Kforce’s second quarter results met Wall Street’s expectations, but the market reacted sharply to underlying challenges. Management attributed the performance to continued macroeconomic uncertainty and a demand-constrained environment, with clients cautious on new investments despite a stable pipeline in technology and finance services. CEO Joseph Liberatore noted, “Our clients continue to carry a significant backlog of strategically imperative technology investments that they expect to execute once greater positive visibility exists.” Sequential growth in flexible staffing, especially consulting-led solutions, helped offset softness in direct hire placements. However, project ends late in the quarter and a strategic shift in client spending contributed to year-over-year revenue declines and margin compression.
Is now the time to buy KFRC? Find out in our full research report (it’s free).
Kforce (KFRC) Q2 CY2025 Highlights:
- Revenue: $334.3 million vs analyst estimates of $335.4 million (6.2% year-on-year decline, in line)
- EPS (GAAP): $0.59 vs analyst estimates of $0.59 (in line)
- Adjusted EBITDA: $19.89 million vs analyst estimates of $20.29 million (5.9% margin, 2% miss)
- Revenue Guidance for Q3 CY2025 is $328 million at the midpoint, below analyst estimates of $334.6 million
- EPS (GAAP) guidance for Q3 CY2025 is $0.57 at the midpoint, missing analyst estimates by 7.2%
- Operating Margin: 4.5%, down from 5.5% in the same quarter last year
- Market Capitalization: $565.6 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Kforce’s Q2 Earnings Call
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Mark Steven Marcon (Baird) asked about the pace of AI adoption and when Kforce expects demand to accelerate. CEO Joseph Liberatore explained that most work is still in the preparatory phase, with only about 10% of organizations fully equipped for AI, and widespread demand will take time to materialize.
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Marcon also questioned the nature of project ends impacting Q3 guidance. COO David Kelly noted that the project ends were due to clients reallocating spend to other technology priorities, not a reduction in overall technology budgets, and described the market as generally stable despite these shifts.
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Trevor Romeo (William Blair) inquired about the turnaround in the finance and accounting business. Kelly credited experienced teams and a strategic pivot toward higher-skill placements, emphasizing that market conditions remain challenging but recent execution has driven sequential growth.
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Romeo also asked about gross margin pressures. CFO Jeffrey Hackman attributed margin compression primarily to lower direct hire mix and stable, slightly improving spreads in the technology business, with health care costs no longer a significant headwind.
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Tobey O'Brien Sommer (Truist Securities) sought clarity on the impact of offshore operations and the expected benefits of the Workday implementation. Kelly and Hackman noted that offshore initiatives are modestly margin-accretive and that Workday is expected to deliver about a 100 basis point operating margin benefit post-2027.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will monitor (1) the pace at which clients move from foundational AI readiness to implementation, (2) the stability and growth of consulting-led and offshore engagements as clients adapt spending, and (3) signs of renewed investment in deferred technology projects if macroeconomic clarity improves. Progress on Workday implementation and further margin benefits from blended delivery models will also be key indicators.
Kforce currently trades at $32.64, down from $46.90 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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