~~Our investment in Persol Holdings exposes us to potential market and currency exchange risks.~~

We are exposed to market and currency risks on our investment in Persol Holdings. The investment is stated at fair value and is marked to market through net earnings. Changes in the market price are based on the Persol Holdings stock price as listed in the Tokyo stock exchange, and such changes may be material. Foreign currency fluctuations on this yen-denominated investment are reflected as a component of other comprehensive income and, accordingly, the exchange rate fluctuations may have a material adverse or favorable effect on our financial statements.

Our international operations subject us to potential liability under anti-corruption, trade protection, and other laws and regulations.

The Foreign Corrupt Practices Act and other anti-corruption laws and regulations (“Anti-Corruption Laws”) prohibit corrupt payments by our employees, vendors, or agents. While we devote substantial resources to our global compliance programs and have implemented policies, training, and internal controls designed to reduce the risk of corrupt payments, our employees, vendors, or agents may violate our policies. Our failure to comply with Anti-Corruption Laws could result in significant fines and penalties, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business, and damage to our reputation. Operations outside the U.S. may be affected by changes in trade protection laws, policies and measures, and other regulatory requirements affecting trade and investment. As a result, we may be subject to legal liability and reputational damage.

Risks Related to Human Capital

We depend on our ability to attract, develop and retain qualified permanent full-time employees.

As we aim to expand the number of clients utilizing our higher margin specialty solutions in support of our growth strategy, we are highly reliant on individuals who possess specialized knowledge and skills to lead related specialty solutions and operations. ~~There~~Social, political and financial conditions can ~~be no assurance that~~negatively impact the availability of qualified ~~personnel will continue~~personnel. Competition for individuals with proven specialized knowledge and skills is intense, and demand for these individuals is expected to ~~be available.~~remain strong in the foreseeable future. Our success is ~~increasingly~~ dependent on our ability to attract, develop and retain these ~~experts.~~employees.

We depend on our ability to attract and retain qualified temporary personnel (employed directly by us or through third-party suppliers).

We depend on our ability to attract qualified temporary personnel who possess the skills and experience necessary to meet the staffing requirements of our customers. We must continually evaluate our base of available qualified personnel to keep pace with changing customer needs. Competition for individuals with proven professional skills is intense, and demand for these individuals is expected to remain strong for the foreseeable future. Low unemployment, as well as social, political and financial conditions can negatively impact the amount of qualified personnel available to meet the staffing requirements of our customers. There can be no assurance that qualified personnel will continue to be available in sufficient numbers and on terms of employment acceptable to us and our customers. Our success is substantially dependent on our ability to recruit and retain qualified temporary personnel.

We may be exposed to employment-related claims and losses, including class action lawsuits and collective actions, which could have a material adverse effect on our business.

We employ and assign personnel in the workplaces of other businesses. The risks of these activities include possible claims relating to:

•discrimination and harassment;

•wrongful termination or retaliation;

•violations of employment rights related to employment screening or privacy issues;

•apportionment between us and our customer of legal obligations as an employer of temporary employees;

•classification of workers as employees or independent contractors;

•employment of unauthorized workers;

•violations of wage and hour requirements;

•~~retroactive~~ entitlement to employee benefits, including health ~~insurance;~~insurance and retroactive benefits;

•failure to comply with leave policy and other labor requirements; and

•errors and omissions by our temporary employees, particularly for the actions of professionals such as ~~attorneys,~~engineers, therapists, accountants, teachers and scientists.

We are also subject to potential risks relating to misuse of customer proprietary information, misappropriation of funds, death or injury to our employees, damage to customer facilities due to negligence of temporary employees, criminal activity and other similar occurrences. We may incur fines and other losses or negative publicity with respect to these risks. In addition, these occurrences may give rise to litigation, which could be time-consuming and expensive. In the U.S. and certain other countries in which we operate, new employment and labor laws and regulations have been proposed or adopted that may increase the potential exposure of employers to employment-related claims and litigation. In addition, such laws and regulations are arising

with increasing frequency at the state and local level in the U.S. and the resulting inconsistency in such laws and regulations results in additional complexity. There can be no assurance that the corporate policies and practices we have in place to help reduce our exposure to these risks will be effective or that we will not experience losses as a result of these risks. Although we maintain insurance in types and amounts we believe are appropriate in light of the aforementioned exposures, there can also be no assurance that such insurance policies will remain available on reasonable terms or be sufficient in amount or scope of coverage. Additionally, should we have a material inability to produce records as a consequence of litigation or a government investigation, the cost or consequences of such matters could become much greater.

Risks Related to Cyber Security and Data Privacy

Damage to our key data centers could affect our ability to sustain critical business applications.

Many business processes critical to our continued operation are hosted in outsourced facilities in America, Europe and Asia. Certain other processes are hosted at our corporate headquarters complex or occur in cloud-based computer environments. These critical processes include, but are not limited to, payroll, customer reporting, and order management. Although we have taken steps to protect all such instances by establishing robust data backup and disaster recovery capabilities, the loss of these data centers or access to the cloud-based environments could create a substantial risk of business interruption which could have a material adverse effect on our business, financial condition and results of operations.

A failure to maintain the privacy of information entrusted to us could have significant adverse consequences.

In the normal course of business we control, we process, or have access to personal information regarding our own employees or employment candidates, as well as that of many of our customers or managed suppliers. Information concerning ~~our employees and candidates~~these individuals may also reside in systems controlled by third parties for purposes such as employee benefits and payroll administration. The legal and regulatory environment concerning data privacy is becoming more complex and challenging, and the potential consequences of non-compliance have become more severe. ~~Changes in the regulatory environment, such as the~~The European Union’s General Data Protection Regulation, ~~and~~ the California Consumer Privacy Act and similar laws impose additional compliance requirements related to the collection, use, processing, transfer, disclosure, and retention of personal information, which can increase operating costs and resources to accomplish. Any failure to abide by these regulations or to protect such personal information from inappropriate access or disclosure, whether through social engineering or by accident or other cause, could have severe consequences including fines, litigation, regulatory sanctions, ~~including loss of our status as a subscriber to the EU-U.S. Privacy Shield Framework,~~ reputational damage, and loss of customers or employees. Although we have a program designed to preserve the privacy rights of the personal data that we control or process, as well as personal data that we entrust to third parties, there can be no assurance that our program will meet all current and future regulatory requirements, anticipate all potential methods of unauthorized access, or prevent all inappropriate disclosures. Our insurance coverage may not be sufficient to cover all such costs or consequences, and there can be no assurance that any insurance that we now maintain will remain available under acceptable terms.

Cyberattacks or other breaches of network or information technology security could have an adverse effect on our systems, services, reputation and financial results.

We rely upon multiple information technology systems and networks, some of which are web-based or managed by third parties, to process, transmit, and store electronic information and to manage or support a variety of critical business processes and activities. Our networks and applications are increasingly accessed from locations and by devices not within our physical control, and the specifics of our technology systems and networks may vary by geographic region. In the course of ordinary business, we may store or process proprietary or confidential information concerning our business and financial performance and current, past or prospective employees, customers, vendors and managed suppliers. The secure and consistent operation of these systems, networks and processes is critical to our business operations. Moreover, our temporary employees may be exposed to, or have access to, similar information in the course of their customer assignments. We routinely experience cyberattacks, which may include the use or attempted use of malware, ransomware, computer viruses, phishing, social engineering schemes and other means of attempted disruption or unauthorized access. Additionally, the rapid pace of change in information security and cyber security threats could result in a heightened threat level for us or companies in our industry with little notice. Our relationships with third parties, including suppliers we manage, customers, and vendors creates potential avenues for malicious actors to initiate a supply chain attack. Even in instances where we are not a target of a malicious actor, we could be exposed to risk due to our relationships and business processes with these third parties.

The actions we take to reduce the risk of impairments to our operations or systems and breaches of confidential or proprietary data may not be sufficient to prevent or repel future cyber events or other impairments of our networks or information technologies. An event involving the destruction, modification, accidental or unauthorized release, or theft of sensitive information from systems related to our business, or an attack that results in damage to or unavailability of our key technology

systems or those of critical vendors (e.g., ransomware), could result in damage to our reputation, fines, regulatory sanctions or interventions, contractual or financial liabilities, additional compliance and remediation costs, loss of employees or customers, loss of payment card network privileges, operational disruptions and other forms of costs, losses or reimbursements, any of which could materially adversely affect our operations or financial condition. Our cyber security and business continuity plans, and those of our third ~~party vendors,~~parties with whom we do business, may not be effective in anticipating, preventing and effectively responding to all potential cyber risk exposures. Our insurance coverage may not be sufficient to cover all such costs or consequences, and there can be no assurance that any insurance that we now maintain will remain available under acceptable terms.

~~Damage~~Risks Related to ~~our key data centers could affect our ability to sustain critical business applications.~~

Many business processes critical to our continued operation are hosted in outsourced facilities in America and Europe. Certain other processes are hosted at our corporate headquarters complex or occur in cloud-based computer environments. These critical processes include, but are not limited to, payroll, customer reporting and order management. Although we have taken steps to protect all such instances by establishing robust data backup and disaster recovery capabilities, the loss of these data centers or access to the cloud-based environments could create a substantial risk of business interruption which could have a material adverse effect on our business, financial condition and results of operations.

Our ~~information technology projects may not yield their intended results.~~

We have a number of information technology projects in process or in the planning stages, including improvements to applicant onboarding and tracking systems, order management, and improvements to financial processes such as billing and accounts payable through system consolidation and upgrades. Although the technology is intended to increase productivity and operating efficiencies, these projects may not yield their intended results. Any delays in completing, or an inability to successfully complete, these technology initiatives or an inability to achieve the anticipated efficiencies could adversely affect our operations, liquidity and financial condition. In our information technology projects we rely on our own project work as well as those of third party vendors. If our vendors are unable to provide these services, or if the vendor is replaced by another vendor, we could be subject to business interruptions or data loss which could have a material adverse effect on our business, financial condition and results of operations.

In addition, our information technology investments and strategy may not provide the ability to keep up with evolving industry trends and customer expectations which could weaken our competitive position. We also do not currently utilize a single enterprise resource planning system, which limits our ability and increases the amount of investment and effort necessary to provide global service integration to our customers.

~~Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting.~~

Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting. If our management is unable to certify the effectiveness of our internal controls or if our independent registered public accounting firm cannot render an opinion on the effectiveness of our internal controls over financial reporting, or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could have a negative effect on our stock price.

~~Impairment charges relating to our goodwill, intangibles and long-lived assets, including equity method investments, could adversely affect our results of operations.~~

We regularly monitor our goodwill, long-lived assets and equity method investments for impairment indicators. In conducting our goodwill impairment testing, we compare the fair value of each of our reporting units with goodwill to the related net book value. In conducting our impairment analysis of long-lived assets and intangibles, we compare the undiscounted cash flows expected to be generated from the long-lived assets and intangibles to the related net book values. We review our equity method investment for indicators of impairment on a quarterly basis or whenever events or circumstances indicate the carrying amount may be other-than-temporarily impaired. Changes in economic or operating conditions impacting our estimates and assumptions could result in the impairment of our goodwill, intangibles, long-lived assets and equity method investments. In the event that we determine that there is an impairment, we may be required to record a significant non-cash charge to earnings that could adversely affect our results of operations.

~~Unexpected changes in claim trends on our workers’ compensation, unemployment, disability and medical benefit plans may negatively impact our financial condition.~~

We self-insure, or otherwise bear financial responsibility for, a significant portion of expected losses under our workers’ compensation program, disability and medical benefits claims. Unexpected changes in claim trends, including the severity and frequency of claims, actuarial estimates and medical cost inflation, could result in costs that are significantly different than initially reported. If future claims-related liabilities increase due to unforeseen circumstances, or if we must make unfavorable adjustments to accruals for prior accident years, our costs could increase significantly. In addition, unemployment insurance costs are dependent on benefit claims experience from employees which may vary from current levels and result in increased costs. There can be no assurance that we will be able to increase the fees charged to our customers in a timely manner and in a sufficient amount to cover increased costs as a result of any changes in claims-related liabilities.

Our business is subject to extensive government regulation, which may restrict the types of employment services we are permitted to offer or result in additional or increased taxes, including payroll taxes or other costs that reduce our revenues and earnings.

The temporary employment industry is heavily regulated in many of the countries in which we operate. Changes in laws or government regulations may result in prohibition or restriction of certain types of employment services we are permitted to offer or the imposition of new or additional benefit, licensing or tax requirements that could reduce our revenues and earnings. In particular, we are subject to state unemployment taxes in the U.S., which typically increase during periods of increased levels of unemployment. We also receive benefits, such as the work opportunity income tax credit in the U.S., that regularly expire and may not be reinstated. There can be no assurance that we will be able to increase the fees charged to our customers in a timely manner and in a sufficient amount to fully cover increased costs as a result of any changes in laws or government regulations. Any future changes in laws or government regulations, or interpretations thereof, including additional laws and regulations enacted at a local level may make it more difficult or expensive for us to provide staffing services and could have a material adverse effect on our business, financial condition and results of operations.

~~Government litigation and regulatory activity relating to competition rules may limit how we structure and market our services.~~

As a leading staffing and recruiting company, we are closely scrutinized by government agencies under U.S. and foreign competition laws. An increasing number of governments are regulating competition law activities, leading to increased scrutiny. Some jurisdictions also allow competitors or consumers to assert claims of anti-competitive conduct.

The European Commission and its various competition authorities have targeted industry trade associations in which we participate. Any government regulatory actions may hamper our ability to provide the cost-effective benefits to consumers and businesses, reducing the attractiveness of our services and the revenue that come from them. New competition law actions could be initiated. The outcome of such actions, or steps taken to avoid them, could adversely affect us in a variety of ways, including:

•We may have to choose between withdrawing certain services from certain geographies to avoid fines or designing and developing alternative versions of those services to comply with government rulings, which may entail a delay in a service delivery.

•~~Adverse rulings may act as precedent in other competition law proceedings.~~

~~We may have additional tax or unclaimed property liabilities that exceed our estimates.~~

We are subject to a multitude of federal, state and local taxes in the jurisdictions we operate in, including the tax provisions of the U.S. Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. We are also subject to unclaimed or abandoned property (escheat) laws. Our tax expense could be materially impacted by changes in tax laws in these jurisdictions, changes in the valuation of deferred tax assets and liabilities or changes in the mix of income by country. The demographics of our workforce and the visibility of our industry may make it more likely we become a target of government investigations, and we are regularly subject to audit by tax authorities. Although we believe our tax and unclaimed property estimates are reasonable, the final determination of audits and any related litigation could be materially different from our historical tax provisions and accruals. The results of an audit or litigation could materially harm our business.

~~We may not be able to realize value from, or otherwise preserve and utilize, our tax credit and net operating loss carryforwards.~~

Provisions in U.S. and foreign tax law could limit the use of tax credit and net operating loss carryforwards in the event of an ownership change. In general, an ownership change occurs under U.S. tax law if there is a change in the corporation’s equity ownership that exceeds 50% over a rolling three-year period. If we experience an ownership change, inclusive of our Class A and Class B common stock, our tax credit and net operating loss carryforwards generated prior to the ownership change may be subject to annual limitations that could reduce, eliminate or defer the utilization. Such limitation could materially impact our financial condition and results of operations.

Failure to maintain specified financial covenants in our bank credit facilities, or credit market events beyond our control, could adversely restrict our financial and operating flexibility and subject us to other risks, including risk of loss of access to capital markets.

Our bank credit facilities contain covenants that require us to maintain specified financial ratios and satisfy other financial conditions. During 2019 we met all of the covenant requirements. Our ability to continue to meet these financial covenants, particularly with respect to interest coverage (see Debt footnote in the notes to our consolidated financial statements), may not be assured. If we default under this or any other of these requirements, the lenders could declare all outstanding borrowings, accrued interest and fees to be due and payable or significantly increase the cost of the facility. In these circumstances, there can be no assurance that we would have sufficient liquidity to repay or refinance this indebtedness at favorable rates or at all. Events beyond our control could result in the failure of one or more of our banks, reducing our access to liquidity and potentially resulting in reduced financial and operating flexibility. If broader credit markets were to experience dislocation, our potential access to other funding sources would be limited.Capital Structure

Our controlling stockholder exercises voting control over our company and has the ability to elect or remove from office all of our directors.

The Terence E. Adderley Revocable Trust K (“Trust K”) which became irrevocable upon the death of Terence E. Adderley on October 9, 2018, is ~~the~~our controlling stockholder. In accordance with the provisions of Trust K, William U. Parfet, David M. Hempstead and Andrew H. Curoe were appointed as successor trustees of the trust. Mr. Parfet is the brother of Donald R. Parfet, the Chairman of the board of directors of the Company. The trustees, acting by majority vote, have sole investment and voting power over the shares of Class B common stock held by Trust K, which represent approximately ~~91.5%~~93.5% of the outstanding Class B shares. The voting rights of our Class B common stock are perpetual, and our Class B common stock is not subject to transfer restrictions or mandatory conversion obligations under our certificate of incorporation or bylaws.

Our Class B common stock is the only class of our common stock entitled to voting rights. The trustees of Trust K are therefore able to exercise voting control with respect to all matters requiring stockholder approval, including the election or removal from office of all members of the Company’s board of directors.

We are not subject to certain of the listing standards that normally apply to companies whose shares are quoted on the NASDAQ Global Market.

Our Class A and Class B common stock are quoted on the NASDAQ Global Market. Under the listing standards of the NASDAQ Global Market, we are deemed to be a “controlled company” ~~by virtue of the fact that~~due to Trust K ~~has~~having voting power with respect to more than fifty percent of our outstanding voting stock. A controlled company is not required to have a majority of its board of directors comprised of independent directors. Director nominees are not required to be selected or recommended for the board’s selection by a majority of independent directors or a nominations committee comprised solely of independent directors, nor do the NASDAQ Global Market listing standards require a controlled company to certify the adoption of a formal written charter or board resolution, as applicable, addressing the nominations process. A controlled company is also exempt from NASDAQ Global Market’s requirements regarding the determination of officer compensation by a majority of independent directors or a compensation committee comprised solely of independent directors. A controlled company is required to have an audit committee composed of at least three directors who are independent as defined under the rules of both the ~~Securities and Exchange Commission~~SEC and the NASDAQ Global Market. The NASDAQ Global Market further requires that all members of the audit committee have the ability to read and understand fundamental financial statements and that at least one member of the audit committee possess financial sophistication. The independent directors must also meet at least twice a year in meetings at which only they are present.

We currently comply with ~~certain of~~ the listing standards of the NASDAQ Global Market that do not apply to controlled companies. Our compliance is voluntary, however, and there can be no assurance that we will continue to comply with these standards in the future.

Provisions in our certificate of incorporation and bylaws and Delaware law may delay or prevent an acquisition of our ~~company.~~Company.

Our restated certificate of incorporation and bylaws contain provisions that could make it harder for a third party to acquire us without the consent of our board of directors. For example, if a potential acquirer were to make a hostile bid for us, the acquirer would not be able to call a special meeting of stockholders to remove our board of directors or act by written consent without a meeting. The acquirer would also be required to provide advance notice of its proposal to replace directors at any annual meeting and would not be able to cumulate votes at a meeting, which would require the acquirer to hold more shares to gain representation on the board of directors than if cumulative voting were permitted.

Our board of directors also has the ability to issue additional shares of common stock which could significantly dilute the ownership of a hostile acquirer. In addition, Section 203 of the Delaware General Corporation Law limits mergers and other business combination transactions involving 15 percent or greater stockholders of Delaware corporations unless certain board or stockholder approval requirements are satisfied. These provisions and other similar provisions make it more difficult for a third party to acquire us without negotiation.

Our board of directors could choose not to negotiate with an acquirer that it did not believe was in our strategic interests. If an acquirer is discouraged from offering to acquire us or prevented from successfully completing a hostile acquisition by these or other measures, our shareholders could lose the opportunity to sell their shares at a favorable price.

The holders of shares of our Class A common stock are not entitled to voting rights.

Under our certificate of incorporation, the holders of shares of our Class A common stock are not entitled to voting rights, except as otherwise required by Delaware law. As a result, Class A common stockholders do not have the right to vote for the election of directors or in connection with most other matters submitted for the vote of our stockholders, including mergers and certain other business combination transactions involving the Company.

~~Our~~We may not be able to realize value from, or otherwise preserve and utilize, our tax credit and net operating loss carryforwards.

Provisions in U.S. and foreign tax law could limit the use of tax credit and net operating loss carryforwards in the event of an ownership change. In general, an ownership change occurs under U.S. tax law if there is a change in the corporation’s equity ownership that exceeds 50% over a rolling three-year period. If we experience an ownership change, inclusive of our Class A and Class B common stock, ~~price~~our tax credit and net operating loss carryforwards generated prior to the ownership change may be subject to ~~significant volatility~~annual limitations that could reduce, eliminate or defer their utilization. Such limitation could materially impact our financial condition and ~~could suffer a decline in value.~~results of operations.

~~The~~Failure to maintain specified financial covenants in our bank credit facilities, or credit market ~~price of our common stock may be subject to significant volatility. We believe that many factors, including several which are~~events beyond our control, ~~have a significant effect on the market price~~could adversely restrict our financial and operating flexibility and subject us to other risks, including risk of ~~our common stock. These include:~~loss of access to capital markets.

