10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________________________________________________________________________

FORM 10-Q

 ________________________________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 000-26058

_________________________________________________________________

 

Kforce Inc.

Exact name of registrant as specified in its charter

_______________________________________________________________ 

Florida	59-3264661
State or other jurisdiction of incorporation or organization	IRS Employer Identification No.

1001 East Palm Avenue, Tampa, Florida	33605
Address of principal executive offices	Zip Code

Registrant’s telephone number, including area code: (813) 552-5000

 _______________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 per share	KFRC	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x   No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.):    Yes  ☐  No  x

The number of shares outstanding of the registrant’s common stock as of October 29, 2021 was 21,424,139.

KFORCE INC.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	30
Item 4.	Controls and Procedures.	30
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings.	31
Item 1A.	Risk Factors.	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	31
Item 3.	Defaults Upon Senior Securities.	31
Item 4.	Mine Safety Disclosures.	31
Item 5.	Other Information.	32
Item 6.	Exhibits.	32
SIGNATURES		33

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

References in this document to the “Registrant,” “Kforce,” the “Company,” “we,” the “Firm,” “management,” “our” or “us” refer to Kforce Inc. and its subsidiaries, except where the context otherwise requires or indicates.

This report, particularly Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and Part II. Item 1A. Risk Factors, and the documents we incorporate into this report contain certain statements that are, or may be deemed to be, forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are made in reliance upon the protections provided by such acts for forward-looking statements. Such statements may include, but may not be limited to, projections of financial or operational performance, our beliefs regarding potential government actions or changes in laws and regulations, anticipated costs and benefits of proposed investments, effects of interest rate variations, financing needs or plans, funding of employee benefit plans, estimates concerning the effects of litigation or other disputes, the occurrence of unanticipated expenses, developments within the staffing sector including, but not limited to, the penetration rate (the percentage of temporary staffing to total employment) and growth rate in temporary staffing, a reduction in the supply of consultants and candidates or the Firm’s ability to attract such individuals, changes in client demand for our services and our ability to adapt to such changes, the entry of new competitors in the market, the ability of the Firm to maintain and attract clients in the face of changing economic or competitive conditions, our ability to maintain compliance with our credit facility's covenants, our beliefs regarding the future flexibility of the working environment for Kforce, the impact of the COVID-19 pandemic on the global and U.S. macro-economic environments, and our business, customers, financial condition and results of operations, as well as assumptions as to any of the foregoing and all statements that are not based on historical fact but rather reflect our current expectations concerning future results and events. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, refer to the Risk Factors and MD&A sections. In addition, when used in this discussion, the terms “anticipate,” “assume,” “estimate,” “expect,” “intend,” “plan,” “believe,” “will,” “may,” “likely,” “could,” “should,” “future” and variations thereof and similar expressions are intended to identify forward-looking statements.

Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted. Future events and actual results could differ materially from those set forth in or underlying the forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements contained in this report, which speak only as of the date of this report. Kforce undertakes no obligation to update any forward-looking statements.

2

PART I - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS.

KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue	$	402,725	$	365,424	$	1,169,564	$	1,043,652
Direct costs	283,461		261,546		832,687		747,889
Gross profit	119,264		103,878		336,877		295,763
Selling, general and administrative expenses	88,972		75,852		251,617		235,614
Depreciation and amortization	1,026		1,308		3,420		4,081
Income from operations	29,266		26,718		81,840		56,068
Other expense, net	1,448		938		5,845		3,746
Income from operations, before income taxes	27,818		25,780		75,995		52,322
Income tax expense	7,650		7,017		21,378		14,568
Net income	20,168		18,763		54,617		37,754
Other comprehensive income (loss), net of tax:
Defined benefit pension plans	—		—		3,103		—
Change in fair value of interest rate swaps	152		118		1,101		(1,473)
Comprehensive income	$	20,320	$	18,881	$	58,821	$	36,281
Earnings per share – basic	$	0.99	$	0.90	$	2.64	$	1.79
Earnings per share – diluted	$	0.96	$	0.89	$	2.57	$	1.77
Weighted average shares outstanding – basic	20,429		20,782		20,676		21,041
Weighted average shares outstanding – diluted	21,098		21,180		21,260		21,369

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	115,631	$	103,486
Trade receivables, net of allowances of $2,264 and $3,204, respectively	269,910		228,373
Prepaid expenses and other current assets	8,044		7,033
Total current assets	393,585		338,892
Fixed assets, net	5,821		26,804
Other assets, net	88,065		77,575
Deferred tax assets, net	10,115		10,738
Goodwill	25,040		25,040
Total assets	$	522,626	$	479,049
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$	77,983	$	35,533
Accrued payroll costs	73,006		65,849
Current portion of operating lease liabilities	6,407		5,520
Income taxes payable	4,127		964
Other current liabilities	56		300
Total current liabilities	161,579		108,166
Long-term debt – credit facility	100,000		100,000
Other long-term liabilities	71,078		90,948
Total liabilities	332,657		299,114
Commitments and contingencies (Note M)
Stockholders’ equity:
Preferred stock, $0.01 par; 15,000 shares authorized, none issued and outstanding	—		—
Common stock, $0.01 par; 250,000 shares authorized, 72,640 and 72,600 issued, respectively	726		726
Additional paid-in capital	484,034		472,378
Accumulated other comprehensive loss	(219)		(4,423)
Retained earnings	427,622		388,645
Treasury stock, at cost; 51,207 and 50,427 shares, respectively	(722,194)		(677,391)
Total stockholders’ equity	189,969		179,935
Total liabilities and stockholders’ equity	$	522,626	$	479,049

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(IN THOUSANDS)

 

	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)				Treasury Stock			Total Stockholders’ Equity
	Shares	Amount						Retained Earnings		Shares	Amount
Balance, December 31, 2020	72,600	$	726	$	472,378	$	(4,423)	$	388,645	50,427	$	(677,391)	$	179,935
Net income	—	—		—		—		13,261		—	—		13,261
Issuance for stock-based compensation and dividends, net of forfeitures	15	—		271		—		(271)		—	—		—
Stock-based compensation expense	—	—		3,403		—		—		—	—		3,403
Employee stock purchase plan	—	—		113		—		—		(4)	57		170
Dividends ($0.23 per share)	—	—		—		—		(4,786)		—	—		(4,786)
Defined benefit pension plan, no tax benefit	—	—		—		47		—		—	—		47
Change in fair value of interest rate swaps, net of tax benefit of $319	—	—		—		939		—		—	—		939
Repurchases of common stock	—	—		—		—		—		317	(16,313)		(16,313)
Balance, March 31, 2021	72,615	$	726	$	476,165	$	(3,437)	$	396,849	50,740	$	(693,647)	$	176,656
Net income	—	—		—		—		21,188		—	—		21,188
Issuance for stock-based compensation and dividends, net of forfeitures	40	1		274		—		(273)		—	—		2
Stock-based compensation expense	—	—		3,532		—		—		—	—		3,532
Employee stock purchase plan	—	—		143		—		—		(4)	52		195
Dividends ($0.23 per share)	—	—		—		—		(4,746)		—	—		(4,746)
Defined benefit pension plan, net of tax provision of $283	—	—		—		3,056		—		—	—		3,056
Change in fair value of interest rate swaps, net of tax benefit of $3	—	—		—		10		—		—	—		10
Repurchases of common stock	—	—		—		—		—		225	$	(13,614)	(13,614)
Balance, June 30, 2021	72,655	$	727	$	480,114	$	(371)	$	413,018	50,961	$	(707,209)	$	186,279
Net income	—	—		—		—		20,168		—	—		20,168
Issuance for stock-based compensation and dividends, net of forfeitures	(15)	(1)		260		—		(260)		—	—		(1)
Stock-based compensation expense	—	—		3,512		—		—		—	$	—	3,512
Employee stock purchase plan	—	—		148		—		—		(3)	45		193
Dividends ($0.26 per share)	—	—		—		—		(5,304)		—	$	—	(5,304)
Change in fair value of interest rate swaps, net of tax benefit of $55	—	—		—		152		—		—	$	—	152
Repurchases of common stock	—	—		—		—		—		249	(15,030)		(15,030)
Balance, September 30, 2021	72,640	$	726	$	484,034	$	(219)	$	427,622	51,207	$	(722,194)	$	189,969

5

	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss				Treasury Stock			Total Stockholders’ Equity
	Shares	Amount						Retained Earnings		Shares	Amount
Balance, December 31, 2019	72,202	$	722	$	459,545	$	(1,526)	$	350,545	49,277	$	(642,023)	$	167,263
Net income	—	—		—		—		9,106		—	—		9,106
Adoption of new accounting standard, net of tax of $75	—	—		—		—		(214)		—	—		(214)
Issuance for stock-based compensation and dividends, net of forfeitures	(4)	—		218		—		(218)		—	—		—
Stock-based compensation expense	—	—		2,896		—		—		—	—		2,896
Employee stock purchase plan	—	—		93		—		—		(4)	49		142
Dividends ($0.20 per share)	—	—		—		—		(4,293)		—	—		(4,293)
Change in fair value of interest rate swap, net of tax benefit of $384	—	—		—		(1,121)		—		—	—		(1,121)
Repurchases of common stock	—	—		—		—		—		685	(20,380)		(20,380)
Balance, March 31, 2020	72,198	$	722	$	462,752	$	(2,647)	$	354,926	49,958	$	(662,354)	$	153,399
Net income	—	—		—		—		9,885		—	—		9,885
Issuance for stock-based compensation and dividends, net of forfeitures	39	—		240		—		(240)		—	—		—
Stock-based compensation expense	—	—		2,903		—		—		—	—		2,903
Employee stock purchase plan	—	—		62		—		—		(5)	72		134
Dividends ($0.20 per share)	—	—		—		—		(4,162)		—	—		(4,162)
Change in fair value of interest rate swap, net of tax benefit of $160	—	—		—		(470)		—		—	—		(470)
Repurchases of common stock	—	—		—		—		—		342	(9,213)		(9,213)
Balance, June 30, 2020	72,237	$	722	$	465,957	$	(3,117)	$	360,409	50,295	$	(671,495)	$	152,476
Net income	—	—		—		—		18,763		—	—		18,763
Issuance for stock-based compensation and dividends, net of forfeitures	10	—		241		—		(241)		—	—		—
Stock-based compensation expense	—	—		2,908		—		—		—	—		2,908
Employee stock purchase plan	—	—		71		—		—		(5)	64		135
Dividends ($0.20 per share)	—	—		—		—		(4,164)		—	—		(4,164)
Change in fair value of interest rate swap, net of tax benefit of $40	—	—		—		118		—		—	—		118
Repurchases of common stock	—	—		—		—		—		1	(30)		(30)
Balance, September 30, 2020	72,247	$	722	$	469,177	$	(2,999)	$	374,767	50,291	$	(671,461)	$	170,206

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income	$	54,617	$	37,754
Adjustments to reconcile net income to cash provided by operating activities:
Deferred income tax provision, net	302		(4,414)
Provision for credit losses	(139)		2,723
Depreciation and amortization	3,420		4,081
Stock-based compensation expense	10,448		8,707
Defined benefit pension plan expense	2,157		632
(Gain) loss on disposal or impairment of assets	(1,979)		1,795
Noncash lease expense	3,992		4,392
Loss on equity method investment	1,709		1,237
Other	681		820
Increase in operating assets
Trade receivables, net	(41,397)		(15,085)
Other assets	(6,384)		(5,034)
Increase in operating liabilities
Accrued payroll costs	7,715		31,496
Other liabilities	24,801		24,767
Cash provided by operating activities	59,943		93,871
Cash flows from investing activities:
Capital expenditures	(5,026)		(5,296)
Equity method investment	(7,000)		(2,500)
Proceeds from the sale of assets held within the Rabbi Trust	—		3,548
Net proceeds from the sale of assets	23,742		—
Cash provided by (used in) investing activities	11,716		(4,248)
Cash flows from financing activities:
Proceeds from credit facility	—		35,000
Repurchases of common stock	(44,407)		(29,623)
Cash dividends	(14,836)		(12,619)
Payments on other financing arrangements	(271)		(939)
Cash used in financing activities	(59,514)		(8,181)
Change in cash and cash equivalents	12,145		81,442
Cash and cash equivalents, beginning of period	103,486		19,831
Cash and cash equivalents, end of period	$	115,631	$	101,273

7

	Nine Months Ended September 30,
Supplemental Disclosure of Cash Flow Information	2021		2020
Cash Paid During the Period For:
Income taxes	$	17,845	$	13,493
Operating lease liabilities	5,591		5,641
Interest, net	1,934		1,924
Non-Cash Investing and Financing Transactions:
ROU assets obtained from operating leases	$	4,053	$	5,722
Employee stock purchase plan	558		411

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8

KFORCE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note A - Summary of Significant Accounting Policies

Unless otherwise noted below, there have been no material changes to the accounting policies presented in Note 1 - “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of the 2020 Annual Report on Form 10-K.

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and footnotes normally required by GAAP for complete financial statements have been condensed or omitted pursuant to those rules and regulations, although management believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2020 Annual Report on Form 10-K. In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation. The Unaudited Condensed Consolidated Balance Sheet as of December 31, 2020 was derived from our audited Consolidated Balance Sheet as of December 31, 2020, as presented in our 2020 Annual Report on Form 10-K.

Our quarterly operating results are affected by the number of billing days in a particular quarter, the seasonality of our clients’ businesses and increased holiday and vacation days taken. In addition, we typically experience higher costs in the first quarter of each fiscal year as a result of certain U.S. state and federal employment tax resets, which adversely affects our gross profit and overall profitability. The impact of the COVID-19 pandemic on our business was somewhat unpredictable in 2020, but based on our current assessment, we do not expect any material impact on our long-term strategic plans, operations and liquidity due to COVID-19. However, we continue to assess the effect on our operations by monitoring the spread of COVID-19 (and associated variants) and the actions implemented to combat the virus as reported in the official agency reports. As such, the results of operations for any interim period may be impacted by these factors, among others, and are not necessarily indicative of, nor comparable to, the results of operations for a full year.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Kforce Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. References in this document to “Kforce,” the “Company,” “we,” the “Firm,” “management,” “our” or “us” refer to Kforce Inc. and its subsidiaries, except where the context indicates otherwise.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most critical of these estimates and assumptions relate to the following: allowance for credit losses; income taxes; self-insured liabilities for health insurance; and the impairment of goodwill, other long-lived assets and the equity method investment. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates. The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, have been and may continue to be uncertain, rapidly changing and difficult to predict. Therefore, our accounting estimates and assumptions might change materially in future periods in response to the COVID-19 pandemic.

Health Insurance

Except for certain fully insured health insurance lines of coverage, Kforce retains the risk of loss per participant for each health insurance claim up to $600 thousand in claims annually. Additionally, for all claim amounts exceeding $600 thousand, Kforce retains the risk of loss up to an aggregate annual loss of those claims of $200 thousand. For its partially self-insured lines of coverage, health insurance costs are accrued using estimates to approximate the liability for reported claims and incurred but not reported claims, which are primarily based upon an evaluation of historical claims experience, completion factors determined by an actuary and a qualitative review of our health insurance exposure including the extent of outstanding claims and expected changes in health insurance costs.

9

Earnings per Share

Basic earnings per share is computed as net income divided by the weighted average number of common shares outstanding (“WASO”) during the period. WASO excludes unvested shares of restricted stock. Diluted earnings per share is computed by dividing net income by diluted WASO. Diluted WASO includes the dilutive effect of potentially dilutive securities such as unvested shares of restricted stock using the treasury stock method, except where the effect of including potential common shares would be anti-dilutive.

For the three and nine months ended September 30, 2021, 669 thousand and 584 thousand common stock equivalents were included in the diluted WASO, respectively. For the three and nine months ended September 30, 2020, 398 thousand and 328 thousand common stock equivalents were included in the diluted WASO, respectively. For the three and nine months ended September 30, 2021, there were insignificant anti-dilutive common stock equivalents. For the three and nine months ended September 30, 2020, there were 266 thousand and 348 thousand anti-dilutive common stock equivalents, respectively.

New Accounting Standards

Recently Adopted Accounting Standards

In August 2018, the FASB issued authoritative guidance regarding changes to the disclosure requirement for defined benefit plans including additions and deletions to certain disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The guidance was effective for fiscal periods beginning after December 15, 2020, with the retrospective method required for all periods presented. The Company adopted the provisions of this new accounting standard at the beginning of fiscal year 2021. This guidance did not have a financial impact on the Company’s financial statements.

10

Note B - Reportable Segments

Kforce provides services through our Technology (“Tech”) and Finance and Accounting (“FA”) segments. Historically, and for the three and nine months ended September 30, 2021, we have reported sales and gross profit information on a segment basis. Total assets, liabilities and operating expenses are not reported separately by segment as our operations are largely combined.

