UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~July 3, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-1088

KELLY SERVICES, INC.

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(Exact name of registrant as specified in its charter)


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

999 West Big Beaver Road, Troy, Michigan 48084

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(Address of principal executive offices) (Zip Code)

(248) 362-4444

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(Registrant’s telephone number, including area code)

No Change

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(Former name, former address and former fiscal year, if changed since last report.)

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


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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

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


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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

At ~~November~~August 1, ~~2021, 36,030,919~~2022, 34,588,694 shares of Class A and ~~3,358,521~~3,357,146 shares of Class B common stock of the Registrant were outstanding.

KELLY SERVICES, INC. AND SUBSIDIARIES


			Page Number

PART I. FINANCIAL INFORMATION			4

Item 1. Financial Statements (unaudited).			4

Consolidated Statements of Earnings			4

Consolidated Statements of Comprehensive Income (Loss)			5

Consolidated Balance Sheets			6

Consolidated Statements of Stockholders' Equity			8

Consolidated Statements of Cash Flows			9

Notes to Consolidated Financial Statements			11

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.			2931

Item 3. Quantitative and Qualitative Disclosures About Market Risk.			4749

Item 4. Controls and Procedures.			4749

PART II. OTHER INFORMATION			4850

Item 1. Legal Proceedings.			4850

Item 1A. Risk Factors.			4850

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			4951

Item 3. Defaults Upon Senior Securities.			4951

Item 4. Mine Safety Disclosures.			4951

Item 5. Other Information.			4951

Item 6. Exhibits.			4951

SIGNATURES			5153

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)

(In millions of dollars except per share data)


		13 Weeks Ended				39 Weeks Ended					13 Weeks Ended				26 Weeks Ended
		October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020			July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Revenue from services	Revenue from services	$	1,195.4	$	1,038.2	$	3,659.4	$	3,274.6	Revenue from services	$	1,267.3	$	1,258.1	$	2,563.7	$	2,464.0

Cost of services	Cost of services	966.5		847.2		2,986.2		2,671.1		Cost of services	1,004.9		1,027.1		2,042.7		2,019.7

Gross profit	Gross profit	228.9		191.0		673.2		603.5		Gross profit	262.4		231.0		521.0		444.3

Selling, general and administrative expenses	Selling, general and administrative expenses	219.9		193.4		639.9		591.0		Selling, general and administrative expenses	240.1		217.3		476.2		420.0

Goodwill impairment charge		—		—		—		147.7
Impairment of assets held for sale										Impairment of assets held for sale	18.5		—		18.5		—

Gain on sale of assets	Gain on sale of assets	—		—		—		(32.1)		Gain on sale of assets	(4.4)		—		(5.3)		—

Earnings (loss) from operations		9.0		(2.4)		33.3		(103.1)
Earnings from operations										Earnings from operations	8.2		13.7		31.6		24.3

Gain (loss) on investment in Persol Holdings	Gain (loss) on investment in Persol Holdings	35.5		16.8		71.8		(31.4)		Gain (loss) on investment in Persol Holdings	—		6.3		(67.2)		36.3

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	(0.3)		(0.7)		(4.0)		3.6		Other income (expense), net	(1.1)		(0.3)		1.7		(3.7)

Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	44.2		13.7		101.1		(130.9)		Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	7.1		19.7		(54.3)		56.9

Income tax expense (benefit)	Income tax expense (benefit)	11.1		(1.2)		19.0		(36.5)		Income tax expense (benefit)	4.9		(2.6)		(8.1)		7.9

Net earnings (loss) before equity in net earnings (loss) of affiliate	Net earnings (loss) before equity in net earnings (loss) of affiliate	33.1		14.9		82.1		(94.4)		Net earnings (loss) before equity in net earnings (loss) of affiliate	2.2		22.3		(46.2)		49.0

Equity in net earnings (loss) of affiliate	Equity in net earnings (loss) of affiliate	1.7		1.8		2.3		(1.0)		Equity in net earnings (loss) of affiliate	—		1.7		0.8		0.6

Net earnings (loss)	Net earnings (loss)	$	34.8	$	16.7	$	84.4	$	(95.4)	Net earnings (loss)	$	2.2	$	24.0	$	(45.4)	$	49.6

Basic earnings (loss) per share	Basic earnings (loss) per share	$	0.87	$	0.42	$	2.12	$	(2.43)	Basic earnings (loss) per share	$	0.06	$	0.60	$	(1.19)	$	1.25
Diluted earnings (loss) per share	Diluted earnings (loss) per share	$	0.87	$	0.42	$	2.12	$	(2.43)	Diluted earnings (loss) per share	$	0.06	$	0.60	$	(1.19)	$	1.25

Average shares outstanding (millions):	Average shares outstanding (millions):									Average shares outstanding (millions):
Basic	Basic	39.4		39.3		39.4		39.3		Basic	37.9		39.4		38.3		39.4
Diluted	Diluted	39.5		39.4		39.5		39.3		Diluted	38.2		39.5		38.3		39.5

See accompanying unaudited Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In millions of dollars)


		13 Weeks Ended				39 Weeks Ended					13 Weeks Ended				26 Weeks Ended
		October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020			July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Net earnings (loss)	Net earnings (loss)	$	34.8	$	16.7	$	84.4	$	(95.4)	Net earnings (loss)	$	2.2	$	24.0	$	(45.4)	$	49.6

Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax expense of $0.1, $0.4, $0.5 and $0.0, respectively		(3.5)		5.1		(15.1)		0.4
Less: Reclassification adjustments included in net earnings (loss)		—		(1.5)		—		(1.5)
Foreign currency translation adjustments, net of tax expense of $0.0, tax benefit of $0.1, tax expense of $0.1 and $0.4, respectively										Foreign currency translation adjustments, net of tax expense of $0.0, tax benefit of $0.1, tax expense of $0.1 and $0.4, respectively	1.3		2.0		(8.6)		(11.6)
Less: Reclassification adjustments included in net earnings (loss) - liquidation of Japan subsidiary										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										Less: Reclassification adjustments included in net earnings (loss) - equity method investment and other	0.2		—		2.7		—
Foreign currency translation adjustments	Foreign currency translation adjustments	(3.5)		3.6		(15.1)		(1.1)		Foreign currency translation adjustments	1.5		2.0		14.5		(11.6)

Other comprehensive income (loss)	Other comprehensive income (loss)	(3.5)		3.6		(15.1)		(1.1)		Other comprehensive income (loss)	1.5		2.0		14.5		(11.6)

Comprehensive income (loss)	Comprehensive income (loss)	$	31.3	$	20.3	$	69.3	$	(96.5)	Comprehensive income (loss)	$	3.7	$	26.0	$	(30.9)	$	38.0

See accompanying unaudited Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In millions)


		October 3, 2021		January 3, 2021			July 3, 2022		January 2, 2022
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and equivalents	Cash and equivalents	$	43.5	$	223.0	Cash and equivalents	$	133.9	$	112.7
Trade accounts receivable, less allowances of $12.3 and $13.3, respectively		1,423.9		1,265.2
Trade accounts receivable, less allowances of $12.0 and $12.6, respectively						Trade accounts receivable, less allowances of $12.0 and $12.6, respectively	1,497.9		1,423.2
Prepaid expenses and other current assets	Prepaid expenses and other current assets	71.0		61.4		Prepaid expenses and other current assets	80.6		52.8

Assets held for sale						Assets held for sale	24.6		—
Total current assets	Total current assets	1,538.4		1,549.6		Total current assets	1,737.0		1,588.7

Noncurrent Assets	Noncurrent Assets					Noncurrent Assets
Property and equipment:	Property and equipment:					Property and equipment:
Property and equipment	Property and equipment	208.2		222.3		Property and equipment	173.3		205.1
Accumulated depreciation	Accumulated depreciation	(172.1)		(181.3)		Accumulated depreciation	(147.9)		(169.8)
Net property and equipment	Net property and equipment	36.1		41.0		Net property and equipment	25.4		35.3
Operating lease right-of-use assets	Operating lease right-of-use assets	79.3		83.2		Operating lease right-of-use assets	70.1		75.8
Deferred taxes	Deferred taxes	304.0		282.0		Deferred taxes	298.3		302.8
Goodwill, net	Goodwill, net	114.8		3.5		Goodwill, net	192.1		114.8
Investment in Persol Holdings	Investment in Persol Holdings	222.6		164.2		Investment in Persol Holdings	—		264.3
Investment in equity affiliate	Investment in equity affiliate	122.0		118.5		Investment in equity affiliate	—		123.4
Other assets	Other assets	386.3		319.9		Other assets	412.3		389.1
Total noncurrent assets	Total noncurrent assets	1,265.1		1,012.3		Total noncurrent assets	998.2		1,305.5

Total Assets	Total Assets	$	2,803.5	$	2,561.9	Total Assets	$	2,735.2	$	2,894.2

See accompanying unaudited Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In millions)


		October 3, 2021		January 3, 2021			July 3, 2022		January 2, 2022
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current Liabilities	Current Liabilities					Current Liabilities
Short-term borrowings	Short-term borrowings	$	—	$	0.3	Short-term borrowings	$	—	$	—
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	645.2		536.8		Accounts payable and accrued liabilities	734.7		687.2
Operating lease liabilities	Operating lease liabilities	18.4		19.6		Operating lease liabilities	15.3		17.5
Accrued payroll and related taxes	Accrued payroll and related taxes	334.9		293.0		Accrued payroll and related taxes	322.4		318.4
Accrued workers’ compensation and other claims	Accrued workers’ compensation and other claims	21.1		22.7		Accrued workers’ compensation and other claims	24.4		20.8
Income and other taxes	Income and other taxes	58.4		53.2		Income and other taxes	50.5		51.3
Liabilities held for sale						Liabilities held for sale	13.7		—

Total current liabilities	Total current liabilities	1,078.0		925.6		Total current liabilities	1,161.0		1,095.2

Noncurrent Liabilities	Noncurrent Liabilities					Noncurrent Liabilities
Operating lease liabilities	Operating lease liabilities	64.1		67.5		Operating lease liabilities	57.7		61.4
Accrued payroll and related taxes	Accrued payroll and related taxes	58.2		58.5		Accrued payroll and related taxes	—		57.6
Accrued workers’ compensation and other claims	Accrued workers’ compensation and other claims	39.1		42.2		Accrued workers’ compensation and other claims	43.4		37.0
Accrued retirement benefits	Accrued retirement benefits	213.5		205.8		Accrued retirement benefits	180.2		220.0
Other long-term liabilities	Other long-term liabilities	76.5		59.3		Other long-term liabilities	16.0		86.8
Total noncurrent liabilities	Total noncurrent liabilities	451.4		433.3		Total noncurrent liabilities	297.3		462.8

Commitments and contingencies (see Contingencies footnote)	Commitments and contingencies (see Contingencies footnote)	0		0		Commitments and contingencies (see Contingencies footnote)	0		0

Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
Capital stock, $1.00 par value	Capital stock, $1.00 par value					Capital stock, $1.00 par value
Class A common stock, 100.0 shares authorized; 36.7 shares issued at 2021 and 2020		36.7		36.7
Class B common stock, 10.0 shares authorized; 3.4 shares issued at 2021 and 2020		3.4		3.4
Class A common stock, 100.0 shares authorized; 35.1 shares issued at 2022 and 36.7 shares issued at 2021						Class A common stock, 100.0 shares authorized; 35.1 shares issued at 2022 and 36.7 shares issued at 2021	35.1		36.7
Class B common stock, 10.0 shares authorized; 3.4 shares issued at 2022 and 3.4 shares issued at 2021						Class B common stock, 10.0 shares authorized; 3.4 shares issued at 2022 and 3.4 shares issued at 2021	3.4		3.4
Treasury stock, at cost	Treasury stock, at cost					Treasury stock, at cost
Class A common stock, 0.7 shares at 2021 and 0.8 shares at 2020		(14.6)		(16.5)
Class A common stock, 0.6 shares at 2022 and 0.7 shares at 2021						Class A common stock, 0.6 shares at 2022 and 0.7 shares at 2021	(11.9)		(14.5)
Class B common stock	Class B common stock	(0.6)		(0.6)		Class B common stock	(0.6)		(0.6)
Paid-in capital	Paid-in capital	23.2		21.3		Paid-in capital	24.9		23.9
Earnings invested in the business	Earnings invested in the business	1,245.3		1,162.9		Earnings invested in the business	1,239.2		1,315.0
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(19.3)		(4.2)		Accumulated other comprehensive income (loss)	(13.2)		(27.7)
Total stockholders’ equity	Total stockholders’ equity	1,274.1		1,203.0		Total stockholders’ equity	1,276.9		1,336.2

Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	2,803.5	$	2,561.9	Total Liabilities and Stockholders’ Equity	$	2,735.2	$	2,894.2

