Kforce Reports Solid First Quarter Results

Kforce, a leading provider of technology and finance and accounting talent solutions, has reported its financial results for the first quarter of 2026. Despite a softer labor market and heightened geopolitical uncertainty, the company experienced year-over-year revenue growth for the first time in over three years.

Business Overview

Kforce serves a diverse set of clients, with a focus on Fortune 500 and other leading companies. At the end of March 2026, the company employed over 1,600 associates and had nearly 8,000 consultants on assignment.

Recent economic data points to a softening labor market, particularly in professional roles. Heightened geopolitical tensions, including the conflict involving Iran, have contributed to significant volatility in global energy markets. In this environment, Kforce’s clients are focused on agility and are seeking flexible workforce solutions to advance their technology initiatives.

Financial Performance

Kforce’s total revenue for the first quarter of 2026 was $330.4 million, a 0.1% increase compared to the same period in 2025. This marks the first year-over-year revenue growth the company has experienced in over three years.

The key drivers of the company’s performance were:

Flex Revenue

• Technology Flex revenue increased 0.2%, driven by an increase in consultants on assignment, partially offset by a slight decrease in the average bill rate.
• Finance and Accounting (FA) Flex revenue increased 5.7%, driven by an increase in consultants on assignment and a nearly 1% improvement in average bill rates.

Direct Hire Revenue

• Direct Hire revenue decreased 17.7%, primarily due to a decrease in placements.

Gross Profit

• Total gross profit percentage increased 60 basis points to 27.3%, driven by an increase in Flex gross profit margins.
• Technology Flex gross profit margins increased 80 basis points, primarily due to improved bill and pay spreads and lower healthcare costs.
• FA Flex gross profit margins increased 70 basis points, also driven by improved bill and pay spreads and lower healthcare costs.

SG&A Expenses

• SG&A expenses as a percentage of revenue increased 40 basis points to 23.2%, primarily due to higher performance-based compensation costs.
• The company continues to prioritize investments in strategic initiatives, including the implementation of a new back-office system, integrated strategy efforts, and the evolution of its nearshore and offshore delivery capabilities.

Other Metrics

• Depreciation and amortization expense decreased 10.9% compared to the prior year period.
• The effective tax rate increased to 30.2% from 26.4% in the prior year period, primarily due to non-deductible items.

Non-GAAP Financial Measures

Kforce also reported several non-GAAP financial measures to provide additional insights into the company’s performance:

Revenue Growth Rates

• On a non-GAAP basis, which adjusts for the impact of billing days, Kforce’s total Flex revenue grew 0.5% year-over-year in the first quarter.

Free Cash Flow

• Free cash flow, defined as net cash provided by operating activities less capital expenditures, was negative $7.4 million in the first quarter, compared to negative $3.9 million in the prior year period.

Adjusted EBITDA

• Adjusted EBITDA, which excludes the impact of depreciation, amortization, stock-based compensation, interest, and taxes, was $16.9 million, compared to $16.8 million in the prior year period.

Liquidity and Capital Resources

Kforce primarily relies on operating cash flows and borrowings under its credit facility to meet its capital and liquidity requirements. At the end of the first quarter, the company had $91.5 million outstanding under its credit facility and $107.4 million in available borrowing capacity.

Cash used in operating activities was $4.1 million during the first quarter, compared to cash provided of $0.2 million in the prior year period. This decrease was primarily driven by lower collections on trade receivables, partially offset by the timing of payments.

The company used $3.3 million in investing activities, primarily for capital expenditures. Financing activities provided $6.6 million, driven by decreases in share repurchases and net proceeds on the credit facility.

Kforce’s Board of Directors declared and paid a quarterly dividend of $0.40 per share during the first quarter, representing a 3% increase from the prior year period.

Outlook and Strategic Priorities

Based on the company’s performance and the current market environment, Kforce expects the following for the second quarter of 2026:

• Technology Flex revenue to increase in the low to mid single digits sequentially and year-over-year
• FA Flex revenue to increase in the mid to high single digits sequentially and high single digits year-over-year
• Technology and FA Flex gross profit margins to increase sequentially due to lower seasonal payroll taxes and stable bill and pay spreads

The company believes it is well-positioned to support its clients as they advance their technology initiatives amid the evolving economic landscape. Kforce continues to prioritize investments in strategic areas, including its back-office transformation, integrated strategy efforts, and the development of its nearshore and offshore delivery capabilities.

Analysis and Outlook

Kforce’s first-quarter results demonstrate the company’s ability to navigate a challenging macroeconomic environment and deliver solid financial performance. The year-over-year revenue growth, particularly in the FA segment, is a positive sign and suggests that the company’s strategic initiatives are gaining traction.

The increase in Flex gross profit margins is also encouraging, as it indicates Kforce is effectively managing the spread between bill rates and pay rates, as well as controlling costs. The company’s focus on investing in strategic priorities, such as technology infrastructure and delivery capabilities, should help position it for future growth and profitability.

However, the decline in Direct Hire revenue is a concern, as it reflects a softening in the labor market for professional roles. This could put pressure on the company’s overall revenue and profitability if the trend continues.

Additionally, the increase in SG&A expenses as a percentage of revenue is something to monitor, as the company will need to balance its investment in strategic initiatives with maintaining cost discipline.

Overall, Kforce’s first-quarter performance suggests the company is navigating the current market environment well and is taking the necessary steps to position itself for long-term success. The company’s focus on flexible workforce solutions, technology initiatives, and strategic investments should help it capitalize on the evolving needs of its clients. Investors will likely be closely watching Kforce’s ability to sustain its revenue growth and profitability improvements in the coming quarters.