The following table provides information on the operations of our segments (in thousands):

	Tech		FA		Total
Three Months Ended September 30,
2021
Revenue	$	337,230	$	65,495	$	402,725
Gross profit	$	95,934	$	23,330	$	119,264
Operating and other expenses					$	91,446
Income from operations, before income taxes					$	27,818
2020
Revenue	$	260,251	$	105,173	$	365,424
Gross profit	$	71,960	$	31,918	$	103,878
Operating and other expenses					$	78,098
Income from operations, before income taxes					$	25,780
Nine Months Ended September 30,
2021
Revenue	$	927,518	$	242,046	$	1,169,564
Gross profit	$	258,449	$	78,428	$	336,877
Operating and other expenses					$	260,882
Income from operations, before income taxes					$	75,995
2020
Revenue	$	782,785	$	260,867	$	1,043,652
Gross profit	$	216,606	$	79,157	$	295,763
Operating and other expenses					$	243,441
Income from operations, before income taxes					$	52,322

11

Note C - Disaggregation of Revenue

The following table provides the disaggregation of revenue by segment and type (in thousands):

	Tech		FA		Total
Three Months Ended September 30,
2021
Revenue by type:
Flex revenue	$	330,170	$	59,003	$	389,173
Direct Hire revenue	7,060		6,492		13,552
Total Revenue	$	337,230	$	65,495	$	402,725
2020
Revenue by type:
Flex revenue	$	256,118	$	100,569	$	356,687
Direct Hire revenue	4,133		4,604		8,737
Total Revenue	$	260,251	$	105,173	$	365,424
Nine Months Ended September 30,
2021
Revenue by type:
Flex revenue	$	909,599	$	224,783	$	1,134,382
Direct Hire revenue	17,919		17,263		35,182
Total Revenue	$	927,518	$	242,046	$	1,169,564
2020
Revenue by type:
Flex revenue	$	770,635	$	248,578	$	1,019,213
Direct Hire revenue	12,150		12,289		24,439
Total Revenue	$	782,785	$	260,867	$	1,043,652

Note D - Allowance for Credit Losses

The allowance for credit losses on trade receivables is determined based on a number of factors such as recent and historical write-off and delinquency trends, a specific analysis of significant receivable balances that are past due, the concentration of trade receivables among clients and the current state of the U.S. economy. As part of our analysis, we apply credit loss rates to outstanding receivables by aging category. For certain clients, we perform a quarterly credit review, which considers the client’s credit rating and financial position as well as our total credit loss exposure. Trade receivables are written off after all reasonable collection efforts have been exhausted. Recoveries of trade receivables previously written off are recorded when received and are immaterial for the three and nine months ended September 30, 2021.

The following table presents the activity within the allowance for credit losses on trade receivables for the nine months ended September 30, 2021 (in thousands):

Allowance for credit losses, January 1, 2021	$	2,757
Current period provision (credit)	(139)
Write-offs charged against the allowance, net of recoveries of amounts previously written off	(987)
Allowance for credit losses, September 30, 2021	$	1,631

The allowances on trade receivables presented in the Unaudited Condensed Consolidated Balance Sheets include $0.6 million and $0.4 million at September 30, 2021 and December 31, 2020, respectively, for reserves unrelated to credit losses.

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Note E - Sale of Corporate Headquarters

On May 19, 2021, Kforce completed the sale of its corporate headquarters, which had a net book value of $21.7 million, to an independent third party. Kforce received net proceeds of $23.7 million and recognized a gain on the sale in the amount of $2.0 million, which is recorded in SG&A expenses.

Note F - Other Assets, Net

Other assets, net consisted of the following (in thousands):

	September 30, 2021		December 31, 2020
Assets held in Rabbi Trust	$	39,418	$	36,164
Right-of-use assets for operating leases, net	16,351		16,835
Capitalized software, net (1)	15,243		12,802
Equity method investment (2)	15,779		10,488
Deferred loan costs, net	236		501
Other non-current assets	1,038		785
Total Other assets, net	$	88,065	$	77,575

(1) Accumulated amortization of capitalized software was $35.2 million and $34.0 million as of September 30, 2021 and December 31, 2020, respectively.

(2) In June 2019, Kforce entered into a joint venture resulting in a 50% noncontrolling interest in WorkLLama, LLC (“WorkLLama”), which is accounted for as an equity method investment. The loss on this WorkLLama investment was $0.7 million and $1.7 million for the three and nine months ended September 30, 2021, respectively. In addition, Kforce contributed $7.0 million and $4.0 million of capital during the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively. Refer to Note M - “Commitments and Contingencies” for more information on contingencies related to WorkLLama.

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Note G - Current Liabilities

The following table provides information on certain current liabilities (in thousands):

	September 30, 2021		December 31, 2020
Accounts payable and other accrued liabilities:
Accounts payable	$	41,836	$	20,177
Accrued liabilities	36,147		15,356
Total Accounts payable and other accrued liabilities	$	77,983	$	35,533
Accrued payroll costs:
Payroll and benefits	$	60,402	$	38,257
Payroll taxes	7,623		21,842
Health insurance liabilities	4,184		4,641
Workers’ compensation liabilities	797		1,109
Total Accrued payroll costs	$	73,006	$	65,849

Our accounts payable balance includes vendor and independent contractor payables. Our accrued liabilities balance includes the current portion of the deferred compensation plans liability, obligations related to the supplemental executive retirement plan, liabilities from contracts with customers (such as rebates) and other accrued liabilities .

Note H - Other Long-Term Liabilities

Other long-term liabilities consisted of the following (in thousands):

	September 30, 2021		December 31, 2020
Deferred compensation plan	$	38,749	$	34,501
Supplemental executive retirement plan (1)	—		20,628
Operating lease liabilities	12,712		14,692
Interest rate swap derivative instruments	296		1,774
Other long-term liabilities (2)	19,321		19,353
Total Other long-term liabilities	$	71,078	$	90,948

(1) The Company terminated its supplemental executive retirement plan on April 30, 2021 and expects to pay out the obligation in July 2022. The obligation, as of September 30, 2021, is included as part of Accrued liabilities under Current Liabilities in Note G - Current Liabilities, above.

(2) As a result of the application of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), we have approximately $19.3 million in payroll tax deferrals recorded within Other long-term liabilities as of September 30, 2021 and December 31, 2020 (expected to be paid by December 31, 2022).

Note I - Employee Benefit Plans

Supplemental Executive Retirement Plan

Prior to April 30, 2021, Kforce maintained a Supplemental Executive Retirement Plan (“SERP”), which benefited two executives. The SERP was a non-qualified benefit plan and did not include elective deferrals of covered executive officers’ compensation. The related net periodic benefit costs were comprised of service cost and interest cost. The service cost amounted to $199 thousand in the nine months ending September 30, 2021, and $87 thousand and $259 thousand in the three and nine months ended September 30, 2020, respectively, and were recorded in SG&A. The interest cost amounted to $138 thousand in the nine months ending September 30, 2021, and $124 thousand and $373 thousand in the three and nine months ended September 30, 2020, respectively, and were recorded in Other expense, net in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

Effective April 30, 2021, Kforce’s Board of Directors irrevocably terminated the SERP. The benefits owed to the two participants under the SERP as of September 30, 2021 amount to $20.0 million in the aggregate, which is recorded in Other accrued liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheets. Kforce must

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make the benefit payments to the participants within 24 months of the termination date but no sooner than 12 months after the termination date. We anticipate making the benefit payments during the third quarter ending September 30, 2022. No contributions were made to the SERP during the four months ended April 30, 2021.

As a result of the termination of the SERP, Kforce recognized a net loss of $1.8 million in the nine months ending September 30, 2021. The loss is reflected in Other expense, net in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

Note J - Stock Incentive Plans

On April 22, 2021, Kforce’s shareholders approved the 2021 Stock Incentive Plan (the “2021 Plan”). The 2021 Plan allows for the issuance of stock options, stock appreciation rights (“SAR”), stock awards (including restricted stock awards (“RSAs”) and restricted stock units (“RSUs”)) and other stock-based awards. The aggregate number of shares reserved under the 2021 Plan is approximately 3.9 million. Grants of an option or SAR reduce the reserve by one share, while a stock award reduces the reserve by 2.72 shares. The 2021 Plan terminates on April 22, 2031.

Restricted stock (including RSAs and RSUs) are granted to directors, executives and management either for awards related to Kforce’s annual long-term incentive program or as part of a compensation package for attraction and retention purposes. Restricted stock granted during the nine months ended September 30, 2021, will vest over a period of one to ten years, with vesting occurring in equal annual installments.

During the three and nine months ended September 30, 2021, stock-based compensation expense was $3.5 million and $10.5 million, respectively. During the three and nine months ended September 30, 2020, stock-based compensation expense was $2.9 million and $8.7 million, respectively.

The following table presents the restricted stock activity for the nine months ended September 30, 2021 (in thousands, except per share amounts):

	Number of  Restricted Stock	Weighted-Average Grant Date Fair Value		Total Intrinsic Value of Restricted Stock Vested
Outstanding at December 31, 2020	1,137	$	33.63
Granted	60	$	50.74
Forfeited	(20)	$	26.93
Vested	(47)	$	25.43	$	2,607
Outstanding at September 30, 2021	1,130	$	34.98

As of September 30, 2021, total unrecognized stock-based compensation expense related to restricted stock was $27.3 million, which will be recognized over a weighted-average remaining period of 3.1 years.

Note K - Derivative Instruments and Hedging Activity

On April 21, 2017, Kforce entered into a forward-starting interest rate swap agreement with Wells Fargo Bank, N.A (“Swap A”). Swap A was effective on May 31, 2017 and matures on April 29, 2022. Swap A has a fixed interest rate of 1.81%, which we add to our interest rate margin to determine the fixed rate that the Firm will pay to the counterparty during the term of Swap A based on the notional amount of Swap A. The notional amount of Swap A through maturity is $25.0 million.

On March 12, 2020, Kforce entered into a forward-starting interest rate swap agreement with Wells Fargo Bank, N.A (“Swap B”, together with Swap A, the "Swaps"). Swap B was effective on March 17, 2020 and matures on May 30, 2025. Swap B has a fixed interest rate of 0.61% and a notional amount of $75.0 million and increases to $100.0 million in May 2022, and subsequently decreases to $75.0 million and $40.0 million in May 2023 and May 2024, respectively. The increase in the notional amount of Swap B in May 2022 corresponds to the decrease in the notional amount for Swap A.

The Firm uses the Swaps as an interest rate risk management tool to mitigate the potential impact of rising interest rates on variable rate debt. The fixed interest rate for each Swap (which will remain throughout the remainder of the hedging arrangement), plus the applicable interest margin under our credit facility, is included in interest expense and recorded in Other expense, net in the accompanying Consolidated Financial Statements of Operations and Comprehensive Income. Both Swap A and B have been designated as cash flow hedges and were effective as of September 30, 2021. The change in the fair value of the Swaps are recorded as a component of Accumulated other comprehensive income (loss) in the unaudited consolidated financial statements.

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The following table sets forth the activity in the accumulated derivative instrument activity (in thousands):

	Nine Months Ended September 30,
	2021		2020
Accumulated derivative instrument loss, beginning of period	$	(1,774)	$	(179)
Net change associated with current period hedging transactions	1,478		(1,978)
Accumulated derivative instrument loss, end of period	$	(296)	$	(2,157)

Note L - Fair Value Measurements

Our interest rate swaps are measured at fair value using readily observable inputs, which are considered to be Level 2 inputs and are recorded in Other long-term liabilities within the accompanying Unaudited Condensed Consolidated Balance Sheets. Refer to Note J - “Derivative Instruments and Hedging Activity” for a complete discussion of our interest rate swaps.

There were no transfers into or out of Level 1, 2 or 3 assets or liabilities during the nine months ended September 30, 2021. The following table sets forth by level, within the fair value hierarchy, estimated fair values on a recurring basis (in thousands):

Asset/(Liability) Measured at Fair Value:	Asset/(Liability)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)
At September 30, 2021
Interest rate swap derivative instruments	$	(296)	$	—	$	(296)	$	—
At December 31, 2020
Interest rate swap derivative instrument	$	(1,774)	$	—	$	(1,774)	$	—

Note M - Commitments and Contingencies

Employment Agreements

Kforce has employment agreements with certain executives that provide for minimum compensation, salary and continuation of certain benefits for a six-month to a three-year period after their employment ends under certain circumstances. Certain of the agreements also provide for a severance payment ranging from one to three times annual salary and one-half to three times average annual bonus if such an agreement is terminated without good cause by Kforce or for good reason by the executive subject to certain post-employment restrictive covenants. At September 30, 2021, our liability would be approximately $45.0 million if, following a change in control, all of the executives under contract were terminated without cause by the employer or if the executives resigned for good reason and $17.3 million if, in the absence of a change in control, all of the executives under contract were terminated by Kforce without cause or if the executives resigned for good reason.

Litigation and Loss Contingencies

On August 30, 2021, Kforce Inc. was served with a complaint brought in the U.S. District Court, Southern District of California. Darryn Lewis, et. al. v. Kforce Inc., Case No.: 3:21-cv-01375-AJB-JLB. On behalf of himself and all others similarly situated, the Plaintiff brings a one-count class action complaint for alleged violations of the Fair Labor Standards Act (“FLSA”), and specifically, failure to pay overtime wages. The FLSA class is purported to include commissioned employees who work or have worked for Kforce, nationwide, in the past three (3) years. Plaintiff alleges that Kforce failed to maintain a policy that compensates its employees for all hours worked, and specifically alleges that Kforce misclassified employees as exempt from overtime, failed to pay hourly aggrieved employees for all overtime hours worked, including off-the-clock work performed during meal periods, failed to pay all overtime and double-time wages earned at the correct regular rate because Kforce allegedly failed to include commission and other non-discretionary performance-based pay in the regular rate of pay. Plaintiff and class members seek the amounts of unpaid wages allegedly owed to them, liquidated damages, attorneys’ fees and costs, prejudgment interest, and other legal and equitable relief. The parties have engaged in attempts to resolve the matter. We believe that this matter is unlikely to have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.

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On March 19, 2021, a complaint was filed against Kforce Inc. in United States District Court, Central District of California, and served on March 25, 2021. Jessica Cook, et. al. v. Kforce Inc., case no. 2:21-cv-02453. On behalf of herself and all others similarly situated, the plaintiff purports to bring a collective action challenging the exempt classification of a select class of recruiters. Plaintiff alleges that due to the misclassification of the recruiter class Kforce violated the Fair Labor Standards Act by failing to pay overtime and failing to make, keep, and preserve records with respect to each employee sufficient to determine their wages. The class action is brought pursuant to California state law, on behalf of the same class of California recruiters, and alleges: (i) classification and overtime violations under California law; (ii) untimely payment of wages; (iii) legally deficient wage statements; (iv) violations of meal and rest period requirements; and (v) violation of California's Unfair Competition Law. Plaintiff, on behalf of herself and the class and/or collective, seeks damages in the amount of unpaid overtime compensation, double time pay as applicable (for the California class), liquidated damages, attorney’s fees, interest, and other relief. The parties agreed to dismiss the action without prejudice through a joint stipulation and have engaged in discussions to resolve. If the parties are unable to resolve, it is expected that Plaintiff will re-file her class and collective action claims. At this stage in the litigation, it is not feasible to predict the outcome of this matter or reasonably estimate a range of loss, should a loss occur, from this proceeding.

On December 24, 2020, a complaint was filed and on January 5, 2021, the complaint was served against Kforce Inc., et al. in Superior Court of the State of California, Los Angeles County. Sydney Elliott-Brand, et. al. v. Kforce Inc., et al., Case No.: 20STCV49193. On behalf of herself and a putative class of current and former commissioned employees employed by Defendants, the plaintiff purports to bring a collective action for alleged violations of the California Labor Code, §201, et seq., Industrial Welfare Commission (“IWC”) Wage Orders, and the California Business and Professions Code, §17200, et. seq, based upon the defendants’ alleged failure to: (i) pay minimum and overtime wages; (ii) timely pay all earned wages; (iii) provide meal periods and rest breaks; (iv) reimburse business expenses; (v) provide accurate itemized wage statements; and (vi) timely pay wages and vacation pay upon separation of employment; as well as associated unfair competition. The plaintiff seeks payment to recover minimum, regular, and/or overtime wages for all hours worked as required by law, meal period premiums, rest period premiums, unpaid business expenses, reasonable attorneys’ fees, cost of suit and interest, statutory penalties and liquidated damages, and also seeks an order requiring Defendants to restore and disgorge all funds acquired by means of unfair competition under the California Business and Professions Code. The parties have engaged in attempts to resolve the matter. We believe that this matter is unlikely to have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.

On November 18, 2020, Kforce Inc., et al. was served with a complaint brought in the Superior Court of the State of California, San Diego County. Bernardo Buchsbaum, et al. v. Kforce Inc., et al., Case No.: 37-2020-00030994-CU-OE-CTL. The former employee purports to bring a representative action on his own behalf and on behalf of other current and former California aggrieved employees pursuant to the Private Attorneys General Act (“PAGA”) alleging violations of the California Labor Code (“Labor Code”). The purported Labor Code violations include the failure to: (i) pay all earned wages, including minimum wages and overtime wages; (ii) provide and pay proper wages for meal and rest periods; (iii) reimburse all reasonable and necessary business expenses; (iv) provide accurate itemized wage statements; and (v) provide unused vacation wages upon termination. The plaintiff seeks civil penalties, interest, attorney’s fees and costs under the Labor Code. On January 21, 2021, the Plaintiff served an amended complaint to add Kforce Flexible Solutions as a party and narrow the scope of alleged aggrieved employees to “internal” commissioned employees. The parties have engaged in attempts to resolve the matter. We believe that this matter is unlikely to have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.