See accompanying unaudited Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In millions of dollars)

13 Weeks Ended 39 Weeks Ended
October 3,
2021 September 27,
2020 October 3,
2021 September 27,
2020
Capital Stock
Class A common stock
Balance at beginning of period $ 36.7 $ 36.6 $ 36.7 $ 36.6
Conversions from Class B — — — —
Balance at end of period 36.7 36.6 36.7 36.6
Class B common stock
Balance at beginning of period 3.4 3.5 3.4 3.5
Conversions to Class A — — — —
Balance at end of period 3.4 3.5 3.4 3.5
Treasury Stock
Class A common stock
Balance at beginning of period (14.7) (16.7) (16.5) (20.3)
Net issuance of stock awards 0.1 0.1 1.9 3.7
Balance at end of period (14.6) (16.6) (14.6) (16.6)
Class B common stock
Balance at beginning of period (0.6) (0.6) (0.6) (0.6)
Net issuance of stock awards — — — —
Balance at end of period (0.6) (0.6) (0.6) (0.6)
Paid-in Capital
Balance at beginning of period 22.3 20.5 21.3 22.5
Net issuance of stock awards 0.9 0.1 1.9 (1.9)
Balance at end of period 23.2 20.6 23.2 20.6
Earnings Invested in the Business
Balance at beginning of period 1,212.5 1,122.8 1,162.9 1,238.6
Cumulative-effect adjustment, net of tax, from adoption of ASU 2016-13, Credit Losses — — — (0.7)
Net earnings (loss) 34.8 16.7 84.4 (95.4)
Dividends (2.0) — (2.0) (3.0)
Balance at end of period 1,245.3 1,139.5 1,245.3 1,139.5
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period (15.8) (20.5) (4.2) (15.8)
Other comprehensive income (loss), net of tax (3.5) 3.6 (15.1) (1.1)
Balance at end of period (19.3) (16.9) (19.3) (16.9)
Stockholders’ Equity at end of period $ 1,274.1 $ 1,166.1 $ 1,274.1 $ 1,166.1


	13 Weeks Ended				26 Weeks Ended
	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Capital Stock
Class A common stock
Balance at beginning of period	$	35.1	$	36.7	$	36.7	$	36.7
Conversions from Class B	—		—		—		—
Share retirement	—		—		(1.6)		—
Balance at end of period	35.1		36.7		35.1		36.7

Class B common stock
Balance at beginning of period	3.4		3.4		3.4		3.4
Conversions to Class A	—		—		—		—

Balance at end of period	3.4		3.4		3.4		3.4

Treasury Stock
Class A common stock
Balance at beginning of period	(12.4)		(15.1)		(14.5)		(16.5)
Net issuance of stock awards	0.5		0.4		2.6		1.8
Balance at end of period	(11.9)		(14.7)		(11.9)		(14.7)

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

Paid-in Capital
Balance at beginning of period	22.8		20.6		23.9		21.3
Net issuance of stock awards	2.1		1.7		1.0		1.0
Balance at end of period	24.9		22.3		24.9		22.3

Earnings Invested in the Business
Balance at beginning of period	1,239.9		1,188.5		1,315.0		1,162.9



Net earnings (loss)	2.2		24.0		(45.4)		49.6
Dividends	(2.9)		—		(4.8)		—
Share retirement	—		—		(25.6)		—
Balance at end of period	1,239.2		1,212.5		1,239.2		1,212.5

Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period	(14.7)		(17.8)		(27.7)		(4.2)

Other comprehensive income (loss), net of tax	1.5		2.0		14.5		(11.6)
Balance at end of period	(13.2)		(15.8)		(13.2)		(15.8)

Stockholders’ Equity at end of period	$	1,276.9	$	1,243.8	$	1,276.9	$	1,243.8

See accompanying unaudited Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In millions of dollars)


		39 Weeks Ended					26 Weeks Ended
		October 3, 2021		September 27, 2020			July 3, 2022		July 4, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings (loss)	Net earnings (loss)	$	84.4	$	(95.4)	Net earnings (loss)	$	(45.4)	$	49.6
Adjustments to reconcile net earnings (loss) to net cash from operating activities:	Adjustments to reconcile net earnings (loss) to net cash from operating activities:					Adjustments to reconcile net earnings (loss) to net cash from operating activities:
Goodwill impairment charge		—		147.7
Deferred income taxes on goodwill impairment charge		—		(23.0)

Impairment of assets held for sale						Impairment of assets held for sale	18.5		—
Depreciation and amortization	Depreciation and amortization	22.0		18.0		Depreciation and amortization	16.1		14.1
Operating lease asset amortization	Operating lease asset amortization	16.0		15.9		Operating lease asset amortization	9.8		10.7
Provision for credit losses and sales allowances	Provision for credit losses and sales allowances	0.8		10.7		Provision for credit losses and sales allowances	1.3		—
Stock-based compensation	Stock-based compensation	4.0		2.9		Stock-based compensation	3.8		2.8
(Gain) loss on investment in Persol Holdings	(Gain) loss on investment in Persol Holdings	(71.8)		31.4		(Gain) loss on investment in Persol Holdings	67.2		(36.3)
Loss on currency translation from liquidation of subsidiary						Loss on currency translation from liquidation of subsidiary	20.4		—
Gain on foreign currency remeasurement						Gain on foreign currency remeasurement	(5.5)		—
Gain on sale of assets	Gain on sale of assets	—		(32.1)		Gain on sale of assets	(5.3)		—
Equity in net (earnings) loss of PersolKelly Pte. Ltd.	Equity in net (earnings) loss of PersolKelly Pte. Ltd.	(2.3)		1.0		Equity in net (earnings) loss of PersolKelly Pte. Ltd.	(0.8)		(0.6)
Other, net	Other, net	4.6		1.8		Other, net	2.9		2.2
Changes in operating assets and liabilities, net of acquisitions	Changes in operating assets and liabilities, net of acquisitions	(26.7)		137.6		Changes in operating assets and liabilities, net of acquisitions	(190.3)		5.1

Net cash from operating activities		31.0		216.5
Net cash (used in) from operating activities						Net cash (used in) from operating activities	(107.3)		47.6

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(7.5)		(12.3)		Capital expenditures	(3.5)		(4.9)
Proceeds from sale of assets	Proceeds from sale of assets	—		55.5		Proceeds from sale of assets	4.5		—
Acquisition of companies, net of cash received	Acquisition of companies, net of cash received	(213.0)		(36.4)		Acquisition of companies, net of cash received	(143.1)		(219.0)
Proceeds from company-owned life insurance	Proceeds from company-owned life insurance	10.4		2.3		Proceeds from company-owned life insurance	1.5		10.4
Proceeds from sale of Brazil, net of cash disposed		—		1.2
Proceeds from loans with equity affiliate		5.8		—
Proceeds from (investment in) equity securities		5.0		(0.2)
Proceeds from sale of Persol Holdings investment						Proceeds from sale of Persol Holdings investment	196.9		—
Proceeds from sale of equity method investment						Proceeds from sale of equity method investment	119.5		—
Proceeds related to loans with equity affiliate						Proceeds related to loans with equity affiliate	—		5.8
Proceeds from equity securities						Proceeds from equity securities	—		5.0
Other investing activities	Other investing activities	0.9		0.2		Other investing activities	(0.2)		1.0

Net cash (used in) from investing activities		(198.4)		10.3
Net cash from (used in) investing activities						Net cash from (used in) investing activities	175.6		(201.7)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net change in short-term borrowings	Net change in short-term borrowings	(0.2)		(1.5)		Net change in short-term borrowings	—		(0.1)
Financing lease payments	Financing lease payments	(1.3)		(1.0)		Financing lease payments	(0.4)		(0.3)
Dividend payments	Dividend payments	(2.0)		(3.0)		Dividend payments	(4.8)		—
Payments of tax withholding for stock awards	Payments of tax withholding for stock awards	(0.6)		(1.2)		Payments of tax withholding for stock awards	(0.8)		(0.6)
Buyback of common shares						Buyback of common shares	(27.2)		—
Contingent consideration payments	Contingent consideration payments	(1.6)		—		Contingent consideration payments	(0.7)		—
Other financing activities		—		(0.1)

Net cash used in financing activities	Net cash used in financing activities	(5.7)		(6.8)		Net cash used in financing activities	(33.9)		(1.0)

Effect of exchange rates on cash, cash equivalents and restricted cash	Effect of exchange rates on cash, cash equivalents and restricted cash	(3.9)		3.4		Effect of exchange rates on cash, cash equivalents and restricted cash	0.1		(2.3)

Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	(177.0)		223.4		Net change in cash, cash equivalents and restricted cash	34.5		(157.4)

Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	228.1		31.0		Cash, cash equivalents and restricted cash at beginning of period	119.5		228.1

Cash, cash equivalents and restricted cash at end of period (1)	Cash, cash equivalents and restricted cash at end of period (1)	$	51.1	$	254.4	Cash, cash equivalents and restricted cash at end of period (1)	$	154.0	$	70.7

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(UNAUDITED)

(In millions of dollars)

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


		39 Weeks Ended					26 Weeks Ended
		October 3, 2021		September 27, 2020			July 3, 2022		July 4, 2021
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	Cash and cash equivalents	$	43.5	$	248.2	Cash and cash equivalents	$	133.9	$	64.4
Cash included in assets held for sale						Cash included in assets held for sale	12.2		—
Restricted cash included in prepaid expenses and other current assets	Restricted cash included in prepaid expenses and other current assets	1.0		0.9		Restricted cash included in prepaid expenses and other current assets	0.6		0.1
Noncurrent assets:	Noncurrent assets:					Noncurrent assets:
Restricted cash included in other assets	Restricted cash included in other assets	6.6		5.3		Restricted cash included in other assets	7.3		6.2
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	51.1	$	254.4	Cash, cash equivalents and restricted cash at end of period	$	154.0	$	70.7

See accompanying unaudited Notes to Consolidated Financial Statements.

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Kelly Services, Inc. (the “Company,” “Kelly,” “we” or “us”) have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and notes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, necessary for a fair statement of the results of the interim periods, have been made. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. The unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal year ended January ~~3, 2021,~~2, 2022, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February ~~18,~~17, 2022 (the 2021 ~~(the 2020~~ consolidated financial statements). There were no changes in accounting policies as disclosed in the Form 10-K, with the exception of those described in the New Accounting Pronouncements footnote. The Company’s ~~third~~second fiscal quarter ended on ~~October~~July 3, 2022 (2022) and July 4, 2021 (2021) ~~and September 27, 2020 (2020)~~, each of which contained 13 weeks. The corresponding ~~September year to date~~June year-to-date periods for ~~2021~~2022 and ~~2020~~2021 each contained 3926 weeks.

Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year's presentation.

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

2. Revenue

Revenue Disaggregated by Service Type

Kelly has five ~~specialty~~operating segments: Professional & Industrial (“P&I”), Science, Engineering & Technology (“SET”), Education, Outsourcing & Consulting Group ("Outsourcing & Consulting," "OCG") and International. Other than OCG, each segment delivers talent through staffing services, permanent placement or outcome-based services. Our OCG segment delivers talent solutions including managed service provider ("MSP"), payroll process outsourcing ("PPO"), recruitment process outsourcing ("RPO"), and talent advisory services. International also delivers RPO talent solutions within its local markets.

