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, 2020~~March 31, 2021


☐			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

☒

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, 2020~~April 30, 2021 was ~~21,956,078.~~21,914,936.

Table of Contents

KFORCE INC.

TABLE OF CONTENTS

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.

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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,					Three Months Ended March 31,
		2020		2019		2020		2019				2021		2020
Revenue	Revenue	$	365,424	$	345,558	$	1,043,652	$	1,011,157	Revenue		$	363,225	$	335,208
Direct costs	Direct costs	261,546		242,747		747,889		714,144		Direct costs		264,543		240,684
Gross profit	Gross profit	103,878		102,811		295,763		297,013		Gross profit		98,682		94,524
Selling, general and administrative expenses	Selling, general and administrative expenses	75,852		79,223		235,614		237,053		Selling, general and administrative expenses		78,029		79,216
Depreciation and amortization	Depreciation and amortization	1,308		1,427		4,081		4,619		Depreciation and amortization		1,202		1,393
Income from operations	Income from operations	26,718		22,161		56,068		55,341		Income from operations		19,451		13,915
Other expense, net	Other expense, net	938		880		3,746		2,206		Other expense, net		1,285		1,381
Income from continuing operations, before income taxes		25,780		21,281		52,322		53,135
Income from operations, before income taxes										Income from operations, before income taxes		18,166		12,534
Income tax expense	Income tax expense	7,017		5,374		14,568		13,178		Income tax expense		4,905		3,428
Income from continuing operations		18,763		15,907		37,754		39,957
Income from discontinued operations, net of tax		0		(967)		0		76,697

Net income	Net income	18,763		14,940		37,754		116,654		Net income		13,261		9,106
Other comprehensive loss:	Other comprehensive loss:									Other comprehensive loss:
Defined benefit pension plans, no tax benefit										Defined benefit pension plans, no tax benefit		47		0
Change in fair value of interest rate swaps, net of tax	Change in fair value of interest rate swaps, net of tax	118		(113)		(1,473)		(871)		Change in fair value of interest rate swaps, net of tax		939		(1,121)
Comprehensive income	Comprehensive income	$	18,881	$	14,827	$	36,281	$	115,783	Comprehensive income		$	14,247	$	7,985

Earnings per share – basic:
Continuing operations		$	0.90	$	0.70	$	1.79	$	1.68
Discontinued operations		0		(0.04)		0		3.24

Earnings per share – basic	Earnings per share – basic	$	0.90	$	0.66	$	1.79	$	4.92	Earnings per share – basic		$	0.63	$	0.42
Earnings per share – diluted:
Continuing operations		$	0.89	$	0.68	$	1.77	$	1.65
Discontinued operations		0		(0.04)		0		3.16

Earnings per share – diluted	Earnings per share – diluted	$	0.89	$	0.64	$	1.77	$	4.81	Earnings per share – diluted		$	0.62	$	0.42

Weighted average shares outstanding – basic	Weighted average shares outstanding – basic	20,782		22,770		21,041		23,723		Weighted average shares outstanding – basic		20,932		21,553
Weighted average shares outstanding – diluted	Weighted average shares outstanding – diluted	21,180		23,342		21,369		24,278		Weighted average shares outstanding – diluted		21,361		21,860

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

Table of Contents

KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	101,273	$	19,831	Cash and cash equivalents	$	101,341	$	103,486
Trade receivables, net of allowances of $4,101 and $2,078, respectively		230,002		217,929
Trade receivables, net of allowances of $2,216 and $3,204, respectively						Trade receivables, net of allowances of $2,216 and $3,204, respectively	244,226		228,373
Prepaid expenses and other current assets	Prepaid expenses and other current assets	7,413		7,475		Prepaid expenses and other current assets	6,904		7,033
Total current assets	Total current assets	338,688		245,235		Total current assets	352,471		338,892
Fixed assets, net	Fixed assets, net	27,671		29,975		Fixed assets, net	26,373		26,804
Other assets, net	Other assets, net	73,871		72,838		Other assets, net	79,980		77,575
Deferred tax assets, net	Deferred tax assets, net	12,956		8,037		Deferred tax assets, net	9,490		10,738
Goodwill	Goodwill	25,040		25,040		Goodwill	25,040		25,040
Total assets	Total assets	$	478,226	$	381,125	Total assets	$	493,354	$	479,049
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and other accrued liabilities	Accounts payable and other accrued liabilities	$	40,821	$	33,232	Accounts payable and other accrued liabilities	$	38,382	$	35,533
Accrued payroll costs	Accrued payroll costs	75,086		44,001		Accrued payroll costs	77,883		65,849
Current portion of operating lease liabilities	Current portion of operating lease liabilities	5,190		5,685		Current portion of operating lease liabilities	4,487		5,520
Income taxes payable	Income taxes payable	6,181		878		Income taxes payable	4,622		964
Other current liabilities	Other current liabilities	500		1,168		Other current liabilities	198		300
Total current liabilities	Total current liabilities	127,778		84,964		Total current liabilities	125,572		108,166
Long-term debt – credit facility	Long-term debt – credit facility	100,000		65,000		Long-term debt – credit facility	100,000		100,000
Other long-term liabilities	Other long-term liabilities	80,242		63,898		Other long-term liabilities	91,126		90,948
Total liabilities	Total liabilities	308,020		213,862		Total liabilities	316,698		299,114
Commitments and contingencies (Note M)
Commitments and contingencies (Note L)						Commitments and contingencies (Note L)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.01 par; 15,000 shares authorized, NaN issued and outstanding	Preferred stock, $0.01 par; 15,000 shares authorized, NaN issued and outstanding	0		0		Preferred stock, $0.01 par; 15,000 shares authorized, NaN issued and outstanding	0		0
Common stock, $0.01 par; 250,000 shares authorized, 72,247 and 72,202 issued, respectively		722		722
Common stock, $0.01 par; 250,000 shares authorized, 72,615 and 72,600 issued, respectively						Common stock, $0.01 par; 250,000 shares authorized, 72,615 and 72,600 issued, respectively	726		726
Additional paid-in capital	Additional paid-in capital	469,177		459,545		Additional paid-in capital	476,165		472,378
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(2,999)		(1,526)		Accumulated other comprehensive loss	(3,437)		(4,423)
Retained earnings	Retained earnings	374,767		350,545		Retained earnings	396,849		388,645
Treasury stock, at cost; 50,291 and 49,277 shares, respectively		(671,461)		(642,023)
Treasury stock, at cost; 50,740 and 50,427 shares, respectively						Treasury stock, at cost; 50,740 and 50,427 shares, respectively	(693,647)		(677,391)
Total stockholders’ equity	Total stockholders’ equity	170,206		167,263		Total stockholders’ equity	176,656		179,935
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	478,226	$	381,125	Total liabilities and stockholders’ equity	$	493,354	$	479,049

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

Table of Contents

KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(IN THOUSANDS)


		Common Stock			Additional Paid-In Capital				Accumulated Other Comprehensive Loss								Treasury Stock							Total Stockholders’ Equity			Common Stock				Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss)						Treasury Stock					Total Stockholders’ Equity
		Shares	Amount								Retained Earnings				Shares			Amount					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 (Note E), net of tax of $75		—	—		—				—				(214)				—		—					(214)
Issuance for stock-based compensation and dividends, net of forfeitures		(4)	—		218				—				(218)				—		—					0
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 swaps, 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
Balance, December 31, 2020																										Balance, December 31, 2020	72,600		$	726		$	472,378			$	(4,423)		$	388,645		50,427		$	(677,391)		$	179,935
Net income	Net income	—	—		—				—				9,885				—		—					9,885		Net income	—		—		—				—			13,261			—		—			13,261
Issuance for stock-based compensation and dividends, net of forfeitures	Issuance for stock-based compensation and dividends, net of forfeitures	39	—		240				—				(240)				—		—					0		Issuance for stock-based compensation and dividends, net of forfeitures	15		—		271				—			(271)			—		—			0
Stock-based compensation expense	Stock-based compensation expense	—	—		2,903				—				—				—		—					2,903		Stock-based compensation expense	—		—		3,403				—			—			—		—			3,403
Employee stock purchase plan	Employee stock purchase plan	—	—		62				—				—				(5)		72					134		Employee stock purchase plan	—		—		113				—			—			(4)		57			170
Dividends ($0.20 per share)		—	—		—				—				(4,162)				—		—					(4,162)
Change in fair value of interest rate swaps, net of tax benefit of $160		—	—		—				(470)				—				—		—					(470)
Dividends ($0.23 per share)																										Dividends ($0.23 per share)	—		—		—				—			(4,786)			—		—			(4,786)
Defined benefit pension plan, no tax benefit																										Defined benefit pension plan, no tax benefit									47											47
Change in fair value of interest rate swaps, net of tax benefit of $319																										Change in fair value of interest rate swaps, net of tax benefit of $319	—		—		—				939			—			—		—			939
Repurchases of common stock	Repurchases of common stock	—	—		—				—				—				342		(9,213)					(9,213)		Repurchases of common stock	—		—		—				—			—			317		(16,313)			(16,313)
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)				—		—					0
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 swaps, net of tax expense 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
Balance, March 31, 2021																										Balance, March 31, 2021	72,615		$	726	$	476,165			$	(3,437)		$	396,849		50,740		$	(693,647)		$	176,656