•~~actual or anticipated variations in our quarterly operating results;~~

•~~announcements~~Our bank credit facilities contain covenants that require us to maintain specified financial ratios and satisfy other financial conditions. During 2022, we met all of ~~new services by us or our competitors;~~

•~~announcements relating~~the covenant requirements. Our ability to ~~strategic relationships or acquisitions;~~

•~~changes in~~continue to meet these financial ~~estimates by securities analysts;~~

•~~changes in general economic conditions;~~

•~~actual or anticipated changes in laws and government regulations;~~

•~~commencement of, or involvement in, litigation;~~

•~~any major change in our board or management;~~

•~~changes in industry trends or conditions; and~~

•~~sales of significant amounts of our common stock or other securities~~covenants, particularly with respect to interest coverage (see Debt footnote in the ~~market.~~

notes to our consolidated financial statements), cannot be assured. If we default under this or any other of these requirements, the lenders could declare all outstanding borrowings, accrued interest and fees to be due and payable or significantly increase the cost of the facility. Additionally, our credit facilities contain cross-default provisions. In ~~addition, the stock market in general, and the NASDAQ Global Market in particular,~~these circumstances, there can be no assurance that we would have ~~experienced significant price and volume fluctuations that have often been unrelated~~sufficient liquidity to repay or ~~disproportionate to the operating performance of listed companies. These broad market and industry factors may seriously harm the market price of~~refinance this indebtedness at favorable rates or at all. Events beyond our common stock, regardless of our operating performance. In the past, securities class action litigation has often been instituted following periods of volatility in the market price of a company’s securities. A securities class action suit against uscontrol could result in ~~substantial costs, potential liabilities and~~ the ~~diversion~~failure of one or more of our ~~management’s attention~~banks, reducing our access to liquidity and ~~resources. Further,~~potentially resulting in reduced financial and operating flexibility. If broader credit markets were to experience dislocation, our ~~operating results may~~potential access to other funding sources would be ~~below the expectations of securities analysts or investors. In such event, the price of our common stock may decline.~~limited.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

Our headquarters is a leased facility located in Troy, Michigan ~~where~~and is available to our corporate, subsidiary and divisional ~~offices are currently located. The original headquarters building was purchased~~employees. We also conduct business operations in ~~1977. Headquarters operations were expanded into~~both the U.S. and international locations in additional ~~buildings purchased in 1991, 1997 and 2001, providing approximately 345,000 square feet of combined usable floor space. As of December 29, 2019, three~~leased facilities. Since 2020, the majority of our ~~headquarters properties, totaling approximately 310,000 square feet, are held for sale, with the sale expected to take place in the first quarter~~internal employees have also conducted business remotely as part of ~~2020. The main headquarters building included in the sale will be leased back.~~our flexible work policy.

Branch office business is conducted in leased premises with the majority of leases being fixed for terms of generally three to five years in the U.S. and Canada and five to ten years outside the U.S. and Canada. We own virtually all of the office furniture and the equipment used in our corporate headquarters and branch offices.

ITEM 3. LEGAL PROCEEDINGS.

The Company is continuously engaged in litigation, threatened ligation, claims, audits or investigations arising in the ordinary course of its business, such as matters alleging employment discrimination, wage and hour violations, claims for indemnification or liability, or violations of privacy rights, anti-competition regulations, ~~breach of contract~~commercial and ~~claims or actions~~contractual disputes, and tax related ~~to customer or supplier bankruptcy proceedings or insolvency actions,~~matters which could result in a material adverse outcome. We record accruals for loss contingencies when we believe it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Such accruals are recorded in accounts payable and accrued liabilities and in accrued workers’ compensation and other claims in the consolidated balance sheet. The Company maintains insurance coverage which may cover certain claims. When claims exceed the applicable policy deductible and realization of recovery of the claim from existing insurance policies is deemed probable, the Company records receivables from the insurance company for the excess amount, which are included in prepaid expenses and other current assets and other assets in the consolidated balance sheet.

While the outcome of these matters currently pending cannot be predicted with certainty, we believe that the resolution of any such proceedings will not have a material adverse effect on our financial condition, results of operations or cash flows.

We are also currently engaged in litigation with a customer over a disputed accounts receivable balance for services rendered, which is recorded as a long-term receivable in other assets in the consolidated balance sheet. While we believe the balance is collectible, there is a reasonably possible risk of an unfavorable outcome.

In January 2018, the Hungarian Competition Authority initiated proceedings against ~~the Company, along with~~ a local industry trade association and its members, due to alleged infringement of national competition regulations. ~~We are fully cooperating~~The Authority announced its decision on December 18, 2020, levying a fine against the trade association with joint and several secondary liability placed on the ~~investigation, and are supplying materials and information~~20 member companies. Our apportioned secondary liability as a member company is approximately $300,000. The matter is still pending. Certain member companies exercised their right to ~~comply with~~challenge the ~~Authority’s undertakings.~~decision, which could impact the apportionment. The Company does not believe that resolution of this matter will have a material adverse effect upon the Company’s competitive position, results of operations, cash flows or financial position.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

1617

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information and Dividends

Our Class A and Class B common stock is traded on the NASDAQ Global Market under the symbols “KELYA” and “KELYB,” respectively. The high and low selling prices for our Class A common stock and Class B common stock as quoted by the NASDAQ Global Market and the dividends paid on the common stock for each quarterly period in the last two fiscal years are reported in the table below. Our ability to pay dividends is subject to compliance with certain financial covenants contained in our debt facilities, as described in the Debt footnote in the notes to our consolidated financial statements.


		Per share amounts (in dollars)																			Per share amounts (in dollars)
		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Year			First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Year
2019
2022												2022
Class A common	Class A common											Class A common
High	High	$	25.63	$	26.39	$	28.91	$	25.09	$	28.91	High	$	23.00	$	21.69	$	22.56	$	18.78	$	23.00
Low	Low	20.00		22.03		23.50		20.74		20.00		Low	16.22		16.73		13.41		13.64		13.41

Class B common	Class B common											Class B common
High	High	24.68		25.49		29.43		23.46		29.43		High	22.30		21.77		26.64		18.63		26.64
Low	Low	20.91		25.49		23.59		20.66		20.66		Low	16.74		17.01		13.64		14.04		13.64

Dividends	Dividends	0.075		0.075		0.075		0.075		0.30		Dividends	0.05		0.075		0.075		0.075		0.275

2018
2021												2021
Class A common	Class A common											Class A common
High	High	$	30.99	$	32.31	$	26.57	$	25.00	$	32.31	High	$	23.90	$	26.98	$	25.00	$	20.87	$	26.98
Low	Low	26.65		21.44		22.23		19.21		19.21		Low	19.13		22.51		18.58		15.88		15.88

Class B common	Class B common											Class B common
High	High	29.07		34.30		34.30		23.40		34.30		High	57.46		60.00		24.70		21.27		60.00
Low	Low	27.00		22.00		21.50		22.01		21.50		Low	18.00		22.15		17.95		16.63		16.63

Dividends	Dividends	0.075		0.075		0.075		0.075		0.30		Dividends	—		—		0.05		0.05		0.10

Holders

The number of holders of record of our Class A and Class B common stock were approximately ~~8,200~~10,500 and ~~300,~~700, respectively, as of January ~~31, 2020.~~30, 2023.

Recent Sales of Unregistered Securities

None.

1718

Issuer Purchases of Equity Securities

During the fourth quarter of ~~2019,~~2022, we reacquired shares of our Class A common stock as follows:

Period
Total Number
of Shares
(or Units)
Purchased
Average
Price Paid
per Share
(or Unit)
Total Number
of Shares (or
Units) Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units)
That May Yet Be
Purchased Under the
Plans or Programs
(in millions of dollars)
September 30, 2019 through November 3, 2019 5,578 $ 23.58 — $ —
November 4, 2019 through December 1, 2019 210 21.18 — —
December 2, 2019 through December 29, 2019 — — — —
Total 5,788 $ 23.49 —


Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs
					(in millions of dollars)
October 3, 2022 through November 6, 2022	143	$	14.53	—	$	—

November 7, 2022 through December 4, 2022	68,238	16.90		68,114	48.8

December 5, 2022 through January 1, 2023	408,607	16.41		406,530	42.2

Total	476,988	$	16.48	474,644

On November 9, 2022, the Company's board of directors approved a plan for the Company to repurchase shares of its Class A common stock with a market value not to exceed $50.0 million through transactions executed in the open market within one year. We may also reacquire shares outside the program in connection with shares sold to cover employee tax withholdings due upon the vesting of restricted stock held by employees. Accordingly, ~~5,788~~2,344 shares were reacquired in transactions outside the repurchase program during the Company’s fourth quarter.

1819

Performance Graph

The following graph compares the cumulative total return of our Class A common stock with that of the S&P SmallCap 600 Index and the S&P 1500 Human Resources and Employment Services Index for the five years ended December 31, ~~2019.~~2022. The graph assumes an investment of $100 on December 31, ~~2014~~2017 and that all dividends were reinvested.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN

Assumes Initial Investment of $100

December 31, ~~2014~~2017 – December 31, ~~2019~~2022

2014 2015 2016 2017 2018 2019
Kelly Services, Inc. $ 100.00 $ 96.05 $ 138.40 $ 166.88 $ 126.85 $ 141.59
S&P SmallCap 600 Index $ 100.00 $ 98.03 $ 124.06 $ 140.48 $ 128.56 $ 157.85
S&P 1500 Human Resources and Employment Services Index $ 100.00 $ 107.96 $ 118.15 $ 150.39 $ 125.92 $ 154.62

~~ITEM 6. SELECTED FINANCIAL DATA.~~

The following table summarizes selected financial information of Kelly Services, Inc. and its subsidiaries for each of the most recent five fiscal years. This table should be read in conjunction with the other financial information, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements included elsewhere in this report. The statement of earnings data for the 2016 and 2015 fiscal years as well as the balance sheet data as of 2017, 2016 and 2015 are derived from consolidated financial statements previously on file with the SEC.

(In millions except per share amounts) 2019 2018 2017 2016
2015⁽¹⁾
Revenue from services $ 5,355.6 $ 5,513.9 $ 5,374.4 $ 5,276.8 $ 5,518.2
Gain on sale of assets ⁽²⁾
12.3 — — — —
Asset impairment charge ⁽³⁾
15.8 — — — —
Earnings from operations 81.8 87.4 83.3 63.2 66.7
Gain (loss) on investment in Persol Holdings ⁽⁴⁾
35.8 (96.2) — — —
Gain on investment in PersolKelly Asia Pacific ⁽⁵⁾
— — — 87.2 —
Net earnings 112.4 22.9 71.6 120.8 53.8
Basic earnings per share 2.85 0.59 1.84 3.10 1.39
Diluted earnings per share 2.84 0.58 1.81 3.08 1.39
Dividends per share
Classes A and B common 0.30 0.30 0.30 0.275 0.20
Working capital ⁽⁶⁾
521.6 503.0 458.1 443.5 411.3
Total assets 2,480.6 2,314.4 2,378.2 2,028.1 1,939.6
Total noncurrent liabilities 332.0 257.4 300.5 245.0 228.4

~~(1)Fiscal year included 53 weeks.~~

~~(2)Gain on sale of assets primarily represents the excess of the proceeds over the cost of an unused parcel of land located near the Company headquarters sold during the second quarter of 2019.~~

~~(3)~~Asset impairment charge represents the write-off of previously capitalized costs associated with a new U.S. front and middle office technology development project which management determined would not be completed but replaced by an enhanced and expanded use of an existing technology platform.

~~(4)Represents the change in fair value of the investment in the common stock of Persol Holdings.~~

~~(5)Represents the fair value of the Company's investment in PersolKelly Asia Pacific in addition to the cash received less the carrying value of assets transferred to the joint venture.~~

~~(6)Working capital is calculated as current assets minus current liabilities.~~


	2017		2018		2019		2020		2021		2022
Kelly Services, Inc.	$	100.00	$	76.01	$	84.84	$	77.59	$	63.59	$	65.03
S&P SmallCap 600 Index	$	100.00	$	91.52	$	112.37	$	125.05	$	158.59	$	133.06
S&P 1500 Human Resources and Employment Services Index	$	100.00	$	83.73	$	102.81	$	103.69	$	156.71	$	117.07

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Executive Overview

~~The Talent Solutions Industry~~

~~Labor markets are~~In 2022, Kelly moved forward on its strategic growth journey amid a dynamic macroeconomic environment in the ~~midst~~first half of ~~change due~~the year. As the year progressed, a mixed pattern of revenue growth and deceleration emerged and persisted through the balance of 2022 driven by rising inflation, increasing interest rates and heightened economic uncertainty. Consequently, a growing number of employers scaled back or paused hiring – and in some cases reduced the size of their workforces – to ~~automation, secular shifts in~~align their costs with declining growth. Notwithstanding these dynamics, the labor ~~supply~~market remained tight. The economy continued to add jobs – albeit at a slightly slower pace to end the year – and ~~demand and skills gaps. Global demographic trends are reshaping and redefining the way in~~unemployment remained at historically low levels, which ~~companies find and use talent. In response, the talent solutions industry is adjusting how it sources, recruits, trains and places~~contributed to ongoing challenges with sourcing talent.

Our industry is evolving to meet businesses’ growing demand for talent, whether delivered as a single individual or as part of a total workforce solution. Companies in our industry are using novel sourcing approaches—including gig platforms, independent contractors and other talent pools—to create workforce solutions that are flexible, responsive to the labor market and tailored to meet clients’ needs.

In addition, today’s companies are elevating their commitment to talent, with the growing realization that meeting the changing needs and requirements of talent is essential to remain competitive. The ways in which people view, find and conduct work are undergoing fundamental shifts. And as the demand for skilled talent continues to climb, workers’ changing ideas about the integration of work into life are becoming more important. In this increasingly talent-driven market, a diverse set of workers, empowered by technology, is seeking to take greater control over their career trajectories.

~~Our Business~~

Kelly Services is a talent and global workforce solutions company serving customers of all sizes in a variety of industries. We offer innovative outsourcing and consulting services, as well as staffing on a temporary, temporary-to-hire and direct-hire basis. We provide commercial and professional/technical staffing through our branch networks in our Americas Staffing and International Staffing segments and, in APAC, we provide staffing solutions to customers through PersolKelly Asia Pacific, our joint venture with Persol Holdings, a leading provider of HR solutions in Japan. For the U.S. education market, Kelly Education is the leading provider of substitute teachers to more than 7,000 schools nationwide.

We also provide a suite of talent fulfillment and outcome-based solutions through our Global Talent Solutions (“GTS”) segment, which delivers integrated talent management solutions on a global basis. GTS provides Contingent Workforce Outsourcing ("CWO"), Recruitment Process Outsourcing ("RPO"), Business Process Outsourcing ("BPO"), Advisory and Talent Fulfillment solutions to help customers plan for, manage and execute their acquisition of contingent labor, full-time labor and free agents, and gain access to service providers and qualified talent quickly, at competitive rates, with minimized risk.

We earn revenues from customers that procure the services of our temporary employees on a time and materials basis, that use us to recruit permanent employees, and that rely on our talent advisory and outsourcing services. Our working capital requirements are primarily generated from temporary employee payroll and customer accounts receivable. The nature of our business is such that trade accounts receivable are our most significant asset. Average days sales outstanding varies within and outside the U.S. but was 58 days on a global basis as of the 2019 year end and 55 days as of the 2018 year end. Since receipts from customers generally lag temporary employee payroll, working capital requirements increase substantially in periods of growth.

~~Our Strategic Intent and Outlook~~

~~Kelly is committed to being a leading talent solutions provider among the talent with whom we choose to specialize and in the markets in which we choose to compete, which is the foundation of~~By executing our strategy in ~~2019~~a disciplined manner and ~~beyond. This strategic intent is underpinned by~~focusing on factors within our ~~Noble Purpose, “We connect people to work in ways that enrich their lives,”~~control, we managed through these ongoing headwinds and ~~is brought to life by our expected behaviors and actions:~~achieved solid growth over the prior year.

•~~Employ~~We increased total company revenue driven by top-line growth in our Education, SET and OCG business units.

•Our more profitable outcome-based solutions demonstrated resilience amid macroeconomic headwinds and generated solid revenue and gross profit growth.

•Each of our five business units expanded itsgross profit rate, reflecting our ongoing drive to shift toward a ~~talent-first mentality~~higher-margin, higher-value business mix.

•Excluding the impact of goodwill impairment charges and a loss on the disposal of our Russian operations, we improved earnings from operations, demonstrating our ability to effectively translate gross margin expansion to earnings growth.

2022 was also a year in which we accelerated our transformation and streamlined our portfolio.

•~~Relentlessly deliver for customers~~We ended the cross-ownership arrangement between Kelly and Persol Holdings – selling our investment in the common shares of Persol Holdings and repurchasing our Class A and B common shares held by Persol Holdings – and reduced our ownership interest in our PersolKelly joint venture, unlocking $235 million of liquidity.

•We redeployed a portion of the net proceeds from these transactions to advance our inorganic growth strategy, while preserving the remaining capital to pursue additional high-margin, high-growth acquisitions in the future.

•We monetized non-core real estate holdings, unlocking more capital to invest in growth initiatives.

•We acted decisively to transfer ownership of our Russian operations to a Russian company.

•We increased our dividend to its pre-pandemic level and authorized a $50 million repurchase of outstanding Class A common shares.

•~~Grow through discipline~~Together, these achievements and ~~focus~~actions demonstrate our commitment to our specialty growth strategy and create long-term value for all our stakeholders.

•~~Deliver~~As the macroeconomic situation unfolds in 2023, we will stay the course in our pursuit of profitable growth while proactively controlling costs to manage through this economic cycle. In each of our chosen specialties, we will continue to shift toward a business mix characterized not only by higher margins and value, but greater resilience to lessen the impact of market fluctuations. We also intend to drive inorganic growth using our available capital to pursue additional high-quality acquisitions in Education, SET and OCG. Finally, we will continue to invest in technology and new products that will improve the talent and customer experience, increase efficiency and ~~effectiveness~~enable organic growth. Together, these actions will ensure that we continue to move forward on our strategic journey in ~~everything we do~~pursuit of profitable, specialty growth.

By aligning ourselves with our Noble Purpose, executing against these strategic pillars and investing in additional innovation, we intend to reap the benefits of operating as a more agile and focused organization and we expect to achieve new levels of growth and profitability as we develop further specializations across our portfolio of businesses.

We have continued our progress as a talent solutions company and identified several specialty growth platforms for investment. We expanded our engineering portfolio with the January 2, 2019 acquisition of Global Technology Associates, LLC (“GTA”) and NextGen Global Resources LLC (“NextGen”), leaders in the growing 5G telecommunications market.~~These position Kelly as one of the leading engineering workforce solutions companies in this fast-growing market.~~On January 14, 2020, we acquired Insight Workforce Solutions LLC, an educational staffing company, to expand our leadership position in the U.S. education talent solutions industry. We intend to further accelerate our efforts to drive revenue and earnings growth through additional inorganic growth platforms, making smart acquisitions that align with Kelly's focus on specialization.

We continue to make investments in technology, particularly those which support greater efficiency in finding talent to answer customer needs. We are accelerating the implementation of our front office platforms, which, when fully deployed in mid-2020, will streamline the processes and workflows associated with recruiting, onboarding and reassigning workers. This investment will create the platform from which we will deploy additional operational improvements over the next several years that will enhance the experience of the hundreds of thousands of job seekers who interact and work with Kelly each year.

We completed a review of our commercial staffing operations delivered by our U.S. branch network in the first quarter of 2019 and reorganized our operations to improve geographic coverage and operational efficiency. The new structure will allow us to refine our focus on specialties within the commercial staffing portfolio, including light industrial, electronic assembly, office professionals and contact center staffing. During 2019, we recorded total restructuring charges of $5.5 million as a result of these actions. While we have already gained efficiency from the restructure, the growth we anticipated has not yet occurred. We remain committed to delivering revenue growth in our U.S. market and have initiated further actions to modernize our operations and deliver on that commitment.

While faced with market conditions that may hamper our efforts, including a sluggish manufacturing sector and a tight labor market, Kelly continues to focus on accelerating the execution of our strategic plan and making the necessary investments and adjustments to advance that strategy. Our objective is to become an even more agile, consultative and profitable company, and we are reshaping our business to make that goal a reality. We will measure our progress using financial measures, including:

•~~Revenue growth (both organic and inorganic);~~

•~~Gross profit rate improvement; and~~

•~~Conversion rate and EBITDA margin.~~

Financial Measures

The constant currency (“CC”) change amounts in the following tables refer to the year-over-year percentage changes resulting from translating ~~2019~~2022 financial data into U.S. dollars using the same foreign currency exchange rates used to translate financial data for ~~2018.~~2021. We believe that CC measurements are a useful measure, indicating the actual trends of our operations without distortion due to currency fluctuations. We use CC results when analyzing the performance of our segments and measuring our results against those of our competitors. Additionally, substantially all of our foreign subsidiaries derive revenues and incur cost of services and selling, general and administrative (“SG&A”) expenses within a single country and currency which, as a result, provides a natural hedge against currency risks in connection with their normal business operations.

CC measures are non-GAAP ~~(Generally Accepted Accounting Principles)~~ measures and are used to supplement measures in accordance with ~~GAAP.~~GAAP (Generally Accepted Accounting Principles). Our non-GAAP measures may be calculated differently from those provided by other companies, limiting their usefulness for comparison purposes. Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

Reported and CC percentage changes ~~in the following tables~~ were computed based on actual amounts in thousands of dollars.

Return on sales (earnings from operations divided by revenue from services) and conversion rate (earnings from operations divided by gross profit) ~~in the following tables~~ are ratios used to measure the Company’s operating efficiency.

EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA margin (EBITDA divided by revenue from services) are measures used for understanding the Company's ability to generate cash flow and for judging overall operating performance.

NM (not meaningful) in the following tables is used in place of percentage changes where: the change is in excess of 500%, the change involves a comparison between earnings and loss amounts, or the comparison amount is zero.

Days sales outstanding (“DSO”) represents the number of days that sales remain unpaid for the period being reported. DSO is calculated by dividing average net sales per day (based on a rolling three-month period) into trade accounts receivable, net of allowances at the period end. Although secondary supplier revenues are recorded on a net basis (net of secondary supplier expense), secondary supplier revenue is included in the daily sales calculation in order to properly reflect the gross revenue amounts billed to the customer.

