KFORCE INC (KFRC) Business

ITEM 1.     BUSINESS.

COMPANY OVERVIEW

Kforce Inc., along with its subsidiaries (collectively, “Kforce”), is a solutions firm specializing in technology, finance and accounting, and other professional staffing services. Through our KNOWLEDGEforce®, we help industry-leading companies realize their digital transformation initiatives. We assemble and deploy teams of skilled technical experts who design and deliver solutions tailored to the unique requirements of each client. These scalable and flexible solutions are shaped by our deep market insight, thought leadership and broad experience across multiple industries.

Our integrated approach is rooted in more than 60 years of proven success providing highly skilled professionals on a temporary (“Flex”) basis, whether through traditional staffing assignments or solutions-oriented engagements where we are responsible for delivering defined outcomes. We also support our clients by placing highly skilled professionals in permanent (“Direct Hire”) roles. Each year, approximately 17,000 talented experts work with Fortune 500 and other leading companies, enabling us to achieve Great Results Through Strategic Partnership and Knowledge Sharing®.

Over more than a decade, we have executed meaningful strategic changes to sharpen our focus on technology talent solutions, including completing a series of divestitures of businesses that were outside our core offerings.

During 2025, we expanded our delivery capabilities by establishing a development center in Pune, India, which is frequently ranked as one of the top information technology hubs in India. Beginning in January 2025, our India operations began supporting engagements with our U.S. clients. We believe that combining this offshore capability with our strong U.S. sales and delivery teams and our high-quality vendor network enhances our ability to meet clients’ evolving needs, whether onshore, nearshore or offshore.

Our operating results are influenced by several factors, including:

•the number of billing days;

•seasonal patterns in our clients’ business;

•changes in holidays and vacation days taken, which is usually highest in the fourth quarter of each calendar year; and

•increased payroll-related costs resulting from the annual reset of certain U.S. state and federal employment taxes at the beginning of each calendar year, which negatively impacts gross profit and overall profitability in the first quarter of each calendar year.

Our Technology and Finance and Accounting (“FA”) businesses represent our two reportable segments. Our Technology business comprises 93% of our overall revenues, and the remainder is generated by our FA business. For our Flex services, we provide our clients with qualified individuals (“consultants”), or teams of consultants, on a finite basis when the skills and experience of the consultants are the right match for our clients. For our Direct Hire services, we identify qualified individuals (“candidates”) for permanent placement with our clients. We further describe our two reportable segments below.

Our Technology Business

We deliver talent solutions to our clients across a range of highly skilled disciplines including, but not limited to, systems and applications architecture and development (mobility and web); data management and analytics; cloud architecture and engineering; business and artificial intelligence (“AI”); machine learning; project and program management; and network architecture and security.

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Over time, our service offerings have expanded beyond traditional staffing to include solutions-oriented engagements in response to evolving client demand. Clients continue to prioritize efficient access to specialized talent and view our solutions offering as a cost-effective means for advancing their technology initiatives. This offering has been a meaningful contributor to the financial performance of our Technology business in recent years, and we expect the mix of this offering to continue to grow in the future.

We serve clients across virtually all major industries, with a diversified presence in financial and business services, communications, insurance, retail and technology, among others.

The demand for our solutions engagements contributed positively to the results of our Technology business again in 2025, experiencing growth on a year-over-year basis, while our traditional staff augmentation offering has experienced relatively weaker results. Our integrated strategy initiative seeks to capitalize on the strong relationships we have with world-class companies by utilizing the full breadth of our existing sales teams, recruiters, consulting solutions professionals, and technology practice experts, among other teams within the Firm, to effectively provide higher value engagements to our clients, cost efficiently. We expect to continue to fuel investments in our consulting solutions offering and further integrate this capability within the Firm.

According to the September 2025 report published by Staffing Industry Analysts (“SIA”), temporary technology staffing was projected to decline 2% in 2025 and return to modest growth of 1% in 2026. Technology, as a discipline, continues to be project driven, even amidst generational technological changes like AI. We believe companies must continue investing in technology initiatives to remain competitive and to effectively change how they operate and deliver value to their customers, clients, investors and employees, regardless of macroeconomic conditions.

