior to engaging with any third-party vendor who will have access to sensitive data. Additionally, we require audits of certain third parties’ information technology processes on an annual basis.
These improved capabilities are expected to help deliver exceptional service to our clients, consultants and candidates and improve the productivity of our associates and the scalability of our organization. New business strategies and initiatives, such as these, can be distracting to our management team and associates, and can also be disruptive to our operations.
These strategic priorities are expected to enhance the support and experience of our clients, consultants and candidates, contribute to the attainment of our long-term profitability objectives and generate significant shareholder value. 8 Table of Contents New business strategies and initiatives, such as these, can be distracting to our management team and associates, and can also be disruptive to our operations.
Reclassification of our independent contractors by tax or regulatory authorities could have a material adverse effect on our business model and/or could require us to pay significant retroactive wages, taxes and penalties. We utilize individuals to provide services in connection with our business as qualified third-party independent contractors rather than our direct employees.
We utilize individuals to provide services in connection with our business as qualified third-party independent contractors rather than our direct employees.
The Tax Cuts and Jobs Act, enacted in December 2017, provided a significant reduction in the corporate tax rate, but the current administration continues to scrutinize and could potentially modify key aspects of the tax code, which could materially affect our tax obligations and the effective tax rate.
The Tax Cuts and Jobs Act, enacted in December 2017, provided a significant reduction in the corporate tax rate.
Our information technology may not provide sufficient protection, and as a result we may lose significant information about us, our employees, candidates, consultants, vendors, or clients. Additionally, many of our information technology systems and networks are cloud-based or managed by third parties, whose future performance and reliability we cannot control.
Additionally, many of our information technology systems and networks are cloud-based or managed by third parties, whose future performance and reliability we cannot control. The risk of a cyberattack or security breach on a third party carries the same risks to Kforce as those associated with our internal systems.
The collection, possession and use of personal information and data in conducting our business subjects us to legislative and regulatory burdens and compliance risk. Other results of these incidents could include, but are not limited to, increased cybersecurity protection costs, litigation, regulatory penalties, monetary damages and reputational damage adversely affecting client or investor confidence.
Other results of these incidents could include, but are not limited to, increased cybersecurity protection costs, litigation, regulatory penalties, monetary damages and reputational damage adversely affecting client or investor confidence. We may be required to incur significant expenses to comply with mandatory privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations.
Significant declines in business or a loss of a significant client could have a material adverse effect on our revenues and financial results.
Significant declines in business or a loss of a significant client could have a material adverse effect on our revenues and financial results. We primarily provide services to Fortune 500 and other similarly sized companies, which is intended to provide relative durability to our revenue stream during adverse economic environments and enable us to grow our revenues more profitably.
If our systems become outdated, or if our investments in technology fail to provide the expected results, then we may be unable to maintain our technological capabilities relative to our competitors and our business could be negatively affected. 9 Table of Contents Risks Related to Legal, Compliance and Regulatory Matters Kforce may be adversely affected by immigration restrictions and reform.
Additionally, other unforeseen risks stemming from our use and development of AI tools and technology may arise in the future if we cannot successfully keep pace with technological changes which could adversely affect our business, financial condition and results of operations. Risks Related to Legal, Compliance and Regulatory Matters Kforce may be adversely affected by immigration restrictions and reform.
New business initiatives and strategic changes in the composition of our business mix can be a diversion to our management’s attention from other business concerns and could be disruptive to our operations, which could cause our business and results of operations to suffer materially. 7 Table of Contents Kforce may not be able to recruit and retain qualified consultants and candidates.
New business initiatives and strategic changes in the composition of our business mix could be disruptive to our operations, which could have a material adverse effect on our business, financial condition and operating results.
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Part of our business strategy includes enhancing our service offerings and relationships with larger consumers of our services, which is intended to provide relative durability to our revenue stream during adverse economic environments and enable us to grow our revenues more profitably.
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We have been and expect to continue allocating significant investments (and the attention of executive management and many of our leaders) towards our strategic priorities, including our back-office transformation program involving the implementation of Workday, integrated strategy, and the evolution of our nearshore and offshore capability, including the establishment and maturity of our India development center in Pune, India.
Removed
We expect to continue allocating significant investments towards our multi-year transformation program for our back-office technology, investing in our managed teams and project solutions capabilities, and evolving our nearshore and offshore delivery strategy.
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Our planned nearshore and offshore strategies expose us to additional business, financial, regulatory, geopolitical and other related risks, which may have a material adverse effect on our business. We continue to evolve our nearshore and offshore capabilities to further enhance our service offerings to our clients by engaging with nearshore and offshore third-party suppliers.
Removed
Our future success is likely to depend in part on our ability to successfully keep pace with technological changes and advances occurring across our industry. Our business is reliant on a variety of systems and technologies, including those that support consultant and candidate searching and matching, hiring and tracking, order management, billing and client data analytics.
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We are reliant upon our third-party suppliers’ compliance with applicable laws and contractual obligations. We also recently expanded our offshore capabilities to include a development center in Pune, India to enhance our service offerings to our clients.
Removed
Our success depends in part on our ability to keep pace with rapid technological advancements in the development and implementation of these services.
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Additional risks related to our nearshore and offshore capabilities include: difficulties staffing and managing foreign operations; exposure to changes in economic and geopolitical and business conditions; compliance with foreign laws and regulations; and fluctuations in foreign currency exchange rates and tax compliance.
Removed
Citizenship and Immigration Service (“USCIS”) continues to closely scrutinize companies seeking to sponsor, renew or transfer H-1B status, including Kforce and Kforce’s third-party independent contractors, and has issued internal guidance to its field offices that appears to narrow the eligibility criteria for H-1B status in the context of staffing services.
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If we are unable to successfully control or predict these risks, it could have a material adverse effect on our business, financial condition and operating results. Kforce may not be able to recruit and retain qualified consultants and candidates.
Removed
In addition to USCIS restrictions, certain aspects of the H-1B program are also subject to regulation and review by the U.S. Department of Labor and U.S. Department of State, which have recently increased enforcement activities in the program.
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Our business utilizes certain AI capabilities, which are likely to expand in the future. This introduces certain risks including dependency on accurate AI performance, potential data privacy and security breaches, challenges in regulatory compliance, ethical considerations, potential workforce disruption, the risk of intellectual property infringement, and emerging technology risks.
Removed
Significant increases in wages or payroll-related costs could have a material adverse effect on our financial results.
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While we have established policies governing the use of AI technology, and we safeguard our assets, including intellectual property and sensitive information, we cannot ensure that our employees, consultants and third-party vendors would adhere to those policies.
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The COVID-19 economic and health crisis (including all of its variants) impacted many of our clients’ business operations due to reduced demand, which in some cases was caused by government closures and/or initiatives to reduce costs or preserve cash, thereby decreasing demand for our services and/or adversely affecting our profitability and collectability of our accounts receivable.
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If we fail to adequately address these risks and maintain sufficient oversight as rapidly as AI technology is changing, it may negatively impact our operations, reputation and financial performance. This challenge is further complicated by rapidly evolving regulations governing the permitted uses of AI.
Removed
Outbreaks of disease, including epidemics and pandemics, can affect our operations and financial performance if potential new variants are declared, vaccines are mandated, and government actions to prevent and manage disease spread. Outbreaks of diseases could negatively affect our business, financial position, results of operations and/or cash flows in the future.
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Immigration laws and regulations can be significantly affected by changes in administration (including the most recent change), other political developments and levels of economic activity.
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We have a credit facility consisting of a revolving line of credit of up to $200.0 million, subject to certain limitations. Borrowings under the credit facility are secured by substantially all of the tangible and intangible assets of the Firm and certain other designated collateral.
Added
While we have policies and procedures in place to ensure that the third-party independent contractors are qualified, heightened state and federal scrutiny of independent contractor relationships could adversely affect us given that we utilize independent contractors to perform our services.
Added
Although the current administration may extend these tax cuts, there is no assurance that these tax cuts will be extended and other key aspects of the tax code may be modified, which could have a material adverse effect on our tax obligations and effective tax rate.
Added
Kforce may maintain levels of debt that exposes us to interest rate risk and contains restrictive covenants that could trigger prepayment of obligations or additional costs. We have a credit facility consisting of a revolving line of credit of up to $200.0 million , subject to certain limitations.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe face risks from cybersecurity threats that could have a material adverse effect on our business strategy. See “Risk Factors Risks Related to Cybersecurity and Technology – Cybersecurity risks and cyber incidents could adversely affect our business and disrupt operations.” in Part 1, Item 1A. Risk Factors of this report for a discussion of these risks.
Biggest changeRisk Factors of this report for a discussion of risks from cybersecurity threats that could have a material adverse effect on our business, financial condition and results of operations.
We have taken a defense in depth approach to the implementation of our cybersecurity controls. These controls are set to block and/or provide alerts on suspicious activities. Our around the clock security operation center responds as appropriate to risks identified, and performs the risk assessment and risk evaluation.