Results of Operations

~~2019 versus 2018~~

~~Total Company~~

~~(Dollars in millions except per share data)~~

2019 2018 Change CC
Change
Revenue from services $ 5,355.6 $ 5,513.9 (2.9) % (1.9) %
Gross profit 968.4 972.2 (0.4) 0.5
SG&A expenses excluding restructuring charges 877.6 884.8 (0.8) 0.1
Restructuring charges 5.5 — NM NM
Total SG&A expenses 883.1 884.8 (0.2) 0.7
Gain on sale of assets 12.3 — NM
Asset impairment charge 15.8 — NM
Earnings from operations 81.8 87.4 (6.5)
Earnings from operations excluding restructuring charges 87.3 87.4 (0.2)
Diluted earnings per share $ 2.84 $ 0.58 389.7
Staffing fee-based income (included in revenue from services) 60.1 68.6 (12.5) (10.6)
Gross profit rate 18.1 % 17.6 % 0.5 pts.
Conversion rate 8.4 9.0 (0.6)
Conversion rate excluding restructuring charges 9.0 9.0 —
Return on sales 1.5 1.6 (0.1)
Return on sales excluding restructuring charges 1.6 1.6 —

Total Company revenue from services for 2019 declined 2.9% in comparison to the prior year and 1.9% on a CC basis. As noted in the following discussions, revenue decreases in Americas Staffing and International Staffing were partially offset by an increase in GTS revenue. Revenue from services for 2019 includes the results of NextGen and GTA acquisitions, which added approximately 250 basis points to the total revenue growth rate.

The gross profit rate increased by 50 basis points from the prior year. As noted in the following discussions, the gross profit rate increased in all segments. The NextGen and GTA acquisitions accounted for approximately 30 basis points of the gross profit rate growth.

Total SG&A expenses decreased 0.2% on a reported basis, due primarily to the effect of currency exchange rates. On a CC basis, SG&A expenses increased 0.7% due primarily to the addition of SG&A expenses from the NextGen and GTA acquisitions. Also included in SG&A expenses for 2019 are restructuring charges of $5.5 million, related primarily to the U.S. branch-based staffing operations.

Gain on sale of assets primarily represents the excess of the proceeds over the cost of an unused parcel of land located near the Company headquarters sold during the second quarter of 2019. Asset impairment charge represents the write-off of previously capitalized costs associated with a new U.S. front and middle office technology development project which management determined would not be completed but replaced by an enhanced and expanded use of an existing technology platform.

Diluted earnings per share for 2019 were $2.84, as compared to diluted earnings per share of $0.58 for 2018. Diluted earnings per share for 2019 were favorably impacted by a gain, net of tax, of approximately $0.63 per share related to the investment in Persol Holdings, a gain, net of tax, of approximately $0.23 per share related to the sale of assets and a gain, net of tax, of approximately $0.22 per share related to acquisitions. Diluted earnings per share for 2019 were unfavorably impacted by approximately $0.30 per share related to the asset impairment charge, net of tax, and approximately $0.10 per share related to restructuring charges, net of tax. Diluted earnings per share for 2018 were unfavorably impacted by a loss, net of tax, of approximately $1.69 per share related to the investment in Persol Holdings.

~~Americas Staffing~~

~~(Dollars in millions)~~

2019 2018 Change CC
Change
Revenue from services $ 2,320.1 $ 2,417.7 (4.0) % (3.8) %
Gross profit 429.5 441.3 (2.7) (2.5)
SG&A expenses excluding restructuring charges 367.2 364.2 0.8 1.0
Restructuring charges 5.5 — NM NM
Total SG&A expenses 372.7 364.2 2.3 2.6
Earnings from operations 56.8 77.1 (26.3)
Earnings from operations excluding restructuring charges 62.3 77.1 (19.2)
Gross profit rate 18.5 % 18.3 % 0.2 pts.
Conversion rate 13.2 17.5 (4.3)
Conversion rate excluding restructuring charges 14.5 17.5 (3.0)
Return on sales 2.4 3.2 (0.8)
Return on sales excluding restructuring charges 2.7 3.2 (0.5)

Americas Staffing includes the impact of the January 2019 NextGen acquisition. Excluding NextGen, Americas Staffing revenue from services reflects a 10% decrease in hours volume and a 2.1% increase in average bill rates (2.3% on a CC basis). The decrease in hours volume was primarily due to the disruption resulting from the restructure of the U.S. branch-based staffing in the first quarter of 2019 and slower achievement of the related benefits. The increase in average bill rates was the result of wage increases and stronger revenue growth in our service lines with higher pay rates. Americas Staffing represented 43% of total Company revenue in 2019 and 44% in 2018.

From a staffing specialty perspective, the change in revenue reflects decreases in volume in our light industrial and office services specialties. These decreases were partially offset by an increase in engineering (due primarily to the NextGen acquisition), educational staffing and science specialties.

~~The Americas Staffing gross profit rate increased in comparison to the prior year. The gross profit rate was positively impacted by the addition of NextGen.~~

Total SG&A expenses increased 2.3% from the prior year, due primarily to the addition of NextGen SG&A expenses during 2019. Also included in total SG&A expenses for 2019 are restructuring charges primarily related to U.S. branch-based staffing operations of $5.5 million, representing primarily severance costs.

~~GTS~~

~~(Dollars in millions)~~

2019 2018 Change CC
Change
Revenue from services $ 2,024.5 $ 1,997.4 1.4 % 1.6 %
Gross profit 400.5 381.1 5.1 5.6
Total SG&A expenses 293.1 296.5 (1.2) (0.6)
Earnings from operations 107.4 84.6 26.9

Gross profit rate 19.8 % 19.1 % 0.7 pts.
Conversion rate 26.8 22.2 4.6
Return on sales 5.3 4.2 1.1

Revenue from services increased 1.4% compared to last year, due primarily to the increase in revenue from the GTA acquisition, combined with program expansion in our BPO and KellyConnect products. These increases were partially offset by lower demand from a number of customers in centrally delivered staffing. GTS revenue represented 38% of total Company revenue in 2019 and 36% in 2018.

~~The increase in the GTS gross profit rate was due to improving product mix coupled with lower employee-related costs.~~

Total SG&A expenses decreased 1.2% from the prior year on a reported basis and 0.6% on a CC basis, due to proactive cost management in a growth environment, as we continue to align our resources and spending levels with volumes and gross profit in our products. These decreases were partially offset by an increase in SG&A expenses related to the January 2019 acquisition of GTA.

~~International Staffing~~

~~(Dollars in millions)~~

2019 2018 Change CC
Change
Revenue from services $ 1,025.9 $ 1,116.6 (8.1) % (4.0) %
Gross profit 140.5 152.3 (7.7) (3.6)
Total SG&A expenses 125.3 132.3 (5.3) (1.2)
Earnings from operations 15.2 20.0 (24.1)
Gross profit rate 13.7 % 13.6 % 0.1 pts.
Conversion rate 10.8 13.2 (2.4)
Return on sales 1.5 1.8 (0.3)

In comparison to the prior year, International Staffing revenue from services decreased 8.1% on a reported basis and 4.0% on a CC basis. The decline was primarily due to revenue declines in France and Germany, reflecting current staffing market conditions. These decreases were partially offset by increased revenue in Russia, due to higher hours volume. International Staffing represented 19% of total Company revenue in 2019 and 20% in 2018.

~~The International Staffing gross profit decreased 7.7% on a reported basis and 3.6% on a CC basis as a result of declining revenue.~~

~~Total SG&A expenses decreased 5.3% on a reported basis and 1.2% on a CC basis due to continued effective cost management to align to revenue trends.~~

~~Results of Operations~~

~~2018 versus 2017~~

Total Company

(Dollars in ~~millions except per share data)~~

2018 2017 Change CC
Change
Revenue from services $ 5,513.9 $ 5,374.4 2.6 % 2.2 %
Gross profit 972.2 954.1 1.9 1.6
SG&A expenses excluding restructuring charges 884.8 868.4 1.9 1.6
Restructuring charges — 2.4 NM NM
Total SG&A expenses 884.8 870.8 1.6 1.4
Earnings from operations 87.4 83.3 5.0
Earnings from operations excluding restructuring charges 87.4 85.7 2.1
Diluted earnings per share $ 0.58 $ 1.81 (68.0)
Staffing fee-based income (included in revenue from services) 68.6 57.3 19.6 19.0
Gross profit rate 17.6 % 17.8 % (0.2) pts.
Conversion rate 9.0 8.7 0.3
Conversion rate excluding restructuring charges 9.0 9.0 —
Return on sales 1.6 1.5 0.1
Return on sales excluding restructuring charges 1.6 1.6 —
millions)

~~Total Company revenue~~


	2022			2021			Change
Revenue from services	$	4,965.4		$	4,909.7		1.1	%
Gross profit	1,011.8			919.2			10.1
SG&A expenses excluding restructuring charges	943.5			866.6			8.9
Restructuring charges	—			4.0			NM
Total SG&A expenses	943.5			870.6			8.4
Goodwill impairment charge	(41.0)			—			NM
Loss on disposal	(18.7)			—			NM
Gain on sale of assets	6.2			—			NM

Earnings (loss) from operations	14.8			48.6			(69.7)
Gain (loss) on investment in Persol Holdings	(67.2)			121.8			NM
Loss on currency translation from liquidation of subsidiary	(20.4)			—			NM
Gain on insurance settlement	—			19.0			NM
Other income (expense), net	1.6			(3.6)			146.4
Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	(71.2)			185.8			NM
Income tax expense (benefit)	(7.9)			35.1			(122.6)
Equity in net earnings (loss) of affiliate	0.8			5.4			(85.9)
Net earnings (loss)	$	(62.5)		$	156.1		NM	%

Gross profit rate	20.4		%	18.7		%	1.7	pts.
Conversion rate	1.5			5.3			(3.8)

The discussion that follows focuses on 2022 results compared to 2021. For a discussion of 2021 results compared to 2020, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 2, 2022, filed on February 17, 2022.

2022 vs. 2021

Revenue from services ~~for 2018 was up 2.6% in comparison to 2017~~increased 1.1% on a reported basis and ~~up 2.2%~~3.2% on a CCconstant currency basis, ~~reflecting the weakening of the U.S. dollar against several currencies, primarily the Euro~~and reflects revenue increases in ~~the first half of 2018. As more fully described~~Education, Science, Engineering & Technology, and Outsourcing & Consulting operating segments, partially offset by declines in ~~the following discussions, revenue increased in Americas Staffing~~Professional & Industrial and International ~~Staffing, while GTS~~segments. Our first quarter 2021 acquisition of Softworld, a technology staffing and solutions firm, and our first quarter 2022 acquisition of RocketPower, an RPO solutions provider, and our second quarter 2022 acquisition of PTS, a specialty firm that provides in-school therapy services, added approximately 180 basis points to the revenue ~~was relatively flat.~~growth rate. Compared to 2021, revenue from staffing services decreased 1.2% and revenue from outcome-based services increased 6.3%. Permanent placement revenue, which is included in revenue from services, increased 18.9% from 2021.

Gross profit increased 10.1% on a reported basis and 12.1% on a constant currency basis on higher revenue volume, combined with an increase in the gross profit rate. The gross profit rate ~~decreased 20~~increased 170 basis points ~~year over year. As more fully described in~~due primarily to favorable product mix, lower employee-related costs, higher permanent placement income and the ~~following discussions, a decline in~~impact of the acquisitions of Softworld, RocketPower and PTS, which generate higher gross profit rates. The gross profit rate increased in ~~International Staffing was partially offset by an increase~~all operating segments. Permanent placement revenue, which is included in ~~the GTS~~revenue from services and has very low direct costs of services, has a disproportionate impact on gross profit ~~rate. The Americas Staffing gross profit rate was unchanged.~~rates.

Total SG&A expenses increased ~~1.6%~~8.4% on a reported basis ~~(1.4%~~and 10.0% on a ~~CC basis), due primarily~~constant currency basis. Approximately 320 basis points of the year-over-year increase is attributable to ~~increases in Americas Staffing SG&A expenses, as described in~~ the ~~following discussion. Included in total~~first quarter SG&A expenses for ~~2017 are restructuring charges~~Softworld and the SG&A expenses for RocketPower and PTS, including amortization of ~~$2.4 million, relating primarily to an initiative to optimize our GTS service delivery models.~~

Diluted earnings per share for 2018 were $0.58, as compared to $1.81 for 2017. Diluted earnings per share for 2018 were impacted by a loss, net of tax, of approximately $1.69 per share related to the investmentintangibles and other operating expenses. The increase in Persol Holdings. Diluted earnings per share for 2017 were impacted by approximately $0.35 per share related to the impact of revaluing net deferred tax assets as a result of the U.S. Tax Cuts and Jobs Act and approximately $0.04 per share related to restructuring charges.

SG&A

2823

~~Americas Staffing~~expenses also reflects increases in salary and related costs and increases in performance-based incentive compensation expenses.

~~(Dollars~~

The goodwill impairment charge relates to our RocketPower business, which delivers RPO services primarily to customers in ~~millions)~~the high-tech industry, and is included in the Outsourcing & Consulting segment. Changes in market conditions related to demand in hiring in the high-tech industry and slowing growth in RPO more broadly resulted in a goodwill impairment charge of $41.0 million in 2022.

2018 2017 Change CC
Change
Revenue from services $ 2,417.7 $ 2,345.9 3.1 % 3.4 %
Gross profit 441.3 429.1 2.9 3.1
SG&A expenses excluding restructuring charges 364.2 346.0 5.2 5.5
Restructuring charges — 0.4 NM NM
Total SG&A expenses 364.2 346.4 5.1 5.4
Earnings from operations 77.1 82.7 (6.7)
Earnings from operations excluding restructuring charges 77.1 83.1 (7.1)

Gross profit rate 18.3 % 18.3 % — pts.
Conversion rate 17.5 19.3 (1.8)
Conversion rate excluding restructuring charges 17.5 19.3 (1.8)
Return on sales 3.2 3.5 (0.3)
Return on sales excluding restructuring charges 3.2 3.5 (0.3)

Loss on disposal relates to our decision in May 2022 to sell our business in Russia. As a result, our Russian operations were classified as a held for sale disposal group and an impairment loss of $18.5 million representing the excess carrying value over the fair value of the net assets, less costs to sell, was recognized in the second quarter of 2022 with an additional loss of $0.2 million recognized in the third quarter upon completion of the transaction. Gain on sale of assets relates to the disposition of under-utilized real property located in the United States.

Earnings from operations for 2022 totaled $14.8 million, compared to earnings of $48.6 million in 2021. The decline is due primarily to the goodwill impairment charge and the loss on disposal, partially offset by higher gross profit, net of increased SG&A expenses and gain on sale of assets. Included in total earnings from operations in 2022 is approximately $14.4 million related to Softworld, RocketPower and PTS earnings from operations, inclusive of amortization of intangibles but excluding the RocketPower goodwill impairment charge, and $6.3 million in 2021 related to Softworld, inclusive of amortization of intangibles.

The loss on investment in Persol Holdings in 2022 represented the $52.4 million loss resulting from changes in the market price of our investment in the common stock of Persol Holdings up until the date of the transaction and the $14.8 million loss on sale, including transaction costs from the sale of the investment in an open-market transaction. The gain on the investment in Persol Holdings in 2021 resulted from changes in the quoted market price of the Persol Holdings common stock.

Loss on currency translation from liquidation of subsidiary represents the impact of the liquidation of our Kelly Japan subsidiary following the sale of the company’s investment in Persol Holdings and the return of capital through a dividend payment to its U.S. parent.

The change in ~~Americas Staffing~~Other income (expense), net is primarily the result of $5.5 million of foreign exchange gains related to U.S.-denominated cash equivalents held by our Kelly Japan subsidiary following the sale of the Persol Holdings shares and prior to its dividend payment to the U.S. parent in the first quarter of 2022.

Income tax benefit was $7.9 million for 2022 and income tax expense was $35.1 million for 2021. 2022 benefited from lower pretax earnings, changes in the fair value of the Company’s investment in Persol Holdings, and the impairment of tax deductible goodwill. These benefits were offset by the charge associated with tax exempt life insurance cash surrender value losses. Income tax expense for 2021 included charges from changes in the fair value of the Company’s investment in Persol Holdings and the gain on insurance settlement. These amounts were offset by benefits from a change in tax rate in the United Kingdom and tax exempt life insurance cash surrender value gains.

Our tax expense is affected by recurring items, such as the amount of pretax income and its mix by jurisdiction, U.S. work opportunity credits and the change in cash surrender value of tax exempt investments in life insurance policies. It is also affected by discrete items that may occur in any given period but are not consistent from period to period, such as tax law changes, changes in judgment regarding the realizability of deferred tax assets, the tax effects of stock compensation and, prior to February 2022, changes in the fair value of the Company’s investment in Persol Holdings which were treated as discrete since they could not be estimated.

The net loss for 2022 was $62.5 million, compared to net earnings of $156.1 million for 2021. This change was due to the Persol Holdings investment, including the first quarter 2022 sale and related impacts, the goodwill impairment charge, the loss on disposal related to the sale of our Russian operations, partially offset by improved gross profit in 2022 and the gain on sale of under-utilized real property in the United States.

Operating Results By Segment

(Dollars in millions)


	2022		2021		% Change
Revenue From Services:
Professional & Industrial	$	1,666.2	$	1,837.4	(9.3)	%
Science, Engineering & Technology	1,265.4		1,156.8		9.4
Education	636.2		416.5		52.7
Outsourcing & Consulting	468.0		432.1		8.3
International	932.2		1,067.8		(12.7)
Less: Intersegment revenue	(2.6)		(0.9)		182.8
Consolidated Total	$	4,965.4	$	4,909.7	1.1	%

2022 vs. 2021

Professional & Industrial revenue from services ~~reflects~~decreased 9.3%. The decrease was due primarily to a 12.4% decline in staffing services resulting from lower hours volume, partially offset by higher bill rates. Included in the decline in hours was the impact from a shift of a large staffing customer to a permanent placement model which resulted in lower staffing volume. Revenue from outcome-based services declined 0.3% due to lower demand for our call center specialty, partially offset by growth in other specialties.

Science, Engineering & Technology revenue from services increased 9.4% on a reported basis, which includes revenue from the acquisition of Softworld in the second quarter of 2021. Excluding the impact of ~~a 2%~~the addition of Softworld revenue in the first quarter of 2022, the revenue growth was 6.1%, which was driven by increases in our outcome-based services as well as an increase in ~~average~~revenue in our staffing business coming from increases in bill rates ~~(a 3%~~and permanent placement income, partially offset by a decline in hours.

Education revenue from services increased 52.7%. The revenue increase includes the impact of the acquisition of PTS in May 2022. On an organic basis, revenue increased 45.9% reflecting increased demand from existing customers, new customer wins and the impact of higher bill rates.

Outsourcing & Consulting revenue from services increased 8.3% on a ~~CC basis),~~reported basis, which includes the revenue from the acquisition of RocketPower in March 2022. On an organic basis, revenue growth was 2.7% due primarily to strong demand for RPO services, coupled with revenue growth in MSP, partially offset by declines in PPO revenue.

International revenue from services decreased 12.7% on a reported basis and decreased 4.7% in constant currency. The decrease was primarily the result of the sale of our Russian operations in July 2022, combined with revenue declines in Mexico due to the impact of legislation enacted in the third quarter of 2021, which placed restrictions on the staffing industry. Revenue in Europe decreased 9.2% on a reported basis and decreased 0.3% in constant currency, with the impact of the ~~September 2017 acquisition~~sale of ~~TOC, and partially~~our Russian operations nearly offset by ~~a 1% decrease in hours volume. The increase in average bill rates was the result of wage increases and stronger revenue~~ growth in ~~our service lines with higher pay rates. Americas Staffing represented 44% of total Company revenue in both 2018 and 2017.~~most geographies.

From a product perspective, the increase in revenue reflects an increase in commercial, including light industrial and educational staffing (due primarily to the TOC acquisition) and professional/technical, including engineering, science and IT products. These increases were partially offset by a decrease in our commercial office services volume.

~~The Americas Staffing gross profit rate was unchanged from 2017. Increases related to higher staffing fee-based income and lower payroll taxes were offset by unfavorable customer mix.~~

The increase in total SG&A expenses was due primarily to higher costs for recruiting and sales resources and additional effort to attract and place candidates in the current talent environment, combined with SG&A expenses related to TOC.

~~GTS~~Operating Results By Segment (continued)

(Dollars in millions)

2018 2017 Change CC
Change
Revenue from services $ 1,997.4 $ 1,998.9 (0.1) % (0.1) %
Gross profit 381.1 373.7 2.0 1.8
SG&A expenses excluding restructuring charges 296.5 294.7 0.6 0.4
Restructuring charges — 2.0 NM NM
Total SG&A expenses 296.5 296.7 — 0.2
Earnings from operations 84.6 77.0 9.8
Earnings from operations excluding restructuring charges 84.6 79.0 7.1
Gross profit rate 19.1 % 18.7 % 0.4 pts.
Conversion rate 22.2 20.6 1.6
Conversion rate excluding restructuring charges 22.2 21.1 1.1
Return on sales 4.2 3.9 0.3
Return on sales excluding restructuring charges 4.2 4.0 0.2


	2022			2021			Change
Gross Profit:
Professional & Industrial	$	302.5		$	310.0		(2.4)	%
Science, Engineering & Technology	297.0			253.9			17.0
Education	100.3			65.1			54.0
Outsourcing & Consulting	169.6			141.4			20.0
International	142.4			148.8			(4.3)
Consolidated Total	$	1,011.8		$	919.2		10.1	%

Gross Profit Rate:
Professional & Industrial	18.2		%	16.9		%	1.3	pts.
Science, Engineering & Technology	23.5			21.9			1.6
Education	15.8			15.6			0.2
Outsourcing & Consulting	36.3			32.7			3.6
International	15.3			13.9			1.4
Consolidated Total	20.4		%	18.7		%	1.7	pts.

