WE LOVE WHAT WE DO.
WE LOVE WHO WE SERVE.®
Annual Report 2022 Kforce is a solutions firm specializing in technology and
other professional staffing services. Each year, we provide
career opportunities for approximately 30,000 highly skilled
professionals on a temporary, consulting or direct-hire basis.
These experts work with approximately 3,000 clients,
including a significant majority of the Fortune 500, helping them
conquer challenges and meet their digital transformation goals.
Together, we reimagine how business gets done. For more than
60 years, we’ve achieved our clients’ objectives by combining
a KnowledgeForce® — our namesake — with flexibility and an
unmatched drive for excellence.
TO OUR FELLOW SHAREHOLDERS, CLIENTS, CONSULTANTS AND EMPLOYEES:
WE ARE PLEASED WITH
OUR PERFORMANCE IN 2022,
which was an extremely successful year for Kforce. We
met the financial objectives we outlined at the beginning
of the year, despite the softening in demand we began to
experience in the second half of 2022. We organically grew
revenues in our Technology business by approximately
18% after growing more than 22% in 2021 and further
improved profitability levels. Strategically, we advanced our
integrated sales strategy to further integrate our managed
teams and project solutions capability within our Technology
business. Our team made significant progress advancing
the multi-year effort to transform our back office and
fully transitioned to our hybrid Office OccasionalSM work
environment across all our markets, including the opening
of our new state-of-the-art headquarters in Tampa. This
has resulted in improved retention of our associates and
positions Kforce as a destination for top talent. Kforce
is proud to be certified as a Great Place to Work, which
distinguishes Kforce as one of the best companies to work
for in the country.
Given the high degree of macro-economic uncertainty, let
me offer some commentary about the current operating
environment, which is informed by our internal metrics and
discussions with clients and our associates. We experienced
unprecedented demand in our technology business
beginning in 2021 and continuing largely for the first half of
2022 driven by our clients’ acceleration of their digital spend
and transformation efforts geared towards employee
Since 2007, we have
returned in excess of
$830 million in capital
to our shareholders,
which has represented
approximately 75%
of the cash our business
has generated.
engagement in a more remote-centric environment and their
customer experiences. The unprecedented demand fueled
the two-year growth rate in our Technology business of
approximately 44%, which yet again significantly exceeded
the market benchmarks. We had previously noted a
slowdown in demand during the second half of the year and
more recently have seen a higher level of project scrutiny
being exercised by our clients given the macroeconomic
uncertainty. However, technology spend on critical
technology initiatives across industries is still proceeding and
provides a strong underpinning for our technology business.
We continue to have an unwavering belief and expectation
that the long-term secular drivers of demand in technology
spend are more present than ever, irrespective of how
the economic environment plays out. The strength of the
secular drivers of demand in technology accelerated coming
out of the Great Recession by advancements in mobility,
big data, cloud, and the rapid expansion of consumer-facing
technology initiatives. The pandemic has only accelerated
the strategic imperative for all businesses to further
digitize their business to enhance consumer and employee
experiences. Technology is not optional and is core to all
business strategies regardless of industry and we don’t see
that changing. While our business is not immune from the
impacts of economic turbulence, trends during periods
of economic softness suggest that technology spend is
increasingly resilient and less correlated than other areas
where companies utilize flexible talent. This is supported
by our performance in the Great Recession where our
technology business was down approximately 7% versus
general staffing market declines of roughly 25% to 30%
and the 2020 pandemic where our technology business was
virtually flat in comparison to the general staffing market
which experienced 10% to 15% declines.
We also believe that our focus on organic growth for the
last 15 years and the divestiture of non-core businesses
has dramatically sharpened our focus and contributed to
our sustained success. It has also resulted in a clean balance
sheet with an insignificant amount of debt and allowed us to
return a tremendous amount of capital to our shareholders.
We have continued to expand profitability levels as revenues
have grown, as evidenced by the significant improvements in
our operating margins. This has been accomplished while also
reducing our concentration of cyclically sensitive Direct Hire
revenues to less than 3% of revenues in the fourth quarter of
2022 versus 7.5% immediately preceding the Great Recession
and 19.4% preceding the dot com recession. The quality of
our business and revenue stream continues to improve. To
that point, 2022 was an extremely successful year for Kforce.
KFORCE INC. AND SUBSIDIARIES | 1
We met the financial objectives we outlined at the beginning
of the year, despite the softening in demand we began to
experience in the second half of 2022. In addition, we further
meaningfully improved our profitability levels in 2022 over
2021 levels. We continued to be active in returning capital
to our shareholders as we repurchased $25 million of stock
in the fourth quarter and nearly $68 million of stock in the
open market for the full year. We returned approximately
100% of operating cash flows through dividends and share
repurchases to our shareholders in 2022. As an additional
signal of our belief in the strength of our operating trends
and financial strength going into 2023, our Board of Directors
recently approved an increase of approximately 20% in our
annual dividend from $1.20 per share to $1.44 per share.
Since 2007, we have returned in excess of $830 million
in capital to our shareholders, which has represented
approximately 75% of the cash our business has generated.
We believe our financial performance has put us in an excellent
position to continue to make incremental investments in
our business even in an uncertain environment, which we
believe will benefit our shareholders in the long term and
are important drivers to our attainment of double-digit
operating margins. Overall, we believe our strategy has
put us in an exceptional place and are fully prepared for
the various economic possibilities that may lie ahead.
KEY 2022 FINANCIAL ACCOMPLISHMENTS
• Revenue for the year ended December 31, 2022 of
approximately $1.71 billion increased 7.9% year-over-year,
per billing day.
• Technology revenue of $1.51 billion increased 17.9%
year-over-year, per billing day.
• As reported, operating margins were 6.8% for the year
ended December 31, 2022. As adjusted, operating margins
of 6.9% increased 20 basis points year-over-year.
• As reported, earnings per share was $3.68 for the year
ended December 31, 2022. As adjusted, earnings per share
of $4.25 increased 20% year-over-year.
• Returned $91.6 million of capital to our shareholders through
$67.6 million of share repurchases and $24.0 million in
dividends during the year ended December 31, 2022.
• On our fourth quarter 2022 earnings call, we announced a
20% increase in our dividend and an additional $100 million
to buy back stock.
• We have rationalized our real estate portfolio from more
than 50 properties pre-pandemic to slightly more than
30 properties currently, where we have implemented
productivity supporting technologies in each office to
ensure remote and in-office work is seamlessly connected
and executed.
• We continue to have among the highest Glassdoor rating
among our peers and maintain a world-class net promoter
score from our clients and consultants.
2 | KFORCE INC. AND SUBSIDIARIES
OUR ENVIRONMENT, SOCIAL AND
GOVERNANCE (ESG) FOCUS
Our shareholders remain acutely interested in our ESG
efforts. In 2022, we partnered with industry experts to
help us refine and deepen our ESG journey and ensure
we are providing relevant information to stakeholders in
an easy-to-access manner. We are committed to reducing
our impacts on the environment, affecting positive social
change and exercising sound corporate governance.
I am proud of our teams’ efforts to meaningfully advance
ESG efforts in the following ways:
• Full oversight of ESG resides with the entire Board of
Directors, as reinforced by a 2022 formal review of the
board’s responsibilities. Specific aspects of ESG oversight
were delegated to board committees and reflected in their
updated committee charters.
• Through Office OccasionalSM — our hybrid work model —
we significantly lessened our environmental impact through
a strategic reduction of office space, business travel,
in-office electricity usage and employee commutes. In 2022
alone, our overall real-estate footprint decreased nearly
40%. Our long-term vision for office occasional includes
continuing to shrink our square footage and minimizing our
impact on the environment through technology-enabled
hybrid work.
• We conducted a formal environmental impact study with
guidance from third-party experts and reported our scope 1
and 2 emissions in our 2022 Sustainability Report. Between
2019 and 2021, our total scope 1 and 2 emissions decreased
more than 30% using the location-based method.
• Our board is comprised of 44% diverse members in terms
of gender and race, a significant improvement over the last
few years.
• We updated our code of conduct — called our Commitment
to Integrity — with new policies and additional topics,
such as data privacy. We adopted a new Human Rights
Policy to strengthen our existing commitment and a
Supplier Code of Conduct to ensure our business partners
operate with ethics and principles comparable to our own
high standards.
• Our continued dedication to cybersecurity and protection
of information and privacy included an increased
cybersecurity budget and expansion of our team.
• We adopted the Sustainability Accounting Standards Board
framework for ESG reporting.
• The addition of internal listening sessions, led by a third-
party vendor, and “stay interviews” with employees
deepened our connection with our people.
• We transitioned to an associate-led, firm-sponsored
affinity group framework to foster a diverse, inclusive
workplace and better support employees.
• We increased direct spending with certified diverse partners
by 39% from 2021 to 2022, totaling $139 million this year.
• Our desire to positively impact our communities and act
as good stewards yet again remained a priority for our
firm. We live out this mission in many ways, including (i)
hosting our annual Kforce Kids’ STEM Fair, (ii) helping
develop a program for high school students to learn
business skills and problem solve real-world challenges,
(iii) participating in the Best Buddies’ Jobs program to help
individuals with intellectual and developmental disabilities
find work, and (iv) contributing more than 10,000 hours to
events benefiting organizations like Junior Achievement,
Feeding America, American Heart Association and Special
Operations Warrior Foundation.
You can find more information in our 2022 Sustainability
Report.
OUR EXPECTATIONS FOR 2023
As we look ahead to 2023, we will continue to make the
necessary investments in our business to further advance
our integrated sales strategy and the transformation of
our back office to sustain our long-term growth ambitions
and attain double-digit operating margins. We have built
a solid foundation at Kforce and are partnering with
world-class companies to solve complex problems and
help them transform their businesses. There is simply
no other market we would want to be focused on other
than the domestic technology talent solutions space. In
a macro sense, the near term is uncertain, but our path
forward couldn’t be clearer, and we will remain consistent
with the principles under which we have been operating
so successfully. We have a solid, highly tenured team in place
with the expectation of continuing to capture additional
market share and are prepared for the long term and
whatever the near-term environment may bring. We have a
long track record of expanding our market share, particularly
in times of market turbulence, and intend on continuing to
deliver above-market performance.
I am thankful for the tireless efforts of all Kforcers’, from our
incredible leadership team, our sales and delivery associates
to our revenue enablement teams and our Executive
Leadership team who have been together through multiple
economic cycles. I could not be prouder of what this team has
achieved in executing our strategy over many years.
Joseph J. Liberatore
President & Chief Executive Officer
Director
KFORCE INC. AND SUBSIDIARIES | 3
TECHNOLOGY
FINANCE AND ACCOUNTING
Kforce is a leading technology staffing and solutions
firm in the U.S. with a proven history of evolving to meet
our customers’ needs. Our focus is to provide the right
professionals, teams and methodologies to deliver great
results. These experts help our clients solve their greatest
challenges in the areas of:
APPLICATION ENGINEERING
Creating and deploying full-stack solutions across the entire
software development life cycle and technology ecosystem.
Our application strategy and engineering experts help our
clients find the best solution.
CLOUD
Customizing our clients’ platform journeys using a cloud-
first approach that addresses top business and market
drivers to achieve speed, agility, scalability and security.
DATA AND ANALYTICS
Analyzing our clients’ most valuable asset, their data, and
building a framework with industry best practices and a
technology-agnostic approach.
DIGITAL
Establishing high-value, customer-centric experiences by
focusing on the critical connection between technology,
people and process. This includes design thinking,
experience engineering, UI and UX.
As a top provider of finance and accounting services in the
U.S., we provide highly skilled analytics and decision support
in the following areas:
STRATEGIC
Supporting senior-level decision making, ranging from
financial, risk and mergers and acquisitions to business
intelligence and data science.
OPERATIONAL AND TECHNICAL
Executing day-to-day accounting and staffing analysis,
such as directing, controlling and planning.
TRANSACTIONAL
Performing essential functions, including accounts
receivable, accounts payable and payroll.
Our total
shareholder
return (TSR)
since going
public in
August 1995
has been
approximately
1,737%, roughly
3.6 times
greater than the
Russell 2000
over the
same period.
2,000%
1,600%
KFRC
1,200%
800%
400%
0
RUSSELL
2000
Kforce TSR vs. Russell 2000 Index stock
performance from 8/15/95 (IPO) to 12/31/22
4 | KFORCE INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The information set forth below is not necessarily indicative of the results of future operations and should be read in conjunction with Kforce’s
Consolidated Financial Statements and the related notes thereto (”Consolidated Financial Statements”) incorporated into this Annual Report.
Years Ended December 31,
(In thousands, except per share amounts)
Revenue
Gross profit
Selling, general and administrative expenses
Depreciation and amortization
Other expense, net
Income from continuing operations,
before income taxes
Income tax expense
Income from continuing operations
Income from discontinued operations,
net of tax
Net income
Earnings per share — basic, continuing operations
Earnings per share — diluted, continuing operations
Weighted average shares outstanding — basic
Weighted average shares outstanding — diluted
Dividends declared per share
As of December 31,
(In thousands)
2022
2021
2020
2019
2018
$ 1,710,765
$1,579,922
$1,397,700
$1,347,387
$1,303,937
501,107
379,815
4,427
14,423
102,442
27,011
75,431
456,864
345,721
4,500
7,376
99,267
24,090
75,177
396,224
310,713
5,255
5,044
75,212
19,173
56,039
395,038
314,167
6,050
3,425
71,396
16,830
54,566
386,487
307,250
6,836
4,521
67,880
17,004
50,876
—
—
—
76,296
7,104
$
75,431
$ 75,177
$ 56,039
$ 130,862
$ 57,980
$3.76
$3.68
20,054
20,503
$1.20
$3.65
$3.54
20,579
21,212
$0.98
$2.67
$2.62
20,983
21,395
$0.80
$2.35
$2.29
23,186
23,772
$0.72
$2.05
$2.02
24,738
25,251
$0.60
2022
2021
2020
2019
2018
Cash and cash equivalents
$
121
$ 96,989
$ 103,486
$ 19,831
$ 112
Working capital
Total assets
Total outstanding borrowings on credit facility
Total long-term liabilities
Stockholders’ equity
$ 146,327
$ 211,680
$ 230,726
$ 160,271
$ 158,104
$ 392,004
$ 503,401
$ 479,049
$ 381,125
$ 379,908
$
$
25,600
$ 100,000
$ 100,000
$ 65,000
$ 71,800
78,373
$ 154,564
$ 190,948
$ 128,898
$ 121,219
$ 182,198
$ 188,406
$ 179,935
$ 167,263
$ 168,331
KFORCE INC. AND SUBSIDIARIES | 5
STOCK PRICE PERFORMANCE
The following graph compares the cumulative five-year total return on our common stock, the NASDAQ Stock Market (U.S.) Index and
our Peer Group using the value of an investment of $100 on December 31, 2017 with dividends fully reinvested. All returns are weighted
based on market capitalization at the end of each discrete measurement period. Historical stock prices of our common stock are not
necessarily indicative of future stock price performance.
Index
Kforce Inc.
NASDAQ Stock Market (Composite)
2022 Peer Group (1)
2021 Peer Group (2)
(1) 2022 Peer Group:
2017
100.0
100.0
100.0
100.0
2018
124.7
96.1
87.2
90.2
2019
163.4
130.0
107.6
111.4
2020
177.2
186.7
107.4
110.7
2021
321.8
226.6
163.0
167.1
2022
239.2
151.6
130.2
132.6
AMN Healthcare Services, Inc.
ASGN Incorporated
Barrett Business Services, Inc.
CBIZ, Inc.
Cross Country Healthcare Inc.
The Hackett Group, Inc.
Heidrick & Struggles International, Inc.
Huron Consulting Group Inc.
Kelly Services, Inc.
Korn Ferry
ManpowerGroup, Inc.
Resources Connection, Inc.
Robert Half International Inc.
True Blue, Inc.
(2) 2021 Peer Group:
AMN Healthcare Services, Inc.
ASGN Incorporated
Cross Country Healthcare Inc.
Computer Task Group, Inc.
The Hackett Group, Inc.
Heidrick & Struggles International, Inc.
Huron Consulting Group Inc.
Kelly Services, Inc.
Korn Ferry
ManpowerGroup, Inc.
Resources Connection, Inc.
Robert Half International Inc.
True Blue, Inc.
Volt Information Sciences, Inc.
6 | KFORCE INC. AND SUBSIDIARIES
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
The Compensation Committee (“Committee”) utilizes a peer group of companies as a source for executive compensation benchmarking
data and comparisons to Kforce’s executive compensation levels; for insight into external compensation practices; and for determining
specific financial objectives for our performance-based compensation. Additionally, our peer group is used to determine annual equity LTI
compensation levels based on our relative TSR performance.
The Committee focuses on selecting peers that are publicly traded professional staffing companies active in recruiting and placing
similar skill sets at similar types of clients, including companies we consider to be our direct business competitors. The specialty staffing
industry is made up of thousands of companies, most of which are small local firms providing limited service offerings to a relatively small
local client base. According to a report published by Staffing Industry Analysts in 2022, Kforce is one of the 20 largest publicly traded
specialty staffing firms in the U.S., so the size of our peer companies vary considerably. Therefore, the Committee selects other peers that
are similar in terms of size (revenue and market capitalization), but may not be in the staffing industry. The primary criteria for selection
include customers, revenue footprint, geographical/domestic presence, talent, complexity of operating model and companies with which
we compete for executive level talent.