On October 13, 2020, Kforce Inc. was served with a complaint brought in the U.S. District Court, Eastern District of Pennsylvania. Hope Gofton and Adam Kimbrel, et al. v. Kforce Inc., Case No.: 2:20-cv-04886 on behalf of themselves and other similarly situated current and former employees. The plaintiffs purport to bring a collective action for alleged violations of the Fair Labor Standards Act, 29 U.S.C. § 201, et seq., and a class action for alleged violations of the Pennsylvania Minimum Wage Act, 43 P.S. §§ 333.101, et seq., based upon the defendant’s purported failure to pay federal and state overtime wages. The plaintiffs allege that the defendant improperly classified as exempt the plaintiffs and other putative collective and class members, and allegedly failed to pay overtime wages. The plaintiffs seek payment of unpaid overtime wages, liquidated damages, interest, attorney’s fees, costs and other relief deemed equitable by the Court. The Court entered a Final Approval Order on September 30, 2021 approving the settlement and dismissing the action without prejudice. Case will convert to dismissal with prejudice sixty days after the deadline to fully fund the settlement account. This matter did not have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.

There have been no material developments with regard to the following legal proceedings previously disclosed in our 2020 Annual Report on Form 10-K or in our most recent 10-Q filing:

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•On December 17, 2019, Kforce Inc., et al. was served with a complaint brought in Superior Court of the State of California, Alameda County. Kathleen Wahrer, et al. v. Kforce Inc., et al., Case No.: RG19047269.

•On February 19, 2021, a first amended complaint was filed against Kforce and its client, Verity Health System of California (Verity) in the Superior Court of California, County of Los Angeles. Ramona Webb v. Kforce Flexible Solutions, LLC, et. al. case no. 20STCV47529.

We are also involved in other legal proceedings, claims and administrative matters from time to time, and may also be exposed to loss contingencies, that arise in the ordinary course of business. We have made accruals with respect to certain matters, where appropriate, which are reflected in our unaudited condensed consolidated financial statements. While the ultimate outcomes and any amounts accrued are inherently uncertain, we currently do not expect that these matters, individually or in the aggregate, will have a material effect on our financial position.

Equity Method Investment

Under the joint venture operating agreement for WorkLLama, Kforce is obligated to make additional cash contributions, which are contingent on WorkLLama's achievement of certain operational and financial milestones. Our maximum potential capital contributions are $22.5 million. The original operating and financial milestones established in the joint venture operating agreement were not achieved, in part, due to the impacts of the COVID-19 pandemic on WorkLLama’s business. We have continued to provide capital contributions to the joint venture due to our belief in the long-term value of the joint venture. We contributed $7.0 million and $4.0 million of capital during the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively. Refer to Note F - “Other Assets, Net” for more details on WorkLLama.

Lease commitments

We lease office space and certain equipment under operating leases that expire between 2021 and 2033. The terms of the leases provide for rental payments on a graduated scale, options to renew the leases (one to five years), landlord incentives or allowances, and periods of free rent.

During the three months ended September 30, 2021, we entered into a lease agreement for office space in Tampa, Florida, that will become our new corporate headquarters. This new lease for office space is intended to replace our current headquarters, also in Tampa, Florida, the lease for which expires November 2022. The new lease has not yet commenced, but will require aggregate future lease payments of approximately $10.9 million over the entire lease term, which includes annual upward adjustments, and has a non-cancelable lease term of 129 months, excluding renewal options. The new lease also provides for the Company to receive an allowance, from the Landlord, of $1.6 million to be used toward costs to design, engineer, install, supply and to construct improvements that will become part of the building, all of which must be approved by the landlord and the Company. The landlord will designate a general contractor and oversee all construction improvements. The future lease payments and the allowance are not yet recorded on our condensed consolidated balance sheets. Lease payments will be required beginning July 1, 2023, however, we expect the accounting lease commencement date for this initial portion of the lease for financial reporting purposes to begin at the start of the fourth quarter of 2022.

Note N - Subsequent Events

Credit Facility

On October 20, 2021, the Firm entered into an amended and restated credit agreement with Wells Fargo Bank, National Association, as administrative agent, Wells Fargo Securities, LLC, as lead arranger and bookrunner, Bank of America, N.A., as syndication agent, BMO Harris Bank, N.A., as documentation agent, and the lenders referred to therein (the “Credit Facility”). Under the Credit Facility, the Firm will have a maximum borrowing capacity of $200.0 million, which may, subject to certain conditions and the participation of the lenders, be increased up to an aggregate additional amount of $150.0 million (the “Commitment”). The maturity date of the Credit Facility is October 20, 2026.

Revolving credit loans under the Credit Facility will bear interest at a rate equal to (a) the Base Rate (as described below) plus the Applicable Margin (as described below) or (b) the LIBOR Rate plus the Applicable Margin. Swingline loans under the Credit Facility will bear interest at a rate equal to the Base Rate plus the Applicable Margin. The Base Rate is the highest of: (i) the Wells Fargo Bank, National Association prime rate, (ii) the federal funds rate plus 0.50% or (iii) one-month LIBOR plus 1.00%, and the LIBOR Rate is reserve-adjusted LIBOR for the applicable interest period, but not less than zero. The Applicable Margin is based on the Firm’s total leverage ratio. The Applicable Margin for Base Rate loans ranges from 0.125% to 0.500% and the Applicable Margin for LIBOR Rate loans ranges from 1.125% to 1.50%. The Amendment included customary provisions relating to the transition from LIBOR as the benchmark interest rate under the Credit Agreement, including providing for a Benchmark Replacement option (as defined in the Credit Agreement) to replace LIBOR. The Firm will pay a quarterly non-refundable commitment fee equal to the

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Applicable Margin on the average daily unused portion of the Commitment (swingline loans do not constitute usage for this purpose). The Applicable Margin for the commitment fee is based on the Firm’s total leverage ratio and ranges between 0.20% and 0.30%.

The Firm will continually be subject to certain affirmative and negative covenants including (but not limited to), the maintenance of a fixed charge coverage ratio of no less than 1.25 to 1.00 and the maintenance of a total leverage ratio of no greater than 3.50 to 1.00. The numerator in the fixed charge coverage ratio is defined pursuant to the Credit Facility as earnings before interest expense, income taxes, depreciation and amortization, stock-based compensation expense and other permitted items pursuant to our Credit Facility (disclosed as “Consolidated EBITDA”), less cash paid for capital expenditures, income taxes and dividends. The denominator is defined as Kforce’s fixed charges such as interest expense and principal payments paid or payable on outstanding debt other than borrowings under the Credit Facility. The total leverage ratio is defined pursuant to the Credit Facility as total indebtedness divided by Consolidated EBITDA. Our ability to make distributions or repurchases of equity securities could be limited if an event of default has occurred. Furthermore, our ability to repurchase equity securities in excess of $25.0 million over the last four quarters could be limited if (a) the total leverage ratio is greater than 3.00 to 1.00 and (b) the Firm’s availability, inclusive of unrestricted cash, is less than $25.0 million.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

EXECUTIVE SUMMARY

The following is an executive summary of what Kforce believes are highlights as of and for the nine months ended September 30, 2021, which should be considered in the context of the additional discussions herein and in conjunction with the unaudited condensed consolidated financial statements and notes thereto.

•Revenue for the nine months ended September 30, 2021, increased 12.1%, to $1,169.6 million from $1,043.7 million in the comparable period in 2020. Revenue increased 18.5% for Tech and decreased 7.2% for FA.

•Flex revenue for the nine months ended September 30, 2021, increased 11.9% on a billing day basis, to $1,134.4 million from $1,019.2 million in the comparable period in 2020. Flex revenue increased 18.7% and decreased 9.1%, on a billing day basis for Tech and FA, respectively, on a year-over-year basis.

•Flex revenue in our Technology business increased 28.9% on a year-over-year basis in the three months ended September 30, 2021.

•Revenue from contracts we secured to support government-sponsored COVID-19 related initiatives (the “COVID-19 Business”) was $7.5 million and $51.1 million for the three months ended September 30, 2021 and 2020, respectively.

•Direct Hire revenue for the nine months ended September 30, 2021, increased 44.0% to $35.2 million from $24.4 million in the comparable period in 2020.

•Gross profit margin for the nine months ended September 30, 2021, increased 50 basis points to 28.8%. Flex gross profit margin for the nine months ended September 30, 2021 and 2020, was flat at 26.6%. Tech Flex margins decreased 10 basis points due primarily to spread compression as a result of business mix. FA Flex gross profit margin increased 130 and 30 basis points for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020, due to a decrease in the amount of lower margin COVID-19 related business in 2021.

•SG&A as a percentage of revenue for the nine months ended September 30, 2021, decreased to 21.5% from 22.6% in the comparable period in 2020 primarily due to leverage gained from our revenue growth, associate productivity improvements, lower spending in areas such as travel and lease expenses, a decline in our credit expense and a gain on the sale of our corporate headquarters.

•Other income and expense, net, for the nine months ended September 30, 2021, increased 56.0% to $5.8 million from $3.7 million in the comparable period in 2020, primarily due to the recognition of unamortized losses related to the termination of the SERP on April 30, 2021.

•Income from continuing operations for the nine months ended September 30, 2021, increased 44.7% to $54.6 million, or $2.57 per share, from $37.8 million, or $1.77 per share, in the comparable period in 2020.

•The Firm returned $59.3 million of capital to our shareholders in the form of open market repurchases totaling $44.5 million and quarterly dividends totaling $14.8 million during the nine months ending September 30, 2021.

•Cash provided by operating activities was $59.9 million during the nine months ended September 30, 2021, as compared to $93.9 million for the nine months ended September 30, 2020.

•Cash and cash equivalents, net of outstanding borrowings under our credit facility, was $15.6 million as of September 30, 2021.

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RESULTS OF OPERATIONS

Business Overview

Kforce provides professional staffing services and solutions to our clients on both a temporary (“Flex”) and permanent (“Direct Hire”) basis through our Tech and FA segments. Our corporate headquarters is in Tampa, Florida and we have field offices located throughout the United States (U.S.). As of September 30, 2021, Kforce employed approximately 2,000 associates, including approximately 1,300 supporting the revenue-generating aspects of our business and approximately 700 supporting the revenue-enabling aspects. We also had approximately 11,000 consultants on assignment providing flexible staffing services and solutions to our clients, the vast majority of which are also employees of Kforce.. Kforce serves clients across many industries and geographies as well as organizations of all sizes, with a particular focus on Fortune 1000 and other large companies. We believe that our 100% domestic focus, concentration on technology staffing and solutions (representing nearly 85% of overall revenues) and client portfolio comprised of world-class companies have been key contributors to our strong performance in 2020 and 2021 and will be key drivers to our future success.

In December 2020 and early 2021, the U.S. Food and Drug Administration authorized the distribution and administration of certain COVID-19 vaccines in the U.S. While the level of vaccinations and potential variants of COVID-19 along with the potential impact of regulations surrounding the COVID-19 vaccines are difficult to predict and could negatively impact our business, growth in our business has meaningfully accelerated since the low point in June 2020. From an economic standpoint, total and temporary employment figures and trends have historically been important indicators of staffing demand. Based on information published by the Bureau of Labor Statistics and Staffing Industry Analysts (“SIA”), these figures and trends have been trending positively since the end of the third quarter of 2020. In addition,, the penetration rate (the percentage of temporary staffing to total employment) remained stable at 1.8% and the unemployment rate decreased again to 4.8% in September 2021, down from 5.9% in June 2021. As another indicator that the market is strengthening, in the latest U.S. staffing industry forecast published by SIA in September 2021, the domestic technology temporary staffing industry is estimated to grow 11% in 2021 (up from the previous expectation of 9%), and 6% (consistent with the previous expectation) in 2022.

We have delivered strong results, especially in our Technology business, with year-over-year growth of 29.6% significantly exceeding the market expectation per SIA. Sequentially, we were successful in effectively replacing the expected lower revenues from our COVID-19 Business (down $27.2 million sequentially) with higher-quality Technology revenue (up $26.5 million sequentially). While the business climate related to this economic and health crisis, along with related governmental legislation (including that which is aimed at stimulating the economy) is still extremely fluid, we believe that we are very well positioned to continue capturing additional market share in our Technology business and delivering strong operating results to our shareholders.

The results of multiple employee surveys conducted over the last eighteen months indicate that our associates have embraced the ingenuity required to work remotely and have been successful in settling into new, productive routines. We continue to make great progress in our “Kforce Reimagined” initiative that was initiated shortly after the onset of the pandemic, which is an effort to position Kforce to provide a more flexible hybrid work environment for our associates. We are referring to this new era of Kforce’s work environment as “Office Occasional” whereby our people will have maximum flexibility and choice in designing their workdays that is rooted in trust and supported by integrated technology aligned with our evolved operating model. We will have a remote first approach but encourage our people to leverage physical office spaces, when desirable, for activities best done through in-person, active collaboration such as training, team building, client and candidate interactions. We announced in September that we signed a lease for our future corporate headquarters, which we anticipate occupying in the fourth quarter of 2022. This new space will be modern, open and technology enabled to provide a flexible environment for our people to work effectively, very similarly to how we approaching the design of our field offices.

During 2021, we engaged an independent third-party consulting firm to assist us in our assessment of our middle and back office capabilities. We believe that the culmination of these and other efforts, on which we have made significant progress, will provide a differentiated employee experience, in the case of our Kforce Reimagined effort, and significant contributions to improving productivity and profitability in both cases.

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Operating Results - Three and Nine Months Ended September 30, 2021 and 2020

The following table presents certain items in our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income as a percentage of revenue:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenue by segment:
Tech	83.7	%	71.2	%	79.3	%	75.0	%
FA	16.3		28.8		20.7		25.0
Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Revenue by type:
Flex	96.6	%	97.6	%	97.0	%	97.7	%
Direct Hire	3.4		2.4		3.0		2.3
Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Gross profit	29.6	%	28.4	%	28.8	%	28.3	%
Selling, general and administrative expenses	22.1	%	20.8	%	21.5	%	22.6	%
Depreciation and amortization	0.3	%	0.4	%	0.3	%	0.4	%
Income from operations	7.3	%	7.3	%	7.0	%	5.4	%
Income from operations, before income taxes	6.9	%	7.1	%	6.5	%	5.0	%
Net income	5.0	%	5.1	%	4.7	%	3.6	%

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Revenue. The following table presents revenue by type for each segment and the percentage change from the prior period (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		Increase (Decrease)		2020		2021		Increase (Decrease)		2020
Tech
Flex revenue	$	330,170	28.9	%	$	256,118	$	909,599	18.0	%	$	770,635
Direct Hire revenue	7,060		70.8	%	4,133		17,919		47.5	%	12,150
Total Tech revenue	$	337,230	29.6	%	$	260,251	$	927,518	18.5	%	$	782,785
FA
Flex revenue	$	59,003	(41.3)	%	$	100,569	$	224,783	(9.6)	%	$	248,578
Direct Hire revenue	6,492		41.0	%	4,604		17,263		40.5	%	12,289
Total FA revenue	$	65,495	(37.7)	%	$	105,173	$	242,046	(7.2)	%	$	260,867
Total Flex revenue	$	389,173	9.1	%	$	356,687	$	1,134,382	11.3	%	$	1,019,213
Total Direct Hire revenue	13,552		55.1	%	8,737		35,182		44.0	%	24,439
Total Revenue	$	402,725	10.2	%	$	365,424	$	1,169,564	12.1	%	$	1,043,652

Our quarterly operating results are affected by the number of billing days in a quarter. The following table presents the year-over-year revenue growth rates, on a billing day basis, for the last five quarters:

	Year-Over-Year Revenue Growth Rates
	(Per Billing Day)
	Q3 2021		Q2 2021		Q1 2021		Q4 2020		Q3 2020
Billing Days	64		64		63		62		64
Technology	28.9	%	20.9	%	6.3	%	0.8	%	(4.2)	%
FA	(41.3)	%	2.7	%	26.4	%	26.0	%	51.6	%
Total Flex	9.1	%	16.3	%	10.2	%	5.9	%	6.9	%

Flex Revenue. The key drivers of Flex revenue are the number of consultants on assignment, billable hours, the bill rate per hour and, to a limited extent, the amount of billable expenses incurred by Kforce.

Flex revenue for Tech increased 28.9% and 18.7% on a billing day basis, during the three and nine months ended September 30, 2021, respectively, as compared to the same period in 2020. Flex revenue in our Tech business improved 8.4% sequentially in the third quarter of 2021. The sequential and year-over-year growth that we experienced in our Technology business in the third quarter of 2021 was driven principally by a higher number of consultants on assignment, which have improved consistently since June 2020 (the low point in the pandemic). Given the acceleration we are continuing to experience in our Technology business, we expect our year-over-year growth rate in the fourth quarter to be stable with third quarter levels off a more difficult year-over-year comparison. We believe the secular drivers of demand in technology have only strengthened as companies continue to invest significantly in technology to improve their consumer’s experience, gain cost efficiencies and stay relevant in an increasingly competitive environment.

Our FA segment experienced a decrease in Flex revenue of 9.6% during the nine months ended September 30, 2021 as compared to the same period in 2020, primarily driven by a decrease in the COVID-19 Business. FA Flex experienced a decrease to Flex revenue of 41.3% during the three months ended September 30, 2021 as compared to the same period in 2020, as we experienced a sharp decline in the portion of business related to COVID-19, which was anticipated. As we move into the fourth quarter of 2021, we expect overall revenues in the FA business to decline on a year-over-year basis due primarily to the COVID-19 Business, which largely ended early in the third quarter of 2021. We continue to migrate our FA business towards more highly-skilled roles that are less susceptible to technological change and automation; we have seen good progress in this transition.