Revenue from services was flat in comparison to 2017. Lower demand in specific customers in centrally delivered staffing and PPO was offset by increased revenue in BPO, KellyConnect and CWO from program expansions and new customer wins in each product. GTS revenue represented 36% of total Company revenue in 2018 and 37% in 2017.2022 vs. 2021

~~The~~Gross profit for the Professional & Industrial segment decreased due to lower revenue volume, partially offset by an increase in the ~~GTS~~gross profit rate. In comparison to the prior year, the gross profit rate ~~was~~increased 130 basis points. This increase reflects improved business mix, higher permanent placement income, including conversion fees related to a large customer and lower employee-related costs.

Science, Engineering & Technology gross profit increased on higher revenue volume, combined with an increase in the gross profit rate. The gross profit rate increased 160 basis points due to ~~improving product~~improved specialty mix, including the acquisition of Softworld which generates higher gross profit margins, and increased permanent placement income, partially offset by ~~increases~~higher employee-related costs.

Gross profit for the Education segment increased on higher revenue volume and an increase in ~~employee-related healthcare costs.~~the gross profit rate. The gross profit rate increased 20 basis points, due primarily to the acquisition of PTS which generates higher margins, and higher permanent placement income at Greenwood/Asher.

Outsourcing & Consulting gross profit increased on higher revenue volume, combined with an increase in the gross profit rate. The gross profit rate increased 360 basis points, primarily due to a change in product mix within this segment. Growth in RPO, including the acquisition of RocketPower, and MSP with higher margins, was coupled with decreased revenues in our PPO product, which generates lower profit margins.

International gross profit decreased 4.3% on a reported basis and improved 4.6% on a constant currency basis. On a reported basis, lower revenue volume was partially offset by an improved gross profit rate. On a constant currency basis, the improved gross profit rate more than offset the impact of lower revenue volume. In comparison to the prior year, the gross profit rate increased 140 basis points, primarily due to improved business mix and higher permanent placement income.

Operating Results By Segment (continued)

(Dollars in millions)


	2022		2021		% Change
SG&A Expenses:
Professional & Industrial	$	270.5	$	278.6	(2.9)	%
Science, Engineering & Technology	214.9		180.2		19.2
Education	81.8		62.1		31.7
Outsourcing & Consulting	149.8		122.7		22.1
International	132.5		138.9		(4.6)
Corporate expenses	94.0		88.1		6.6
Consolidated Total	$	943.5	$	870.6	8.4	%

2022 vs. 2021

Total SG&A expenses ~~were flat~~ in ~~comparison~~Professional & Industrial decreased 2.9%, primarily due to ~~2017. Increased headcount~~lower expenses to support lower volumes in our staffing and ~~costs related to new programs and expansion of programs in the CWO, BPO and KellyConnect practices were~~outcome-based call center specialties, partially offset by ~~lower salary costs in centrally delivered staffing and PPO. Additionally, the year-over-year change in total~~higher performance-based incentive compensation expense.

Total SG&A expenses in Science, Engineering & Technology increased 19.2%, and includes the impact of the acquisition of Softworld in the second quarter of 2021. Excluding the impact of the addition of Softworld expenses in the first quarter of 2022, SG&A expenses increased 13.6%. The increase in organic SG&A expenses is due primarily to higher performance-based incentive compensation expense and higher salary-related costs from increasing headcount.

Total SG&A expenses in Education increased 31.7%, and includes the impact of the acquisition of PTS in May 2022. Excluding the impact of the PTS acquisition, SG&A expenses increased 24.0%, due primarily to higher salary-related expenses as headcount has increased as revenues have grown.

Total SG&A expenses in Outsourcing & Consulting increased 22.1%, and includes the impact of the acquisition of RocketPower in March 2022. Excluding the impact of the RocketPower acquisition, SG&A expenses increased 12.0%, due primarily to higher salary-related expenses as headcount has increased as revenues have grown.

Total SG&A expenses in International decreased 4.6% on a reported basis and increased 3.6% on a constant currency basis. The increase in constant currency was ~~impacted~~primarily due to higher salary-related expenses driven by ~~restructuring charges~~an increase in headcount, reflecting improving revenue in Europe, partially offset by the impact of ~~$2.0 million~~the sale of our Russian operations in ~~2017, representing severance relating~~July 2022.

Corporate expenses increased 6.6%, primarily due to ~~an initiative to optimize our GTS service delivery models.~~

higher performance-based incentive compensation expense.

3027

~~International Staffing~~Operating Results By Segment (continued)

(Dollars in millions)

2018 2017 Change CC
Change
Revenue from services $ 1,116.6 $ 1,048.2 6.5 % 4.0 %
Gross profit 152.3 153.7 (0.9) (3.2)
Total SG&A expenses 132.3 131.6 0.5 (1.4)
Earnings from operations 20.0 22.1 (9.5)
Gross profit rate 13.6 % 14.7 % (1.1) pts.
Conversion rate 13.2 14.4 (1.2)
Return on sales 1.8 2.1 (0.3)


	2022		2021		% Change
Earnings (Loss) from Operations:
Professional & Industrial	$	32.0	$	31.4	1.8	%
Science, Engineering & Technology	82.1		73.7		11.4
Education	18.5		3.0		NM
Outsourcing & Consulting	(21.2)		18.7		NM
International	9.9		9.9		(0.5)
Corporate	(94.0)		(88.1)		(6.6)
Loss on disposal	(18.7)		—		NM
Gain on sale of assets	6.2		—		NM
Consolidated Total	$	14.8	$	48.6	(69.7)	%

The change in International Staffing revenue from services reflects primarily a 6% increase in average bill rates (a 3% increase on a CC basis), due to customer and country mix. Hours volume was flat in comparison to 2017. International Staffing represented 20% of total Company revenue in both 2018 and 2017.2022 vs. 2021

Professional & Industrial reported earnings of $32.0 million, a 1.8% increase from 2021. The ~~International Staffing~~increase was due to effective cost management as gross profit ~~rate decreased~~declined.

Science, Engineering & Technology reported earnings of $82.1 million, an 11.4% increase from 2021. The increase in earnings was primarily due to ~~unfavorable customer mix~~the impact of the Softworld acquisition. In addition, increases in gross profit in our outcome-based and ~~the effect of French payroll tax adjustments. These decreases~~telecom specialties were partially offset by ~~an increase~~increases in ~~staffing fee-based income.~~certain expenses in most of our specialties in the SET business unit, including those related to additional headcount and increased performance-based incentive compensation.

Education reported earnings of $18.5 million in 2022, compared to earnings of $3.0 million in 2021. The ~~increase in total SG&A expenses~~change was primarily due to the ~~effect~~increase in revenue resulting from improved demand for our services as compared to 2021, coupled with operating leverage. 2022 results also include earnings of ~~currency exchange rates. On~~$3.8 million from PTS acquired in May 2022.

Outsourcing & Consulting reported a ~~constant currency basis, SG&A expenses decreased~~loss of $21.2 million in 2022, compared to earnings of $18.7 million in 2021, due primarily to a charge of $41.0 million related to the impairment of goodwill of RocketPower in 2022.

International reported earnings of $9.9 million in both 2022 and 2021. The decline in earnings due to ~~effective cost control~~the sale of operations in ~~expenses across the region.~~Russia was nearly offset by growth in most geographies.

3128

Results of Operations

Financial Condition

Historically, we have financed our operations through cash generated by operating activities and access to credit markets. Our working capital requirements are primarily generated from temporary employee payroll, which is generally paid weekly or monthly, and customer accounts ~~receivable.~~receivable, which is generally outstanding for longer periods. Since receipts from customers ~~generally~~ lag payroll paid to temporary employees, working capital requirements increase substantially in periods of growth. Conversely, when economic activity slows, working capital requirements may substantially decrease. This may result in an increase in our operating cash flows; however, any such increase would not be sustainable in the event that an economic downturn continued for an extended period.

As highlighted in the consolidated statements of cash flows, our liquidity and available capital resources are impacted by four key components: cash, cash equivalents and restricted cash, operating activities, investing activities and financing activities.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash totaled ~~$31.0~~$162.4 million at year-end ~~2019,~~2022, compared to ~~$40.1~~$119.5 million at year-end ~~2018.~~2021. As further described below, during ~~2019,~~2022, we used $76.3 million of cash for operating activities, generated ~~$102.2~~$167.5 million of cash from ~~operating activities, used $94.3 million of cash for~~ investing activities and used ~~$16.1~~$50.6 million of cash for financing activities.

Operating Activities

In ~~2019,~~2022, we ~~generated $102.2~~used $76.3 million of net cash ~~from~~for operating activities, as compared to generating ~~$61.4~~$85.0 million in ~~2018~~2021 and ~~$70.8~~generating $186.0 million in ~~2017. The change~~2020. Net cash used for operating activities in 2022 and 2021 included $86.8 million and $29.7 million, respectively, of cash outflows related to the repayment of U.S. payroll taxes originally deferred in 2020. Net cash from ~~2018~~operating activities in 2020 benefited from the deferral of $117.0 million of U.S. payroll taxes. In addition, in 2022 we paid $48.4 million of income taxes related to ~~2019 was primarily driven by working capital changes. The change from 2017 to 2018 was primarily driven by working capital changes and an increase in performance-based compensation payments.~~the sale of Persol Holdings common stock.

The change from 2021 to 2022 was primarily due to the impact of payments related to the payroll tax deferral, income tax payments related to the sale of Persol Holdings common stock and increased working capital requirements. Trade accounts receivable totaled ~~$1.3~~$1.5 billion at year-end ~~2019~~2022 and ~~2018.~~$1.4 billion at year-end 2021. Global DSO for the fourth quarter was 5861 days for ~~2019,~~2022, compared to 5560 days for ~~2018.~~2021. Accounts payable and accrued liabilities was $723.3 million and increased from year-end 2021 as a result of increased MSP supplier payables. The ~~increase in DSO reflects both increasing pressure~~change from 2020 to ~~extend payment terms from our large customers and~~2021 was primarily due to the ~~timing~~deferral of ~~customer~~payroll tax payments, ~~at year end.~~partially offset by the impact of higher global DSO.

Our working capital position (total current assets less total current liabilities) was ~~$521.6~~$586.4 million at year-end ~~2019,~~2022, an increase of ~~$18.6~~$92.9 million from year-end ~~2018.~~2021. Excluding the increase in cash, working capital increased $51.9 million from year-end 2021. The current ratio (total current assets divided by total current liabilities) was ~~1.6~~1.5 at year-end ~~2019~~2022 and ~~2018.~~2021.

Investing Activities

In ~~2019,~~2022, we ~~used $94.3~~generated $167.5 million of net cash ~~for~~from investing activities, compared to using ~~$29.8~~$180.7 million in ~~2018~~2021 and ~~using $61.0~~generating $9.8 million in ~~2017.~~2020. Included in cash ~~used for~~generated from investing activities in ~~2019~~2022 is ~~$50.8~~$196.9 million of proceeds from the sale of the investment in Persol Holdings, $119.5 million of proceeds from the sale of almost all of the Company's shares in our equity investment in PersolKelly and $10.1 million of proceeds from the sale of land and other real property. This was partially offset by $58.3 million of cash used for the acquisition of ~~NextGen~~RocketPower in ~~January 2019,~~March 2022, net of cash received, ~~$35.6~~$84.8 million of cash used for the acquisition of ~~GTA~~PTS in ~~January 2019,~~May 2022, net of cash received, and ~~$4.4~~$6.0 million ~~for loans to PersolKelly Asia Pacific to fund working capital requirements. These uses~~ of cash ~~were partially offset by proceeds of $13.8 million primarily~~disposed from the sale of ~~unused land during the second quarter~~our operations in Russia in July 2022, net of ~~2019.~~proceeds.

Included in cash used for investing activities in ~~2018~~2021 is ~~$7.0~~$213.0 million ~~for loans to PersolKelly Asia Pacific to fund working capital requirements as a result~~ of their sustained revenue growth and $5.0 million for an investment in equity securities relating to the Company’s investment in Business Talent Group, LLC, partially offset by $7.9 million for proceeds from company-owned life insurance. Included in cash used ~~for investing activities in 2017 is $37.2 million~~ for the acquisition of ~~Teachers On Call,~~Softworld in April 2021, net of cash received and including working capital adjustments. This was partially offset by $19.0 million of proceeds from an insurance settlement that represented a payment received in the fourth quarter of 2021 related to the settlement of claims under a representations and warranties insurance policy purchased by the Company in connection with the acquisition of Softworld.

Included in cash generated from investing activities in 2020 is $55.5 million of proceeds representing the cash received, net of transaction expenses, for the sale of three headquarters properties as a part of a sale and leaseback transaction and $5.6 million received from a payment on the loans to PersolKelly Pte. Ltd. This was partially offset by cash used for the acquisitions of

Insight in January 2020 and Greenwood/Asher in November 2020. Cash used for the acquisition of Insight totaled $36.4 million, net of the cash ~~received.~~received and including working capital adjustments. Cash used for the acquisition of Greenwood/Asher totaled $2.8 million, net of the cash received and including working capital adjustments.

Capital expenditures ~~which~~ totaled ~~$20.0~~$12.0 million in ~~2019, $25.6~~2022, $11.2 million in ~~2018~~2021 and ~~$24.6~~$15.5 million in ~~2017, were primarily related to the Company’s technology programs~~2020. Capital expenditures in ~~2019~~both 2022 and 2021 primarily related to the Company's IT infrastructure, technology programs and headquarters furniture and fixtures. Capital expenditures in 2020 primarily related to the Company's headquarters leasehold improvements, IT infrastructure and ~~headquarters building improvements in 2018 and 2017.~~technology programs.

Financing Activities

In ~~2019,~~2022, we used ~~$16.1~~$50.6 million of cash for financing activities, as compared to using ~~$26.5~~$8.1 million in ~~2018~~both 2021 and ~~using $3.4 million~~2020. The change in ~~2017. Changes in net~~ cash ~~from~~used for financing activities ~~were~~was primarily related to the buyback of the Company's common shares held by Persol Holdings for $27.2 million in February 2022, $7.8 million in share repurchases of the Company's Class A common stock in the fourth quarter of 2022 and the year-over-year change in dividend ~~payments in 2019, 2018 and 2017.~~payments. Dividends paid per common share were ~~$0.30~~$0.275 in ~~2019, 2018~~2022, $0.10 in 2021 and ~~2017.~~$0.075 in 2020. Payments of dividends are restricted by the financial covenants contained in our debt facilities. Details of this restriction are contained in the Debt footnote in the notes to our consolidated financial statements.

Changes in net cash from financing activities are also impacted by short-term borrowing activities. Debt totaled ~~$1.9~~$0.7 million at year-end ~~2019 and was $2.2 million~~2022, which represented local borrowings, compared to no debt at year-end ~~2018.~~2021. Debt-to-total capital (total debt reported in the consolidated balance sheet divided by total debt plus stockholders’ equity) is a common ratio to measure the relative capital structure and leverage of the Company. Our ratio of debt-to-total capital was 0.1% at year-end ~~2019~~2022 and ~~0.2%~~0.0% at year-end ~~2018.~~ 2021.

In ~~2019,~~2022, the net change in short-term borrowings was primarily due to borrowings on local lines of credit. In 2021 and 2020, the net change in short-term borrowings was primarily due to payments on local lines of credit. In 2018, the net change in short-term borrowings was primarily due to payments on our revolving credit facility. In 2017, the net change in short-term borrowings was primarily due to borrowings on our revolving credit facility.

Contractual Obligations and Commercial Commitments

Summarized below are our obligations and commitments to make future payments as of year-end ~~2019:~~2022:

Payment due by period
Total
Less than
1 year
1-3 Years 3-5 Years
More than
5 years
(In millions of dollars)
Leases $ 74.4 $ 24.6 $ 33.6 $ 11.8 $ 4.4
Short-term borrowings 1.9 1.9 — — —
Accrued workers’ compensation 71.5 25.7 21.5 8.6 15.7
Accrued retirement benefits 207.7 20.4 40.7 40.9 105.7
Other liabilities 8.9 2.2 3.8 1.1 1.8
Uncertain income tax positions 1.1 0.5 0.2 0.1 0.3
Purchase obligations 45.6 19.5 14.6 11.5 —
Total $ 411.1 $ 94.8 $ 114.4 $ 74.0 $ 127.9


			Payment due by period
	Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 years
	(In millions of dollars)
Leases	$	85.9	$	19.1	$	23.3	$	13.2	$	30.3
Short-term borrowings	0.7		0.7		—		—		—
Accrued workers’ compensation	63.6		22.9		19.1		8.3		13.3
Accrued retirement benefits	197.5		23.4		46.7		46.9		80.5
Other liabilities	7.4		2.2		4.2		0.6		0.4
Uncertain income tax positions	0.6		0.2		0.3		0.1		—
Purchase obligations	53.0		32.9		20.1		—		—

Total	$	408.7	$	101.4	$	113.7	$	69.1	$	124.5

Purchase obligations above represent unconditional commitments relating primarily to technology services and online tools which we expect to utilize generally within the next ~~two~~three fiscal years, in the ordinary course of business. We have no material, unrecorded commitments, losses, contingencies or guarantees associated with any related parties or unconsolidated entities.

Liquidity

We expect to meet our ongoing short-term and long-term cash requirements principally through cash generated from operations, available cash and equivalents, securitization of customer receivables and committed unused credit facilities. ~~We are reviewing other potential sources of liquidity, such as wage subsidy receivables outside the U.S., in an effort to potentially monetize such sources.~~ Additional funding sources could include ~~asset-based lending or~~ additional bank ~~facilities. In addition, on December 4, 2019,~~facilities or sale of non-core assets. To meet significant cash requirements related to our nonqualified retirement plan, we ~~entered into an agreement to sell three headquarters properties. See~~may utilize proceeds from Company-owned life insurance policies. During 2020, cash generated from operations was supplemented by the ~~Assets Held for Sale footnote~~deferral of payments of the Company's U.S. social security taxes as allowed by the Coronavirus Aid, Relief, and Economic Security Act. We have repaid the $117.0 million deferred payroll tax balances, including $29.5 million in the ~~notes to our consolidated financial statements for more information.~~first quarter of 2022 and $57.3 million in the fourth quarter of 2022.

We utilize intercompany loans, dividends, capital contributions and redemptions to effectively manage our cash on a global basis. We periodically review our foreign subsidiaries’ cash balances and projected cash needs. As part of those reviews, we may identify cash that we feel should be repatriated to optimize the Company’s overall capital structure. As of the ~~2019~~2022 year end, these reviews have not resulted in ~~any~~ specific plans to repatriate a majority of our international cash balances. We expect much of our international cash will be needed to fund working capital growth in our local ~~operations. The majority~~operations as working capital needs, primarily trade accounts receivable, increase during periods of ~~our international cash is concentrated in a~~growth. A cash pooling arrangement (the “Cash Pool”) ~~and~~ is available to fund general corporate needs internationally. The Cash Pool is a set of cash accounts maintained with a single bank that must, as a whole, maintain at least a zero balance; individual accounts may be positive or negative. This allows countries with excess cash to invest and countries with cash needs to utilize the excess cash.

At year-end 2022, we had $200.0 million of available capacity on our $200.0 million revolving credit facility and $100.5 million of available capacity on our $150.0 million securitization facility. The securitization facility carried no short-term borrowings and $49.5 million of standby letters of credit related to workers’ compensation. Together, the revolving credit and securitization facilities provide the Company with committed funding capacity that may be used for general corporate purposes subject to financial covenants and restrictions. While we believe these facilities will cover our working capital needs over the short term, if economic conditions or operating results change significantly from our current expectations, we may need to seek additional sources of funds. Throughout 2022 and as of the 2022 year end, we met the debt covenants related to our revolving credit facility and securitization facility.

At year-end 2022, we also had additional unsecured, uncommitted short-term credit facilities totaling $5.9 million, under which we had $0.7 million of borrowings. Details of our debt facilities as of the 2022 year end are contained in the Debt footnote in the notes to our consolidated financial statements.

We ~~manage~~have historically managed our cash and debt very closely to optimize our capital structure. As our cash balances build, we tend to pay down debt as appropriate. Conversely, when working capital needs grow, we tend to use corporate cash and cash available in the Cash Pool first, and then access our borrowing facilities. We expect our working capital requirements to increase if demand for our services increases. We also expect to use $42.2 million of cash for repurchases of the Company's Class A common stock during 2023 pursuant to the $50.0 million plan approved by the Company's board of directors on November 9, 2022.

~~At year-end 2019,~~In February 2022, we ~~had $200.0~~completed transactions to monetize a substantial portion of our assets in the Asia-Pacific region which will allow us to strategically redeploy resources to accelerate our growth. Specifically, we concluded our cross-shareholding arrangement with Persol Holdings and reduced our ownership interest in PersolKelly, our APAC joint venture. We sold our investment in Persol Holdings common stock in an open-market transaction. We repurchased the 1.6 million Kelly Class A and 1,475 Kelly Class B common shares owned by Persol Holdings at a price based on the last five trading days prior to the transaction. We sold almost all of ~~available capacity on~~ our ~~$200.0 million revolving credit facility and $97.7 million of available capacity on~~ownership interest in PersolKelly to our $150.0 million securitization facility. The securitization facility had no short-term borrowings and $52.3 million of standby letters of credit related to workers’ compensation. Together, the revolving credit and securitization facilities providejoint venture partner. In 2022, the Company ~~with committed funding capacity that may be used for general corporate purposes. While we believe these facilities will cover our working capital needs over~~paid $48.4 million in taxes resulting from the ~~short term, if economic conditions or operating results change significantly, we may need to seek additional sources of funds. Throughout 2019 and as~~sale of the ~~2019 year end, we met the debt covenants related to our revolving credit facility and securitization facility.~~

At year-end 2019, we also had additional unsecured, uncommitted short-term credit facilities totaling $11.1 million, under which we had $1.1 million of borrowings. Details of our debt facilities as of the 2019 year end are contained in the Debt footnote in the notes to our consolidated financial statements.