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 22, 2023, there were 145 holders of record.
Purchases of Equity Securities by the Issuer
In February 2023, the Board approved an increase in our stock repurchase authorization, bringing the total authorization from $41.3
million to $100.0 million. Purchases of common stock under the Plan are subject to certain price, market, volume and timing constraints,
which are specified in the plan.
The following table presents information with respect to our repurchases of Kforce common stock during the three months ended
December 31, 2022:
Period
October 1, 2022 to October 31, 2022
November 1, 2022 to November 30, 2022
December 1, 2022 to December 31, 2022
Total
Total Number of
Shares Purchased
(1)(2)(3)
Average Price
Paid Per Share
110,658
188,866
276,444
575,968
$60.82
$57.52
$54.18
$56.55
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
105,714
187,319
145,817
438,850
$59,844,814
$49,069,125
$41,276,204
$41,276,204
(1) Includes 4,944 shares of stock received upon vesting of restricted stock to satisfy tax withholding requirements for the period October 1, 2022 to October 31, 2022.
(2) Includes 1,547 shares of stock received upon vesting of restricted stock to satisfy tax withholding requirements for the period November 1, 2022 to November 30, 2022.
(3) Includes 130,627 shares of stock received upon vesting of restricted stock to satisfy tax withholding requirements for the period December 1, 2022 to December 31, 2022.
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, 2022, we had $25.6 million outstanding under our credit facility. A hypothetical 10% increase in interest rates
in effect at December 31, 2022 would increase Kforce’s annual interest expense by less than $0.2 million. Refer to Note 13 — “Credit
Facility” in the Notes to Consolidated Financial Statements, included in this Annual Report, for further details on our credit facility.
KFORCE INC. AND SUBSIDIARIES | 7
BUSINESS OVERVIEW
COMPANY OVERVIEW
Our Technology Business
Kforce Inc., along with its subsidiaries (collectively, “Kforce”), is a
leading domestic provider of technology and finance and accounting
talent solutions primarily to many innovative and industry-leading
companies. While Kforce was incorporated in 1994 and completed its
initial public offering in August 1995, we have been providing domestic
staffing services through our predecessor companies since 1962.
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. Since the 2008
financial crisis, we successfully divested a number of businesses that
we did not believe aligned with our vision to become a technology
services focused organization. Those divestitures included our clinical
research business (sold in March 2012), our healthcare staffing
business (sold in August 2014), the assets of a business based in
Manila, Philippines (sold in September 2017), our federal government
solutions business (sold in April 2019), and our federal government
product business (sold in June 2019). Our Technology business now
comprises nearly 90% of our overall revenues with the remainder
being our finance and accounting (“FA”) business.
In the fourth quarter of 2022, we moved into our new corporate
headquarters in Tampa, Florida. The design of our new space is
modern, open and technology-enabled and we believe it provides
a flexible environment for our associates to work effectively. We have
successfully transitioned many of our other offices to align with our
Office OccasionalSM strategy and will continue to transition our
remaining offices as they come up for renewal. The shift in strategy
to Office OccasionalSM has allowed us to introduce a new design and
streamline our overall physical footprint, which has led to a 40% decline
in overall square footage compared to pre-pandemic periods. We
expect further declines as remaining offices transition upon renewal.
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. Our 10 largest clients
represented approximately 25% of revenue for the year ended
December 31, 2022.
Our quarterly operating results can be affected by:
• the number of billing days in a particular quarter;
• the seasonality of our clients’ businesses;
• increased holidays and vacation days taken, which is usually
highest in the fourth quarter of each calendar year; and
• increased costs as a result of certain annual U.S. state and federal
employment tax resets that occur at the beginning of each
calendar year, which negatively impacts our gross profit and
overall profitability in the first fiscal quarter of each calendar year.
Our Technology and FA businesses represent our two
operating segments.
8 | KFORCE INC. AND SUBSIDIARIES
We provide talent solutions by striving to comprehensively
understand our clients’ requirements and match their requirements
with qualified candidates in highly skilled areas including, but not
limited to, systems/applications architecture and development
(mobility and/or web), data management and analytics, business
and artificial intelligence, machine learning, project and program
management, and network architecture and security.
Driven by a shift in the breadth of service offerings our clients were
looking for from Kforce, one of our strategies over the last several
years has been to invest in organically building our managed teams
and project solutions capabilities in order to provide a higher-value,
differentiated offering to our clients. We believe Kforce has been
successfully winning these more complex engagements due to the
strong, long-standing partnerships we have built with our clients,
our reputation for delivering quality services and our capability in
identifying quality technology talent. Going forward, we expect to
further integrate this capability into our Technology business as we
continue to solve increasingly complex challenges for our clients.
We provide our clients with qualified individuals (“consultants”), or
teams of consultants, on a temporary basis when the consultant’s
set of skills and experience is the right match for our clients. We refer
to this as our Flex offering, which comprised roughly 98% of overall
Technology revenues in 2022. We also identify qualified individuals
(“candidates”) for permanent placement with our clients. We refer to
this as our Direct Hire offering, which comprised approximately 2% of
overall Technology revenue in 2022.
We provide services to clients in a variety of industries with a
diversified footprint in, among others, financial and business services,
communications, insurance, retail and technology. No single industry
represents more than approximately 16% of our overall Technology
revenues in 2022. In addition, no single client comprised more than
5% of overall Firm revenues in 2022.
The September 2022 report published by Staffing Industry Analysts
(“SIA”) stated that temporary technology staffing is forecasted to
experience growth of 16% and 8%, respectively, in 2022 and 2023.
While we believe the evolving macro-economic environment may
result in SIA lowering their expectations of growth for 2023, we expect
the technology staffing market to be more resilient than the overall
macro-economic environment to adverse economic climates. Digital
transformation, as a general trend, is driving organizations across all
industries to increase their technology investments as competition and
the speed of change intensifies. Nontraditional competitors are also
entering new emerging technologies and markets. This development
puts increased pressure on companies to invest in innovation and the
evolution of their business models. We believe the secular drivers of
technology spend is driving many companies to become increasingly
dependent on the efficiencies provided by technology and the need
for innovation to support business strategies and sustain relevancy
in today’s rapidly changing marketplace. At the macro level, demand
is also being driven by an ever-changing and complex regulatory
and employment law environment, which increases the overall cost
of employment for many companies. We believe that these factors,
among others, are continuing to drive companies to look to temporary
staffing and solutions providers, such as Kforce, to meet their human
capital needs.
We believe the performance of our Technology business in 2022 was
very solid as revenues improved 18% on a billing day basis, year-over-
year to $1.5 billion after growing more than 22% in 2021 on a billing
day basis, year-over-year. We did experience a degree of moderation
in demand in the second half of 2022 given the deterioration in
the macro-economic environment. In the fourth quarter of 2022,
our Technology business grew approximately 8% on a year-over-
year basis. The average bill rate in the fourth quarter of 2022 was
approximately $90 per hour, which increased approximately 10%, as
compared to the fourth quarter of 2021. Our average assignment
duration is approximately 11 months, which has continued to
increase over the last several years. We continue to benefit from an
improving bill rate environment and longer assignment durations,
which we believe is related to the acute labor shortage, particularly
in the highly-skilled positions. In addition to our capability to source
highly qualified U.S. domestic technology talent, we believe an
important differentiator in a candidate-constrained environment is
our capability to source highly qualified foreign-born talent working
domestically in the U.S. in higher-end technology roles. We maintain
this capability on a centralized basis, which we believe allows us to
operate consistently with a keen focus on ensuring compliance in this
highly regulated space.
Our Technology Flex and Direct Hire offerings improved 18% and 20%,
respectively, on a year-over-year basis for 2022 compared to 2021.
We are very pleased with our performance in our Technology
business in 2022. Our belief in the strength in the secular drivers of
demand in the technology space has not changed as a result of the
macro-economic environment. While our Technology business is not
immune to economic turbulence, we expect that technology spend
will be more resilient compared to other areas where companies
leverage flexible talent.
Our FA Business
The talent solutions we offer our clients in our FA business include
consultants in 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); business and cost analysis; and taxation
and treasury. We have historically also provided our clients with
consultants in lower skilled areas such as: loan servicing and support;
customer and call center support; data entry; and other administrative
roles. Lower skilled roles have recently become a significantly reduced
proportion of our FA business given our change in strategic focus.
Over the last few 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 more
closely aligned with our Technology business. We will continue to
support certain clients, where we have long-standing relationships
and that are strategically important to our overall success, by
providing consultants in lower skilled roles. We believe we have made
solid progress in this transition as is evidenced by our overall average
bill rate in FA, which has improved from $37 per hour to $51 per hour
(excluding the Hurricane Ian support project in the fourth quarter of
2022), or approximately 38%, in the fourth quarter of 2022 compared
to the fourth quarter of 2019.
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. No single industry
represents more than approximately 19% of overall FA revenues in
2022. In addition, no single client comprised more than 5% of overall
Firm revenues in 2022. Revenue for our FA business decreased 33.6%
to $203.1 million in 2022 compared to 2021, which was primarily
driven by the impact of the planned run-off in the COVID-19 project-
related business and repositioning efforts.
Our Consultants
The vast majority of our consultants are directly employed by Kforce,
including domestic 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 social
security taxes (“FICA”), federal and state unemployment taxes,
workers’ compensation insurance and other direct labor costs. 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
is to foster a positive experience for our consultants and to offer
rewarding assignments with world-class companies, all of which has
a direct correlation to consultant retention and redeployment.
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. Our consultant NPS ratings are well above staffing
industry averages and have reached World-Class level as defined by the
independent third-party provider we utilized. Additionally, we continually
seek direct feedback from our consultants, which helps us identify
opportunities to refine our services.
INDUSTRY OVERVIEW
We operate in a highly competitive environment. The professional
staffing industry is made up of thousands of companies, most
of which are small local firms providing limited service offerings
to a relatively small local client base. A report published by SIA in
2022 indicated that, in the United States, Kforce is one of the
largest publicly-traded specialty staffing firms, the seventh largest
technology temporary staffing firm and the fourth largest finance
and accounting temporary staffing firm.
KFORCE INC. AND SUBSIDIARIES | 9
According to the September 2022 SIA report, the technology
temporary staffing industry and finance and accounting temporary
staffing industry are expected to generate projected revenues of
$45 billion and $10 billion, respectively, in 2023. Based on these
projected revenues, our current market share is slightly greater than
3%. Our business strategies are focused on continuing to expand our
share of the U.S. temporary staffing industry, which we have been
successful doing over the last 15 years (prior to the Great Recession),
and investing in our capability to provide higher level IT services and
solutions. We believe that the organic investments that we have
made in our managed teams and project solutions capabilities over
the last several years have expanded Kforce’s total addressable
market. Published reports indicate that the addressable market in the
technology solutions space is well in excess of $100 billion.
From an economic standpoint, temporary employment figures and
trends are important indicators of staffing demand, based on data
published by the Bureau of Labor Statistics and SIA. In December
2022, the penetration rate (the percentage of temporary staffing to
total employment) increased slightly to 2.0% from 1.9% in December
2021, while the unemployment rate, at 3.5%, was down from 3.9%
in December 2021. In 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, was 1.9% in
December 2022, down from 2.0% in December 2021.
Business Strategies
Our primary objectives are driving long-term shareholder value
by achieving above-market revenue growth, making prudent
investments to enhance our efficiency and effectiveness within our
operating model and significantly improving our profitability as we
progress towards double digit operating margins. We believe the
following strategies will help us achieve our objectives.
Evolving our Integrated Sales Strategy. Our clients have increasingly
been looking to Kforce to assume a greater level of responsibility in
assisting them with their digital transformation efforts. We believe
that our managed teams and project solutions capabilities have
been meaningful drivers to our success in growing our Technology
business over the last several years. We expect to make continued
investments in advancing our capabilities in this offering and further
integrating this capability within our overall Technology business.
We are leveraging the longevity of our relationships, primarily with
Fortune 500 companies, and our understanding of existing client
needs to provide services in areas including resource and capacity
management as well as managed outcomes and solutions.
We are also continuing to enhance the focus on higher-value skill
areas for our FA business that we believe are less susceptible to
technological disruption and better aligned to our Technology business.
Investments to Improve the Productivity of our People. We believe
that it is critical to provide our associates with high quality tools to
effectively and efficiently perform their roles, better evaluate business
opportunities and advance the value we bring to our clients and
consultants. The investments we have made historically include our
customer relationship management (“CRM”) and talent relationship
management (“TRM”) capabilities, which are both on the Microsoft
10 | KFORCE INC. AND SUBSIDIARIES
Dynamics platform. We continue to invest in these technologies 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.
Several years ago, we initiated a program along with an
independent third-party consulting firm to transform how our back
office operations support the Firm, including our clients, candidates
and consultants. This multi-year program was initiated following a
comprehensive assessment of our current state versus intended
future state capabilities. This assessment confirmed our belief that
we have a tremendous opportunity to fundamentally transform how
our back office functions support the Firm. In 2023, we expect to
continue allocating significant investment towards this initiative as
we look to make decisions around our future state technology and
initiate detailed design and implementation steps.
We expect to continually enhance our business and data intelligence
efforts as part of an ongoing effort to significantly upgrade our
technology tools, including cloud-based platforms. 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.
Positioning Kforce as a Destination for Top Talent. In 2022, we
brought our Office OccasionalSM work environment to life. This
remote-first, hybrid work model is anchored by more than 30 offices
nationwide. We believe Office OccasionalSM, in addition to our world-
class tools, customer base, market position and culture, enhances the
lives and productivity of our people while allowing us to reduce our
real estate footprint. We believe that it is a new way forward that
betters our people, our firm and our environment. Although we have
a remote-first approach, we encourage our associates to leverage
physical office space, when desirable, for activities that are most
efficiently done through in-person, active collaboration. We believe
that these efforts position Kforce as a destination for top talent
during a time where there is great disruption in the labor markets.
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 each market generally
has one or more significant competitors. Within our managed teams
and project solutions offerings, we also face competition from
global, national and regional accounting, consulting and advisory
firms and national and regional strategic consulting and systems
implementation firms. We believe that our boundaryless reach within
the U.S., 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 strengthens compliance, longevity of our brand and reputation
in the market, along with our dedicated compliance and regulatory
infrastructure, all provide a competitive advantage.
Many clients utilize Managed Service Providers (“MSP”) or Vendor
Management Organizations (“VMO”) for the management and
procurement of our services. Generally, MSPs and VMOs standardize
processes through the use of Vendor Management Systems (“VMS”),
which are tools used to aggregate spend and measure supplier
performance. VMSs 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.
Therefore, the use of MSPs by our clients has, in certain instances,
resulted in margin compression, but has also led to incremental client
share through our client’s vendor consolidation efforts. 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.
We believe that the principal elements of competition in our
industry are differentiated offerings, reputation, ability of consultants
to work on assignments with innovative and leading companies, the
availability and quality of associates, consultants and candidates,
level of service, effective monitoring of job performance, scope
of geographic service, types of service offerings and compliance
orientation. 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. Because individuals pursue other employment
opportunities on a regular basis, it is important that we respond
to market conditions affecting these individuals and focus on our
consultant relationship objectives. Additionally, in certain markets,
from time to time we have experienced significant pricing pressure as
a result of our competitors’ pricing strategies, which may result in us
not being able to effectively compete or choosing to not participate in
certain business that does not meet our profitability standard.
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,
tax withholding and reporting, immigration/H-1B visa regulations,
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.
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. Additionally for our associates and certain
consultants, we provide paid leave. 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. For more discussion of the potential
impact that the regulatory environment could have on Kforce’s
financial results, refer to Item 1A. Risk Factors of the KForce 10-K.
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. These policies provide coverage subject to
their terms, conditions, limits of liability and deductibles, for certain
liabilities that may arise from Kforce’s operations. There can be no
assurance that any of the above policies will be adequate for our
needs or that we will maintain all such policies in the future.
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.
We believe we have made great progress on our ESG-related
commitments during 2022, which were outlined in our 2021 Corporate
Social Responsibility Impact Report. Our 2022 Sustainability Report,
which was published on February 17, 2023, recognizes achievements
in our ESG-related initiatives, and also outlines opportunities for
continued growth and evolution. For a detailed discussion on our ESG
initiatives, achievements and commitments, please refer to our 2022
Sustainability Report, publicly available on our website: https://www.
kforce.com/about/kforce-corporate-social-responsibility/.
We are grounded by our people-first approach with a set of Core
Values that serves as a solid foundation.
Core Values
Our Core Values ground us. They are the foundation for how
we positively impact our communities, the environment and the
governance of our firm. Our Core Values are:
• INTEGRITY: Act with intention. Keep promises. Take responsibility.
• EXCELLENCE: Embrace competition. Succeed together. Go for
the win.
• COMPASSION: Respect others. Nurture relationships. Spread
kindness.