We have taken a comprehensive defense-in-depth approach to the implementation of our cybersecurity controls. These controls are set to block and/or provide alerts on suspicious activities. Our around-the-clock security operation center responds as appropriate to risks identified and performs the risk assessment and risk evaluation.
Management Oversight Our Chief Information Security Officer (“CISO”) leads our Information Security and Data Privacy Council, which meets quarterly, or more frequently if necessary, to assess, identify and manage cybersecurity threats, support advocacy programs and advise our Chief Information Officer (“CIO”) and CISO on solutions.
Governance Management Oversight Our Chief Information Security Officer (“CISO”) leads our Information Security and Data Privacy Council, which meets quarterly, or more frequently if necessary, to assess, identify and manage cybersecurity threats, support advocacy programs and advise our Chief Information Officer (“CIO”) and CISO on solutions.
The council is made up of key members of senior management across the Firm, including enterprise security, human resources, legal, internal audit, finance, procurement, communications and field management. Our Enterprise Security team monitors and manages system infrastructure to protect the Firm against threats.
The council is made up of key members of senior management across the Firm, including enterprise security, human resources, legal, internal audit, finance, procurement, communications and field management. Our enterprise security team monitors and manages system infrastructure to protect the Firm against cyber threats.
Annually, the Board and management participate in a comprehensive strategy discussion on cybersecurity. 12 Table of Contents To further enhance the Board and Audit Committee’s role in overseeing cybersecurity risks, the Board formed a special working group that is comprised of two members of the Audit Committee to have more frequent and detailed dialogue with executive management (including our COO, CFO, CIO, CISO and VP of Internal Audit) on all areas pertaining to cybersecurity.
Annually, the Board and management participate in a strategy discussion on cybersecurity. 14 Table of Contents To further enhance the Board and Audit Committee’s role in overseeing cybersecurity risks, the Board formed a special working group that is comprised of two members of the Audit Committee to have more frequent and detailed dialogue with executive management (including our COO, CFO, CIO, CISO and VP of Internal Audit) on all areas pertaining to cybersecurity.
On a quarterly basis, the Audit Committee receives updates on (a) our progress meeting objectives established in our cybersecurity maturity roadmap, (b) relevant reported cybersecurity events in the overall market and evolving risks, (c) results of work performed by our information security organization (ex. penetration tests, cybersecurity program maturity assessments) and (d) detailed reports of cybersecurity trends within the Firm.
On a quarterly basis, the Audit Committee receives updates on (a) our progress meeting objectives established in our cybersecurity maturity roadmap, (b) relevant reported cybersecurity events in the overall market (and for Kforce, if any) and evolving risks, (c) results of work performed by our information security organization (ex. penetration tests, cybersecurity program maturity assessments) and (d) detailed reports of cybersecurity trends within the Firm.
Our risk register and risk remediation processes help us ensure we are tracking and addressing priority risks, as appropriate. Any potential risks or threats identified by the Enterprise Security team are communicated to the CISO and Information Security and Data Privacy Council.
Our risk register and risk remediation processes help us ensure we are tracking and addressing priority risks, as appropriate. Any potential risks or threats identified by the enterprise security team are communicated to the CISO, Information Security and Data Privacy Council and other senior leaders as appropriate.
ITEM 1C. CYBERSECURITY. Our cybersecurity program helps us secure our systems, keeps our business running around the clock and protects our clients, consultants, employees and shareholders from vulnerabilities and threats.
ITEM 1C. CYBERSECURITY. Risk Management and Strategy Our cybersecurity program helps us secure our systems, keeps our business running around the clock and protects our clients, consultants, employees and shareholders from vulnerabilities and threats.
Senior management, including our CIO and CISO, brief the Board on an annual basis on our cybersecurity and information security posture and cybersecurity incidents deemed to have a moderate or higher business impact, even if it is considered immaterial to us.
Senior management, including our CIO and CISO, brief the Board on an annual basis on our cybersecurity and information security posture and cybersecurity incidents deemed to have a moderate business impact (even if the incidents do not rise to the level of being material).
Our CIO and CISO have extensive information technology and program management experience, and have served many years in our corporate information security organization. Under the guidance of the CIO, the CISO manages day-to-day operations of the security and data privacy functions and proposes changes to the Firm’s cybersecurity strategy, which is part of our overall information technology strategy.
Under the guidance of the CIO, the CISO manages day-to-day operations of the security and data privacy functions and proposes changes to the Firm’s cybersecurity strategy, which is part of our overall information technology strategy. The CIO and CISO meet frequently to discuss cyber and data operations, privacy programs and risks.
The CIO and CISO meet frequently to discuss cyber and data operations, privacy programs and risks. Each of these teams remain in close coordination to ensure risk mitigation strategies are designed and operating effectively. Board Oversight The Board is actively engaged in the oversight of cybersecurity and data privacy.
Each of these teams remain in close coordination to ensure risk mitigation strategies are designed and operating effectively. Board Oversight The Board is actively engaged in the oversight of cybersecurity and data privacy. The Audit Committee assists the Board in meeting its responsibility to oversee cybersecurity and data privacy strategies and practices.
With oversight from our Board, the Audit Committee and key leaders across Kforce, we have put proactive measures and systems in place to protect our information assets from unauthorized use or access. The Firm’s cybersecurity framework is based on the National Institute of Standards and Technology (“NIST”).
With oversight from our Board, the Audit Committee, a special working group comprised of two of our Board members, and key leaders across Kforce, we have put proactive measures and systems in place to protect our information assets from unauthorized use or access, including annual employee training.
As a result, at least in part, of the steps taken by the Firm with respect to our cybersecurity program, we have not experienced a material breach to date. Third-Party Vendor Management Many of our information technology systems and networks are cloud-based or managed by third parties, whose future performance and reliability we cannot control.
Additionally, we require annual audits of certain third parties’ information technology processes. As a result, at least in part, of the steps taken by the Firm with respect to our cybersecurity program, to our knowledge, we have not experienced a material breach to date.
Management also provides the Audit Committee with an annual overview of Kforce’s various lines of insurance that we maintain, including our cybersecurity insurance policy. The Audit Committee provides the Board with quarterly reports on the Firm’s risks and ERM program findings, including cybersecurity risk and data privacy practices.
This working group provides updates on a quarterly basis, or more frequently if necessary, to the Audit Committee. Management also provides the Audit Committee with an annual overview of Kforce’s various lines of insurance that we maintain, including our cybersecurity insurance policy.
Removed
The Audit Committee assists the Board in meeting its responsibility to oversee cybersecurity and data privacy strategies and practices.
Added
We acknowledge the importance of assessing, identifying, and managing material risks associated with cybersecurity threats including: operational disruptions; violation of data privacy laws and regulations; breach of confidentiality; and financial and reputational harm.
Removed
This working group provides updates on a quarterly basis, or more frequently if necessary, to the Audit Committee. As a result of the steps taken by the Firm with respect to our cybersecurity program, we have not experienced a material breach to date.
Added
The Firm’s cybersecurity framework is based on the National Institute of Standards and Technology (“NIST”).
Removed
Additionally, we require annual audits of certain third parties’ information technology processes.
Added
Our CIO and CISO have over 35 and 25 years, respectively, of experience in information security and program management, and have both served over 10 years in our corporate information security organization.
Added
The Audit Committee provides the Board with quarterly reports on the Firm’s risks and ERM program findings, including cybersecurity risk and data privacy practices. Third-Party Vendor Management Many of our information technology systems and networks are cloud-based or managed by third parties, whose future performance and reliability we cannot control.
Added
While all organizations are inherently at risk of cybersecurity threats, we do not believe that cybersecurity threats have affected, or are reasonably likely to materially affect, our business strategy, results of operations or financial condition.
Added
However, we routinely face risks of cybersecurity incidents, wholly or partially beyond our control, and there can be no assurance that the security efforts and measures of the Firm and third-party providers will prevent incidents that could adversely affect the Firm’s business. Refer to “Risk Factors Risks Related to Cybersecurity and Technology” in Item 1A.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES. As of December 31, 2023, we leased approximately 132,000 square feet of total office space in 29 offices located throughout the U.S.
Biggest changeITEM 2. PROPERTIES. As of December 31, 2024, we leased approximately 127,000 square feet of total office space in 31 offices located throughout the U.S. Most of our operations for both of our Technology and FA businesses are conducted from these leased field offices when not performed remotely with our Office Occasional ® model.
When not being done remotely in our Office Occasional ® model, most of our operations for both Technology and FA segments are conducted from these leased premises, and we do not anticipate any difficulty in renewing these leases, or in finding alternative sites in the ordinary course of business.
We do not anticipate any difficulty in renewing these leases, or in finding alternative sites in the ordinary course of business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS. We are involved in legal proceedings, claims and administrative matters that arise in the ordinary course of business. We do not believe that any of our current such proceedings, claims or matters are material.
Biggest changeITEM 3. LEGAL PROCEEDINGS. We are involved in legal proceedings, claims and administrative matters that arise in the ordinary course of business, and we have made accruals with respect to certain of these matters, where appropriate, that are reflected in our consolidated financial statements but are not, individually or in the aggregate, considered material.