On January 14, 2020, we acquired the membership interests of a company for $34.5 million, using cash on hand. See the Subsequent Event footnote in the notes to our consolidated financial statements for more information.Persol Holdings shares.

We monitor the credit ratings of our major banking partners on a regular basis and have regular discussions with them. Based on our reviews and communications, we believe the risk of one or more of our banks not being able to honor commitments is insignificant. We also review the ratings and holdings of our money market funds and other investment vehicles regularly to ensure high credit quality and access to our invested cash.

Critical Accounting Estimates

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States. In this process, it is necessary for us to make certain assumptions and related estimates affecting the amounts reported in the consolidated financial statements and the attached notes. Actual results can differ from assumed and estimated amounts.

Critical accounting estimates are those that we believe require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Judgments and uncertainties affecting the application of those estimates may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following estimates to be most critical in understanding the judgments involved in preparing our consolidated financial statements.

Workers’ Compensation

In the U.S., we have a combination of insurance and self-insurance contracts under which we effectively bear the first $1.0 million of risk per single accident. There is no aggregate limitation on our per-accident exposure under these insurance and self-insurance programs. We establish accruals for workers’ compensation utilizing actuarial methods to estimate the undiscounted future cash payments that will be made to satisfy the claims, including an allowance for incurred-but-not-reported claims. We retain an independent consulting actuary to establish ultimate loss forecasts for the current and prior accident years of our insurance and self-insurance programs. The consulting actuary establishes loss development factors and loss rates, based on our historical claims experience as well as industry experience, and applies those factors to current claims information to derive an estimate of our ultimate claims liability. In preparing the estimates, the consulting actuary may consider factors such as the nature, frequency and severity of the claims; reserving practices of our third party claims administrators; performance of our medical cost management and return to work programs; changes in our territory and business line mix; and current legal, economic and regulatory factors such as industry estimates of medical cost trends. Where appropriate, multiple generally accepted actuarial techniques are applied and tested in the course of preparing the loss forecast. We use the ultimate loss forecasts, as developed by the consulting actuary, to establish total expected program costs for each accident year by adding our estimates of non-loss costs such as claims handling fees and excess insurance premiums. When claims exceed the applicable loss limit or self-insured retention and realization of recovery of the claim from existing insurance policies is deemed probable, we record a receivable from the insurance company for the excess amount.

We evaluate the accrual quarterly and make adjustments as needed. The ultimate cost of these claims may be greater than or less than the established accrual. While we believe that the recorded amounts are reasonable, there can be no assurance that changes to our estimates will not occur due to limitations inherent in the estimation process. In the event we determine that a smaller or larger accrual is appropriate, we would record a credit or a charge to cost of services in the period in which we made such a determination. The accrual for workers’ compensation, net of related receivables which are included in prepaid expenses

and other current assets and other assets in the consolidated balance sheet, was ~~$59.5~~$43.3 million and ~~$61.4~~$48.4 million at year-end ~~2019~~2022 and ~~2018,~~2021, respectively.

Business Combinations

We account for business combinations using the acquisition method of accounting, in which the purchase price is allocated for assets acquired and liabilities assumed and recorded at the estimated fair values at the date of acquisition. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Management is required to make significant assumptions and estimates in determining the fair value of the assets acquired, particularly intangible assets. Purchased intangible assets are primarily comprised of acquired trade names and customer relationships that are recorded at fair value at the date of acquisition. We utilize third-party valuation specialists to assist us in the determination of the fair value of the intangibles. The fair value of trade name intangibles is determined using the relief-from-royalty method, which relies on the use of estimates and assumptions about projected revenue growth rates, royalty rates and discount rates. The fair value of customer relationship intangibles is determined using the multi-period excess earnings method, which relies on the use of estimates and assumptions about projected revenue growth rates, customer attrition rates, profit margins and discount rates. Determining the useful lives of intangible assets also requires judgment and are inherently uncertain. There is a measurement period of up to one year in which to finalize the fair value determinations and preliminary fair value estimates may be revised if new information is obtained during this period.

Income Taxes

Income tax expense is based on expected income and statutory tax rates in the various jurisdictions in which we operate. Judgment is required in determining our income tax expense. We establish accruals for uncertain tax positions under generally accepted accounting principles, which require that a position taken or expected to be taken in a tax return be recognized in the consolidated financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) the position would be sustained upon examination by tax authorities who have full knowledge of all relevant information. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

Our effective tax rate includes the impact of accruals and changes to accruals that we consider appropriate, as well as related interest and penalties. A number of years may lapse before a particular matter, for which we have or have not established an accrual, is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our accruals are appropriate under generally accepted accounting principles. Favorable or unfavorable adjustments of the accrual for any particular issue would be recognized as an increase or decrease to our income tax expense in the period of a change in facts and circumstances. Our current tax accruals are presented in income and other taxes in the consolidated balance sheet and long-term tax accruals are presented in other long-term liabilities in the consolidated balance sheet.

Tax laws require items to be included in the tax return at different times than the items are reflected in the consolidated financial statements. As a result, the income tax expense reflected in our consolidated financial statements is different than the liability reported in our tax return. Some of these differences are permanent, which are not deductible or taxable on our tax return, and some are temporary differences, which give rise to deferred tax assets and liabilities. We establish valuation allowances for our deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. Our net deferred tax asset is recorded using currently enacted tax laws, and may need to be adjusted in the event tax laws change.

The U.S. work opportunity credit is allowed for wages earned by employees in certain targeted groups. The actual amount of creditable wages in a particular period is estimated, since the credit is only available once an employee reaches a minimum employment period and the employee’s inclusion in a targeted group is certified by the applicable state. As these events often occur after the period the wages are earned, judgment is required in determining the amount of work opportunity credits accrued for in each period. We evaluate the accrual regularly throughout the year and make adjustments as needed.

~~Equity Method Investment~~

We account for our investment in PersolKelly Asia Pacific under the equity method of accounting on a one quarter lag. We review our equity method investment for indicators of impairment on a quarterly basis or whenever events or circumstances indicate the carrying amount may be other-than-temporarily impaired. An impairment assessment requires the exercise of judgment related to financial trends, forecasts, relevant events, as well as any operating, economic, legal or regulatory changes that may have an impact on the investment. There were no indicators of an other-than-temporary impairment in 2019 or 2018.

As of year-end 2019 and 2018, the equity method investment was $117.2 million and $121.3 million, respectively. See the Investment in PersolKelly Asia Pacific footnote in the notes to our consolidated financial statements.

Goodwill

We test goodwill for impairment annually and whenever events or circumstances make it more likely than not that an impairment may have occurred. ~~Generally accepted accounting principles require~~GAAP requires that goodwill be tested for impairment at a reporting unit level. WeFor segments with a goodwill balance, we have determined that our reporting units are the same as our operating and reportable segments based on our organizational ~~structure. Goodwill~~structure or one level below our operating segments (the component level).

We may first use a qualitative assessment ("step zero test") for the annual impairment test if we have determined that it is more likely than not that the fair value for one or more reporting units is greater than their carrying value. In conducting the qualitative assessment, we assess the totality of relevant events and circumstances that affect the fair value or carrying value of the reporting unit. Such events and circumstances may include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, entity-specific events and events affecting a reporting unit.

If we elect to forgo the qualitative assessment for a reporting unit, goodwill is tested for impairment by comparing the estimated fair value of a reporting unit to its carrying ~~value.~~value ("step one test"). If the estimated fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is not considered impaired and no further testing is required. If the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of a reporting unit, goodwill is deemed impaired and is written down to the extent of the difference.

~~To derive~~For the ~~estimated~~step one quantitative test, we determine the fair value of our reporting units ~~we primarily relied on an income approach. We also utilized various market approaches to validate the fair value determined~~ using the income approach. Under the income approach, estimated fair value is determined based on estimated future cash flows discounted by an estimated market participant weighted-average cost of capital, which reflects the overall level of inherent risk of the reporting unit being measured. Estimated future cash flows are based on our internal projection model and reflects management’s outlook for the reporting units. Assumptions and estimates about future cash flows and discount rates are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. Our analysis used significant assumptions by reporting unit, including: expected future revenue growth rates, profit margins and discount rate.

The goodwill resulting from the acquisition of RocketPower during the first quarter of 2022 was allocated to the OCG reportable segment and RocketPower was deemed to be a separate reporting unit. The goodwill resulting from the acquisition of PTS during the second quarter of 2022 was allocated to the Education reportable segment and PTS was deemed to be a separate reporting unit. The goodwill resulting from the acquisition of Softworld during the second quarter of 2021 was allocated to the SET reportable segment and Softworld was deemed to be a separate reporting unit. See the Acquisitions and Dispositions footnote in the notes to our consolidated financial statements for more information.

We completed our annual impairment test for all reporting units with goodwill in the fourth quarter for the fiscal year ended ~~2019 and 2018 and determined that goodwill was not impaired. In 2019 and 2018, we~~2022. We performed a step one quantitative ~~assessment~~test for the ~~Americas Staffing~~Softworld and ~~GTS~~PTS reporting units. As a result of the quantitative assessment, we determined that the estimated fair value of the Softworld and PTS reporting units was more than its carrying value. Additionally, we performed a step zero qualitative analysis for the Education and RocketPower reporting units to determine whether a further quantitative analysis was necessary and concluded that a step one quantitative analysis was not necessary at that time. As a result of the quantitative and qualitative assessments, the Company determined goodwill related to these reporting units was not impaired at that time.

During 2022, customers within the high-tech industry vertical, in which RocketPower specializes, reduced or eliminated their full-time hiring, reducing demand for RocketPower's services, and on-going economic uncertainty has more broadly impacted the growth in demand for RPO in the near-term. These changes in market conditions therefore caused a triggering event requiring an interim impairment test for goodwill as of the third quarter of 2022. Job eliminations in the high-tech industry vertical continued during the fourth quarter of 2022, indicating a broad, sustained reduction in hiring was likely and is now expected to last through much of 2023, directly impacting RocketPower and the demand for RocketPower's services in this vertical. These changes in market conditions caused another triggering event requiring an interim impairment test for goodwill as of year-end 2022.

We performed an interim step one quantitative test for RocketPower’s goodwill and determined that the estimated fair value of the reporting unit no longer exceeded the carrying value as of third quarter-end and year-end 2022. Based on the result of our interim goodwill impairment test, we recorded a goodwill impairment charge of $30.7 million in the third quarter of 2022 and we recorded an additional goodwill impairment charge of $10.3 million to write off the remaining balance of RocketPower’s goodwill in the fourth quarter of 2022, for a total goodwill impairment charge of $41.0 million as of year-end 2022.

Our analysis used significant assumptions, ~~by segment,~~ including: expected future revenue ~~and expense~~ growth rates, profit margins ~~cost of capital,~~and discount ~~rate and forecasted capital expenditures.~~rate. Although we believe the assumptions and estimates we have made are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results. Different assumptions of the anticipated future results and growth from ~~these businesses~~our business could result in an impairment charge, which would decrease operating income and result in lower asset values on our consolidated balance sheet. The estimated fair value of the Softworld and PTS reporting units exceeds the carrying value by more than 10%. As a measure of sensitivity ~~both~~of the fair value for the Softworld and PTS reporting units, ~~have~~while holding all other assumptions constant, an ~~estimated fair value more than 150%~~increase in the discount rate of ~~the carrying value~~100 basis points or a decrease of 100 basis points in ~~2019 and reducing our~~the revenue growth rate assumptions ~~by 45%~~for each forecasted period used to determine the fair value of both reporting units would not result in an impairment of goodwill.

We completed our annual impairment test for all reporting units with goodwill in the fourth quarter for the fiscal year ended 2021. We performed a step one quantitative test for the Softworld reporting unit. As a result of the quantitative assessment, we determined that the estimated fair value ~~falling below~~of the Softworld reporting unit was more than its carrying ~~value~~value. Additionally, we performed a step zero qualitative analysis for ~~both~~the Education reporting ~~units.~~unit to determine whether a further quantitative analysis was necessary and concluded that a step one quantitative analysis was not necessary. As a result of the quantitative and qualitative assessments, the Company determined goodwill was not impaired as of year-end 2021.

At year-end ~~2019~~2022 and ~~2018,~~2021, total goodwill amounted to ~~$127.8~~$151.1 million and ~~$107.3~~$114.8 million, respectively. See the Goodwill and Intangible Assets footnote in the notes to our consolidated financial statements for more information.

Litigation

Kelly is subject to legal proceedings, investigations and claims arising out of the normal course of business. Kelly routinely assesses the likelihood of any adverse judgments or outcomes to these matters, as well as ranges of probable losses. A determination of the amount of the accruals required, if any, for these contingencies is made after analysis of each known issue. Development of the analysis includes consideration of many factors including: potential exposure, the status of proceedings, negotiations, discussions with our outside counsel and results of similar litigation. The required accruals may change in the future due to new developments in each matter. For further discussion, see the Contingencies footnote in the notes to our consolidated financial statements. At year-end ~~2019~~2022 and ~~2018,~~2021, the gross accrual for litigation costs amounted to ~~$9.9~~$2.3 millionand ~~$12.8~~$1.4 million, respectively, which ~~are~~is included in accounts payable and accrued liabilities and in accrued workers’ compensation and other claims in the consolidated balance sheet.

NEW ACCOUNTING PRONOUNCEMENTS

See New Accounting Pronouncements footnote in the notes to our consolidated financial statements presented in Part II, Item 8 of this report for a description of new accounting pronouncements.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained herein and in ~~this report~~our investor conference call related to these results are “forward-looking” statements within the meaning of the ~~Private Securities Litigation Reform Act~~applicable securities laws and regulations. These forward-looking statements are based on current expectations and assumptions and are subject to a number of ~~1995.~~significant risks and uncertainties. Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, or which include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or variations or negatives thereof or by similar or comparable words or phrases. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions by us that may be provided by management, including oral statements or other written materials released to the public, are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and assumptions about our Company and economic and market factors in the countries in which we do business, among other things. These statements are not guarantees of future performance, and we have no specific intention to update these statements.

Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, changing market and economic conditions, the impact of the novel coronavirus (COVID-19) outbreak, competitive market pressures including pricing and technology introductions and disruptions, ~~changing~~disruption in the labor market and ~~economic conditions,~~weakened demand for human capital resulting from technological advances, competition law risks, the impact of changes in laws and regulations (including federal, state and international tax laws), unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, or the risk of additional tax liabilities in excess of our estimates, our ability to achieve our business strategy, ~~the risk of damage to our brand, the risk our intellectual property assets could be infringed upon or compromised,~~ our ability to successfully develop new service offerings, our exposure to risks associated with services outside traditional staffing, including business process outsourcing and services connecting talent to independent work, our increasing dependency on third parties for the execution of critical functions, the risks associated with past and future acquisitions, exposure to risks associated with investments in equity affiliates including PersolKelly Asia Pacific, material changes in demand from or loss of large corporate customers as well as changes in their buying practices, risks particular to doing business with ~~the~~ government or government contractors, the risk of damage to our brands, our exposure to risks associated with services outside traditional staffing, including business process outsourcing, services of licensed professionals and services connecting talent to independent work, our increasing dependency on third parties for the execution of critical functions, our ability to effectively implement and manage our information technology strategy, the risks associated with past and future acquisitions, including risk of related impairment of goodwill and intangible assets, exposure to risks associated with certain equity investments, including with strategic partners, risks associated with conducting business in foreign countries, including foreign currency fluctuations, ~~the exposure to potential market and currency exchange risks relating to our investment in Persol Holdings,~~ risks associated with violations of anti-corruption, trade protection and other laws and regulations, availability of qualified full-time employees, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, our ability to sustain critical business applications through our key data centers, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyberattacks or other breaches of network or information technology security, our ability to sustain critical business applications through our key data centers, our ability to effectively implement and manage our information technology projects, our ability to maintain adequate financial and management processes and controls, risk of potential impairment charges triggered by adverse industry developments or operational circumstances, unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, the impact of changes in laws and regulations (including federal, state and international tax laws), competition law risks, the risk of additional tax or unclaimed property liabilities in excess of our estimates, our ability to realize value from our tax credit and net operating loss carryforwards, our ability to maintain specified financial covenants in our bank facilities to continue to access credit markets, and other risks, uncertainties and factors discussed in this report and in our other filings with the Securities and Exchange Commission. Actual results may differ materially from any forward-looking statements contained herein, and we ~~have~~undertake no ~~intention~~duty to update ~~these statements.~~ any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations. Certain risk factors are discussed more fully under “Risk Factors” in Part I, Item 1A of this report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to foreign currency risk primarily related to our foreign subsidiaries. Exchange rates impact the U.S. dollar value of our reported earnings, our investments in and held by subsidiaries, local currency denominated borrowings and intercompany transactions with and between subsidiaries. Our foreign subsidiaries primarily derive revenues and incur expenses within a single country and currency which, as a result, provide a natural hedge against currency risks in connection with normal business operations. Accordingly, changes in foreign currency rates vs. the U.S. dollar, euro or Swiss franc generally do not impact local cash flows. Intercompany transactions which create transactional foreign currency risk include services, royalties, loans, contributions and distributions.

In addition, we are exposed to interest rate risks through our use of the multi-currency line of credit and other borrowings. A hypothetical fluctuation of 10% of market interest rates would not have had a material impact on ~~2019~~2022 earnings.

We are exposed to market and currency risks on our investment in Persol Holdings, which may be material. The investment is stated at fair value and is marked to market through net earnings. Foreign currency fluctuations on this yen-denominated investment are reflected as a component of other comprehensive income. See Fair Value Measurements footnote in the notes to our consolidated financial statements of this Annual Report on Form 10-K for further discussion.

We are exposed to market risk as a result of our obligation to pay benefits under our nonqualified deferred compensation plan and our related investments in company-owned variable universal life insurance policies. The obligation to employees increases and decreases based on movements in the equity and debt markets. The investments in mutual funds, as part of the

company-owned variable universal life insurance policies, are designed to mitigate, but not eliminate, this risk with offsetting gains and losses.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements and supplementary data required by this Item are set forth in the accompanying index on page 4442 of this filing and are presented in pages ~~45-90.~~43-95.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective at a reasonable assurance level.

Management’s Report on Internal Control Over Financial Reporting

Management’s report on internal control over financial reporting is presented preceding the consolidated financial statements on page 4543 of this report.

Attestation Report of Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP, independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of ~~December 29, 2019,~~January 1, 2023, as stated in their report which appears herein.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

3937

PART III

Information required by Part III with respect to Directors, Executive Officers and Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (Item 12), Certain Relationships and Related Transactions, and Director Independence (Item 13) and Principal Accounting Fees and Services (Item 14), except as set forth under the titles “Executive Officers of the Registrant,” which is included on ~~page 40,~~pages 38-39, and “Code of Business Conduct and Ethics,” which is included on page ~~41,~~40, (Item 10), and except as set forth under the title “Equity Compensation Plan Information,” which is included on ~~pages 41-42,~~page 40, (Item 12), is to be included in a definitive proxy statement filed not later than 120 days after the close of our fiscal year and the proxy statement, when filed, is incorporated in this report by reference.

ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT.

The following individuals serve as executive officers of the Company as of ~~December 29, 2019:~~January 1, 2023:

Name/Office

Age

Served as an

Officer Since

Business Experience

During Last 5 Years

Name/Office

Age

Served as an Officer Since

Business Experience During Last 5 Years

Peter W. Quigley

President and

Chief Executive Officer

Peter W. Quigley

President and

Chief Executive Officer

2004

Served as officer of the Company.

Peter W. Quigley

President and

Chief Executive Officer

2004

Served as officer of the Company.

Olivier G. Thirot

Executive Vice President

and Chief Financial Officer

Olivier G. Thirot

Executive Vice President

and Chief Financial Officer

2008

Served as officer of the Company.

Olivier G. Thirot

Executive Vice President

and Chief Financial Officer

2008

Served as officer of the Company.

Peter M. Boland

Senior Vice President

Chief Marketing Officer

Peter M. Boland

Senior Vice President

Chief Marketing Officer

2018

January 2018 - Present
Served as officer of the Company.

January 2012 - June 2017
SVP Brand Marketing - Charles Schwab
& Co., San Francisco, CA

Peter M. Boland

Senior Vice President

Chief Marketing Officer

2018

January 2018 - Present

Served as officer of the Company.

James H. Bradley

Senior Vice President, Global

Business Services and Global

Talent Solutions

1996

Served as officer of the Company.

Amy J. Bouque
Senior Vice President
Chief People Officer

2020

September 2020 - Present

Served as officer of the Company.

January 2016 - August 2020

Executive Director - Talent Management -

Ally Financial, Detroit Michigan

Hannah S. Lim-Johnson

Senior Vice President and

Chief Legal Officer

2017

September 2017 - Present
Served as officer of the Company.

October 2016 - April 2017
Deputy General Counsel, Chief Litigation
Counsel & Assistant Corporate Secretary -
PSEG, Newark, NJ

June 2012 - September 2016
VP, Chief Litigation & Chief Compliance
Counsel - ADT Corp, Boca Raton, FL

Tammy L. Browning

Senior Vice President

President, KellyOCG

Tammy L. Browning

Senior Vice President

President, KellyOCG

2018

October 2018 - Present

Served as officer of the Company.