~~Table of Contents~~


		Common Stock			Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss)								Treasury Stock							Total Stockholders’ Equity			Common Stock				Additional Paid-In Capital				Accumulated Other Comprehensive Loss						Treasury Stock					Total Stockholders’ Equity
		Shares	Amount								Retained Earnings				Shares			Amount					Shares					Amount						Retained Earnings				Shares			Amount
Balance, December 31, 2018		71,856	$	719			$	447,337			$	1,296			$	237,308		45,822			$	(518,329)					$	168,331
Balance, December 31, 2019																										Balance, December 31, 2019	72,202		$	722		$	459,545			$	(1,526)		$	350,545		49,277		$	(642,023)		$	167,263
Net income	Net income	—	—		—				—				26,855				—		—					26,855		Net income	—		—		—				—			9,106			—		—			9,106
Reclassification of stranded tax effects		—	—		—				168				(168)				—		—					0
Adoption of new accounting standard, net of tax of $75																										Adoption of new accounting standard, net of tax of $75	—		—		—							(214)			—		—			(214)
Issuance for stock-based compensation and dividends, net of forfeitures	Issuance for stock-based compensation and dividends, net of forfeitures	4	—		233				—				(233)				—		—					0		Issuance for stock-based compensation and dividends, net of forfeitures	(4)		—		218				—			(218)			—		—			0
Stock-based compensation expense	Stock-based compensation expense	—	—		2,620				—				—				—		—					2,620		Stock-based compensation expense	—		—		2,896				—			—			—		—			2,896
Employee stock purchase plan	Employee stock purchase plan	—	—		86				—				—				(5)		54					140		Employee stock purchase plan	—		—		93				—			—			(4)		49			142
Dividends ($0.18 per share)		—	—		—				—				(4,406)				—		—					(4,406)
Change in fair value of interest rate swap, net of tax benefit of $95		—	—		—				(280)				—				—		—					(280)
Dividends ($0.20 per share)																										Dividends ($0.20 per share)	—		—		—				—			(4,293)			—		—			(4,293)
Change in fair value of interest rate swap, net of tax benefit of $384																										Change in fair value of interest rate swap, net of tax benefit of $384	—		—		—				(1,121)			—			—		—			(1,121)
Repurchases of common stock	Repurchases of common stock	—	—		—				—				—				432		(14,688)					(14,688)		Repurchases of common stock	—		—		—				—			—			685		(20,380)			(20,380)
Balance, March 31, 2019		71,860	719		450,276				1,184				259,356				46,249		(532,963)					178,572
Net income		—	—		—				—				74,859				—		—					74,859
Issuance for stock-based compensation and dividends, net of forfeitures		5	—		177				—				(177)				—		—					0
Stock-based compensation expense		—	—		3,524				—				—				—		—					3,524
Employee stock purchase plan		—	—		94				—				—				(4)		49					143
Dividends ($0.18 per share)		—	—		—				—				(4,278)				—		—					(4,278)
Change in fair value of interest rate swap, net of tax benefit of $162		—	—		—				(478)				—				—		—					(478)
Repurchases of common stock		—	—		—				—				—				1,048		(37,486)					(37,486)
Balance, June 30, 2019		71,865	719		454,071				706				329,760				47,293		(570,400)					214,856
Net income		—	—		—				—				14,940				—		—					14,940
Issuance for stock-based compensation and dividends, net of forfeitures		9	—		221				—				(221)				—		—					0
Stock-based compensation expense		—	—		2,419				—				—				—		—					2,419
Employee stock purchase plan		—	—		91				—				—				(4)		53					144
Dividends ($0.18 per share)		—	—		—				—				(4,043)				—		—					(4,043)
Change in fair value of interest rate swap, net of tax benefit of $37		—	—		—				(113)				—				—		—					(113)
Repurchases of common stock		—	—		—				—				—				1,169		(40,278)					(40,278)
Balance, September 30, 2019		71,874	$	719	$	456,802			$	593			$	340,436			48,458		$	(610,625)				$	187,925
Balance, March 31, 2020																										Balance, March 31, 2020	72,198		$	722	$	462,752			$	(2,647)		$	354,926		49,958		$	(662,354)		$	153,399

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

Table of Contents

KFORCE INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	37,754	$	116,654	Net income	$	13,261	$	9,106
Adjustments to reconcile net income to cash provided by operating activities:	Adjustments to reconcile net income to cash provided by operating activities:					Adjustments to reconcile net income to cash provided by operating activities:
Deferred income tax provision, net	Deferred income tax provision, net	(4,414)		1,022		Deferred income tax provision, net	931		(126)
Provision for credit losses	Provision for credit losses	2,723		936		Provision for credit losses	(852)		2,229
Depreciation and amortization	Depreciation and amortization	4,081		5,051		Depreciation and amortization	1,202		1,393
Stock-based compensation expense	Stock-based compensation expense	8,707		7,469		Stock-based compensation expense	3,403		2,896
Defined benefit pension plan expense	Defined benefit pension plan expense	632		647		Defined benefit pension plan expense	252		211
Loss on deferred compensation plan investments, net		555		80
Loss on disposal or impairment of assets		1,795		1,077

Noncash lease expense	Noncash lease expense	4,392		4,830		Noncash lease expense	1,114		1,521
Loss on equity method investment	Loss on equity method investment	1,237		359		Loss on equity method investment	491		595
Gain on sale of discontinued operations		0		(79,602)
Other	Other	265		722		Other	242		141
(Increase) decrease in operating assets
Increase in operating assets						Increase in operating assets
Trade receivables, net	Trade receivables, net	(15,085)		(14,987)		Trade receivables, net	(15,001)		(20,176)
Other assets	Other assets	(5,034)		(8,344)		Other assets	(324)		(452)
Increase (decrease) in operating liabilities
Increase in operating liabilities						Increase in operating liabilities
Accrued payroll costs	Accrued payroll costs	31,496		9,583		Accrued payroll costs	12,203		2,129
Other liabilities	Other liabilities	24,767		1,013		Other liabilities	5,504		3,538
Cash provided by operating activities	Cash provided by operating activities	93,871		46,510		Cash provided by operating activities	22,426		3,005
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(5,296)		(7,728)		Capital expenditures	(1,350)		(1,971)
Equity method investment	Equity method investment	(2,500)		(7,500)		Equity method investment	(2,000)		0
Proceeds from the sale of assets held within the Rabbi Trust		3,548		0
Net proceeds from the sale of assets held for sale		0		123,254
Cash (used in) provided by investing activities		(4,248)		108,026

Cash used in investing activities						Cash used in investing activities	(3,350)		(1,971)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from credit facility	Proceeds from credit facility	35,000		80,100		Proceeds from credit facility	0		35,000
Payments on credit facility		0		(86,900)

Repurchases of common stock	Repurchases of common stock	(29,623)		(91,947)		Repurchases of common stock	(16,313)		(19,470)
Cash dividends	Cash dividends	(12,619)		(12,726)		Cash dividends	(4,786)		(4,293)
Payments on other financing arrangements	Payments on other financing arrangements	(939)		(1,353)		Payments on other financing arrangements	(122)		(328)

Other		0		(502)
Cash used in financing activities		(8,181)		(113,328)

Cash (used in) provided by financing activities						Cash (used in) provided by financing activities	(21,221)		10,909
Change in cash and cash equivalents	Change in cash and cash equivalents	81,442		41,208		Change in cash and cash equivalents	(2,145)		11,943
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	19,831		112		Cash and cash equivalents, beginning of period	103,486		19,831
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	101,273	$	41,320	Cash and cash equivalents, end of period	$	101,341	$	31,774

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		Nine Months Ended September 30,					Three Months Ended March 31,
Supplemental Disclosure of Cash Flow Information	Supplemental Disclosure of Cash Flow Information	2020		2019		Supplemental Disclosure of Cash Flow Information	2021		2020
Cash Paid During the Period For:	Cash Paid During the Period For:					Cash Paid During the Period For:
Income taxes	Income taxes	$	13,493	$	16,749	Income taxes	$	332	$	399
Operating lease liabilities	Operating lease liabilities	5,641		6,256		Operating lease liabilities	1,690		1,987
Interest, net	Interest, net	1,924		1,079		Interest, net	634		541
Non-Cash Investing and Financing Transactions:	Non-Cash Investing and Financing Transactions:					Non-Cash Investing and Financing Transactions:
ROU assets obtained from operating leases	ROU assets obtained from operating leases	$	5,722	$	7,224	ROU assets obtained from operating leases	$	243	$	924
Employee stock purchase plan	Employee stock purchase plan	411		427		Employee stock purchase plan	170		142
Contingent contribution for equity method investment		0		1,500

Unsettled repurchases of common stock	Unsettled repurchases of common stock	0		1,060		Unsettled repurchases of common stock	0		910
Equipment acquired under finance leases		0		202

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

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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 ~~2019~~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 ~~2019~~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, ~~2019~~2020 was derived from our audited Consolidated Balance Sheet as of December 31, ~~2019,~~2020, as presented in our ~~2019~~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 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 workers’ compensation;~~insurance; obligations for the pension plan; ~~variable consideration for revenue recognition;~~ and ~~any asset impairments.~~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, ~~actuarially-determined~~ 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.

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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.

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For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~398~~429 thousand and ~~328~~307 thousand common stock equivalents were included in the diluted WASO, respectively. For the three ~~and nine~~ months ended ~~September 30, 2019, 572 thousand~~March 31, 2021 and ~~555 thousand common stock equivalents were included in the diluted WASO, respectively. For the three and nine months ended September 30,~~ 2020, there were ~~266 thousand~~NaN and ~~348~~332 thousand anti-dilutive common stock equivalents, respectively. ~~For the three and nine months ended September 30, 2019, there were insignificant anti-dilutive common stock equivalents.~~

New Accounting Standards

Recently Adopted Accounting Standards

In June 2016, the FASB issued authoritative guidance on accounting for credit losses on financial instruments, including trade receivables, and has since issued subsequent updates to the initial guidance. The amended guidance requires the application of a current expected credit loss model, a new impairment model, which measures expected credit losses based on relevant information, including historical experience, current conditions and reasonable and supportable forecasts. The guidance is effective for annual periods beginning after December 15, 2019. We adopted this standard using the modified retrospective approach as of January 1, 2020, as required. Refer to Note E - “Allowance for Credit Losses” additional accounting policy and transition disclosures related to our allowance for credit losses.

In March 2020, the FASB issued authoritative guidance, which provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions that reference LIBOR and are affected by reference rate reform if certain criteria are met. Entities may adopt the provisions of the new standard as of the beginning of the reporting period when the election is made between March 12, 2020 through December 31, 2022. We adopted this optional standard effective January 1, 2020 using the prospective method, and utilized the optional expedients for cash flow hedges to assume that a hedged forecasted transaction is probable of occurring and that the reference rate will not be replaced for the remainder of a hedging relationship.

~~Accounting Standards Not Yet Adopted~~

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 iswas effective for fiscal periods beginning after December 15, 2020, with the retrospective method required for all periods presented. The ~~adoption~~Company adopted the provisions of this new accounting standard at the beginning of fiscal 2021. This guidance ~~will modify our~~addresses disclosures ~~but we do~~only and did not ~~expect this standard to~~ have ~~a material effect~~an impact on ~~our consolidated~~the Company’s financial statements.

Note B ~~- Discontinued Operations~~

During 2019, management completed the sale of our Government Solutions (“GS”) segment as a result of the Firm’s decision to focus solely on the commercial technical and professional staffing services and solutions space. The GS segment consisted of Kforce Government Solutions, Inc. (“KGS”), our federal government solutions business, and TraumaFX® Solutions, Inc. (“TFX”), our federal government product business. The results of operations for both KGS and TFX have been reported as discontinued operations in our consolidated financial statements for all prior periods presented.

~~The following table summarizes the line items of pretax profit of the GS segment (in thousands):~~

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Revenue $ 0 $ 27,737
Direct costs 0 19,494
Gross profit 0 8,243
Selling, general and administrative expenses 0 6,842
Depreciation and amortization 0 307
Income from discontinued operations 0 1,094
(Loss) gain on sale of discontinued operations (402) 79,602
Other expense, net 0 (436)
(Loss) income from discontinued operations, before income taxes (402) 80,260
Income tax expense 565 3,563
(Loss) income from discontinued operations, net of tax $ (967) $ 76,697

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During the three months ended September 30, 2019, we recorded $0.6 million of income tax expense related to a revision in an estimate of our tax obligation for the sale of KGS, which is included in the Loss on sale of discontinued operations, net of tax.

For the nine months ended September 30, 2019, the accompanying Unaudited Condensed Consolidated Statements of Cash Flows are presented on a combined basis (continuing operations and discontinued operations) and cash provided by operating activities and cash provided by investing activities for discontinued operations were $5.1 million and $118.5 million, respectively.