Removed
For further information regarding legal proceedings, refer to Note 17 - "Commitments and Contingencies" in the Notes to Consolidated Financial Statements in the section entitled "Litigation," included in Item 8. Financial Statements and Supplementary Data of this report, which is incorporated into this Item 3 by reference. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. PART II
Added
For other matters for which an accrual has not been made, we have not yet determined that a loss is probable, or the amount of loss cannot be reasonably estimated.
Added
The outcome of any litigation is inherently uncertain, but we do not expect that these proceedings and claims, individually or in the aggregate, will have a material effect on our consolidated financial statements; however, if decided adversely to us, or if we determine that settlement of particular litigation is appropriate, we may be subject to additional liabilities that could have a material adverse effect on our financial position, results of operations or cash flows.
Added
Kforce maintains liability insurance that insures us against workers’ compensation, personal and bodily injury, property damage, directors’ and officers’ liability, errors and omissions, cyber liability, employment practices liability and fidelity losses. There can be no assurance that Kforce’s liability insurance will cover all events or that the limits of coverage will be sufficient to fully cover all liabilities. ITEM 4.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures. 13 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 13 Item 6. [Reserved.] 14 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 15 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 25 Item 8.
Biggest changeItem 4. Mine Safety Disclosures. 15 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 15 Item 6. [Reserved.] 16 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 17 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 27 Item 8.
Removed
Financial Statements and Supplementary Data. 25 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 45 Item 9A. Controls and Procedures. 46 Item 9B. Other Information. 46

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchases of common stock under the Plan are subject to certain price, market, volume and timing constraints, which are specified in the plan. 13 Table of Contents The following table presents information with respect to our repurchases of Kforce common stock during the three months ended December 31, 2023: Period Total Number of Shares Purchased (1)(2)(3) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2023 to October 31, 2023 5,124 $ 59.23 — $ 66,822,516 November 1, 2023 to November 30, 2023 221,392 $ 65.38 219,473 $ 52,472,901 December 1, 2023 to December 31, 2023 253,855 $ 68.56 155,722 $ 41,731,977 Total 480,371 $ 66.99 375,195 $ 41,731,977 (1) Includes 5,124 shares of stock received upon vesting of restricted stock to satisfy tax withholding requirements for the period October 1, 2023 to October 31, 2023.
Biggest changePurchases of Equity Securities by the Issuer Purchases of common stock under the Plan are subject to certain price, market, volume and timing constraints, which are specified in the plan. 15 Table of Contents The following table presents information with respect to our repurchases of Kforce common stock during the three months ended December 31, 2024: Period Total Number of Shares Purchased (1)(2) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (3) October 1, 2024 to October 31, 2024 167,508 $ 54.87 167,508 $ 70,498,722 November 1, 2024 to November 30, 2024 1,633 $ 59.24 — $ 70,498,722 December 1, 2024 to December 31, 2024 192,306 $ 58.35 118,045 $ 63,497,672 Total 361,447 $ 56.74 285,553 $ 63,497,672 (1) Includes 1,633 repurchased shares withheld for tax withholding upon vesting of restricted stock for the period November 1, 2024 to November 30, 2024.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Holders of Common Stock Our common stock trades on the NASDAQ using the ticker symbol “KFRC.” As of February 20, 2024, there were 138 holders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Holders of Common Stock Our common stock trades on the New York Stock Exchange (“NYSE”) using the ticker symbol “KFRC.” As of February 13, 2025, there were 270 holders of record.
(2) Includes 1,919 shares of stock received upon vesting of restricted stock to satisfy tax withholding requirements for the period November 1, 2023 to November 30, 2023. (3) Includes 98,133 shares of stock received upon vesting of restricted stock to satisfy tax withholding requirements for the period December 1, 2023 to December 31, 2023.
(2) Includes 74,261 repurchased shares withheld for tax withholding upon vesting of restricted stock for the period December 1, 2024 to December 31, 2024. (3) In February 2024, the Board approved a change in our stock repurchase authorization increasing the available authorization to $100 million.
Removed
Purchases of Equity Securities by the Issuer In February 2024, the Board approved an increase in our stock repurchase authorization, bringing the total authorization from $41.7 million to $100.0 million.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear-Over-Year Growth Rates (As Reported) 2023 2022 YTD Q4 Q3 Q2 Q1 Q4 Technology Flex (7.4)% (11.1)% (12.5)% (7.8)% 2.2% 8.5% FA Flex (27.6)% (28.0)% (26.9)% (27.3)% (28.2)% (28.8)% Total Flex revenue (9.6)% (12.8)% (13.9)% (9.8)% (1.6)% 3.1% Year-Over-Year Growth Rates (As Adjusted) 2023 2022 YTD Q4 Q3 Q2 Q1 Q4 Billing Days 252 61 63 64 64 61 Technology Flex (7.1)% (11.1)% (11.1)% (7.8)% 2.2% 8.5% FA Flex (27.3)% (28.0)% (25.7)% (27.3)% (28.2)% (28.8)% Total Flex revenue (9.2)% (12.8)% (12.5)% (9.8)% (1.6)% 3.1% Free Cash Flow.
Biggest changeSequential Growth Rates (GAAP) 2024 2023 Q4 Q3 Q2 Q1 Q4 Technology Flex (2.5)% (0.6)% 1.7% (2.3)% (2.5)% FA Flex (2.7)% (4.1)% (5.7)% (11.5)% (1.0)% Total Flex revenue (2.5)% (0.8)% 1.2% (3.1)% (2.3)% Sequential Growth Rates (Non-GAAP) 2024 2023 Q4 Q3 Q2 Q1 Q4 Billing Days 62 64 64 64 61 Technology Flex 0.6% (0.6)% 1.7% (6.9)% 0.7% FA Flex 0.5% (4.1)% (5.7)% (15.7)% 2.3% Total Flex revenue 0.6% (0.8)% 1.2% (7.6)% 0.9% Year-Over-Year Growth Rates (GAAP) 2024 2023 YTD Q4 Q3 Q2 Q1 YTD Q4 Technology Flex (6.4)% (3.7)% (3.6)% (6.4)% (11.4)% (7.4)% (11.1)% FA Flex (23.5)% (22.1)% (20.7)% (23.1)% (27.2)% (27.6)% (28.0)% Total Flex revenue (7.9)% (5.2)% (5.0)% (7.8)% (12.8)% (9.6)% (12.8)% Year-Over-Year Growth Rates (Non-GAAP) 2024 2023 YTD Q4 Q3 Q2 Q1 YTD Q4 Billing Days 254 62 64 64 64 252 61 Technology Flex (7.1)% (5.2)% (5.1)% (6.4)% (11.4)% (7.1)% (11.1)% FA Flex (24.1)% (23.3)% (21.9)% (23.1)% (27.2)% (27.3)% (28.0)% Total Flex revenue (8.6)% (6.7)% (6.5)% (7.8)% (12.8)% (9.2)% (12.8)% Free Cash Flow.
“Revenue growth rates,” a non-GAAP financial measure, is defined by Kforce as year-over-year revenue growth after removing the impacts on reported revenues from the changes in the number of billing days. Management believes this data is particularly useful because it aids in evaluating revenue trends over time.
“Revenue growth rates,” a non-GAAP financial measure, is defined by Kforce as revenue growth after removing the impacts on reported revenues from the changes in the number of billing days. Management believes this data is particularly useful because it aids in evaluating revenue trends over time.
Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.
Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.
In addition, although we excluded amortization of stock-based compensation expense because it is a non-cash expense, we expect to continue to incur stock-based compensation in the future and the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our shareholder ownership interest.
In addition, although we excluded stock-based compensation expense because it is a non-cash expense, we expect to continue to incur stock-based compensation in the future and the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our shareholder ownership interest.
These types of analyses contain uncertainties because they require management to make significant assumptions and judgments including: (1) an appropriate rate to discount the expected future cash flows; (2) the inherent risk in achieving forecasted operating results; (3) long-term growth rates; (4) expectations for future economic cycles; (5) market comparable companies and appropriate adjustments thereto; and (6) market multiples.
These types of analyses contain uncertainties because the inputs require management to make significant assumptions and judgments including: (1) an appropriate rate to discount the expected future cash flows; (2) the inherent risk in achieving forecasted operating results; (3) long-term growth rates; (4) expectations for future economic cycles; (5) market comparable companies and appropriate adjustments thereto; and (6) market multiples.
Investing Activities Cash used in investing activities was $4.9 million during the year ended December 31, 2023, and primarily consisted of cash used for capital expenditures of $7.8 million, partially offset by the proceeds from the sale of our joint venture interest of $5.1 million.
Cash used in investing activities was $4.9 million during the year ended December 31, 2023, which primarily consisted of cash used for capital expenditures of $7.8 million, partially offset by the proceeds from the sale of our joint venture interest of $5.1 million.