Secular demand drivers for technology accelerated significantly exiting both the Great Recession - with innovations in mobility and cloud computing, among others - and the 2020 COVID-19 Pandemic, which led to widespread digitalization of businesses and a heightened focus on generative AI. While each economic cycle unfolds differently, we believe the broad and strategic application of technology, including the early-stages of AI, will continue to play an increasingly essential role in enabling businesses. Over the long term, we believe that AI and other innovative technologies will continue to drive higher levels of demand for technology resources and that the pace of change will accelerate. We believe our Technology business is well positioned to meet this demand.

While our Technology business is not immune to economic turbulence, we continue to believe that innovation remains critical for companies seeking to execute their business strategies and maintain relevance in a rapidly changing marketplace.

Our Technology revenues decreased 4.8% year over year (4.5% on a billing day basis) to $1.2 billion in 2025 and marked the third consecutive year of revenue declines (2023-2025), which we believe was largely due to ongoing macroeconomic uncertainties that have largely persisted since the second half of 2022, the shedding of technologists hired during the immediate post-pandemic boom (where our Technology business grew 18% in 2022 and more than 22% in 2021, on a year-over-year billing day basis) and is also reflective of the early phases of technology disruption with generative AI where companies are assessing implications on their business and technological roadmaps. Notably, we experienced sequential growth in the fourth quarter of 2025 of approximately 3% on a billing day basis, which was the highest sequential growth since the second quarter of 2022. The average bill rate was approximately $89 per hour in the fourth quarter of 2025, which was stable on a year-over-year basis. Our average assignment duration was 10 months in 2025, which is also consistent with the prior period.

Our FA Business

In recent years, we have strategically repositioned our FA business to focus on more highly skilled assignments that we believe will be less vulnerable to technological disruption or automation and that align more closely with our Technology business. Our FA talent solutions primarily support traditional finance and accounting roles, including: financial planning and analysis; business intelligence analysis; general accounting; transactional accounting (such as payables, billing, cash applications and receivables); business and cost analysis; and taxation and treasury.

We selectively continue to provide consultants in lower skilled roles to support certain long-standing clients that remain strategically important to our overall success (such as mortgage servicing, customer and call center support, data entry and administrative roles).

We serve FA clients across a diverse set of industries, including financial services, business services, healthcare and manufacturing sectors, among others.

Our overall average bill rate in the fourth quarter of 2025 was approximately $53 per hour, an increase of 3.9% from $51 per hour in the fourth quarter of 2024. This continues the upward trajectory following our repositioning efforts as compared to our average bill rate in the fourth quarter of 2019 of $37 per hour.

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Our FA revenues decreased 12.3% year over year (11.9% on a billing day basis) to $98.7 million in 2025 compared to 2024, which we believe was largely due to the ongoing macroeconomic uncertainties. With that said, FA revenues experienced sequential growth in the third and fourth quarters of 2025 of 6.9% and 2.4%, respectively.

Our Consultants

The majority of our consultants are directly employed by Kforce, including domestic employees and foreign workers whose visas are sponsored by the Firm. As the employer of these consultants, we are responsible for the employer’s share of payroll taxes (“FICA”); federal and state unemployment taxes; workers’ compensation insurance; health, welfare and retirement benefits and other direct labor-related costs.

A key ingredient to our overall success in attracting and retaining our consultants is fostering a positive overall experience, including meaningful and rewarding assignments with world-class companies.

We evaluate the quality of our consultants’ experience through established staffing industry benchmarks and net promoter score (“NPS”) surveys administered by an independent third-party. We also regularly solicit direct feedback from our consultants to identify opportunities to enhance our services. Our 2025 consultant NPS results exceeded current industry averages and achieved the world-class designation, as defined by the independent third-party.

Our Industry Overview and Addressable Market Opportunity

We assist our clients, which are principally market-leading companies across a broad range of industries, in helping to solve their complex business challenges through the application of technologies and assisting them with digitally transforming their businesses. We continue to believe that technology is at the epicenter of how business is conducted and investments in technology are necessary in today’s competitive and disruptive business climate. Our core competency is rooted in the ability to identify and provide highly-qualified and highly-skilled consultants to our clients under a spectrum of engagement structures from traditional staffing assignments to project teams responsible for ultimately delivering technology solutions directly to the client.