~~Note C~~ - 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,~~March 31, 2021 and 2020, ~~and 2019,~~ 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			Tech		FA		Total
Three Months Ended September 30,
Three Months Ended March 31,								Three Months Ended March 31,
2021								2021
Revenue								Revenue	$	279,560	$	83,665	$	363,225
Gross profit								Gross profit	$	74,280	$	24,402	$	98,682
Operating and other expenses								Operating and other expenses					$	80,516
Income from operations, before income taxes								Income from operations, before income taxes					$	18,166
2020	2020							2020
Revenue	Revenue	$	260,251	$	105,173	$	365,424	Revenue	$	266,784	$	68,424	$	335,208
Gross profit	Gross profit	$	71,960	$	31,918	$	103,878	Gross profit	$	72,454	$	22,070	$	94,524
Operating and other expenses	Operating and other expenses					$	78,098	Operating and other expenses					$	81,990
Income from continuing operations, before income taxes						$	25,780
2019
Revenue		$	271,999	$	73,559	$	345,558
Gross profit		$	76,436	$	26,375	$	102,811
Operating and other expenses						$	81,530
Income from continuing operations, before income taxes						$	21,281
Nine Months Ended September 30,
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 continuing operations, before income taxes						$	52,322
2019
Revenue		$	792,947	$	218,210	$	1,011,157
Gross profit		$	219,431	$	77,582	$	297,013
Operating and other expenses						$	243,878
Income from continuing operations, before income taxes						$	53,135
Income from operations, before income taxes								Income from operations, before income taxes					$	12,534

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Note DC - Disaggregation of Revenue

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


		Tech		FA		Total			Tech		FA		Total
Three Months Ended September 30,
Three Months Ended March 31,								Three Months Ended March 31,
2021								2021
Revenue by type:								Revenue by type:
Flex revenue								Flex revenue	$	274,784	$	79,063	$	353,847
Direct Hire revenue								Direct Hire revenue	4,776		4,602		9,378
Total Revenue								Total Revenue	$	279,560	$	83,665	$	363,225
2020	2020							2020
Revenue by type:	Revenue by type:							Revenue by type:
Flex revenue	Flex revenue	$	256,118	$	100,569	$	356,687	Flex revenue	$	262,569	$	63,540	$	326,109
Direct Hire revenue	Direct Hire revenue	4,133		4,604		8,737		Direct Hire revenue	4,215		4,884		9,099
Total Revenue	Total Revenue	$	260,251	$	105,173	$	365,424	Total Revenue	$	266,784	$	68,424	$	335,208
2019
Revenue by type:
Flex revenue		$	267,304	$	66,348	$	333,652
Direct Hire revenue		4,695		7,211		11,906
Total Revenue		$	271,999	$	73,559	$	345,558
Nine Months Ended September 30,
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
2019
Revenue by type:
Flex revenue		$	777,227	$	196,760	$	973,987
Direct Hire revenue		15,720		21,450		37,170
Total Revenue		$	792,947	$	218,210	$	1,011,157

Note ED - 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, 2020.~~March 31, 2021.

The following table presents the activity within the allowance for credit losses on trade receivables for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 (in thousands):




Allowance for credit losses, January 1, ~~2020 (1)~~2021	$	~~1,843~~2,757
Current period provision	~~2,723~~ (852)
Write-offs charged against the allowance, net of recoveries of amounts previously written off	~~(900)~~(164)

Allowance for credit losses, ~~September 30, 2020~~March 31, 2021	$	~~3,666~~1,741

~~(1)~~ ~~As a result of the adoption of the new credit losses accounting standard, we recorded a cumulative effect adjustment to increase the allowance for credit losses of $0.3 million as of January 1, 2020.~~

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The allowances on trade receivables presented in the Unaudited Condensed Consolidated Balance Sheets include $0.5 million and $0.4 million ~~and $0.5 million~~ at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, for reserves unrelated to credit losses.

~~Management considered~~During 2020, in response to the ~~ongoing~~ COVID-19 economic and health crisis and its impact on our clients’ ability to pay outstanding ~~receivables. We analyzed~~ receivables, ~~concentrated within specific industries considered to be most significantly impacted, reviewed specific clients with credit ratings that were in a higher risk category~~management performed an in-depth analysis and ~~applied higher credit loss rates in order to estimate our potential credit loss exposure, which resulted in an increase to our~~increased the Company’s allowance for credit ~~losses during~~losses. During the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021, management continued to perform similar analyses and determined that as a result of continued strong collections, low write-off experience, minimal client-specific credit loss concerns, and an overall improvement in the aging of our portfolio, the allowance for credit loss should be reduced.

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Note FE - Other Assets, Net

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


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Assets held in Rabbi Trust	Assets held in Rabbi Trust	$	33,001	$	35,413	Assets held in Rabbi Trust	$	37,231	$	36,164
Right-of-use assets for operating leases, net ~~(1)~~	Right-of-use assets for operating leases, net ~~(1)~~	17,933		18,344		Right-of-use assets for operating leases, net ~~(1)~~	15,907		16,835
Capitalized software, net ~~(2)~~(1)	Capitalized software, net ~~(2)~~(1)	11,955		8,759		Capitalized software, net ~~(2)~~(1)	13,811		12,802
Equity method investment ~~(3)~~(2)	Equity method investment ~~(3)~~(2)	9,432		8,169		Equity method investment ~~(3)~~(2)	11,997		10,488
Deferred loan costs, net	Deferred loan costs, net	589		855		Deferred loan costs, net	413		501

Other non-current assets	Other non-current assets	961		1,298		Other non-current assets	621		785
Total Other assets, net	Total Other assets, net	$	73,871	$	72,838	Total Other assets, net	$	79,980	$	77,575

(1) During the three and nine months ended September 30, 2020, we recognized $0.6 million and $1.5 million, respectively, of expense related to impairment of certain ROU assets, which was recorded in SG&A in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income, due to the Firm’s decisions not to reoccupy certain of our leased offices.

~~(2)~~ Accumulated amortization of capitalized software was ~~$35.0~~$34.4 million and ~~$34.2~~$34.0 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

~~(3)~~(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 ~~equity method~~this WorkLLama investment was ~~$0.1~~$0.5 million and ~~$1.2~~$0.6 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~respectively and was $0.4 million for the three and nine months ended September 30, 2019,~~ respectively. Refer to Note ML - “Commitments and Contingencies” for more information on contingencies related to WorkLLama.

Note GF - Current Liabilities

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

September 30, 2020 December 31, 2019
Accounts payable and other accrued liabilities:
Accounts payable $ 23,776 $ 20,267
Accrued liabilities 17,045 12,965
Total Accounts payable and other accrued liabilities $ 40,821 $ 33,232
Accrued payroll costs:
Payroll and benefits $ 53,491 $ 38,035
Health insurance liabilities 5,426 3,907
Payroll taxes (1) 15,117 992
Workers’ compensation liabilities 1,052 1,067
Total Accrued payroll costs $ 75,086 $ 44,001

~~(1)~~ On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law, which includes provisions that allow for, among other things, the deferment of employer social security payments. As of September 30, 2020, we have approximately $12.7 million in deferred payroll tax payments recorded within Accrued payroll costs resulting from the application of the CARES Act.


	March 31, 2021		December 31, 2020
Accounts payable and other accrued liabilities:
Accounts payable	$	28,746	$	20,177
Accrued liabilities	9,636		15,356
Total Accounts payable and other accrued liabilities	$	38,382	$	35,533
Accrued payroll costs:
Payroll and benefits	$	41,516	$	38,257
Payroll taxes	30,512		21,842
Health insurance liabilities	4,720		4,641
Workers’ compensation liabilities	1,135		1,109
Total Accrued payroll costs	$	77,883	$	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, contract liabilities from contracts with customers (such as rebates) and other accrued liabilities. Included within payroll taxes in the table above is approximately $19.3 million in payroll tax deferrals as a result of the Coronavirus Aid, Relief and Economic Security Act (the “CARES ACT”)I, which is expected to be paid in 2021.

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Note HG - Other Long-Term Liabilities

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


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Deferred compensation plan	Deferred compensation plan	$	30,375	$	30,361	Deferred compensation plan	$	36,635	$	34,501
Supplemental executive retirement plan	Supplemental executive retirement plan	18,712		18,080		Supplemental executive retirement plan	20,833		20,628
Operating lease liabilities	Operating lease liabilities	15,895		14,627		Operating lease liabilities	13,813		14,692
Interest rate swap derivative instruments	Interest rate swap derivative instruments	2,157		179		Interest rate swap derivative instruments	516		1,774
Other long-term liabilities (1)	Other long-term liabilities (1)	13,103		651		Other long-term liabilities (1)	19,329		19,353
Total Other long-term liabilities	Total Other long-term liabilities	$	80,242	$	63,898	Total Other long-term liabilities	$	91,126	$	90,948

(1) As a result of the application of the CARES Act, we have ~~approximatel~~approximaytely $~~12.7~~19.3 million in payroll tax ~~payments~~deferrals recorded within Other long-term liabilities as of ~~September 30, 2020.~~March 31, 2021 and December 31, 2020 that is expected to be paid in 2022.

Note IH - Employee Benefit Plans

Supplemental Executive Retirement Plan

Kforce maintains a Supplemental Executive Retirement Plan (“SERP”), which benefits 2 executives. The SERP is a non-qualified benefit plan and does not include elective deferrals of covered executive officers’ compensation.

The following table presents the components of net periodic benefit cost (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019				2021		2020
Service cost	Service cost	$	87	$	65	$	259	$	195	Service cost		$	149	$	86
Interest cost	Interest cost	124		151		373		453		Interest cost		103		125
Net periodic benefit cost	Net periodic benefit cost	$	211	$	216	$	632	$	648	Net periodic benefit cost		$	252	$	211

The service cost is recorded in SG&A and the interest cost is recorded in Other expense, net in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

The projected benefit obligation as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020, was ~~$18.7~~$20.8 million and ~~$18.1~~$20.6 million, respectively, and is recorded in Other long-term liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheets. There is no requirement for Kforce to fund the SERP and, as a result, 0 contributions were made to the SERP during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. Kforce does 0t currently anticipate funding the SERP during the year ended December 31, ~~2020.~~2021.

Kforce’s Board of Directors terminated the SERP effective April 30, 2021. Please see Note M - “Subsequent Events” for additional disclosure.

Note JI - Stock Incentive Plans

On April ~~28, 2020,~~22, 2021, Kforce’s shareholders approved the ~~2020~~2021 Stock Incentive Plan (the ~~“2020~~“2021 Plan”). The ~~2020~~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 ~~2020~~2021 Plan is approximately ~~3.6~~3.9 million. Grants of an option or SAR reduce the reserve by 1 share, while a stock award reduces the reserve by 2.72 shares. The ~~2020~~2021 Plan terminates on April ~~28, 2030.~~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 ~~in order to retain directors, executives~~for attraction and ~~management.~~retention purposes. Restricted stock granted during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 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,~~March 31, 2021 and 2020, stock-based compensation expense from continuing operations was ~~$2.9~~$3.4 million and ~~$8.7 million, respectively. During the three and nine months ended September 30, 2019, stock-based compensation expense from continuing operations was $2.4 million and $7.4~~$2.9 million, respectively.

