Kforce (KFRC) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue was $330 million, down 6.2% year-over-year, with Technology and FA segments impacted by macroeconomic uncertainty and delayed client investments.

• Flex revenue declined 6.4% to $322.6 million, with Technology down 5.0% and FA down 23.2%; Direct Hire revenue rose 4.1% to $7.5 million.

• Strategic focus remains on technology staffing, consulting, and investments in AI, cloud, and modernization initiatives.

• The company is executing long-term transformation projects, including Workday implementation and expansion of nearshore/offshore capabilities.

• $28.3 million was returned to shareholders via share repurchases and dividends in Q1 2025.

Financial highlights

• Gross profit margin was 26.7%, down 40 basis points year-over-year, mainly due to lower Flex margins and higher healthcare costs.

• Earnings per share for Q1 was $0.45, with net income of $8.1 million, down 25.9% year-over-year.

• Operating margin was 3.5%, and the effective tax rate was 26.4%.

• Adjusted EBITDA was $16.8 million, down from $20.6 million in Q1 2024.

• Free cash flow was negative $3.9 million, compared to positive $11.3 million in Q1 2024.

Outlook and guidance

• Q2 2025 revenue guidance is $332–$340 million, with EPS of $0.57–$0.65 and gross margin expected at 27.2%–27.4%.

• Technology Flex revenue expected to improve slightly sequentially in Q2 2025 but decrease low-to-mid single digits year-over-year.

• Management remains cautious due to macroeconomic uncertainty and potential tariff impacts.

• Operating margins are targeted to reach 8% when annual revenues return to $1.7 billion, driven by strategic investments.