From a traditional staffing standpoint, the staffing industry is made up of thousands of companies, most of which are small local firms providing limited service offerings to relatively small local client bases. A report based on revenues published by SIA in 2025 indicated that, in the United States, Kforce is among the largest publicly-traded specialty staffing firms and is the sixth largest technology temporary staffing firm.

According to the September 2025 SIA report, the technology temporary staffing industry and finance and accounting temporary staffing industry are projected to generate revenues of $38 billion and $8 billion, respectively, in 2026. Based on these projected revenues, our market share in our Technology business is approximately 3%. We continue to focus on expanding our market share of the U.S. technology temporary staffing industry and to further invest in our capability to provide higher level technology services and solutions while also integrating that capability within our overall Technology business. We believe that the organic investments that we have made in our solutions capabilities over the last several years has meaningfully expanded Kforce’s total addressable market into the technology services and solutions space. As we continue to deliver on our solutions engagements with clients and further mature our capabilities in our digital, cloud, data and AI, and platform engineering practice areas, we would expect our ability to capture an increasing portion of the overall technology services and solutions market to improve. While reports differ in the size of the technology services and solutions addressable market, IBISWorld has indicated it is greater than $750 billion. While the portion that is addressable by Kforce is debatable, we believe that our addressable market is many times greater than the $38 billion for the technology temporary staffing industry.

Based on data published by the U.S. Bureau of Labor Statistics and SIA, temporary employment figures and trends are important indicators of staffing demand from an economic standpoint. The penetration rate (the percentage of temporary staffing to total employment) decreased to 1.5% in December 2025, from 1.7% in December 2024, while the unemployment rate, increased to 4.4% in December 2025 from 4.1% in December 2024. In addition, the college-level unemployment rate, which we view as a more relevant benchmark for the professional talent markets we serve, increased to 2.8% in December 2025, from 2.4% in December 2024. While these labor market indicators point to broader economic uncertainty, our recent trends suggest that demand for skilled professionals, particularly in technology, continues to be supported by clients’ ongoing project requirements and long‑term transformation initiatives.

Our Strategic Priorities

Our strategic priorities are centered around driving greater long-term shareholder value by outperforming the market from a revenue growth perspective, making prudent investments to enhance our efficiency and effectiveness and that we believe best strategically position Kforce within a rapidly evolving technological marketplace, and significantly improving our profitability levels as we progress towards our financial objectives. We believe the following strategic priorities are important to achieving our objectives.

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Technology Transformation. We have been meaningfully investing in high quality technologies that have significantly bolstered our associates’ productivity and enhanced our ability to effectively and efficiently support our clients, consultants and candidates. Examples of the more significant technological investments have been, among others, (i) the implementation of Microsoft Dynamics as our customer relationship management (CRM) and talent relationship management (TRM) platform, (ii) the implementation of a data and analytics and business intelligence capability and (iii) more recently, making significant progress on the implementation of Workday as our future state enterprise cloud application for Human Capital Management (HCM) and financials. We continue to make investments in our technologies and enhance our sales and delivery capabilities and processes in ways we believe will allow us to better evaluate and shape business opportunities with our clients and more seamlessly match candidates to assignments and projects.

The last significant investment in back-office technologies was more than 15 years ago, despite the complexities of our business and client requirements having grown significantly. We have been primarily meeting these complexities and requirements by incrementally adding internal resources, which is not a scalable solution as we continue to grow and have a greater mix of solutions-oriented engagements. We believe our multi-year transformation program for our back-office technology will enhance the support to our Firm, including our clients, candidates and consultants. Overall, we believe the benefits of streamlining our processes will create a positive impact resulting in increased client satisfaction and improved associate productivity. This multi-year effort was initiated following a comprehensive assessment of our current technological position, which confirmed our belief that we have a tremendous opportunity to fundamentally transform and create advancements in our back-office functions.

We made significant progress related to the implementation of Workday over the last few years with our expected go-live event to be in early 2027. We expect to continue making significant investments in 2026 towards this go-live in certain areas, including comprehensive data validation and end-to-end testing, deployment preparation activities and readiness for post-implementation support. We remain committed to disciplined execution of this initiative and to ensuring a successful implementation of Workday in 2027 and subsequent realization of the expected benefits.