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The following table presents the key drivers for the change in Flex revenue by segment over the prior period (in thousands):

	Three Months Ended				Nine Months Ended
	September 30, 2021 vs. September 30, 2020				September 30, 2021 vs. September 30, 2020
	Tech		FA		Tech		FA
Key Drivers - Increase (Decrease)
Volume - hours billed	$	65,590	$	(51,695)	$	115,482	$	(30,581)
Bill rate	7,665		10,134		22,967		6,981
Billable expenses	797		(5)		515		(195)
Total change in Flex revenue	$	74,052	$	(41,566)	$	138,964	$	(23,795)

The following table presents total Flex hours billed by segment and percentage change over the prior period (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021	Increase (Decrease)		2020	2021	Increase (Decrease)		2020
Tech	4,031	25.7	%	3,207	11,226	15.0	%	9,759
FA	1,515	(51.4)	%	3,118	6,339	(12.3)	%	7,229
Total Flex hours billed	5,546	(12.3)	%	6,325	17,565	3.4	%	16,988

For the three and nine months ended September 30, 2021, FA Flex hours billed included 209 and 2,134 thousand hours, respectively, from the COVID-19 Business.

Direct Hire Revenue. The key drivers of Direct Hire revenue are the number of placements and the associated placement fee. Direct Hire revenue also includes conversion revenue, which may occur when a consultant initially assigned to a client on a temporary basis is later converted to a permanent placement for a fee.

Direct Hire revenue increased 55.1% and 44.0% during the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. The increase during the third quarter was primarily driven by a significant increase in both the number of placements and fees, as the economic environment has improved and competition for talent has increased. As we look to the fourth quarter, we expect Direct Hire revenues may seasonally decline sequentially.

The following table presents the key drivers for the change in Direct Hire revenue by segment over the prior period (in thousands):

	Three Months Ended				Nine Months Ended
	September 30, 2021 vs. September 30, 2020				September 30, 2021 vs. September 30, 2020
	Tech		FA		Tech		FA
Key Drivers - Increase (Decrease)
Volume - number of placements	$	1,676	$	1,236	$	3,724	$	3,141
Placement fee	1,251		652		2,045		1,833
Total change in Direct Hire revenue	$	2,927	$	1,888	$	5,769	$	4,974

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The following table presents the total number of placements by segment and percentage change over the prior period:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021	Increase (Decrease)		2020	2021	Increase (Decrease)		2020
Tech	290	40.8	%	206	831	30.7	%	636
FA	401	26.9	%	316	1,094	25.6	%	871
Total number of placements	691	32.4	%	522	1,925	27.7	%	1,507

The following table presents the average placement fee by segment and percentage change over the prior period:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		Increase (Decrease)		2020		2021		Increase (Decrease)		2020
Tech	$	24,360	21.5	%	$	20,045	$	21,576	12.9	%	$	19,114
FA	16,181		11.2	%	14,557		$	15,780	11.9	%	$	14,104
Total average placement fee	$	19,611	17.3	%	$	16,722	$	18,282	12.7	%	$	16,217

Gross Profit. Gross profit is calculated by deducting direct costs (primarily consultant compensation, payroll taxes, payroll-related insurance and certain fringe benefits, as well as independent contractor costs) from total revenue. There are no consultant payroll costs associated with Direct Hire placements, thus all Direct Hire revenue increases gross profit by the full amount of the placement fee.

The following table presents the gross profit percentage (gross profit as a percentage of total revenue) by segment and percentage change over the prior period:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		Increase (Decrease)		2020		2021		Increase (Decrease)		2020
Tech	28.4	%	2.5	%	27.7	%	27.9	%	0.7	%	27.7	%
FA	35.6	%	17.5	%	30.3	%	32.4	%	6.9	%	30.3	%
Total gross profit percentage	29.6	%	4.2	%	28.4	%	28.8	%	1.8	%	28.3	%

The total gross profit percentage for the three months ended September 30, 2021, increased 120 basis points as compared to the same period in 2020 primarily as a result of an increased mix of Direct Hire revenues and Flex margin increases resulting from higher bill pay spreads. The total gross profit percentage for the nine months ended September 30, 2021, as compared to the same period in 2020, increased 50 basis points due primarily to an increased mix of Direct Hire revenues.

Flex gross profit percentage (Flex gross profit as a percentage of Flex revenue) provides management with helpful insight into the other drivers of total gross profit percentage driven by our Flex business such as changes in the spread between the consultants’ bill rate and pay rate, changes in payroll tax rates or benefits costs, as well as the impact of billable expenses, which provide no profit margin.

The following table presents the Flex gross profit percentage by segment and percentage change over the prior period:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		Increase (Decrease)		2020		2021		Increase (Decrease)		2020
Tech	26.9	%	1.5	%	26.5	%	26.4	%	(0.4)	%	26.5	%
FA	28.5	%	4.8	%	27.2	%	27.2	%	1.1	%	26.9	%
Total Flex gross profit percentage	27.2	%	1.9	%	26.7	%	26.6	%	—	%	26.6	%

Overall, our Flex gross profit percentage increased 50 basis points for the three months ended September 30, 2021 and was flat for the nine months ended September 30, 2021, as compared to the same periods in 2020. The notable fluctuations within our segments were as follows:.

•Flex margins in our Tech business increased 40 basis points for the three months ended September 30, 2021 and decreased 10 basis points for the nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. The increase for the three month period was primarily due to spread improvement and lower healthcare costs.

•FA Flex gross profit margin increased 130 and 30 basis points for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. The increases for each period were primarily due to a

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lower mix of lower margin COVID-19 Business and spread improvements due to the repositioning of this business in higher skilled areas.

The following table presents the key drivers for the change in Flex gross profit by segment over the prior period (in thousands):

	Three Months Ended				Nine Months Ended
	September 30, 2021 vs. September 30, 2020				September 30, 2021 vs. September 30, 2020
	Tech		FA		Tech		FA
Key Drivers - Increase (Decrease)
Revenue impact	$	19,612	$	(11,289)	$	36,869	$	(6,401)
Profitability impact	1,435		813		(795)		698
Total change in Flex gross profit	$	21,047	$	(10,476)	$	36,074	$	(5,703)

SG&A Expenses. Total compensation, commissions, payroll taxes and benefit costs as a percentage of SG&A represented 84.9% and 86.0% for the three and nine months ended September 30, 2021, respectively, as compared to 83.3% and 82.1% for the comparable periods in 2020. Commissions and bonus incentives are variable costs driven primarily by revenue and gross profit levels. Therefore, as those levels change, these expenses would also generally be anticipated to change.

The following table presents components of SG&A as a percentage of revenue (in thousands):

	2021		% of Revenue		2020		% of Revenue
Three Months Ended September 30,
Compensation, commissions, payroll taxes and benefits costs	$	75,537	18.8	%	$	63,162	17.3	%
Other (1)	13,435		3.3	%	12,690		3.5	%
Total SG&A	$	88,972	22.1	%	$	75,852	20.8	%
Nine Months Ended September 30,
Compensation, commissions, payroll taxes and benefits costs	$	216,324	18.5	%	$	193,534	18.5	%
Other (1)	35,293		3.0	%	42,080		4.1	%
Total SG&A	$	251,617	21.5	%	$	235,614	22.6	%

(1) Includes credit expense, lease expense, professional fees, travel, telephone, computer, and certain other expenses, which includes a gain on the sale of the corporate headquarters facility during the nine months ended September 30, 2021.

SG&A as a percentage of revenue increased 130 basis points for the three months ended September 30, 2021 and decreased 110 basis points for the nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. The increase for the three month period ended September 30, 2021, was primarily related to higher performance-based compensation, given the strength in our revenue growth. The decrease for the nine months ended September 30, 2021 is primarily related to the recognition of a $2.0 million gain from the sale of our corporate headquarters, declines in credit expense due to larger reserves in the first quarter of 2020 at the onset of the pandemic given inherent risk, leverage from our revenue growth, and continued improvements in associate productivity.

The Firm continues to focus on generating increased operating leverage through continued solid revenue growth, improved productivity of our associates, structural reductions in operating costs and continuing to exercise solid expense discipline.

Depreciation and Amortization. The following table presents depreciation and amortization expense and percentage change over the prior period by major category (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		Increase (Decrease)		2020		2021		Increase (Decrease)		2020
Fixed asset depreciation (includes finance leases)	$	609	(36.4)	%	$	957	$	2,164	(33.7)	%	$	3,265
Capitalized software amortization	417		18.8	%	351		1,256		53.9	%	816
Total Depreciation and amortization	$	1,026	(21.6)	%	$	1,308	$	3,420	(16.2)	%	$	4,081

Other Expense, Net. Other expense, net for the three and nine months ended September 30, 2021 was $1.4 million and $5.8 million, respectively. Other expense, net for the three and nine months ended September 30, 2020 was $0.9 million and $3.7 million, respectively. Other expense, net includes interest expense related to outstanding borrowings under our credit facility, which is partially offset by the interest income on cash held in government money market funds.

During the nine months ended September 30, 2021, Other expense, net also includes an expense of $1.8 million related to the termination of our SERP. Refer to Note I - “Employee Benefit Plans” in the Unaudited Condensed Consolidated Financial Statements, included in this report on Form 10-Q, for a complete discussion of the termination of our SERP.

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During the three and nine months ended September 30, 2021, Other expense, net also includes our proportionate share of the loss from WorkLLama, our equity method investment, of $0.7 million and $1.7 million.

Income Tax Expense. Income tax expense as a percentage of income from continuing operations, before income taxes (our “effective tax rate” from continuing operations) for the nine months ended September 30, 2021 and 2020 was 28.1% and 27.8%, respectively.

Non-GAAP Financial Measures

Free Cash Flow. “Free Cash Flow,” a non-GAAP financial measure, is defined by Kforce as net cash provided by operating activities determined in accordance with GAAP, less capital expenditures. Management believes this provides an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows and is useful information to investors as it provides a measure of the amount of cash generated from the business that can be used for strategic opportunities including investing in our business, making acquisitions, repurchasing common stock or paying dividends. Free Cash Flow is limited, however, because it does not represent the residual cash flow available for discretionary expenditures. Therefore, we believe it is important to view Free Cash Flow as a complement to (but not a replacement of) our Unaudited Condensed Consolidated Statements of Cash Flows.

The following table presents Free Cash Flow (in thousands):

	Nine Months Ended September 30,
	2021		2020
Net cash provided by operating activities	$	59,943	$	93,871
Capital expenditures	(5,026)		(5,296)
Free cash flow	54,917		88,575
Change in debt	—		35,000
Repurchases of common stock	(44,407)		(29,623)
Cash dividends	(14,836)		(12,619)
Equity method investment	(7,000)		(2,500)
Net proceeds from the sale of assets	23,742		—
Other	(271)		2,609
Change in cash and cash equivalents	$	12,145	$	81,442

Adjusted EBITDA. “Adjusted EBITDA”, a non-GAAP financial measure, is defined by Kforce as net income before depreciation and amortization, stock-based compensation expense, interest expense, net, income tax expense and loss from equity method investment. Adjusted EBITDA should not be considered a measure of financial performance under GAAP. Items excluded from Adjusted EBITDA are significant components in understanding and assessing our past and future financial performance, and this presentation should not be construed as an inference by us that our future results will be unaffected by those items excluded from Adjusted EBITDA. Adjusted EBITDA is a key measure used by management to assess our operations including our ability to generate cash flows and our ability to repay our debt obligations and management believes it provides a good metric of our core profitability in comparing our performance to our competitors, as well as our performance over different time periods. Consequently, management believes it is useful information to investors. The measure should not be considered in isolation or as an alternative to net income, cash flows or other financial statement information presented in the consolidated financial statements as indicators of financial performance or liquidity. The measure is not determined in accordance with GAAP and is thus susceptible to varying calculations. Also, Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

In addition, although we excluded amortization of stock-based compensation expense because it is a non-cash expense, we expect to continue to incur stock-based compensation in the future and the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our shareholder ownership interest. We suggest that you evaluate these items and the potential risks of excluding such items when analyzing our financial position.

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The following table presents a reconciliation of Adjusted EBITDA to net income (in thousands):

	2021		2020
Three Months Ended September 30,
Net income	$	20,168	$	18,763
Depreciation and amortization	1,026		1,308
Stock-based compensation expense	3,512		2,908
Interest expense, net	750		849
Income tax expense	7,650		7,017
Loss from equity method investment	687		103
Adjusted EBITDA	$	33,793	$	30,948
Nine Months Ended September 30,
Net income	$	54,617	$	37,754
Depreciation and amortization	3,420		4,081
Gain on sale of corporate headquarters	(2,051)		—
Stock-based compensation expense	10,447		8,707
Interest expense, net	2,312		2,533
Income tax expense	21,378		14,568
SERP termination expense	1,821		—
Loss from equity method investment	1,709		1,237
Adjusted EBITDA	$	93,653	$	68,880

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LIQUIDITY AND CAPITAL RESOURCES

To meet our capital and liquidity requirements, we primarily rely on our operating cash flows and, if necessary, borrowings under our credit facility. At September 30, 2021 and December 31, 2020, we had $115.6 million and $103.5 million in cash and cash equivalents, respectively, which consisted primarily of government money market funds. At both September 30, 2021 and December 31, 2020, we had $100.0 million outstanding under our credit facility, and $198.7 million available under our credit facility. The amounts outstanding under our credit facility were hedged by interest rate swaps, as discussed below. In addition, on April 19, 2021, we completed the sale of our corporate headquarters to an independent third party. We received net proceeds of $23.7 million and recorded a gain on the sale of $2.0 million, which is included in SG&A expenses. In conjunction with the sale, we entered into an agreement to lease back the building for a period of 18 months.

In September 2021, Kforce entered into a lease agreement (the “Lease Agreement”) for our new corporate headquarters in Tampa, Florida. The lease term is 129 months, the lease commencement date is October 1, 2022 and the rent commencement date is nine (9) months following the lease commencement date. The minimum base rent over the lease term is $10.9 million, which includes annual escalations. The Lease Agreement also provides for the Company to receive an allowance, from the Landlord, of approximately $1.6 million to be used towards costs to design, engineer, install, supply and to construct improvements that will become part of the building. The future lease payments and the allowance are not yet recorded on our condensed consolidated balance sheets.

Cash Flows

We are principally focused on achieving an appropriate balance of cash flow across several areas of opportunity such as: generating positive cash flow from operating activities; investing in our infrastructure to allow sustainable growth via capital expenditures; returning capital to our shareholders through our quarterly dividends and common stock repurchase program; maintaining appropriate leverage under our credit facility; selectively pursuing acquisition opportunities; and maintaining sufficient liquidity for operations.

Cash provided by operating activities was $59.9 million during the nine months ended September 30, 2021, as compared to $93.9 million provided during the nine months ended September 30, 2020. Our largest source of operating cash flows is the collection of trade receivables, and our largest use of operating cash flows is the payment of our associate and consultant compensation. The decrease was primarily driven by growth in our accounts receivable portfolio and the payment of payroll taxes deferred in 2020 related to the CARES ACT, offset in part by profitable revenue growth.

Cash provided by investing activities during the nine months ended September 30, 2021 was $11.7 million and cash used in investing activities during the nine months ended September 30, 2020 was $4.2 million. Cash provided by investing activities during the nine months ended September 30, 2021 includes $23.7 million in net proceeds from the sale of our corporate headquarters, offset by cash used for capital expenditures and payments for capital invested in WorkLLama. We expect to continue selectively investing in our infrastructure, primarily focusing on implementing new and upgrading existing technologies that will provide the most benefit.

Cash used in financing activities was $59.5 million during the nine months ended September 30, 2021, as compared to $8.2 million used during the nine months ended September 30, 2020. The change was primarily driven by the $35.0 million draw down on our credit facility during the nine months ended September 30, 2020 and an increase in the repurchases of common stock during the nine month period of 2021 compared to 2020.

The following table presents the cash flow impact of the common stock repurchase activity (in thousands):

	Nine Months Ended September 30,
	2021		2020
Open market repurchases	$	43,973	$	29,386
Repurchase of shares related to tax withholding requirements for vesting of restricted stock	434		237
Total cash flow impact of common stock repurchases	$	44,407	$	29,623

During the nine months ended September 30, 2021 and 2020, Kforce declared and paid quarterly dividends of $14.8 million ($0.72 per share) and $12.6 million ($0.60 per share), respectively, which represents a 20% increase in the per share payment. The declaration, payment and amount of future dividends are discretionary and will be subject to determination by our Board each quarter following its review of, among other things, the Firm’s current and expected financial performance as well as the ability to pay dividends under applicable law.

We believe that existing cash and cash equivalents, cash flow from operations and available borrowings under our credit facility will be adequate to meet the capital expenditure and working capital requirements of our operations for at least the next 12 months. However, a material deterioration in the economic environment or market conditions, among other things, could adversely affect operating results and liquidity, as well as the ability of our lenders to fund borrowings. Actual results could also differ materially from these indicated as a result of a number of factors, including the use of currently available resources for capital expenditures, investments, additional common stock repurchases or dividends.

Credit Facility

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On May 25, 2017, the Firm entered into a credit agreement with Wells Fargo Bank, National Association, as administrative agent, Wells Fargo Securities, LLC, as lead arranger and bookrunner, Bank of America, N.A., as syndication agent, Regions Bank and BMO Harris Bank, N.A., as co-documentation agents, and the lenders referred to therein (the “Credit Facility”). The maturity date of the Credit Facility is May 25, 2022. Borrowings under the Credit Facility are secured by substantially all of the tangible and intangible assets of the Firm, excluding the Firm’s corporate headquarters (which was sold in the second quarter of 2021) and certain other designated collateral. Accordingly, as of September 30, 2021, $100.0 million was outstanding and is classified as a long-term liability within our balance sheet. In addition, as of September 30, 2021, $198.7 million was available on our Credit Facility, subject to certain covenants, and as of December 31, 2020, $100.0 million was outstanding. As of September 30, 2021, we are in compliance with our credit facility covenants as described in the 2020 Annual Report on Form 10-K and currently expect that we will be able to maintain compliance with these covenants.