• UNITY: Encourage collaboration. Support each other. Pursue a
shared vision.
• ADAPTABILITY: Champion innovation. Stay curious. Consider
the uncommon.
• COURAGE: Dare to fail. Speak openly. Dream big.
• FUN: Be yourself. Laugh often. Enjoy the journey.
KFORCE INC. AND SUBSIDIARIES | 11
The following sections provide a high-level overview of our strategic
initiatives related to each of the ESG pillars.
Governance
We believe that our governance principles add value to our
shareholders, associates, consultants, clients and communities.
These principles provide a framework for our culture, strategy, people
and policy. This section includes an overview of our commitment to
oversight, ethics and integrity, and risk management.
Oversight — Our Board of Directors (“Board”) meet regularly
to assess strategic plans and manage risks to our business and
people, as well as to promote sound corporate governance
practices and policies. These practices and policies, include
firm-wide compliance with our Commitment to Integrity —
Kforce’s Code of Business Conduct — that intends to set the
highest ethical standards for how we conduct business (“Code
of Conduct”). The Board is responsible for the oversight of our
ESG policies and strategy and delegates certain aspects to Board
committees who inherently play an active role and are jointly
responsible for ESG compliance and oversight.
In 2022, we also formalized the oversight structure of our
ESG program within our executive leadership team, which is
accountable to our Board.
Code of Conduct — Our Code of Conduct reflects our
commitment to operate in a fair, honest, responsible and ethical
manner, and covers various topics including, but not limited to,
cybersecurity, data privacy, equity opportunity employment and
acceptable pay practices. Our associates receive annual training
on our Code of Conduct and are required to certify compliance.
Cybersecurity — We take the privacy and protection of our
data seriously. Our cybersecurity program helps us secure our
systems, keeps our business running around the clock and
protects our clients, consultants, associates and shareholders
from vulnerabilities and threats. The Board’s Audit Committee
oversees the Firm’s cybersecurity and data privacy strategies
and practices, and regularly reviews the Firm’s cybersecurity
road maps and framework progress and receives updates on
relevant activities and measures.
People
As of December 31, 2022, Kforce employed approximately 2,000
associates and had 10,000 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. In 2022, we believe
we deepened our connections with our people through conducting
stay interviews and listening sessions to gauge employee sentiment,
which helps guide our decisions. We also maintain a commitment to
well-being, flexibility and balance; learning and development; and
our ongoing efforts to create a diverse and inclusive workplace. 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
12 | KFORCE INC. AND SUBSIDIARIES
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.
Shaped by the feedback of our people, our Office OccasionalSM
remote-first, hybrid work model is supported by flexibility and
choice, and empowered by trust and technology. We believe that
our Office OccasionalSM model allows our associates to design
their workdays; thus, additionally contributing to their health
and well-being.
In 2022, we invested in additional technology to gather and
analyze employee sentiment, which we believe provides us with
valuable insights to better direct our people strategies.
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
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. Roughly 90% of our leaders have
participated in advanced leadership development.
Diversity, Equity and Inclusion (“DE&I”) — Our DE&I mission is
to advocate for and support the inclusion, growth and success
of all people connected to Kforce. The ultimate goal is to weave
DE&I seamlessly into our overall firm strategy using a variety of
approaches including creating an inclusive culture, ensuring an
equitable talent journey for all, establishing policies that support
our people, building an increasingly robust pipeline of diverse
candidates, enhancing our supplier diversity practices, and
instituting training programs to meet our DE&I objectives.
In 2022, we established a DE&I council, conducted listening
sessions through a third-party specialist, and evolved a sense of
community with our people through the use of affinity groups.
Included in our 2022 Sustainability Report are trends related to
employee turnover rates and workforce demographics.
Environmental
As a people-focused solutions business, our impact on the
environment is relatively low. Still, we regularly look for ways to take
action and serve as responsible stewards of the environment. We saw
some of the greatest environmental benefits to date as a result of
the continued rollout of our Office OccasionalSM work model, which
resulted in a significant reduction in office space, business travel,
in-office electricity usage and reduced employee commutes. As we
have continued to minimize our environmental impacts, we recognize
the importance of measuring our efforts. During 2022, we engaged
a third-party specialist to calculate our greenhouse gas emissions
(“GHG”) for Scopes 1 and 2 for 2019 to 2021, which indicated a more
than 30% decline over this period. This information is more fully
detailed in our 2022 Sustainability Report.
We are currently in the process of calculating our Scope 3 emissions
for 2019 to 2022 and plan to report this measurement along with
Scopes 1 and 2 in our next annual Sustainability Report.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
• Net income for the year ended December 31, 2022, increased to
$75.4 million, or $3.68 per share, from $75.2 million, or $3.54 per
share, in 2021. The impairment charge and provision for the note
receivable from our joint venture negatively impacted earnings per
share in 2022 by $0.57. Excluding this impact, earnings per share
improved approximately 20% in 2022 on a year-over-year basis.
• The Firm returned $91.6 million of capital to our shareholders in
the form of open market repurchases totaling $67.6 million, or
1.1 million shares, and quarterly dividends totaling $24.0 million
during the year ended December 31, 2022. The total capital
returned to shareholders in 2022 represented approximately
100% of operating cash flows.
• Net debt was $25.5 million as of December 31, 2022, as compared
to $3.0 million as of December 31, 2021.
• Cash provided by operating activities was $90.8 million during
the year ended December 31, 2022, as compared to $72.9 million
for 2021. This increase is primarily driven by the strength in our
accounts receivable portfolio and improved profitability levels,
partially offset by payments for deferred payroll taxes as a result
of the Coronavirus, Aid, Relief and Economic Security Act (the
“CARES Act”) of approximately $19 million and final payments
under our terminated Supplemental Executive Retirement Plan
(“SERP”) of approximately $20 million.
RESULTS OF OPERATIONS
Certain discussions of the changes in our results of operations from
the year ended December 31, 2021, as compared to the year ended
December 31, 2020, have been omitted from this Annual Report,
and may be found in “Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations” of our Form 10-K
for the fiscal year ended December 31, 2021, filed with the SEC on
February 25, 2022.
This MD&A should be read in conjunction with our Consolidated
Financial Statements and the accompanying notes thereto and the
Business Overview included in this Annual Report, for an overview of
our operations and business environment.
EXECUTIVE SUMMARY
The following is an executive summary of what Kforce believes are
highlights for 2022, 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, 2022, increased
7.9%, per billing day, to $1.7 billion in 2022 from $1.6 billion in
2021. Revenue per billing day increased 17.9% in our Technology
business and decreased 33.9% in our FA business, which was
impacted by the expected run-off in the COVID-19 project-related
business and repositioning efforts.
• Flex revenue increased 7.6%, per billing day, to $1.65 billion in
2022 from $1.53 billion in 2021. Flex revenue increased 17.8%,
per billing day, for Technology and decreased 37.8%, per billing
day, for FA. Excluding revenues from the COVID-19 project-
related business for both periods, our FA Flex business would
have declined 16.7% in 2022 on a year-over-year, billing day basis
primarily as a result of our repositioning efforts.
• While our growth rates slowed in the second half of 2022 given
the macro-economic uncertainties, our Technology business
carried momentum into the fourth quarter of 2022 as evidenced
by 8% growth on a year-over-year billing day basis.
• Direct Hire revenue, per billing day, increased 16.7% to $58.3
million in 2022 from $49.8 million in 2021. Revenue in this more
cyclically sensitive business was down 19.4% in the fourth
quarter of 2022 on a year-over-year basis.
• Gross profit margin increased 40 basis points to 29.3% in 2022
from 28.9% in 2021, primarily as a result of an increased mix of
Direct Hire revenue and increased margins in our FA business.
Flex gross profit margin increased 20 basis points to 26.8%
for 2022 from 26.6% in 2021. Flex gross profit margin was flat
for Technology and increased 230 basis points for FA in 2022
over 2021.
• Selling, General and Administrative (“SG&A”) expenses as a
percentage of revenue for the year ended December 31, 2022,
increased to 22.2% from 21.9% in 2021. The increase is primarily
driven by a provision for the note receivable from our joint venture
recognized in the fourth quarter of 2022 and a gain on the sale of
our corporate headquarters in 2021.
KFORCE INC. AND SUBSIDIARIES | 13
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,
Revenue by segment:
Technology
FA
Total Revenue
Revenue by type:
Flex
Direct Hire
Total Revenue
Gross profit
Selling, general and administrative expenses
Depreciation and amortization
Income from operations
Income from operations, before income taxes
Net income
2022
2021
2020
88.1%
11.9
80.6%
19.4
75.1%
24.9
100.0%
100.0%
100.0%
96.6%
3.4
100.0%
29.3%
22.2%
0.3%
6.8%
6.0%
4.4%
96.9%
3.1
97.6%
2.4
100.0%
100.0%
28.9%
21.9%
0.3%
6.7%
6.3%
4.8%
28.3%
22.2%
0.4%
5.7%
5.4%
4.0%
Revenue. The following table presents revenue by type for each segment and percentage change from the prior period for the years ended
December 31 (in thousands):
Technology
Flex revenue
Direct Hire revenue
Total Technology revenue
FA
Flex revenue
Direct Hire revenue
Total FA revenue
Total Flex revenue
Total Direct Hire revenue
Total Revenue
Increase
(Decrease)
2022
Increase
(Decrease)
2021
2020
$1,476,055
31,572
$1,507,627
$ 176,395
26,743
$ 203,138
$1,652,450
58,315
$1,710,765
18.3%
19.7%
18.3%
(37.6)%
14.4%
(33.6)%
8.0%
17.2%
8.3%
$1,247,560
26,381
$1,273,941
20.8%
57.7%
21.4%
$1,032,901
16,727
$1,049,628
$ 282,597
23,384
$ 305,981
$1,530,157
49,765
$1,579,922
(14.7)%
38.6%
(12.1)%
12.2%
48.1%
13.0%
$ 331,196
16,876
$ 348,072
$1,364,097
33,603
$1,397,700
Our quarterly operating results are affected by the number of billing days in a quarter. The following table presents the year-over-year
revenue growth rates, per billing day, for the last five quarters:
Year-Over-Year Revenue Growth Rates (Per Billing Day)
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Billing days
Technology Flex
FA Flex
Total Flex
61
8.5%
(28.8)%
3.1%
64
15.7%
(30.7)%
8.7%
64
23.3%
(49.0)%
7.2%
64
26.0%
(37.6)%
11.8%
61
31.0%
(28.9)%
16.6%
14 | KFORCE INC. AND SUBSIDIARIES
Flex Revenue. The key drivers of Flex revenue are the number
of consultants on assignment, billable hours, the bill rate per hour
and, to a limited extent, the amount of billable expenses incurred by
Kforce.
Flex revenue for our Technology business increased 17.8% per
billing day, during the year ended December 31, 2022, as compared
to the same period in 2021. The increase was driven principally by
a combination of significant growth in the number of consultants
on assignment and higher average bill rates. Given the inflationary
pressures on wages and scarcity of highly-skilled technology
consultants, we have continued to experience a meaningful
acceleration in average bill rates, which increased 1.7% sequentially in
the fourth quarter of 2022. We believe that the growth in consultants
on assignment was fueled by strong secular drivers of demand, the
strength of our client portfolio, our concentration in highly-skilled
technology talent, and solid execution. While we may be susceptible
to short-term disruption with specific clients or industry-specific
dynamics as a result of the macro-economic environment, we
believe that we are positioned well to achieve our long-term growth
ambitions. We expect first quarter 2023 Technology Flex revenue to
grow in the low to mid-single digits year-over-year.
Our FA business experienced a decrease in Flex revenue of
37.8%, per billing day, during the year ended December 31, 2022,
as compared to the same period in 2021, primarily driven by the
expected run-off of the COVID-related project business. Excluding the
COVID-related business in 2021, FA Flex revenues declined 16.7% in
2022, per billing day, primarily as a result of our repositioning effort
towards more highly-skilled roles. We expect first quarter 2023 FA
Flex revenue to be down in the mid 20% range year-over-year.
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,
2022 vs. 2021
2021 vs. 2020
Key Drivers—Increase (Decrease)
Volume—hours billed
Bill rate
Billable expenses
Total change in Flex revenue
Technology
FA
Technology
FA
$118,757
109,357
381
$228,495
$(114,684)
38,456
26
$(106,202)
$177,865
35,242
1,552
$214,659
$(63,558)
15,167
(208)
$(48,599)
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):
Technology
FA
Total Flex hours billed
2022
16,794
3,789
20,583
Increase
(Decrease)
9.6%
(51.2)%
(10.9)%
2021
15,329
7,768
23,097
Increase
(Decrease)
17.3%
(19.2)%
1.8%
2020
13,070
9,615
22,685
Direct Hire Revenue. The key drivers of Direct Hire revenue are the
number of placements and the associated placement fee.
Direct Hire revenue increased 16.7% per billing day, during the year
ended December 31, 2022, as compared to the same period in 2021,
primarily driven by a significant increase in both placement fees and the
number of placements. There has, however, been a moderation in the
performance of this more cyclically sensitive business in the second
half of 2022 given the macro-economic concerns. We expect Direct Hire
revenue to decline in the first quarter of 2023 on a year-over-year
basis by approximately 30%.
Gross Profit. Gross profit is determined by deducting direct costs
(primarily consultant compensation, payroll taxes, payroll-related
insurance and certain fringe benefits, as well as independent
contractor costs) from total revenue. In addition, there are no
consultant payroll costs associated with Direct Hire placements;
thus, all Direct Hire revenue increases gross profit by the full amount
of the placement fee.
The following table presents the gross profit as a percentage of total revenue (“gross profit percentage”) for each segment and percentage
change over the prior period for the years ended December 31:
Technology
FA
Total gross profit percentage
2022
28.0%
39.0%
29.3%
Increase
(Decrease)
0.4%
18.2%
1.4%
2021
27.9%
33.0%
28.9%
Increase
(Decrease)
1.1%
7.8%
2.1%
2020
27.6%
30.6%
28.3%
KFORCE INC. AND SUBSIDIARIES | 15
Total gross profit percentage increased 40 basis points for the year ended December 31, 2022, as compared to the same period in 2021,
primarily as a result of an increased mix of Direct Hire revenue and the expected run-off of the COVID-19 related business, which had a lower
margin profile.
Flex gross profit percentage (Flex gross profit as a percentage of Flex revenue) provides management with helpful insight into the other
drivers of total gross profit percentage driven by our Flex business such as changes in the spread between the consultants’ bill rate and pay rate.
The following table presents the Flex gross profit percentage for each segment and percentage change over the prior period for the years
ended December 31:
Technology
FA
Total Flex gross profit percentage
2022
26.4%
29.7%
26.8%
Increase
(Decrease)
—%
8.4%
0.8%
2021
26.4%
27.4%
26.6%
Increase
(Decrease)
—%
1.1%
—%
2020
26.4%
27.1%
26.6%
Our Flex gross profit percentage for the year ended December 31, 2022, as compared to the same period in 2021, increased 20 basis points.
We have seen good stability in our Technology Flex gross margins over the last several years as the benefit from higher growth in our managed
teams and project solutions business, which typically carries a higher margin profile, has offset any spread compression in the remainder of
our Technology business.
FA Flex gross profit margins increased 230 basis points for the year ended December 31, 2022, as compared to the same period in 2021,
primarily due to the expected run-off of the lower margin COVID-19 related business and our repositioning efforts.
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,
2022 vs. 2021
2021 vs. 2020
Key Drivers—Increase (Decrease)
Revenue impact
Profitability impact
Total change in Flex gross profit
Technology
FA
Technology
FA
$60,365
395
$60,760
$(29,128)
4,061
$(25,067)
$56,734
(137)
$56,597
$(13,152)
1,033
$(12,119)
SG&A Expenses. Total compensation, commissions, payroll taxes and benefit costs as a percentage of SG&A represented 84.1%, 85.4%
and 83.0% of SG&A for the years ended December 31, 2022, 2021 and 2020, respectively. Commissions and other bonus incentives for our
revenue-generating talent are variable costs driven primarily by revenue and gross profit levels, and associate performance.
16 | KFORCE INC. AND SUBSIDIARIES
The following table presents certain components of SG&A as a percentage of total revenue for the years ended December 31 (in thousands):
2022 % of Revenue
2021 % of Revenue
2020 % of Revenue
Compensation, commissions,
payroll taxes and benefits costs
Other(1)
Total SG&A
$319,501
60,314
$379,815
18.7%
3.5%
22.2%
$295,187
50,534
$345,721
18.7%
3.2%
21.9%
$257,802
52,911
$310,713
18.4%
3.8%
22.2%
(1) Includes items such as credit loss expense, lease expense, professional fees, travel, telephone, computer and certain other expenses.
SG&A as a percentage of revenue increased 30 basis points for the year ended December 31, 2022, as compared to the same period in 2021,
mostly driven by a $1.9 million reserve related to the note receivable issued to our joint venture and a $2.0 million gain on the sale of our
previous corporate headquarters in 2021.
The Firm continues to focus on improving the productivity of our associates and generating increased operating leverage as revenues grow.