The following table presents the restricted stock activity for the three months ended March 31, 2021 (in thousands, except per share amounts):

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~~The following table presents the restricted stock activity for the nine months ended September 30, 2020 (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, 2019 1,180 $ 29.51
Granted 57 $ 28.98
Forfeited (12) $ 22.62
Vested (52) $ 29.46 $ 1,530
Outstanding at September 30, 2020 1,173 $ 29.56


	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	15	$	42.82

Vested	(8)	$	21.77	$	389
Outstanding at March 31, 2021	1,144	$	33.83

As of ~~September 30, 2020,~~March 31, 2021, total unrecognized stock-based compensation expense related to restricted stock was ~~$24.0~~$32.8 million, which will be recognized over a weighted-average remaining period of ~~3.1~~3.2 years.

Note KJ - 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% ~~(plus Kforce’s credit spread) and a~~, 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 at September 30, 2020.~~million.

On March 12, 2020, Kforce entered into a forward-starting interest rate swap agreement with Wells Fargo Bank, ~~N.A.~~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% ~~(plus Kforce’s credit spread)~~ and a notional amount of $75.0 million ~~at September 30, 2020, which~~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 ~~interest rate swaps~~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,~~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 ~~Unaudited Condensed~~ Consolidated Financial Statements of Operations and Comprehensive Income. Both Swap A and B have been designated as cash flow hedges and were effective ~~at September 30, 2020.~~as of March 31, 2021. The change in the fair value of the ~~swaps is~~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,				Three Months Ended March 31,
		2020		2019				2021		2020
Accumulated derivative instrument (loss) gain, beginning of period		$	(179)	$	900
Accumulated derivative instrument loss, beginning of period							Accumulated derivative instrument loss, beginning of period	$	(1,774)	$	(179)
Net change associated with current period hedging transactions	Net change associated with current period hedging transactions	(1,978)		(1,165)			Net change associated with current period hedging transactions	1,258		(1,505)

Accumulated derivative instrument loss, end of period	Accumulated derivative instrument loss, end of period	$	(2,157)	$	(265)		Accumulated derivative instrument loss, end of period	$	(516)	$	(1,684)

Note LK - 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 KJ - “Derivative Instruments and Hedging Activity” for a complete discussion of our interest rate swaps.

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There were no transfers into or out of Level 1, 2 or 3 assets or liabilities during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 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) 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)		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, 2020
At March 31, 2021										At March 31, 2021

Interest rate swap derivative instruments	Interest rate swap derivative instruments	$	(2,157)	$	0	$	(2,157)	$	0	Interest rate swap derivative instruments	$	(516)	$	0	$	(516)	$	0
At December 31, 2019
At December 31, 2020										At December 31, 2020

Interest rate swap derivative instrument	Interest rate swap derivative instrument	$	(179)	$	0	$	(179)	$	0	Interest rate swap derivative instrument	$	(1,774)	$	0	$	(1,774)	$	0

Note ML - 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, 2020,~~March 31, 2021, our liability would be approximately ~~$39.5~~$45.0 million if, following a change in control, all of the executives under contract were terminated without ~~good~~ cause by the employer or if the executives resigned for good reason and ~~$16.8~~$17.3 million if, in the absence of a change in control, all of the executives under contract were terminated by Kforce without ~~good~~ cause or if the executives resigned for good reason.

Litigation and Loss Contingencies

Unless otherwise noted below, ~~there~~there have been no material developments with regard to any of the legal proceedings previously disclosed in our ~~2019~~2020 Annual Report on Form ~~10-K and Form 10-Q for the quarterly period ended June 30, 2020.~~

10-K.

On ~~September 3, 2020,~~February 19, 2021, a first amended complaint was filed against Kforce ~~Inc., et al.~~and its client, Verity Health System of California (Verity) in the Superior Court of ~~the State~~California, County of Los Angeles. Ramona Webb v. Kforce Flexible Solutions, LLC, et. al. case no. 20STCV47529. Former consultant Ramona Webb, who worked for client Verity, has sued both Kforce and Verity alleging gender discrimination (sex harassment), disability discrimination, wrongful discharge in violation 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~~public policy, retaliation for engaging in protected activity, failure to ~~bring~~produce employment records, and 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~~claim based on violations of various provisions 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. TheCode. With respect to her individual claims, plaintiff seeks ~~civil penalties, interest,~~to recover medical expenses, past and future economic loss, pain and suffering, punitive damages, attorney’s fees and ~~costs under~~costs. With respect to the ~~Labor Code.~~PAGA claim, Plaintiff seeks to recover on their behalf, on behalf of the State of California, and on behalf of all current and former allegedly aggrieved employees of defendants, the civil penalties provided by PAGA, attorney’s fees and costs. 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 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. 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 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

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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. ~~At this stage in~~On April 22, 2021, the ~~litigation, it~~parties reached a preliminary settlement of the case, which is ~~not feasible~~subject to ~~predict~~approval by the ~~outcome of~~Court. We believe that this matter is unlikely to have a material adverse effect on our business, consolidated financial position, results of operations, or ~~reasonably estimate a range of loss, should a loss occur, from this proceeding.~~

cash flows.

We are 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 of these matters, where appropriate, which are reflected in our unaudited condensed consolidated financial statements. While the ultimate outcome of these matters cannot be determined and any amounts accrued are inherently uncertain estimates, we currently do not expect that these matters, individually or in the aggregate, will have a material effect on our financial position.

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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 were $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 ~~$9.0~~$2.0 million and $4.0 million of capital during the three months ended March 31, 2021 and the year ended December 31, ~~2019 and $2.5 million during the nine months ended September 30, 2020.~~2020, respectively. Refer to Note FE - “Other Assets, Net” for more details on WorkLLama.

Note M - Subsequent Events

Sale of Corporate Headquarters

Kforce entered into a purchase and sale agreement (the “Agreement”) with an independent third party (the “Buyer”) to sell its corporate headquarters for $24.0 million and lease it back for a period of 18 months. This transaction was subject to the completion of due diligence by the Buyer, the negotiation of a lease agreement between the parties, among other items, during an investigation period that concluded on April 19, 2021 (the “Investigation Period”). Up to the conclusion of the Investigation Period, either party could terminate the Agreement for any reason or no reason. While there are certain risks and uncertainties that still exist surrounding the successful closing of this transaction; with the completion of the Investigation Period, Kforce now believes that it is more likely than not that this transaction will close in mid-May 2021. As of March 31, 2021, the net book value of the assets contemplated by the Agreement was approximately $21.5 million. Assuming this transaction closes, we would expect to recognize a gain of approximately $2.0 million in the second quarter of 2021.

Termination of the SERP

Effective April 30, 2021, Kforce’s Board of Directors irrevocably terminated the SERP. The benefits owed to the 2 participants under the SERP as of April 30, 2021 amount to approximately $20 million in the aggregate, which has been fully accrued in Other long-term liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020. Kforce intends on making the benefit payments to the participants no earlier than 12 months and no later than 24 months following the termination date of April 30, 2021.

As a result of the termination of the SERP, Kforce anticipates recognizing a net loss of $2.0 million in the second quarter ending June 30, 2021,

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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~~three months ended ~~September 30, 2020,~~March 31, 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~~three months ended ~~September 30, 2020~~March 31, 2021, increased ~~3.2%~~8.4%, to ~~$1,043.7~~$363.2 million from ~~$1,011.2~~$335.2 million in the comparable period in ~~2019.~~2020. Revenue increased 4.8% and 22.3% for Tech and FA, respectively.

•Flex revenue for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021, increased ~~4.6%~~10.2% on a billing day basis, to ~~$1,019.2~~$353.8 million from ~~$974.0~~$326.1 million in the comparable period in ~~2019.~~2020. Flex revenue ~~decreased 0.8%~~increased 6.3% and ~~increased 26.3%~~26.4%, on a billing day basis for Tech and FA, respectively, on a year-over-year basis. ~~During the second quarter,~~

•Revenues from contracts we secured ~~contracts~~ to support government-sponsored COVID-19 related initiatives (the “COVID-19 Business”) ~~that benefited FA Flex with $51.1~~was $24.0 million ~~and $86.2 million in revenue~~ for ~~the three and nine months ended September 30, 2020, respectively.~~

•~~Flex revenue in Tech increased 1.7% in~~ the three months ended ~~September 30, 2020 versus~~March 31, 2021, which benefited our FA Flex business. Excluding revenues from the ~~three months ended June 30, 2020.~~COVID- 19 Business, our FA Flex business would have declined 12.8% in 2021 on a year-over-year basis.

•Direct Hire revenue for the ~~nine~~three months ended ~~September 30, 2020 decreased 34.3%~~March 31, 2021, increased 3.1% to ~~$24.4~~$9.4 million from ~~$37.2~~$9.1 million in the comparable period in ~~2019, primarily driven by a significant decline in the volume of placements due to the ongoing impact of the COVID-19 pandemic on the economic environment.~~2020 .

•Gross profit margin for the three months ended March 31, 2021, decreased 100 basis points to 27.2%. Flex gross profit margin for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021, decreased 10100 basis points to ~~26.6%~~25.2% from ~~26.7%~~26.2% in the comparable period in ~~2019. For the nine months ended September 30, 2020,~~2020. Flex gross profit ~~increased 30~~margin decreased 70 basis points for Tech due primarily to spread compression as a result of business mix but also a result of higher health insurance and payroll tax costs and decreased ~~160~~200 basis points for ~~FA. The~~FA primarily as a result of the COVID-19 Business ~~negatively impacted FA~~carrying a lower Flex gross profit margin.

•SG&A as a percentage of revenue for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021, decreased to ~~22.6%~~21.5% from ~~23.4%~~23.6% in the comparable period in ~~2019~~2020 due to leverage gained from our revenue growth, associate productivity improvements, reductions in certain areas such as travel and ~~tight management of spend during the pandemic.~~office related expenses given ongoing travel restrictions and a decline in our credit expense.

•Income from continuing operations for the ~~nine~~three months ended ~~September 30, 2020 decreased 5.5%~~March 31, 2021, increased 45.6% to ~~$37.8~~$13.3 million, or ~~$1.77~~$0.62 per share, from ~~$40.0~~$9.1 million, or ~~$1.65~~$0.42 per share, in the comparable period in ~~2019.~~

•In March 2020, Kforce entered into a forward-starting interest rate swap agreement with a fixed interest rate of 0.61% (which is added to the applicable margin under our credit facility), resulting in an increase in the notional amount of our interest rate swaps of $35.0 million, for a total of $100.0 million. We executed this swap in order to take advantage of historically low interest rates and reduce liquidity risk at the onset of the COVID-19 economic and health crisis.2020.

