Kforce, Inc.

Well, good day, everyone, and welcome to the K-Force Q4 2025 earnings call. Just a reminder that today's call is being recorded. I would now like to hand the call over to Mr. Joe Liberatore. Please go ahead, sir.

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 filings 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. We are pleased to have delivered fourth quarter revenues that exceeded our expectations and were reflective of the continued build of momentum that we discussed in our last earnings call. The sequential flex revenue growth that we delivered in our technology business represents the highest sequential billing day growth since the second quarter of 2022. This momentum appears to be carrying over into the first quarter as January results suggest that 2026 is our best start since 2022. These trends are suggestive of the strength in our client portfolio, the criticality of the work that we are doing, and the resilience of our people. We also believe that our trends are evidence that clients may increasingly pursuing a flexible talent model as a means to complete critical projects in this uncertain macro landscape and the growing belief that returns that will be generating from continuing AI investments may take longer to realize and may be more specific in nature to unique business problems rather than an overarching solution to all technology challenges. I am very proud of our team's accomplishment in driving our business forward and making the necessary adjustments to maintain high levels of performance. To that end, our results for the fourth quarter reflect certain charges related to the refinement of our internal headcount, and organizational structure that further align the current revenue levels and position us well to execute in 2026 and beyond. We also took certain actions to streamline other areas of our operating costs, which Jeff Hackman will cover in more detail in his remarks, along with the expected benefits. We have made tremendous progress in 2025 with our strategic initiatives. including the advancement of the implementation of Workday as our future state enterprise cloud application for HCM and financials, the evolution of our offshore delivery capabilities in India, and the further integration of all of the firm's capabilities across the full spectrum of our service offerings as 1K Force. Each of these initiatives are transformational in nature and will be a meaningful contributor to us meeting our long-term financial objectives. 2025 marked the third consecutive year of revenue declines for K-Force and the broader technology services sector. The latest economic data continues to suggest a persistently weak and largely frozen labor market marked by prolonged stagnation of job gains coming off the post pandemic peaks and companies protective reaction to the great resignation. That being said, Our historical experience is that companies typically turn to flexible talent solutions as an initial step prior to making core hires while they assess the durability of the macroeconomic conditions. We are optimistic that our recent operating trends are suggestive of a more typical cyclicality. The debates continue on the relative impact of AI on the technology services sector revenue trends versus the impact of economic uncertainty and a soft labor market. Regardless, this uncertainty may intensify the use of flexible talent as companies prioritize agility until they gain clear insight into how these technologies and at what pace they will reshape their overall business and talent strategies. We have witnessed transformative shifts before, such as migration of the mainframe to distributed processing, the emergence of the internet, the mobile revolution, and the move to cloud computing. The emergence of the internet likely most closely aligns with AI. Unlike other secular technology shifts, the internet and AI directly impact operating models and broadly touch virtually all white collar roles in some manner. The internet secular shift followed a typical investment and integration cycle pattern where we had initial exuberance, massive infrastructure investment, premature abandonment of legacy systems, realization of integration and modernization needs, a return to balanced strategic investment, and finally workforce transformation and skill shortage. We believe generative AI and its offshoots into agentic AI and cognitive AI is in the early endings of the evolution and may just be starting to mirror this historical pattern, which has in past cycles been an opportunity for K-Force and the broader technology sector. Securing the right talent, organizing the right teams, and launching focused enterprise-level initiatives is essential for organizations to successfully adopt and maximize these new tools to remain competitive. Our strong position should allow us to increase client share and expand into new clients, continuing our track record of gaining market share and reinforcing the solid foundation that drives lasting value for our shareholders. Our domestically focused, organic growth strategy continues to serve us well, minimizing distractions and enabling our people to fully concentrate on partnering with clients to solve their most critical business challenges. Before I conclude, I want to express my appreciation for the exceptional people who make up the KFORCE team. I am proud of the performance, resilience, and commitment demonstrated across the organization. It is a privilege to work alongside such talented and dedicated Their passion and contributions place us in a strong strategic position, and I am confident in our direction and enthusiastic about the opportunities ahead. Dave Kelly, our Chief Operating Officer, will now give greater insight into our performance and recent operating trends. Jeff Hackman, K-Force's Chief Financial Officer, will then provide additional detail on our financial results as well as our future financial expectations. Dave?