Depreciation and Amortization. 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):
Fixed asset depreciation (includes finance leases)
Capitalized software amortization
Total Depreciation and amortization
2022
$2,655
1,772
$4,427
Increase
(Decrease)
(5.9)%
5.6%
(1.6)%
2021
$2,822
1,678
$4,500
Increase
(Decrease)
(30.7)%
42.0%
(14.4)%
2020
$4,073
1,182
$5,255
Other Expense, Net. Other expense, net was $14.4 million in 2022,
$7.4 million in 2021 and $5.0 million in 2020. 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.
During the years ended December 31, 2022, 2021 and 2020, we
recognized $3.8 million, $2.5 million, and $1.7 million, respectively,
related to our share of losses related to our equity method investment.
During the year ended December 31, 2022, Other expense, net also
includes an impairment charge of $13.7 million for our equity method
investment. Refer to Note 1 — “Summary of Significant Accounting
Policies” in the Notes to Consolidated Financial Statements, included
in this Annual Report, for a more detailed discussion on the
impairment of our equity method investment.
During the year ended December 31, 2022, Other expense,
net also includes a $4.1 million gain recognized as a result of
the termination of an interest rate swap agreement in May 2022.
Refer to Note 14 — “Derivative Instrument and Hedging Activity”
in the Notes to Consolidated Financial Statements, included in this
Annual Report, for a complete discussion of the interest rate swap
derivative instruments.
During the year ended December 31, 2021, Other expense, net
includes $1.8 million expense related to the termination of our SERP
in 2021. Refer to Note 12 — “Employee Benefit Plans” in the Notes
to Consolidated Financial Statements, included in this Annual Report,
for a complete discussion of the termination of our SERP.
Income Tax Expense. Income tax expense as a percentage of
income from operations, before income taxes (our “effective tax
rate”) for the years ended December 31, 2022, 2021 and 2020 were
26.4%, 24.3% and 25.5%, respectively. The 2022 effective tax rate
was unfavorably impacted by a lower work opportunity tax credit and
a lower tax benefit from the vesting of restricted stock in 2022, as
compared to 2021.
NON-GAAP FINANCIAL MEASURES
Free Cash Flow. “Free Cash Flow”, a non-GAAP financial measure,
is defined by Kforce as net cash provided by operating activities
determined in accordance with GAAP, less capital expenditures.
Management believes this provides an additional way of viewing our
liquidity that, when viewed with our GAAP results, provides a more
complete understanding of factors and trends affecting our cash
flows and is useful information to investors as it provides a measure
of the amount of cash generated from the business that can be
used for strategic opportunities including investing in our business,
repurchasing common stock, paying dividends or making acquisitions.
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.
KFORCE INC. AND SUBSIDIARIES | 17
The following table presents Free Cash Flow (in thousands):
Years Ended December 31,
Net income
Non-cash provisions and other
Changes in operating assets/liabilities
Net cash provided by operating activities
Capital expenditures
Free cash flow
Note receivable issued to our joint venture
Cash proceeds received from Company-owned life insurance
Equity method investment
Change in debt
Repurchases of common stock
Cash dividends
Net proceeds from the sale of assets held for sale
Other
2022
$ 75,431
50,294
(34,920)
90,805
(8,109)
82,696
(6,750)
1,077
(500)
(74,400)
(74,913)
(24,027)
—
(51)
2021
2020
$ 75,177
30,188
(32,467)
$ 56,039
27,582
25,538
72,898
(6,441)
66,457
—
—
(9,000)
—
(66,210)
(20,120)
23,742
(1,366)
109,159
(6,475)
102,684
—
—
(4,000)
35,000
(35,613)
(16,787)
3,548
(1,177)
Change in cash and cash equivalents
$ (96,868)
$ (6,497)
$ 83,655
Adjusted EBITDA. “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, loss from equity method investment, gain
from Swap termination, reserve associated with the note receivable
issued to our joint venture, impairment of equity method investment,
gain on the sale of the corporate headquarters, legal settlement
expense and SERP termination expense. Adjusted EBITDA should
not be considered a measure of financial performance under GAAP.
Items excluded from Adjusted EBITDA are significant components
in understanding and assessing our past and future financial
performance, and this presentation should not be construed as an
inference by us that our future results will be unaffected by those
items excluded from Adjusted EBITDA. Adjusted EBITDA is a key
measure used by management to assess our operations including
our ability to generate cash flows and our ability to repay our debt
obligations and management believes it provides a good metric of our
core profitability in comparing our performance to our competitors,
as well as our performance over different time periods. Consequently,
management believes it is useful information to investors. The
measure should not be considered in isolation or as an alternative
to net income, cash flows or other financial statement information
presented in the consolidated financial statements as indicators of
financial performance or liquidity. The measure is not determined in
accordance with GAAP and is thus susceptible to varying calculations.
Also, Adjusted EBITDA, as presented, may not be comparable to
similarly titled measures of other companies.
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. We suggest that you evaluate these items
and the potential risks of excluding such items when analyzing our
financial position.
The following table presents Adjusted EBITDA and includes a reconciliation of net income to Adjusted EBITDA (in thousands):
Years Ended December 31,
Net income
Depreciation and amortization
Stock-based compensation expense
Interest expense, net
Income tax expense
Loss from equity method investment
Gain from termination of interest rate swap
Reserve associated with note receivable issued to our joint venture
Impairment of equity method investment
Gain on sale of corporate headquarters
Legal settlement expense
SERP termination expense
2022
$ 75,431
4,427
17,655
973
27,011
3,824
(4,059)
1,925
13,684
—
—
—
2021
$ 75,177
4,500
13,999
3,073
24,090
2,480
—
—
—
(2,051)
3,350
1,821
Adjusted EBITDA
$140,871
$126,439
2020
$56,039
5,255
11,595
3,396
19,173
1,681
—
—
—
—
—
—
$97,139
18 | KFORCE INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
Investing Activities
To meet our capital and liquidity requirements, we primarily rely on
operating cash flow, as well as borrowings under our credit facility. At
December 31, 2022 and 2021, we had $0.1 million and $97.0 million,
respectively, in cash and cash equivalents, which consisted primarily
of government money market funds. At December 31, 2022, Kforce
had $146.3 million in working capital compared to $211.7 million at
December 31, 2021.
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 via capital expenditures; (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,
2022
2021
2020
Cash Provided by (Used in)
Operating activities
Investing activities
Financing activities
Change in cash and
cash equivalents
$ 90,805
(14,282)
(173,391)
$ 72,898
8,301
(87,696)
$109,159
(6,927)
(18,577)
$ (96,868) $ (6,497) $ 83,655
Operating Activities
Cash provided by operating activities was $90.8 million during the
year ended December 31, 2022, as compared to $72.9 million during
the year ended December 31, 2021. Our largest source of operating
cash flows is the collection of trade receivables, and our largest use of
operating cash flows is the payment of our associate and consultant
compensation. Cash provided by operating activities during the year
ended December 31, 2022, includes the payment of $20.0 million for
amounts owed to two participants under the terminated SERP and
the payment of approximately $19.3 million in deferred payroll taxes
as a result of the application of the CARES Act. The year-over-year
increase in cash provided by operating activities was primarily driven
by strong collections of accounts receivable, improved profitability
levels, proceeds from the termination of our interest rate swap, and
continued management of working capital. This is partially offset by
payments for deferred payroll taxes under the CARES Act.
Cash used in investing activities was $14.3 million during the year
ended December 31, 2022, and 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. Cash
provided by investing activities of $8.3 million during the year ended
December 31, 2021 primarily included $23.7 million in net proceeds
from the sale of our corporate headquarters, partially offset by
cash used for capital expenditures and capital contributions to our
joint venture. We expect to continue selectively investing in our
infrastructure, primarily focusing on implementing new and upgrading
existing technologies that we expect will help deliver exceptional
service to our clients, consultants, and candidates and improve
productivity of our associates and the scalability of our organization.
Financing Activities
Cash used in financing activities was $173.4 million during the year
ended December 31, 2022, as compared to $87.7 million during the year
ended December 31, 2021. The change was primarily driven by $74.4
million of net payments on our credit facility, which includes payments
of $112.6 million and draw downs of $38.2 million, as well as an overall
increase in repurchases of common stock and dividend payments.
The following table presents the cash flow impact of the common
stock repurchase activity for the years ended December 31
(in thousands):
Open market repurchases
Repurchase of shares related
to tax withholding
requirements for vesting of
restricted stock
Total cash flow impact
of common stock
repurchases
Cash paid in current year for
settlement of prior year
2022
2021
2020
$66,806
$54,265
$29,386
8,107
11,945
6,227
$74,913
$66,210
$35,613
repurchases
$ 181
$ —
$ —
KFORCE INC. AND SUBSIDIARIES | 19
During the years ended December 31, 2022, 2021 and 2020,
Kforce declared and paid dividends of $24.0 million ($1.20 per
share), $20.1 million ($0.98 per share) and $16.8 million ($0.80 per
share), respectively.
On February 3, 2023, Kforce’s Board approved a 20% annual
increase to the Company’s dividend from $1.20 per share to $1.44
per share. The declaration, payment and amount of future dividends
are discretionary and will be subject to determination by Kforce’s
Board each quarter following its review of, among other things, the
Firm’s current and expected financial performance as well as the
ability to pay dividends under applicable law.
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.
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. 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.
Credit Facility
On October 20, 2021, the Firm entered into an amended
and restated credit agreement with Wells Fargo Bank, National
Association, as administrative agent, Wells Fargo Securities, LLC, as
lead arranger and bookrunner, Bank of America, N.A., as syndication
agent, BMO Harris Bank, N.A., as documentation agent, and the
lenders referred to therein (the “Amended and Restated Credit
Facility”). Under the Amended and Restated Credit Facility, the Firm
has a maximum borrowing capacity of $200.0 million, which may,
subject to certain conditions and the participation of the lenders, be
increased up to an aggregate additional amount of $150.0 million.
The maturity date of the Amended and Restated Credit Facility is
October 20, 2026. Refer to Note 13 — “Credit Facility” in the Notes
to Consolidated Financial Statements, included in this Annual Report,
for a complete discussion of our credit facility. As of December 31,
2022, $25.6 million was outstanding and $173.1 million, subject to
certain covenants, was available.
In April 2017 and March 2020, Kforce entered into two forward-
starting interest rate swap agreements to mitigate the risk of rising
interest rates. As of December 31, 2022, the Firm did not have any
outstanding interest rate swap derivative instruments. Refer to
Note 14 — “Derivative Instrument and Hedging Activity” in the Notes
to Consolidated Financial Statements, included in this Annual Report
for a complete discussion of our interest rate swaps.
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):
2022
2021
Shares $ Shares $
Open market
repurchases
1,124
$67,599
922
$54,446
On February 3, 2023, the Board approved an increase in our stock
repurchase authorization, bringing the total authorization to $100.0
million. As of December 31, 2022, $41.3 million remained available
for further repurchases under the Board-authorized common stock
repurchase program.
Contractual Obligations
In addition to our discussion and analysis surrounding our
liquidity and capital resources, consideration should also be given to
significant contractual obligations:
• Our credit facility matures October 20, 2026, and as of December 31,
2022, our outstanding debt balance was $25.6 million. 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 is unknown. Refer to Note 13 — “Credit Facility”
in the Notes to Consolidated Financial Statements, included in
this Annual Report for further detail of our 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. As of December 31, 2022, the
amount of our obligation under these plans was $40.5 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). Amounts payable upon the retirement or termination of
employment may become payable during the next five years if a
covered employee retires, terminates, or schedules a distribution.
• Our purchase obligations consist of agreements to purchase
goods and services entered into in the ordinary course of
business. As of December 31, 2022, the value of our non-
cancellable unconditional purchase obligations was $21.9 million.
20 | KFORCE INC. AND SUBSIDIARIES
• 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. At
December 31, 2022, our liability would be approximately $40.3
million for terminations related to a change in control and $17.3
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 this Annual Report
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, 2022, the value of
our obligations under operating leases was $22.8 million. Refer
to Note 11 — “Operating Leases” in the Notes to Consolidated
Financial Statements, included in this Annual Report 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. At December 31, 2022, Kforce had letters of credit
outstanding for operating lease and insurance coverage deposits
totaling $1.3 million.
These off-balance sheet arrangements do not have a material
impact on our liquidity or capital resources. These off-balance sheet
arrangements do not provide financing, liquidity, market or credit
risk support.
CRITICAL ACCOUNTING ESTIMATES
Our significant accounting policies are discussed in Note 1 —
“Summary of Significant Accounting Policies” in the Notes to
Consolidated Financial Statements, included in this Annual Report.
Our consolidated financial statements are prepared in accordance
with GAAP. 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. We base our assumptions, estimates
and judgments on historical experience, current trends and
other factors that management believes to be relevant at the
time our consolidated financial statements are prepared. On
a regular basis, management reviews the accounting policies,
estimates, assumptions and judgments to ensure that our
consolidated financial statements are presented fairly and
in accordance with GAAP. However, because future events and their
effects cannot be determined with certainty, actual results could
differ from our assumptions and estimates, and such differences
could be material. 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. We have not made any material changes
in our accounting methodologies used in prior years.
Equity Method Investment
Initial Investment
We entered into a joint venture with WorkLLama in June 2019 and
contributed $22.5 million in equity capital from inception through
December 31, 2022.
Impairment Assessment
We review the equity method investment for impairment whenever
events or changes in circumstances indicate that the carrying amount
of the investment may not be recoverable. An impairment loss is
recognized in the event that an other-than-temporary decline in the
fair value of the investment occurs. Management’s estimate of fair
value of the investment is generally based on the income approach
and/or market approach or another acceptable fair value method.
For the income approach, we utilize estimated discounted future
cash flows expected to be generated by WorkLLama. For the market
approach, we utilized market multiples of revenue and earnings
derived from comparable publicly-traded companies. 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.
For the year ended December 31, 2022, we recognized an
impairment charge of $13.7 million, which was recorded in Other
Expense, net, on the accompanying Consolidated Statements of
Operations and Comprehensive Income.
Refer to Note 1 — “Summary of Significant Accounting Policies”
and Note 15 — “Fair Value Measurements” in the Notes to
Consolidated Financial Statements, included in this Annual Report,
for a complete discussion of our equity method investment and our
impairment analysis.
KFORCE INC. AND SUBSIDIARIES | 21
Allowance for Credit Losses
Management performs an ongoing analysis of factors in establishing
its allowance for doubtful accounts including recent write-off and
delinquency trends, a specific analysis of significant receivable
balances that are past due, the concentration of accounts receivable
among clients and higher-risk sectors, and the current state of the
U.S. economy. A 10% change in accounts reserved, at December 31,
2022, would have impacted our net income by approximately
$0.1 million in 2022.
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 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. 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 $0.5 million in 2022.
Refer to Note 6 – “Income Taxes” in the Notes to Consolidated
Financial Statements, included in this Annual 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, 2022.
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.
We evaluate goodwill for impairment annually or more frequently
whenever events or circumstances indicate that the fair value of a
reporting unit is below its carrying value. We monitor the existence
of potential impairment indicators throughout the year. It is our
policy to conduct impairment testing based on our current business
strategy in light of present industry and economic conditions, as well
as future expectations.
When performing a quantitative assessment, we determine the
fair value of our reporting units using widely accepted valuation
techniques, including the discounted cash flow, guideline transaction
and guideline company methods. 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. When performing a qualitative assessment, we assess
qualitative factors to determine whether the existence of events or
circumstances indicated that it was more likely than not that the fair
value of the reporting unit was less than its carrying amount.
Refer to Note 8 — “Goodwill” in the Notes to Consolidated Financial
Statements, included in this Annual Report, for a complete discussion
of the valuation methodologies employed.
Self-Insured Liabilities
We are self-insured for certain losses related to health insurance
claims that are below insurable limits. However, we obtain third-
party insurance coverage to limit our exposure to claims in excess
of insurable limits. When estimating our self-insured liabilities, we
consider a number of factors, including historical claims experience,
plan structure, internal claims management activities, demographic
factors and severity factors. Periodically, management reviews its
assumptions to determine the adequacy of our self-insured liabilities.
liabilities contain uncertainties because
management is required to make assumptions and to apply judgment
to estimate the ultimate total cost to settle reported claims and claims
incurred but not reported (“IBNR”) as of the balance sheet date.
A 10% change in our self-insured liabilities related to health insurance,
as of December 31, 2022, would have impacted our net income by
approximately $0.3 million in 2022.
Our self-insured
NEW ACCOUNTING STANDARDS
Refer to Note 1 — “Summary of Significant Accounting Policies”
in the Notes to Consolidated Financial Statements, included in this
Annual Report, for a discussion of new accounting standards.
22 | KFORCE INC. AND SUBSIDIARIES
MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Kforce is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) of the Exchange Act. Kforce’s internal control system was designed to provide reasonable assurance to Kforce’s management
and the Board regarding the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Under the supervision and with the participation of the CEO and the CFO, Kforce’s management assessed the effectiveness of Kforce’s
internal control over financial reporting as of December 31, 2022. In making this assessment, it used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Based on our assessment
we believe that, as of December 31, 2022, Kforce’s internal control over financial reporting is effective based on those criteria.