Integrated Strategy. Our technology service offering has evolved over the years beyond traditional staffing assignments to include more consulting and solutions-oriented engagements based on the demand we were seeing from our clients. Our clients continue to prioritize efficient access to highly skilled talent and see our services as a cost-effective solution to meet their technology project requirements. While many companies have siloed their staffing and consulting capabilities, our integrated strategy efforts are intended to capitalize on the strong relationships we have with world-class companies by utilizing our existing sales teams, recruiters, consulting solutions professionals and technology practice experts, among other teams within the Firm, to deliver a seamless and connected experience to our clients. We expect that our integrated strategy efforts will result in a differentiated experience, leading to accelerated revenue growth and improved profitability levels as we make progress towards our longer-term financial objectives of approximately 8% operating margin at $1.7 billion in annual revenues and double-digit operating margins at slightly greater than $2 billion in annual revenues.

Evolving our Nearshore and Offshore Delivery Strategy. Historically, the overwhelming majority of our revenues were generated by helping our clients solve their most complex technology challenges through our onshore delivery model. This onshore delivery capability was complemented by a high-quality vendor network where our clients required a multi-shore delivery model (onshore, nearshore and offshore). An increasingly important vehicle to providing cost-effective solutions is the ability to source highly skilled talent outside of the United States. Following a period of comprehensive due diligence, including an executive trip in August 2024 to India, we made the strategic decision to establish an offshore delivery capability in Pune, India referred to as Knowledgeforce India. Pune is a premier technology hub in India, and we are optimistic about leveraging this capability to further enhance our service offerings to our clients. Beginning in January 2025, Knowledgeforce India began supporting project engagements for our U.S. clients. We believe that combining this offshore capability with our strong U.S. sales and delivery teams and our high-quality vendor network enhances our ability to meet clients’ evolving needs, whether onshore, nearshore or offshore.

Empowering Strategy Through AI. Our adoption of and commitment to AI is a continuation of the values, mission and identity we have established over 60 years to fully embrace and utilize technology as it evolves. We have strategically concentrated our technology platforms with market-leading providers, most namely Microsoft and Workday (implementation is in progress), and expect to benefit from their tremendous investments in AI capabilities within their platforms. In addition, we are thoughtfully incorporating AI capabilities into areas of our operations to enhance efficiency and support our teams. These efforts focus on responsible use, employee training and ongoing evaluation to ensure that the tools are applied in a manner consistent with our longstanding principles. While we believe AI may complement aspects of our existing processes, the scope and impact of future adoption may change as we continue to assess opportunities, benefits and risks. We will continue to monitor developments and adjust our approach as the technology develops.

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Competition

We operate in a highly competitive and fragmented staffing industry comprised of large, mature, global and national providers and many local staffing and solutions firms. Within our solutions offerings, we also face competition from global, national and regional accounting, consulting and advisory firms, as well as national and regional strategic consulting and systems implementation firms.

We believe that our competitive advantage lies in a combination of factors: long-standing client relationships with primarily Fortune 500 and other leading companies; greater focus with more than 93% of our business concentrated in providing technology staffing and solutions services; breadth of service offerings from traditional staffing assignments to solutions engagements; providing timely access to highly qualified talent, which allows us to deliver our solutions at scale; and dedicated, tenured and passionate associates. We believe our long-established brand reputation reinforces our position as a trusted partner while upholding a strong compliance framework to ensure regulatory adherence. Together, these strengths enable us to provide high-quality solutions in an increasingly competitive market.

Managed Service Providers (“MSP”) or Vendor Management Organizations (“VMO”) are utilized by many of our clients for the management and procurement of our services. We do not consider these organizations as a competitive threat. Generally, MSPs and VMOs standardize processes through the use of Vendor Management Systems (“VMS”), which are tools used to aggregate spend and measure supplier performance. VMS providers are also offered through independent providers. MSPs, VMOs and/or VMS providers charge staffing firms administrative fees typically ranging from 1% to 4% of revenue.

In addition, the aggregation of services by MSPs for their clients into a single program can result in significant buying power and, thus, pricing power. Therefore, the use of MSPs by our clients has, in certain instances, resulted in gross margin compression, but has also led to incremental client share through our client’s vendor consolidation efforts given our reputation for providing superior services. Kforce does not currently provide MSP or VMO services directly to our clients; rather, our strategy has been to work with MSPs, VMOs and VMS providers that enable us to better extend our services to current and prospective clients.