Thank you, Joe. Total revenues of $332 million surpassed our expectations and represented a 3% overall sequential improvement per billing day in the fourth quarter. Flex revenues in our technology and F&A businesses grew sequentially 3% and 5.7% respectively on a billing day basis in the fourth quarter. As we entered the second half of 2025, we began to see signs of improvement across much of our portfolio. The second half momentum punctuated by our Q4 sequential growth and the strong start to 2026, puts us in a position where our Q1 guidance contemplates year-over-year revenue growth on the high end and only a slight revenue decline on the low end. Although many clients continue to take a measured approach to technology investments as they await greater evidence suggesting a sustained period of economic stability, they continue to prioritize mission-critical initiatives that require high-end talent to execute. as well as investments in areas such as data and digital that are critical for the realization of their AI strategies. Our recent momentum and operating trends suggest to us that clients may be reaching a point where they can no longer wait to execute their long-term roadmap of critical technology needs and are looking to begin addressing the significant backlog of initiatives. The improvements in our business spanned many industries as evidenced by sequential growth in eight of our top ten industries. We continue to fuel further organic investments in our consulting solutions business in response to increasing client demand for cost-effective access to highly skilled talent. This evolution positions us to deliver greater value through flexible delivery structures and differentiated expertise. Our consulting-led offerings have continued to contribute positively to the overall results in our technology business, which is further supported by a robust pipeline of qualified opportunities. The integrated approach we've taken in delivering a seamless client experience through a variety of engagement models across various technologies and skill sets is rather uncommon across our industry and has been a key driver to our success. It also has enabled us to slightly enhance our margin profile against a challenging macro backdrop and maintain stability in our average bill rates. Whereas many companies have siloed their staff augmentation in consulting businesses, Our integrated approach leverages our deep, long-standing client relationships as the bedrock to greatly enhance the seamlessness of the client experience and ease the buying decision. The expansion of solutions-based engagements underscores our adaptability and commitment to meeting evolving client needs and evolving our brand in the marketplace. Our consulting solutions business has continued to organically grow over the last three years. An increasingly important aspect of providing cost effective solutions is our ability to source highly skilled talent from outside the United States. Our development center in Pune, when combined with robust US sales and delivery capabilities and a high quality vendor network, enables us to comprehensively address client needs through a multi-shore delivery model. We've begun to see an acceleration in demand for this offering over the last few months. which is an encouraging sign as we head into 2026. The average bill rate in our technology business has remained steady at roughly $90 per hour over the past three years, even amid macroeconomic uncertainty. The growing mix of consulting-oriented engagements, which typically command higher bill rates and deliver stronger margin profiles and wage inflation in technology skill sets, is offsetting the pressure on our average bill rates, from a greater mix of consultants in nearshore and offshore locations. Demand across our core practices, data and AI, digital, application engineering, and cloud continue to be robust, and our pipeline of consulting-led opportunities is expanding. These disciplines are essential foundational pillars for the development and deployment of AI tools, and we expect companies will increasingly require access to specialized talent to achieve their objectives creating significant opportunities for our firm. Our ability to provide flexible talent, whether through traditional staff augmentation and consulting-oriented engagements, positions K-Force to capitalize on growing investments in AI, including data modernization and readiness initiatives, while continuing to support core technology areas that remain active. Our core strength lies in delivering quality talent at scale and adapting to evolving skill demands. By providing cost-effective access to the very best professionals on a nearly real-time basis who can solve complex technological challenges, we ensure our services remain indispensable even as broader industry trends fluctuate. As technology has advanced over the decades, we've consistently evolved alongside it, reinforcing our role as a trusted partner in driving clients' technological progress. Looking ahead to Q1, with momentum and new engagements building throughout Q4 and carrying into early Q1, we anticipate a seasonal sequential billing day decrease in our technology business in the low single digits. Flex revenues in our FA business declined 2.4% year over year, but saw 5.7% sequential growth in the fourth quarter. This marks the third consecutive quarter of sequential billing day growth after declines over the past several years, as we've transformed that business and further focused our efforts organizationally. Our average bill rate of approximately $53 per hour notably improved year over year and is reflective of the higher skilled areas we are pursuing. As to our first quarter expectations, despite an expected seasonal sequential billing day decline in the mid single digits, we expect F&A to be up in the mid to high single digits on a year over year basis for the first time since the third quarter of 2021. I want to express my appreciation to our teams for their persistence in driving positive momentum in our FAA business. Over the last several years, we've made responsible adjustments to align headcount levels with revenue levels and productivity expectations. Today, we announce further refinements. While taking these actions is always difficult, we've aligned our support infrastructure to current revenue levels and continue to prioritize the retention of our most productive associates while making targeted investments to ensure we are well positioned to capitalize on accelerating market demand. Despite these reductions, we believe we have sufficient capacity to absorb increased demand without adding significant resources, particularly as we enable AI solutions to gain greater efficiency. We remain committed to investing in our consulting solutions business, as well as our other strategic initiatives that we believe will drive long-term growth in both revenues and profitability. The actions taken provide additional confidence in continuing these investments while allowing the firm to maintain its previously stated profitability objectives. We are energized by the opportunities ahead and are confident in our ability to continue delivering exceptional results and sustaining the recent momentum. Our success reflects the deep trust and partnership we share with our clients, candidates, and consultants, relationships that continue to drive our growth and innovation. I'll turn the call over to Jeff Hackman, K-Force's Chief Financial Officer.