The following table presents our segment revenues disaggregated by service type (in millions of dollars):


		Third Quarter				September Year to Date					Second Quarter				June Year to Date
		2021		2020		2021		2020			2022		2021		2022		2021
Professional & Industrial	Professional & Industrial									Professional & Industrial
Staffing services	Staffing services	$	344.7	$	341.3	$	1,057.0	$	1,033.1	Staffing services	$	309.5	$	359.8	$	644.4	$	712.3
Permanent placement	Permanent placement	6.9		2.3		17.1		7.0		Permanent placement	7.7		5.3		17.9		10.2
Outcome-based services	Outcome-based services	101.0		102.9		312.6		306.6		Outcome-based services	98.6		101.4		197.8		211.6
Total Professional & Industrial	Total Professional & Industrial	452.6		446.5		1,386.7		1,346.7		Total Professional & Industrial	415.8		466.5		860.1		934.1

Science, Engineering & Technology	Science, Engineering & Technology									Science, Engineering & Technology
Staffing services	Staffing services	214.0		181.6		613.1		562.3		Staffing services	223.1		212.9		443.7		399.1
Permanent placement	Permanent placement	6.5		3.1		17.4		9.0		Permanent placement	8.5		6.1		16.5		10.9
Outcome-based services	Outcome-based services	85.7		59.3		228.6		190.2		Outcome-based services	92.7		79.2		181.2		142.9
Total Science, Engineering & Technology	Total Science, Engineering & Technology	306.2		244.0		859.1		761.5		Total Science, Engineering & Technology	324.3		298.2		641.4		552.9

Education	Education									Education
Staffing services	Staffing services	65.7		27.4		280.6		194.9		Staffing services	152.5		104.1		324.4		214.9
Permanent placement	Permanent placement	0.9		0.1		3.5		0.2		Permanent placement	3.0		1.8		4.5		2.6
Total Education	Total Education	66.6		27.5		284.1		195.1		Total Education	155.5		105.9		328.9		217.5

Outsourcing & Consulting	Outsourcing & Consulting									Outsourcing & Consulting
Talent solutions	Talent solutions	113.4		87.9		320.0		261.0		Talent solutions	124.4		107.3		233.5		206.6
Total Outsourcing & Consulting	Total Outsourcing & Consulting	113.4		87.9		320.0		261.0		Total Outsourcing & Consulting	124.4		107.3		233.5		206.6

International	International									International
Staffing services	Staffing services	247.1		228.8		784.7		697.9		Staffing services	237.2		272.0		478.9		537.6
Permanent placement	Permanent placement	5.4		3.6		16.3		12.7		Permanent placement	5.6		5.4		12.5		10.9
Talent solutions	Talent solutions	4.3		—		9.1		—		Talent solutions	4.8		3.0		9.0		4.8
Total International	Total International	256.8		232.4		810.1		710.6		Total International	247.6		280.4		500.4		553.3

Total Intersegment	Total Intersegment	(0.2)		(0.1)		(0.6)		(0.3)		Total Intersegment	(0.3)		(0.2)		(0.6)		(0.4)

Total Revenue from Services	Total Revenue from Services	$	1,195.4	$	1,038.2	$	3,659.4	$	3,274.6	Total Revenue from Services	$	1,267.3	$	1,258.1	$	2,563.7	$	2,464.0

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

Revenue Disaggregated by Geography

Our operations are subject to different economic and regulatory environments depending on geographic location. Our P&I and Education segments operate in the Americas region, our SET segment operates in the Americas and Europe regions, and OCG operates in the Americas, Europe and Asia-Pacific regions. The International segment includes ~~Europe and~~ our ~~Brazil and~~ Mexico operations, which are included in the Americas ~~region. Our Brazil staffing operations were sold in August 2020 (see Acquisitions~~region, and ~~Disposition footnote).~~Europe.

The below table presents our revenues disaggregated by geography (in millions of dollars):


		Third Quarter				September Year to Date					Second Quarter				June Year to Date
		2021		2020		2021		2020			2022		2021		2022		2021
Americas	Americas									Americas
United States	United States	$	851.7	$	740.6	$	2,604.8	$	2,369.2	United States	$	928.9	$	894.6	$	1,885.5	$	1,753.1
Canada	Canada	43.3		30.3		116.9		88.7		Canada	40.3		39.5		79.4		73.6
Puerto Rico	Puerto Rico	25.5		18.4		76.6		56.1		Puerto Rico	28.9		26.9		56.5		51.1
Mexico	Mexico	14.4		27.4		82.1		78.6		Mexico	11.2		33.1		21.5		67.7
Brazil		—		1.8		—		17.0

Total Americas Region	Total Americas Region	934.9		818.5		2,880.4		2,609.6		Total Americas Region	1,009.3		994.1		2,042.9		1,945.5

Europe	Europe									Europe
Switzerland										Switzerland	55.3		54.0		110.3		106.7
France	France	56.3		48.8		168.1		141.2		France	50.4		57.5		105.0		111.8
Switzerland		54.5		49.6		161.2		141.2
Portugal	Portugal	36.6		31.7		120.9		99.1		Portugal	42.0		40.6		83.9		84.3
Russia	Russia	33.0		27.2		99.3		88.6		Russia	28.7		33.7		58.4		66.3
Italy	Italy	18.5		14.5		56.0		42.5		Italy	18.4		19.4		37.9		37.5
United Kingdom	United Kingdom	17.2		16.4		51.9		56.5		United Kingdom	16.0		17.7		31.0		34.7
Germany		9.0		7.0		24.6		22.1
Ireland		7.4		4.9		18.8		14.0

Other	Other	17.3		12.0		49.9		38.7		Other	35.7		31.8		72.0		59.6
Total Europe Region	Total Europe Region	249.8		212.1		750.7		643.9		Total Europe Region	246.5		254.7		498.5		500.9

Total Asia-Pacific Region	Total Asia-Pacific Region	10.7		7.6		28.3		21.1		Total Asia-Pacific Region	11.5		9.3		22.3		17.6

Total Kelly Services, Inc.	Total Kelly Services, Inc.	$	1,195.4	$	1,038.2	$	3,659.4	$	3,274.6	Total Kelly Services, Inc.	$	1,267.3	$	1,258.1	$	2,563.7	$	2,464.0

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

The below table presents our SET, OCG and International segment revenues disaggregated by geographic region (in millions of dollars):


		Third Quarter				September Year to Date					Second Quarter				June Year to Date
		2021		2020		2021		2020			2022		2021		2022		2021
Science, Engineering & Technology	Science, Engineering & Technology									Science, Engineering & Technology
Americas	Americas	$	304.3	$	242.8	$	854.1	$	757.3	Americas	$	320.4	$	296.6	$	634.2	$	549.8
Europe	Europe	1.9		1.2		5.0		4.2		Europe	3.9		1.6		7.2		3.1
Total Science, Engineering & Technology	Total Science, Engineering & Technology	$	306.2	$	244.0	$	859.1	$	761.5	Total Science, Engineering & Technology	$	324.3	$	298.2	$	641.4	$	552.9

Outsourcing & Consulting	Outsourcing & Consulting									Outsourcing & Consulting
Americas	Americas	$	97.5	$	72.9	$	274.9	$	215.9	Americas	$	107.1	$	92.6	$	199.4	$	177.4
Europe	Europe	5.2		7.4		16.8		24.0		Europe	5.8		5.5		11.8		11.7
Asia-Pacific	Asia-Pacific	10.7		7.6		28.3		21.1		Asia-Pacific	11.5		9.2		22.3		17.5
Total Outsourcing & Consulting	Total Outsourcing & Consulting	$	113.4	$	87.9	$	320.0	$	261.0	Total Outsourcing & Consulting	$	124.4	$	107.3	$	233.5	$	206.6

International	International									International
Americas	Americas	$	14.1	$	28.9	$	81.2	$	94.9	Americas	$	10.8	$	32.8	$	20.9	$	67.1
Europe	Europe	242.7		203.5		728.9		615.7		Europe	236.8		247.6		479.5		486.2
Total International	Total International	$	256.8	$	232.4	$	810.1	$	710.6	Total International	$	247.6	$	280.4	$	500.4	$	553.3

Deferred Costs

Deferred sales commissions, which are included in other assets in the consolidated balance sheet, were $0.9 million as of third quarter-end 2021 and $1.0 million as of year-end 2020. Amortization expense for the deferred costs for the third quarter and September year to date 2021 was $0.2 million and $0.6 million, respectively. Amortization expense for the deferred costs for the third quarter and September year to date 2020 was $0.2 million and $0.8 million, respectively.

Deferred fulfillment costs, which are included in prepaid expenses and other current assets in the consolidated balance sheet, were ~~$2.6~~$3.1 million as of ~~third~~second quarter-end ~~2021~~2022 and ~~$4.1~~$1.3 million as of year-end ~~2020.~~2021. Amortization expense for the deferred costs for the ~~third~~second quarter and ~~September year to date 2021~~June year-to-date 2022 was ~~$4.3~~$1.9 million and ~~$16.4~~$3.8 million, respectively. Amortization expense for the deferred costs for the ~~third~~second quarter and ~~September year to date 2020~~June year-to-date 2021 was ~~$5.3~~$5.2 million and ~~$14.9~~ $12.1 million, respectively.

3. Credit Losses

On December 30, 2019, we adopted Accounting Standards Codification ("ASC") Topic 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures, as applicable.

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

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

~~(UNAUDITED)~~

The rollforward of our allowance for credit losses related to trade accounts receivable, which is recorded in trade accounts receivable, less allowance in the consolidated balance sheet, is as follows (in millions of dollars):


		September Year to Date					June Year to Date
		2021		2020			2022		2021
Allowance for credit losses:	Allowance for credit losses:					Allowance for credit losses:
Beginning balance	Beginning balance	$	9.8	$	9.7	Beginning balance	$	9.4	$	9.8
Impact of adopting ASC 326		—		0.3
Current period provision	Current period provision	0.8		1.2		Current period provision	0.9		(0.2)
Currency exchange effects	Currency exchange effects	(0.4)		(0.2)		Currency exchange effects	(0.3)		0.1
Write-offs	Write-offs	(0.7)		(1.6)		Write-offs	(1.6)		(0.8)
Ending balance	Ending balance	$	9.5	$	9.4	Ending balance	$	8.4	$	8.9

Write-offs are presented net of recoveries, which were not material for ~~September year to date 2021~~June year-to-date 2022 and ~~2020.~~2021.

We ~~have been~~were engaged in litigation with a customer over a disputed accounts receivable balance for certain services rendered more than five years ago, which was recorded as a long-term receivable in other assets in the consolidated balance ~~sheet. In September 2020, a ruling was issued in favor~~sheet as of ~~the customer, which we appealed. Upon receiving the ruling, we increased our~~second quarter-end 2021. The related allowance for credit losses ~~by $9.2~~on this long-term customer receivable was $10.9 million ~~in the third quarter of 2020 to reflect~~and represented the likelihood of collection ~~which was recorded in other assets in the consolidated balance sheet. In September 2021,~~as of second quarter-end 2021. Based on a final ruling in the case ~~was entered~~ in favor of the ~~customer. As a result, in the third quarter of 2021,~~customer, we wrote off the entire receivable balance ~~with this customer, including $0.6 million not previously reserved. The unreserved portion was recorded in selling, general and administrative ("SG&A") expenses~~ in the ~~consolidated statements~~third quarter of ~~earnings.~~

The rollforward of our allowance for credit losses related to the long-term customer receivable, which was recorded in other assets in the consolidated balance sheet, is as follows (in millions of dollars):

September Year to Date
2021 2020
Allowance for credit losses:
Beginning balance $ 10.9 $ 1.0
  Impact of adopting ASC 326 — 0.7
  Current period provision 0.6 9.5
  Currency exchange effects — (0.3)
  Write-offs (11.5) —
Ending Balance $ — $ 10.9

~~We are also exposed to credit losses for other receivables measured at amortized cost.~~2021. No other allowances related to other receivables were material for ~~third~~second quarter-end ~~2021.~~2022.

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

4. Acquisitions

In the second quarter of 2022, Kelly Services USA, LLC ("KSU"), a wholly owned subsidiary of the Company, acquired Pediatric Therapeutic Services ("PTS"), as detailed below. In the first quarter of 2022, the Company acquired Rocket Power Holdings LLC and ~~Disposition~~

~~Acquisitions~~

Rocket Power Ops LLC (collectively, "RocketPower"), as detailed below. In the second quarter of 2021, the Company acquired Softworld, Inc. ("Softworld"), as detailed below. In

Pediatric Therapeutic Services

On May 2, 2022, KSU acquired 100% of the ~~fourth~~membership interests of PTS for a purchase price of $82.1 million. PTS is a specialty firm that provides and manages various state and federally mandated in-school therapy services. This acquisition will expand Kelly Education's K-12 solution offering in the education staffing market and serve as an entry point into the therapeutic services market. Under terms of the purchase agreement, the purchase price was adjusted for cash held by PTS at the closing date and estimated working capital adjustments resulting in the Company paying cash of $85.7 million. Total consideration includes $1.1 million of additional consideration that is payable to the seller by the end of 2022 related to employee retention credits. The total consideration is as follows (in millions of dollars):


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

Due to the limited amount of time that has passed since acquiring PTS, the purchase price allocation for this acquisition is preliminary and could change. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars):


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

The fair value of the acquired receivables represents the contractual value. Included in the assets purchased in the PTS acquisition was $40.3 million of intangibles, made up of $29.8 million in customer relationships, $9.3 million associated with PTS's trade names and $1.2 million for non-compete agreements. Customer relationships will be amortized over 15 years with no residual value, trade names will be amortized over 15 years with no residual value, and the non-compete agreements will be amortized over five years with no residual value. Goodwill generated from the acquisition was primarily attributable to expected synergies from combining operations and expanding market potential and was assigned to the Education operating segment (see Goodwill footnote). All of the goodwill is expected to be deductible for tax purposes.

PTS's results of operations are included in the Education segment. Our consolidated revenues and earnings from operations for the second quarter and June year-to-date 2022 included $7.2 million and $0.9 million, respectively, from PTS. Pro forma results of ~~2020, Kelly Services USA, LLC ("KSU"),~~operations for this acquisition have not been presented as the acquisition does not have a ~~wholly owned subsidiary~~material impact to the consolidated statements of earnings.