On October 20, 2021, the Firm entered into an amended and restated credit agreement with Wells Fargo Bank, National Association, as administrative agent, Wells Fargo Securities, LLC, as lead arranger and bookrunner, Bank of America, N.A., as syndication agent, BMO Harris Bank, N.A., as documentation agent, and the lenders referred to therein (the “the Amended and Restated Credit Facility”). Under the Amended and Restated Credit Facility, the Firm will have a maximum borrowing capacity of $200.0 million, which may, subject to certain conditions and the participation of the lenders, be increased up to an aggregate additional amount of $150.0 million. The maturity date of the Amended and Restated Credit Facility is October 20, 2025. Refer to Note N - “ Subsequent Events” in the Unaudited Condensed Consolidated Financial Statements, included in this report on Form 10-Q, for a more complete discussion of the new credit agreement.

Kforce has two forward-starting interest rate swap agreements, which have been designated as cash flow hedges, to mitigate the risk of rising interest rates. Refer to Note K - “Derivative Instruments and Hedging Activity” in the Notes to Unaudited Condensed Consolidated Financial Statements, included in this report on Form 10-Q, for a complete discussion of our interest rate swaps. At September 30, 2021 and December 31, 2020, the fair value of our interest rate swaps were a liability of $0.3 million and $1.8 million, respectively.

Stock Repurchases

In March 2020, the Board approved an increase in our stock repurchase authorization to an aggregate total of $100.0 million. During the nine months ended September 30, 2021, Kforce repurchased approximately 0.8 million shares of common stock on the open market at a total cost of approximately $44.5 million and $40.0 million remained available for further repurchases under the Board-authorized common stock repurchase program at September 30, 2021.

Contractual Obligations and Commitments

Other than the changes described elsewhere in this Quarterly Report, there have been no material changes during the period covered by this report on Form 10-Q to our contractual obligations previously disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2020 Annual Report on Form 10-K.

CRITICAL ACCOUNTING ESTIMATES

Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our unaudited condensed consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amount of assets, liabilities, revenues, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our unaudited condensed consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, estimates, assumptions and judgments to ensure that our unaudited condensed consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Refer to Note A – “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” in our 2020 Annual Report on Form 10-K for a more detailed discussion of our significant accounting policies and critical accounting estimates.

NEW ACCOUNTING STANDARDS

Refer to Note A - “Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial Statements, included in Item 1. Financial Statements of this report for a discussion of new accounting standards.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

With respect to our quantitative and qualitative disclosures about market risk, there have been no material changes to the information included in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

ITEM 4.    CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of September 30, 2021, we carried out an evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act (the “Evaluation”) under the supervision and with the participation of our CEO and CFO, of the effectiveness of our disclosure

30

controls and procedures as defined in Rules 13a-15 and 15d-15 under the Exchange Act (“Disclosure Controls”). Based on the Evaluation, our CEO and CFO concluded that the design and operation of our Disclosure Controls were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (2) accumulated and communicated to management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding disclosure.

Changes in Internal Control over Financial Reporting

Management has evaluated, with the participation of our CEO and CFO, whether any changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, management has concluded that no such changes have occurred.

Inherent Limitations of Internal Control Over Financial Reporting

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

CEO and CFO Certifications

Exhibits 31.1 and 31.2 are the Certifications of the CEO and the CFO, respectively. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This Item of this report, which you are currently reading, is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are involved in legal proceedings, claims and administrative matters that arise in the ordinary course of business. For further information regarding legal proceedings, refer to Note M - "Commitments and Contingencies" in the Notes to Unaudited Condensed Consolidated Financial Statements in the section entitled "Litigation and Loss Contingencies," included in Item 1. Financial Statements of this report. While the ultimate outcome of these legal proceedings cannot be determined, we currently do not expect that these matters, individually or in the aggregate, will have a material effect on our financial position.

ITEM 1A. RISK FACTORS.

There have been no material changes in the risk factors previously disclosed in our 2020 Annual Report on Form 10-K.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Purchases of Equity Securities by the Issuer

The following table presents information with respect to our repurchases of Kforce common stock during the three months ended September 30, 2021:

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value  of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2021 to July 31, 2021	94,958	$	61.43	94,958	$	49,115,641
August 1, 2021 to August 31, 2021	57,656	$	58.65	56,514	$	45,803,109
September 1, 2021 to September 30, 2021	96,204	$	60.14	96,204	$	40,017,182
Total	248,818	$	60.29	247,676	$	40,017,182

(1) Includes 1,142 shares received upon vesting of restricted stock to satisfy tax withholding requirements for the period August 1, 2021 to August 31, 2021.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

None.

31

ITEM 5. OTHER INFORMATION.

None.

ITEM 6.    EXHIBITS.

Exhibit Number	Description
3.1	Amended and Restated Articles of Incorporation, incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 33-91738) filed with the SEC on April 28, 1995.
3.1a	Articles of Amendment to Articles of Incorporation, incorporated by reference to the Registrant’s Registration Statement on Form S-4/A (File No. 333-111566) filed with the SEC on February 9, 2004, as amended.
3.1b	Articles of Amendment to Articles of Incorporation, incorporated by reference to the Registrant’s Registration Statement on Form S-4/A (File No. 333-111566) filed with the SEC on February 9, 2004, as amended.
3.1c	Articles of Amendment to Articles of Incorporation, incorporated by reference to the Registrant’s Registration Statement on Form S-4/A (File No. 333-111566) filed with the SEC on February 9, 2004, as amended.
3.1d	Articles of Amendment to Articles of Incorporation, incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-26058) filed with the SEC on May 17, 2000.
3.1e	Articles of Amendment to Articles of Incorporation, incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 000-26058) filed with the SEC on March 29, 2002.
3.2	Amended & Restated Bylaws, incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-26058) filed with the SEC on April 29, 2013.
31.1	Certification by the Chief Executive Officer of Kforce Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by the Chief Financial Officer of Kforce Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by the Chief Executive Officer of Kforce Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by the Chief Financial Officer of Kforce Inc. pursuant to 18 U.S.C. Section 2350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1	The following material from this Quarterly Report on Form 10-Q of Kforce Inc. for the period ended September 30, 2021, formatted in XBRL Part I, Item 1 of this Form 10-Q formatted in XBRL (Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income; (ii) Unaudited Condensed Consolidated Balance Sheets; (iii) Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity; (iv) Unaudited Condensed Consolidated Statements of Cash Flows; and (v) related notes to these financial statements.
104	Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

32

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

			KFORCE INC.
Date:	November 3, 2021	By:		/s/ DAVID M. KELLY
				David M. Kelly
				Executive Vice President, Chief Financial Officer
				(Principal Financial Officer)
Date:	November 3, 2021	By:		/s/ JEFFREY B. HACKMAN
				Jeffrey B. Hackman
				Senior Vice President, Finance and Accounting
				(Principal Accounting Officer)

33

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, David L. Dunkel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Kforce Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2021

/s/ DAVID L. DUNKEL

David L. Dunkel,

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, David M. Kelly, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Kforce Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2021

/s/ DAVID M. KELLY

David M. Kelly,

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Kforce Inc. (“Kforce”) on Form 10-Q for the quarterly period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, David L. Dunkel, Chief Executive Officer of Kforce, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Kforce.

Date: November 3, 2021	/s/ DAVID L. DUNKEL
	David L. Dunkel,
	Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Kforce Inc. (“Kforce”) on Form 10-Q for the quarterly period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, David M. Kelly, Chief Financial Officer of Kforce, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Kforce.

Date: November 3, 2021

/s/ DAVID M. KELLY

David M. Kelly,

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

XML

Cover - shares	9 Months Ended
	Sep. 30, 2021	Oct. 29, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2021
Document Transition Report	false
Entity File Number	000-26058
Entity Registrant Name	Kforce Inc
Entity Incorporation, State or Country Code	FL
Entity Tax Identification Number	59-3264661
Entity Address, Address Line One	1001 East Palm Avenue
Entity Address, City or Town	Tampa
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33605
City Area Code	813
Local Phone Number	552-5000
Title of 12(b) Security	Common Stock, $0.01 per share
Trading Symbol	KFRC
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		21,424,139
Amendment Flag	false
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Entity Central Index Key	0000930420
Current Fiscal Year End Date	--12-31

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Income Statement [Abstract]
Revenue	$ 402,725	$ 365,424	$ 1,169,564	$ 1,043,652
Direct costs	283,461	261,546	832,687	747,889
Gross profit	119,264	103,878	336,877	295,763
Selling, general and administrative expenses	88,972	75,852	251,617	235,614
Depreciation and amortization	1,026	1,308	3,420	4,081
Income from operations	29,266	26,718	81,840	56,068
Other expense, net	1,448	938	5,845	3,746
Income from operations, before income taxes	27,818	25,780	75,995	52,322
Income tax expense	7,650	7,017	21,378	14,568
Net income	20,168	18,763	54,617	37,754
Other comprehensive income (loss), net of tax:
Defined benefit pension plans	0	0	3,103	0
Change in fair value of interest rate swaps	152	118	1,101	(1,473)
Comprehensive income	$ 20,320	$ 18,881	$ 58,821	$ 36,281
Earnings per share – basic (in dollars per share)	$ 0.99	$ 0.90	$ 2.64	$ 1.79
Earnings per share - diluted (in dollars per share)	$ 0.96	$ 0.89	$ 2.57	$ 1.77
Weighted average shares outstanding – basic (in shares)	20,429	20,782	20,676	21,041
Weighted average shares outstanding – diluted (in shares)	21,098	21,180	21,260	21,369

XML

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 115,631	$ 103,486
Trade receivables, net of allowances of $2,264 and $3,204, respectively	269,910	228,373
Prepaid expenses and other current assets	8,044	7,033
Total current assets	393,585	338,892
Fixed assets, net	5,821	26,804
Other assets, net	88,065	77,575
Deferred tax assets, net	10,115	10,738
Goodwill	25,040	25,040
Total assets	522,626	479,049
Current liabilities:
Accounts payable and other accrued liabilities	77,983	35,533
Accrued payroll costs	73,006	65,849
Current portion of operating lease liabilities	6,407	5,520
Income taxes payable	4,127	964
Other current liabilities	56	300
Total current liabilities	161,579	108,166
Long-term debt – credit facility	100,000	100,000
Other long-term liabilities	71,078	90,948
Total liabilities	332,657	299,114
Commitments and contingencies (Note M)
Stockholders’ equity:
Preferred stock, $0.01 par; 15,000 shares authorized, none issued and outstanding	0	0
Common stock, $0.01 par; 250,000 shares authorized, 72,640 and 72,600 issued, respectively	726	726
Additional paid-in capital	484,034	472,378
Accumulated other comprehensive loss	(219)	(4,423)
Retained earnings	427,622	388,645
Treasury stock, at cost; 51,207 and 50,427 shares, respectively	(722,194)	(677,391)
Total stockholders’ equity	189,969	179,935
Total liabilities and stockholders’ equity	$ 522,626	$ 479,049

XML

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Trade receivables, allowances	$ 2,264	$ 3,204
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	15,000,000	15,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	250,000,000	250,000,000
Common stock, shares issued (in shares)	72,640,000	72,600,000
Treasury stock, shares (in shares)	51,207,000	50,427,000

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Retained Earnings Cumulative Effect, Period of Adoption, Adjustment	Treasury Stock
Shares at beginning of period (in shares) at Dec. 31, 2019			72,202					49,277
Beginning of period at Dec. 31, 2019	$ 167,263	$ (214)	$ 722	$ 459,545	$ (1,526)	$ 350,545	$ (214)	$ (642,023)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	9,106					9,106
Issuance for stock-based compensation and dividends, net of forfeitures (in shares)			4
Issuance for stock-based compensation and dividends, net of forfeitures	0			218		(218)
Stock-based compensation expense	2,896			2,896
Employee stock purchase plan (in shares)								(4)
Employee stock purchase plan	142			93				$ 49
Dividends	(4,293)					(4,293)
Change in fair value of interest rate swaps	(1,121)				(1,121)
Repurchases of common stock (in shares)								685
Repurchases of common stock	(20,380)							$ (20,380)
Shares at end of period (in shares) at Mar. 31, 2020			72,198					49,958
End of period at Mar. 31, 2020	153,399		$ 722	462,752	(2,647)	354,926		$ (662,354)
Shares at beginning of period (in shares) at Dec. 31, 2019			72,202					49,277
Beginning of period at Dec. 31, 2019	167,263	$ (214)	$ 722	459,545	(1,526)	350,545	$ (214)	$ (642,023)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	37,754
Employee stock purchase plan	411
Defined benefit pension plans	0
Change in fair value of interest rate swaps	(1,473)
Shares at end of period (in shares) at Sep. 30, 2020			72,247					50,291
End of period at Sep. 30, 2020	170,206		$ 722	469,177	(2,999)	374,767		$ (671,461)
Shares at beginning of period (in shares) at Mar. 31, 2020			72,198					49,958
Beginning of period at Mar. 31, 2020	153,399		$ 722	462,752	(2,647)	354,926		$ (662,354)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	9,885					9,885
Issuance for stock-based compensation and dividends, net of forfeitures (in shares)			39
Issuance for stock-based compensation and dividends, net of forfeitures	0			240		(240)
Stock-based compensation expense	2,903			2,903
Employee stock purchase plan (in shares)								(5)
Employee stock purchase plan	134			62				$ 72
Dividends	(4,162)					(4,162)
Change in fair value of interest rate swaps	(470)				(470)
Repurchases of common stock (in shares)								342
Repurchases of common stock	(9,213)							$ (9,213)
Shares at end of period (in shares) at Jun. 30, 2020			72,237					50,295
End of period at Jun. 30, 2020	152,476		$ 722	465,957	(3,117)	360,409		$ (671,495)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	18,763					18,763
Issuance for stock-based compensation and dividends, net of forfeitures (in shares)			10
Issuance for stock-based compensation and dividends, net of forfeitures	0			241		(241)
Stock-based compensation expense	2,908			2,908
Employee stock purchase plan (in shares)								(5)
Employee stock purchase plan	135			71				$ 64
Dividends	(4,164)					(4,164)
Defined benefit pension plans	0
Change in fair value of interest rate swaps	118				118
Repurchases of common stock (in shares)								1
Repurchases of common stock	(30)							$ (30)
Shares at end of period (in shares) at Sep. 30, 2020			72,247					50,291
End of period at Sep. 30, 2020	170,206		$ 722	469,177	(2,999)	374,767		$ (671,461)
Shares at beginning of period (in shares) at Dec. 31, 2020			72,600					50,427
Beginning of period at Dec. 31, 2020	179,935		$ 726	472,378	(4,423)	388,645		$ (677,391)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	13,261					13,261
Issuance for stock-based compensation and dividends, net of forfeitures (in shares)			15
Issuance for stock-based compensation and dividends, net of forfeitures	0			271		(271)
Stock-based compensation expense	3,403			3,403
Employee stock purchase plan (in shares)								(4)
Employee stock purchase plan	170			113				$ 57
Dividends	(4,786)					(4,786)
Defined benefit pension plans	47				47
Change in fair value of interest rate swaps	939				939
Repurchases of common stock (in shares)								317
Repurchases of common stock	(16,313)							$ (16,313)
Shares at end of period (in shares) at Mar. 31, 2021			72,615					50,740
End of period at Mar. 31, 2021	176,656		$ 726	476,165	(3,437)	396,849		$ (693,647)
Shares at beginning of period (in shares) at Dec. 31, 2020			72,600					50,427
Beginning of period at Dec. 31, 2020	179,935		$ 726	472,378	(4,423)	388,645		$ (677,391)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	54,617
Employee stock purchase plan	558
Defined benefit pension plans	3,103
Change in fair value of interest rate swaps	1,101
Shares at end of period (in shares) at Sep. 30, 2021			72,640					51,207
End of period at Sep. 30, 2021	189,969		$ 726	484,034	(219)	427,622		$ (722,194)
Shares at beginning of period (in shares) at Mar. 31, 2021			72,615					50,740
Beginning of period at Mar. 31, 2021	176,656		$ 726	476,165	(3,437)	396,849		$ (693,647)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	21,188					21,188
Issuance for stock-based compensation and dividends, net of forfeitures (in shares)			40
Issuance for stock-based compensation and dividends, net of forfeitures	2		$ 1	274		(273)
Stock-based compensation expense	3,532			3,532
Employee stock purchase plan (in shares)								(4)
Employee stock purchase plan	195			143				$ 52
Dividends	(4,746)					(4,746)
Defined benefit pension plans	3,056				3,056
Change in fair value of interest rate swaps	10				10
Repurchases of common stock (in shares)								225
Repurchases of common stock	(13,614)							$ (13,614)
Shares at end of period (in shares) at Jun. 30, 2021			72,655					50,961
End of period at Jun. 30, 2021	186,279		$ 727	480,114	(371)	413,018		$ (707,209)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	20,168					20,168
Issuance for stock-based compensation and dividends, net of forfeitures (in shares)			(15)
Issuance for stock-based compensation and dividends, net of forfeitures	(1)			260		(260)
Stock-based compensation expense	3,512			3,512
Employee stock purchase plan (in shares)								(3)
Employee stock purchase plan	193			148				$ 45
Dividends	(5,304)					(5,304)
Defined benefit pension plans	0
Change in fair value of interest rate swaps	152				152
Repurchases of common stock (in shares)								249
Repurchases of common stock	(15,030)							$ (15,030)
Shares at end of period (in shares) at Sep. 30, 2021			72,640					51,207
End of period at Sep. 30, 2021	$ 189,969		$ 726	$ 484,034	$ (219)	$ 427,622		$ (722,194)