October 2010 - April 2018

SVP Global Operations - Yoh

Laura S. Lockhart

Vice President, Corporate Controller

and Chief Accounting Officer

2008

Served as officer of the Company.

Timothy L. Dupree

Senior Vice President

President, Kelly Professional &

Industrial

Timothy L. Dupree

Senior Vice President

President, Kelly Professional &

Industrial

2014

Served as officer of the Company.

Dinette Koolhaas

Senior Vice President

President, Kelly International

Dinette Koolhaas

Senior Vice President

President, Kelly International

2008

Served as officer of the Company.

4038

ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT (continued)


Name/Office	Age	Served as an Officer Since	Business Experience During Last 5 Years
Daniel Hugo Malan Senior Vice President President, Kelly Science, Engineering & Technology	53	2020	March 2020 - Present Served as officer of the Company. December 2019 - February 2020 Managing Partner - Talent Capital Advisors August 2018 - November 2019 Chief Operating Officer - Employbridge December 2016 - July 2018 President, Commercial Business - Employbridge

Darren L. Simons Senior Vice President and Chief Digital Officer	52	2021	July 2021 - Present Served as officer of the Company. July 2020 - July 2021 President - RDI Global Solutions May 2019 - July 2020 President - Cielo May 2014 - April 2019 SVP and President - CDI

Nicola M. Soares Senior Vice President President, Kelly Education	54	2011	Served as officer of the Company.

Vanessa P. Williams Senior Vice President General Counsel Assistant Secretary	51	2020	October 2020 - Present Served as officer of the Company. February 2020 - September 2020 SVP, Division General Counsel- Transportation and Third Party Risk Management and Compliance - IHS Markit December 2016 - February 2020 VP, Division General Counsel - Transportation - IHS Markit

Laura S. Lockhart Vice President, Corporate Controller and Chief Accounting Officer	53	2008	Served as officer of the Company.

CODE OF BUSINESS CONDUCT AND ETHICS.

We have adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller or persons performing similar functions. The Code of Business Conduct and Ethics is included as Exhibit 14 in the Index to Exhibits on page ~~91.~~96. We have posted our Code of Business Conduct and Ethics on our website at www.kellyservices.com. We intend to post any changes in or waivers from our Code of Business Conduct and Ethics applicable to any of these officers on our website.

ITEM 12. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.

Equity Compensation Plan Information

The following table shows the number of shares of our Class A common stock that may be issued upon the exercise of outstanding options, warrants and rights, the weighted-average exercise price of outstanding options, warrants and rights, and the number of securities remaining available for future issuance under our equity compensation plans as of the fiscal year end for ~~2019.~~

2022.


	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
~~Equity compensation plans approved by security holders - Evergreen provision~~ ^{(1), (2)}	—		$	—		—

Equity compensation plans approved by security holders - Fixed Share provision^{(1), (3)}(2)	—	$	—		~~3,448,495~~2,705,794

Equity compensation plans not approved by security holders⁽⁴⁾(3)	—	—			—

Total	—	$	—		2,705,794	~~3,448,495~~

(1)The equity compensation plan approved by our stockholders is our Equity Incentive Plan.

(2)The Evergreen provision applied to shares granted prior to May 10, 2017, and the Equity Incentive Plan provided that the maximum number of shares available for grants, including restricted stock, was 15 percent of the outstanding Class A common stock, adjusted for plan activity over the preceding five years. The Company has no plans to issue additional shares under the Evergreen provision that was in effect prior to May 10, 2017.

The number of shares to be issued upon exercise of outstanding options, warrants and rights under the Evergreen provision excludes: 31,109 shares of restricted stock; performance shares that have been earned but not yet vested totaling 48,680 shares of financial measure performance awards, zero shares of total shareholder return performance awards, and 12,701 shares of single financial measure performance awards.

~~(3)~~The Fixed Share provision applies to shares granted on and after May 10, 2017, and the amended Equity Incentive Plan provides that the maximum number of shares available for grants is 4,700,000.

The number of shares to be issued upon exercise of outstanding options, warrants and rights under the Fixed Share provision excludes: ~~328,351~~607,154 shares of restricted stock; performance shares that have been earned but not yet vested totaling ~~20,232 of~~8,388 financial measure performance awards, ~~zero total shareholder return performance awards,~~ and ~~78,208~~82,996 single financial measure performance awards; and performance shares granted to employees and not yet earned or vested totaling ~~570,980~~893,573 shares of financial measure performance awards, ~~and 103,684 shares of total shareholder~~

~~return performance awards, each~~ calculated using an assumed maximum award performance level of 200%, where applicable, at ~~December 29, 2019.~~January 1, 2023.

~~(4)~~(3)The Non-Employee Directors Deferred Compensation Plan is an equity compensation plan that has not been approved by our stockholders. This plan provides non-employee directors with the opportunity to defer all or a portion of the fees they receive. Participants may elect to have director fees that are paid in either cash or common stock, deferred into the plan. Participants choose from a list of investment funds as determined by the Company for their deferrals of cash. Deferrals of common stock must remain in common stock. Amounts deferred under the plan are subject to applicable tax withholding. The plan is intended to be a non-qualified deferred compensation arrangement in compliance with Section 409A of the Code. Shares acquired by participants in this plan will be issued from the share reserve stated in the ~~EIP.~~Equity Incentive Plan.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)The following documents are filed as part of this report:

(i)Financial statements:

Management’s Report on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm (PCAOB ID 238)

Consolidated Statements of Earnings for the three fiscal years ended ~~December 29, 2019~~January 1, 2023

Consolidated Statements of Comprehensive Income for the three fiscal years ended ~~December 29, 2019~~January 1, 2023

Consolidated Balance Sheets at ~~December 29, 2019~~January 1, 2023 and ~~December 30, 2018~~January 2, 2022

Consolidated Statements of Stockholders’ Equity for the three fiscal years ended ~~December 29, 2019~~January 1, 2023

Consolidated Statements of Cash Flows for the three fiscal years ended ~~December 29, 2019~~January 1, 2023

Notes to Consolidated Financial Statements

(ii)Financial Statement Schedule -

For the three fiscal years ended ~~December 29, 2019:~~January 1, 2023:

Schedule II - Valuation Reserves

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

(iii)The Exhibits are listed in the Index to Exhibits included beginning at page ~~91,~~96, which is incorporated herein by reference.

(b)The Index to Exhibits and required Exhibits are included following the Financial Statement Schedule beginning at page 9196 of this filing.

(c)None.

ITEM 16. FORM 10-K SUMMARY.

None.

4341

KELLY SERVICES, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS AND

SUPPLEMENTAL SCHEDULE


			Page Reference in Report on Form 10-K

Management’s Report on Internal Control Over Financial Reporting			4543

Report of Independent Registered Public Accounting Firm			4644

Consolidated Statements of Earnings for the three fiscal years ended ~~December 29, 2019~~January 1, 2023			4947

Consolidated Statements of Comprehensive Income for the three fiscal years ended ~~December 29, 2019~~January 1, 2023			5048

Consolidated Balance Sheets at January 1 , 202 3 and January ~~December 29, 2019~~2 , 20 ~~and~~ 2 ~~December 30, 2018~~2			5149

Consolidated Statements of Stockholders' Equity for the three fiscal years ended ~~December 29, 2019~~January 1, 2023			5351

Consolidated Statements of Cash Flows for the three fiscal years ended ~~December 29, 2019~~January 1, 2023			5452

Notes to Consolidated Financial Statements			5654

Financial Statement Schedule - Schedule II - Valuation Reserves at ~~December 29, 2019, December 30, 2018~~January 1 , 202 3 , January 2 , 202 2 and ~~December 31, 2017~~January 3 , 2 021			9095

4442

Management’s Report on Internal Control Over Financial Reporting

The management of Kelly Services, Inc. (the “Company”), is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may change.

The Company completed the acquisition of RocketPower on March 7, 2022 and the acquisition of PTS on May 2, 2022. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company. Accordingly, we have excluded the acquired RocketPower and PTS businesses from our assessment and report on internal control over financial reporting for the year ending January 1, 2023. We are in the process of integrating RocketPower and PTS into our system of internal control over financial reporting. RocketPower and PTS both individually accounted for less than 1% of the Company's total assets as of January 1, 2023 and less than 1% of the Company's total revenue for the year ended 2022.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of ~~December 29, 2019.~~January 1, 2023. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

Based on our assessment, management determined that, as of ~~December 29, 2019,~~January 1, 2023, the Company’s internal control over financial reporting was effective based on those criteria.

The effectiveness of the Company’s internal control over financial reporting as of ~~December 29, 2019~~January 1, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on pages ~~46-48.~~

44-46.

4543

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Kelly Services, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Kelly Services, Inc. and its subsidiaries (the “Company”) as of ~~December 29, 2019~~January 1, 2023 and ~~December 30, 2018,~~January 2, 2022, and the related consolidated statements of earnings, comprehensive income, stockholders’ equity and cash flows for the years ended ~~December 29, 2019, December 30, 2018,~~January 1, 2023, January 2, 2022, and ~~December 31, 2017,~~January 3, 2021, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of ~~December 29, 2019,~~January 1, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of ~~December 29, 2019~~January 1, 2023 and ~~December 30, 2018,~~January 2, 2022, and the results of its operations and its cash flows for the years ended ~~December 29, 2019, December 30, 2018,~~January 1, 2023, January 2, 2022, and ~~December 31, 2017~~January 3, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of ~~December 29, 2019,~~January 1, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

~~Changes in Accounting Principles~~

As discussed in Note 25 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenues from contracts with customers and investments in equity securities in 2018.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying ~~Management's~~Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Rocket Power Holdings LLC and Rocket Power Ops LLC (collectively, RocketPower) and Pediatric Therapeutic Services (PTS) from its assessment of internal control over financial reporting as of January 1, 2023, because they were acquired by the Company in purchase business combinations during 2022. We have also excluded RocketPower and PTS from our audit of internal control over financial reporting. RocketPower and PTS are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting both individually represented less than 1% of the related consolidated financial statement amounts as of and for the year ended January 1, 2023.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures

that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Interim Impairment Assessment – RocketPower Reporting Unit

As described in Notes 1, 4, and 9 to the consolidated financial statements, the Company’s goodwill balance was $151.1 million as of January 1, 2023, and the goodwill allocated to the RocketPower reporting unit was $41.0 million upon its March 2022 acquisition and $0 as of January 1, 2023. The Company performs its annual goodwill impairment testing in the fourth quarter each year and regularly assesses whenever events or circumstances make it more likely than not that an impairment may have occurred. If the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of a reporting unit, goodwill is deemed impaired and is written down to the extent of the difference. During the third quarter of 2022, customers within the high-tech industry vertical in which RocketPower specializes reduced or eliminated their full-time hiring, reducing demand for RocketPower’s services, and on-going economic uncertainty has more broadly impacted the growth in demand for Recruitment Process Outsourcing (RPO) in the near-term. These changes in market conditions therefore caused a triggering event requiring an interim impairment test for goodwill. Based on the result of management’s interim goodwill impairment test as of third quarter 2022, management recorded a goodwill impairment charge of $30.7 million to write off a portion of RocketPower’s goodwill. Management determined the fair value of the RocketPower reporting unit using an income approach. Under the income approach, estimated fair value is determined based on estimated future cash flows discounted by an estimated market participant weighted-average cost of capital. Management’s analysis used the following significant assumptions: expected future revenue growth rates, profit margins and discount rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the RocketPower reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to expected future revenue growth rates, profit margins and discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of theRocketPower reporting unit. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting unit; (ii) evaluating the appropriateness of the income approach; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the reasonableness of the significant assumptions used by management related to expected future revenue growth rates, profit margins, and discount rate. Evaluating management’s assumptions related to expected future revenue growth rates and profit margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s income approach and the discount rate significant assumption.

Workers’ Compensation

As described in Note 1 to the consolidated financial statements, in the U.S., the Company has a combination of insurance and self-insurance contracts under which they effectively bear the first $1.0 million of risk per single accident. Management establishes the accrual for workers’ compensation claims utilizing actuarial methods to estimate the undiscounted future cash payments that will be made to satisfy the claims, including an allowance for incurred-but-not-reported claims. ~~As of December 29, 2019, the accrual for workers’ compensation, net of related receivables, is $59.5 million.~~ Management

retains an independent consulting actuary to establish loss development factors and loss rates, based on historical claims experience as well as industry experience, and applies those factors to current claims information to derive an estimate of the ultimate claims liability. In preparing the estimates, the consulting actuary considers a number of assumptions and multiple generally accepted actuarial methods in the course of preparing the loss forecast for claims. When claims exceed the applicable loss limit or self-insured retention and realization of recovery of the claim from existing insurance policies is deemed probable, management records a receivable from the insurance company for the excess amount. Management evaluates the accrual quarterly throughout the year and makes adjustments as needed. As disclosed by management, as of January 1, 2023, the accrual for accrued workers’ compensation, net of related receivables, is $43.3 million.

The principal considerations for our determination that performing procedures relating to workers’ compensation is a critical audit matter are (i) ~~there was~~the significant judgment by management when determining the actuarial methods and the significant assumptions to use in establishing the accrual for workers’ compensation ~~claims, which in turn led to~~claims; (ii) a high degree of auditor judgment, subjectivity, and effort in performing ~~our~~ procedures and evaluating management’s actuarial methods and significant assumptions ~~including~~related to the loss development factors and ~~(ii)~~loss rates; and (iii) the audit effort ~~included~~involved the ~~involvement~~use of professionals with specialized skill and ~~knowledge to assist in performing these procedures and evaluating the audit evidence obtained.~~knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s accrual for workers’ compensation claims, including controls over the actuarial methods and development of significant assumptions. These procedures also included, among others obtaining and evaluating the Company’s workers’ compensation plan documents and testing the completeness and accuracy of data used in management’s accrual, including incurred and paid claims. Testing management’s process included evaluating the actuarial methods and significant assumptions, including the loss development factors used by management to estimate the workers’ compensation accrual, and using professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

~~Acquisitions of NextGen Global Resources and Global Technology Associates –Valuation of Intangible Assets~~

As described in Notes 1 and 4 to the consolidated financial statements, in 2019, the Company completed acquisitions of NextGen Global Resources LLC (NextGen) for $54.3 million and Global Technology Associates, LLC (GTA) for $35.7 million, for which approximately $21.5 million and $17.3 million of intangible assets were recorded, respectively. The fair value of trade name intangibles is determined using the relief-from-royalty method, which relies on the use of estimates and assumptions about projected revenue growth and discount rates. The fair value of customer relationship intangibles is determined using the multi-period excess earnings method, which relies on the use of estimates and assumptions about projected revenue growth, customer attrition, and discount rates.

The principal considerations for our determination that performing procedures relating to the acquisitions of NextGen and GTA and the related valuation of intangible assets is a critical audit matter are (i) there was a high degree of auditor subjectivity in applying our procedures relating to the fair value measurement of the intangible assets due to the significant judgment by management when developing these estimates, (ii) significant audit effort and auditor judgment was required in assessing the

~~significant assumptions used in the valuation of the intangible assets, including the revenue growth rates, the customer attrition rates, and the discount rates, and (iii) the audit effort included~~ the involvement of professionals with specialized skill and knowledge to assist in ~~performing these procedures~~developing an independent estimate for the accrual for workers’ compensation claims and ~~evaluating~~(ii) comparing the ~~audit evidence obtained.~~

~~Addressing~~independent estimate to management’s estimate to evaluate the ~~matter~~reasonableness of management’s estimate. Developing the independent estimate involved ~~performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included~~(i) testing the ~~effectiveness~~completeness and accuracy of ~~controls relating to the acquisition accounting, including controls over~~underlying data provided by management; (ii) evaluating management’s ~~valuation of the intangible assets~~actuarial methods and ~~controls over development of the~~ significant assumptions related to the ~~valuation of~~loss development factors and loss rates; and (iii) independently developing the ~~intangible assets, including the revenue growth rates, the customer attrition~~loss development factors and loss rates and the discount rates. These procedures also included, among others, reading the purchase agreements and testing management’s process for estimating the fair value of the intangible assets. Testing management’s process included evaluating the appropriateness of the valuationactuarial methods testing the completeness, accuracy, and relevance of underlying data used in calculating the estimates, and the reasonableness of significant assumptions, including the revenue growth rates, the customer attrition rates, and the discount rates, including using professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. Evaluating the reasonableness of the revenue growth rates and customer attrition rates involved considering the past performance of the acquired businesses, as well as economic and industry forecasts. The discount rates were evaluated by considering the cost of capital of comparable businesses and other industry factors.used.

/s/ PricewaterhouseCoopers LLP

Detroit, Michigan

February ~~13, 2020~~16, 2023

We have served as the Company’s auditor since 1960.

4846

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS


		2019		2018		2017			2022		2021		2020
		(In millions of dollars except per share items)											(In millions of dollars except per share items)
Revenue from services	Revenue from services	$	5,355.6	$	5,513.9	$	5,374.4	Revenue from services	$	4,965.4	$	4,909.7	$	4,516.0

Cost of services	Cost of services	4,387.2		4,541.7		4,420.3		Cost of services	3,953.6		3,990.5		3,688.4

Gross profit	Gross profit	968.4		972.2		954.1		Gross profit	1,011.8		919.2		827.6

Selling, general and administrative expenses	Selling, general and administrative expenses	883.1		884.8		870.8		Selling, general and administrative expenses	943.5		870.6		805.6

Goodwill impairment charge								Goodwill impairment charge	41.0		—		147.7

Gain on sale of assets	Gain on sale of assets	(12.3)		—		—		Gain on sale of assets	(6.2)		—		(32.1)

Asset impairment charge		15.8		—		—
Loss on disposal								Loss on disposal	18.7		—		—

Earnings from operations		81.8		87.4		83.3
Earnings (loss) from operations								Earnings (loss) from operations	14.8		48.6		(93.6)

Gain (loss) on investment in Persol Holdings	Gain (loss) on investment in Persol Holdings	35.8		(96.2)		—		Gain (loss) on investment in Persol Holdings	(67.2)		121.8		(16.6)

Gain on insurance settlement								Gain on insurance settlement	—		19.0		—

Loss on currency translation from liquidation of subsidiary								Loss on currency translation from liquidation of subsidiary	(20.4)		—		—

Other income (expense), net	Other income (expense), net	(1.2)		(0.6)		(1.6)		Other income (expense), net	1.6		(3.6)		3.4

Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	116.4		(9.4)		81.7		Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	(71.2)		185.8		(106.8)

Income tax expense (benefit)	Income tax expense (benefit)	0.4		(27.1)		12.8		Income tax expense (benefit)	(7.9)		35.1		(34.0)

Net earnings before equity in net earnings (loss) of affiliate		116.0		17.7		68.9
Net earnings (loss) before equity in net earnings (loss) of affiliate								Net earnings (loss) before equity in net earnings (loss) of affiliate	(63.3)		150.7		(72.8)

Equity in net earnings (loss) of affiliate	Equity in net earnings (loss) of affiliate	(3.6)		5.2		2.7		Equity in net earnings (loss) of affiliate	0.8		5.4		0.8


Net earnings		$	112.4	$	22.9	$	71.6
Net earnings (loss)								Net earnings (loss)	$	(62.5)	$	156.1	$	(72.0)

Basic earnings per share		$	2.85	$	0.59	$	1.84
Basic earnings (loss) per share								Basic earnings (loss) per share	$	(1.64)	$	3.93	$	(1.83)

Diluted earnings per share		$	2.84	$	0.58	$	1.81
Diluted earnings (loss) per share								Diluted earnings (loss) per share	$	(1.64)	$	3.91	$	(1.83)

Average shares outstanding (millions):	Average shares outstanding (millions):							Average shares outstanding (millions):
Basic	Basic	39.1		38.8		38.3		Basic	38.1		39.4		39.3
Diluted	Diluted	39.2		39.1		39.0		Diluted	38.1		39.5		39.3

See accompanying Notes to Consolidated Financial Statements.

4947

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

2019 2018 2017
(In millions of dollars)
Net earnings $ 112.4 $ 22.9 $ 71.6
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax benefit of $0.1 million, tax benefit of $0.4 million and tax expense of $0.2 million, respectively 2.5 (8.4) 16.4
Less: Reclassification adjustments included in net earnings — (0.4) —
Foreign currency translation adjustments 2.5 (8.8) 16.4
Unrealized gains (losses) on investment, net of tax expense of $0.0 million, $0.0 million and $30.2 million, respectively — — 56.2
Pension liability adjustments, net of tax benefit of $0.3 million, tax expense of $0.2 million and tax benefit of $0.1 million, respectively (1.3) 0.8 (0.6)
Less: Reclassification adjustments included in net earnings 0.1 0.1 0.1
Pension liability adjustments (1.2) 0.9 (0.5)
Other comprehensive income (loss) 1.3 (7.9) 72.1
Comprehensive income $ 113.7 $ 15.0 $ 143.7

~~See accompanying Notes to Consolidated Financial Statements.~~

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED BALANCE SHEETS~~

2019 2018
(In millions of dollars)
Assets
Current Assets
Cash and equivalents $ 25.8 $ 35.3
Trade accounts receivable, less allowances of $12.9 million and $13.2 million, respectively 1,282.2 1,293.3
Prepaid expenses and other current assets 76.5 71.9
Properties held for sale 21.2 —
Total current assets 1,405.7 1,400.5
Noncurrent Assets
Property and equipment:
Property and equipment 225.8 294.7
Accumulated depreciation (182.7) (208.4)
Net property and equipment 43.1 86.3
Operating lease right-of-use assets 60.4 —
Deferred taxes 229.1 198.7
Goodwill, net 127.8 107.3
Investment in Persol Holdings 173.2 135.1
Investment in equity affiliate 117.2 121.3
Other assets 324.1 265.2
Total noncurrent assets 1,074.9 913.9
Total Assets $ 2,480.6 $ 2,314.4


	2022		2021		2020
	(In millions of dollars)
Net earnings (loss)	$	(62.5)	$	156.1	$	(72.0)

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax benefit of $0.2 million and tax expense of $0.1 million and $0.2 million, respectively	(7.5)		(24.2)		13.9
Less: Reclassification adjustments included in net earnings (loss) - liquidation of Japan subsidiary	20.4		—		—
Less: Reclassification adjustments included in net earnings (loss) - equity method investment and other	4.7		—		(1.5)
Foreign currency translation adjustments	17.6		(24.2)		12.4



Pension liability adjustments, net of tax expense of $0.5 million and $0.2 million, respectively and tax benefit of $0.1 million	1.5		0.5		(0.9)
Less: Reclassification adjustments included in net earnings	0.1		0.2		0.1
Pension liability adjustments	1.6		0.7		(0.8)

Other comprehensive income (loss), net of tax	19.2		(23.5)		11.6

Comprehensive income (loss)	$	(43.3)	$	132.6	$	(60.4)

See accompanying Notes to Consolidated Financial Statements.