Kforce’s independent registered public accounting firm, Deloitte & Touche LLP, has issued an audit report on our internal control over financial
reporting, which is included herein.
KFORCE INC. AND SUBSIDIARIES | 23
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Kforce Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Kforce, Inc. and subsidiaries (the “Company”) as of December 31, 2022
and 2021, the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows, for
each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively
referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31,
2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2022, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal
Control — Integrated Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the
Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and
whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter
below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
24 | KFORCE INC. AND SUBSIDIARIES
Equity Method Investment – Refer to Note 1 to the Consolidated Financial Statements
Critical Audit Matter Description
In June 2019, Kforce Inc. entered into a joint venture whereby Kforce Inc. has a 50% noncontrolling ownership in WorkLLama, LLC
(“WorkLLama”). The noncontrolling interest in WorkLLama, a variable interest entity, is accounted for as an equity method investment. Under the
equity method, the investment carrying value is recorded at cost and adjusted for the proportionate share of earnings or losses. Management
reviews the equity method investment for impairment whenever events or changes in circumstances indicate that the carrying amount of the
investment may not be recoverable. An impairment loss would be recognized in the event that an other-than-temporary decline in fair value
of an investment occurs. Management’s estimate of fair value of an investment is considered a critical accounting estimate and changes in
the assumptions used could have a significant impact on either the fair value, the amount of any impairment charge, or both. An other-than-
temporary impairment related to the equity method investment of $13.7 million was recorded in other expense, net, in the statement of
operations and comprehensive income for the year December 31, 2022, resulting in a complete write off of the investment.
We identified the other-than-temporary impairment assessment and related impairment for the Company’s equity method investment in
WorkLLama as a critical audit matter. A high degree of subjective auditor judgment and an increased extent of effort was required throughout
the audit to evaluate management’s assessment related to the financial condition and near-term prospects of the investee, including the
Company’s intent to the hold the investment until recovery. Consideration of management’s assessment to determine fair value included
evaluating factors that a market participant would use to measure fair value in consideration of the circumstances.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the other-than-temporary impairment assessment and associated impairment of the Company’s equity
method investment in WorkLLama included the following, among others:
• We performed risk assessment procedures which included procedures to understand and assess the reasonableness of WorkLLama
projections and involved a fair value specialist to assist in evaluating the fair value assumptions.
• We tested the operating effectiveness of the controls over the Company’s process to evaluate if other-than-temporary impairment
indicators exist for its equity method investment in WorkLLama, as well as to evaluate the considerations used to determine the fair value of
the investment.
• We evaluated the reasonableness of management’s assessment related to the Company’s intent to the hold the investment until recovery.
• We evaluated the valuation techniques and relevant inputs to determine the fair value of the investee. This included involvement of our
fair value specialists to evaluate the appropriateness of the methodology used in consideration of the circumstances and the sufficiency of
data and the relevant observable inputs available to measure fair value.
Tampa, Florida
February 24, 2023
We have served as the Company’s auditor since 2000.
KFORCE INC. AND SUBSIDIARIES | 25
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
Years Ended December 31,
Revenue
Direct costs
Gross profit
Selling, general and administrative expenses
Depreciation and amortization
Income from operations
Other expense, net
Income from operations, before income taxes
Income tax expense
Net income
Other comprehensive (loss) income:
Defined benefit pension plans, net of tax
Change in fair value of interest rate swap, net of tax
Comprehensive income
Earnings per share:
Basic
Diluted
Weighted average shares outstanding — basic
Weighted average shares outstanding — diluted
The accompanying notes are an integral part of these consolidated financial statements.
2022
2021
2020
$1,710,765
1,209,658
$1,579,922
1,123,058
$1,397,700
1,001,476
501,107
379,815
4,427
116,865
14,423
102,442
27,011
75,431
—
(615)
456,864
345,721
4,500
106,643
7,376
99,267
24,090
75,177
3,103
1,941
396,224
310,713
5,255
80,256
5,044
75,212
19,173
56,039
(1,706)
(1,191)
$ 74,816
$ 80,221
$ 53,142
$3.76
$3.68
20,054
20,503
$3.65
$3.54
20,579
21,212
$2.67
$2.62
20,983
21,395
26 | KFORCE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
December 31,
ASSETS
Current assets:
Cash and cash equivalents
Trade receivables, net of allowances of $1,575 and $2,342, respectively
Income tax refund receivable
Prepaid expenses and other current assets
Total current assets
Fixed assets, net
Other assets, net
Deferred tax assets, net
Goodwill
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities
Accrued payroll costs
Current portion of operating lease liabilities
Income taxes payable
Total current liabilities
Long-term debt — credit facility
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 17)
Stockholders’ equity:
Preferred stock, $0.01 par value; 15,000 shares authorized, none issued and outstanding
Common stock, $0.01 par value; 250,000 shares authorized, 73,242 and 72,997 issued and
outstanding, respectively
Additional paid-in capital
Accumulated other comprehensive income
Retained earnings
Treasury stock, at cost; 52,744 and 51,493 shares, respectively
Total stockholders’ equity
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
2022
2021
$ 121
269,496
35
8,108
277,760
8,647
75,771
4,786
25,040
$ 96,989
265,322
3,010
6,790
372,111
5,964
92,629
7,657
25,040
$ 392,004
$ 503,401
$ 72,792
48,369
4,576
5,696
131,433
25,600
52,773
209,806
$ 81,408
71,424
6,338
1,261
160,431
100,000
54,564
314,995
—
—
732
507,734
6
492,764
(819,038)
182,198
730
488,036
621
442,596
(743,577)
188,406
$ 392,004
$ 503,401
KFORCE INC. AND SUBSIDIARIES | 27
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)
Balance, December 31, 2019
Net income
Adoption of new accounting standard, net of tax of $75
Issuance for stock-based compensation and dividend equivalents, net of forfeitures
Stock-based compensation expense
Employee stock purchase plan
Dividends ($0.80 per share)
Defined benefit pension plan, no tax benefit
Change in fair value of interest rate swap, net of tax of $404
Repurchases of common stock
Balance, December 31, 2020
Net income
Issuance for stock-based compensation and dividend equivalents, net of forfeitures
Stock-based compensation expense
Employee stock purchase plan
Dividends ($0.98 per share)
Defined benefit pension plan, no tax benefit
Change in fair value of interest rate swap, net of tax of $657
Repurchases of common stock
Balance, December 31, 2021
Net income
Issuance for stock-based compensation and dividend equivalents, net of forfeitures
Stock-based compensation expense
Employee stock purchase plan
Dividends ($1.20 per share)
Change in fair value of interest rate swap, net of tax benefit of $209
Repurchases of common stock
Balance, December 31, 2022
The accompanying notes are an integral part of these consolidated financial statements.
Common Stock
Shares Amount
72,202
—
—
398
—
—
—
—
—
—
72,600
—
397
—
—
—
—
—
—
72,997
—
245
—
—
—
—
—
73,242
$722
—
—
4
—
—
—
—
—
—
726
—
4
—
—
—
—
—
—
730
—
2
—
—
—
—
—
$732
28 | KFORCE INC. AND SUBSIDIARIES
Additional
Paid-In
Capital
$459,545
—
—
934
11,595
304
—
—
—
—
472,378
—
1,102
13,999
557
—
—
—
—
488,036
—
1,234
17,655
809
—
—
—
Accumulated Other
Comprehensive
Income (Loss)
$(1,526)
—
—
—
—
—
—
(1,706)
(1,191)
—
(4,423)
—
—
—
—
—
3,103
1,941
—
621
—
—
—
—
—
(615)
—
Retained
Earnings
$350,545
56,039
(214)
(938)
—
—
(16,787)
—
—
—
388,645
75,177
(1,106)
—
—
(20,120)
—
—
—
442,596
75,431
(1,236)
—
—
(24,027)
—
—
$507,734
$ 6
$492,764
Treasury Stock
Shares Amount
Total
Stockholders’
Equity
49,277
—
—
—
—
(19)
—
—
—
1,169
50,427
—
—
—
(15)
—
—
—
1,080
51,492
—
—
—
(17)
—
—
1,269
52,744
$(642,023)
—
—
—
—
245
—
—
—
(35,613)
(677,391)
—
—
—
205
—
—
—
(66,391)
(743,577)
—
—
—
245
—
—
(75,706)
$ 167,263
56,039
(214)
—
11,595
549
(16,787)
(1,706)
(1,191)
(35,613)
179,935
75,177
—
13,999
762
(20,120)
3,103
1,941
(66,391)
188,406
75,431
—
17,655
1,054
(24,027)
(615)
(75,706)
$(819,038)
$182,198
KFORCE INC. AND SUBSIDIARIES | 29
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended December 31,
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to cash provided by operating activities:
2022
2021
2020
$ 75,431
$ 75,177
$ 56,039
Reserve related to note receivable
Impairment of equity method investment
Deferred income tax provision, net
Provision for credit losses
Depreciation and amortization
Stock-based compensation expense
Loss (gain) on disposal or impairment of assets
Noncash lease expense
Loss on equity method investment
Defined benefit pension plans expense
Other
(Increase) decrease in operating assets
Trade receivables, net
Other assets
Increase (decrease) in operating liabilities
Accrued payroll costs
Payment of benefit under terminated pension plan
Other liabilities
Cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Equity method investment
Note receivable issued to our joint venture
Cash proceeds received from Company-owned life insurance
Net proceeds from the sale of assets held for sale
Cash (used in) provided by investing activities
Cash flows from financing activities:
Proceeds from credit facility
Payments on credit facility
Repurchases of common stock
Cash dividends
Payments on other financing arrangements
Cash used in financing activities
Change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Income taxes
Operating lease liabilities
Interest, net
Non-Cash Financing and Investing Transactions:
ROU assets obtained from operating leases
Unsettled repurchases of common stock
Employee stock purchase plan
The accompanying notes are an integral part of these consolidated financial statements.
30 | KFORCE INC. AND SUBSIDIARIES
1,925
13,684
3,081
(126)
4,427
17,655
191
5,683
3,824
—
(50)
(4,049)
(9,199)
(22,003)
(19,965)
20,296
90,805
(8,109)
(500)
(6,750)
1,077
—
(14,282)
38,200
(112,600)
(74,913)
(24,027)
(51)
(173,391)
(96,868)
96,989
—
—
2,425
11
4,500
13,999
(1,929)
5,509
2,480
2,157
1,036
—
—
(2,298)
2,130
5,255
11,595
1,822
5,499
1,681
842
1,056
(36,960)
(9,779)
(12,863)
(4,485)
6,337
—
7,935
22,397
—
20,489
72,898
109,159
(6,441)
(9,000)
—
—
23,742
8,301
—
—
(66,210)
(20,120)
(1,366)
(87,696)
(6,497)
103,486
(6,475)
(4,000)
—
—
3,548
(6,927)
35,000
—
(35,613)
(16,787)
(1,177)
(18,577)
83,655
19,831
$ 121
$ 96,989
$103,486
$ 16,579
6,992
885
$ 9,997
974
1,054
$ 24,277
7,468
2,453
$ 5,098
181
762
$ 21,737
7,330
2,574
$ 5,695
—
549
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared in
conformity with Generally Accepted Accounting Principles (“GAAP”)
and the rules of the Securities and Exchange Commission (the “SEC”).
Principles of Consolidation
The consolidated financial statements include the accounts
of Kforce Inc. and its subsidiaries. All intercompany transactions
and balances have been eliminated in consolidation. References
in this document to “Kforce,” the “Company,” “we,” the “Firm,”
“management,” “our” or “us” refer to Kforce Inc. and its subsidiaries,
except where the context indicates otherwise.
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. The most critical of these estimates
and assumptions relate to the following: allowance for credit losses;
income taxes; self-insured liabilities for workers’ compensation
and health insurance; obligations for the pension plan; and the
impairment of goodwill, other long-lived assets and the equity method
investment. Although these and other estimates and assumptions
are based on the best available information, actual results could be
materially different from these estimates.
Revenue Recognition
All of our revenue and trade receivables are generated from
contracts with customers and our revenues are derived from U.S.
domestic operations.
Revenue is recognized when control of the promised services
is transferred to our customers at an amount that reflects the
consideration to which we expect to be entitled to in exchange for
those services. Revenue is recorded net of sales or other transaction
taxes collected from clients and remitted to taxing authorities.
For substantially all of our revenue transactions, we have
determined that the gross reporting of revenues as a principal,
versus net as an agent, is the appropriate accounting treatment
because Kforce: (i) is primarily responsible for fulfilling the promise
to provide the specified service to the customer; (ii) has discretion
in selecting and assigning the temporary workers to particular jobs
and establishing the bill rate; and (iii) bears the risk and rewards of
the transaction, including credit risk if the customer fails to pay for
services performed.
Flex Revenue
Substantially all of our Flex revenue is recognized over time as
temporary staffing services and managed solutions are provided
by our consultants at the contractually established bill rates, net
of applicable variable consideration, such as customer rebates
and discounts. Reimbursements of travel and out-of-pocket
expenses (“billable expenses”) are also recorded within Flex
revenue when incurred and the equivalent amount of expense
is recorded in Direct costs in the Consolidated Statements of
Operations and Comprehensive Income. We recognize revenue in
the amount of consideration to which we have the right to invoice
when it corresponds directly to the services transferred to the
customer satisfied over time. A relatively insignificant portion of
our Flex revenue is outcome-based, as specified in our contractual
arrangements with our clients. These arrangements are managed
principally on a time and materials basis, but do involve an element
of financial risk and is monitored by the Company.
Direct Hire Revenue
Direct Hire revenue is recognized at the agreed upon rate at the
point in time when the performance obligation is considered complete.
Our policy requires the following criteria to be met in order for the
performance obligation to be considered complete: (i) the candidate
accepted the position; (ii) the candidate resigned from their current
employer; and (iii) the agreed upon start date falls within the following
month. Because the client has accepted the candidate and can direct
the use of and obtains the significant risk and rewards of the placement,
we consider this point as the transfer of control to our client.
Variable Consideration
Transaction prices for Flex revenue include variable consideration.
Management evaluates the facts and circumstances of each contract
to estimate the variable consideration using the most likely amount
method which utilizes management’s expectation of the volume of
services to be provided over the applicable period.
Direct Hire revenue is recorded net of a fallout reserve. Direct Hire
fallouts occur when a candidate does not remain employed with the client
through the respective contingency period (typically 90 days or less).
Management uses the expected value method to estimate the fallout
reserve based on a combination of past experience and current trends.
Payment Terms
Our payment terms and conditions vary by arrangement. The vast
majority of our terms are typically less than 90 days, however, we
have extended our payment terms beyond 90 days for certain of
our customers. Generally, the timing between the satisfaction of the
performance obligation and the payment is not significant and we do
not currently have any significant financing components.
Unsatisfied Performance Obligations
We do not disclose the value of unsatisfied performance obligations
for contracts if either the original expected length is one year or less
or if revenue is recognized at the amount to which we have the right
to invoice for services performed.
Contract Balances
We record accounts receivable when our right to consideration
becomes unconditional and services have been performed. Other
than our trade receivable balance, we do not have any material
contract assets as of December 31, 2022 and 2021.
We record a contract liability when we receive consideration
from a customer prior to transferring services to the customer. We
recognize the contract liability as revenue after we have transferred
control of the goods or services to the customer. Contract liabilities
are recorded within Accounts payable and other accrued liabilities if
expected to be recognized in less than one year and Other long-term
liabilities, if over one year, in the Consolidated Balance Sheets. We do
not have any material contract liabilities as of December 31, 2022
and 2021.
KFORCE INC. AND SUBSIDIARIES | 31
Cost of Services
Cash and Cash Equivalents
Direct costs are composed of all related costs of employment for
consultants, including compensation, payroll taxes, certain fringe
benefits and subcontractor costs. Direct costs exclude depreciation
and amortization expense, which is presented on a separate line
in the accompanying Consolidated Statements of Operations and
Comprehensive Income.
Associate and field management compensation, payroll taxes and
fringe benefits are included in SG&A along with other customary costs
such as administrative and corporate costs.
Commissions
Our associates make placements and earn commissions as a
percentage of revenue or gross profit pursuant to a commission
plan. The amount of associate commissions paid increases as
volume increases. Commissions are accrued at an amount equal to
the percent of total expected commissions payable to total revenue
or gross profit for the commission-plan period, as applicable. We
generally expense sales commissions and any other incremental
costs of obtaining a contract as incurred because the amortization
period is typically less than one year.
Stock-Based Compensation
Stock-based compensation is measured using the grant-date fair
value of the award of equity instruments. The expense is recognized
over the requisite service period and forfeitures are recognized as
incurred and is reflected in SG&A in the accompanying Consolidated
Statements of Operations and Comprehensive Income. Excess tax
benefits or deficiencies of deductions attributable to employees’
vesting of restricted stock are reflected in Income tax expense in
the accompanying Consolidated Statements of Operations and
Comprehensive Income.
Income Taxes
Income taxes are recorded using the asset and liability approach
for deferred tax assets and liabilities and the expected future tax
consequences of differences between carrying amounts and the tax
basis of assets and liabilities. A valuation allowance is recorded unless
it is more likely than not that the deferred tax asset can be utilized
to offset future taxes.