RocketPower

On March 7, 2022, the Company acquired ~~Greenwood/Asher & Associates, LLC ("Greenwood/Asher"),~~100% of the issued and outstanding membership interests of RocketPower for a purchase price of $59.3 million. RocketPower is a leading provider of RPO and other outsourced talent solutions to U.S. high-

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

tech companies. This acquisition will expand OCG's RPO solution and delivery offering and enhance the specialty RPO strategy and expertise within the high-tech industry. Under terms of the purchase agreement, the purchase price was adjusted for cash held by RocketPower at the closing date and estimated working capital adjustments resulting in the Company paying cash of $61.8 million. Total consideration includes $1.1 million of additional consideration that is payable to the seller in 2023 related to employee retention credits and contingent consideration with an estimated fair value of $0.6 million related to an earnout payment with a maximum potential cash payment of $31.8 million in the event certain financial metrics are met per the terms of the agreement. The initial fair value of the earnout was established using a Black Scholes model (see Fair Value Measurements footnote). The earnout is expected to be paid in 2023 and 2024 after each earn-out year pursuant to the terms of the purchase agreement. The total consideration is as ~~detailed below. In~~follows (in millions of dollars):


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

Due to the limited amount of time that has passed since acquiring RocketPower, the purchase price allocation for this acquisition is preliminary and could change. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars):


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


Goodwill	41.0
Intangibles	15.8

Accounts payable and accrued liabilities, current	(2.9)

Accrued payroll and related taxes, current	(1.5)

Other long-term liabilities	(1.2)

Total consideration, including working capital adjustments	$	63.5

The fair value of the acquired receivables represents the contractual value. Included in the assets purchased in the RocketPower acquisition was $15.8 million of intangible assets, made up of $7.5 million in customer relationships, $6.6 million associated with RocketPower's trade names and $1.7 million for non-compete agreements. Customer relationships will be amortized over three years with no residual value, trade names will be amortized over 10 years with no residual value, and the non-compete agreements will be amortized over six years with no residual value. Goodwill generated from the acquisition was primarily attributable to expected synergies from combining operations and expanding market potential and was assigned to the OCG operating segment (see Goodwill footnote). The amount of goodwill expected to be deductible for tax purposes is approximately $28.0 million.

RocketPower's results of operations are included in the OCG segment in 2022 on a one-month lag, accordingly our first quarter 2022 consolidated revenues and earnings from operations did not include any results from RocketPower. Our consolidated revenues and earnings from operations for the second quarter and June year-to-date 2022 included $11.5 million and $1.0 million, respectively, from RocketPower. Pro forma results of ~~2020, KSU acquired Insight Workforce Solutions LLC and its affiliate, Insight EDU LLC (collectively, "Insight"),~~operations for this acquisition have not been presented as ~~detailed below.~~the acquisition does not have a material impact to the consolidated statements of earnings.

1516

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

Softworld

On April 5, 2021, the Company acquired 100% of the shares of Softworld for a purchase price of $215.0 million. Softworld is a leading technology staffing and workforce solutions firm that serves clients across several end-markets, including financial services, life sciences, aerospace, defense, insurance, retail and IT consulting. This acquisition ~~will~~is intended to expand our capabilities, scale and solution set in our technology specialty. Under terms of the purchase agreement, the purchase price was adjusted for cash held by Softworld at the closing date and estimated working capital adjustments resulting in the Company paying cash of $220.4 million. Total consideration includes $2.6 million of additional consideration that is payable to the seller in 2022. In the third quarter of 2021, the Company received cash for a post-close working capital adjustment of $6.0 million. The total consideration is as follows (in millions of dollars):


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

~~Due to the limited amount~~As of ~~time that has passed since acquiring Softworld,~~first quarter-end 2022, the purchase price allocation for this acquisition ~~is preliminary and could change.~~

~~The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars):~~


~~Cash~~	$	~~1.4~~
~~Trade accounts receivable~~	~~21.6~~
~~Prepaid expenses and other current assets~~	~~3.3~~
~~Net property and equipment~~	~~1.2~~
~~Operating lease right-of-use assets~~	~~7.6~~
~~Non-current deferred tax~~	~~5.9~~
~~Goodwill~~	~~111.3~~
~~Intangibles~~	~~79.4~~
~~Other assets, noncurrent~~	~~1.2~~
~~Accounts payable and accrued liabilities, current~~	~~(2.5)~~
~~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~~	$	~~217.0~~

~~The fair value of the acquired receivables represents the contractual value. Included in the assets purchased in the Softworld acquisition~~ was $79.4 million of intangible assets, made up of $54.9 million in customer relationships, $23.1 million associated with Softworld's trade names and trademarks, and $1.4 million for non-compete agreements. The customer relationships and trade names and trademarks will be amortized over 10 years with no residual value and the non-compete agreements will be amortized over five years with no residual value.final. Goodwill generated from the acquisition was primarily attributable to expanding market potential and the expected revenue synergies and was assigned to the SET operating segment (see Goodwill footnote). All of the goodwill is expected to be deductible for tax purposes.

Softworld's results of operations are included in the SET segment in 2021. For the third quarter-end 2021, our consolidated revenues and net earnings included $33.7 million and $1.3 million from Softworld, respectively. For September year to date 2021, our consolidated revenues and net earnings included $64.1 million and $3.0 million, respectively, from Softworld. The

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

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

~~(UNAUDITED)~~

~~date of the acquisition was the first day of our second quarter, therefore, our first quarter results do not include any revenue or earnings from Softworld.~~

~~Pro Forma Information~~

~~The following unaudited pro forma information presents a summary of the operating results as if the Softworld acquisition had been completed as of December 30, 2019 (in millions of dollars):~~

Third Quarter September Year to Date
2021 2020 2021 2020
Pro forma revenues $ 1,195.4 $ 1,065.6 $ 3,690.6 $ 3,356.2
Pro forma net earnings (loss) $ 34.8 $ 17.5 $ 86.0 $ (95.3)

Due to the date of the acquisition, the third quarter 2021 pro forma results reflect actual results for the period. The pro forma results for September year to date 2021 and 2020 reflect amortization of the intangible assets of $2.0 million per quarter, a non-recurring adjustment to reclassify $1.3 million of transaction expenses from September year to date 2021 to September year to date 2020 and applicable taxes. The unaudited pro forma information presented has been prepared for comparative purposes only and is not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed date, nor is it necessarily an indication of future operating results.

~~Greenwood/Asher~~

On November 18, 2020, KSU acquired 100% of the membership interests of Greenwood/Asher, a premier specialty education executive search firm in the U.S., for a purchase price of $3.5 million. Under terms of the purchase agreement, the purchase price was adjusted for cash held by Greenwood/Asher at the closing date and estimated working capital adjustments resulting in the Company paying cash of $5.2 million. The purchase price of the acquisition also included contingent consideration with an estimated fair value of $2.1 million related to an earnout payment in the event certain conditions are met per the terms of the agreement. The initial fair value of the earnout was established using a Black Scholes model and the liability is recorded in accounts payable and accrued liabilities and other noncurrent liabilities in the consolidated balance sheet (see Fair Value Measurements footnote). The earnout is revalued quarterly, resulting in a decrease to the liability of $0.4 million in the first quarter of 2021 and an increase to the liability of $2.4 million in the third quarter of 2021. The earnout is expected to be paid in 2022 and 2023 after each earnout year pursuant to the terms of the purchase agreement. As of third quarter-end 2021, the purchase price allocation for this acquisition is final.

Goodwill generated from the acquisition was primarily attributable to the expected synergies from combining operations and expanding market potential, and was assigned to the Education reporting unit (see Goodwill footnote). The amount of goodwill expected to be deductible for tax purposes is approximately $0.9 million.

~~Insight~~

On January 14, 2020, KSU acquired 100% of the membership interests of Insight, an educational staffing company in the U.S., for a purchase price of $34.5 million. Under terms of the purchase agreement, the purchase price was adjusted for cash held by Insight at the closing date and estimated working capital adjustments resulting in the Company paying cash of $38.1 million. The purchase price of the acquisition also included contingent consideration with an estimated fair value of $1.6 million related to an earnout payment in the event certain conditions are met per the terms of the agreement. The initial fair value of the earnout was established using a Monte Carlo simulation and the liability is recorded in accounts payable and accrued liabilities in the consolidated balance sheet (see Fair Value Measurements footnote). Subsequently, the earnout was revalued, resulting in a net increase to the liability of $0.1 million in 2020 and a further increase of $0.1 million in the second quarter of 2021. In the third quarter of 2021, the Company paid the final earnout amount of $1.8 million in cash. In our consolidated statements of cash flows, $1.6 million of the payment is reflected as a financing activity representing the initial fair value of the earnout, with the remainder flowing through operating activities. There is no remaining liability for the earnout as of third quarter-end 2021. In the second quarter of 2020, the Company paid a working capital adjustment of $0.1 million. As of year-end 2020, the purchase price allocation for this acquisition was final.

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

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

~~(UNAUDITED)~~

Goodwill generated from the acquisition was primarily attributable to the expected synergies from combining operations and expanding market potential, and was assigned to the former Americas Staffing reporting unit. The goodwill related to this acquisition was included in the goodwill impairment charge taken in the first quarter of 2020. The goodwill impairment charge resulted from an interim goodwill impairment test triggered by declines in our common stock price as a result of negative market reaction to the COVID-19 crisis (see Goodwill footnote). The amount of goodwill expected to be deductible for tax purposes is approximately $20.4 million.

~~Disposition~~

On August 18, 2020, the Company sold its Brazil operations for a purchase price of $1.4 million. The Company received cash proceeds of $1.2 million, net of cash disposed. As a part of the transaction, the Company has agreed to indemnify the buyer for losses and costs incurred in connection with certain events or occurrences initiated within a six-year period after closing. The aggregate losses for which the Company will provide indemnification shall not exceed $8.8 million. Accordingly, the Company recorded an indemnification liability of $2.5 million in other long-term liabilities in the consolidated balance sheet, which represented the fair value of the liability at the time of disposition and completely offset the gain on the sale. The indemnification liability is revalued on a quarterly basis (see Fair Value Measurements footnote).

5. Investment in Persol Holdings

~~The~~Prior to February 2022, the Company ~~has~~had a yen-denominated investment through the Company's subsidiary, Kelly Services Japan, Inc., in the common stock of Persol Holdings Co., Ltd. ("Persol Holdings"), the 100% owner of Persol Asia Pacific Pte. Ltd., the Company’s joint venture partner in PersolKelly Pte. Ltd. (the "JV"). In February 2022, the Company's board approved a series of transactions that ended the cross-shareholding agreement with Persol Holdings.

On February 14, 2022, the Company repurchased 1,576,169 Class A and 1,475 Class B common shares held by Persol Holdings for $27.2 million. The purchase price was based on the average closing price of the last five business days prior to the transaction. The shares were subsequently retired and returned to an authorized, unissued status. In accordance with the Company's policy, the amount paid to repurchase the shares in excess of par value of $25.6 million was recorded to earnings invested in the business in the consolidated balance sheet at the time of the share retirement.

On February 15, 2022, Kelly Services Japan, Inc. sold the investment in the common stock of Persol Holdings in an open-market transaction for proceeds of $196.9 million, net of transaction fees. As our investment iswas a noncontrolling interest in Persol Holdings, ~~this~~the investment iswas recorded at fair value based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange asthrough the date of the ~~period end~~transaction (see Fair Value Measurements footnote). AThe $67.2 million loss in the first quarter of 2022 recorded in gain (loss) on investment in Persol Holdings in the consolidated statements of earnings included $52.4 million for losses related to changes in fair value up to the date of the transaction and $14.8 million for the discount from the market price on the date of the sale and transaction costs. The gain on the investment of ~~$35.5~~$6.3 million and ~~$71.8~~$36.3 million in the ~~third~~second quarter and ~~September year to date~~June year-to-date 2021, ~~respectively, a gain on the investment of $16.8 million and a loss on the investment of $31.4 million in the third quarter and September year to date 2020,~~ respectively, was recorded in gain (loss) on investment in Persol Holdings in the consolidated statements of earnings.

Subsequent to the transaction discussed above, the Company commenced the dissolution process of its Kelly Services Japan, Inc. subsidiary, which was considered substantially liquidated as of first quarter-end 2022. As a result, the Company recognized a $20.4 million cumulative translation adjustment loss in the first quarter of 2022, which is recorded in loss on currency translation from liquidation of subsidiary in the consolidated statements of earnings. The Company also recognized a $5.5 million foreign exchange gain related to U.S.-denominated cash equivalents held by Kelly Services Japan, Inc. following the sale of the Persol Holdings shares and prior to a dividend payment to the Company in the first quarter of 2022. The foreign exchange gain is recorded in other income (expense), net in the consolidated statements of earnings.