Financial Statements and Supplementary Data for further details on the Amended and Restated Credit Facility. • We maintain various non-qualified deferred compensation plans pursuant to which eligible management and highly-compensated key employees may elect to defer all or part of their compensation to later years.
Financial Statements and Supplementary Data for further details on the Amended and Restated Credit Facility. 25 Table of Contents • We maintain various non-qualified deferred compensation plans pursuant to which eligible management and highly-compensated key employees may elect to defer all or part of their compensation to later years.
“Adjusted EBITDA”, a non-GAAP financial measure, is defined by Kforce as net income before depreciation and amortization, stock-based compensation expense, interest expense, net, income tax expense, organizational realignment activities, legal settlement expense, loss from equity method investment, reserve associated with the note receivable issued to our joint venture, impairment of equity method investment, gain from termination of interest rate swap, gain on the sale of the corporate headquarters, and SERP termination expense.
“Adjusted EBITDA”, a non-GAAP financial measure, is defined by Kforce as net income before depreciation and amortization; stock-based compensation expense; interest expense, net; income tax expense; organizational realignment activities; legal settlement expense; loss from equity method investment; reserve associated with the note receivable issued to our joint venture; impairment of equity method investment; and gain from termination of interest rate swap.
Total payments, however, are inherently uncertain as the interest rates related to this outstanding balance are variable and the outstanding borrowings that will occur over the remaining term of the Credit Facility are unknown. Refer to Note 13 - “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8.
Total payments, however, are inherently uncertain as the interest rates related to this outstanding balance are variable and the outstanding borrowings that will occur over the remaining term of the Amended and Restated Credit Facility are unknown. Refer to Note 12 - “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8.
Other expense, net was $1.9 million, $14.4 million and $7.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. Other expense, net consists of our proportionate share of losses for our joint venture and interest expense related to outstanding borrowings under our credit facility.
Other expense, net was $2.1 million, $1.9 million and $14.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. Other expense, net consists of our proportionate share of losses for our joint venture and interest expense related to outstanding borrowings under our credit facility.
The following table presents certain items in our Consolidated Statements of Operations and Comprehensive Income as a percentage of revenue for the years ended: DECEMBER 31, 2023 2022 2021 Revenue by segment: Technology 90.4 % 88.1 % 80.6 % FA 9.6 11.9 19.4 Total Revenue 100.0 % 100.0 % 100.0 % Revenue by type: Flex 97.5 % 96.6 % 96.9 % Direct Hire 2.5 3.4 3.1 Total Revenue 100.0 % 100.0 % 100.0 % Gross profit 27.9 % 29.3 % 28.9 % Selling, general and administrative expenses 21.9 % 22.2 % 21.9 % Depreciation and amortization 0.3 % 0.3 % 0.3 % Income from operations 5.7 % 6.8 % 6.7 % Income from operations, before income taxes 5.6 % 6.0 % 6.3 % Net income 4.0 % 4.4 % 4.8 % 16 Table of Contents Revenue.
The following table presents certain items in our Consolidated Statements of Operations and Comprehensive Income as a percentage of revenue for the years ended: DECEMBER 31, 2024 2023 2022 Revenue by segment: Technology 92.0 % 90.4 % 88.1 % FA 8.0 9.6 11.9 Total Revenue 100.0 % 100.0 % 100.0 % Revenue by type: Flex 97.9 % 97.5 % 96.6 % Direct Hire 2.1 2.5 3.4 Total Revenue 100.0 % 100.0 % 100.0 % Gross profit 27.4 % 27.9 % 29.3 % Selling, general and administrative expenses 22.0 % 21.9 % 22.2 % Depreciation and amortization 0.4 % 0.3 % 0.3 % Income from operations 5.0 % 5.7 % 6.8 % Income from operations, before income taxes 4.8 % 5.6 % 6.0 % Net income 3.6 % 4.0 % 4.4 % 18 Table of Contents Revenue.
Financial Statements and Supplementary Data of this report. In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amount of assets, liabilities, revenues, expenses and the related disclosures.
In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amount of assets, liabilities, revenues, expenses and the related disclosures.
As of December 31, 2023, the total amount of our obligations under these plans was $48.0 million. These amounts are included in the accompanying Consolidated Balance Sheets and classified as Accounts payable and other accrued liabilities and Other long-term liabilities, as appropriate, and are payable based upon the elections of the plan participants (e.g., retirement, termination of employment, change-in-control, etc.).
As of December 31, 2024, the total amount of our obligations under these plans was $54.8 million. These amounts are included in the accompanying Consolidated Balance Sheets and classified as Accounts payable and other accrued liabilities and Other long-term liabilities, as appropriate, and are payable based upon the elections of the plan participants (e.g., retirement, termination of employment, change-in-control, etc.).
Financial Statements and Supplementary Data for additional information regarding our commitments related to employment agreements. • We lease certain facilities and other properties under non-cancellable operating lease arrangements that expire at various dates through 2033. As of December 31, 2023, the total amount of our obligations under operating leases was $18.2 million.
Financial Statements and Supplementary Data for additional information regarding our commitments related to employment agreements. • We lease certain facilities and other properties under non-cancellable operating lease arrangements that expire at various dates through 2033. As of December 31, 2024, the total amount of our obligations under operating leases was $17.0 million.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 24, 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 23, 2024.
Contractual Obligations In addition to our discussion and analysis surrounding our liquidity and capital resources, consideration should also be given to significant contractual obligations: • The Amended and Restated Credit Facility matures on October 20, 2026, and as of December 31, 2023, our outstanding debt balance under the credit facility was $41.6 million.
Contractual Obligations In addition to our discussion and analysis surrounding our liquidity and capital resources, consideration should also be given to significant contractual obligations: • The Amended and Restated Credit Facility matures on October 20, 2026, and as of December 31, 2024, our outstanding debt balance under the credit facility was $32.7 million.
EXECUTIVE SUMMARY The following is an executive summary of what Kforce believes are highlights for 2023, which should be considered in the context of the additional discussions herein and in conjunction with the consolidated financial statements and notes thereto. • Revenue for the year ended December 31, 2023, decreased 10.5% to $1.53 billion in 2023 from $1.71 billion in 2022.
EXECUTIVE SUMMARY The following is an executive summary of what Kforce believes are highlights for 2024, which should be considered in the context of the additional discussions herein and in conjunction with the consolidated financial statements and notes thereto. • Revenue for the year ended December 31, 2024 decreased 8.3% to $1.41 billion in 2024 from $1.53 billion in 2023.
However, a material deterioration in the economic environment or market conditions, among other things, could negatively impact operating results and liquidity, as well as the ability of our lenders to fund borrowings.
However, a material deterioration in the macroeconomic environment or market conditions, among other things, could adversely affect operating results and liquidity, as well as the ability of our lenders to fund borrowings.
The following table presents depreciation and amortization expense and percentage change over the prior period by major category for the years ended December 31 (in thousands): 2023 Increase (Decrease) 2022 Increase (Decrease) 2021 Fixed asset depreciation $ 3,142 18.3 % $ 2,655 (5.9) % $ 2,822 Capitalized software amortization 1,870 5.5 % 1,772 5.6 % 1,678 Total Depreciation and amortization $ 5,012 13.2 % $ 4,427 (1.6) % $ 4,500 Other Expense, Net.
The following table presents depreciation and amortization expense and percentage change over the prior period by major category for the years ended December 31: (in thousands) 2024 Increase (Decrease) 2023 Increase (Decrease) 2022 Fixed asset depreciation $ 3,178 1.1 % $ 3,142 18.3 % $ 2,655 Capitalized software amortization 2,744 46.7 % 1,870 5.5 % 1,772 Total Depreciation and amortization $ 5,922 18.2 % $ 5,012 13.2 % $ 4,427 Other Expense, Net.
The following table presents the gross profit as a percentage of total revenue (“gross profit percentage”) for each segment and the percentage change over the prior period for the years ended December 31: 2023 Increase (Decrease) 2022 Increase (Decrease) 2021 Technology 26.7 % (4.6) % 28.0 % 0.4 % 27.9 % FA 39.2 % 0.5 % 39.0 % 18.2 % 33.0 % Total gross profit percentage 27.9 % (4.8) % 29.3 % 1.4 % 28.9 % Total gross profit percentage decreased 140 basis points for the year ended December 31, 2023, as compared to the same period in 2022, primarily as a result of a decline in the mix of Direct Hire revenue and lower Technology Flex gross profit margins.
The following table presents the gross profit (gross profit as a percentage of total revenue) by segment and percentage change over the prior period: 2024 Increase (Decrease) 2023 Increase (Decrease) 2022 Technology 26.5 % (0.7) % 26.7 % (4.6) % 28.0 % FA 38.5 % (1.8) % 39.2 % 0.5 % 39.0 % Total gross profit percentage 27.4 % (1.8) % 27.9 % (4.8) % 29.3 % Total gross profit percentage decreased 50 basis points for the year ended December 31, 2024, as compared to the same period in 2023, primarily as a result of a decline in the mix of Direct Hire revenue.