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UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Parenthetical) - USD ($) $ in Thousands	3 Months Ended						12 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019
Dividend (in dollars per share)	$ 0.26	$ 0.23	$ 0.23	$ 0.20	$ 0.20	$ 0.20
Tax provision on defined benefit pension plan		$ 283
Tax benefit on interest rate swap	$ 55	$ 3	$ 319	$ 40	$ 160	$ 384
Accounting Standards Update 2016-13
Tax effect of new accounting standard							$ 75

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended				9 Months Ended		12 Months Ended
	Sep. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Mar. 31, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Cash flows from operating activities:
Net income	$ 20,168	$ 13,261	$ 18,763	$ 9,106	$ 54,617	$ 37,754
Adjustments to reconcile net income to cash provided by operating activities:
Deferred income tax provision, net					302	(4,414)
Provision for credit losses					(139)	2,723
Depreciation and amortization					3,420	4,081
Stock-based compensation expense					10,448	8,707
Defined benefit pension plan expense					2,157	632
(Gain) loss on disposal or impairment of assets					(1,979)	1,795
Noncash lease expense					3,992	4,392
Loss on equity method investment					1,709	1,237
Other					681	820
Increase in operating assets
Trade receivables, net					(41,397)	(15,085)
Other assets					(6,384)	(5,034)
Increase in operating liabilities
Accrued payroll costs					7,715	31,496
Other liabilities					24,801	24,767
Cash provided by operating activities					59,943	93,871
Cash flows from investing activities:
Capital expenditures					(5,026)	(5,296)
Equity method investment					(7,000)	(2,500)
Proceeds from the sale of assets held within the Rabbi Trust					0	3,548
Net proceeds from the sale of assets					23,742	0
Cash provided by (used in) investing activities					11,716	(4,248)
Cash flows from financing activities:
Proceeds from credit facility					0	35,000
Repurchases of common stock					(44,407)	(29,623)
Cash dividends					(14,836)	(12,619)
Payments on other financing arrangements					(271)	(939)
Cash used in financing activities					(59,514)	(8,181)
Change in cash and cash equivalents					12,145	81,442
Cash and cash equivalents, beginning of period		103,486		19,831	103,486	19,831	$ 19,831
Cash and cash equivalents, end of period	115,631		101,273		115,631	101,273	$ 103,486
Cash Paid During the Period For:
Income taxes					17,845	13,493
Operating lease liabilities					5,591	5,641
Interest, net					1,934	1,924
Non-Cash Investing and Financing Transactions:
ROU assets obtained from operating leases					4,053	5,722
Employee stock purchase plan	$ 193	$ 170	$ 135	$ 142	$ 558	$ 411

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Unless otherwise noted below, there have been no material changes to the accounting policies presented in Note 1 - “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of the 2020 Annual Report on Form 10-K.

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and footnotes normally required by GAAP for complete financial statements have been condensed or omitted pursuant to those rules and regulations, although management believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2020 Annual Report on Form 10-K. In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation. The Unaudited Condensed Consolidated Balance Sheet as of December 31, 2020 was derived from our audited Consolidated Balance Sheet as of December 31, 2020, as presented in our 2020 Annual Report on Form 10-K.

Our quarterly operating results are affected by the number of billing days in a particular quarter, the seasonality of our clients’ businesses and increased holiday and vacation days taken. In addition, we typically experience higher costs in the first quarter of each fiscal year as a result of certain U.S. state and federal employment tax resets, which adversely affects our gross profit and overall profitability. The impact of the COVID-19 pandemic on our business was somewhat unpredictable in 2020, but based on our current assessment, we do not expect any material impact on our long-term strategic plans, operations and liquidity due to COVID-19. However, we continue to assess the effect on our operations by monitoring the spread of COVID-19 (and associated variants) and the actions implemented to combat the virus as reported in the official agency reports. As such, the results of operations for any interim period may be impacted by these factors, among others, and are not necessarily indicative of, nor comparable to, the results of operations for a full year.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Kforce Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. References in this document to “Kforce,” the “Company,” “we,” the “Firm,” “management,” “our” or “us” refer to Kforce Inc. and its subsidiaries, except where the context indicates otherwise.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most critical of these estimates and assumptions relate to the following: allowance for credit losses; income taxes; self-insured liabilities for health insurance; and the impairment of goodwill, other long-lived assets and the equity method investment. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates. The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, have been and may continue to be uncertain, rapidly changing and difficult to predict. Therefore, our accounting estimates and assumptions might change materially in future periods in response to the COVID-19 pandemic.

Health Insurance

Except for certain fully insured health insurance lines of coverage, Kforce retains the risk of loss per participant for each health insurance claim up to $600 thousand in claims annually. Additionally, for all claim amounts exceeding $600 thousand, Kforce retains the risk of loss up to an aggregate annual loss of those claims of $200 thousand. For its partially self-insured lines of coverage, health insurance costs are accrued using estimates to approximate the liability for reported claims and incurred but not reported claims, which are primarily based upon an evaluation of historical claims experience, completion factors determined by an actuary and a qualitative review of our health insurance exposure including the extent of outstanding claims and expected changes in health insurance costs.

Earnings per Share

Basic earnings per share is computed as net income divided by the weighted average number of common shares outstanding (“WASO”) during the period. WASO excludes unvested shares of restricted stock. Diluted earnings per share is computed by dividing net income by diluted WASO. Diluted WASO includes the dilutive effect of potentially dilutive securities such as unvested shares of restricted stock using the treasury stock method, except where the effect of including potential common shares would be anti-dilutive.

For the three and nine months ended September 30, 2021, 669 thousand and 584 thousand common stock equivalents were included in the diluted WASO, respectively. For the three and nine months ended September 30, 2020, 398 thousand and 328 thousand common stock equivalents were included in the diluted WASO, respectively. For the three and nine months ended September 30, 2021, there were insignificant anti-dilutive common stock equivalents. For the three and nine months ended September 30, 2020, there were 266 thousand and 348 thousand anti-dilutive common stock equivalents, respectively.

New Accounting Standards

Recently Adopted Accounting Standards

In August 2018, the FASB issued authoritative guidance regarding changes to the disclosure requirement for defined benefit plans including additions and deletions to certain disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The guidance was effective for fiscal periods beginning after December 15, 2020, with the retrospective method required for all periods presented. The Company adopted the provisions of this new accounting standard at the beginning of fiscal year 2021. This guidance did not have a financial impact on the Company’s financial statements.

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Reportable Segments

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Reportable Segments

Reportable Segments

Kforce provides services through our Technology (“Tech”) and Finance and Accounting (“FA”) segments. Historically, and for the three and nine months ended September 30, 2021, we have reported sales and gross profit information on a segment basis. Total assets, liabilities and operating expenses are not reported separately by segment as our operations are largely combined.

The following table provides information on the operations of our segments (in thousands):

	Tech		FA		Total
Three Months Ended September 30,
2021
Revenue	$	337,230	$	65,495	$	402,725
Gross profit	$	95,934	$	23,330	$	119,264
Operating and other expenses					$	91,446
Income from operations, before income taxes					$	27,818
2020
Revenue	$	260,251	$	105,173	$	365,424
Gross profit	$	71,960	$	31,918	$	103,878
Operating and other expenses					$	78,098
Income from operations, before income taxes					$	25,780
Nine Months Ended September 30,
2021
Revenue	$	927,518	$	242,046	$	1,169,564
Gross profit	$	258,449	$	78,428	$	336,877
Operating and other expenses					$	260,882
Income from operations, before income taxes					$	75,995
2020
Revenue	$	782,785	$	260,867	$	1,043,652
Gross profit	$	216,606	$	79,157	$	295,763
Operating and other expenses					$	243,441
Income from operations, before income taxes					$	52,322

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Disaggregation of Revenue

9 Months Ended

Sep. 30, 2021

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

Disaggregation of RevenueThe following table provides the disaggregation of revenue by segment and type (in thousands):

	Tech		FA		Total
Three Months Ended September 30,
2021
Revenue by type:
Flex revenue	$	330,170	$	59,003	$	389,173
Direct Hire revenue	7,060		6,492		13,552
Total Revenue	$	337,230	$	65,495	$	402,725
2020
Revenue by type:
Flex revenue	$	256,118	$	100,569	$	356,687
Direct Hire revenue	4,133		4,604		8,737
Total Revenue	$	260,251	$	105,173	$	365,424
Nine Months Ended September 30,
2021
Revenue by type:
Flex revenue	$	909,599	$	224,783	$	1,134,382
Direct Hire revenue	17,919		17,263		35,182
Total Revenue	$	927,518	$	242,046	$	1,169,564
2020
Revenue by type:
Flex revenue	$	770,635	$	248,578	$	1,019,213
Direct Hire revenue	12,150		12,289		24,439
Total Revenue	$	782,785	$	260,867	$	1,043,652

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Allowance for Credit Losses

9 Months Ended

Sep. 30, 2021

Receivables [Abstract]

Allowance for Credit Losses

Allowance for Credit Losses

The allowance for credit losses on trade receivables is determined based on a number of factors such as recent and historical write-off and delinquency trends, a specific analysis of significant receivable balances that are past due, the concentration of trade receivables among clients and the current state of the U.S. economy. As part of our analysis, we apply credit loss rates to outstanding receivables by aging category. For certain clients, we perform a quarterly credit review, which considers the client’s credit rating and financial position as well as our total credit loss exposure. Trade receivables are written off after all reasonable collection efforts have been exhausted. Recoveries of trade receivables previously written off are recorded when received and are immaterial for the three and nine months ended September 30, 2021.

The following table presents the activity within the allowance for credit losses on trade receivables for the nine months ended September 30, 2021 (in thousands):

Allowance for credit losses, January 1, 2021	$	2,757
Current period provision (credit)	(139)
Write-offs charged against the allowance, net of recoveries of amounts previously written off	(987)
Allowance for credit losses, September 30, 2021	$	1,631

The allowances on trade receivables presented in the Unaudited Condensed Consolidated Balance Sheets include $0.6 million and $0.4 million at September 30, 2021 and December 31, 2020, respectively, for reserves unrelated to credit losses.

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Sale of Corporate Headquarters	9 Months Ended
	Sep. 30, 2021
Leases [Abstract]
Sale of Corporate Headquarters	Sale of Corporate HeadquartersOn May 19, 2021, Kforce completed the sale of its corporate headquarters, which had a net book value of $21.7 million, to an independent third party. Kforce received net proceeds of $23.7 million and recognized a gain on the sale in the amount of $2.0 million, which is recorded in SG&A expenses.

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Other Assets, Net

9 Months Ended

Sep. 30, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Assets, Net

Other Assets, Net

Other assets, net consisted of the following (in thousands):

	September 30, 2021		December 31, 2020
Assets held in Rabbi Trust	$	39,418	$	36,164
Right-of-use assets for operating leases, net	16,351		16,835
Capitalized software, net (1)	15,243		12,802
Equity method investment (2)	15,779		10,488
Deferred loan costs, net	236		501
Other non-current assets	1,038		785
Total Other assets, net	$	88,065	$	77,575

(1) Accumulated amortization of capitalized software was $35.2 million and $34.0 million as of September 30, 2021 and December 31, 2020, respectively.

(2) In June 2019, Kforce entered into a joint venture resulting in a 50% noncontrolling interest in WorkLLama, LLC (“WorkLLama”), which is accounted for as an equity method investment. The loss on this WorkLLama investment was $0.7 million and $1.7 million for the three and nine months ended September 30, 2021, respectively. In addition, Kforce contributed $7.0 million and $4.0 million of capital during the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively. Refer to Note M - “Commitments and Contingencies” for more information on contingencies related to WorkLLama.

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Current Liabilities

9 Months Ended

Sep. 30, 2021

Payables and Accruals [Abstract]

Current Liabilities

Current LiabilitiesThe following table provides information on certain current liabilities (in thousands):

	September 30, 2021		December 31, 2020
Accounts payable and other accrued liabilities:
Accounts payable	$	41,836	$	20,177
Accrued liabilities	36,147		15,356
Total Accounts payable and other accrued liabilities	$	77,983	$	35,533
Accrued payroll costs:
Payroll and benefits	$	60,402	$	38,257
Payroll taxes	7,623		21,842
Health insurance liabilities	4,184		4,641
Workers’ compensation liabilities	797		1,109
Total Accrued payroll costs	$	73,006	$	65,849

Our accounts payable balance includes vendor and independent contractor payables. Our accrued liabilities balance includes the current portion of the deferred compensation plans liability, obligations related to the supplemental executive retirement plan, liabilities from contracts with customers (such as rebates) and other accrued liabilities .

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Other Long-Term Liabilities

9 Months Ended

Sep. 30, 2021

Other Liabilities Disclosure [Abstract]

Other Long-Term Liabilities

Other Long-Term Liabilities

Other long-term liabilities consisted of the following (in thousands):

	September 30, 2021		December 31, 2020
Deferred compensation plan	$	38,749	$	34,501
Supplemental executive retirement plan (1)	—		20,628
Operating lease liabilities	12,712		14,692
Interest rate swap derivative instruments	296		1,774
Other long-term liabilities (2)	19,321		19,353
Total Other long-term liabilities	$	71,078	$	90,948

(1) The Company terminated its supplemental executive retirement plan on April 30, 2021 and expects to pay out the obligation in July 2022. The obligation, as of September 30, 2021, is included as part of Accrued liabilities under Current Liabilities in Note G - Current Liabilities, above.

(2) As a result of the application of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), we have approximately $19.3 million in payroll tax deferrals recorded within Other long-term liabilities as of September 30, 2021 and December 31, 2020 (expected to be paid by December 31, 2022).

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Employee Benefit Plans

9 Months Ended

Sep. 30, 2021

Retirement Benefits [Abstract]

Employee Benefit Plans

Employee Benefit Plans

Supplemental Executive Retirement Plan

Prior to April 30, 2021, Kforce maintained a Supplemental Executive Retirement Plan (“SERP”), which benefited two executives. The SERP was a non-qualified benefit plan and did not include elective deferrals of covered executive officers’ compensation. The related net periodic benefit costs were comprised of service cost and interest cost. The service cost amounted to $199 thousand in the nine months ending September 30, 2021, and $87 thousand and $259 thousand in the three and nine months ended September 30, 2020, respectively, and were recorded in SG&A. The interest cost amounted to $138 thousand in the nine months ending September 30, 2021, and $124 thousand and $373 thousand in the three and nine months ended September 30, 2020, respectively, and were recorded in Other expense, net in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

Effective April 30, 2021, Kforce’s Board of Directors irrevocably terminated the SERP. The benefits owed to the two participants under the SERP as of September 30, 2021 amount to $20.0 million in the aggregate, which is recorded in Other accrued liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheets. Kforce must

make the benefit payments to the participants within 24 months of the termination date but no sooner than 12 months after the termination date. We anticipate making the benefit payments during the third quarter ending September 30, 2022. No contributions were made to the SERP during the four months ended April 30, 2021.As a result of the termination of the SERP, Kforce recognized a net loss of $1.8 million in the nine months ending September 30, 2021. The loss is reflected in Other expense, net in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

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Stock Incentive Plans

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Stock Incentive Plans

Stock Incentive Plans

On April 22, 2021, Kforce’s shareholders approved the 2021 Stock Incentive Plan (the “2021 Plan”). The 2021 Plan allows for the issuance of stock options, stock appreciation rights (“SAR”), stock awards (including restricted stock awards (“RSAs”) and restricted stock units (“RSUs”)) and other stock-based awards. The aggregate number of shares reserved under the 2021 Plan is approximately 3.9 million. Grants of an option or SAR reduce the reserve by one share, while a stock award reduces the reserve by 2.72 shares. The 2021 Plan terminates on April 22, 2031.

Restricted stock (including RSAs and RSUs) are granted to directors, executives and management either for awards related to Kforce’s annual long-term incentive program or as part of a compensation package for attraction and retention purposes. Restricted stock granted during the nine months ended September 30, 2021, will vest over a period of one to ten years, with vesting occurring in equal annual installments.

During the three and nine months ended September 30, 2021, stock-based compensation expense was $3.5 million and $10.5 million, respectively. During the three and nine months ended September 30, 2020, stock-based compensation expense was $2.9 million and $8.7 million, respectively.

The following table presents the restricted stock activity for the nine months ended September 30, 2021 (in thousands, except per share amounts):

	Number of  Restricted Stock	Weighted-Average Grant Date Fair Value		Total Intrinsic Value of Restricted Stock Vested
Outstanding at December 31, 2020	1,137	$	33.63
Granted	60	$	50.74
Forfeited	(20)	$	26.93
Vested	(47)	$	25.43	$	2,607
Outstanding at September 30, 2021	1,130	$	34.98

As of September 30, 2021, total unrecognized stock-based compensation expense related to restricted stock was $27.3 million, which will be recognized over a weighted-average remaining period of 3.1 years

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Derivative Instrument and Hedging Activity

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instrument and Hedging Activity

Derivative Instruments and Hedging Activity

On April 21, 2017, Kforce entered into a forward-starting interest rate swap agreement with Wells Fargo Bank, N.A (“Swap A”). Swap A was effective on May 31, 2017 and matures on April 29, 2022. Swap A has a fixed interest rate of 1.81%, which we add to our interest rate margin to determine the fixed rate that the Firm will pay to the counterparty during the term of Swap A based on the notional amount of Swap A. The notional amount of Swap A through maturity is $25.0 million.

