Kforce, Inc.

earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Once again, star one. And if you'd like to withdraw your question, simply press star one again. Thank you. I would now like to turn the call over to Joe Liberatore, President and CEO. Joe, please go ahead.

Good afternoon and thank you for your time today. This call contains certain statements that are forward-looking, are based upon current assumptions and expectations, and are subject to risk and uncertainties. Actual results may vary materially from the factors listed in K-Force's public filing and other reports and filing with the SEC. We cannot undertake any duty to update any forward-looking statements. You can find additional information about our results in our earnings release and our SEC filings. In addition, we have published our prepared remarks within the investor relation portion of our website. Like many others, we entered 2025 with a general sense of optimism for the U.S. economic growth with the expected derivative benefit being a boost in our client's confidence in accelerating investments in technology initiatives that have been deferred for the last several years. The signs of a slowing mid-Q1, followed by the announcement of significant tariffs for which the outcome and impact remains unclear, reintroduce many uncertainties into the U.S. economic outlook. The general tonality as we sit here today is that the earlier optimism has waned to a degree and the macro uncertainties have increased, which may delay an acceleration of investment for many companies. With that said, the macro uncertainties have not resulted in a deterioration in our business. In fact, over the last six weeks, our consultants on assignments have improved and our front end KPIs have been elevated compared to first quarter levels. We are cautiously optimistic about the level of demand we are seeing against this more uncertain backdrop. As to our first quarter performance, it was generally consistent with our expectations. Regardless to the ultimate environment, we believe there remains an increasingly strong backlog of strategically imperative technology investments. We continue to be well positioned to take additional market share, as we have been doing successfully for years, and continue laying the foundation to generate significant long-term returns for our shareholders. We are fortunate to have made the strategic decision more than five years ago to focus on the commercial space and divest our federal government business such that we no longer have any direct business with the federal government and limited indirect exposure through the support of our larger system integrator clients. As we look ahead to the second quarter and the remainder of 2025, As has been the case over the last few years, we will continue to stay close to our clients and monitor our key performance indicators and make any necessary adjustments to our business while continuing to invest in our long-term strategic priorities with a keen focus on the retention of our most productive associates. Our motto continues to be control what we can control. Our teams have continued to persevere and make the necessary adjustments within the business while we also have continued to make significant investments in critical initiatives that will provide a great foundation moving forward, positioning us to return higher levels of profitability as revenues inflect. We continue to make significant progress with the implementation of Workday as our future state enterprise cloud application for HCM and financials. The go-live of this technology platform is expected in early 2026, and we expect to begin to generate immediate efficiency gains that will continue to improve as we rationalize the new platform. We also continue to evolve our nearshore and offshore delivery capabilities with our India Development Center and further integrate all the firm's capabilities across the full spectrum of our service offerings as one K-force. Each of these strategic initiatives are transformational in nature and will be meaningful contributors to us meeting our financial objectives. AI continues to dominate the headlines. As we have previously articulated over the long term, we believe that AI and other innovative technologies will continue to play an increasing role empowering businesses. We are ideally positioned to meet that demand and continue to see an increased focus of AI foundational readiness work in areas such as data, cloud, and modernization, along with AI projects in our consulting-oriented engagements. Internally, we expect to benefit from the future leverage of AI and in that regard are extremely fortunate to have made the strategic decision to concentrate our platform technologies with Microsoft and Workday. We have accelerated our investments in these technologies by acquiring enterprise licensing of Office 365 Copilot and Sales Copilot from Microsoft. We are taking active steps within the firm to provide these important productivity enhancing technologies to all of our associates and leaders. We have built a solid foundation at K-Force and will continue to make the necessary investments to transform our business. Our domestically focused organic growth strategy continues to benefit our organization by eliminating any unnecessary distractions for our people so that their full energy is directed to partnering with our clients to help them solve their most important business challenges. Before transitioning the call, I wanted to reiterate how proud I am of the performance and resiliency of the collective K-Force team. We are blessed to have a high-performing organization that is united, tenured, dedicated, and passionate. I could not be more excited about the future of K-Force. Dave Kelly, our Chief Operating Officer, will now give greater insights into our performance and recent operating trends. Jeff Hackman, K-Force's Chief Financial Officer, will then provide additional details on our financial results, as well as our future financial expectations. Dave?