•The Firm returned ~~$42.0~~$21.0 million of capital to our shareholders ~~with a quarterly dividend~~in the form of ~~$12.6 million ($0.60 per share) and~~ open market ~~common stock~~ repurchases ~~of $29.4~~totaling $16.2 million and quarterly dividends totaling $4.8 million during the ~~nine months ended September 30, 2020. In~~year ending March ~~2020, the~~31, 2021. We have $68.4 million under our current Board ~~approved an increase in our stock repurchase authorization to an aggregate of $100.0 million and we have $84.5 million remaining under current authorizations.~~authorization.

•Cash provided by operating activities was ~~$93.9~~$22.4 million during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021, as compared to ~~$46.5~~$3.0 million for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. Our operating cash flows were positively impacted by ~~certain tax payment deferrals,~~ improved profitability, ~~and~~ solid management of our ~~accounts receivable portfolio.~~working capital and payment delays by our clients at the onset of the pandemic in 2020 that impacted operating cash flows in the first quarter of 2020.

•Cash and cash equivalents, net of long-term debt of ~~$100~~$100.0 million, was $1.3 million as of ~~September 30, 2020.~~March 31, 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. We operate through our corporate headquarters in Tampa, Florida and ~~through~~ our various field offices located throughout the United ~~States.~~States (U.S.). As of ~~September 30, 2020,~~March 31, 2021, Kforce employed approximately 2,000 associates, including approximately 1,300 supporting the revenue-generating aspects of our business and weapproximately 700 supporting the revenue-enabling aspects. We also had approximately ~~13,700~~12,100 consultants on assignment ~~(of which approximately 5,000 of these consultants were on assignment supporting the COVID-19 Business, which is expected~~providing flexible staffing services and solutions to ~~be of relatively short-term duration).~~our clients. 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 portfolio of service offerings and client portfolio are key contributors to our performance during ~~this~~the COVID-19 pandemic and long-term financial stability.

~~During~~

In December 2020 and early 2021, the U.S. Food and ~~global macro-economic environments have been severely impacted by~~Drug Administration authorized the distribution and administration of certain vaccines for the prevention of COVID-19 in the U.S. The availability of COVID-19 vaccines, economic stimulus measures initiated in the U.S., among other factors, has significantly lifted the prospects of economic growth in the U.S. While the level of vaccinations and ~~health crisis.~~potential variants of COVID-19 are difficult to predict and could negatively impact our business, growth in our business as accelerated over the last several quarters. From an economic standpoint, total and temporary employment figures and trends have historically been important indicators of staffing demand. ~~These figures and trends have fluctuated significantly during the nine months of 2020 based~~Based on ~~data~~information published by the Bureau of Labor Statistics and Staffing Industry Analysts (“SIA”), these figures and ~~substantial~~trends have been trending positively since the end of the third quarter of 2020. While uncertainty still remains around the future trends and impact on staffing ~~demand. The~~demand, the penetration rate (the percentage of temporary staffing to total employment) remained at 1.9% and the unemployment rate ~~were 1.75% and 7.9%, respectively,~~decreased again to 6.0% in ~~September 2020, which will likely continue to fluctuate significantly~~March 2021, down from 6.2% in December 2020. In the ~~near-term as this economic and health crisis evolves. A report~~latest U.S. staffing industry forecast published by SIA in ~~September 2020 indicates that~~April 2021, the technology temporary staffing industry and finance and accounting temporary staffing industry are estimated to ~~decline~~grow by 9% and ~~17%~~14%, respectively, ~~for 2020.~~

~~Certain sectors~~in 2021, and by 6% and 5%, respectively, in 2022. In addition, SIA noted that the domestic technology staffing market became the largest market segment in 2020, with spend of ~~the U.S. economy have been more acutely impacted by the COVID-19 economic~~nearly $31 billion, and health crisis, such as the hospitality, transportation, retail, entertainment, health services and manufacturing sectors, though very few sectors appear to be immune. Kforce generates revenue within each of the aforementioned sectors of the U.S. economy, although the composition of our revenue by industry is, by intent, diversified. Our top three industries include financial services, business services and telecommunications.

~~During the end of~~overtaking industrial staffing for the first ~~quarter and through the third quarter, the U.S. economy increasingly suffered the adverse effects of the COVID-19 economic and health crisis. Accordingly, we have and will continue to work closely~~time.

We were successful delivering strong results in 2020 with our ~~clients to assist them in navigating these turbulent times. In some cases, this has resulted in~~largest business, Technology, only being down 1% for the reduction or elimination of consultants on previous projects and assignments, reducing bill rates, granting extended payment terms, and/or temporary furloughs for consultants, among other impacts. We also experienced a decrease in our leading indicators, such as job orders for both Flex assignments and Direct Hire placements. However, we believe Kforce has been successful thus far in mitigating the adverse effects due to the concentration of our revenues in technology, which have displayed resiliency during this pandemic, and having a diversified client portfolio serving many industries with no undue concentration in any single client or industry, among other factors.full year 2020. Our client relationships and capability to source and deliver resources at scale ~~has~~ significantly contributed to us securing the COVID-19 Business during 2020. While trends related to ~~assist the U.S. economy during this crisis in areas such as customer service, loan processing and administration. This new business~~our COVID-19 Business are difficult to predict, it contributed ~~$51.1 million and $86.2~~$24.0 million in FA Flex revenue for the three ~~and nine~~ months ended ~~September 30, 2020. The COVID-19 Business~~March 31, 2021 and is expected to continue into the ~~fourth~~second quarter ~~although at lower levels than~~of 2021. While the ~~third quarter, and these contracts are likely shorter-term and non-recurring in nature. The~~ business climate related to this economic and health crisis, along with ~~political uncertainty,~~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 ~~there is significant uncertainty as to the extent and length of the potential impacts.~~

~~Despite certain adverse effects~~delivering strong operating results to our business due to the abrupt economic disruption, we believe our strategic decisions to (i) focus our offerings in the U.S. domestic technology and professional staffing and solutions market, (ii) limit the concentration of Direct Hire revenue (less than 3% of total revenue), (iii) focus on serving Fortune 1000 clients and (iv) maintain a strong balance sheet has resulted in what we believe to be exceptional performance in 2020 and provides us confidence moving forward. In addition, we believe our investments in recent years to implement new and upgrade existing technologies have increased our operating efficiencies and enabled us to be more responsive to our consultants and clients, especially in this remote environment. shareholders.

We have conducted multiple employee satisfaction surveys during this pandemic and the results indicate that our associates have embraced the ingenuity required to work remotely and have been successful in establishing new, productive routines. ~~Given the positive feedback from~~We continue to make great progress in our ~~associates during this~~“Kforce Reimagined” initiative that was started in 2020, which is an effort to position Kforce to provide a more flexible work remote environment, we are taking the time to implement appropriate health and safety measures in each of our offices including, but not limited to, personal protective equipment, social distancing standards and personal accountability measures. Our guiding principle is to ensure the safety and well-being of our employees, consultants and clients. We are also taking this opportunity to challenge each area of our business given that we believe the working environment for ~~Kforce~~our associates. This initiative involves efforts to streamline our real estate footprint and ~~our clients, candidates~~make investments in technology and ~~consultants~~other tools necessary to provide a seamless in-office and remote experience. We believe that the culmination of these efforts will ~~be more flexible in the future.~~provide significant contributions to improving productivity and profitability.

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Operating Results - Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~

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					Three Months Ended
		September 30,				September 30,					March 31,
		2020		2019		2020		2019				2021		2020
Revenue by segment:	Revenue by segment:									Revenue by segment:
Tech	Tech	71.2	%	78.7	%	75.0	%	78.4	%	Tech		77.0	%	79.6	%
FA	FA	28.8		21.3		25.0		21.6		FA		23.0		20.4
Total Revenue	Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%	Total Revenue		100.0	%	100.0	%
Revenue by type:	Revenue by type:									Revenue by type:
Flex	Flex	97.6	%	96.6	%	97.7	%	96.3	%	Flex		97.4	%	97.3	%
Direct Hire	Direct Hire	2.4		3.4		2.3		3.7		Direct Hire		2.6		2.7
Total Revenue	Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%	Total Revenue		100.0	%	100.0	%
Gross profit	Gross profit	28.4	%	29.8	%	28.3	%	29.4	%	Gross profit		27.2	%	28.2	%
Selling, general and administrative expenses	Selling, general and administrative expenses	20.8	%	23.0	%	22.6	%	23.4	%	Selling, general and administrative expenses		21.5	%	23.6	%
Depreciation and amortization	Depreciation and amortization	0.4	%	0.4	%	0.4	%	0.5	%	Depreciation and amortization		0.3	%	0.4	%
Income from operations	Income from operations	7.3	%	6.4	%	5.4	%	5.5	%	Income from operations		5.4	%	4.2	%
Income from continuing operations, before income taxes		7.1	%	6.2	%	5.0	%	5.3	%
Income from continuing operations		5.1	%	4.6	%	3.6	%	4.0	%
Income from discontinued operations, net of tax		—	%	(0.3)	%	—	%	7.6	%
Income from operations, before income taxes										Income from operations, before income taxes		5.0	%	3.7	%

Net income	Net income	5.1	%	4.3	%	3.6	%	11.5	%	Net income		3.7	%	2.7	%

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,							Three Months Ended March 31,
		2020		Increase (Decrease)		2019		2020		Increase (Decrease)		2019				2021		Increase (Decrease)		2020
Tech	Tech													Tech
Flex revenue	Flex revenue	$	256,118	(4.2)	%	$	267,304	$	770,635	(0.8)	%	$	777,227	Flex revenue		$	274,784	4.7	%	$	262,569
Direct Hire revenue	Direct Hire revenue	4,133		(12.0)	%	4,695		12,150		(22.7)	%	15,720		Direct Hire revenue		4,776		13.3	%	4,215
Total Tech revenue	Total Tech revenue	$	260,251	(4.3)	%	$	271,999	$	782,785	(1.3)	%	$	792,947	Total Tech revenue		$	279,560	4.8	%	$	266,784
FA	FA													FA
Flex revenue	Flex revenue	$	100,569	51.6	%	$	66,348	$	248,578	26.3	%	$	196,760	Flex revenue		$	79,063	24.4	%	$	63,540
Direct Hire revenue	Direct Hire revenue	4,604		(36.2)	%	7,211		12,289		(42.7)	%	21,450		Direct Hire revenue		4,602		(5.8)	%	4,884
Total FA revenue	Total FA revenue	$	105,173	43.0	%	$	73,559	$	260,867	19.5	%	$	218,210	Total FA revenue		$	83,665	22.3	%	$	68,424

Total Flex revenue	Total Flex revenue	$	356,687	6.9	%	$	333,652	$	1,019,213	4.6	%	$	973,987	Total Flex revenue		$	353,847	8.5	%	$	326,109
Total Direct Hire revenue	Total Direct Hire revenue	8,737		(26.6)	%	11,906		24,439		(34.3)	%	37,170		Total Direct Hire revenue		9,378		3.1	%	9,099
Total Revenue	Total Revenue	$	365,424	5.7	%	$	345,558	$	1,043,652	3.2	%	$	1,011,157	Total Revenue		$	363,225	8.4	%	$	335,208