Management evaluates tax positions taken or expected to be
taken in our tax returns and records a liability (including interest
and penalties) for uncertain tax positions. We recognize tax benefits
from uncertain tax positions when it is more likely than not that the
position will be sustained upon examination, including resolutions of
any related appeals or litigation processes. The Company recognizes
interest and penalties related to uncertain tax positions in Income tax
expense in the accompanying Consolidated Statements of Operations
and Comprehensive Income.
All highly liquid investments with original maturity dates of
three months or less at the time of purchase are classified as cash
equivalents. Cash and cash equivalents are stated at cost, which
approximates fair value because of the short-term nature of these
instruments. Our cash equivalents are held in government money
market funds and at times may exceed federally insured limits.
Trade Receivables and Related Reserves
Trade receivables are recorded net of allowance for credit losses.
The allowance for credit losses is determined using the application of
a current expected credit loss model, which measures expected credit
losses based on relevant information, including historical experience,
current conditions and reasonable and supportable forecasts. Trade
receivables are written off after all reasonable collection efforts have
been exhausted. Trade accounts receivable reserves as a percentage
of gross trade receivables was less than 1% at both December 31,
2022 and 2021.
Fixed Assets
Fixed assets are carried at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. The cost of leasehold
improvements is amortized using the straight-line method over the
lesser of the estimated useful lives of the assets or the expected
terms of the related leases. Upon sale or disposition of our fixed
assets, the cost and accumulated depreciation are removed and any
resulting gain or loss, net of proceeds, is reflected within SG&A in the
Consolidated Statements of Operations and Comprehensive Income.
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of such
assets may not be recoverable. Recoverability of long-lived assets is
measured by a comparison of the carrying amount of the asset group
to the future undiscounted net cash flows expected to be generated
by those assets. If an analysis indicates the carrying amount
of these long-lived assets exceeds the fair value, an impairment
loss is recognized to reduce the carrying amount to its fair market
value, as determined based on the present value of projected future
cash flows.
Goodwill
Management has determined that the reporting units for the
goodwill analysis is consistent with our reporting segments. We
evaluate goodwill for impairment either through a qualitative or
quantitative approach annually, or more frequently if an event
occurs or circumstances change that indicate the carrying value of a
reporting unit may not be recoverable. If we perform a quantitative
assessment that indicates the carrying amount of a reporting unit
exceeds its fair market value, an impairment loss is recognized
to reduce the carrying amount to its fair market value. Kforce
determines the fair market value of each reporting unit based on a
weighting of the present value of projected future cash flows (the
32 | KFORCE INC. AND SUBSIDIARIES
“income approach”) and the use of comparative market approaches
(“market approach”). Factors requiring significant judgment include,
among others, the assumptions related to discount rates, forecasted
operating results, long-term growth rates, the determination of
comparable companies and market multiples. Changes in economic
and operating conditions or changes in Kforce’s business strategies
that occur after the annual impairment analysis may impact these
assumptions and result in a future goodwill impairment charge, which
could be material to our consolidated financial statements.
Equity Method Investment and Note Receivable
In June 2019, we entered into a joint venture whereby Kforce has
a 50% noncontrolling interest in WorkLLama, which is accounted
for as an equity method investment. Under the equity method,
our carrying value included equity capital contributions, adjusted
for our proportionate share of earnings or losses. During the years
ended December 31, 2022 and 2021, we contributed $0.5 million
and $9.0 million of equity capital contributions to our joint venture,
respectively. We recorded a loss related to our equity method
investment of $3.8 million and $2.5 million during the years ended
December 31, 2022 and 2021, respectively.
During the year ended December 31, 2022, Kforce executed
a series of promissory notes (the “Note Receivable”) to our joint
venture for up to $7.5 million, with 7% annual interest, and principal
and accrued interest payable due in a lump sum in June 2025, which is
secured by all of the assets of the joint venture. The amount funded
to our joint venture under the Note Receivable was $6.8 million as of
December 31, 2022. There have been no payments received on the
Note Receivable during the year ended December 31, 2022.
In December 2022, WorkLLama executed a letter of intent (“LOI”)
with an independent third party whereby the third party would
acquire WorkLLama and settle the outstanding debt, or a portion
thereof, owed by WorkLLama to Kforce.
Based on the financial terms of the LOI and the seniority of the Note
Receivable taking precedence, management determined that the
equity method investment had an other than temporary impairment
as of December 31, 2022, and we recognized an impairment loss of
the full balance of the equity method investment of $13.7 million,
which was recorded in Other Expense, net in the Consolidated
Statements of Operations and Comprehensive Income. The balance of
the equity method investment is nil and $17.0 million at December 31,
2022 and 2021, respectively, and was included in Other assets, net in the
Consolidated Balance Sheet at December 31, 2021. Refer to Note 15 —
“Fair Value Measurements” for more details on the impairment
analysis of our equity method investment.
In addition, based on the proceeds expected upon the sale of our
joint venture, as well as the associated legal, transaction and other
costs, we assessed the collectability of the Note Receivable and
recorded a credit loss on the Note Receivable of $1.9 million, which
was recorded in SG&A in the Consolidated Statements of Operations
and Comprehensive Income for the year ended December 31, 2022.
The balance of the Note Receivable, net was $4.8 million and was
included in Other assets, net in the Consolidated Balance Sheet at
December 31, 2022.
On February 23, 2023, Kforce sold it’s 50% noncontrolling interest
in WorkLLama to an unaffiliated third party. The net proceeds
from this transaction settle the outstanding balance of the Note
Receivable owed by WorkLLama to Kforce. Any gain as a result of
this transaction is expected to be immaterial. Kforce will not have
continuing involvement in the operations of WorkLLama other than
as a customer of WorkLLama’s SaaS talent community platform.
Operating Leases
Kforce leases property for our field offices and corporate
headquarters as well as certain office equipment, which limits our
exposure to risks related to ownership. We determine if a contract or
arrangement meets the definition of a lease at inception. We elected
not to separate lease and non-lease components when determining
the consideration in the contract. Right-of-use (“ROU”) assets and
lease liabilities are recognized based on the present value of the lease
payments over the lease term at the commencement date. If there
is no rate implicit in the lease, we use our incremental borrowing rate
in the present value calculation, which is based on our collateralized
borrowing rate and determined based on the terms of our leases
and the economic environment in which they exist. Our lease
agreements do not contain any material residual value guarantees
or restrictive covenants.
ROU assets for operating leases, net of amortization, are recorded
within Other assets, net and operating lease liabilities are recorded
within current liabilities if expected to be recognized in less than
one year and in Other long-term liabilities, if over one year, in the
Consolidated Balance Sheets. Operating lease additions are non-cash
transactions and the amortization of the ROU assets is reflected as
Noncash lease expense within operating activities in the Consolidated
Statement of Cash Flows.
Our lease terms range from two to eleven years with a limited
number of leases contain short-term renewal provisions that range
from month-to-month to one year and some containing options to
renew or terminate.
We elected the short-term practical expedient for leases with an
initial term of 12 months or less and do not recognize ROU assets or
lease liabilities for these short-term leases.
In addition to base rent, certain of our operating leases require
variable payments of property taxes, insurance and common area
maintenance. These variable lease costs, other than those dependent
upon an index or rate, are expensed when the obligation for those
payments is incurred.
KFORCE INC. AND SUBSIDIARIES | 33
Capitalized Software
Derivative Instrument
Our interest rate swap derivative instruments were designated
as cash flow hedges and recorded at fair value on the Consolidated
Balance Sheets. The effective portion of the gain or loss on the
derivative instruments are recorded as a component of Accumulated
other comprehensive income, net of tax, and reclassified into earnings
when the hedged items affect earnings and into the line item of the
hedged item. Any ineffective portion of the gain or loss is recognized
immediately into Other expense, net on the Consolidated Statements
of Operations and Comprehensive Income. Cash flows from the
derivative instrument are classified in the Consolidated Statements of
Cash Flows in the same category as the hedged item. As of December 31,
2022, the Firm did not have any outstanding interest rate swap
derivative instruments.
Fair Value Measurements
Fair value is defined as the price that would be received to sell
an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly
transaction between market participants at the measurement date.
The fair value hierarchy uses a framework which requires
categorizing assets and liabilities into one of three levels based on
the inputs used in valuing the asset or liability.
• Level 1 inputs are unadjusted, quoted market prices in active
markets for identical assets or liabilities.
• Level 2 inputs are observable inputs other than quoted prices
included in Level 1, such as quoted prices for similar assets or
liabilities in active markets or quoted prices for identical assets or
liabilities in inactive markets.
• Level 3 inputs include unobservable inputs that are supported by
little, infrequent or no market activity and reflect management’s
own assumptions about inputs used in pricing the asset or liability.
Level 1 provides the most reliable measure of fair value, while Level 3
generally requires significant management judgment. Assets and
liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement.
Certain assets, in specific circumstances, are measured at fair value
on a non-recurring basis utilizing Level 3 inputs such as goodwill,
other long-lived assets and the equity method investment. For these
assets, measurement at fair value in periods subsequent to their
initial recognition would be applicable if one or more of these assets
were determined to be impaired.
The carrying values of cash and cash equivalents, trade receivables,
other current assets and accounts payable and other accrued
liabilities approximate fair value because of the short-term nature of
these instruments.
Kforce purchases, develops and implements software to enhance
the performance of our technology infrastructure. Direct internal
costs, such as payroll and payroll-related costs, and external costs
incurred during the development stage are capitalized and classified
as capitalized software. Capitalized software development costs
and the associated accumulated amortization are included in Other
assets, net in the accompanying Consolidated Balance Sheets.
Amortization expense is computed using the straight-line method
over the estimated useful lives of the software, which range from one
to ten years. Amortization expense of capitalized software during the
years ended December 31, 2022, 2021 and 2020 was $1.8 million,
$1.7 million and $1.1 million, respectively.
Health Insurance
Except for certain fully insured health insurance lines of coverage,
Kforce retains the risk of loss for each health insurance plan
participant up to $600 thousand in claims annually. Additionally, for
all claim amounts exceeding $600 thousand, Kforce retains the risk of
loss up to an annual aggregate loss of those claims of $200 thousand.
For its partially self-insured lines of coverage, health insurance costs
are accrued using estimates to approximate the liability for reported
claims and incurred but not reported claims, which are primarily
based upon an evaluation of historical claims experience, actuarially-
determined completion factors and a qualitative review of our health
insurance exposure including the extent of outstanding claims and
expected changes in health insurance costs.
Legal Costs
Legal costs incurred in connection with loss contingencies are
expensed as incurred.
Earnings per Share
Basic earnings per share is computed as net income divided by the
weighted-average number of common shares outstanding (“WASO”)
during the period. WASO excludes unvested shares of restricted
stock. Diluted earnings per share is computed by dividing net income
by diluted WASO. Diluted WASO includes the dilutive effect of
unvested shares of restricted stock using the treasury stock method,
except where the effect of including potential common shares would
be anti-dilutive.
For the years ended December 31, 2022, 2021 and 2020, there
were 449 thousand, 633 thousand and 412 thousand common stock
equivalents, respectively, included in the diluted WASO. For the years
ended December 31, 2022, 2021 and 2020, there were 292 thousand,
9 thousand and 249 thousand, respectively, of anti-dilutive common
stock equivalents.
Treasury Stock
The Board may authorize share repurchases of our common stock.
Shares repurchased under Board authorizations are held in treasury
for general corporate purposes. Treasury shares are accounted for
under the cost method and reported as a reduction of stockholders’
equity in the accompanying consolidated financial statements.
34 | KFORCE INC. AND SUBSIDIARIES
New Accounting Standards
Recently Issued Accounting Standards Not Yet Adopted
In March 2020, the FASB issued guidance for reference rate reform,
which provided temporary optional guidance to ease the potential
burden in accounting for reference rate reform in contracts and other
transactions that reference LIBOR, or another reference rate expected
to be discontinued because of reference rate reform, if certain criteria
are met. We adopted this guidance effective January 1, 2020. The
FASB has since issued subsequent updates to the initial guidance. In
December 2022, the FASB issued subsequent guidance for reference
rate reform, which extends the final sunset date from December 31,
2022 to December 31, 2024. We are currently evaluating the potential
impact of adopting this standard, but do not expect it to have a
material impact on our consolidated financial statements.
2. REPORTABLE SEGMENTS
Kforce’s reportable segments are Technology and FA. Historically,
and for the year ended December 31, 2022, Kforce has generated
only sales and gross profit information on a segment basis. We do not
report total assets or income from continuing operations separately
by segment as our operations are largely combined.
The following table provides information concerning the operations of our segments for the years ended December 31 (in thousands):
2022
Revenue
Gross profit
Operating and other expenses
Income from operations, before income taxes
2021
Revenue
Gross profit
Operating and other expenses
Income from operations, before income taxes
2020
Revenue
Gross profit
Operating and other expenses
Income from operations, before income taxes
Technology
FA
Total
$1,507,627
$ 421,922
$203,138
$ 79,185
$1,273,941
$ 355,971
$305,981
$100,893
$1,049,628
$ 289,720
$348,072
$106,504
$1,710,765
$ 501,107
398,665
$ 102,442
$1,579,922
$ 456,864
357,597
$ 99,267
$1,397,700
$ 396,224
321,012
$ 75,212
3. DISAGGREGATION OF REVENUE
The following table provides information about disaggregated revenue by segment and revenue type for the years ended December 31
(in thousands):
2022
Flex revenue
Direct Hire revenue
Total Revenue
2021
Flex revenue
Direct Hire revenue
Total Revenue
2020
Flex revenue
Direct Hire revenue
Total Revenue
Technology
FA
Total
$1,476,055
31,572
$176,395
26,743
$1,652,450
58,315
$1,507,627
$203,138
$1,710,765
$1,247,560
26,381
$282,597
23,384
$1,530,157
49,765
$1,273,941
$305,981
$1,579,922
$1,032,901
16,727
$331,196
16,876
$1,364,097
33,603
$1,049,628
$348,072
$1,397,700
KFORCE INC. AND SUBSIDIARIES | 35
4. ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses on trade receivables is determined
by estimating and recognizing lifetime expected losses, rather than
incurred losses, which results in the earlier recognition of credit
losses even if the expected risk of credit loss is remote. As part of our
analysis, we apply credit loss rates to outstanding receivables by aging
category. For certain clients, we perform a quarterly credit review,
which considers the client’s credit rating and financial position as well
as our total credit loss exposure. Trade receivables are written off after
all reasonable collection efforts have been exhausted. Recoveries of
trade receivables previously written off are recorded when received
and are immaterial for the year ended December 31, 2022.
The following table presents the activity within the allowance for
credit losses on trade receivables for the years ended December 31,
2022 and 2021 (in thousands):
Allowance for credit losses, January 1, 2021
Current period provision
Write-offs charged against the allowance, net of
recoveries of amounts previously written off
Allowance for credit losses, December 31, 2021
Current period provision
Write-offs charged against the allowance, net of
recoveries of amounts previously written off
Allowance for credit losses, December 31, 2022
$ 2,757
11
(1,039)
1,729
(126)
(597)
$ 1,006
The allowances on trade receivables presented in the
Consolidated Balance Sheets include $0.6 million for reserves
unrelated to credit losses at December 31, 2022 and 2021.
5. FIXED ASSETS, NET
The following table presents major classifications of fixed assets and related useful lives (in thousands, except useful lives):
December 31,
Furniture and equipment
Computer equipment
Leasehold improvements
Total fixed assets
Less accumulated depreciation
Total Fixed assets, net
USEFUL LIFE
2022
2021
1-10 years
1-10 years
1-11 years
$ 5,553
5,168
9,624
20,345
(11,698)
$ 5,630
5,358
6,989
17,977
(12,013)
$ 8,647
$ 5,964
Depreciation expense was $2.7 million, $2.8 million and $4.1 million during the years ended December 31, 2022, 2021 and 2020, respectively.
6. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
Years Ended December 31,
Current tax expense:
Federal
State
Deferred tax expense
Total Income tax expense
2022
2021
2020
$17,535
6,400
3,076
$27,011
$15,617
5,765
2,708
$24,090
$17,278
4,119
(2,224)
$19,173
36 | KFORCE INC. AND SUBSIDIARIES
The provision for income taxes shown above varied from the
statutory federal income tax rate for those periods as follows:
Years Ended December 31,
2022
2021
2020
Federal income tax rate
State income taxes,
net of Federal tax effect
Non-deductible compensation
and meals and entertainment
Tax credits
Tax benefit from restricted
stock vesting
Other
21.0%
21.0% 21.0%
5.4
5.0
5.3
2.5
(1.2)
(1.0)
(0.3)
2.2
(2.2)
(2.6)
0.9
1.4
(1.5)
(1.5)
0.8
Effective tax rate
26.4%
24.3% 25.5%
The 2022 effective tax rate was unfavorably impacted by a lower
Work Opportunity Tax Credit (“WOTC”) and a lower tax benefit from
the vesting of restricted stock in 2022, as compared with 2021. The
2021 effective rate was favorably impacted by a higher WOTC and a
greater tax benefit from the vesting of restricted stock in 2021, as
compared with 2020. These were offset by greater non-deductible
compensation to certain executive officers pursuant to IRS Code
Section 162(m).