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

6. Investment in PersolKelly Pte. Ltd.

~~The~~Prior to February 2022, the Company ~~has~~had a 49% ownership interest in the JV (see Investment in Persol Holdings footnote above), a staffing services business operating in 10 geographies in the Asia-Pacific region. On February 14, 2022, the Company entered into an agreement to sell 95% of the Company's shares in the JV to Persol Asia Pacific Pte. Ltd. On March 1, 2022, the Company received cash proceeds of $119.5 million. The carrying value of the shares sold was $117.6 million. In addition, the Company had $1.9 million of accumulated other comprehensive income representing the Company's share of the JV's other comprehensive income over time related to the shares sold that was realized upon the sale, offsetting the $1.9 million gain that resulted from the proceeds in excess of the carrying value.

The operating results of the Company’s interest in the JV ~~are~~were accounted for on a one-quarter lag under the equity method and ~~are~~were reported in equity in net earnings (loss) of affiliate in the consolidated statements of earnings ~~which amounted to~~through the date of the sale. Such amounts were earnings of $0.8 million in June year-to-date 2022, representing the results through the date of the sale, and earnings of $1.7 million and ~~$2.3~~$0.6 million in the ~~third~~second quarter and ~~September year to date~~June year-to-date 2021, ~~respectively, and earnings of $1.8 million and~~respectively.

After the sale, the Company has a ~~loss of $1.0 million~~2.5% ownership interest in the ~~third quarter~~JV and ~~September year to date 2020, respectively. This~~discontinued its use of equity method accounting. The remaining investment is ~~evaluated~~accounted for ~~indicators of impairment on a quarterly basis or whenever events or circumstances indicate the carrying amount may be other-than-temporarily impaired. If we conclude that there is~~as an ~~other-than-temporary impairment of this~~ equity investment ~~we will adjust the carrying amount of the~~without a readily determinable fair value (see Fair Value Measurements footnote). The equity investment, ~~to the current fair value.~~

~~The investment~~included in ~~equity affiliate~~other assets on the Company’s consolidated balance sheet, totaled ~~$122.0~~$6.4 million as of ~~third~~second quarter-end ~~2021~~2022 and ~~$118.5~~the investment in equity affiliate on the Company's consolidated balance sheet totaled $123.4 million as of year-end 2020. The net amount due to the JV, a related party, was not material as of the third quarter-end 2021 and the net amount due from the JV was $5.6 million as of year-end 2020. The Company made loans in prior years, proportionate to its 49% ownership, to the JV to fund working capital requirements as a result of its sustained revenue growth. In April 2021, the Company received $5.8 million from the JV for the outstanding balance of the loan. As of third quarter-end 2021, there is no outstanding loan balance or accrued interest receivable relating to the loan. Accrued interest receivable, which is included in prepaid expenses and other current assets in the consolidated balance sheet, was not material at year-end 2020. The JV is a supplier to certain MSP programs in the region and the amounts for services provided to the Company, which are included in accounts payable and accrued liabilities in the consolidated balance sheet, are not material.2021.

On April 1, 2020, 100% of the shares of Kelly Services Australia Pty Ltd and Kelly Services (New Zealand) Limited, both subsidiaries of the JV, were sold to an affiliate of Persol Holdings. The JV received proceeds of $17.5 million upon the sale and the Company received a direct royalty payment of $0.7 million.

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

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

~~(UNAUDITED)~~

7. Fair Value Measurements

Trade accounts receivable, short-term borrowings, accounts payable, accrued liabilities and accrued payroll and related taxes approximate their fair values due to the short-term maturities of these assets and liabilities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present assets and liabilities measured at fair value on a recurring basis as of ~~third~~second quarter-end ~~2021~~2022 and year-end ~~2020~~2021 in the consolidated balance sheet by fair value hierarchy level, as described below.

Level 1 measurements consist of unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 measurements include quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 3 measurements include significant unobservable inputs.


		As of Third Quarter-End 2021									As of Second Quarter-End 2022
Description	Description	Total		Level 1		Level 2		Level 3		Description	Total		Level 1		Level 2		Level 3
		(In millions of dollars)									(In millions of dollars)
Money market funds	Money market funds	$	6.5	$	6.5	$	—	$	—	Money market funds	$	51.2	$	51.2	$	—	$	—
Investment in Persol Holdings	Investment in Persol Holdings	222.6		222.6		—		—		Investment in Persol Holdings	—		—		—		—

Total assets at fair value	Total assets at fair value	$	229.1	$	229.1	$	—	$	—	Total assets at fair value	$	51.2	$	51.2	$	—	$	—

Brazil indemnification	Brazil indemnification	$	(2.5)	$	—	$	—	$	(2.5)	Brazil indemnification	$	(3.3)	$	—	$	—	$	(3.3)
Greenwood/Asher earnout	Greenwood/Asher earnout	(4.1)		—		—		(4.1)		Greenwood/Asher earnout	(3.0)		—		—		(3.0)
Insight earnout		—		—		—		—

RocketPower earnout										RocketPower earnout	(0.6)		—		—		(0.6)
Total liabilities at fair value	Total liabilities at fair value	$	(6.6)	$	—	$	—	$	(6.6)	Total liabilities at fair value	$	(6.9)	$	—	$	—	$	(6.9)

As of Year-End 2020
Description Total Level 1 Level 2 Level 3
(In millions of dollars)
Money market funds $ 120.3 $ 120.3 $ — $ —
Investment in Persol Holdings 164.2 164.2 — —
Total assets at fair value $ 284.5 $ 284.5 $ — $ —
Brazil indemnification $ (2.6) $ — $ — $ (2.6)
Greenwood/Asher earnout (2.1) — — (2.1)
Insight earnout (1.7) — — (1.7)
Total liabilities at fair value $ (6.4) $ — $ — $ (6.4)

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)


	As of Year-End 2021
Description	Total		Level 1		Level 2		Level 3
	(In millions of dollars)
Money market funds	$	96.3	$	96.3	$	—	$	—
Investment in Persol Holdings	264.3		264.3		—		—
Total assets at fair value	$	360.6	$	360.6	$	—	$	—

Brazil indemnification	$	(2.4)	$	—	$	—	$	(2.4)
Greenwood/Asher earnout	(4.6)		—		—		(4.6)

Total liabilities at fair value	$	(7.0)	$	—	$	—	$	(7.0)

Money market funds represent investments in money market funds that hold government securities, of which $7.3 million as of second quarter-end 2022 and $6.5 million as of ~~third quarter-end~~year-end 2021 ~~and $5.1 million as of year-end 2020,~~ are restricted as to use and are included in other assets in the consolidated balance sheet. The money market funds that are restricted as to use account for the majority of our restricted cash balance and represents cash balances that are required to be maintained to fund disability claims in California. The remaining money market funds as of second quarter-end 2022 and year-end ~~2020~~2021 are included in cash and equivalents in the consolidated balance sheet. The valuations of money market funds are based on quoted market prices of those accounts as of the respective period end.

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

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

~~(UNAUDITED)~~

On February 15, 2022, Kelly Services Japan, Inc. sold the investment in the common stock of Persol Holdings in an open-market transaction. The valuation of the investment ~~in Persol Holdings is~~was based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange as of ~~the period end,~~year-end 2021, and the related changes in fair value ~~are~~were recorded in the consolidated statements of earnings (see Investment in Persol Holdings footnote). The cost of this yen-denominated investment, which ~~fluctuates~~fluctuated based on foreign exchange rates, was ~~$18.6 million as of the third quarter-end 2021 and $20.1~~$18.0 million at year-end ~~2020.~~2021.

As of ~~third~~second quarter-end ~~2021~~2022 and year-end ~~2020,~~2021, the Company had an indemnification liability of ~~$2.5~~$3.3 million and ~~$2.6~~$2.4 million, respectively, in other long-term liabilities onin the consolidated balance sheet related to the 2020 sale of the Brazil ~~operations (see Acquisitions~~operations. As part of the sale, the Company agreed to indemnify the buyer for losses and ~~Disposition footnote).~~costs incurred in connection with certain events or occurrences initiated within a six-year period after closing. The aggregate losses for which the Company will provide indemnification shall not exceed $8.8 million. The valuation of the indemnification liability was established using a discounted cash flow methodology based on probability weighted-average cash flows discounted by weighted-average cost of capital. The valuation, which represents the fair value, is considered a Level 3 liability, and is being measured on a recurring basis. During ~~year~~the second quarter of 2022, the Company reassessed the value of the indemnification liability and determined that it was necessary to ~~date 2021,~~record an increase to the liability of $0.8 million. Additionally, during year-to-date 2022, the Company recognized ~~a decrease~~an increase of $0.1 million to the indemnification liability related to exchange rate fluctuations in other income (expense), net in the consolidated statements of earnings.

The Company recorded an earnout liability relating to the 2020 acquisition of ~~Insight,~~Greenwood/Asher, totaling ~~$1.7~~$3.0 million at ~~year-end 2020~~second quarter-end 2022 in accounts payable and accrued liabilities and $4.6 million at year-end 2021 with $2.3 million in accounts payable and accrued liabilities and $2.3 million in other long-term liabilities in the consolidated balance ~~sheet (see Acquisitions and Disposition footnote). During the third quarter of 2021, the Company paid the earnout totaling $1.8 million.~~sheet. The initial valuation of the earnout liability was ~~initially~~ established using a ~~Monte Carlo simulation~~Black Scholes model and represented the fair value and ~~was~~is considered a Level 3 liability. During the first quarter of 2022, the Company paid the year one portion of the earnout totaling $2.3 million. In the consolidated statements of cash flows, $0.7 million of the payment is reflected as a financing activity representing the initial fair value of the earnout, with the remainder flowing through operating activities. During the second quarter of 2022, the Company reassessed the value of the indemnification liability and determined it was necessary to record an increase to the liability of $0.7 million.

The Company recorded an earnout liability relating to the ~~2020~~2022 acquisition of ~~Greenwood/Asher,~~RocketPower, totaling ~~$4.1~~$0.6 million at ~~third~~second quarter-end ~~2021~~2022 with ~~$1.9~~$0.5 million in accounts payable and accrued liabilities and ~~$2.2~~$0.1 million ~~in other long-term liabilities in the consolidated balance sheet and $2.1 million at year-end 2020~~ in other long-term liabilities in the consolidated balance sheet (see Acquisitions ~~and Disposition~~ footnote). The maximum total cash payments which may be due related to the earnout liability is $31.8 million. The initial valuation of the earnout liability was established using a Black Scholes model and represents the fair value and is considered a Level 3 liability. ~~During year to date 2021, the Company recorded an increase of $2.0 million to the earnout liability in SG&A expenses in the consolidated statements of earnings.~~

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

Equity Investment Without Readily Determinable Fair Value

On March 1, 2022, the Company sold the majority of its investment in the JV (see Investment in PersolKelly Pte. Ltd. footnote), with the remaining 2.5% interest now being measured using the measurement alternative for equity investments without a readily determinable fair value. The measurement alternative represents cost, less impairment, plus or minus observable price changes. The sale of the shares of the JV represented an observable transaction requiring the Company to calculate the current fair value based on the purchase price of the shares, in which the resulting adjustment was not material. The investment totaled $6.4 million as of second quarter-end 2022, representing total cost plus observable price changes to date.

Prior to April 2021, the Company had a minority investment in Business Talent Group, LLC, which was included in other assets in the consolidated balance sheet. ~~This~~The investment was also measured using the measurement alternative for equity investments without a readily determinable fair ~~value. The measurement alternative represents cost, less impairment, plus or minus observable price changes.~~value as described above. In the second quarter of 2021, BTG entered into a merger agreement which resulted in all of the Company's shares of BTG being automatically canceled upon approval of the merger and resulted in the receipt of $5.0 million in cash, which iswas equal to the carrying value and purchase price of the BTG investment.

Prior to March 2021, the Company had a minority investment in Kenzie Academy Inc., which was included in other assets in the consolidated balance sheet. The investment was also measured using the measurement alternative for equity investments without a readily determinable fair value as described above. On March 8, 2021, Kenzie entered into a transaction to sell its assets. As of the date of the sale, ~~and year-end 2020,~~ the investment had a carrying value of $1.4 million, representing total cost plus observable price changes to date. ~~The~~In the first quarter of 2021, the asset was written down as a result of the sale and the loss of $1.4 million was recorded in other income (expense), net in the ~~year to date~~ consolidated statements of earnings.