2018

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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											Year-Over-Year Revenue Growth Rates
		(Per Billing Day)											(Per Billing Day)
		Q3 2020		Q2 2020		Q1 2020		Q4 2019		Q3 2019			Q1 2021		Q4 2020		Q3 2020		Q2 2020		Q1 2020
Billing Days	Billing Days	64		64		64		62		64		Billing Days	63		62		64		64		64
Tech Flex	Tech Flex	(4.2)	%	(3.0)	%	3.3	%	4.8	%	6.5	%	Tech Flex	6.3	%	0.8	%	(4.2)	%	(3.0)	%	3.3	%
FA Flex	FA Flex	51.6	%	28.7	%	(3.4)	%	(7.6)	%	(5.3)	%	FA Flex	26.4	%	26.0	%	51.6	%	28.7	%	(3.4)	%
Total Flex	Total Flex	6.9	%	3.4	%	1.9	%	2.1	%	3.9	%	Total Flex	10.2	%	5.9	%	6.9	%	3.4	%	1.9	%

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 ~~decreased 4.2% and 0.8%~~increased 6.3% on a billing day basis, during the three ~~and nine~~ months ended ~~September 30, 2020, respectively,~~March 31, 2021, as compared to the same ~~periods~~period in ~~2019. The decline~~2020. Flex revenue in ~~the third quarter was primarily driven by assignment ends by clients that were most significantly impacted late~~our Tech business improved 3.1%, on billing day basis sequentially in the first quarter ~~and early in~~of 2021, which is the ~~second quarter by~~strongest sequential performance that we have on record. Importantly, the ~~economic and health crisis. In addition, while new assignment starts~~growth we experienced during the ~~third~~first quarter ~~were below~~of 2021 accelerated as the quarter progressed. The growth we are experiencing in Tech is being driven by higher levels ~~experienced~~of consultants on assignment as well as an increase in ~~the comparable period in 2019, assignment ends continued to stabilize. Additionally, lower billable hours in our Tech business were partially offset by higher~~ average bill rates, which increased ~~4.6%~~1.3% sequentially and 4.5% year-over-year in the first quarter of 2021. While the overall economy is still feeling the effects of the COVID-19 pandemic, our Tech Flex business displayed a high level of resiliency during the COVID-19 pandemic with Tech Flex revenues only being down approximately 1% for the full year 2020. We have made significant progress in growing our technology consultants on assignment since June 2020. Given the acceleration we are experiencing in Tech Flex growth, we expect revenues in the second quarter of 2021 to grow in the mid to high teens on a year-over-year basis in the third quarter of 2020, due to the demand for higher-skilled consultants. In September 2020, SIA projected that temporary technology staffing would experience a decline of 9% for 2020. Due to the level of resiliency this business has displayed during this pandemic and our progress in growing billable consultants since early June 2020, we expect that revenues for 2020 may be down only 1.5% to 2.0% for the full year. This would imply a slight acceleration in the sequential billing day ~~growth from the third quarter in the fourth quarter of 2020.~~basis. We believe ~~that the current crisis has only strengthened~~ the secular drivers of demand in technology have only strengthened as companies continue to assess their digital transformation efforts and capabilities to conduct business in ~~what may be~~ a more virtual operating environment.

Our FA segment experienced an increase in Flex revenue of ~~51.6% and 26.3%~~24.4% during the three ~~and nine~~ months ended ~~September 30, 2020, respectively,~~March 31, 2021, as compared to the same ~~periods~~period in ~~2019,~~2020, primarily driven by the COVID-19 Business, which contributed approximately ~~$51.1 million and $86.2~~$24.0 million in revenue during the three ~~and nine~~ months ended ~~September 30, 2020, respectively.~~March 31, 2021. This positively impacted FA Flex revenue growth rates by ~~77.0% and 43.8%~~37.8% for the three ~~and nine~~ months ended September 30, 2020, respectively. Although these contracts positively impacted FA Flex during the third quarter and are still expected to benefit fourth quarter revenues, levels are expected to be lower than the third quarter. In September 2020, SIA projected that finance and accounting temporary staffing would decline 17% in 2020.March 31, 2021. As we ~~look to~~move into the ~~fourth~~second quarter ~~FA Flex~~of 2021, we expect overall revenues ~~are expected to decline as compared to the third quarter due to the reduced expectations of COVID-19 Business and partially offset by an acceleration~~ in the ~~sequential billing day growth in~~FA business to remain relatively stable year-over-year as we continue to migrate our ~~remaining~~ FA ~~Flex~~ business ~~in the fourth quarter of 2020 versus third quarter levels.~~towards highly-skilled roles that are less susceptible to technological change, location and automation.

Future forecasts and predictions about the demand for temporary staffing and solutions are inherently uncertain due to the unknown and continued impacts of the current macro-economic environment ~~in which we are currently operating~~ as a result of the COVID-19 economic and health crisis and political uncertainty, and any forward-looking information could fluctuate materially.

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					Three Months Ended
		September 30, 2020 vs. September 30, 2019				September 30, 2020 vs. September 30, 2019					March 31, 2021 vs. March 31, 2020
		Tech		FA		Tech		FA				Tech		FA
Key Drivers - Increase (Decrease)	Key Drivers - Increase (Decrease)									Key Drivers - Increase (Decrease)
Volume - hours billed	Volume - hours billed	$	(20,611)	$	48,497	$	(35,827)	$	68,123	Volume - hours billed		$	1,363	$	27,264
Bill rate	Bill rate	11,196		(14,142)		32,449		(16,042)		Bill rate		11,686		(11,603)
Billable expenses	Billable expenses	(1,771)		(134)		(3,214)		(263)		Billable expenses		(834)		(138)
Total change in Flex revenue	Total change in Flex revenue	$	(11,186)	$	34,221	$	(6,592)	$	51,818	Total change in Flex revenue		$	12,215	$	15,523

2119

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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,					Three Months Ended March 31,
		2020	Increase (Decrease)		2019	2020	Increase (Decrease)		2019			2021	Increase (Decrease)		2020
Tech	Tech	3,207	(7.8)	%	3,478	9,759	(4.6)	%	10,234	Tech		3,428	0.5	%	3,410
FA	FA	3,118	73.3	%	1,799	7,229	34.7	%	5,366	FA		2,376	43.0	%	1,662
Total Flex hours billed	Total Flex hours billed	6,325	19.9	%	5,277	16,988	8.9	%	15,600	Total Flex hours billed		5,804	14.4	%	5,072

For the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, FA Flex hours billed included ~~1,778 and 2,995~~849 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 ~~decreased 26.6% and 34.3%~~increased 3.1% during the three ~~and nine~~ months ended ~~September 30, 2020, respectively,~~March 31, 2021, as compared to the same ~~periods~~period in ~~2019,~~2020, primarily driven by a significant ~~decline~~increase in the ~~volume~~average placement fee during the first quarter of ~~placements due to the uncertain economic environment.~~2021. As we look to the ~~fourth~~second quarter, we expect Direct Hire revenue could approximate ~~third~~first quarter levels.

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					Three Months Ended
		September 30, 2020 vs. September 30, 2019				September 30, 2020 vs. September 30, 2019					March 31, 2021 vs. March 31, 2020
		Tech		FA		Tech		FA				Tech		FA
Key Drivers - Increase (Decrease)	Key Drivers - Increase (Decrease)									Key Drivers - Increase (Decrease)
Volume - number of placements	Volume - number of placements	$	(710)	$	(2,650)	$	(3,980)	$	(9,281)	Volume - number of placements		$	21	$	(973)
Placement fee	Placement fee	148		43		410		120		Placement fee		540		691
Total change in Direct Hire revenue	Total change in Direct Hire revenue	$	(562)	$	(2,607)	$	(3,570)	$	(9,161)	Total change in Direct Hire revenue		$	561	$	(282)

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,					Three Months Ended March 31,
		2020	Increase (Decrease)		2019	2020	Increase (Decrease)		2019			2021	Increase (Decrease)		2020
Tech	Tech	206	(15.2)	%	243	636	(25.3)	%	851	Tech		244	0.4	%	243
FA	FA	316	(36.8)	%	500	871	(43.3)	%	1,536	FA		294	(19.9)	%	367
Total number of placements	Total number of placements	522	(29.7)	%	743	1,507	(36.9)	%	2,387	Total number of placements		538	(11.8)	%	610

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,							Three Months Ended March 31,
		2020		Increase (Decrease)		2019		2020		Increase (Decrease)		2019				2021		Increase (Decrease)		2020
Tech	Tech	$	20,045	3.7	%	$	19,328	$	19,114	3.5	%	$	18,469	Tech		$	19,559	12.8	%	$	17,347
FA	FA	14,557		1.0	%	14,420		$	14,104	1.0	%	$	13,967	FA		$	15,643	17.7	%	$	13,294
Total average placement fee	Total average placement fee	$	16,722	4.4	%	$	16,024	$	16,217	4.1	%	$	15,572	Total average placement fee		$	17,419	16.8	%	$	14,908

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.

2220

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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,							Three Months Ended March 31,
		2020		Increase (Decrease)		2019		2020		Increase (Decrease)		2019				2021		Increase (Decrease)		2020
Tech	Tech	27.7	%	(1.4)	%	28.1	%	27.7	%	—	%	27.7	%	Tech		26.6	%	(2.2)	%	27.2	%
FA	FA	30.3	%	(15.6)	%	35.9	%	30.3	%	(14.9)	%	35.6	%	FA		29.2	%	(9.6)	%	32.3	%
Total gross profit percentage	Total gross profit percentage	28.4	%	(4.7)	%	29.8	%	28.3	%	(3.7)	%	29.4	%	Total gross profit percentage		27.2	%	(3.5)	%	28.2	%

The change in total gross profit percentage for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, as compared to the same period in ~~2019,~~2020, is primarily driven by ~~the~~a 100 basis point decrease in our Flex gross profit margin driven by spread compression, higher healthcare costs, higher payroll taxes and lower margins from the COVID-19 Business. A lower mix of Direct Hire ~~revenue as well as lower Flex gross profit margins on~~revenues also contributed to the ~~COVID-19 Business.~~decline.

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,							Three Months Ended March 31,
		2020		Increase (Decrease)		2019		2020		Increase (Decrease)		2019				2021		Increase (Decrease)		2020
Tech	Tech	26.5	%	(1.1)	%	26.8	%	26.5	%	1.1	%	26.2	%	Tech		25.3	%	(2.7)	%	26.0	%
FA	FA	27.2	%	(5.9)	%	28.9	%	26.9	%	(5.6)	%	28.5	%	FA		25.0	%	(7.4)	%	27.0	%
Total Flex gross profit percentage	Total Flex gross profit percentage	26.7	%	(1.8)	%	27.2	%	26.6	%	(0.4)	%	26.7	%	Total Flex gross profit percentage		25.2	%	(3.8)	%	26.2	%

Overall, our Flex gross profit percentage decreased slightly for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021, as compared to ~~2019,~~2020, although there were notable fluctuations within our segments.