To attract consultants and candidates, we emphasize our ability to provide: competitive compensation and benefits; high quality and challenging assignments with market-leading companies; scheduling flexibility and permanent placement opportunities, all of which are important to Kforce being the employer of choice.

Because individuals pursue other employment opportunities on a regular basis, it is important that we respond to market conditions affecting these individuals and focus on our consultant relationship objectives. Additionally, in certain markets, from time to time we have experienced significant pricing pressure as a result of our competitors’ pricing strategies, which may result in us not being able to effectively compete or choosing to not participate in certain business that does not meet our profitability standard.

Regulatory Environment

Staffing and solutions firms are generally subject to the following types of government regulations and enforcement: (1) regulation of the employer/employee relationship, such as wage and hour regulations, payroll tax withholding and reporting, immigration/visa regulations, as well as social security and other retirement, anti-discrimination, employee benefits and workers’ compensation regulations; (2) registration, licensing, recordkeeping and reporting requirements; and (3) worker classification regulations.

As the employer of the majority of our consultants, Kforce is responsible for the employer’s share of FICA, federal and state unemployment taxes, workers’ compensation insurance, providing healthcare and retirement plan options, and other direct labor costs relating to our employees. We also provide paid leave for our core associates and certain consultants. We have no collective bargaining agreements covering any of our employees, have not experienced any material labor disruption and are unaware of any current efforts or plans of our employees to organize.

Because we operate in a complex regulatory environment, one of our top priorities is compliance. For more discussion of the potential impact that the regulatory environment could have on Kforce’s financial results, refer to Item 1A. Risk Factors.

Insurance

Kforce maintains a number of insurance policies, including directors and officers, cybersecurity, professional liability, employment practices liability, general liability, umbrella and excess liability, excess health insurance coverage, workers’ compensation and employers’ liability, crime, property, fiduciary, automobile liability, and liability for certain foreign exposure. These policies provide coverage, subject to certain terms, conditions and limits of liability and deductibles, for certain liabilities that may arise from Kforce’s operations. There can be no assurance that any of the above policies will be adequate for our needs, or that we will maintain all such policies in the future.

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Human Capital Management

For over 60 years, Kforce’s values have been rooted in integrity, compassion, and stewardship. As a human capital solutions business, we are driven by the desire to serve others, provide meaningful work opportunities to a diverse workforce and strengthen the communities in which we operate.

Our work environment is shaped by our people. We maintain a commitment to our employees’ well-being, flexibility and balance, and learning and development. We believe these initiatives are a testament to how much we value and invest in our people.

Well-Being, Flexibility and Balance

The success of our business is fundamentally connected to the well-being of our people. We provide our associates and consultants, and their families, with access to a variety of flexible and convenient health and wellness programs. These programs are part of our thoughtful and comprehensive response to support the physical and mental health of our employees by providing tools and resources that each employee can use to improve or maintain their health.

Our Office Occasional® work environment (remote-first, office occasionally) is supported by flexibility and choice and empowered by trust and technology. The shift in strategy following the pandemic allowed us to introduce a new design, which led to the streamlining of our overall physical real estate footprint. We believe that our Office Occasional® model allows our associates to design their workdays; thus, additionally contributing to their health and well-being.

Learning and Development

To turn a job into a career, we believe people need clear and attainable paths to grow. We are committed to investing in the tools, resources and trainings necessary for our people to excel in all stages of their career. We believe our leadership development programs help people grow their skills from the moment they join our Firm through the most senior level of their careers.

At December 31, 2025, Kforce employed over 1,600 associates and had approximately 7,800 consultants on assignment with our clients, of which a significant majority of these consultants are employed directly by Kforce.

Availability of Reports and Other Information

Our internet address is www.kforce.com. We post our filings, free of charge, at https://investor.kforce.com the same day they are electronically filed with, or furnished to, the SEC, including our annual and quarterly reports on Forms 10-K and 10-Q, current reports on Form 8-K, proxy statements, and any amendments to those reports or statements. The content on any website referred to in this Form 10-K is not incorporated by reference in this Form 10-K unless expressly noted.