At December 31, 2023, our liability would be approximately $30.3 million for terminations related to a change in control and $11.4 million related to terminations in the absence of cause. Refer to Note 17 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements, included in Item 8.
At December 31, 2024, our liability would be approximately $27.7 million for terminations related to a change in control and $8.8 million related to terminations in the absence of cause. Refer to Note 15 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements, included in Item 8.
Cash Flows Our business has historically generated a significant amount of operating cash flows, which allows us to balance deploying available capital towards: (i) investing in our infrastructure to allow sustainable growth; (ii) our dividend and share repurchase programs; and (iii) maintaining sufficient liquidity for potential acquisitions or other strategic investments.
Cash Flows Our business has historically generated a significant amount of operating cash flows, which allows us to balance deploying available capital towards: (i) investing in our strategic priorities that we expect will accelerate future revenue growth and profitability levels; (ii) our dividend and share repurchase programs; and (iii) maintaining sufficient liquidity for potential acquisitions or other strategic investments.
The following table presents a summary of our net cash flows from operating, investing and financing activities (in thousands): YEARS ENDED DECEMBER 31, Cash Provided by (Used in) 2023 2022 2021 Operating activities $ 91,465 $ 90,805 $ 72,898 Investing activities (4,862) (14,282) 8,301 Financing activities (86,605) (173,391) (87,696) Change in cash and cash equivalents $ (2) $ (96,868) $ (6,497) 21 Table of Contents Operating Activities Cash provided by operating activities was $91.5 million during the year ended December 31, 2023, as compared to $90.8 million during the year ended December 31, 2022.
The following table presents a summary of our net cash flows from operating, investing and financing activities (in thousands): YEARS ENDED DECEMBER 31, Cash Provided by (Used in) 2024 2023 2022 Operating activities $ 86,874 $ 91,465 $ 90,805 Investing activities (7,564) (4,862) (14,282) Financing activities (79,080) (86,605) (173,391) Change in cash and cash equivalents $ 230 $ (2) $ (96,868) Operating Activities Cash provided by operating activities was $86.9 million during the year ended December 31, 2024, as compared to $91.5 million during the year ended December 31, 2023.
Actual results could also differ materially from those indicated as a result of a number of factors, including the use of currently available resources for potential acquisitions and additional stock repurchases.
Actual results could also differ materially from those indicated as a result of a number of factors, including the use of currently available resources for capital expenditures, investments, additional common stock repurchases or dividends.
Billing days impact is calculated by dividing each comparative period’s reported revenues by the number of billing days for that period to arrive at a per billing day amount. Same billing day growth rates are then calculated based on the per billing day amounts.
The impact of billing days is calculated by dividing each comparative period’s reported revenues by the number of billing days for the respective period to arrive at a per billing day amount for each quarter. Growth rates are then calculated using the per billing day amounts as a percentage change compared to the respective period.
As of December 31, 2023, $41.6 million was outstanding and $157.2 million, net of $1.2 million in letters of credit outstanding, was available under the Amended and Restated Credit Facility. As of December 31, 2023, we were in compliance with all of our financial covenants.
As of December 31, 2024, $32.7 million was outstanding and $166.3 million, net of $1.0 million in letters of credit outstanding, was available under the Amended and Restated Credit Facility. As of December 31, 2024, we were in compliance with all of our financial covenants.
The following table presents Adjusted EBITDA and includes a reconciliation of net income to Adjusted EBITDA (in thousands): YEARS ENDED DECEMBER 31, 2023 2022 2021 Net income $ 61,075 $ 75,431 $ 75,177 Depreciation and amortization 5,012 4,427 4,500 Stock-based compensation expense 17,747 17,655 13,999 Interest expense, net 1,122 973 3,073 Income tax expense 24,175 27,011 24,090 Organizational realignment activities 3,662 — — Legal settlement expense 2,175 — 3,350 Loss from equity method investment 750 3,824 2,480 Reserve associated with note receivable issued to our joint venture — 1,925 — Impairment of equity method investment — 13,684 — Gain from termination of interest rate swap — (4,059) — Gain on sale of corporate headquarters — — (2,051) SERP termination expense — — 1,821 Adjusted EBITDA $ 115,718 $ 140,871 $ 126,439 LIQUIDITY AND CAPITAL RESOURCES To meet our capital and liquidity requirements, we primarily rely on operating cash flow, as well as borrowings under our credit facility.
We suggest that you evaluate these items and the potential risks of excluding such items when analyzing our financial position. 23 Table of Contents The following table presents Adjusted EBITDA and includes a reconciliation of net income to Adjusted EBITDA: YEARS ENDED DECEMBER 31, (in thousands) 2024 2023 2022 Net income $ 50,414 $ 61,075 $ 75,431 Depreciation and amortization 5,922 5,012 4,427 Stock-based compensation expense 14,044 17,747 17,655 Interest expense, net 2,097 1,122 973 Income tax expense 17,210 24,175 27,011 Organizational realignment activities — 3,662 — Legal settlement expense — 2,175 — Loss from equity method investment — 750 3,824 Reserve associated with note receivable issued to our joint venture — — 1,925 Impairment of equity method investment — — 13,684 Gain from termination of interest rate swap — — (4,059) Adjusted EBITDA $ 89,687 $ 115,718 $ 140,871 LIQUIDITY AND CAPITAL RESOURCES To meet our capital and liquidity requirements, we primarily rely on operating cash flow, as well as borrowings under our credit facility.
The following table presents revenue by type for each segment and the percentage change from the prior period for the years ended December 31 (in thousands): 2023 Increase (Decrease) 2022 Increase (Decrease) 2021 Technology Flex revenue $ 1,366,095 (7.4) % $ 1,476,055 18.3 % $ 1,247,560 Direct Hire revenue 18,458 (41.5) % 31,572 19.7 % 26,381 Total Technology revenue $ 1,384,553 (8.2) % $ 1,507,627 18.3 % $ 1,273,941 FA Flex revenue $ 127,679 (27.6) % $ 176,395 (37.6) % $ 282,597 Direct Hire revenue 19,524 (27.0) % 26,743 14.4 % 23,384 Total FA revenue $ 147,203 (27.5) % $ 203,138 (33.6) % $ 305,981 Total Flex revenue $ 1,493,774 (9.6) % $ 1,652,450 8.0 % $ 1,530,157 Total Direct Hire revenue 37,982 (34.9) % 58,315 17.2 % 49,765 Total Revenue $ 1,531,756 (10.5) % $ 1,710,765 8.3 % $ 1,579,922 Flex Revenue.
The following table presents revenue by type for each segment and the percentage change from the prior period for the years ended December 31: (in thousands) 2024 Increase (Decrease) 2023 Increase (Decrease) 2022 Technology Flex revenue $ 1,278,715 (6.4) % $ 1,366,095 (7.4) % $ 1,476,055 Direct Hire revenue 14,028 (24.0) % 18,458 (41.5) % 31,572 Total Technology revenue $ 1,292,743 (6.6) % $ 1,384,553 (8.2) % $ 1,507,627 FA Flex revenue $ 97,729 (23.5) % $ 127,679 (27.6) % $ 176,395 Direct Hire revenue 14,836 (24.0) % 19,524 (27.0) % 26,743 Total FA revenue $ 112,565 (23.5) % $ 147,203 (27.5) % $ 203,138 Total Flex revenue $ 1,376,444 (7.9) % $ 1,493,774 (9.6) % $ 1,652,450 Total Direct Hire revenue 28,864 (24.0) % 37,982 (34.9) % 58,315 Total Revenue $ 1,405,308 (8.3) % $ 1,531,756 (10.5) % $ 1,710,765 Flex Revenue.
The following table presents the key drivers for the change in Flex gross profit by segment over the prior period (in thousands): YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, 2023 vs. 2022 2022 vs. 2021 Key Drivers - Increase (Decrease) Technology FA Technology FA Revenue impact (volume) $ (29,079) $ (14,483) $ 60,365 $ (29,128) Profitability impact (rate) (10,333) 187 395 4,061 Total change in Flex gross profit $ (39,412) $ (14,296) $ 60,760 $ (25,067) SG&A Expenses.
The following table presents the key drivers for the change in Flex gross profit by segment over the prior period (in thousands): YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, 2024 vs. 2023 2023 vs. 2022 Key Drivers - Increase (Decrease) Technology FA Technology FA Revenue impact (volume) $ (22,448) $ (8,948) $ (29,079) $ (14,483) Profitability impact (rate) (364) (743) (10,333) 187 Total change in Flex gross profit $ (22,812) $ (9,691) $ (39,412) $ (14,296) SG&A Expenses.
Refer to Note 11 - “Operating Leases” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data for additional information regarding our lease obligations and the timing of expected future payments, including a five-year maturity schedule. Off-Balance Sheet Arrangements Kforce provides letters of credit to certain vendors in lieu of cash deposits.
Refer to Note 10 - “Operating Leases” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data for additional information regarding our lease obligations and the timing of expected future payments, including a five-year maturity schedule.