•Tech Flex gross profit margin decreased 3070 basis points for the three months ended ~~September 30, 2020~~March 31, 2021, as compared to the same period in 2019, which was impacted by a decline in the spread between consultant bill and pay rates, partially offset by the impact of a reduction in the amount of billable expenses. Tech Flex gross profit margin increased 30 basis points for the nine months ended September 30, 2020, ~~as compared to the same period in 2019,~~ primarily due to ~~the impact~~spread compression as a result of ~~a reduction~~changes in ~~the amount of billable expenses.~~business mix, higher healthcare costs and higher payroll taxes.

•FA Flex gross profit margin decreased ~~170 basis points and 160~~200 basis points for the three ~~and nine~~ months ended ~~September 30, 2020, respectively,~~March 31, 2021, as compared to the same periods in ~~2019,~~2020, primarily due to spread compression ~~in bill~~ and ~~pay spreads.~~higher healthcare costs. The decrease was also impacted by the COVID-19 Business, which contributed a lower gross profit margin than the rest of the FA portfolio. For the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, the estimated Flex gross profit margin for the COVID-19 Business was ~~25.1%~~23.3%, ~~and 24.9%, respectively,~~ which is roughly ~~420 and 360~~250 basis points ~~respectively,~~ lower than the remaining FA Flex business.

We expect that the positive margin impact of lower billable expenses will continue in the near-term as our clients continue to limit travel for our consultants, but may begin to change if our clients increase their travel requirements. Additionally, our expectation is that the spread between consultant bill and pay rates may be under some pressure in the near-term due to the current economic and health crisis and political uncertainty. Our FA Flex gross profit percentage is expected to be adversely affected, on a year-over-year basis, due to the COVID-19 Business as described above, for the duration of these contracts.

~~Table of Contents~~

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					Three Months Ended
		September 30, 2020 vs. September 30, 2019				September 30, 2020 vs. September 30, 2019					March 31, 2021 vs. March 31, 2020
		Tech		FA		Tech		FA				Tech		FA
Key Drivers - Increase (Decrease)	Key Drivers - Increase (Decrease)									Key Drivers - Increase (Decrease)
Revenue impact	Revenue impact	$	(3,003)	$	9,885	$	(1,729)	$	14,783	Revenue impact		$	3,174	$	4,199
Profitability impact	Profitability impact	(911)		(1,735)		2,474		(4,047)		Profitability impact		(1,909)		(1,585)
Total change in Flex gross profit	Total change in Flex gross profit	$	(3,914)	$	8,150	$	745	$	10,736	Total change in Flex gross profit		$	1,265	$	2,614

SG&A Expenses. Total compensation, commissions, payroll taxes and benefit costs as a percentage of SG&A represented ~~83.3% and 82.1%~~85.7% for the three ~~and nine~~ months ended ~~September 30, 2020, respectively,~~March 31, 2021, as compared to ~~83.2% and 83.3%~~81.3% for the comparable ~~periods~~period in ~~2019, respectively.~~2020. We believe this increase mostly results from the fact that in the first quarter of 2020, we had lower bonus accruals due to the uncertainty of the potential impact of the pandemic on our business. Commissions and other bonus incentives for our revenue-generating talent are variable costs driven primarily by revenue and gross profit levels. Therefore, as gross profit levels change, these expenses would also generally be anticipated to change, but remain relatively consistent as a percentage of revenue.

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

2020 % of Revenue 2019 % of Revenue
Three Months Ended September 30,
Compensation, commissions, payroll taxes and benefits costs $ 63,162 17.3 % $ 65,875 19.1 %
Other (1) 12,690 3.5 % 13,348 3.9 %
Total SG&A $ 75,852 20.8 % $ 79,223 23.0 %
Nine Months Ended September 30,
Compensation, commissions, payroll taxes and benefits costs $ 193,534 18.5 % $ 197,432 19.5 %
Other (1) 42,080 4.1 % 39,621 3.9 %
Total SG&A $ 235,614 22.6 % $ 237,053 23.4 %

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	2021		% of Revenue		2020		% of Revenue




Three Months Ended March 31,
Compensation, commissions, payroll taxes and benefits costs	$	66,874	18.4	%	$	64,367	19.2	%
Other (1)	11,155		3.1	%	14,849		4.4	%
Total SG&A	$	78,029	21.5	%	$	79,216	23.6	%

(1) Includes credit loss expense, lease expense, professional fees, travel, telephone, computer and certain other expenses.

SG&A as a percentage of revenue decreased ~~220 and 80~~210 basis points for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021, as compared to the same periods in ~~2019.~~2020. The decrease is primarily related to leverage from our revenue growth, continued improvements in associate productivity, reductions in certain areas such as travel and office related expenses, ~~given~~declines in credit expense due to larger reserves taken in the ~~impact~~first quarter of 2020 at the onset of the pandemic ~~and overall tight management of spend. We are prioritizing the retention of our most productive people and will continue to monitor the business environment~~given inherent risk and our ~~operating trends and~~efforts to manage ~~our performer headcount accordingly. For the nine months ended September 30, 2020, SG&A was negatively impacted~~spend. These decreases were partially offset by an increase in ~~credit loss expense due to a higher estimated risk of default within~~professional fess driven by our ~~accounts receivable portfolio resulting from the current economic~~investments in information technology initiatives and health crisis, as well as approximately $1.9 million in operating lease and other expenses related to the streamlining of our field offices. During the nine months ended September 30, 2019, SG&A was adversely affected by approximately $2.0 million of expense due to actions taken as a result of the GS divestiture.increased legal costs.

The Firm continues to focus on ~~improving the~~generating increased operating leverage by improved productivity of our associates and ~~expects~~continuing to ~~continue exercising~~exercise solid expense ~~discipline, especially in light of the potential adverse impacts that could occur as a result of the macro-economic uncertainties related to the current economic and health crisis.~~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,							Three Months Ended March 31,
		2020		Increase (Decrease)		2019		2020		Increase (Decrease)		2019				2021		Increase (Decrease)		2020
Fixed asset depreciation (includes finance leases)	Fixed asset depreciation (includes finance leases)	$	957	(19.7)	%	$	1,192	$	3,265	(12.4)	%	$	3,726	Fixed asset depreciation (includes finance leases)		$	810	(31.1)	%	$	1,176
Capitalized software amortization	Capitalized software amortization	351		49.4	%	235		816		(8.6)	%	893		Capitalized software amortization		392		80.6	%	217
Total Depreciation and amortization	Total Depreciation and amortization	$	1,308	(8.3)	%	$	1,427	$	4,081	(11.6)	%	$	4,619	Total Depreciation and amortization		$	1,202	(13.7)	%	$	1,393

Other Expense, Net. Other expense, net for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 was ~~$0.9~~$1.3 million and ~~$3.7 million, respectively. Other expense, net for the three and nine months ended September 30, 2019 was $0.9 million and $2.2~~$1.4 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.

~~Table of Contents~~

During the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, Other expense, net also includes our proportionate share of the loss from WorkLLama, our equity method investment, of ~~$0.1 million and $1.2 million, respectively. Although the~~$0.5 million. The impact of the COVID-19 economic and health crisis remains highly ~~uncertain,~~uncertain. Therefore, it could have a material adverse impact on the fair value of our equity method investment in ~~WorkLLama;~~WorkLLama and if the fair value falls below the book value of the equity method investment, we would be required to evaluate whether an other-than-temporary impairment has occurred.

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~~three months ended ~~September 30,~~March 31, 2021 and 2020 was 27.0% and ~~2019 was 27.8% and 24.8%~~27.3%, respectively. ~~The increase was primarily driven by certain tax provision true-ups recorded during 2020.~~

~~Discontinued Operations, Net of Tax.~~ During 2019, we sold the GS segment and reported it as discontinued operations in the consolidated statements of operations for all periods presented. Refer to Note B - “Discontinued Operations” to the Notes to the Unaudited Condensed Consolidated Financial Statements for a more detailed discussion.

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. ~~For the nine months ended September 30, 2019, Free Cash Flows includes results from discontinued operations.~~

Table of Contents

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


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020

Net cash provided by operating activities	Net cash provided by operating activities	$	93,871	$	46,510	Net cash provided by operating activities	$	22,426	$	3,005
Capital expenditures	Capital expenditures	(5,296)		(7,728)		Capital expenditures	(1,350)		(1,971)
Free cash flow	Free cash flow	88,575		38,782		Free cash flow	21,076		1,034
Change in debt	Change in debt	35,000		(6,800)		Change in debt	—		35,000
Repurchases of common stock	Repurchases of common stock	(29,623)		(91,947)		Repurchases of common stock	(16,313)		(19,470)
Cash dividends	Cash dividends	(12,619)		(12,726)		Cash dividends	(4,786)		(4,293)
Equity method investment	Equity method investment	(2,500)		(7,500)		Equity method investment	(2,000)		—
Net proceeds from the sale of assets held for sale		—		123,254

Other	Other	2,609		(1,855)		Other	(122)		(328)
Change in cash and cash equivalents	Change in cash and cash equivalents	$	81,442	$	41,208	Change in cash and cash equivalents	$	(2,145)	$	11,943

Adjusted EBITDA. “Adjusted EBITDA”, a non-GAAP financial measure, is defined by Kforce as net income before ~~income from discontinued operations, net of tax,~~ 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.

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

~~Table of Contents~~


		2020		2019			2021		2020
Three Months Ended September 30,
Three Months Ended March 31,						Three Months Ended March 31,
Net income	Net income	$	18,763	$	14,940	Net income	$	13,261	$	9,106
Income from discontinued operations, net of tax		—		(967)
Income from continuing operations		18,763		15,907

Depreciation and amortization	Depreciation and amortization	1,308		1,427		Depreciation and amortization	1,202		1,393
Stock-based compensation expense	Stock-based compensation expense	2,908		2,419		Stock-based compensation expense	3,403		2,896
Interest expense, net	Interest expense, net	849		504		Interest expense, net	797		791
Income tax expense	Income tax expense	7,017		5,374		Income tax expense	4,905		3,428
Loss from equity method investment	Loss from equity method investment	103		359		Loss from equity method investment	491		595
Adjusted EBITDA	Adjusted EBITDA	$	30,948	$	25,990	Adjusted EBITDA	$	24,059	$	18,209

Nine Months Ended September 30,
Net income		$	37,754	$	116,654
Income from discontinued operations, net of tax		—		76,697
Income from continuing operations		37,754		39,957
Depreciation and amortization		4,081		4,619
Stock-based compensation expense		8,707		7,382
Interest expense, net		2,533		1,837
Income tax expense		14,568		13,178
Loss from equity method investment		1,237		359
Adjusted EBITDA		$	68,880	$	67,332

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LIQUIDITY AND CAPITAL RESOURCES

To meet our capital and liquidity requirements, we primarily rely on our operating cash flow as well as borrowings under our credit facility. At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had $101.3 million and ~~$19.8~~$103.5 million in cash and cash equivalents, respectively, which consisted primarily of government money market funds. At ~~September 30, 2020~~both March 31, 2021 and December 31, ~~2019,~~2020, we had $100.0 ~~million and $65.0~~ million outstanding under our credit facility, ~~respectively.~~and $198.5 million available under our credit facility. The amounts outstanding under our credit facility were hedged by interest rate swaps, as discussed below.