On March 12, 2020, Kforce entered into a forward-starting interest rate swap agreement with Wells Fargo Bank, N.A (“Swap B”, together with Swap A, the "Swaps"). Swap B was effective on March 17, 2020 and matures on May 30, 2025. Swap B has a fixed interest rate of 0.61% and a notional amount of $75.0 million and increases to $100.0 million in May 2022, and subsequently decreases to $75.0 million and $40.0 million in May 2023 and May 2024, respectively. The increase in the notional amount of Swap B in May 2022 corresponds to the decrease in the notional amount for Swap A.

The Firm uses the Swaps as an interest rate risk management tool to mitigate the potential impact of rising interest rates on variable rate debt. The fixed interest rate for each Swap (which will remain throughout the remainder of the hedging arrangement), plus the applicable interest margin under our credit facility, is included in interest expense and recorded in Other expense, net in the accompanying Consolidated Financial Statements of Operations and Comprehensive Income. Both Swap A and B have been designated as cash flow hedges and were effective as of September 30, 2021. The change in the fair value of the Swaps are recorded as a component of Accumulated other comprehensive income (loss) in the unaudited consolidated financial statements.

The following table sets forth the activity in the accumulated derivative instrument activity (in thousands):

	Nine Months Ended September 30,
	2021		2020
Accumulated derivative instrument loss, beginning of period	$	(1,774)	$	(179)
Net change associated with current period hedging transactions	1,478		(1,978)
Accumulated derivative instrument loss, end of period	$	(296)	$	(2,157)

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Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Our interest rate swaps are measured at fair value using readily observable inputs, which are considered to be Level 2 inputs and are recorded in Other long-term liabilities within the accompanying Unaudited Condensed Consolidated Balance Sheets. Refer to Note J - “Derivative Instruments and Hedging Activity” for a complete discussion of our interest rate swaps.

There were no transfers into or out of Level 1, 2 or 3 assets or liabilities during the nine months ended September 30, 2021. The following table sets forth by level, within the fair value hierarchy, estimated fair values on a recurring basis (in thousands):

Asset/(Liability) Measured at Fair Value:	Asset/(Liability)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)
At September 30, 2021
Interest rate swap derivative instruments	$	(296)	$	—	$	(296)	$	—
At December 31, 2020
Interest rate swap derivative instrument	$	(1,774)	$	—	$	(1,774)	$	—

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Employment Agreements

Kforce has employment agreements with certain executives that provide for minimum compensation, salary and continuation of certain benefits for a six-month to a three-year period after their employment ends under certain circumstances. Certain of the agreements also provide for a severance payment ranging from one to three times annual salary and one-half to three times average annual bonus if such an agreement is terminated without good cause by Kforce or for good reason by the executive subject to certain post-employment restrictive covenants. At September 30, 2021, our liability would be approximately $45.0 million if, following a change in control, all of the executives under contract were terminated without cause by the employer or if the executives resigned for good reason and $17.3 million if, in the absence of a change in control, all of the executives under contract were terminated by Kforce without cause or if the executives resigned for good reason.

Litigation and Loss Contingencies

On August 30, 2021, Kforce Inc. was served with a complaint brought in the U.S. District Court, Southern District of California. Darryn Lewis, et. al. v. Kforce Inc., Case No.: 3:21-cv-01375-AJB-JLB. On behalf of himself and all others similarly situated, the Plaintiff brings a one-count class action complaint for alleged violations of the Fair Labor Standards Act (“FLSA”), and specifically, failure to pay overtime wages. The FLSA class is purported to include commissioned employees who work or have worked for Kforce, nationwide, in the past three (3) years. Plaintiff alleges that Kforce failed to maintain a policy that compensates its employees for all hours worked, and specifically alleges that Kforce misclassified employees as exempt from overtime, failed to pay hourly aggrieved employees for all overtime hours worked, including off-the-clock work performed during meal periods, failed to pay all overtime and double-time wages earned at the correct regular rate because Kforce allegedly failed to include commission and other non-discretionary performance-based pay in the regular rate of pay. Plaintiff and class members seek the amounts of unpaid wages allegedly owed to them, liquidated damages, attorneys’ fees and costs, prejudgment interest, and other legal and equitable relief. The parties have engaged in attempts to resolve the matter. We believe that this matter is unlikely to have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.

On March 19, 2021, a complaint was filed against Kforce Inc. in United States District Court, Central District of California, and served on March 25, 2021. Jessica Cook, et. al. v. Kforce Inc., case no. 2:21-cv-02453. On behalf of herself and all others similarly situated, the plaintiff purports to bring a collective action challenging the exempt classification of a select class of recruiters. Plaintiff alleges that due to the misclassification of the recruiter class Kforce violated the Fair Labor Standards Act by failing to pay overtime and failing to make, keep, and preserve records with respect to each employee sufficient to determine their wages. The class action is brought pursuant to California state law, on behalf of the same class of California recruiters, and alleges: (i) classification and overtime violations under California law; (ii) untimely payment of wages; (iii) legally deficient wage statements; (iv) violations of meal and rest period requirements; and (v) violation of California's Unfair Competition Law. Plaintiff, on behalf of herself and the class and/or collective, seeks damages in the amount of unpaid overtime compensation, double time pay as applicable (for the California class), liquidated damages, attorney’s fees, interest, and other relief. The parties agreed to dismiss the action without prejudice through a joint stipulation and have engaged in discussions to resolve. If the parties are unable to resolve, it is expected that Plaintiff will re-file her class and collective action claims. At this stage in the litigation, it is not feasible to predict the outcome of this matter or reasonably estimate a range of loss, should a loss occur, from this proceeding.

On December 24, 2020, a complaint was filed and on January 5, 2021, the complaint was served against Kforce Inc., et al. in Superior Court of the State of California, Los Angeles County. Sydney Elliott-Brand, et. al. v. Kforce Inc., et al., Case No.: 20STCV49193. On behalf of herself and a putative class of current and former commissioned employees employed by Defendants, the plaintiff purports to bring a collective action for alleged violations of the California Labor Code, §201, et seq., Industrial Welfare Commission (“IWC”) Wage Orders, and the California Business and Professions Code, §17200, et. seq, based upon the defendants’ alleged failure to: (i) pay minimum and overtime wages; (ii) timely pay all earned wages; (iii) provide meal periods and rest breaks; (iv) reimburse business expenses; (v) provide accurate itemized wage statements; and (vi) timely pay wages and vacation pay upon separation of employment; as well as associated unfair competition. The plaintiff seeks payment to recover minimum, regular, and/or overtime wages for all hours worked as required by law, meal period premiums, rest period premiums, unpaid business expenses, reasonable attorneys’ fees, cost of suit and interest, statutory penalties and liquidated damages, and also seeks an order requiring Defendants to restore and disgorge all funds acquired by means of unfair competition under the California Business and Professions Code. The parties have engaged in attempts to resolve the matter. We believe that this matter is unlikely to have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.

On November 18, 2020, Kforce Inc., et al. was served with a complaint brought in the Superior Court of the State of California, San Diego County. Bernardo Buchsbaum, et al. v. Kforce Inc., et al., Case No.: 37-2020-00030994-CU-OE-CTL. The former employee purports to bring a representative action on his own behalf and on behalf of other current and former California aggrieved employees pursuant to the Private Attorneys General Act (“PAGA”) alleging violations of the California Labor Code (“Labor Code”). The purported Labor Code violations include the failure to: (i) pay all earned wages, including minimum wages and overtime wages; (ii) provide and pay proper wages for meal and rest periods; (iii) reimburse all reasonable and necessary business expenses; (iv) provide accurate itemized wage statements; and (v) provide unused vacation wages upon termination. The plaintiff seeks civil penalties, interest, attorney’s fees and costs under the Labor Code. On January 21, 2021, the Plaintiff served an amended complaint to add Kforce Flexible Solutions as a party and narrow the scope of alleged aggrieved employees to “internal” commissioned employees. The parties have engaged in attempts to resolve the matter. We believe that this matter is unlikely to have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.

On October 13, 2020, Kforce Inc. was served with a complaint brought in the U.S. District Court, Eastern District of Pennsylvania. Hope Gofton and Adam Kimbrel, et al. v. Kforce Inc., Case No.: 2:20-cv-04886 on behalf of themselves and other similarly situated current and former employees. The plaintiffs purport to bring a collective action for alleged violations of the Fair Labor Standards Act, 29 U.S.C. § 201, et seq., and a class action for alleged violations of the Pennsylvania Minimum Wage Act, 43 P.S. §§ 333.101, et seq., based upon the defendant’s purported failure to pay federal and state overtime wages. The plaintiffs allege that the defendant improperly classified as exempt the plaintiffs and other putative collective and class members, and allegedly failed to pay overtime wages. The plaintiffs seek payment of unpaid overtime wages, liquidated damages, interest, attorney’s fees, costs and other relief deemed equitable by the Court. The Court entered a Final Approval Order on September 30, 2021 approving the settlement and dismissing the action without prejudice. Case will convert to dismissal with prejudice sixty days after the deadline to fully fund the settlement account. This matter did not have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.

There have been no material developments with regard to the following legal proceedings previously disclosed in our 2020 Annual Report on Form 10-K or in our most recent 10-Q filing:

•On December 17, 2019, Kforce Inc., et al. was served with a complaint brought in Superior Court of the State of California, Alameda County. Kathleen Wahrer, et al. v. Kforce Inc., et al., Case No.: RG19047269.

•On February 19, 2021, a first amended complaint was filed against Kforce and its client, Verity Health System of California (Verity) in the Superior Court of California, County of Los Angeles. Ramona Webb v. Kforce Flexible Solutions, LLC, et. al. case no. 20STCV47529.

We are also involved in other legal proceedings, claims and administrative matters from time to time, and may also be exposed to loss contingencies, that arise in the ordinary course of business. We have made accruals with respect to certain matters, where appropriate, which are reflected in our unaudited condensed consolidated financial statements. While the ultimate outcomes and any amounts accrued are inherently uncertain, we currently do not expect that these matters, individually or in the aggregate, will have a material effect on our financial position.

Equity Method Investment

Under the joint venture operating agreement for WorkLLama, Kforce is obligated to make additional cash contributions, which are contingent on WorkLLama's achievement of certain operational and financial milestones. Our maximum potential capital contributions are $22.5 million. The original operating and financial milestones established in the joint venture operating agreement were not achieved, in part, due to the impacts of the COVID-19 pandemic on WorkLLama’s business. We have continued to provide capital contributions to the joint venture due to our belief in the long-term value of the joint venture. We contributed $7.0 million and $4.0 million of capital during the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively. Refer to Note F - “Other Assets, Net” for more details on WorkLLama.

Lease commitments

We lease office space and certain equipment under operating leases that expire between 2021 and 2033. The terms of the leases provide for rental payments on a graduated scale, options to renew the leases (one to five years), landlord incentives or allowances, and periods of free rent.

During the three months ended September 30, 2021, we entered into a lease agreement for office space in Tampa, Florida, that will become our new corporate headquarters. This new lease for office space is intended to replace our current headquarters, also in Tampa, Florida, the lease for which expires November 2022. The new lease has not yet commenced, but will require aggregate future lease payments of approximately $10.9 million over the entire lease term, which includes annual upward adjustments, and has a non-cancelable lease term of 129 months, excluding renewal options. The new lease also provides for the Company to receive an allowance, from the Landlord, of $1.6 million to be used toward costs to design, engineer, install, supply and to construct improvements that will become part of the building, all of which must be approved by the landlord and the Company. The landlord will designate a general contractor and oversee all construction improvements. The future lease payments and the allowance are not yet recorded on our condensed consolidated balance sheets. Lease payments will be required beginning July 1, 2023, however, we expect the accounting lease commencement date for this initial portion of the lease for financial reporting purposes to begin at the start of the fourth quarter of 2022.

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Subsequent Events

9 Months Ended

Sep. 30, 2021

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Credit Facility

On October 20, 2021, the Firm entered into an amended and restated credit agreement with Wells Fargo Bank, National Association, as administrative agent, Wells Fargo Securities, LLC, as lead arranger and bookrunner, Bank of America, N.A., as syndication agent, BMO Harris Bank, N.A., as documentation agent, and the lenders referred to therein (the “Credit Facility”). Under the Credit Facility, the Firm will have a maximum borrowing capacity of $200.0 million, which may, subject to certain conditions and the participation of the lenders, be increased up to an aggregate additional amount of $150.0 million (the “Commitment”). The maturity date of the Credit Facility is October 20, 2026.

Revolving credit loans under the Credit Facility will bear interest at a rate equal to (a) the Base Rate (as described below) plus the Applicable Margin (as described below) or (b) the LIBOR Rate plus the Applicable Margin. Swingline loans under the Credit Facility will bear interest at a rate equal to the Base Rate plus the Applicable Margin. The Base Rate is the highest of: (i) the Wells Fargo Bank, National Association prime rate, (ii) the federal funds rate plus 0.50% or (iii) one-month LIBOR plus 1.00%, and the LIBOR Rate is reserve-adjusted LIBOR for the applicable interest period, but not less than zero. The Applicable Margin is based on the Firm’s total leverage ratio. The Applicable Margin for Base Rate loans ranges from 0.125% to 0.500% and the Applicable Margin for LIBOR Rate loans ranges from 1.125% to 1.50%. The Amendment included customary provisions relating to the transition from LIBOR as the benchmark interest rate under the Credit Agreement, including providing for a Benchmark Replacement option (as defined in the Credit Agreement) to replace LIBOR. The Firm will pay a quarterly non-refundable commitment fee equal to the

Applicable Margin on the average daily unused portion of the Commitment (swingline loans do not constitute usage for this purpose). The Applicable Margin for the commitment fee is based on the Firm’s total leverage ratio and ranges between 0.20% and 0.30%.The Firm will continually be subject to certain affirmative and negative covenants including (but not limited to), the maintenance of a fixed charge coverage ratio of no less than 1.25 to 1.00 and the maintenance of a total leverage ratio of no greater than 3.50 to 1.00. The numerator in the fixed charge coverage ratio is defined pursuant to the Credit Facility as earnings before interest expense, income taxes, depreciation and amortization, stock-based compensation expense and other permitted items pursuant to our Credit Facility (disclosed as “Consolidated EBITDA”), less cash paid for capital expenditures, income taxes and dividends. The denominator is defined as Kforce’s fixed charges such as interest expense and principal payments paid or payable on outstanding debt other than borrowings under the Credit Facility. The total leverage ratio is defined pursuant to the Credit Facility as total indebtedness divided by Consolidated EBITDA. Our ability to make distributions or repurchases of equity securities could be limited if an event of default has occurred. Furthermore, our ability to repurchase equity securities in excess of $25.0 million over the last four quarters could be limited if (a) the total leverage ratio is greater than 3.00 to 1.00 and (b) the Firm’s availability, inclusive of unrestricted cash, is less than $25.0 million.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and footnotes normally required by GAAP for complete financial statements have been condensed or omitted pursuant to those rules and regulations, although management believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2020 Annual Report on Form 10-K. In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation. The Unaudited Condensed Consolidated Balance Sheet as of December 31, 2020 was derived from our audited Consolidated Balance Sheet as of December 31, 2020, as presented in our 2020 Annual Report on Form 10-K.

Principles of Consolidation

Principles of ConsolidationThe unaudited condensed consolidated financial statements include the accounts of Kforce Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. References in this document to “Kforce,” the “Company,” “we,” the “Firm,” “management,” “our” or “us” refer to Kforce Inc. and its subsidiaries, except where the context indicates otherwise.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most critical of these estimates and assumptions relate to the following: allowance for credit losses; income taxes; self-insured liabilities for health insurance; and the impairment of goodwill, other long-lived assets and the equity method investment. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates. The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, have been and may continue to be uncertain, rapidly changing and difficult to predict. Therefore, our accounting estimates and assumptions might change materially in future periods in response to the COVID-19 pandemic.

Earnings per Share

Earnings per ShareBasic earnings per share is computed as net income divided by the weighted average number of common shares outstanding (“WASO”) during the period. WASO excludes unvested shares of restricted stock. Diluted earnings per share is computed by dividing net income by diluted WASO. Diluted WASO includes the dilutive effect of potentially dilutive securities such as unvested shares of restricted stock using the treasury stock method, except where the effect of including potential common shares would be anti-dilutive.

New Accounting Standards, Recently Adopted Accounting Standards

New Accounting Standards

Recently Adopted Accounting Standards

In August 2018, the FASB issued authoritative guidance regarding changes to the disclosure requirement for defined benefit plans including additions and deletions to certain disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The guidance was effective for fiscal periods beginning after December 15, 2020, with the retrospective method required for all periods presented. The Company adopted the provisions of this new accounting standard at the beginning of fiscal year 2021. This guidance did not have a financial impact on the Company’s financial statements.