Deferred tax assets and liabilities are composed of the following (in thousands):
December 31,
Deferred tax assets:
Accounts receivable reserves
Accrued liabilities
Deferred compensation obligation
Stock-based compensation
Operating lease liabilities
Pension and post-retirement benefit plans
Deferred payroll taxes
Other
Deferred tax assets
Deferred tax liabilities:
Prepaid expenses
Fixed assets
Goodwill
ROU assets for operating leases
Partnership basis difference
Other
Deferred tax liabilities
Valuation allowance
Total Deferred tax assets, net
2022
2021
$ 901
2,855
6,521
902
5,411
—
—
8
16,598
(359)
(4,694)
(2,408)
(4,397)
46
—
(11,812)
—
$ 604
2,367
5,702
715
4,704
2,929
4,965
11
21,997
(604)
(4,185)
(2,413)
(3,965)
(2,966)
(207)
(14,340)
—
$ 4,786
$ 7,657
In evaluating the realizability of Kforce’s deferred tax assets, management assesses whether it is more likely than not that some portion, or all,
of the deferred tax assets, will be realized. Management considers, among other things, the ability to generate future taxable income (including
reversals of deferred tax liabilities) during the periods in which the related temporary differences will become deductible.
Kforce is periodically subject to IRS audits, as well as state and other local income tax audits for various tax years. Although Kforce has not experienced
any material liabilities in the past due to income tax audits, Kforce can make no assurances concerning any future income tax audits.
Kforce and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states. With a few exceptions, Kforce is no longer
subject to federal, state, local, or non-U.S. income tax examinations by tax authorities for years before 2019.
KFORCE INC. AND SUBSIDIARIES | 37
7. OTHER ASSETS, NET
9. CURRENT LIABILITIES
Other assets, net consisted of the following (in thousands):
The following table provides information on certain current
liabilities (in thousands):
December 31,
Accounts payable
Accrued liabilities
Total Accounts payable and
other accrued liabilities
Payroll and benefits
Payroll taxes
Health insurance liabilities
Workers’ compensation liabilities
Total Accrued payroll costs
2022
2021
$49,600
23,192
$40,241
41,167
$72,792
$81,408
$41,506
2,633
3,481
749
$ 43,738
22,466
4,474
746
$48,369
$71,424
Our accounts payable balance includes vendor and third party
payables. Our accrued liabilities balance includes the current portion
of our deferred compensation plans liability, contract liabilities from
contracts with customers (such as customer rebates) and other accrued
liabilities. Our accrued liabilities as of December 31, 2021, included
$20 million of aggregate benefit obligation owed to two participants
under the Supplemental Executive Retirement Plan (“SERP”). The SERP
was terminated on April 30, 2021, and the Company paid the SERP
benefits obligation in full during the year ended December 31, 2022.
Our payroll taxes as of December 31, 2021, included approximately
$19.3 million in deferred payroll taxes as a result of the application
of the CARES Act, and were paid in full during the year ended
December 31, 2022.
10. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following (in thousands):
December 31,
Deferred compensation plan
Operating lease liabilities
Other long-term liabilities
2022
2021
$36,390
16,380
3
$42,623
11,919
22
Total Other long-term liabilities
$52,773
$54,564
December 31,
Assets held in Rabbi Trust
ROU assets for operating leases, net
Capitalized software, net(2)
Deferred loan costs, net
Note receivable, net(3)
Equity method investment(1)
Other non-current assets
Total Other assets, net
2022
2021
$31,976 $41,607
15,395
14,666
1,115
—
17,008
2,838
17,102
16,149
881
4,825
—
4,838
$75,771 $92,629
(1) In December 2022, management determined there was an
other than temporary impairment related to the equity method
investment. Refer to Note 1 — “Summary of Significant
Accounting Policies” for more information on our equity method
investment.
(2) Accumulated amortization of capitalized software was $36.6
million and $35.5 million as of December 31, 2022 and 2021,
respectively.
(3) During the year ended December 31, 2022, Kforce executed the
Note Receivable with our joint venture that amounted to $6.75
million. For the year ended December 31, 2022, we recorded a
reserve of $1.9 million on the Note Receivable. Refer to Note 1 —
“Summary of Significant Accounting Policies” for more details on
the Note Receivable issued to our joint venture.
8. GOODWILL
The following table presents the gross amount and accumulated
impairment losses for each of our reporting units as of December 31,
2022, 2021 and 2020 (in thousands):
Goodwill, gross amount
Accumulated impairment
Technology
FA
Total
$ 156,391
$ 19,766 $ 176,157
losses
(139,357)
(11,760)
(151,117)
Goodwill, carrying value
$ 17,034
$ 8,006 $ 25,040
There was no impairment expense related to goodwill for each of
the years ended December 31, 2022, 2021 and 2020.
Management performed its annual impairment assessment of
the carrying value of goodwill as of December 31, 2022 and 2021.
For each of our reporting units, we assessed qualitative factors
to determine whether the existence of events or circumstances
indicated that it was more likely than not that the fair value of the
reporting units was less than its carrying amount. Based on the
qualitative assessments, management determined that it was not
more likely than not that the fair values of the reporting units were
less than the carrying values at December 31, 2022 and 2021. A
deterioration in any of the assumptions could result in an impairment
charge in the future.
38 | KFORCE INC. AND SUBSIDIARIES
11. OPERATING LEASES
The following table presents weighted-average terms for our
operating leases:
12. EMPLOYEE BENEFIT PLANS
401(k) Savings Plans
December 31,
Weighted-average discount rate
Weighted-average remaining
lease term
2022
2.6%
2021
3.0%
6.8 years
3.9 years
The following table presents operating lease expense included in
SG&A (in thousands):
December 31,
Lease Cost
Operating lease expense
Variable lease costs
Short-term lease expense
Sublease income
Total operating lease expense
2022
2021
$6,279
965
1,615
(205)
$6,363
1,078
1,199
(87)
$8,654
$8,553
The following table presents the maturities of operating lease
liabilities as of December 31, 2022 (in thousands):
2023
2024
2025
2026
2027
Thereafter
Total maturities of operating lease liabilities
Less: imputed interest
Total operating lease liabilities
$ 5,051
4,072
2,869
1,864
1,763
7,151
22,770
1,814
$20,956
Our corporate headquarters lease in Tampa, Florida, requires
aggregate future lease payments of approximately $10.9 million
over the entire lease term, which includes annual escalation
adjustments, and has a non-cancellable lease term of 129 months,
excluding renewal options. As part of the executed lease, we
received a leasehold improvement allowance of $1.6 million for the
design, engineering, installation, supply and construction of the
improvements. Lease payments begin on July 1, 2023, however, the
lease accounting commencement date began in the fourth quarter of
2022 when we occupied the facility.
The Firm maintains various qualified defined contribution 401(k)
retirement savings plans for eligible employees. Assets of these
plans are held in trust for the sole benefit of employees and/or their
beneficiaries. Employer matching contributions are discretionary
and are funded annually as approved by the Board. Kforce
accrued matching 401(k) contributions for continuing operations
of $2.1 million and $1.9 million as of December 31, 2022 and
2021, respectively.
Employee Stock Purchase Plan
Kforce’s employee stock purchase plan allows all eligible employees
to enroll each quarter to purchase Kforce’s common stock at a
5% discount from its market price on the last day of the quarter.
Kforce issued 17 thousand, 15 thousand, and 19 thousand shares of
common stock at an average purchase price of $63.37, $51.10 and
$29.43 per share during the years ended December 31, 2022, 2021
and 2020, respectively. All shares purchased under the employee
stock purchase plan were settled using Kforce’s treasury stock.
Deferred Compensation Plans
The Firm maintains various non-qualified deferred compensation
plans, pursuant to which eligible management and highly compensated
key employees, as defined by IRS regulations, may elect to defer all
or part of their compensation to later years. These amounts are
classified in Accounts payable and other accrued liabilities if payable
within the next year or in Other long-term liabilities if payable after
the next year, upon retirement or termination of employment, in the
accompanying Consolidated Balance Sheets. At December 31, 2022
and 2021, amounts related to the deferred compensation plans
included in Accounts payable and other accrued liabilities were $4.1
million and $4.1 million, respectively, and $36.4 million and $42.6
million was included in Other long-term liabilities at December 31,
2022 and 2021, respectively, in the Consolidated Balance Sheets. For
the years ended December 31, 2022, 2021 and 2020, we recognized
compensation expense for the plans of $0.5 million, $1.1 million and
$1.0 million, respectively.
Kforce maintains a Rabbi Trust and holds life insurance policies
on certain individuals to assist in the funding of the deferred
compensation liability. If necessary, employee distributions are funded
through proceeds from the sale of assets held within the Rabbi Trust.
The balance of the assets held within the Rabbi Trust, including the
cash surrender value of the Company-owned life insurance policies,
was $32.0 million and $41.6 million as of December 31, 2022 and 2021,
respectively, and is recorded in Other assets, net in the accompanying
Consolidated Balance Sheets. As of December 31, 2022, the life
insurance policies had a net death benefit of $168.3 million.
KFORCE INC. AND SUBSIDIARIES | 39
Supplemental Executive Retirement Plan
Prior to April 30, 2021, Kforce maintained the SERP, which
benefited two executives. The SERP was a non-qualified benefit plan
and did not include elective deferrals of covered executive officers’
compensation. The related net periodic benefit costs were comprised
of service cost and interest cost. The service cost amounted to $199
thousand and $345 thousand for the years ended December 31, 2021
and 2020, respectively, and were recorded in SG&A. The interest cost
amounted to $138 thousand and $497 thousand for the years ended
December 31, 2021 and 2020, respectively, and were recorded in
Other expense, net in the accompanying Consolidated Statements of
Operations and Comprehensive Income.
Effective April 30, 2021, Kforce’s Board of Directors irrevocably
terminated the SERP. As a result of the termination of the SERP,
Kforce recognized a net loss of $1.8 million for the year ended
December 31, 2021, which was recorded in Other expense, net in
the accompanying Consolidated Statements of Operations and
Comprehensive Income.
The SERP benefits owed to the two participants at December 31,
2021 was approximately $20.0 million in the aggregate, which
represented the fair value at the date of termination, and was
recorded in Accounts payable and accrued liabilities in the
Consolidated Balance Sheet. During the year ended December 31,
2022, the Company paid the SERP benefit obligation in full.
13. CREDIT FACILITY
On October 20, 2021, the Firm entered into an amended and
restated credit agreement with Wells Fargo Bank, National Association,
as administrative agent, Wells Fargo Securities, LLC, as lead arranger
and bookrunner, Bank of America, N.A., as syndication agent, BMO
Harris Bank, N.A., as documentation agent, and the lenders referred
to therein (the “Amended and Restated Credit Facility”). Under the
Amended and Restated Credit Facility, the Firm has a maximum
borrowing capacity of $200.0 million, which may, subject to certain
conditions and the participation of the lenders, be increased up to an
aggregate additional amount of $150.0 million (the “Commitment”).
The maturity date of the Amended and Restated Credit Facility is
October 20, 2026.
Revolving credit loans under the Amended and Restated Credit
Facility bears interest at a rate equal to (a) the Base Rate (as
described below) plus the Applicable Margin (as described below) or
(b) the LIBOR Rate plus the Applicable Margin. Swingline loans under
the Amended and Restated Credit Facility bears interest at a rate
equal to the Base Rate plus the Applicable Margin. The Base Rate is
the highest of: (i) the Wells Fargo Bank, National Association prime
rate, (ii) the federal funds rate plus 0.50% or (iii) one-month LIBOR
plus 1.00%, and the LIBOR Rate is reserve-adjusted LIBOR for the
applicable interest period, but not less than zero. The Applicable
Margin is based on the Firm’s total leverage ratio. The Applicable
Margin for Base Rate loans ranges from 0.125% to 0.500% and
the Applicable Margin for LIBOR Rate loans ranges from 1.125% to
1.50%. The Amended and Restated Credit Facility includes customary
provisions relating to the transition from LIBOR as the benchmark
interest rate under the Credit Agreement, including providing for a
Benchmark Replacement option (as defined in the Credit Agreement)
to replace LIBOR. The Firm will pay a quarterly non-refundable
commitment fee equal to the Applicable Margin on the average daily
unused portion of the Commitment (swingline loans do not constitute
usage for this purpose). The Applicable Margin for the commitment
fee is based on the Firm’s total leverage ratio and ranges between
0.20% and 0.30%.
The Firm is subject to certain affirmative and negative financial
covenants including (but not limited to) the maintenance of a fixed
charge coverage ratio of no less than 1.25 to 1.00 and the maintenance
of a total leverage ratio of no greater than 3.50 to 1.00. The
numerator in the fixed charge coverage ratio is defined pursuant to
the Amended and Restated Credit Facility as earnings before interest
expense, income taxes, depreciation and amortization, stock-based
compensation expense and other permitted items pursuant to our
Credit Facility (defined as “Consolidated EBITDA”), less cash paid for
capital expenditures, income taxes and dividends. The denominator
is defined as Kforce’s fixed charges such as interest expense and
principal payments paid or payable on outstanding debt other than
borrowings under the Amended and Restated Credit Facility. The
total leverage ratio is defined pursuant to the Amended and Restated
Credit Facility as total indebtedness divided by Consolidated EBITDA.
Our ability to make distributions or repurchases of equity securities
could be limited if an event of default has occurred. Furthermore, our
ability to repurchase equity securities in excess of $25.0 million over
the last four quarters could be limited if (a) the total leverage ratio is
greater than 3.00 to 1.00 and (b) the Firm’s availability, inclusive of
unrestricted cash, is less than $25.0 million. As of December 31, 2022,
we are in compliance with all of our financial covenants contained in
the Amended and Restated Credit Facility.
As of December 31, 2022 and 2021, $25.6 million and $100.0
million was outstanding on the Amended and Restated Credit Facility,
respectively. Kforce had $1.3 million of outstanding letters of credit
at December 31, 2022 and 2021, which pursuant to the Amended
and Restated Credit Facility, reduces the availability.
14. DERIVATIVE INSTRUMENT AND HEDGING ACTIVITY
As of December 31, 2022, the Firm did not have any outstanding
interest rate swap derivative instruments.
On April 21, 2017, Kforce entered into a forward-starting interest
rate swap agreement with Wells Fargo Bank, N.A (“Swap A”). Swap A
was effective on May 31, 2017 and matured on April 29, 2022. Other
information related to Swap A is as follows: Notional amount – $25.0
million; and Fixed interest rate – 1.81%.
On March 12, 2020, Kforce entered into a forward-starting interest
rate swap agreement with Wells Fargo Bank, N.A (“Swap B”, together
with Swap A, the “Swaps”). Swap B was effective on March 17, 2020.
Other information related to Swap B is as follows: Scheduled maturity
date – May 30, 2025; Fixed interest rate – 0.61%; and Notional
amount – $100.0 million.
40 | KFORCE INC. AND SUBSIDIARIES
The Firm used the Swaps as an interest rate risk management tool
to mitigate the potential impact of rising interest rates on variable
rate debt. The fixed interest rate for each Swap plus the applicable
interest margin under our credit facility, was included in interest
expense and recorded in Other expense, net in the accompanying
Consolidated Statements of Operations and Comprehensive Income.
In May 2022, the Firm terminated Swap B in anticipation of paying
the outstanding amount on the Amended and Restated Credit
Facility, which was $100.0 million. At the termination of Swap B, the
amount recorded in Accumulated other comprehensive income was
recognized. We received proceeds of $4.1 million, which represented
the gain and fair value of Swap B at the time of termination, and
is included in Other expense, net in the accompanying Consolidated
Statements of Operations and Comprehensive Income.
Both Swaps A and B were designated as cash flow hedges. The
change in the fair value of the Swaps was previously recorded as
a component of Accumulated other comprehensive income in the
consolidated financial statements.
The following table sets forth the activity in the accumulated
derivative instrument activity (in thousands):
December 31,
2022
2021
Accumulated derivative instrument
gain (loss), beginning of year
Net change associated with current
period hedging transactions
Accumulated derivative instrument
gain, end of year
$ 823
$(1,774)
(823)
2,597
$ —
$ 823
15. FAIR VALUE MEASUREMENTS
Recurring Fair Values — Interest Rate Swap Derivative Instruments
Our interest rate swaps were previously measured at fair
value using readily observable inputs, which are considered to be
Level 2 inputs, on a recurring basis and were recorded in Other
long-term liabilities within the accompanying Consolidated Balance
Sheets. In April 2022, Swap A matured and in May 2022, we
terminated Swap B. Refer to Note 14 — “Derivative Instrument and
Hedging Activity” for a complete discussion of the interest rate swap
derivative instruments.
The fair value of the interest rate swap derivative instruments
at December 31, 2021 was an asset of $823 thousand and was
classified as a Level 2 instrument. At December 31, 2022, Kforce had
no interest rate swap derivative instruments outstanding.