5148

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

2019 2018
(In millions of dollars)
Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowings $ 1.9 $ 2.2
Accounts payable and accrued liabilities 503.6 540.6
Operating lease liabilities 20.1 —
Accrued payroll and related taxes 267.6 266.0
Accrued workers' compensation and other claims 25.7 26.0
Income and other taxes 65.2 62.7
Total current liabilities 884.1 897.5
Noncurrent Liabilities
Operating lease liabilities 43.3 —
Accrued workers' compensation and other claims 45.8 50.5
Accrued retirement benefits 187.4 162.9
Other long-term liabilities 55.5 44.0
Total noncurrent liabilities 332.0 257.4
Commitments and contingencies (See Commitments and Contingencies footnotes)
Stockholders' Equity
Capital stock, $1.00 par value
Class A common stock, 100.0 million shares authorized; 36.6 million shares issued at 2019 and 2018 36.6 36.6
Class B common stock, 10.0 million shares authorized; 3.5 million shares issued at 2019 and 2018 3.5 3.5
Treasury stock, at cost
Class A common stock, 1.0 million shares at 2019 and 1.2 million at 2018 (20.3) (25.4)
Class B common stock (0.6) (0.6)
Paid-in capital 22.5 24.4
Earnings invested in the business 1,238.6 1,138.1
Accumulated other comprehensive income (loss) (15.8) (17.1)
Total stockholders' equity 1,264.5 1,159.5
Total Liabilities and Stockholders' Equity $ 2,480.6 $ 2,314.4


	2022		2021
	(In millions of dollars)
Assets
Current Assets
Cash and equivalents	$	153.7	$	112.7
Trade accounts receivable, less allowances of $11.2 million and $12.6 million, respectively	1,491.6		1,423.2
Prepaid expenses and other current assets	69.9		52.8


Total current assets	1,715.2		1,588.7

Noncurrent Assets
Property and equipment:
Property and equipment	166.8		205.1
Accumulated depreciation	(139.0)		(169.8)
Net property and equipment	27.8		35.3
Operating lease right-of-use assets	66.8		75.8
Deferred taxes	299.7		302.8
Goodwill, net	151.1		114.8
Investment in Persol Holdings	—		264.3
Investment in equity affiliate	—		123.4
Other assets	403.2		389.1
Total noncurrent assets	948.6		1,305.5

Total Assets	$	2,663.8	$	2,894.2

See accompanying Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	2022		2021
	(In millions of dollars)
Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowings	$	0.7	$	—
Accounts payable and accrued liabilities	723.3		687.2
Operating lease liabilities	14.7		17.5
Accrued payroll and related taxes	315.8		318.4
Accrued workers' compensation and other claims	22.9		20.8
Income and other taxes	51.4		51.3
Total current liabilities	1,128.8		1,095.2

Noncurrent Liabilities
Operating lease liabilities	55.0		61.4
Accrued payroll and related taxes	—		57.6
Accrued workers' compensation and other claims	40.7		37.0
Accrued retirement benefits	174.1		220.0
Other long-term liabilities	11.0		86.8
Total noncurrent liabilities	280.8		462.8

Commitments and contingencies (See Commitments and Contingencies footnotes)

Stockholders' Equity
Capital stock, $1.00 par value
Class A common stock, 100.0 million shares authorized; 35.1 million shares issued at 2022 and 36.7 million shares issued at 2021	35.1		36.7
Class B common stock, 10.0 million shares authorized; 3.4 million shares issued at 2022 and 2021	3.4		3.4
Treasury stock, at cost
Class A common stock, 1.0 million shares at 2022 and 0.7 million shares at 2021	(19.5)		(14.5)
Class B common stock	(0.6)		(0.6)
Paid-in capital	28.0		23.9
Earnings invested in the business	1,216.3		1,315.0
Accumulated other comprehensive income (loss)	(8.5)		(27.7)
Total stockholders' equity	1,254.2		1,336.2

Total Liabilities and Stockholders' Equity	$	2,663.8	$	2,894.2

See accompanying Notes to Consolidated Financial Statements.

5250

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

2019 2018 2017
(In millions of dollars)
Capital Stock
Class A common stock
Balance at beginning of year $ 36.6 $ 36.6 $ 36.6
Conversions from Class B — — —
Balance at end of year 36.6 36.6 36.6
Class B common stock
Balance at beginning of year 3.5 3.5 3.5
Conversions to Class A — — —
Balance at end of year 3.5 3.5 3.5
Treasury Stock
Class A common stock
Balance at beginning of year (25.4) (34.6) (38.4)
Net issuance of stock awards 5.1 9.2 3.8
Balance at end of year (20.3) (25.4) (34.6)
Class B common stock
Balance at beginning of year (0.6) (0.6) (0.6)
Net issuance of stock awards — — —
Balance at end of year (0.6) (0.6) (0.6)
Paid-in Capital
Balance at beginning of year 24.4 32.2 28.6
Net issuance of stock awards (1.9) (7.8) 3.6
Balance at end of year 22.5 24.4 32.2
Earnings Invested in the Business
Balance at beginning of year 1,138.1 983.6 923.6
Cumulative-effect adjustment from adoption of ASU 2016-01, Financial Instruments — 140.0 —
Cumulative-effect adjustment from adoption of ASU 2014-09, Revenue — 3.4 —
Net earnings 112.4 22.9 71.6
Dividends (11.9) (11.8) (11.6)
Balance at end of year 1,238.6 1,138.1 983.6
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of year (17.1) 130.8 58.7
Cumulative-effect adjustment from adoption of ASU 2016-01, Financial Instruments — (140.0) —
Other comprehensive income (loss), net of tax 1.3 (7.9) 72.1
Balance at end of year (15.8) (17.1) 130.8
Stockholders’ Equity at end of year $ 1,264.5 $ 1,159.5 $ 1,151.5


	2022		2021		2020
	(In millions of dollars)
Capital Stock
Class A common stock
Balance at beginning of year	$	36.7	$	36.7	$	36.6
Conversions from Class B	—		—		0.1
Share retirement	(1.6)		—		—
Balance at end of year	35.1		36.7		36.7

Class B common stock
Balance at beginning of year	3.4		3.4		3.5
Conversions to Class A	—		—		(0.1)
Balance at end of year	3.4		3.4		3.4

Treasury Stock
Class A common stock
Balance at beginning of year	(14.5)		(16.5)		(20.3)
Net issuance of stock awards	2.8		2.0		3.8
Purchase of treasury stock	(7.8)		—		—
Balance at end of year	(19.5)		(14.5)		(16.5)

Class B common stock
Balance at beginning of year	(0.6)		(0.6)		(0.6)
Net issuance of stock awards	—		—		—
Balance at end of year	(0.6)		(0.6)		(0.6)

Paid-in Capital
Balance at beginning of year	23.9		21.3		22.5
Net issuance of stock awards	4.1		2.6		(1.2)
Balance at end of year	28.0		23.9		21.3

Earnings Invested in the Business
Balance at beginning of year	1,315.0		1,162.9		1,238.6
Cumulative-effect adjustment from adoption of ASU 2016-13, Credit Losses	—		—		(0.7)


Net earnings (loss)	(62.5)		156.1		(72.0)
Dividends	(10.6)		(4.0)		(3.0)
Share retirement	(25.6)		—		—
Balance at end of year	1,216.3		1,315.0		1,162.9

Accumulated Other Comprehensive Income (Loss)
Balance at beginning of year	(27.7)		(4.2)		(15.8)

Other comprehensive income (loss), net of tax	19.2		(23.5)		11.6
Balance at end of year	(8.5)		(27.7)		(4.2)
Stockholders’ Equity at end of year	$	1,254.2	$	1,336.2	$	1,203.0

See accompanying Notes to Consolidated Financial Statements.

5351

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

2019 2018 2017
(In millions of dollars)
Cash flows from operating activities:
Net earnings $ 112.4 $ 22.9 $ 71.6
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization 31.6 26.2 22.7
Operating lease asset amortization 22.3 — —
Provision for bad debts 4.1 3.0 5.6
Stock-based compensation 5.6 8.1 9.1
Deferred income taxes (18.3) (47.5) (5.9)
(Gain) loss on investment in Persol Holdings (35.8) 96.2 —
(Gain) on sale of assets (12.3) — —
Asset impairment charge 15.8 — —
Equity in net (earnings) loss of PersolKelly Asia Pacific 3.6 (5.2) (2.7)
Other, net (0.4) (0.8) 0.2
Changes in operating assets and liabilities, net of acquisitions (26.4) (41.5) (29.8)
Net cash from operating activities 102.2 61.4 70.8
Cash flows from investing activities:
Capital expenditures (20.0) (25.6) (24.6)
Acquisition of companies, net of cash received (86.4) — (37.2)
Investment in equity securities (1.0) (5.0) —
Loans to equity affiliate (4.4) (7.0) 0.6
Proceeds from sale of assets 13.8 — —
Proceeds from company-owned life insurance 3.0 7.9 —
Other investing activities 0.7 (0.1) 0.2
Net cash used in investing activities (94.3) (29.8) (61.0)
Cash flows from financing activities:
Net change in short-term borrowings (0.3) (7.8) 10.1
Financing lease payments (0.7) — —
Dividend payments (11.9) (11.8) (11.6)
Payments of tax withholding for restricted shares (2.5) (6.9) (1.8)
Other financing activities (0.7) — (0.1)
Net cash used in financing activities (16.1) (26.5) (3.4)
Effect of exchange rates on cash, cash equivalents and restricted cash (0.9) (1.9) (3.8)
Net change in cash, cash equivalents and restricted cash (9.1) 3.2 2.6
Cash, cash equivalents and restricted cash at beginning of year 40.1 36.9 34.3
Cash, cash equivalents and restricted cash at end of year ⁽¹⁾
$ 31.0 $ 40.1 $ 36.9


	2022		2021		2020
	(In millions of dollars)
Cash flows from operating activities:
Net earnings (loss)	$	(62.5)	$	156.1	$	(72.0)
Adjustments to reconcile net earnings to net cash from operating activities:
Goodwill impairment charge	41.0		—		147.7
Deferred income taxes	(72.1)		21.6		(57.1)
Loss on disposal	18.7		—		—
Depreciation and amortization	33.4		29.8		24.2
Operating lease asset amortization	18.5		21.2		21.1
Provision for credit losses and sales allowances	1.5		1.6		12.8
Stock-based compensation	7.8		5.1		3.9
(Gain) loss on investment in Persol Holdings	67.2		(121.8)		16.6
Loss on cumulative translation adjustment reversal	20.4		—		—
Gain on foreign currency remeasurement	(5.5)		—		—
Gain on insurance settlement	—		(19.0)		—
Gain on sale of assets	(6.2)		—		(32.1)
Equity in net (earnings) loss of PersolKelly Pte. Ltd.	(0.8)		(5.4)		(0.8)
Other, net	3.3		6.0		1.4
Changes in operating assets and liabilities, net of acquisitions	(141.0)		(10.2)		120.3

Net cash (used in) from operating activities	(76.3)		85.0		186.0

Cash flows from investing activities:
Capital expenditures	(12.0)		(11.2)		(15.5)
Proceeds from sale of assets	10.1		—		55.5
Acquisition of companies, net of cash received	(143.1)		(213.0)		(39.2)
Cash disposed from sale of Russia, net of proceeds	(6.0)		—		—
Proceeds from sale of Persol Holdings investment	196.9		—		—
Proceeds from sale of equity method investment	119.5		—		—
Proceeds from company-owned life insurance	1.5		12.2		2.3
Proceeds from insurance settlement	—		19.0		—
Proceeds from sale of Brazil, net of cash disposed	—		—		1.2
Proceeds (payments) related to loans to equity affiliate	—		5.9		5.6
Proceeds from (investment in) equity securities	—		5.0		(0.2)
Other investing activities	0.6		1.4		0.1

Net cash from (used in) investing activities	167.5		(180.7)		9.8

Cash flows from financing activities:
Net change in short-term borrowings	0.8		(0.2)		(1.7)
Financing lease payments	(1.4)		(1.5)		(2.0)
Dividend payments	(10.6)		(4.0)		(3.0)
Payments of tax withholding for stock awards	(0.9)		(0.6)		(1.2)
Buyback of common shares	(27.2)		—		—
Purchase of treasury stock	(7.8)		—		—

Contingent consideration payments	(3.3)		(1.6)		—
Other financing activities	(0.2)		(0.2)		(0.2)

Net cash used in financing activities	(50.6)		(8.1)		(8.1)

Effect of exchange rates on cash, cash equivalents and restricted cash	2.3		(4.8)		9.4

Net change in cash, cash equivalents and restricted cash	42.9		(108.6)		197.1
Cash, cash equivalents and restricted cash at beginning of year	119.5		228.1		31.0

Cash, cash equivalents and restricted cash at end of year(1)	$	162.4	$	119.5	$	228.1

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

⁽¹⁾ The following table provides a reconciliation of cash, cash equivalents and restricted cash to the amounts reported in our consolidated balance sheet:


		2019		2018		2017			2022		2021		2020
		(In millions of dollars)											(In millions of dollars)
Reconciliation of cash, cash equivalents and restricted cash:	Reconciliation of cash, cash equivalents and restricted cash:							Reconciliation of cash, cash equivalents and restricted cash:
Current assets:	Current assets:							Current assets:
Cash and cash equivalents		$	25.8	$	35.3	$	32.5
Cash and equivalents								Cash and equivalents	$	153.7	$	112.7	$	223.0
Restricted cash included in prepaid expenses and other current assets	Restricted cash included in prepaid expenses and other current assets	0.2		0.1		—		Restricted cash included in prepaid expenses and other current assets	0.1		0.2		—
Noncurrent assets:	Noncurrent assets:							Noncurrent assets:
Restricted cash included in other assets	Restricted cash included in other assets	5.0		4.7		4.4		Restricted cash included in other assets	8.6		6.6		5.1
Cash, cash equivalents and restricted cash at end of year	Cash, cash equivalents and restricted cash at end of year	$	31.0	$	40.1	$	36.9	Cash, cash equivalents and restricted cash at end of year	$	162.4	$	119.5	$	228.1

See accompanying Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Nature of Operations Kelly Services, Inc. is a specialty talent and workforce solutions provider operating throughout the world.

Fiscal Year The Company’s fiscal year ends on the Sunday nearest to December 31. The three most recent years ended on ~~December 29, 2019 (2019), December 30, 2018 (2018) and December 31, 2017 (2017), all of~~January 1, 2023 (2022, which contained 52 ~~weeks.~~weeks), January 2, 2022 (2021, which contained 52 weeks) and January 3, 2021 (2020, which contained 53 weeks). Period costs included in selling, general and administrative (“SG&A”) expenses are recorded on a calendar-year basis. The Company’s operations in Brazil ~~are~~were accounted for on a one-month ~~lag.~~lag, until the Company sold the Brazil operations in the third quarter of 2020. The Company’s equity method investment in PersolKelly ~~Asia Pacific are~~Pte. Ltd. was accounted for on a one-quarter lag prior to the sale of the majority of the investment in the first quarter of 2022 (see Investment in PersolKelly ~~Asia Pacific~~Pte. Ltd. footnote). Any material transactions in the intervening period are disclosed or accounted for in the current reporting period.

Principles of Consolidation The consolidated financial statements include the accounts and operations of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current presentation.

Investment in Persol Holdings The Company’s previous investment in Persol Holdings, as further described in the Investment in Persol Holdings footnote, iswas carried at fair value with the changes in fair value recognized in net earnings. The fair value of the investment iswas based on the quoted market ~~price.~~price until the sale of the investment in the first quarter of 2022.

Investment in PersolKelly ~~Asia Pacific~~Pte. Ltd. The Company ~~has~~had a 49% ownership interest in its equity affiliate, PersolKelly ~~Asia Pacific,~~Pte. Ltd., which iswas accounted for under the equity method. The operating results of the equity affiliate ~~are~~were recorded on a one-quarter lag and included in equity in net earnings (loss) of affiliate in the consolidated statements of ~~earnings.~~earnings, until the Company sold the majority of the investment in the first quarter of 2022 (see Investment in PersolKelly Pte. Ltd. footnote). The remaining investment is accounted for as an equity investment without a readily determinable fair value (see Fair Value Measurements footnote).

Foreign Currency Translation All of the Company’s international subsidiaries use their local currency as their functional currency, which is the currency in which they transact the majority of their activities. Revenue and expense accounts of foreign subsidiaries are translated to U.S. dollars at average exchange rates, while assets and liabilities are translated to U.S. dollars at year-end exchange rates. Resulting translation adjustments, net of tax, where applicable, are reported as accumulated foreign currency translation adjustments in stockholders’ equity and are recorded as a component of accumulated other comprehensive income (loss).

Revenue Recognition Revenues are recognized when control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. Our revenues are recorded net of any sales, value added, or similar taxes collected from our customers. We generate revenue from: the hourly sales of services by our temporary employees to customers (“staffing ~~solutions”~~services” revenue), the recruiting of permanent employees for our customers (“permanent placement” revenue), and through our talent fulfillment and outcome-based activities (“talent solutions” and “outcome-based services” revenue).

We record revenues from sales of services and the related direct costs in accordance with the accounting guidance on reporting revenue gross as a principal versus net as an agent. When Kelly is the principal, we demonstrate control over the service by being ~~the employer of record for the individuals performing the service, by being~~ primarily responsible to our customers ~~and by having a level of discretion in establishing pricing in which~~for fulfilling the ~~gross amount is recorded as revenues.~~contractual promise to provide the service. When Kelly ~~arranges for~~does not demonstrate control over the service, which may be evident through the arrangement of other contingent labor suppliers and/or service providers to perform services for the customer ~~we do~~or by Kelly not ~~control those~~holding primary responsibility for the fulfillment of the contractual promise to provide services ~~before they are transferred, and therefore,~~to the customer, the amounts billed to our customers are net of the amounts paid to the secondary suppliers/service providers and the net amount is recorded as revenues.

Staffing ~~Solutions~~Services Revenue

Staffing ~~solutions~~services contracts ~~are short-term in nature. Billings~~ are generally negotiated and invoiced on a per-hour or per-unit basis as the temporary staffing services are transferred to the customer. Revenue from the majority of our staffing ~~solutions~~ services continues to be recognized over time as the customer simultaneously receives and consumes the services we provide. We have applied the practical expedient to recognize revenue for these services over the term of the agreement in proportion to the amount we have the right to invoice the customer.

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Permanent Placement Revenue

Permanent placement revenue is recorded at the point in time the permanent placement candidate begins full-time employment. On the candidate start date, the customer accepts the candidate and can direct the use of the candidate as well as obtains the significant risk and rewards of the candidate. We consider this the point the control transfers to the customer.

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~Talent Solutions and~~ Outcome-Based Services Revenue

Billings are generally negotiated and invoiced on a measure of time (hours, weeks, months) or per-unit basis for our services performed. We continue to recognize revenue from the majority of our ~~talent solutions~~outcome-based services over time as the customer simultaneously receives and consumes the services we provide. For the majority of our outcome-based services, we have applied the practical expedient to recognize revenue for these services over the term of the agreement in proportion to the amount we have the right to invoice the customer.

Talent Solutions Revenue

Talent Solutions services include: overall program management of our client’s contingent workforce, external vendors and/or independent contractors, end-to-end talent acquisition, and payroll outsourcing. Billings are generally negotiated and invoiced as a fee-based commission contingent on the amount of services managed through the program, a monthly management fee, measure of time (hours), or a per-unit basis for our services performed. We continue to recognize revenue for talent solution services over time as the customer simultaneously receives and consumes the services we provide. We have applied the practical expedient to recognize revenue for these services over the term of the agreement in proportion to the amount we have the right to invoice the customer.

Variable Consideration

Certain customers may receive cash-based incentives or credits, which are accounted for as a form of variable consideration. We estimate these amounts based on the expected or likely amount to be provided to customers and reduce revenues recognized to the extent that it is probable that a significant reversal of such adjustment will not occur. Provisions for sales allowances (billing adjustments related to errors, service issues and compromises on billing disputes), based on historical experience, are recognized at the time the related sale is recognized as a reduction in revenue from services.

Payment Terms

Customer payments are typically due within 60 days of invoicing, but may be shorter or longer depending on contract terms. Management does not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of the services to the customer will be less than one year. We do not have any significant financing components or extended payment terms.

Deferred Revenue

Items which are billed to the customer at a point in time, rather than billed over time as the services are delivered to the customer, are assessed for potential revenue deferral. At this time, the balance of the contract liability as well as the amount of revenue recognized in the reporting period that was included in the deferred revenue balance at the beginning of the period is not material.

