Kforce Inc.

Second quarter revenue was $349.3 million, up 4.5% year over year, and EPS was $0.73, up approximately 24% year over year. Gross margin was 28.5%, up 140 basis points year over year and 120 basis points sequentially, with operating margin at 5.4% and SG&A at 22.7% of revenue. On a year-to-date basis, operating cash flow was negative $6.7 million, and net debt was $106.8 million at quarter end versus $90.2 million in the prior quarter. For Q3, Kforce guided revenue to $349 million to $357 million and EPS to $0.71 to $0.79, assuming an effective tax rate of about 30%; at the midpoint, revenue would be up about 1.1% sequentially and 6.1% year over year, and EPS would be up 19% year over year.

Joe Liberatore framed the quarter as evidence of a broader cyclical recovery, saying revenue had positively inflected in Q1 and meaningfully expanded in Q2, with Q3 guidance implying more sequential improvement. He emphasized that AI is being approached as both a client opportunity and an internal productivity tool, and argued enterprise adoption is still early, with demand growing for skilled people who can implement AI, data and digital transformation. His tone was confident and constructive, with repeated references to stronger demand, better client behavior and Kforce’s durable strategy and culture.

Jeffrey Hackman highlighted the financial leverage in the quarter: revenue of $349.3 million, EPS of $0.73, gross margin of 28.5%, operating margin of 5.4%, and SG&A of 22.7% of revenue. He said Flex margins improved, Direct Hire was stronger than expected, and Q3 bill pay spreads should stay stable sequentially, while revenue guidance implies 1.1% sequential growth at the midpoint. He also noted year-to-date operating cash flow of negative $6.7 million due to the revenue inflection, expected positive cash generation in the second half of 2026, $9.6 million returned to shareholders in the quarter, and leverage of about 1.4x trailing 12-month EBITDA.

Analysts focused on the durability of order growth, gross margin sustainability, incremental flow-through, AI-related demand, Direct Hire, offshore/India operations, and cash generation. Management said order activity was about 18% year over year in both Q1 and Q2, with the last 3 weeks showing stronger activity, and that Q3 revenue growth should continue with a similar fill ratio. On margins, they pointed to pricing discipline and a richer mix from consulting and offshore, while saying Q3 Flex margin is guided roughly flat to slightly down due to seasonality; on Direct Hire, they said Q3 should be seasonally down and that the business is intentionally kept small as a percentage of revenue. They also said India currently mostly supports solutions work, expands the TAM by enabling work they previously might have declined, and that operating cash should turn positive in the back half of 2026 as receivables are collected.