Kforce Inc. (KFRC)
Q4 2010 Earnings Call
February 8, 2011 5:00 PM ET
Michael Blackman – Chief Corporate Development Officer
Dave Dunkel – Chairman and CEO
Bill Sanders – President
Joe Liberatore – Chief Financial Officer
Mark Marcon – Robert W. Baird
Paul Ginocchio – Deutsche Bank
Tobey Sommer – Suntrust
Giri Krishnan – Credit Suisse
Previous Statements by KFRC
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As a reminder, this conference is being recorded. And now, I turn the program over to Michael Blackman, Chief Corporate Development Officer. Sir, the floor is yours.
Thank you. Good afternoon and welcome to the Q4 Kforce conference call. Before we get started, I would like to remind you that this call may contain certain statements that are forward-looking. These statements are based on current expectations and assumptions and are subject to risks and uncertainties.
Actual results may differ materially because of factors listed in Kforce’s public filings and other reports and filings with the Securities and Exchange Commission. We cannot undertake any duty to update any forward-looking statements.
You could find additional information about Kforce in our 10-Q, 10-K and 8-K filings with the SEC. We provide substantial disclosure in our release and hope that this will improve the dissemination of information about our performance and the quality of this call.
Now, I’d like to turn it over to Dave Dunkel, Chairman and CEO. Dave?
Thank you, Michael. We’re very pleased with our firm’s performance in Q4, as well as for the 2010 year and are optimistic about the firm’s prospects, what appears to be a secular shift towards a greater use of flexible staffing.
Kforce reported revenue for the year ended December 31, 2010 of $991 million, an increase of 9%. Net income was approximately $21 million, which represents a year-over-year increase of 60% and EPS was $0.51, a 54.5% increase.
2010 was unprecedented in U.S. economic history in that never before have we seen a recovery where such a disproportionate percentage of hiring was created through the temp sector. In 2010, the United States saw 36% of net job creation take place through the 1.7% of the U.S. payroll spend in temp. This bodes very well for the sector going forward, as clients are looking at an uncertain economic recovery, combined with significant uncertainties surrounding regulatory tax and healthcare reform.
Our clients are increasingly looking to flexible staffing which allows them to adjust in real time to this constantly shifting economic and regulatory environment. The objectives we established for 2010 were to focus on market and client share gains, and continue to expand our National Recruiting Center and Strategic Accounts teams, while remaining focus on our four service offerings of Technology, Finance and Accounting, Health and Life Sciences and Government.
Over the past year and a half, we have successfully doubled the size of our NRC and Strategic Account team and significantly increased the business development staff in KGS, while continuing to outpace average industry growth.
Our objectives for 2011, the third year of our three-year plan are to further penetrate existing Strategic Accounts, take additional client share and selectively target new accounts for service offerings in business model add value to our clients. Key to achieving these goals is the flexibility we have built in toward delivery platform.
Human capitals are greatest assets and with the NRC and Strategic Accounts team now at an increase scale, we have the flexibility to rapidly deploy these teams to quickly satisfy large volume requests from our clients. Not only do the NRC and Strategic Accounts team enhance our local on the ground capabilities, but the cost structures on NRC and Strategic Accounts group allow us to profitably serve certain clients and niches that would not be possible under a traditional staffing model.
Our goal is to leverage fully the competitive advantage we have created in our NRC and Strategic Accounts teams working in anything a trust partnership with our field teams to accelerate growth and market share gains.
In summary, we believe temporary staffing penetration of the workforce will achieve historic highs in U.S. The demand for our service is improving and the strong platform we have built will fuel accelerated revenue and earnings growth as economic expansion accelerates.
We believe that we will surpass prior peak earnings earlier in the cycle with a higher quality, less firm dependant revenue stream. To put things in prospective, we are already back to 98% of our prior peak revenue and 56% of prior peak EBT.
Based upon these factors, we are very optimistic about our future and we have established revenue and EBIT targets for ext five years. We have set targets of 15% average annual revenue growth and 25% average annual growth in EBIT.
While our revenue growth target for 2011 is approximately 15%, our EBIT target exceeds 50% growth. We have the front and back of the house capabilities to make this happen. Our people, which are our greatest asset are positioned to win.
I will turn the call over to Bill Sanders, Kforce President, who will provide his comments, then Joe Liberatore, Kforce CFO will then provide additional insights on operating tends and expectations and I will then conclude. Bill?