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Reportable Segments (Tables)

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Operations of reportable segments

The following table provides information on the operations of our segments (in thousands):

	Tech		FA		Total
Three Months Ended September 30,
2021
Revenue	$	337,230	$	65,495	$	402,725
Gross profit	$	95,934	$	23,330	$	119,264
Operating and other expenses					$	91,446
Income from operations, before income taxes					$	27,818
2020
Revenue	$	260,251	$	105,173	$	365,424
Gross profit	$	71,960	$	31,918	$	103,878
Operating and other expenses					$	78,098
Income from operations, before income taxes					$	25,780
Nine Months Ended September 30,
2021
Revenue	$	927,518	$	242,046	$	1,169,564
Gross profit	$	258,449	$	78,428	$	336,877
Operating and other expenses					$	260,882
Income from operations, before income taxes					$	75,995
2020
Revenue	$	782,785	$	260,867	$	1,043,652
Gross profit	$	216,606	$	79,157	$	295,763
Operating and other expenses					$	243,441
Income from operations, before income taxes					$	52,322

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Disaggregation of Revenue (Tables)

9 Months Ended

Sep. 30, 2021

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenues

The following table provides the disaggregation of revenue by segment and type (in thousands):

	Tech		FA		Total
Three Months Ended September 30,
2021
Revenue by type:
Flex revenue	$	330,170	$	59,003	$	389,173
Direct Hire revenue	7,060		6,492		13,552
Total Revenue	$	337,230	$	65,495	$	402,725
2020
Revenue by type:
Flex revenue	$	256,118	$	100,569	$	356,687
Direct Hire revenue	4,133		4,604		8,737
Total Revenue	$	260,251	$	105,173	$	365,424
Nine Months Ended September 30,
2021
Revenue by type:
Flex revenue	$	909,599	$	224,783	$	1,134,382
Direct Hire revenue	17,919		17,263		35,182
Total Revenue	$	927,518	$	242,046	$	1,169,564
2020
Revenue by type:
Flex revenue	$	770,635	$	248,578	$	1,019,213
Direct Hire revenue	12,150		12,289		24,439
Total Revenue	$	782,785	$	260,867	$	1,043,652

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Allowance for Credit Losses (Tables)

9 Months Ended

Sep. 30, 2021

Receivables [Abstract]

Schedule of Allowance for Credit Losses

The following table presents the activity within the allowance for credit losses on trade receivables for the nine months ended September 30, 2021 (in thousands):

Allowance for credit losses, January 1, 2021	$	2,757
Current period provision (credit)	(139)
Write-offs charged against the allowance, net of recoveries of amounts previously written off	(987)
Allowance for credit losses, September 30, 2021	$	1,631

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Other Assets, Net (Tables)

9 Months Ended

Sep. 30, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of other assets, net

Other assets, net consisted of the following (in thousands):

	September 30, 2021		December 31, 2020
Assets held in Rabbi Trust	$	39,418	$	36,164
Right-of-use assets for operating leases, net	16,351		16,835
Capitalized software, net (1)	15,243		12,802
Equity method investment (2)	15,779		10,488
Deferred loan costs, net	236		501
Other non-current assets	1,038		785
Total Other assets, net	$	88,065	$	77,575

(1) Accumulated amortization of capitalized software was $35.2 million and $34.0 million as of September 30, 2021 and December 31, 2020, respectively.

(2) In June 2019, Kforce entered into a joint venture resulting in a 50% noncontrolling interest in WorkLLama, LLC (“WorkLLama”), which is accounted for as an equity method investment. The loss on this WorkLLama investment was $0.7 million and $1.7 million for the three and nine months ended September 30, 2021, respectively. In addition, Kforce contributed $7.0 million and $4.0 million of capital during the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively. Refer to Note M - “Commitments and Contingencies” for more information on contingencies related to WorkLLama.

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Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2021

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Liabilities

The following table provides information on certain current liabilities (in thousands):

	September 30, 2021		December 31, 2020
Accounts payable and other accrued liabilities:
Accounts payable	$	41,836	$	20,177
Accrued liabilities	36,147		15,356
Total Accounts payable and other accrued liabilities	$	77,983	$	35,533
Accrued payroll costs:
Payroll and benefits	$	60,402	$	38,257
Payroll taxes	7,623		21,842
Health insurance liabilities	4,184		4,641
Workers’ compensation liabilities	797		1,109
Total Accrued payroll costs	$	73,006	$	65,849

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Other Long-Term Liabilities (Tables)

9 Months Ended

Sep. 30, 2021

Other Liabilities Disclosure [Abstract]

Schedule of Other Long-Term Liabilities

Other long-term liabilities consisted of the following (in thousands):

	September 30, 2021		December 31, 2020
Deferred compensation plan	$	38,749	$	34,501
Supplemental executive retirement plan (1)	—		20,628
Operating lease liabilities	12,712		14,692
Interest rate swap derivative instruments	296		1,774
Other long-term liabilities (2)	19,321		19,353
Total Other long-term liabilities	$	71,078	$	90,948

(1) The Company terminated its supplemental executive retirement plan on April 30, 2021 and expects to pay out the obligation in July 2022. The obligation, as of September 30, 2021, is included as part of Accrued liabilities under Current Liabilities in Note G - Current Liabilities, above.

(2) As a result of the application of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), we have approximately $19.3 million in payroll tax deferrals recorded within Other long-term liabilities as of September 30, 2021 and December 31, 2020 (expected to be paid by December 31, 2022).

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Stock Incentive Plans (Tables)

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Summary of Restricted Stock Activity

The following table presents the restricted stock activity for the nine months ended September 30, 2021 (in thousands, except per share amounts):

	Number of  Restricted Stock	Weighted-Average Grant Date Fair Value		Total Intrinsic Value of Restricted Stock Vested
Outstanding at December 31, 2020	1,137	$	33.63
Granted	60	$	50.74
Forfeited	(20)	$	26.93
Vested	(47)	$	25.43	$	2,607
Outstanding at September 30, 2021	1,130	$	34.98

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Derivative Instrument and Hedging Activity (Tables)

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Activity in the Accumulated Derivative Instrument Gain

The following table sets forth the activity in the accumulated derivative instrument activity (in thousands):

	Nine Months Ended September 30,
	2021		2020
Accumulated derivative instrument loss, beginning of period	$	(1,774)	$	(179)
Net change associated with current period hedging transactions	1,478		(1,978)
Accumulated derivative instrument loss, end of period	$	(296)	$	(2,157)

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table sets forth by level, within the fair value hierarchy, estimated fair values on a recurring basis (in thousands):

Asset/(Liability) Measured at Fair Value:	Asset/(Liability)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)
At September 30, 2021
Interest rate swap derivative instruments	$	(296)	$	—	$	(296)	$	—
At December 31, 2020
Interest rate swap derivative instrument	$	(1,774)	$	—	$	(1,774)	$	—

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Summary of Significant Accounting Policies (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Accounting Policies [Abstract]
Health insurance maximum risk of loss liability per employee insurance plan (up to)			$ 600
Health insurance maximum aggregate amount of risk of loss liability for employee insurance plans (up to)			$ 200
Common stock equivalents (in shares)	(669)	(398)	(584)	(328)
Anti-dilutive common stock equivalents (in shares)		266		348

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Reportable Segments - Schedule (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Segment Reporting Information [Line Items]
Revenue	$ 402,725	$ 365,424	$ 1,169,564	$ 1,043,652
Gross profit	119,264	103,878	336,877	295,763
Operating and other expenses	91,446	78,098	260,882	243,441
Income from operations, before income taxes	27,818	25,780	75,995	52,322
Tech
Segment Reporting Information [Line Items]
Revenue	337,230	260,251	927,518	782,785
Gross profit	95,934	71,960	258,449	216,606
FA
Segment Reporting Information [Line Items]
Revenue	65,495	105,173	242,046	260,867
Gross profit	$ 23,330	$ 31,918	$ 78,428	$ 79,157

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Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Disaggregation of Revenue [Line Items]
Total Revenue	$ 402,725	$ 365,424	$ 1,169,564	$ 1,043,652
Flex revenue
Disaggregation of Revenue [Line Items]
Total Revenue	389,173	356,687	1,134,382	1,019,213
Direct Hire revenue
Disaggregation of Revenue [Line Items]
Total Revenue	13,552	8,737	35,182	24,439
Tech
Disaggregation of Revenue [Line Items]
Total Revenue	337,230	260,251	927,518	782,785
Tech | Flex revenue
Disaggregation of Revenue [Line Items]
Total Revenue	330,170	256,118	909,599	770,635
Tech | Direct Hire revenue
Disaggregation of Revenue [Line Items]
Total Revenue	7,060	4,133	17,919	12,150
FA
Disaggregation of Revenue [Line Items]
Total Revenue	65,495	105,173	242,046	260,867
FA | Flex revenue
Disaggregation of Revenue [Line Items]
Total Revenue	59,003	100,569	224,783	248,578
FA | Direct Hire revenue
Disaggregation of Revenue [Line Items]
Total Revenue	$ 6,492	$ 4,604	$ 17,263	$ 12,289

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Allowance for Credit Losses (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for credit losses, beginning balance	$ 2,757
Current period provision (credit)	(139)	$ 2,723
Write-offs charged against the allowance, net of recoveries of amounts previously written off	(987)
Allowance for credit losses, ending balance	1,631
Trade receivables allowance unrelated to accounts receivable	$ 600		$ 400

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Sale of Corporate Headquarters (Details) $ in Millions	May 19, 2021 USD ($)
Sale Leaseback Transaction [Line Items]
Net book value of assets	$ 21.7
Sales price of corporate headquarters building	23.7
Selling, General and Administrative Expenses
Sale Leaseback Transaction [Line Items]
Gain on sale of building	$ 2.0

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Other Assets, Net (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020	Jun. 30, 2019
Schedule of Equity Method Investments [Line Items]
Assets held in Rabbi Trust	$ 39,418	$ 39,418		$ 36,164
Right-of-use assets for operating leases, net	$ 16,351	$ 16,351		16,835
Operating lease, right-of-use assets, financial statement location	Total Other assets, net	Total Other assets, net
Capitalized software, net	$ 15,243	$ 15,243		12,802
Equity method investment	15,779	15,779		10,488
Deferred loan costs, net	236	236		501
Other non-current assets	1,038	1,038		785
Total Other assets, net	88,065	88,065		77,575
Accumulated amortization of capitalized software	35,200	35,200		34,000
Loss on equity method investment		1,709	$ 1,237
Payments to acquire equity method investment		7,000	$ 2,500
WorkLLama
Schedule of Equity Method Investments [Line Items]
Ownership percentage					50.00%
Loss on equity method investment	$ 700	1,700
Payments to acquire equity method investment		$ 7,000		$ 4,000

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Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Accounts payable and other accrued liabilities:
Accounts payable	$ 41,836	$ 20,177
Accrued liabilities	36,147	15,356
Total Accounts payable and other accrued liabilities	77,983	35,533
Accrued payroll costs:
Payroll and benefits	60,402	38,257
Payroll taxes	7,623	21,842
Health insurance liabilities	4,184	4,641
Workers’ compensation liabilities	797	1,109
Total Accrued payroll costs	$ 73,006	$ 65,849

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Other Long-Term Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Apr. 30, 2021	Dec. 31, 2020
Other Significant Noncash Transactions [Line Items]
Deferred compensation plan	$ 38,749		$ 34,501
Supplemental executive retirement plan	0	$ 20,000	20,628
Operating lease liabilities	12,712		14,692
Interest rate swap derivative instruments	296		1,774
Other long-term liabilities	19,321		19,353
Total Other long-term liabilities	$ 71,078		90,948
Operating lease liabilities, financial statement location	Total Other long-term liabilities
Deferred Payroll Taxes | COVID-19
Other Significant Noncash Transactions [Line Items]
Other long-term liabilities	$ 19,300		$ 19,300

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Employee Benefit Plans - Additional Information (Details)	3 Months Ended	4 Months Ended	9 Months Ended
	Sep. 30, 2020 USD ($)	Apr. 30, 2021 USD ($)	Sep. 30, 2021 USD ($) executive	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Retirement Benefits [Abstract]
Number of executives participating in SERP | executive			2
Service cost of plan	$ 87,000		$ 199,000	$ 259,000
Interest cost of plan	$ 124,000		138,000	$ 373,000
Supplemental executive retirement plan		$ 20,000,000	0		$ 20,628,000
Employer contributions to benefit plans		$ 0
Defined benefit plan, recognized net gain (loss) due to terminations			$ 1,800,000

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Stock Incentive Plans - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Apr. 22, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 3.5	$ 2.9	$ 10.5	$ 8.7
Option Or Stock Appreciation Right
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reduction of shares reserved for grant					1
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reduction of shares reserved for grant					2.72
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation expenses	$ 27.3		$ 27.3
Weighted average period expected to be recognized			3 years 1 month 6 days
Restricted Stock | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year
Restricted Stock | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			10 years
2021 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for grant (in shares)					3,900,000

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Stock Incentive Plans - Summary of Restricted Stock Activity (Details) - Restricted Stock $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Sep. 30, 2021 USD ($) $ / shares shares
Number of  Restricted Stock
Outstanding, at beginning of period (in shares) | shares	1,137
Granted (in shares) | shares	60
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period | shares	(20)
Forfeited (in dollars per share) | $ / shares	$ 26.93
Vested (in shares) | shares	(47)
Outstanding, at end of period (in shares) | shares	1,130
Weighted-Average Grant Date Fair Value
Outstanding, as of beginning of period (in dollars per share) | $ / shares	$ 33.63
Granted (in dollars per share) | $ / shares	50.74
Vested (in dollars per share) | $ / shares	25.43
Outstanding, as of end of period (in dollars per share) | $ / shares	$ 34.98
Total Intrinsic Value of Restricted Stock Vested
Vested | $	$ 2,607

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Derivative Instrument and Hedging Activity - Narrative (Details) - Designated as Hedging Instrument - USD ($)	May 31, 2024	May 31, 2023	May 31, 2022	Sep. 30, 2021	Mar. 17, 2020	May 31, 2017
Interest Rate Swap A
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative rate						1.81%
Derivative, notional amount				$ 25,000,000
Interest Rate Swap B
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative rate					0.61%
Derivative, notional amount				$ 75,000,000
Interest Rate Swap B | Scenario, Forecast
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, notional amount	$ 40,000,000	$ 75,000,000	$ 100,000,000

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Derivative Instrument and Hedging Activity - Accumulated Derivative Instrument Gain (Loss) Activity (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Beginning of period	$ 179,935	$ 167,263
End of period	189,969	170,206
Accumulated Derivative Instrument Gain
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Beginning of period	(1,774)	(179)
Net change associated with current period hedging transactions	1,478	(1,978)
End of period	$ (296)	$ (2,157)

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Fair Value Measurements - Schedule of Estimated Fair Values (Details) - Recurring Basis - Interest Rate Swap - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap derivative instruments	$ (296)	$ (1,774)
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap derivative instruments	0	0
Significant Other Observable Inputs  (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap derivative instruments	(296)	(1,774)
Significant Unobservable Inputs  (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap derivative instruments	$ 0	$ 0

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Commitments and Contingencies (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Other Commitments [Line Items]
Unemployment benefits, possible liability with a change in control	$ 45,000
Unemployment benefits, possible liability without a change in control	17,300
Maximum potential capital contributions	22,500
Equity method investment	(7,000)	$ (2,500)
Operating lease not yet commenced, future lease payments	$ 10,900
Operating lease not yet commenced, term of contract	129 months
Operating lease, advances for leasehold improvements	$ 1,600
WorkLLama
Other Commitments [Line Items]
Equity method investment	$ (7,000)		$ (4,000)
Minimum
Other Commitments [Line Items]
Period for providing minimum compensation salary and continuation of certain benefits to executives under employment agreements	6 months
Severance payment if agreement terminated meeting specific criteria, percentage of annual bonus	50.00%
Severance payment if agreement terminated meeting specific criteria, percentage of annual salary	100.00%
Renewal terms of current operating leases	1 year
Maximum
Other Commitments [Line Items]
Period for providing minimum compensation salary and continuation of certain benefits to executives under employment agreements	3 years
Severance payment if agreement terminated meeting specific criteria, percentage of annual bonus	300.00%
Severance payment if agreement terminated meeting specific criteria, percentage of annual salary	300.00%
Renewal terms of current operating leases	5 years

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Subsequent Events (Details) - Subsequent Event - Credit Facility - Revolving Credit Facility	Oct. 20, 2021 USD ($) Rate
Subsequent Event [Line Items]
Initial maximum borrowing capacity	$ 200,000,000
Aggregate additional amount of increase (up to)	$ 150,000,000
Reserve-adjusted LIBOR rate, period minimum	0.00%
Ability to repurchase equity securities under the debt covenants (in excess of)	$ 25,000,000
Leverage ratio under debt covenants, threshold | Rate	300.00%
Availability of unrestricted cash (less than)	$ 25,000,000
Minimum
Subsequent Event [Line Items]
Commitment fee percentage	0.20%
Minimum fixed charge coverage ratio | Rate	125.00%
Maximum
Subsequent Event [Line Items]
Commitment fee percentage	0.30%
Maximum total leverage ratio | Rate	350.00%
LIBOR
Subsequent Event [Line Items]
Interest rate	1.00%
LIBOR | Minimum
Subsequent Event [Line Items]
Interest rate	1.125%
LIBOR | Maximum
Subsequent Event [Line Items]
Interest rate	1.50%
Base Rate
Subsequent Event [Line Items]
Interest rate	0.50%
Base Rate | Minimum
Subsequent Event [Line Items]
Interest rate	0.125%
Base Rate | Maximum
Subsequent Event [Line Items]
Interest rate	0.50%