~~Assets Measured at Fair Value on a Nonrecurring Basis~~

8. Restructuring

~~Due to the negative market reaction to the COVID-19 crisis, including declines in our common stock price, management determined that a triggering event occurred during~~In the first quarter of ~~2020. We therefore performed an interim step one quantitative impairment test for both of our previous reporting units with goodwill. As a result of this quantitative assessment, we determined that~~2022, the ~~estimated fair value of the reporting units no longer exceeded the carrying value, and recorded a goodwill impairment charge of $147.7 million in the first quarter of 2020 (see Goodwill footnote).~~

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

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

~~(UNAUDITED)~~

~~8. Restructuring~~

Company took restructuring actions designed to increase efficiency. There were no restructuring charges incurred ~~for September year to date 2021. In~~in the ~~first~~second quarter of 2020, the Company took restructuring actions to align costs with expected revenues, position the organization to adopt a new operating model in the third quarter of 2020 and to align the U.S. branch network facilities footprint with a more technology-enabled service delivery methodology.2022 or June year-to-date 2021.

Restructuring costs incurred in ~~September year to date 2020~~the first quarter of 2022 totaled ~~$8.4~~$1.7 million and were recorded entirely in SG&A expenses in the consolidated statements of earnings, as detailed below (in millions of dollars):


		Lease Termination Costs		Severance Costs		Total			Severance Costs		Lease Termination Costs		Total

Professional & Industrial	Professional & Industrial	$	3.5	$	0.8	$	4.3	Professional & Industrial	$	0.1	$	0.2	$	0.3
Science, Engineering & Technology		0.5		—		0.5

Education	Education	0.1		0.7		0.8		Education	0.4		—		0.4
Outsourcing & Consulting								Outsourcing & Consulting	0.2		—		0.2

International		0.7		0.4		1.1
Corporate	Corporate	—		1.7		1.7		Corporate	0.8		—		0.8
Total	Total	$	4.8	$	3.6	$	8.4	Total	$	1.5	$	0.2	$	1.7

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

A summary of the global restructuring balance sheet accrual, included in accrued payroll and related taxes and accounts payable and accrued liabilities in the consolidated balance sheet, is detailed below (in millions of dollars):


Balance as of year-end ~~2020~~2021	$	~~3.5~~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	(2.0)
Balance as of first quarter-end ~~2021~~2022	~~1.5~~2.6
Reductions for cash payments related to all restructuring activities	~~(0.9)~~(1.1)
Accrual adjustments	(0.2)
Balance as of second quarter-end ~~2021~~2022	~~0.6~~
~~Reductions for cash payments related to all restructuring activities~~$	~~(0.4)~~1.3

~~Balance as of third quarter-end 2021~~	$
~~0.2~~

The remaining balance of ~~$0.2~~$1.3 million as of ~~third~~second quarter-end ~~2021~~2022 primarily represents severance costs, and the majority is expected to be paid by ~~the second quarter-end~~year-end 2022. No material adjustments are expected to be recorded.

9. Goodwill

The ~~Company performs its annual goodwill impairment testing~~changes 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. During~~carrying amount of goodwill as of June year-to-date 2022 are included in the table below. The goodwill resulting from the acquisition of RocketPower during the first quarter of ~~2020, negative market reaction~~2022 was allocated to the ~~COVID-19 crisis, including declines in our common stock price, caused our market capitalization to decline significantly compared~~OCG reportable segment and the goodwill resulting from the acquisition of PTS during the second quarter of 2022 was allocated to the fourth quarter of 2019, causing a triggering event. Therefore, we performed an interim step one quantitative test for our previous reporting units with goodwill, Americas Staffing and GTS, and determined that the estimated fair values of both reporting units no longer exceeded their carrying values. Based on the result of our interim goodwill impairment test as of the first quarter of 2020, we recorded a goodwill impairment charge of $147.7 million to write off goodwill for both reporting units. A portion of the goodwill balance was deductible for tax purposes.Education reportable segment (see Acquisitions footnote).

In performing the step one quantitative test and consistent with our prior practice, we determined the fair value of each reporting unit using the income approach, which is validated through reconciliation to observable market capitalization data. 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. Our


	As of Year-End 2021		Additions to Goodwill		Impairment Adjustments		As of Second Quarter-End 2022
	(In millions of dollars)
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	$	—	$	192.1

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

analysis used significant assumptions by segment, including: expected future revenue and expense growth rates, profit margins, cost of capital, discount rate and forecasted capital expenditures and working capital.

The changes in the carrying amount of goodwill as of September year to date 2021 are included in the table below. The goodwill resulting from the acquisition of Softworld during the second quarter of 2021 (see Acquisitions and Disposition footnote) was allocated to the SET reportable segment.

As of
Year-End 2020 Additions to Goodwill Impairment Adjustments As of Third
Quarter-End 2021
(In millions of dollars)
Science, Engineering & Technology $ — $ 111.3 $ — $ 111.3
Education 3.5 — — 3.5
Total $ 3.5 $ 111.3 $ — $ 114.8

10. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component, net of tax, for the ~~third~~second quarter and ~~September year to date~~June year-to-date 2022 and 2021 ~~and 2020~~ are included in the table below. Amounts in parentheses indicate debits. ~~Reclassification~~June year-to-date 2022 reclassification adjustments out of accumulated other comprehensive income (loss), related to the liquidation of the Japan subsidiary, as shown in the table below, were recorded in the loss on currency translation from liquidation of subsidiary line item in the consolidated statements of earnings. June year-to-date 2022 reclassification adjustments out of accumulated other comprehensive income (loss) related to the equity method investment and other, as shown in the table below, which includes $1.9 million related to the investment in PersolKelly Pte. Ltd., were recorded in the other income (expense), net line item in the consolidated statements of earnings. See Investment in PersolKelly Pte. Ltd. footnote for more details.


		Third Quarter				September Year to Date					Second Quarter				June Year to Date
		2021		2020		2021		2020			2022		2021		2022		2021
		(In millions of dollars)									(In millions of dollars)
Foreign currency translation adjustments:	Foreign currency translation adjustments:									Foreign currency translation adjustments:
Beginning balance	Beginning balance	$	(12.4)	$	(17.9)	$	(0.8)	$	(13.2)	Beginning balance	$	(12.0)	$	(14.4)	$	(25.0)	$	(0.8)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(3.5)		5.1		(15.1)		0.4		Other comprehensive income (loss) before reclassifications	1.3		2.0		(8.6)		(11.6)
Amounts reclassified from accumulated other comprehensive income (loss)		—		(1.5)		—		(1.5)
Amounts reclassified from accumulated other comprehensive income (loss) - liquidation of Japan subsidiary										Amounts reclassified from accumulated other comprehensive income (loss) - liquidation of Japan subsidiary	—		—		20.4		—
Amounts reclassified from accumulated other comprehensive income (loss) - equity method investment and other										Amounts reclassified from accumulated other comprehensive income (loss) - equity method investment and other	0.2		—		2.7		—
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	(3.5)		3.6		(15.1)		(1.1)		Net current-period other comprehensive income (loss)	1.5		2.0		14.5		(11.6)
Ending balance	Ending balance	(15.9)		(14.3)		(15.9)		(14.3)		Ending balance	(10.5)		(12.4)		(10.5)		(12.4)

Pension liability adjustments:	Pension liability adjustments:									Pension liability adjustments:
Beginning balance	Beginning balance	(3.4)		(2.6)		(3.4)		(2.6)		Beginning balance	(2.7)		(3.4)		(2.7)		(3.4)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	—		—		—		—		Other comprehensive income (loss) before reclassifications	—		—		—		—
Amounts reclassified from accumulated other comprehensive income (loss)	Amounts reclassified from accumulated other comprehensive income (loss)	—		—		—		—		Amounts reclassified from accumulated other comprehensive income (loss)	—		—		—		—
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	—		—		—		—		Net current-period other comprehensive income (loss)	—		—		—		—
Ending balance	Ending balance	(3.4)		(2.6)		(3.4)		(2.6)		Ending balance	(2.7)		(3.4)		(2.7)		(3.4)

Total accumulated other comprehensive income (loss)	Total accumulated other comprehensive income (loss)	$	(19.3)	$	(16.9)	$	(19.3)	$	(16.9)	Total accumulated other comprehensive income (loss)	$	(13.2)	$	(15.8)	$	(13.2)	$	(15.8)

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

11. Earnings (Loss) Per Share

The reconciliation of basic and diluted earnings (loss) per share on common stock for the ~~third~~second quarter and ~~September year to date~~June year-to-date 2022 and 2021 ~~and 2020~~ follows (in millions of dollars except per share data):


		Third Quarter				September Year to Date					Second Quarter				June Year to Date
		2021		2020		2021		2020			2022		2021		2022		2021
Net earnings (loss)	Net earnings (loss)	$	34.8	$	16.7	$	84.4	$	(95.4)	Net earnings (loss)	$	2.2	$	24.0	$	(45.4)	$	49.6
Less: earnings allocated to participating securities	Less: earnings allocated to participating securities	(0.4)		(0.2)		(0.8)		—		Less: earnings allocated to participating securities	—		(0.2)		—		(0.4)
Net earnings (loss) available to common shareholders	Net earnings (loss) available to common shareholders	$	34.4	$	16.5	$	83.6	$	(95.4)	Net earnings (loss) available to common shareholders	$	2.2	$	23.8	$	(45.4)	$	49.2

Average shares outstanding (millions):	Average shares outstanding (millions):									Average shares outstanding (millions):
Basic	Basic	39.4		39.3		39.4		39.3		Basic	37.9		39.4		38.3		39.4
Dilutive share awards	Dilutive share awards	0.1		0.1		0.1		—		Dilutive share awards	0.3		0.1		—		0.1
Diluted	Diluted	39.5		39.4		39.5		39.3		Diluted	38.2		39.5		38.3		39.5

Basic earnings (loss) per share	Basic earnings (loss) per share	$	0.87	$	0.42	$	2.12	$	(2.43)	Basic earnings (loss) per share	$	0.06	$	0.60	$	(1.19)	$	1.25
Diluted earnings (loss) per share	Diluted earnings (loss) per share	$	0.87	$	0.42	$	2.12	$	(2.43)	Diluted earnings (loss) per share	$	0.06	$	0.60	$	(1.19)	$	1.25

Potentially dilutive shares outstanding are primarily related to ~~performance shares (see Stock-Based Compensation footnote for a description of performance shares)~~deferred common stock related to the non-employee directors deferred compensation plan for the ~~third~~second quarter of 2022 and ~~September year to date~~ 2021 and ~~2020. Dividends paid for Class A and Class B~~June year-to-date 2021. Due to our net loss in June year-to-date 2022, potentially dilutive shares primarily related to deferred common stock related to the non-employee directors deferred compensation plan of 0.2 million shares had an anti-dilutive effect on diluted earnings per share and were ~~$0.05~~excluded from the computation for ~~third quarter 2021 and September year to date 2021.~~June year-to-date 2022. Dividends paid per share for Class A and Class B common stock were $0.075 for the second quarter 2022, $0.125 for June year-to-date 2022 and $0.00 for ~~third~~the second quarter ~~2020~~2021 and ~~$0.075 for September year to date 2020.~~June year-to-date 2021.

12. Stock-Based Compensation

For the ~~third~~second quarter of ~~2021,~~2022, the Company recognized stock compensation expense of ~~$1.2~~$1.7 million, and a related tax benefit of $0.2 million. For the ~~third~~second quarter of ~~2020, the Company recognized stock compensation expense of $0.5 million, and a related tax benefit of $0.2 million. For September year to date~~ 2021, the Company recognized stock compensation expense of ~~$4.0~~$1.4 million, and a related tax benefit of ~~$0.6~~$0.3 million. For ~~September year to date 2020,~~June year-to-date 2022, the Company recognized stock compensation expense of ~~$2.9~~$3.8 million, and a related tax benefit of ~~$0.2~~$0.5 million. For June year-to-date 2021, the Company recognized stock compensation expense of $2.8 million, and a related tax benefit of $0.4 million.

Performance Shares

During ~~2021,~~the first quarter of 2022, the Company granted performance share awards associated with the Company’s Class A common stock to certain senior officers. The payment of performance share awards, which will be satisfied with the issuance of shares out of treasury stock, is contingent upon the achievement of specific revenue growth and earnings before interest, taxes, depreciation and amortization ("EBITDA") margin performance goals ("financial measure performance share awards") over a stated period of time. The maximum number of performance shares that may be earned is 200% of the target shares originally granted. These awards have three one-year performance periods: ~~2021,~~ 2022, 2023 and ~~2023,~~2024, with the payout for each performance period based on separate financial measure goals that are set in February of each of the three performance periods.