As of December 31, 2023, the value of our non-cancellable unconditional purchase commitments was $38.0 million. • We have employment agreements with certain executives that provide for minimum compensation, salary and continuation of certain benefits for a six-month to a three-year period after their employment ends under certain circumstances.
As of December 31, 2024, the value of our unconditional purchase obligations with a remaining term in excess of one year was $30.7 million. • We have employment agreements with certain executives that provide for minimum compensation, salary and continuation of certain benefits for a one-year to a three-year period after their employment ends under certain circumstances.
Flex revenue for our Technology business decreased 7.4% (7.1% on a billing day basis), during the year ended December 31, 2023, as compared to the same period in 2022, primarily due to a decrease in consultants on assignment, which was partially offset by higher average bill rates.
Flex revenue for our Technology business decreased 6.4% (7.1% per billing day) during the year ended December 31, 2024, as compared to the same period in 2023, primarily due to a decrease in the number of consultants on assignment. The average bill rate was approximately $90 per hour for 2024, which remained flat as compared to 2023.
We believe that existing cash and cash equivalents, cash flow from operations and available borrowings under our credit facility will be adequate to meet the capital expenditure and working capital requirements of our operations for at least the next 12 months.
We believe that existing cash and cash equivalents, operating cash flows and available borrowings under our Amended and Restated Credit Facility will be adequate to meet the capital expenditure and working capital requirements of our operations for at least the next 12 months, and the foreseeable future, which we believe will provide us the flexibility to continue returning significant capital to our shareholders.
We are also required to exercise judgment with respect to the realization of our net deferred tax assets. Management evaluates positive and negative evidence and exercises judgment regarding past and future events to determine if it is more likely than not that all or some portion of the deferred tax assets may not be realized.
Management evaluates positive and negative evidence and exercises judgment regarding past and future events to determine if it is more likely than not that all or some portion of the deferred tax assets may not be realized. If appropriate, a valuation allowance is recorded against deferred tax assets to offset future tax benefits that may not be realized.
The following table presents the key drivers for the change in Flex revenue by segment over the prior period (in thousands): YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, 2023 vs. 2022 2022 vs. 2021 Key Drivers - Increase (Decrease) Technology FA Technology FA Volume - hours billed $ (141,498) $ (57,647) $ 118,757 $ (144,684) Bill rate 33,320 8,949 109,357 38,456 Billable expenses (1,782) (18) 381 26 Total change in Flex revenue $ (109,960) $ (48,716) $ 228,495 $ (106,202) The following table presents total Flex hours billed by segment and the percentage change over the prior period for the years ended December 31 (in thousands): 2023 Increase (Decrease) 2022 Increase (Decrease) 2021 Technology 15,178 (9.6) % 16,794 9.6 % 15,329 FA 2,550 (32.7) % 3,789 (51.2) % 7,768 Total Flex hours billed 17,728 (13.9) % 20,583 (10.9) % 23,097 17 Table of Contents Direct Hire Revenue.
The following table presents the key drivers for the change in Flex revenue by segment over the prior period (in thousands): YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, 2024 vs. 2023 2023 vs. 2022 Key Drivers - Increase (Decrease) Technology FA Technology FA Volume - hours billed $ (90,372) $ (32,440) $ (141,498) $ (57,647) Bill rate 3,092 2,469 33,320 8,949 Billable expenses (100) 21 (1,782) (18) Total change in Flex revenue $ (87,380) $ (29,950) $ (109,960) $ (48,716) The following table presents total Flex hours billed by segment and the percentage change over the prior period for the years ended December 31: (in thousands) 2024 Increase (Decrease) 2023 Increase (Decrease) 2022 Technology 14,171 (6.6) % 15,178 (9.6) % 16,794 FA 1,902 (25.4) % 2,550 (32.7) % 3,789 Total Flex hours billed 16,073 (9.3) % 17,728 (13.9) % 20,583 Direct Hire Revenue.
Revenue decreased 8.2% and 27.5% for Technology and FA, respectively, in 2023, primarily driven by the uncertainty in the macro environment and our repositioning efforts in our FA business. • Flex revenue decreased 9.6% (9.2% on a billing day basis), to $1.49 billion in 2023 from $1.65 billion in 2022.
Revenue decreased 6.6% and 23.5% for Technology and FA, respectively, in 2024, primarily driven by the ongoing macroeconomic uncertainty. • Flex revenue decreased 7.9% to $1.38 billion (8.6% on a billing day basis) in 2024 from $1.49 billion in 2023.
Commissions and other bonus incentives for our revenue-generating talent are variable costs driven primarily by revenue and gross profit levels, and associate performance. 18 Table of Contents The following table presents certain components of SG&A as a percentage of total revenue for the years ended December 31 (in thousands): 2023 % of Revenue 2022 % of Revenue 2021 % of Revenue Compensation, commissions, payroll taxes and benefits costs $ 282,439 18.4 % $ 319,501 18.7 % $ 295,187 18.7 % Other (1) 52,494 3.5 % 60,314 3.5 % 50,534 3.2 % Total SG&A $ 334,933 21.9 % $ 379,815 22.2 % $ 345,721 21.9 % (1) Includes items such as credit loss expense, lease expense, professional fees, travel, communication and office related expense, and certain other expenses.
Therefore, as those levels change, these expenses would also generally be anticipated to change. 20 Table of Contents The following table presents certain components of SG&A as a percentage of total revenue for the years ended December 31: (in thousands) 2024 % of Revenue 2023 % of Revenue 2022 % of Revenue Compensation, commissions, payroll taxes and benefits costs $ 260,839 18.6 % $ 282,439 18.4 % $ 319,501 18.7 % Other (1) 48,963 3.4 % 52,494 3.5 % 60,314 3.5 % Total SG&A $ 309,802 22.0 % $ 334,933 21.9 % $ 379,815 22.2 % (1) Includes items such as credit loss expense, lease expense, professional fees, travel, communication and office-related expense, and certain other expenses.
Direct Hire revenue decreased 34.9% during the year ended December 31, 2023, as compared to the same period in 2022, primarily driven by a decrease in placements stemming from uncertainties in the macroeconomic environment. We expect Direct Hire revenue to be down in the 30% range in the first quarter of 2024 on a year-over-year basis. Gross Profit.
Direct Hire revenue decreased 24.0% during the year ended December 31, 2024, as compared to the same period in 2023, primarily driven by a decrease in placements. We expect Direct Hire revenue to be stable in the first quarter of 2025 year over year. 19 Table of Contents Gross Profit.
The following table presents the Flex gross profit percentage for each segment and the percentage change over the prior period for the years ended December 31: 2023 Increase (Decrease) 2022 Increase (Decrease) 2021 Technology 25.7 % (2.7) % 26.4 % — % 26.4 % FA 29.9 % 0.7 % 29.7 % 8.4 % 27.4 % Total Flex gross profit percentage 26.0 % (3.0) % 26.8 % 0.8 % 26.6 % Our Flex gross profit percentage decreased 80 basis points for the year ended December 31, 2023, as compared to the same period in 2022. • Technology Flex gross profit margins decreased 70 basis points for the year ended December 31, 2023, as compared to the same period in 2022, primarily due to a tighter pricing environment. • FA Flex gross profit margins increased 20 basis points for the year ended December 31, 2023, as compared to the same period in 2022, primarily a result of favorable benefits and payroll taxes due to a change in our client portfolio mix, partially offset by a tighter pricing environment.
The following table presents the Flex gross profit percentage for each segment and the percentage change over the prior period for the years ended December 31: 2024 Increase (Decrease) 2023 Increase (Decrease) 2022 Technology 25.7 % — % 25.7 % (2.7) % 26.4 % FA 29.1 % (2.7) % 29.9 % 0.7 % 29.7 % Total Flex gross profit percentage 25.9 % (0.4) % 26.0 % (3.0) % 26.8 % Our Flex gross profit percentage decreased 10 basis points for the year ended December 31, 2024, as compared to the same period in 2023. • Technology Flex gross profit margins remained stable at 25.7% for the year ended December 31, 2024, as compared to the same period in 2023.
Refer to Note 12 - “Employee Benefit Plans” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of this report, for a complete discussion of the termination of our SERP. Income Tax Expense.
Refer to Note 12 - “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of this report for a complete discussion of the Amended and Restated Credit Facility.
Total compensation, commissions, payroll taxes and benefit costs as a percentage of SG&A represented 84.3%, 84.1% and 85.4% of SG&A for the years ended December 31, 2023, 2022 and 2021, respectively.
Total compensation, commissions, payroll taxes and benefit costs as a percentage of SG&A represented 84.2%, 84.3% and 84.1% of SG&A for the years ended December 31, 2024, 2023 and 2022, respectively. Commissions and other bonus incentives are variable costs driven primarily by revenue and gross profit levels.