Thank you, Joe. Total revenues of $330 million declined 4.7 percent year-over-year on a billing day basis. Revenues in our technology business declined 5.2 percent sequentially and declined 3.5 percent year-over-year per billing day. We didn't see a typical recovery in the first quarter. Normally, consultants on assignment decrease in January as year-end projects are wrapped up and then gradually increase during the last two months of the quarter. This year, we actually saw slight declines mid-quarter due to higher than expected assignment attrition, which mirrored the tempering of economic expectations. Headcount levels did begin to increase in late March, and that improvement continued into mid-April. Though uncertainty remains, mission critical initiatives continue to be prioritized by our clients. However, given the macroeconomic uncertainty, clients appear to be awaiting a period of increased confidence before more aggressively adding resources to address the significant backlog of other important technology initiatives. Our technology service offering has significantly evolved over the years, expanding beyond traditional staffing assignments to encompass more consulting oriented engagements. Clients continue to prioritize cost efficient access to highly skilled talent and view our services as an effective solution to meet their technology project requirements, leveraging our superior delivery capabilities. The demand for our consulting-oriented offerings has continued to significantly contribute to our results. This growth underscores our ability to adapt and meet the evolving needs of our clients. While our traditional staffing business has experienced year-over-year revenue declines, growth in solutions-oriented assignments highlights our strategic shift in the increasing value clients place on our consulting capabilities. Our integrated strategy leverages all aspects of the firm's capabilities to meet the needs of the world-class companies we serve. An increasingly important aspect of providing cost-effective solutions is our ability to source highly skilled talents from outside the United States. Our development center in Pune, India positions KFORCE well to compete for client opportunities that were previously unavailable to us. This development center, combined with our robust U.S. sales and delivery capabilities and a high-quality vendor network, allows us to comprehensively address the evolving needs of our clients, whether onshore, nearshore, or offshore. Overall average bill rates in our technology business of $90 grew slightly sequentially and on a year-over-year basis, continuing the trend of stability that has persisted for nearly three years. The consistent demand for highly skilled talent in both traditional staffing assignments and consulting-oriented engagements has played a crucial role in maintaining stable bill and pay rates. This demand is driven by clients' need for expertise in specialized areas, such as AI and machine learning, application engineering, cloud, digital data, and cybersecurity. Our ability to source and provide top-tier professionals who can address complex technological challenges has ensured that our services remain indispensable, even as overall industry trends have slowed. Our core competency lies in sourcing quality talent at scale for our clients, adapting to the evolving demand for various skill sets. We anticipate this trend to continue as clients increasingly rely on us to provide data and digital resources to support their data rationalization and cleanup activities, which are critical to their AI investments. We have relationships with the largest providers in this space, including Microsoft, and continue to strengthen our partnership models with these companies. As technology has evolved over the decades, we've efficiently adapted to the changing skill set demands of our clients, ensuring we remain a trusted partner in their technological advancements. Our client portfolio is diverse and is predominantly comprised of large, market-leading companies. Our focus on addressing their needs continues to be critical to our ability to drive sustainable long-term above market performance. The retail and transportation industries outperform sequentially in Q1, while we experienced downward pressure in the relatively modest footprint with large consulting companies supporting the federal government as well as in financial services. Our footprint is focused on supporting very large clients, all of whom have differing needs. As a result, it's typical to see both increases and decreases in revenue for clients within the same industry vertical, which has been the case in financial services. Given our size and scale, it's difficult to extrapolate our performance with overall industry trends. Looking forward to Q2, we expect modest sequential growth in our technology business. Flex revenues in our FA business, currently 6.1% of our revenues, decline 22% year-over-year on a billing day basis. Our average bill rate of approximately $52 per hour improved slightly sequentially in year over year and is reflective of the highly skilled areas we are pursuing. We expect Q2 revenues in F&A to be down sequentially on a billing day basis in the mid single digits. An area where we have seen a more significant impact from the economic uncertainty is in our direct hire business, which represents approximately 2% of overall revenues. After a reasonably strong first quarter, Activity slowed in early April, and we now expect direct hire to decline sequentially in Q2 in what is typically its strongest quarter. We continue to make adjustments to associate staffing levels based on productivity expectations, focusing on retaining our most productive associates and making targeted investments to ensure we are well prepared to capitalize on market demand when it accelerates. Over the past three years, we've selectively invested in our sales teams while rationalizing our delivery resources which have decreased by close to 40% over that time. Despite these reductions, we believe we have ample capacity to absorb several quarters of increased demand without adding significant resources. Additionally, we continue to invest in our consulting solutions business. Our performance in the first quarter continued to outpace that of our competitors. We remain tremendously excited about our strategic position and our ability to continue delivering above-market performance in our technology business, as we have for well over a decade. The success we achieve as an organization is a testament to the unwavering trust that our clients, candidates, and consultants place in us. I'll now turn the call over to Jeff Hackman, KFORCE's Chief Financial Officer.