~~For the 2021 and 2022 performance periods, half of the~~ Earned shares ~~earned in~~during each ~~respective~~ performance period will cliff vest in February 2025 after ~~achievement of the respective performance goals for the year and~~ approval of the financial results by the Compensation Committee, in early 2022 and 2023, respectively, if not forfeited by the recipient. The remaining half of the shares earned for the 2021 and 2022 performance periods will vest in early 2024, based on continuous employment. For the 2023 performance period, any shares earned will vest after achievement of the 2023 performance goals for the year and approval of the financial results by the Compensation Committee in early 2024, if not forfeited by the recipient. No dividends are paid on these performance shares.

On May 18, 2021, the Compensation Committee approved a modification to the performance goals of our 2021 and 2020 financial measure performance awards to increase the goals to reflect the results of the acquisition of Softworld. We accounted for this change as a Type I modification under ASC 718 as the expectation of the achievement of certain performance conditions related to these awards remained a probable-to-probable post-modification. The Company did not record any incremental stock compensation expense since the fair value of the modified awards immediately after the modification was not

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

~~greater than the fair value of the original awards immediately before the modification. All service-based vesting conditions were unaffected by the modification.~~

A summary of the status of all nonvested performance shares at target as of ~~third~~second quarter-end ~~2021~~2022 and year-to-date changes is presented as follows below (in thousands of shares except per share data). The vesting adjustment in the table below represents the ~~2018~~2019 and a portion of the 2021 financial measure ~~performance shares and the 2018 Total Shareholder Return ("TSR")~~ performance shares that did not vest because actual achievement was below the threshold level and resulted in no payout.


		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 2020		366	$	22.40	47	$	31.38
Nonvested at year-end 2021								Nonvested at year-end 2021	708	$	20.03
Granted	Granted	180	20.20		—	—		Granted	186	21.19
Vested	Vested	(13)	24.90		—	—		Vested	(48)	22.55
Forfeited	Forfeited	(16)	24.73		—	—		Forfeited	(6)	16.81
Vesting adjustment	Vesting adjustment	(94)	16.99		(47)	31.38		Vesting adjustment	(142)	24.45
Nonvested at third quarter-end 2021		423	$	22.50	—	$	—
Nonvested at second quarter-end 2022								Nonvested at second quarter-end 2022	698	$	19.39

Restricted Stock

A summary of the status of nonvested restricted stock as of ~~third~~second quarter-end ~~2021~~2022 and year-to-date changes is presented as follows below (in thousands of shares except per share data). During the second quarter of 2022, the Company granted 128,000 shares with a weighted average grant date fair value of $17.92 as a special retention stock award to certain key employees and is reflected in the granted line item below.


		Shares	Weighted Average Grant Date Fair Value			Shares	Weighted Average Grant Date Fair Value
Nonvested at year-end 2020		281	$	22.74
Nonvested at year-end 2021					Nonvested at year-end 2021	403	$	21.24
Granted	Granted	216	21.33		Granted	388	20.47
Vested	Vested	(90)	23.36		Vested	(101)	22.43
Forfeited	Forfeited	(21)	23.97		Forfeited	(72)	21.62
Nonvested at third quarter-end 2021		386	$	21.74
Nonvested at second quarter-end 2022					Nonvested at second quarter-end 2022	618	$	20.52

13. Sale of Assets

In the second quarter of 2020, the Company monetized wage subsidy receivables outside the U.S. for $16.9 million, net of fees and 5% retainer. The sale of these receivables was accounted for as a sale of financial assets with certain recourse provisions in which we derecognized the receivables. Although the sale of receivables is with recourse, the Company did not record a recourse obligation as the Company concluded the receivables were collectible. The net cash proceeds related to the sale were included in operating activities in the consolidated statements of cash flows and the fees related to the sale were included in SG&A expenses in the consolidated statements of earnings.

~~On March 20, 2020,~~June 2022, the Company sold ~~3 of our 4 headquarters properties~~an under-utilized real property for a purchase price of ~~$58.5~~$4.5 million, ~~as a part of a sale and leaseback transaction. The properties included the parcels of land, together with all rights and easements, in addition~~subject to ~~all improvements located on the land, including buildings.~~final closing adjustments. The Company received cash proceeds of ~~$55.5~~$3.6 million ~~which~~in the second quarter of 2022 and previously received cash proceeds of $0.8 million as a deposit in 2021 when the contract was ~~net of transaction expenses.~~first executed. As of the date of the sale, the ~~properties~~land had ~~a combined net~~insignificant carrying ~~amount of $23.4 million. The~~value; as such, the resulting gain on the sale ~~of the assets~~ was ~~$32.1~~$4.4 million, which ~~was~~is recorded in gain on sale of assets in the consolidated statements of earnings.

In January 2022, the Company sold a property for a purchase price of $0.9 million, subject to final closing adjustments. The Company ~~leased back~~received cash proceeds of $0.9 million in the ~~headquarters buildings~~first quarter of 2022. As of the date of the sale, the property had an immaterial carrying value; as such, the resulting gain on the ~~same date.~~sale of the property was $0.9 million, which is recorded in gain on sale of assets in the consolidated statements of earnings.

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

14. Held for Sale

~~14.~~

Russia Operations

In the second quarter of 2022, the Company announced its intention to transition its business in Russia. On June 30, 2022, the Company entered into a definitive agreement to sell its Russia operations ("disposal group"), which is included in the Company's International operating segment. As of the date of the agreement and until closing of the sale, the disposal group is classified as held for sale and measured at the lower of its carrying amount or fair value less estimated costs to sell. As of July 3, 2022, the assets and liabilities that have met the classification as held for sale are $38.4 million and $13.7 million, respectively. The fair value as of July 3, 2022 less costs to sell was estimated based on the terms of the definitive agreement and is $7.3 million. As a result, the Company has recorded a held for sale impairment charge of $18.5 million in the second quarter of 2022, which is recorded as a reduction to the assets in the assets held for sale in the consolidated balance sheet and in impairment of assets held for sale in the consolidated statements of earnings. The impairment charge includes $1.1 million for the anticipated liquidation of the cumulative translation adjustment. On July 20, 2022, subsequent to the end of the second quarter, the sale was completed and the Company no longer operates in Russia.

The disposal group did not meet the requirements to be classified as discontinued operations as the sale will not have a material effect on the Company's operations and does not represent a strategic shift in the Company's strategy. Our consolidated earnings before taxes for the second quarter of 2022 and 2021 included $0.7 million and $0.8 million, respectively, from the Russia operations and for June year-to-date 2022 and 2021 included $1.1 million and $1.3 million, respectively, from the Russia operations.

The major classes of assets and liabilities of the disposal group that have met the classification of held for sale as of July 3, 2022 are as follows (in millions of dollars):


	July 3, 2022
Assets held for sale
Cash and equivalents	$	12.2
Trade accounts receivable, net	23.9
Prepaid expenses and other current assets	0.8
Property and equipment, net	0.6
Operating lease right-of-use assets	0.2
Deferred taxes	0.4
Other assets	0.3
Assets held for sale	38.4

Liabilities held for sale
Accounts payable and accrued liabilities	(0.5)
Operating lease liabilities	(0.2)
Accrued payroll and related taxes	(8.3)
Income and other taxes	(4.7)
Liabilities held for sale	(13.7)

Disposal group, net	$	24.7

Cash and equivalents in the consolidated statements of cash flows as of the second quarter-end 2022 includes $12.2 million of cash that is included in the disposal group. The disposal group's cash is not reflected as cash and equivalents in the consolidated balance sheet as of second quarter-end 2022, as the assets of the disposal group are recognized net of the impairment charge as assets held for sale.

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

Subsequent to the second quarter-end, the sale was completed and the Company received proceeds of $7.4 million, including purchase price adjustments, in July 2022. The assets and liabilities will be derecognized in the third quarter of 2022 as well as any adjustments to the loss on the sale.

Real Property

Kelly Properties, LLC, a wholly owned subsidiary of the Company, entered into an agreement on May 11, 2022 to sell real property located in Troy, Michigan. Accordingly, during the second quarter of 2022, the transaction met the criteria to classify the property as held for sale. The property held for sale includes the property and all improvements to the property, together with all rights and easements. Assets held for sale are recorded at the lower of their carrying value or fair value less estimated costs to sell, and depreciation is suspended on assets upon classification to held for sale. The carrying amount of the property held for sale as of the second quarter-end 2022 is $4.7 million, which is less than the sales price in the purchase agreement, less estimated costs to sell. The proceeds of the sale are expected to be approximately $5.6 million, net of commissions and transaction expenses. The Company has presented these assets as current assets held for sale in the consolidated balance sheet as of the second quarter-end 2022, as the property is expected to be sold in the fourth quarter of 2022 per terms of the purchase agreement.

15. Other Income (Expense), Net

Included in other income (expense), net for the ~~third~~second quarter and ~~September year to date~~June year-to-date 2022 and 2021 ~~and 2020~~ are the following:
Third Quarter September Year to Date
2021 2020 2021 2020
(In millions of dollars)
Interest income $ 0.1 $ 0.1 $ 0.2 $ 0.5
Interest expense (0.7) (0.5) (1.9) (2.2)
Dividend income — — 1.0 1.3
Foreign exchange gains (losses) 0.3 (0.2) (0.6) 3.5
Other — (0.1) (2.7) 0.5
Other Income (Expense), Net $ (0.3) $ (0.7) $ (4.0) $ 3.6


	Second Quarter				June Year to Date
	2022		2021		2022		2021
	(In millions of dollars)
Interest income	$	0.4	$	—	$	0.5	$	0.1
Interest expense	(0.5)		(0.6)		(1.1)		(1.2)
Dividend income	—		1.0		—		1.0
Foreign exchange gains (losses)	0.9		(0.7)		5.6		(0.9)
Other	(1.9)		—		(3.3)		(2.7)
Other income (expense), net	$	(1.1)	$	(0.3)	$	1.7	$	(3.7)

Included in Other for ~~September year~~the second quarter and June year-to-date 2022 is $0.8 million of expense related to ~~date~~the remeasurement of the Brazil indemnification liability (see Fair Value Measurements footnote). Included in foreign exchange gains (losses) for June year-to-date 2022 is a $5.5 million foreign exchange gain on a U.S. dollar-denominated cash balance held by the Company's Japan entity (see Investment in Persol Holdings footnote). Included in Other for June year-to-date 2021 is a loss from the sale of the assets related to our minority investment in Kenzie Academy (see Fair Value Measurements footnote) and transaction-related expenses from the April 2021 acquisition of Softworld (see Acquisitions ~~and Disposition~~ footnote).

~~15.~~

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

16. Income Taxes

Income tax expense was ~~$11.1 million and benefit was $1.2~~$4.9 million for the ~~third~~second quarter of ~~2021 and 2020, respectively. Income tax expense was $19.0 million~~2022 and income tax benefit was $36.5 million for September year to date 2021 and 2020, respectively. These amounts were impacted by changes in the fair value of the Company's investment in Persol Holdings, which resulted in a charge of $10.9$2.6 million for the ~~third~~second quarter of ~~2021 and $22.0~~2021. Income tax benefit was $8.1 million for ~~September year to date 2021, compared to a charge of $5.2~~June year-to-date 2022 and income tax expense was $7.9 million for ~~the third quarter of 2020 and a benefit of $9.6 million for September year to date 2020.~~June year-to-date 2021. The second quarter ofand June year-to-date 2021 amounts benefited $5.2 million from a change in United Kingdom tax rates, ~~while the~~and from tax exempt gains on life insurance policies. The second quarter ~~of 2020 benefited $7.7 million from Brazil outside basis differences. September year to date 2020 includes a~~and June year-to-date 2022 taxes had no tax benefit ~~of $23.0 million~~from losses on ~~the impairment of goodwill.~~life insurance policies. The ~~quarterly~~second quarter and June year-to-date 2022 amounts are also impacted by changes in earnings from operations.

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 ~~are~~were treated as discrete since they cannot be estimated. The United Kingdom rate change benefit in the second quarter of 2021, impairment of goodwill in the first quarter of 2020 and the Brazil outside basis differences in the second quarter of 2020 were treated as discrete.

The Company provides valuation allowances against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized. At this time, we have no valuation allowance against our Mexican deferred tax asset of $4.3 million, though it is possible this may change as we continue to assess the impacts of the new labor laws effective as of the third quarter of 2021 on our Mexican business operations throughout the remainder of the year.

~~KELLY SERVICES, INC. AND SUBSIDIARIES~~

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

~~(UNAUDITED)~~

~~16.~~17. Contingencies

The Company is continuously engaged in litigation, threatened litigation, 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, violations of privacy rights, anti-competition regulations, commercial and contractual disputes, and ~~tax related~~tax-related 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. At ~~third~~second quarter-end ~~2021~~2022 and year-end ~~2020,~~2021, the gross accrual for litigation costs amounted to ~~$1.1~~$1.7 million and $1.4 million, respectively.