Deferred Costs

Sales commissions paid at initial contract inception and upon contract renewal by our sales team are considered incremental and recoverable costs of obtaining a contract with a customer. The sales commissions (and related fringe benefits such as taxes and benefits) are deferred and then amortized on a straight-line basis over an appropriate period of benefit that we have determined to be contract duration. We determined the period of benefit by taking into consideration our customer contracts and other relevant factors. Anticipated renewal periods are not included in the amortization period of the initial commission. Amortization expense is included in SG&A expenses in the consolidated statements of earnings. As a practical expedient, sales commissions with amortization periods of 12 months or less are expensed as incurred. These costs are recorded in SG&A expenses in the consolidated statements of earnings.

Occasionally, fulfillment costs are incurred after obtaining a contract in order to generate a resource that will be used to provide our services. These costs are considered incremental and recoverable costs to fulfill our contract with the customer. These costs to fulfill a contract are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be the average length of assignment of the employees. We determined the period of benefit by taking into consideration our customer contracts, attrition rates and other relevant factors. Amortization expense is included in SG&A expenses in the consolidated statements of earnings.

Unsatisfied Performance Obligations

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

Allowance for ~~Uncollectible~~Credit Losses - Trade Accounts Receivable The Company records an allowance for uncollectible accounts receivable, billed and unbilled, based on historical loss experience, customer payment patterns, ~~and~~ current economic ~~trends.~~trends, and reasonable and supportable forecasts, as applicable. The reserve for sales allowances ~~as discussed above,~~ is also included in the allowance for uncollectible accounts receivable. The Company estimates the current expected credit losses by applying internally developed loss rates to all outstanding receivable balances by aging category. Accounts receivable are written-off against the allowance when they are deemed uncollectible. The Company reviews the adequacy of the allowance for uncollectible accounts

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

receivable on a quarterly basis and, if necessary, increases or decreases the balance by recording a charge or credit to SG&A expenses for the portion of the adjustment relating to uncollectible accounts receivable, and a charge or credit to revenue from services for the portion of the adjustment relating to sales allowances.

We are exposed to credit losses primarily through our sales of workforce solution services to customers. We establish an allowance for estimated credit losses in the current period resulting from the failure of our customers to make required payments on their trade accounts receivable in future periods. We pool such assets by geography and other similar risk characteristics, such as accounts in collection, and apply an aging method to estimate future credit losses utilizing inputs such as historical write-off experience, customer payment patterns, current collection data, and reasonable and supportable forecasts, as applicable. Credit risk with respect to accounts receivable is limited due to short payment terms. The Company also performs ongoing credit evaluations using applicable credit ratings of its customers to help analyze credit risk. We monitor ongoing credit exposure through frequent review of past due accounts (based on the payment terms of the contract) and follow-up with customers, as appropriate.We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables.

Allowance for Credit Losses - Other Financial Assets The Company measures expected credit losses on qualified financial assets that do not result from revenue transactions using a probability of default method by type of financing receivable. The estimate of expected credit losses considers credit ratings, financial data, historical write-off experience, current conditions, and reasonable and supportable forecasts, as applicable, to estimate the risk of loss.

Cost of Services Cost of services are those costs directly associated with the earning of revenue. The primary examples of these types of costs are temporary employee wages, along with other employee related costs, including associated payroll taxes, temporary employee benefits, such as service bonus and holiday pay, and workers’ compensation costs. These costs differ

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

fundamentally from SG&A expenses in that they arise specifically from the action of providing our services to customers whereas SG&A costs are incurred regardless of whether or not we place temporary employees with our customers.

Advertising Expenses Advertising expenses, which are expensed as incurred and are included in SG&A expenses, were ~~$9.4~~$6.4 million in ~~2019, $8.7~~2022, $7.5 million in ~~2018~~2021 and ~~$7.9~~$8.1 million in ~~2017.~~2020.

Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, the accounting for the allowance for uncollectible accounts receivable and credit losses, workers’ compensation, goodwill and long-lived asset impairment, valuation of acquired intangibles, ~~impairment of equity affiliates,~~ litigation costs and income taxes. Actual results could differ materially from those estimates.

Cash and Equivalents Cash and equivalents are stated at fair value. The Company considers securities with original maturities of three months or less to be cash and equivalents.

Property and Equipment Property and equipment are stated at cost and are depreciated on a straight-line basis over their estimated useful lives. Cost and estimated useful lives of property and equipment by function are as follows:


Category	Category	2019		2018		Life					Category	2022		2021			Useful Life
		(In millions of dollars)										(In millions of dollars)
Land	Land	$	—	$	3.8		—		Land	$	—	$	—			—
Work in process	Work in process	2.7		12.2			—		Work in process	3.0		0.3				—
Buildings and improvements	Buildings and improvements	13.0		65.3		15	to	40 years	Buildings and improvements	0.4		12.9		15		to	40 years
Computer hardware and software	Computer hardware and software	153.1		153.3		3	to	12 years	Computer hardware and software	126.8		147.9		3		to	12 years
Equipment, furniture and fixtures	Equipment, furniture and fixtures	34.1		34.6			5	years	Equipment, furniture and fixtures	22.7		26.6				5	years
Leasehold improvements	Leasehold improvements	22.9		25.5		The lesser of the life of the lease or 5 years.					Leasehold improvements	13.9		17.4			HQ: 15 years
														Branches: Lesser of the lease or 5 years
Total property and equipment	Total property and equipment	$	225.8	$	294.7						Total property and equipment	$	166.8	$	205.1


Delaware						38-1510762
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Title of each class	Trading Symbols	Name of each exchange on which registered
Class A Common	KELYA	NASDAQ Global Market
Class B Common	KELYB	NASDAQ Global Market


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer (Do not check if a smaller reporting company)	☐	Smaller reporting company	☐
Emerging growth company	☐



	December Year to Date
	2019		2018
Branch-Delivered Staffing
Americas Staffing
Staffing Solutions
Commercial	$	1,502.3	$	1,679.6
Education	451.9		428.0
Professional/Technical	332.4		272.2
Permanent Placement	33.5		37.9
Total Americas Staffing	2,320.1		2,417.7

International Staffing
Staffing Solutions	1,001.1		1,087.7
Permanent Placement	24.8		28.9
Total International Staffing	1,025.9		1,116.6

Global Talent Solutions
Talent Fulfillment
Staffing Solutions	1,015.5		1,117.6
Permanent Placement	1.8		1.9
Talent Solutions	365.8		362.8
Total Talent Fulfillment	1,383.1		1,482.3

Outcome-Based Services	641.4		515.1
Total Global Talent Solutions	2,024.5		1,997.4

Total Intersegment	(14.9)		(17.8)

Total Revenue from Services	$	5,355.6	$	5,513.9


	December Year to Date
	2022		2021		2020
Americas
United States	$	3,671.5	$	3,513.4	$	3,260.2
Canada	168.2		155.0		122.5
Puerto Rico	112.4		102.1		77.0
Mexico	46.5		92.7		114.4
Brazil	—		—		17.0
Total Americas Region	3,998.6		3,863.2		3,591.1

Europe
Switzerland	222.8		222.2		200.4
France	199.4		223.1		198.2
Portugal	169.5		158.2		141.7
Italy	69.3		74.2		58.2
Russia	63.4		132.2		118.5
United Kingdom	57.1		68.3		73.7


Other	143.2		128.8		104.6
Total Europe Region	924.7		1,007.0		895.3







Total Asia-Pacific Region	42.1		39.5		29.6

Total Kelly Services, Inc.	$	4,965.4	$	4,909.7	$	4,516.0


			KELLY SERVICES, INC.
			(Exact Name of Registrant as specified in its Charter)


	2014		2015		2016		2017		2018		2019
Kelly Services, Inc.	$	100.00	$	96.05	$	138.40	$	166.88	$	126.85	$	141.59
S&P SmallCap 600 Index	$	100.00	$	98.03	$	124.06	$	140.48	$	128.56	$	157.85
S&P 1500 Human Resources and Employment Services Index	$	100.00	$	107.96	$	118.15	$	150.39	$	125.92	$	154.62


(In millions except per share amounts)	2019		2018		2017		2016		2015⁽¹⁾

Revenue from services	$	5,355.6	$	5,513.9	$	5,374.4	$	5,276.8	$	5,518.2
Gain on sale of assets ⁽²⁾	12.3		—		—		—		—
Asset impairment charge ⁽³⁾	15.8		—		—		—		—
Earnings from operations	81.8		87.4		83.3		63.2		66.7
Gain (loss) on investment in Persol Holdings ⁽⁴⁾	35.8		(96.2)		—		—		—
Gain on investment in PersolKelly Asia Pacific ⁽⁵⁾	—		—		—		87.2		—

Net earnings	112.4		22.9		71.6		120.8		53.8

Basic earnings per share	2.85		0.59		1.84		3.10		1.39
Diluted earnings per share	2.84		0.58		1.81		3.08		1.39

Dividends per share
Classes A and B common	0.30		0.30		0.30		0.275		0.20

Working capital ⁽⁶⁾	521.6		503.0		458.1		443.5		411.3
Total assets	2,480.6		2,314.4		2,378.2		2,028.1		1,939.6
Total noncurrent liabilities	332.0		257.4		300.5		245.0		228.4


Cash consideration paid	$	85.7
Additional consideration payable	1.1
Total consideration	$	86.8


Cash	$	0.9
Trade accounts receivable	10.0
Prepaid expenses and other current assets	1.6
Net property and equipment	0.4


Goodwill	36.3
Intangibles	40.3

Accounts payable and accrued liabilities, current	(2.6)

Accrued payroll and related taxes, current	(0.1)



Total consideration, including working capital adjustments	$	86.8


Cash consideration paid	$	61.8
Additional consideration payable	1.1
Contingent consideration	0.6
Total consideration	$	63.5


Cash	$	3.5
Trade accounts receivable	~~19.7~~6.9
~~Other~~Prepaid expenses and other current assets	~~0.3~~1.8
Net property and equipment	0.1


Goodwill	~~13.7~~41.0
Intangibles	~~21.5~~15.8

Accounts payable and accrued liabilities, current	(2.9)

Accrued payroll and related taxes, current	(1.5)

Other ~~noncurrent assets~~long-term liabilities	~~0.5~~ (1.2)

~~Current liabilities~~	~~(4.9)~~
~~Purchase price paid,~~Total consideration, including working capital adjustments	$	~~54.3~~63.5


Cash consideration paid	$	220.4
Additional consideration payable	2.6
Net working capital adjustment	(6.0)
Total consideration	$	217.0


Cash	$	~~0.1~~1.4
Trade accounts receivable	~~13.9~~21.6
~~Other~~Prepaid expenses and other current assets	~~0.1~~3.3
Net property and equipment	1.2
Operating lease right-of-use assets	7.6
Non-current deferred tax	5.9
Goodwill	~~6.8~~111.3
Intangibles	~~17.3~~79.4
Other assets, noncurrent ~~assets~~	~~0.4~~1.2
~~Current~~Accounts payable and accrued liabilities, current	~~(2.9)~~(2.5)
~~Purchase price paid,~~Operating lease liabilities, current	(1.3)
Accrued payroll and related taxes, current	(4.6)
Income and other taxes, current	(1.2)
Operating lease liabilities, noncurrent	(6.3)
Total consideration, including working capital adjustments	$	~~35.7~~217.0


Assets divested
Cash and equivalents		$	~~1.8~~13.4
Trade accounts receivable, net		22.8
Prepaid expenses and other current assets		0.7
Property and equipment, net		0.7

Deferred taxes		0.4
Other ~~current~~ assets		~~3.6~~0.3
~~Goodwill~~Assets divested		~~18.7~~38.3

~~Intangibles~~Liabilities divested	~~18.3~~
~~Other noncurrent assets~~Accounts payable and accrued liabilities		~~0.5~~ (0.6)

~~Current liabilities~~Accrued payroll and related taxes		~~(3.9)~~(7.3)
~~Purchase price paid at closing~~Income and other taxes		(5.7)
Liabilities divested		(13.6)

Disposal group, net		$	~~39.0~~24.7


(Address of principal executive offices) (Zip Code)


(Registrant’s telephone number, including area code)


	Fair Value Measurements on a Recurring Basis As of Year-End 2019
Description	Total		Level 1		Level 2		Level 3
	(In millions of dollars)
Money market funds	$	4.9	$	4.9	$	—	$	—
Investment in Persol Holdings	173.2		173.2		—		—

Total assets at fair value	$	178.1	$	178.1	$	—	$	—


	Severance Costs		Lease Termination Costs		Total
Professional & Industrial	$	0.1	$	0.2	$	0.3

Education	0.4		—		0.4
Outsourcing & Consulting	0.2		—		0.2

Corporate	0.8		—		0.8
Total	$	1.5	$	0.2	$	1.7


~~Balance as of year-end 2018~~	$		—
~~Additions charged to Americas Staffing~~	~~6.3~~
~~Reductions for cash payments~~	~~(5.2)~~
~~Accrual adjustments~~	~~(0.8)~~





Balance as of year-end ~~2019~~2020	$	3.5




Additions charged to International	1.2
Additions charged to Corporate	2.8

Reductions for cash payments related to all restructuring activities	(4.6)

Balance as of year-end 2021	2.9
Additions charged to Professional & Industrial	0.3

Additions charged to Outsourcing & Consulting	0.2
Additions charged to Education	0.4

Additions charged to Corporate	0.8
Reductions for cash payments related to all restructuring activities	(4.0)
Accrual adjustments	(0.3)
Balance as of year-end 2022	$	0.3


	As of Year-End 2021		Additions to Goodwill		Impairment Adjustments		As of Year-End 2022
Science, Engineering & Technology	$	111.3	$	—	$	—	$	111.3
Education	3.5		36.3		—		39.8
Outsourcing & Consulting	—		41.0		(41.0)		—
Total	$	114.8	$	77.3	$	(41.0)	$	151.1


	As of Year-End 2018		Additions to Goodwill		As of Year-End 2019
	(In millions of dollars)
Americas Staffing	$	44.8	$	13.7	$	58.5
Global Talent Solutions	62.5		6.8		69.3
International Staffing	—		—		—
	$	107.3	$	20.5	$	127.8


	As of Year-End 2020		Additions to Goodwill		Impairment Adjustments		As of Year-End 2021
Science, Engineering & Technology	$	—	$	111.3	$	—	$	111.3
Education	3.5		—		—		3.5
Total	$	3.5	$	111.3	$	—	$	114.8


	2022		2021
Life insurance cash surrender value (see Retirement Benefits footnote)	$	194.3	$	232.9
Intangibles, net of accumulated amortization of $55.5 million in 2022 and $39.1 million in 2021(1)	158.7		122.0
Long-term hosted software, net of accumulated amortization of $7.3 million in 2022 and $3.2 million in 2021(2)	13.7		10.7
Noncurrent restricted cash	8.6		6.6
Workers' compensation and other claims receivable(3)	12.1		5.5
Other(4)	15.8		11.4
Other assets	$	403.2	$	389.1


		December Year to Date
Description	Statements of Earnings Location	2022		2021		2020
Operating:
Operating lease cost	Selling, general and administrative expenses	$	22.8	$	25.8	$	27.0
Short-term lease cost	Selling, general and administrative expenses	2.4		2.6		3.6
Variable lease cost	Selling, general and administrative expenses	5.2		5.7		6.8
Financing:
Amortization of ROU assets	Selling, general and administrative expenses	0.6		1.4		1.3
Interest on lease liabilities	Other income (expense), net	0.1		0.2		0.4
Total lease cost		$	31.1	$	35.7	$	39.1


Description	Balance Sheet Location	As of Year-End 2022		As of Year-End 2021
ROU Assets:
Operating	Operating lease right-of-use assets	$	66.8	$	75.8
Financing	Property and equipment	5.0		6.3
Total lease assets		$	71.8	$	82.1

ROU Liabilities:
Operating - current	Operating lease liabilities, current	$	14.7	$	17.5
Financing - current	Accounts payable and accrued liabilities	1.2		1.9
Operating - noncurrent	Operating lease liabilities, noncurrent	55.0		61.4
Financing - noncurrent	Other long-term liabilities	—		1.2
Total lease liabilities		$	70.9	$	82.0


	Operating Leases		Financing Leases
2023	$	17.8	$	1.3
2024	13.2		—
2025	10.1		—
2026	7.7		—
2027	5.5		—
Thereafter	30.3		—
Total future lease payments	84.6		1.3
Less: Imputed interest	15.0		0.1
Total	$	69.6	$	1.2


	~~December Year to Date~~
	~~2019~~
~~Weighted average remaining lease term (years):~~
~~Operating leases~~	~~3.9~~
~~Financing leases~~	~~3.6~~
~~Weighted average discount rate:~~
~~Operating leases~~	~~5.7~~	%
~~Financing leases~~	~~4.9~~	%


	~~December Year to Date~~
	~~2019~~
~~Cash paid for amounts included in the measurement of lease liabilities:~~
~~Operating cash flows from operating leases~~	$	~~26.0~~
~~Financing cash flows from financing leases~~	~~0.7~~

~~ROU assets obtained in exchange for new lease obligations:~~
~~Operating leases~~	$	~~9.2~~
~~Financing leases~~	~~4.1~~


Fiscal year:
2019	$	26.7
2020	20.4
2021	15.2
2022	9.8
2023	4.7
Later years	4.9
Total	$	81.7


	Restricted Stock	Weighted Average Grant Date Fair Value
Nonvested at year-end 2018	356	$	23.44
Granted	185	24.76
Vested	(134)	21.23
Forfeited	(47)	23.65
Nonvested at year-end 2019	360	$	24.92


	Restricted Stock	Weighted Average Grant Date Fair Value
Nonvested at year-end 2021	403	$	21.24
Granted	417	20.16
Vested	(112)	22.25
Forfeited	(101)	21.51
Nonvested at year-end 2022	607	$	20.27


		Financial Measure Performance Shares				TSR Performance Shares						Financial Measure Performance Shares
		Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value			Shares	Weighted Average Grant Date Fair Value
Nonvested at year-end 2018		481	$	23.58	173	$	23.56
Nonvested at year-end 2021								Nonvested at year-end 2021	708	$	20.03
Granted	Granted	260	25.34		—	—		Granted	186	21.19
Vested	Vested	(188)	28.05		(55)	19.73		Vested	(48)	22.55
Forfeited	Forfeited	(51)	25.14		(4)	28.99		Forfeited	(12)	16.81
Nonvested at year-end 2019		502	$	24.21	114	$	25.24
Vesting Adjustment								Vesting Adjustment	(142)	24.45
Nonvested at year-end 2022								Nonvested at year-end 2022	692	$	19.41


~~Year~~	~~Amount~~


~~2020-2021~~	$	~~0.5~~
~~2022-2036~~	~~0.8~~
~~No expiration~~	~~29.1~~
~~Total~~	$	~~30.4~~


	Fiscal Year 2019
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Year
	(In millions of dollars except per share data)
Revenue from services	$	1,382.6	$	1,367.5	$	1,267.7	$	1,337.8	$	5,355.6
Gross profit	251.6		244.0		227.7		245.1		968.4
SG&A expenses	234.8		221.5		210.6		216.2		883.1
Restructuring charges included in SG&A expenses	6.3		(0.6)		(0.1)		(0.1)		5.5
Gain on sale of assets ⁽²⁾	—		12.3		—		—		12.3
Asset impairment charge ⁽³⁾	—		—		—		15.8		15.8
Gain (loss) on investment in Persol Holdings	13.2		61.2		(39.3)		0.7		35.8

Net earnings (loss)	22.1		83.8		(10.5)		17.0		112.4
Basic earnings (loss) per share ⁽¹⁾	0.56		2.12		(0.27)		0.43		2.85



Diluted earnings (loss) per share ⁽¹⁾	0.56		2.12		(0.27)		0.43		2.84



Dividends per share	0.075		0.075		0.075		0.075		0.30


	Fiscal Year 2018
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Year
	(In millions of dollars except per share data)
Revenue from services	$	1,369.9	$	1,386.9	$	1,342.4	$	1,414.7	$	5,513.9
Gross profit	238.2		240.5		239.1		254.4		972.2
SG&A expenses	226.2		220.1		217.2		221.3		884.8

Gain (loss) on investment in Persol Holdings	23.7		(52.5)		15.8		(83.2)		(96.2)

Net earnings (loss)	29.1		(15.4)		33.1		(23.9)		22.9
Basic earnings (loss) per share ⁽¹⁾	0.74		(0.40)		0.84		(0.62)		0.59



Diluted earnings (loss) per share ⁽¹⁾	0.74		(0.40)		0.84		(0.62)		0.58



Dividends per share	0.075		0.075		0.075		0.075		0.30


			Additions
	Balance at beginning of year		Charged to costs and expenses	Charged to other accounts		Currency exchange effects	Deductions from reserves	Balance at end of year
Description

Fiscal year ended December 29, 2019

Reserve deducted in the balance sheet from the assets to which it applies -

Allowance for doubtful accounts	$	13.2	3.4	0.7	(1)	—	(4.4)	$	12.9

Deferred tax assets valuation allowance	$	27.8	6.1	—		(0.3)	(14.6)	$	19.0

Fiscal year ended December 30, 2018

Reserve deducted in the balance sheet from the assets to which it applies -

Allowance for doubtful accounts	$	12.9	3.5	(0.5)	(1)	(0.4)	(2.3)	$	13.2

Deferred tax assets valuation allowance	$	34.6	2.6	—		(1.8)	(7.6)	$	27.8

Fiscal year ended December 31, 2017

Reserve deducted in the balance sheet from the assets to which it applies -

Allowance for doubtful accounts	$	12.5	5.3	0.3	(1)	0.6	(5.8)	$	12.9

Deferred tax assets valuation allowance	$	42.1	1.7	—		3.3	(12.5)	$	34.6