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 both impacted by macroeconomic uncertainty and delayed client investments.

• EPS was $0.45, down 22.4% year-over-year, and net income dropped 25.9% to $8.1 million.

• Strategic focus remains on technology staffing, consulting, and digital transformation, with continued investments in AI, cloud, and Workday implementation.

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

• Consultants on assignment and front-end KPIs improved in the last six weeks of Q1.

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.

• Operating margin was 3.5%; SG&A expenses were 22.8% of revenue.

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

• Operating cash flow was $0.2 million, and free cash flow was $95,000, both impacted by client payment timing and deferred tax payments.

• Return on equity exceeded 30%.

Outlook and guidance

• Q2 2025 revenue is expected to be $332–$340 million, with EPS guidance of $0.57–$0.65.

• Gross profit margin is projected at 27.2%–27.4%, and operating margin at 4.4%–4.8%.

• Technology Flex revenue expected to improve slightly sequentially but decrease year-over-year; FA and Direct Hire revenues are expected to decline sequentially.

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

• Long-term operating margin target is 8% at $1.7 billion annual revenue, with a goal of double-digit margins.