We believe we were in a position of financial strength before the onset of the economic and health crisis and expect to maintain this strength due to our strong balance sheet, healthy operating cash flows, low capital requirements and $300.0 million credit facility. Although we could experience declines in our revenue and, accordingly, in our profitability over the near term, we believe our working capital, excluding cash, of roughly $110.0 million as of September 30, 2020, provides a reliable source of liquidity. Based on our continued future liquidity assessments (using assumptions that we believe are sufficiently conservative), we continue to believe we are in a position of financial strength and we expect to continue to generate positive cash flows while investing in our business and maintaining our quarterly cash dividend. As the crisis evolves, we will continue to take any actions necessary to improve our liquidity and further fortify our cash position.

The CARES Act includes provisions for, among other things, deferment of the employer portion of social security tax payments, employee retention credits and technical amendments related to depreciation, which allows for retroactive 100% bonus depreciation on qualified improvement property. We benefited from the deferral of social security tax payments, as described below, and expect to continue to benefit from the deferral of social security tax payments for the remainder of 2020. We also benefited from certain employee retention credits during the third quarter. We are in the process of assessing our benefit from the retroactive bonus depreciation and potential further employee retention credits as well as other impacts of the CARES Act on our business.

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; returning capital to our shareholders through our quarterly dividends and common stock repurchase program; maintaining appropriate leverage under our credit facility; investing in our infrastructure to allow sustainable growth via capital expenditures; selectively pursuing acquisition ~~opportunities~~opportunities; and maintaining sufficient liquidity for operations.

In 2019, we sold the GS segment, which has been reflected as discontinued operations. For the nine months ended September 30, 2019, our Unaudited Condensed Consolidated Statements of Cash Flows are presented on a combined basis (continuing operations and discontinued operations) and cash provided by operating activities and cash provided by investing activities for discontinued operations were $5.1 million and $118.5 million, respectively.

Cash provided by operating activities was ~~$93.9~~$22.4 million during the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, as compared to ~~$46.5~~$3.0 million during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 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 increase was primarily driven by the ~~deferral of certain tax payments, including $25.4 million related to the employer portion of social security taxes, which will be paid in 2021 and 2022 as prescribed by the CARES Act,~~ continued positive performance of our accounts receivable portfolio and profitable revenue growth.

Cash used in investing activities was ~~$4.2~~$3.4 million and $2.0 million, during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and March 31, 2020, ~~as compared to cash provided by investing activities of $108.0 million during the nine months ended September 30, 2019, which includes capital expenditures.~~respectively. Cash flows from investing activities for the nine months ended September 30, 2020 includes the receipt of proceeds from the sale of assets held within the Rabbi Trust, as well as payments for capital investedused in ~~WorkLLama. Cash flows from~~ investing activities during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2021 includes ~~the net proceeds from the sale of assets held~~capital expenditures and payments for ~~sale, as well as~~ 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. Assuming that the sale of our corporate headquarters closes in the second quarter, we expect to receive net cash proceeds of approximately $23.0 million. Refer to Note M - “Subsequent Events” in the Notes to Unaudited Condensed Consolidated Financial Statements, included in this report on Form 10-Q, for a complete discussion of the sale of our corporate headquarters.

Cash used in financing activities was ~~$8.2~~$21.2 million during the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, as compared to ~~$113.3~~cash provided by financing activities of $10.9 million during the ~~nine~~three months ended ~~September 30, 2019. This~~March 31, 2020. The change was primarily driven by the $35.0 million draw down on our credit facility during the ~~nine~~three months ended ~~September 30,~~March 31, 2020, partially offset by a decrease in cash used for repurchases of common stock. ~~During the second quarter, we elected to pause our repurchase activity, and we will continue to reassess our share repurchase plan as the economic and health crisis evolves.~~

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

Nine Months Ended September 30,
2020 2019
Open market repurchases $ 29,386 $ 90,808
Repurchase of shares related to tax withholding requirements for vesting of restricted stock 237 1,139
Total cash flow impact of common stock repurchases $ 29,623 $ 91,947
Cash paid in current period for settlement of prior year repurchases $ — $ 556

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	Three Months Ended March 31,
	2021		2020
Open market repurchases	$	16,190	$	19,382
Repurchase of shares related to tax withholding requirements for vesting of restricted stock	123		88
Total cash flow impact of common stock repurchases	$	16,313	$	19,470

During the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ Kforce declared and paid quarterly dividends of ~~$12.6~~$4.8 million ($~~0.60~~0.23 per share) and ~~$12.7~~$4.3 million ($~~0.54~~0.20 per share), respectively. 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

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 and certain other designated collateral. As of ~~September 30, 2020,~~March 31, 2021, $100.0 million was outstanding and $198.5 million was available on our ~~credit facility,~~Credit Facility, subject to certain covenants, and as of December 31, ~~2019, $65.0~~2020, $100.0 million was outstanding. As of ~~September 30, 2020,~~March 31, 2021, we are in compliance with our credit facility covenants as described in the ~~2019~~2020 Annual Report on Form 10-K and currently expect that we will be able to maintain compliance with these covenants. However, we cannot predict the impact from the COVID-19 pandemic, which could have a material adverse effect on our results of operations that could result in an event of default.

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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, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the fair value of our interest rate swaps were a liability of ~~$2.2~~$0.5 million and ~~$0.2~~$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~~three months ended ~~September 30, 2020,~~March 31, 2021, Kforce repurchased approximately ~~1.0~~0.3 million shares of common stock on the open market at a total cost of approximately ~~$29.4~~$16.2 million and ~~$84.5~~$68.4 million remained available for further repurchases under the Board-authorized common stock repurchase program at ~~September 30, 2020. During the second quarter, we elected to pause our repurchase activity, and we will continue to reassess our share repurchase plan as the economic and health crisis evolves.~~

~~Off-Balance Sheet Arrangements~~

There have been no material changes during the period covered by this Quarterly Report on Form 10-Q to our off-balance sheet arrangements previously disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2019 Annual Report on Form 10-K.March 31, 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 ~~2019~~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.

~~Due to the COVID-19 economic~~ However, because future events and health crisis, there has been uncertainty and disruption in the U.S. and global macro-economic environments, which could impact the inputs and assumptions for our critical accounting estimates. We are not currently aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of any assets or liabilities. However,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 1A – “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 ~~2019~~2020 Annual Report on Form 10-K for a more detailed discussion of our significant accounting policies and critical accounting estimates.

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~~Goodwill and Equity Method Investment Impairment~~

For our goodwill and equity method investment fair value estimates, the valuation methodologies employed are sensitive to critical estimates, which could be impacted by the COVID-19 economic and health crisis, including forecasted operating results and long-term growth rates, expectations for future economic cycles and market multiples. At this time, the impact of the crisis on our forecasts is uncertain and increases the subjectivity that will be involved in evaluating our goodwill and equity method investment for potential impairment going forward.

~~Allowance for Credit Losses~~

Due to the ongoing COVID-19 economic and health crisis, we analyzed receivables concentrated within specific industries considered to be most significantly impacted, reviewed specific clients with credit ratings that were in a higher risk category and applied higher credit loss rates in order to estimate our potential credit loss exposure. At this time, the impact of the crisis on these estimates is uncertain and increases the subjectivity of our allowance for credit losses.

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.

~~Unless otherwise noted below,~~With respect to our quantitative and qualitative disclosures about market risk, there have been no material changes to ~~quantitative and qualitative disclosures about market risk~~the information included in Part II, Item 7A, ~~“Quantitative~~��Quantitative and Qualitative Disclosures About Market Risk” in our ~~2019~~ Annual Report on Form ~~10-K.~~

On March 12, 2020, Kforce entered into an additional forward-starting interest rate swap agreement with Wells Fargo Bank, N.A., which was effective on March 17, 2020 and matures on May 30, 2025. This swap has a fixed interest rate of 0.61% and a notional amount of $75.0 million at September 30, 2020, which 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.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, 2020,~~March 31, 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 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.

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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.

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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 ML - "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.

~~Unless otherwise noted below, there~~There have been no material changes in the risk factors previously disclosed in our ~~2019~~2020 Annual Report on Form ~~10-K, as supplemented by the risk factor disclosed in our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2020.~~10-K.

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

Purchases of Equity Securities by the Issuer

In March 2020, the Board approved an increase in our stock repurchase authorization to an aggregate total of $100.0 million. Purchases of common stock under the Plan are subject to certain price, market, volume and timing constraints specified in the plan. The following table presents information with respect to our repurchases of Kforce common stock during the three months ended ~~September 30, 2020:~~March 31, 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, 2020 to July 31, 2020 — $ — — $ 84,540,188
August 1, 2020 to August 31, 2020 801 $ 37.16 — $ 84,540,188
September 1, 2020 to September 30, 2020 — $ — — $ 84,540,188
Total 801 $ 37.16 — $ 84,540,188


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
January 1, 2021 to January 31, 2021	—	$	—	—	$	84,540,188
February 1, 2021 to February 28, 2021	110,435	$	48.80	107,810	$	79,273,336
March 1, 2021 to March 31, 2021	206,271	$	52.96	206,271	$	68,350,234
Total	316,706	$	51.51	314,081	$	68,350,234

(1) Includes ~~801~~2,625 shares received upon vesting of restricted stock to satisfy tax withholding requirements for the period ~~August~~February 1, ~~2020~~2021 to ~~August 31, 2020.~~February 28, 2021.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

None.

ITEM 5. OTHER INFORMATION.

None.

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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.
10.1			Kforce Inc. 2021 Stock Incentive Plan, incorporated by reference to the Registrant’s Registration Statement on Form S-8 (File No. 333-255480) filed with the SEC on April 23, 2021.
10.2			Form of Restricted Stock Award Agreement under the 2021 Stock Incentive Plan.
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 ~~June 30, 2020,~~March 31, 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.

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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 4, 2020~~May 5, 2021

By:

/s/ DAVID M. KELLY

David M. Kelly

Executive Vice President, Chief Financial Officer

(Principal Financial Officer)

Date:

~~November 4, 2020~~May 5, 2021

By:

/s/ ~~JEFFREY~~JEFFRY B. HACKMAN

Jeffrey B. Hackman

Senior Vice President, Finance and Accounting

(Principal Accounting Officer)

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PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1816
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	2925
Item 4.	Controls and Procedures.	2925
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings.	3026
Item 1A.	Risk Factors.	3026
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	3026
Item 3.	Defaults Upon Senior Securities.	3026
Item 4.	Mine Safety Disclosures.	3026
Item 5.	Other Information.	3026
Item 6.	Exhibits.	3127
SIGNATURES		3228


	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Revenue	$	0	$	27,737
Direct costs	0		19,494
Gross profit	0		8,243
Selling, general and administrative expenses	0		6,842
Depreciation and amortization	0		307
Income from discontinued operations	0		1,094
(Loss) gain on sale of discontinued operations	(402)		79,602
Other expense, net	0		(436)
(Loss) income from discontinued operations, before income taxes	(402)		80,260
Income tax expense	565		3,563
(Loss) income from discontinued operations, net of tax	$	(967)	$	76,697