The following table presents Free Cash Flow (in thousands): YEARS ENDED DECEMBER 31, 2023 2022 2021 Net income $ 61,075 $ 75,431 $ 75,177 Non-cash provisions and other 30,713 50,294 30,188 Changes in operating assets/liabilities (323) (34,920) (32,467) Net cash provided by operating activities 91,465 90,805 72,898 Capital expenditures (7,763) (8,109) (6,441) Free cash flow 83,702 82,696 66,457 Change in debt 16,000 (74,400) — Repurchases of common stock (75,024) (74,913) (66,210) Cash dividends (27,562) (24,027) (20,120) Proceeds from the sale of our joint venture interest 5,059 — — (Premiums paid for) cash proceeds received from company-owned life insurance (1,408) 1,077 — Note receivable issued to our joint venture (750) (6,750) — Equity method investment — (500) (9,000) Net proceeds from the sale of assets held for sale — — 23,742 Other (19) (51) (1,366) Change in cash and cash equivalents $ (2) $ (96,868) $ (6,497) 20 Table of Contents Adjusted EBITDA.
Therefore, we believe it is important to view Free Cash Flow as a complement to, but not as a replacement for, our Consolidated Statements of Cash Flows. 22 Table of Contents The following table presents Free Cash Flow: YEARS ENDED DECEMBER 31, (in thousands) 2024 2023 2022 Net cash provided by operating activities $ 86,874 $ 91,465 $ 90,805 Capital expenditures (7,573) (7,763) (8,109) Free cash flow 79,301 83,702 82,696 Change in debt (8,900) 16,000 (74,400) Repurchases of common stock (41,938) (75,024) (74,913) Cash dividends (28,236) (27,562) (24,027) Proceeds from company-owned life insurance 2,377 — 1,077 Premiums paid for company-owned life insurance (2,368) (1,408) — Note receivable issued to our joint venture — (750) (6,750) Proceeds from the sale of our joint venture interest — 5,059 — Equity method investment — — (500) Other (6) (19) (51) Change in cash and cash equivalents $ 230 $ (2) $ (96,868) Adjusted EBITDA.
The following table presents the cash flow impact of the common stock repurchase activity for the years ended December 31 (in thousands): 2023 2022 2021 Open market repurchases $ 67,178 $ 66,806 $ 54,265 Repurchase of shares related to tax withholding requirements for restricted stock vesting 7,846 8,107 11,945 Total cash flow impact of common stock repurchases $ 75,024 $ 74,913 $ 66,210 Cash paid in current year for settlement of prior year repurchases $ 974 $ 181 $ — Kforce’s Board declared and paid dividends of $27.6 million ($1.44 per share), $24.0 million ($1.20 per share) and $20.1 million ($0.98 per share) for the years ended December 31, 2023, 2022 and 2021, respectively.
This change was primarily driven by a decrease in repurchases of common stock driven by lower operating cash flows, partially offset by the net payments made on our Amended and Restated Credit Facility. 24 Table of Contents The following table presents the cash flow impact of the common stock repurchase activity for the years ended December 31: (in thousands) 2024 2023 2022 Open market repurchases $ 37,162 $ 67,178 $ 66,806 Repurchased shares withheld for tax withholding upon vesting of restricted stock 4,776 7,846 8,107 Total cash flow impact from Repurchases of common stock $ 41,938 $ 75,024 $ 74,913 Cash paid in current year for settlement of prior year repurchases $ 920 $ 974 $ 181 Kforce’s Board declared and paid dividends of $28.2 million ($1.52 per share), $27.6 million ($1.44 per share) and $24.0 million ($1.20 per share) for the years ended December 31, 2024, 2023 and 2022, respectively.
Income tax expense as a percentage of income from operations, before income taxes (our “effective tax rate”) were 28.4%, 26.4% and 24.3% for the years ended December 31, 2023, 2022 and 2021, respectively.
Financial Statements and Supplementary Data of this report, for a more detailed discussion on the sale of our equity method investment in February 2023. Income Tax Expense. Income tax expense as a percentage of income from operations, before income taxes (our “effective tax rate”) were 25.4%, 28.4% and 26.4% for the years ended December 31, 2024, 2023 and 2022, respectively.
If appropriate, a valuation allowance is recorded against deferred tax assets to offset future tax benefits that may not be realized. A 0.5% change in our effective tax rate would have impacted our net income by approximately $0.4 million in 2023. Refer to Note 6 – “Income Taxes” in the Notes to Consolidated Financial Statements, included in Item 8.
A 0.5% change in our effective tax rate would have impacted our net income by approximately $0.3 million in 2024. Refer to Note 7 – “Income Taxes” in the Notes to Consolidated Financial Statements, included in Item 8.
These off-balance sheet arrangements do not provide financing, liquidity, market or credit risk support. 23 Table of Contents CRITICAL ACCOUNTING ESTIMATES Our consolidated financial statements are prepared in accordance with GAAP, and our significant accounting policies are discussed in Note 1 – “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, included in Item 8.
CRITICAL ACCOUNTING ESTIMATES Our consolidated financial statements are prepared in accordance with GAAP, and our significant accounting policies are discussed in Note 1 – “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of this report.
Goodwill Impairment Goodwill is tested at the reporting unit level, which is generally an operating segment or one level below the operating segment level, where a business operates and for which discrete financial information is available and reviewed by segment management.
Financial Statements and Supplementary Data of this report, for a complete discussion of the components of our income tax expense, as well as the temporary differences that exist as of December 31, 2024. 26 Table of Contents Goodwill Impairment Goodwill is tested at the reporting unit level, which is generally an operating segment or one level below the operating segment level, where a business operates and for which discrete financial information is available and reviewed by segment management.
Free Cash Flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. Therefore, we believe it is important to view Free Cash Flow as a complement to, but not as a replacement for, our Consolidated Statements of Cash Flows.
Free Cash Flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures.
Cash used in investing activities of $14.3 million during the year ended December 31, 2022 primarily consisted of cash used for capital expenditures of $8.1 million and the issuance of secured promissory notes to our joint venture totaling $6.8 million.
Investing Activities Cash used in investing activities was $7.6 million during the year ended December 31, 2024, and primarily consisted of cash used for capital expenditures.
In February 2024, Kforce’s Board approved a 5.5% annual increase to the Company's dividend from $1.44 per share to $1.52 per share.
In January 2025, Kforce’s Board approved an increase to the Company's dividend from $1.52 per share to $1.56 per share, which is the sixth consecutive annual increase.
Operating cash flows in 2023 were negatively impacted by lower profitability levels due to the decline in revenues stemming from the uncertainty in the macro environment. 15 Table of Contents RESULTS OF OPERATIONS Certain discussions of the changes in our results of operations from the year ended December 31, 2022, as compared to the year ended December 31, 2021, have been omitted from this Form 10-K, and may be found in “Item 7.
The total capital returned to shareholders in 2024 represented approximately 75% of operating cash flows. • Cash provided by operating activities was $86.9 million during the year ended December 31, 2024, as compared to $91.5 million for 2023. 17 Table of Contents RESULTS OF OPERATIONS Certain discussions of the changes in our results of operations from the year ended December 31, 2023, as compared to the year ended December 31, 2022, have been omitted from this Form 10-K, and may be found in “Item 7.
Our FA business experienced a decrease in Flex revenue of 27.6% (27.3% on a billing day basis), during the year ended December 31, 2023, as compared to the same period in 2022, primarily driven by the repositioning of this business towards more highly-skilled roles and the continued uncertainty in the macro environment.
Our FA business experienced a decrease in Flex revenue of 23.5% (24.1% per billing day) during the year ended December 31, 2024, as compared to the same period in 2023, primarily driven by a decrease in the number of consultants on assignment.
Accounting for Income Taxes Our effective income tax rate is influenced by tax planning opportunities available to us in the various jurisdictions in which we conduct business. Significant judgment is required in determining our effective tax rate and in evaluating our tax positions, including those that may be uncertain.
We have not made any material changes in our accounting methodologies used in prior years. Accounting for Income Taxes Our effective income tax rate is influenced by tax planning opportunities available to us in the various jurisdictions in which we conduct business.
In 2023, Flex revenue decreased 7.4% (7.1% on a billing day basis) for Technology and decreased 27.6% (27.3% on a billing day basis) for FA. • Direct Hire revenue decreased 34.9% to $38.0 million in 2023 from $58.3 million in 2022. • Gross profit margin decreased 140 basis points to 27.9% in 2023 from 29.3% in 2022, primarily as a result of a decline in the mix of Direct Hire revenue and Technology Flex gross profit margins. • Flex gross profit margin decreased 80 basis points to 26.0% for 2023 from 26.8% in 2022.
These decreases were driven by a decline in the number of consultants on assignment. • Direct Hire revenue decreased 24.0% to $28.9 million in 2024 from $38.0 million in 2023. • Gross profit margin decreased 50 basis points to 27.4% in 2024 from 27.9% in 2023, primarily as a result of a decline in the mix of Direct Hire revenue. • Flex gross profit margin decreased 10 basis points to 25.9% for 2024 from 26.0% in 2023.
These costs, net of related tax benefits, impacted our earnings per share by $0.36 per share. • Net income for the year ended December 31, 2023, decreased 19.0% to $61.1 million, or $3.13 per share, from $75.4 million, or $3.68 per share, in 2022. • The Firm returned $94.7 million of capital to our shareholders in the form of open market repurchases totaling $67.1 million, or 1.1 million shares, and quarterly dividends totaling $27.6 million during the year ended December 31, 2023.