Nonrecurring Fair Values — Equity Method Investment
We review the equity method investment for impairment whenever
events or changes in circumstances indicate that the carrying amount
of the investment may not be recoverable. An impairment loss is
recognized in the event that an other-than-temporary decline in the
fair value of the investment occurs.
Events such as the impact of the COVID-19 pandemic (in 2020),
a strategic repositioning of the joint venture to focus on providing
its clients with an ability to directly source and engage talent on its
platform (in 2021) and delays in WorkLLama’s ability to achieve its
financial projections, despite continued demand for its technology
platform, have resulted in the indicators of other than temporary
impairments. When these events have occurred, we performed an
impairment test utilizing the market and income approaches. For
the income approach, we utilized estimated discounted future cash
flows expected to be generated by WorkLLama. For the market
approach, we utilized market multiples of revenue and earnings
derived from comparable publicly-traded companies. 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. The fair value determination in our impairment
tests is considered Level 3, due to the high sensitivity to changes
in key assumptions, including, but not limited to, the discount rate
that is applied to the financial projections. The fair value of the
equity investment, determined by our previous impairment analysis,
concluded that the fair value exceeded the carrying value.
During 2022, with the assistance of an independent financial
advisor, WorkLLama and Kforce were pursuing the identification of a
strategic partner to support WorkLLama’s future growth expectations
and further invest in their technology platform. In the fourth quarter
of 2022, Kforce made a strategic decision to focus on investing in
the growth of its business and to pursue an exit of its equity stake
in WorkLLama, which was an indicator of other than temporary
impairment. In December 2022, WorkLLama executed a LOI with an
independent third party whereby they would acquire WorkLLama
and settle the outstanding debt, or a portion thereof, owed by
WorkLLama to Kforce. This transaction closed on February 23,
2023. As a result of this transaction, Kforce no longer has any equity
interest in WorkLLama. Management used this, combined with other
facts and circumstances, to determine the fair value of the equity
method investment and recognized an impairment loss of the full
balance of the equity method investment as of December 31, 2022.
The fair value of the equity method investment was measured
using the best information available, including the economics of
the transaction and management’s judgment, which are considered
Level 3 inputs. The valuation technique utilized at December 31,
2022 changed based on the circumstances discussed above. During
the years ended December 31, 2021 and 2020, the Company did not
record any impairments related to the equity method investment.
Refer to Note 1 — “Summary of Significant Accounting Policies” for
more details.
There were no transfers into or out of Level 1, 2 or 3 assets or
liabilities during the years ended December 31, 2022 and 2021.
KFORCE INC. AND SUBSIDIARIES | 41
16. STOCK-BASED COMPENSATION
Restricted Stock
On April 22, 2021, the Kforce shareholders approved the 2021
Stock Incentive Plan (the “2021 Plan”). The 2021 Plan allows for the
issuance of stock options, stock appreciation rights, stock awards
(including restricted stock awards (“RSAs”) and restricted stock units
(“RSUs”)) and other stock-based awards. The aggregate number of
shares of common stock that are subject to awards under the 2021
Plan is approximately 3.9 million shares. The 2021 Plan terminates
on April 22, 2031. Prior to the effective date of the 2021 Plan, the
Company granted stock awards to eligible participants under our 2020
Stock Incentive Plan, 2017 Stock Incentive Plan, 2016 Stock Incentive
Plan and 2013 Stock Incentive Plan (collectively the “Prior Plans”). As
of the effective date of the 2021 Plan, no additional awards may be
granted pursuant to the Prior Plans; however, awards outstanding
as of the effective date will continue to vest in accordance with the
terms of the Prior Plans.
During the years ended December 31, 2022, 2021 and 2020,
stock-based compensation expense was $17.7 million, $14.0 million
and $11.6 million, respectively. The related tax benefit for the years
ended December 31, 2022, 2021 and 2020 was $3.7 million, $4.1
million, and $3.4 million, respectively.
Restricted stock (including RSAs and RSUs) are granted to
executives and management either: for awards related to Kforce’s
annual long-term incentive (“LTI”) compensation program, or as part
of a compensation package in order to retain directors, executives and
management. The LTI award amounts are primarily based on Kforce’s
total shareholder return versus a pre-defined peer group. Restricted
stock granted during the year ended December 31, 2022, will vest
ratably over a period of one to ten years.
RSAs contain the same voting rights as other common stock as well
as the right to forfeitable dividends in the form of additional RSAs at
the same rate as the cash dividend on common stock and containing
the same vesting provisions as the underlying award. RSUs contain no
voting rights, but have the right to forfeitable dividend equivalents
in the form of additional RSUs at the same rate as the cash dividend
on common stock and containing the same vesting provisions as the
underlying award. The distribution of shares of common stock for each
RSU, pursuant to the terms of the Kforce Inc. Director’s Restricted
Stock Unit Deferral Plan, can be deferred to a date later than the
vesting date if an appropriate election was made. In the event of such
deferral, vested RSUs have the right to dividend equivalents.
The following table presents the restricted stock activity for the years ended December 31, 2022, (in thousands, except per share amounts):
Outstanding at December 31, 2021
Granted
Forfeited/Canceled
Vested
Outstanding at December 31, 2022
Number of
Restricted Stock
Weighted-Average
Grant Date
Fair Value
Total Instrinsic
Value of Restricted
Stock Vested
1,083
285
(40)
(417)
911
$35.00
$55.85
$49.52
$42.19
$54.42
$23,724
The weighted-average grant date fair value of restricted stock granted was $55.85, $47.58 and $40.11 during the years ended December 31,
2022, 2021 and 2020, respectively. The total intrinsic value of restricted stock vested was $23.7 million, $33.6 million and $18.0 million during
the years ended December 31, 2022, 2021 and 2020, respectively.
The fair market value of restricted stock is determined based on the closing stock price of Kforce’s common stock at the date of grant and is
amortized on a straight-line basis over the requisite service period. As of December 31, 2022, total unrecognized stock-based compensation
expense related to restricted stock was $45.6 million, which will be recognized over a weighted-average remaining period of 4.2 years.
42 | KFORCE INC. AND SUBSIDIARIES
17. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
Kforce has various commitments to purchase goods and services
in the ordinary course of business. These commitments are primarily
related to software and online application licenses and hosting.
As of December 31, 2022, these purchase commitments amounted
to approximately $21.9 million and are expected to be paid as follows:
$15.8 million in 2023; $4.6 million in 2024, $0.8 million in 2025,
$0.4 million in 2026 and $0.3 million in 2027.
Letters of Credit
Kforce provides letters of credit to certain vendors in lieu of
cash deposits. At December 31, 2022, Kforce had letters of credit
outstanding for operating lease and insurance coverage deposits
totaling $1.3 million.
Employment Agreements
Kforce has 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. Certain of the
agreements also provide for a severance payment ranging from one
to three times annual salary and one-half to three times average
annual bonus if such an agreement is terminated without good cause
by Kforce or for good reason by the executive subject to certain
post-employment restrictive covenants. At December 31, 2022, our
liability would be approximately $40.3 million if, following a change in
control, all of the executives under contract were terminated without
good cause by the employer or if the executives resigned for good
reason and $17.3 million if, in the absence of a change in control, all
of the executives under contract were terminated by Kforce without
good cause or if the executives resigned for good reason.
Litigation
We are involved in legal proceedings, claims and administrative
matters that arise in the ordinary course of business. 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. 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. While the ultimate outcome of the matters
cannot be determined, we currently do not expect that these
proceedings and claims, individually or in the aggregate, will have a
material effect on our financial position, results of operations or cash
flows. The outcome of any litigation is inherently uncertain, however,
and if decided adversely to us, or if we determine that settlement
of particular litigation is appropriate, we may be subject to liability
that could have a material adverse effect on our financial position,
results of operations or cash flows. Kforce maintains liability
insurance in amounts and with such coverage and deductibles as
management believes is reasonable. The principal liability risks that
Kforce insures against are workers’ compensation, personal injury,
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.
On December 17, 2019, Kforce Inc., et al. was served with a
complaint brought in Superior Court of the State of California,
Alameda County. Kathleen Wahrer, et al. v. Kforce Inc., et al., Case
Number: RG19047269. The former employee purports to bring
a representative action on her own behalf and on behalf of other
allegedly aggrieved employees pursuant to California Private
Attorneys General Act of 2004, California Labor Code Section 2968,
et seq. (“PAGA”) alleging violations of the California Labor Code,
§201, et seq. (“Labor Code”). The plaintiff seeks civil penalties,
interest, attorneys’ fees, and costs under the Labor Code for alleged
failure to: provide and pay for work performed during meal and rest
periods; properly calculate and pay all earned minimum and overtime
wages; provide compliant wage statements; timely pay wages
during employment and upon termination; and reimburse business
expenses. At this stage in the litigation, it is not feasible to predict
the outcome of this matter or reasonably estimate a range of loss,
should a loss occur, from this proceeding.
On November 18, 2020, Kforce Inc., et al. was served with a
complaint brought in the Superior Court of the State of California, San
Diego County, which was subsequently amended on January 21, 2021,
to add Kforce Flexible Solutions as a party. Bernardo Buchsbaum, et
al. v. Kforce Inc., et al., Case Number: 37-2020-00030994-CU-OE-CTL.
The former employee purports to bring a representative action
on his own behalf and on behalf of other allegedly aggrieved
employees pursuant to PAGA alleging violations of the Labor Code.
The plaintiff seeks civil penalties, interest, attorney’s fees, and costs
under the Labor Code for alleged failure to: properly calculate and
pay all earned minimum and overtime wages; provide and pay for
work performed during meal and rest periods; reimburse business
expenses; provide compliant wage statements; and provide unused
vacation wages upon termination. The parties reached a preliminary
settlement agreement to resolve this matter along with Elliott-Brand,
et al. v. Kforce Inc., et al. which is subject to final approval by the
Court, and we have set reserves accordingly. We believe that this
matter is unlikely to have a material adverse effect on our business,
consolidated financial position, results of operations, or cash flows.
KFORCE INC. AND SUBSIDIARIES | 43
On January 6, 2022, a complaint was filed against Kforce Inc. in the
Superior Court of the State of California for the County of Los Angeles and
was served on January 21, 2022. Jessica Cook and Brianna Pratt, et al. v.
Kforce Inc., Case Number: 22STCV00602. On behalf of themselves and
others similarly situated, plaintiffs purport to bring a class action alleging
violations of Labor Code and the California Business and Professional
Code and challenging the exempt classification of a select class of
recruiters. Plaintiffs and class members seek damages for all earned
wages, statutory penalties, injunctive relief, attorney’s fees, and interest
for alleged failure to: properly classify certain recruiters as nonexempt
from overtime; timely pay all wages earned, including overtime premium
pay; provide accurate wage statements; provide meal and rest periods;
and comply with California’s Unfair Competition Law. Kforce anticipated
this action would be filed as a result of failed early resolution attempts in
the previously disclosed Jessica Cook v. Kforce, et al. lawsuit. The parties
reached a preliminary agreement to resolve this matter, and we have set
reserves accordingly. We believe that this matter is unlikely to have a
material adverse effect on our business, consolidated financial position,
results of operations, or cash flows.
On January 6, 2022, a complaint was filed against Kforce Inc. in
the United States District Court for the Middle District of Florida and
was served on February 4, 2022. Sam Whiteman, et al. v. Kforce Inc.,
Case Number: 8:22-cv-00056. On behalf of himself and all others
similarly situated, the plaintiff brings a one-count collective action
complaint for alleged violations of the FLSA by failing to pay overtime
wages. Plaintiff, on behalf of himself and the putative collective,
seeks to recover unpaid wages, liquidated damages, attorneys’ fees
and costs, and prejudgment interest for alleged failure to properly
classify specified recruiters as nonexempt from overtime and
properly compensate for all hours worked over 40 hours in one or
more workweeks. The parties reached a preliminary agreement to
resolve this matter which is subject to approval by the Court, and we
have set reserves accordingly. We believe that this matter is unlikely
to have a material adverse effect on our business, consolidated
financial position, results of operations, or cash flows.
On December 11, 2020, a complaint was filed against Kforce and
its client, Verity Health System of California (“Verity”) in the Superior
Court of California, County of Los Angeles, which was subsequently
amended on February 19, 2021. Ramona Webb v. Kforce Flexible
Solutions, LLC, et al., Case Number: 20STCV47529. Former consultant
Ramona Webb has sued both Kforce and Verity alleging certain
individual claims in addition to a PAGA claim based on alleged
violations of various provisions of the Labor Code. With respect to
the PAGA claim, Plaintiff seeks to recover on her behalf, on behalf
of the State of California, and on behalf of all allegedly aggrieved
employees, the civil penalties provided by PAGA, attorney’s fees
and costs. At this stage in the litigation, it is not feasible to predict
the outcome of this matter or reasonably estimate a range of loss,
should a loss occur, from this proceeding. We intend to continue to
vigorously defend the claims.
On December 24, 2020, a complaint was filed against Kforce
Inc., et al. in Superior Court of the State of California, Los Angeles
County. Sydney Elliott-Brand, et al. v. Kforce Inc., et al., Case Number:
20STCV49193. On January 7, 2022, the lawsuit was amended to add
Bernardo Buchsbaum and Josie Meister as plaintiffs and to add claims
under PAGA and the Fair Labor Standards Act, 29 U.S.C. §§ 201, et
seq. On behalf of themselves and a putative class and collective of
talent recruiters and allegedly aggrieved employees in California and
nationwide, the plaintiffs purport to bring a class action for alleged
violations of the Labor Code, Industrial Welfare Commission Wage
Orders, and the California Business and Professions Code, §17200,
et seq., a collective action for alleged violations of FLSA, and a PAGA
action for alleged violations of the Labor Code. The plaintiffs seek
payment to recover unpaid wages and benefits, interest, attorneys’
fees, costs and expenses, penalties, and liquidated damages for
alleged failure to: properly calculate and pay all earned minimum
and overtime wages; provide meal and rest periods or provide
compensation in lieu thereof; provide accurate itemized wage
statements; reimburse for all business expenses; pay wages due
upon separation; and pay for all hours worked over forty in one or
more workweeks. Plaintiffs also seek an order requiring defendants
to restore and disgorge all funds acquired by means of unfair
competition under the California Business and Professions Code. The
parties reached a preliminary agreement to resolve this matter along
with Buchsbaum, et al. v. Kforce Inc., et al., which is subject to final
approval by the Court, and we have set reserves accordingly. We
believe that this matter is unlikely to have a material adverse effect
on our business, consolidated financial position, results of operations,
or cash flows.
44 | KFORCE INC. AND SUBSIDIARIES
CORPORATE INFORMATION
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
David L. Dunkel
Chairman of the Board
Derrick D. Brooks
Executive Vice President,
Corporate & Community
Business Development,
Vinik Sports Group
Catherine H. Cloudman
President and
Chief Executive Officer,
CHC Advisors, LLC
Ann E. Dunwoody
General (Retired),
U.S. Army
President,
First 2 Four, LLC
Joseph J. Liberatore
President and
Chief Executive Officer
David M. Kelly
Chief Financial Officer and
Secretary
Kye L. Mitchell
Chief Operations Officer
Andrew G. Thomas
Chief Marketing and
People Officer
Jeffrey B. Hackman
Senior Vice President,
Finance and Accounting
Mark F. Furlong
President and
Chief Executive Officer (Retired),
BMO Harris Bank N.A.
CORPORATE COUNSEL
Holland & Knight LLP
Tampa, Florida
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Tampa, Florida
Joseph J. Liberatore
President and
Chief Executive Officer,
Kforce Inc.
Randall A. Mehl
President and
Chief Investment Officer,
Stewardship Capital Advisors, LLC
Elaine D. Rosen
Nonexecutive Chair of the Board,
Assurant, Inc.
Lead Independent Director
N. John Simmons
Chief Executive Officer,
Growth Advisors, LLC
TRANSFER AGENT
Computershare Investor Services
P.O. Box 505000
Louisville, KY 40233-5000
www.computershare.com/investor
Shareholder services:
1 (877) 373-6374
FORM 10-K AVAILABLE
A copy of the Kforce Inc.’s Annual
Report on Form 10-K (excluding
exhibits thereto) is available to
any investor without charge upon
written request to:
Michael R. Blackman
Chief Corporate
Development Officer
Kforce Inc.
1150 Assembly Drive
Suite 500
Tampa, Florida 33607
Or call Investor Relations:
1 (813) 552-2927
ANNUAL MEETING
The annual meeting of
shareholders will be held on
April 20, 2023 at
8:00 a.m. ET at Kforce Inc.
headquarters in Tampa, Florida.
WEBSITE INFORMATION
For a comprehensive profile
of Kforce Inc., visit the Firm’s
website at: www.kforce.com.
This Annual Report contains forward-looking statements (within the
meaning of the federal securities laws). Please see the “Cautionary
Note Regarding Forward-Looking Statements” contained in the
introductory portion of our Annual Report on Form 10-K for the
year ended December 31, 2022 for additional information regarding
forward-looking statements.
Corporate Headquarters:
1150 Assembly Drive
Suite 500
Tampa, Florida 33607
(813) 552-5000
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