The decrease in FA was primarily driven by a greater mix of lower margin projects. • Selling, General and Administrative (“SG&A”) expenses as a percentage of revenue for the year ended December 31, 2024, increased slightly to 22.0% from 21.9% in 2023. • Net income for the year ended December 31, 2024, decreased 17.5% to $50.4 million, or $2.68 per share, from $61.1 million, or $3.13 per share, in 2023. • The Firm returned $64.7 million of capital to our shareholders in the form of open market repurchases totaling $36.5 million, or 0.6 million shares, and quarterly dividends totaling $28.2 million during the year ended December 31, 2024.
Other expense, net also includes an impairment charge of $13.7 million for our equity method investment for the year ended December 31, 2022. Refer to Note 1 - “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, included in Item 8.
During the years ended December 31, 2024, 2023 and 2022, we recognized nil, $0.8 million, and $3.8 million, respectively, related to our share of losses associated with our equity method investment. Refer to Note 1 - “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, included in Item 8.
Financial Statements and Supplementary Data of this report for a complete discussion of our interest rate swaps. 22 Table of Contents Stock Repurchases The following table presents the open market repurchase activity under the Board-authorized common stock repurchase program for the years ended December 31 (in thousands): 2023 2022 Shares $ Shares $ Open market repurchases 1,097 $ 67,124 1,124 $ 67,599 In February 2024, the Board approved an increase in our stock repurchase authorization, bringing the total authorization to $100.0 million.
Stock Repurchases The following table presents the open market repurchase activity under the Board-authorized common stock repurchase program for the years ended December 31: 2024 2023 (in thousands) Shares $ Shares $ Open market repurchases 609 $ 36,502 1,097 $ 67,124 As of December 31, 2024, $63.5 million remained available for further repurchases under the Board-authorized common stock repurchase program.
Financing Activities Cash used in financing activities was $86.6 million during the year ended December 31, 2023, as compared to $173.4 million during the year ended December 31, 2022. This change was primarily driven by $16.0 million of net borrowings on our credit facility in 2023 and $74.4 million of net payments in 2022.
Financing Activities Cash used in financing activities was $79.1 million during the year ended December 31, 2024, as compared to $86.6 million during the year ended December 31, 2023.
In the first quarter of 2024, we expect FA Flex revenue to decrease in the mid 20% range on a year-over-year basis.
As a result of this mix, we expect FA Flex gross profit margins for the first quarter of 2025 to be down on a year-over-year basis.
Financial Statements and Supplementary Data of this report, for a discussion of new accounting standards.
Financial Statements and Supplementary Data of this report, for a complete discussion of the valuation methodologies employed. NEW ACCOUNTING STANDARDS Refer to Note 1 – “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of this report, for a discussion of new accounting standards.
In the first quarter of 2024, we expect Technology Flex revenue to decline in the low double digits year-over-year.
In the first quarter of 2025, we expect Technology Flex revenue to decline sequentially on a billing day basis in the low to mid-single digits, at a level that is largely consistent with pre-pandemic levels and in the low single digits year over year.
Our Technology business declined on a sequential billing day basis in the first, second and third quarters of 2023 and grew almost 1% on a sequential billing day basis in the fourth quarter of 2023.
With that said, our Technology business was largely stable throughout 2024 as indicated by our sequential billing day growth in both the second and fourth quarters of 2024 with a slight sequential decline in the third quarter.
Flex gross profit margin decreased 70 basis points for Technology and increased 20 basis points for FA in 2023 as compared to 2022. • Selling, General and Administrative (“SG&A”) expenses as a percentage of revenue for the year ended December 31, 2023, decreased to 21.9% from 22.2% in 2022.
SG&A as a percentage of revenue increased 10 basis points for the year ended December 31, 2024, as compared to the same period in 2023.
At December 31, 2023, Kforce had letters of credit outstanding for operating lease and insurance coverage deposits totaling $1.2 million. These off-balance sheet arrangements do not have a material impact on our liquidity or capital resources.
Off-Balance Sheet Arrangements We do not have off-balance sheet arrangements that have or are reasonably likely to have a material impact on our liquidity or capital resources.
At December 31, 2023 and 2022, we had $0.1 million in cash and cash equivalents. At December 31, 2023, Kforce had $141.5 million in working capital compared to $146.3 million at December 31, 2022.
At December 31, 2024 and 2023, we had $32.7 million and $41.6 million outstanding under our Amended and Restated Credit Facility, respectively, and the borrowing availability was $166.3 million and $157.2 million, respectively, subject to certain covenants. At December 31, 2024, Kforce had $112.9 million in working capital compared to $141.5 million at December 31, 2023.
Removed
SG&A expenses for the year ended December 31, 2023, include costs of $8.4 million related to (i) organizational realignment activities and actions taken to reduce our costs to better align with the lower revenue levels and (ii) legal costs for settlements.
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In 2024, Flex revenue decreased 6.4% for Technology (7.1% on a billing day basis) and decreased 23.5% for FA (24.1% on a billing day basis).
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The total capital returned to shareholders in 2023 represented over 100% of operating cash flows. • Cash provided by operating activities was $91.5 million during the year ended December 31, 2023, as compared to $90.8 million for 2022.
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Flex gross profit margin remained flat for Technology and decreased 80 basis points for FA in 2024 as compared to 2023.
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In 2022, there were higher cash outlays related to the payment of deferred payroll taxes under the Coronavirus Aid, Relief and Economic Securities Act (the “CARES Act”) and settlement of the Supplemental Executive Retirement Plan (“SERP”) obligation, totaling approximately $39 million.
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Our performance continued to be adversely affected by the ongoing macroeconomic uncertainty, which resulted in our clients being more cautious with the level of investment in their digital transformation efforts.
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There has been heightened uncertainty in the macroeconomic environment, and concerns that the U.S. economy may fall into a recession, since the Federal Reserve began aggressively raising interest rates in March 2022 to address persistently high inflation. The U.S.
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Against the backdrop of revenue declines, we continued to manage down our overall headcount levels, especially in our delivery roles, and tightly control spend levels in order to mitigate the pressure on profitability from the lower revenue and gross margin levels.
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Treasury’s yield curve has also been significantly inverted, which, for more than 50 years, has been a very strong indicator of a likely recession. There are also significant geopolitical concerns including, but not limited to, the Ukraine-Russia War, ongoing supply chain issues, U.S. political uncertainties and the Israel-Hamas War.
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The political landscape in the U.S. remains unclear, particularly in relation to the impacts of the potential policy changes from the new administration. Geopolitical risks persist, including uncertainty in the Middle East and global supply chain disruptions.
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With that said, growth in the U.S. economy was reasonably strong in 2023 as real gross domestic product (“GDP”) grew at a pace of roughly 3% led by robust consumer spending. In addition, the labor markets remained quite strong in 2023 as the overall unemployment rate of 3.7% in December 2023 remained near historically low levels.
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Despite these challenges, the U.S. economy demonstrated consistent growth in 2024, with real GDP expanding at 2.8%, largely driven by increased government spending and a healthy consumer. Although the unemployment rate rose to 4.1% in December 2024 from 3.7% in December 2023, employment grew across most sectors in the final quarter of 2024.
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Despite the expansion in the U.S. economy, the uncertainties in the macro environment caused companies, broadly speaking, to exercise restraint in the number of new technology investments they initiated and to selectively scale back on existing projects in 2023.
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Additionally, the Federal Reserve cut interest rates by a total of 100 basis points in late 2024, but the prospects for further interest rate cuts in 2025 appear less certain with inflation being a bit stickier and the labor markets continuing to show signs of strength.
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This restraint, which we began to see in the second half of 2022, had a negative impact on our results of operations in 2023. Kforce took certain actions to realign our organization and reduce costs to better align with lower revenue levels during the third quarter of 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFinancial Statements and Supplementary Data of this report, for further details on the Amended and Restated Credit Facility. 25 Table of Contents
Biggest changeFinancial Statements and Supplementary Data of this report, for a complete discussion of the Amended and Restated Credit Facility. 27 Table of Contents
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. In addition to the inherent operational risks, Kforce is exposed to certain market risks, primarily related to changes in interest rates. As of December 31, 2023, we had $41.6 million outstanding under the Amended and Restated Credit Facility.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. In addition to the inherent operational risks, Kforce is exposed to certain market risks, primarily related to changes in interest rates. As of December 31, 2024, we had $32.7 million outstanding under the Amended and Restated Credit Facility.
A hypothetical 10% increase in interest rates in effect at December 31, 2023 would increase Kforce’s annual interest expense by less than $0.4 million. Refer to Note 13 - “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8.
A hypothetical 10% increase in interest rates in effect at December 31, 2024 would increase Kforce’s annual interest expense by less than $0.2 million. Refer to Note 12 - “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8.

Other KFRC 10-K year-over-year comparisons