The Company maintains insurance coverage which may cover certain losses. When losses exceed the applicable policy deductible and realization of recovery of the loss 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 in the consolidated balance sheet. At ~~third~~second quarter-end ~~2021 and~~2022, the related insurance receivables amounted to $0.6 million. At year-end ~~2020,~~2021, there were no related insurance receivables.

During the third quarter of 2021, the Company filed a claim, in excess of policy limits, under a representations and warranties insurance policy purchased by the Company in connection with the acquisition of Softworld. The claim asserts damages arising out of alleged breaches by the sellers of Softworld of certain representations and warranties contained in the purchase agreement relating to periods prior to the closing of the acquisition. The insurance policy’s coverage limit is $21.5 million. The Company reached a preliminary agreement with the insurer and continues to negotiate a final resolution of the claim. No insurance receivable has been recorded.

The Company estimates the aggregate range of reasonably possible losses, in excess of amounts accrued, is ~~$0.5~~$0.7 million to ~~$4.3~~$8.6 million as of ~~third~~second quarter-end ~~2021.~~2022. This range includes matters where a liability has been accrued but it is reasonably possible that the ultimate loss may exceed the amount accrued and for matters where a loss is believed to be reasonably possible, but a liability has not been accrued. The aggregate range only represents matters in which we are currently able to estimate a range of loss and does not represent our maximum loss exposure. The estimated range is subject to significant judgment and a variety of assumptions and only based upon currently available information. For other matters, we are currently not able to estimate the reasonably possible loss or range of loss.

While the ultimate outcome of these matters 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.

~~17.~~

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

18. Segment Disclosures

The Company’s operating segments, which also represent its reporting segments, are based on the organizational structure for which financial results are regularly evaluated by the Company’s chief operating decision-maker ("CODM", the Company’s CEO) to determine resource allocation and assess performance. The Company’s 5 reportable segments, (1) Professional & Industrial, (2) Science, Engineering & Technology, (3) Education, (4) Outsourcing & Consulting, and (5) International, reflect the specialty services the Company provides to customers and represent how the business is organized internally. Intersegment revenue represents revenue earned between the reportable segments and is eliminated from total segment revenue from services. ~~Consistent with the information provided to and evaluated by the CODM, the goodwill impairment charge in the first quarter of 2020 was included in Corporate expenses.~~

The following tables present information about the reported revenue from services and gross profit of the Company by reportable segment, along with a reconciliation to earnings (loss) before taxes and equity in net earnings (loss) of affiliate, for the ~~third~~second quarter and ~~September year to date 2021~~June year-to-date 2022 and ~~2020.~~2021. Asset information by reportable segment is not presented, since the Company does not produce such information internally nor does it use such information to manage its business.


	Second Quarter				June Year to Date
	2022		2021		2022		2021
	(In millions of dollars)
Revenue from Services:

Professional & Industrial	$	415.8	$	466.5	$	860.1	$	934.1
Science, Engineering & Technology	324.3		298.2		641.4		552.9
Education	155.5		105.9		328.9		217.5
Outsourcing & Consulting	124.4		107.3		233.5		206.6
International	247.6		280.4		500.4		553.3

Less: Intersegment revenue	(0.3)		(0.2)		(0.6)		(0.4)

Consolidated Total	$	1,267.3	$	1,258.1	$	2,563.7	$	2,464.0

KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

Third Quarter September Year to Date
2021 2020 2021 2020
(In millions of dollars)
Revenue from Services:
Professional & Industrial $ 452.6 $ 446.5 $ 1,386.7 $ 1,346.7
Science, Engineering & Technology 306.2 244.0 859.1 761.5
Education 66.6 27.5 284.1 195.1
Outsourcing & Consulting 113.4 87.9 320.0 261.0
International 256.8 232.4 810.1 710.6
Less: Intersegment revenue (0.2) (0.1) (0.6) (0.3)
Consolidated Total $ 1,195.4 $ 1,038.2 $ 3,659.4 $ 3,274.6


		Third Quarter				September Year to Date					Second Quarter				June Year to Date
		2021		2020		2021		2020			2022		2021		2022		2021
		(In millions of dollars)									(In millions of dollars)
Earnings (loss) from Operations:	Earnings (loss) from Operations:									Earnings (loss) from Operations:

Professional & Industrial gross profit	Professional & Industrial gross profit	$	76.6	$	77.1	$	227.7	$	241.1	Professional & Industrial gross profit	$	77.8	$	75.2	$	160.9	$	151.1
Professional & Industrial SG&A expenses	Professional & Industrial SG&A expenses	(69.4)		(65.3)		(207.8)		(210.4)		Professional & Industrial SG&A expenses	(67.4)		(69.0)		(138.8)		(138.4)
Professional & Industrial earnings (loss) from operations	Professional & Industrial earnings (loss) from operations	7.2		11.8		19.9		30.7		Professional & Industrial earnings (loss) from operations	10.4		6.2		22.1		12.7

Science, Engineering & Technology gross profit	Science, Engineering & Technology gross profit	68.1		50.7		187.8		156.0		Science, Engineering & Technology gross profit	75.2		66.5		149.0		119.7
Science, Engineering & Technology SG&A expenses	Science, Engineering & Technology SG&A expenses	(48.4)		(31.3)		(131.0)		(99.1)		Science, Engineering & Technology SG&A expenses	(54.8)		(46.9)		(108.0)		(82.6)
Science, Engineering & Technology earnings (loss) from operations	Science, Engineering & Technology earnings (loss) from operations	19.7		19.4		56.8		56.9		Science, Engineering & Technology earnings (loss) from operations	20.4		19.6		41.0		37.1

Education gross profit	Education gross profit	10.0		4.1		44.0		28.8		Education gross profit	26.0		16.8		52.6		34.0
Education SG&A expenses	Education SG&A expenses	(17.0)		(11.6)		(46.5)		(37.7)		Education SG&A expenses	(20.4)		(15.3)		(39.0)		(29.5)
Education earnings (loss) from operations	Education earnings (loss) from operations	(7.0)		(7.5)		(2.5)		(8.9)		Education earnings (loss) from operations	5.6		1.5		13.6		4.5

Outsourcing & Consulting gross profit	Outsourcing & Consulting gross profit	37.3		29.1		103.4		87.1		Outsourcing & Consulting gross profit	46.2		34.8		83.5		66.1
Outsourcing & Consulting SG&A expenses	Outsourcing & Consulting SG&A expenses	(30.7)		(25.4)		(89.2)		(79.1)		Outsourcing & Consulting SG&A expenses	(39.8)		(30.1)		(74.1)		(58.5)
Outsourcing & Consulting earnings (loss) from operations	Outsourcing & Consulting earnings (loss) from operations	6.6		3.7		14.2		8.0		Outsourcing & Consulting earnings (loss) from operations	6.4		4.7		9.4		7.6

International gross profit	International gross profit	36.9		30.0		110.3		90.5		International gross profit	37.2		37.7		75.0		73.4
International SG&A expenses	International SG&A expenses	(34.5)		(39.9)		(102.2)		(101.4)		International SG&A expenses	(34.6)		(34.6)		(67.8)		(67.7)
International earnings (loss) from operations	International earnings (loss) from operations	2.4		(9.9)		8.1		(10.9)		International earnings (loss) from operations	2.6		3.1		7.2		5.7

Corporate	Corporate	(19.9)		(19.9)		(63.2)		(178.9)		Corporate	(23.1)		(21.4)		(48.5)		(43.3)
Impairment of assets held for sale										Impairment of assets held for sale	(18.5)		—		(18.5)		—
Gain on sale of assets										Gain on sale of assets	4.4		—		5.3		—
Consolidated Total	Consolidated Total	9.0		(2.4)		33.3		(103.1)		Consolidated Total	8.2		13.7		31.6		24.3
Gain (loss) on investment in Persol Holdings	Gain (loss) on investment in Persol Holdings	35.5		16.8		71.8		(31.4)		Gain (loss) on investment in Persol Holdings	—		6.3		(67.2)		36.3
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	(0.3)		(0.7)		(4.0)		3.6		Other income (expense), net	(1.1)		(0.3)		1.7		(3.7)

Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	$	44.2	$	13.7	$	101.1	$	(130.9)	Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	$	7.1	$	19.7	$	(54.3)	$	56.9

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KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

Depreciation and amortization expense included in SG&A expenses by segment above are as follows:


		Third Quarter				September Year to Date					Second Quarter				June Year to Date
		2021		2020		2021		2020			2022		2021		2022		2021
		(In millions of dollars)									(In millions of dollars)
Depreciation and amortization:	Depreciation and amortization:									Depreciation and amortization:

Professional & Industrial	Professional & Industrial	$	1.3	$	1.4	$	4.1	$	4.1	Professional & Industrial	$	1.0	$	1.4	$	2.1	$	2.8
Science, Engineering & Technology	Science, Engineering & Technology	3.2		1.0		7.5		3.1		Science, Engineering & Technology	3.2		3.3		6.3		4.3
Education	Education	0.9		0.9		2.8		2.7		Education	1.3		0.9		2.1		1.9
Outsourcing & Consulting	Outsourcing & Consulting	0.1		0.2		0.5		0.5		Outsourcing & Consulting	1.0		0.2		1.2		0.4
International	International	0.5		0.5		1.5		1.6		International	0.5		0.5		1.0		1.0

~~18.~~19. New Accounting Pronouncements

Recently Adopted

In ~~January 2020,~~October 2021, the FASB issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, to require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to business combinations that occur after the effective date. We early adopted this standard in the first quarter of 2022 and the adoption did not have a material impact to our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 was effective for the Company in the first quarter of fiscal 2021. The adoption of this standard did not have a material impact to our consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01 which clarifies the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. The adoption of this standard did not have a material impact to our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12 simplifying various aspects related to the accounting for income taxes. The guidance removes exceptions to the general principles in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. The adoption of this standard did not have a material impact to our consolidated financial statements.

Not Yet Adopted

Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Executive Overview

~~The COVID-19 pandemic, including the delta variant, related containment measures~~Kelly’s strategy and ~~the subsequent economic recovery have resulted in ongoing shifts in most aspects of the economy and how professional and private lives~~actions are ~~conducted. While the pace of change has been unprecedented and the resulting impacts are still being determined,~~guided by our simple yet powerful Noble ~~Purpose,~~Purpose: “We connect people to work in ways that enrich their ~~lives,~~lives.” ~~will continue~~We are committed to ~~guide our strategy~~being a leading talent solutions provider among the talent with whom we choose to specialize and ~~actions.~~in the global markets in which we choose to compete. As we navigate ~~a world of work now impacted by these changes,~~the post-pandemic landscape, we will continue to demonstrate our expected behaviors and actions:

•Employ a talent-first mentality

•Relentlessly deliver for customers

•Grow through discipline and focus

•Deliver efficiency and effectiveness in everything we do

~~Kelly remains committed to being a leading talent solutions provider among the talent with whom we choose to specialize and in the global markets in which we choose to compete.~~ By aligning ourselves with our Noble Purpose and executing against these behaviors, we ~~have navigated the challenges of the pandemic and~~ are ~~emerging as~~becoming a more agile and focused organization, prepared to achieve new levels of growth and profitability as we ~~further~~ develop and reshape our portfolio of ~~specialty~~ businesses.

The Talent Solutions Industry

~~Prior to the COVID-19 pandemic, labor~~Labor markets ~~were~~have been in the midst of change due to automation, secular shifts in labor supply and demand and skills ~~gaps, and the current economic situation is accelerating that change.~~gaps. Global demographic trends are reshaping and redefining the way in which companies find and use talent, and the COVID-19 pandemic ~~is changing~~changed where and how companies expect work to be ~~performed.~~performed—a shift we expect will carry over into the future. In response, the talent solutions industry is adjusting how it sources, recruits, trains and places talent.

Our industry is evolving to meet businesses’ growing demand for specialized 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 customized workforce solutions that are flexible and responsive to the labor market.

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. 2021 saw record-breaking employee resignations in the U.S. as workers opted out of jobs that did not align with their needs. In this increasingly talent-driven market, a diverse set of workers, empowered by technology, is seeking to take even greater control over their career ~~trajectories, and Kelly’s Talent Promise confirms our responsibility~~trajectories. Kelly is proud to be a career partner of choice for workers in search of a better way to work.

Our Business

Kelly 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 and direct-hire basis. In 2020, we adopted ~~the Kelly Operating Model~~a new operating model and realigned our business into five specialty business units, which are also our reportable segments.

•Professional & Industrial – delivers staffing, outcome-based and direct-hire services focused onin office, professional, light industrial and contact center specialties in the U.S. and Canada, including our KellyConnect ~~product~~and our Business and Professional Services products

•Science, Engineering & Technology – delivers staffing, outcome-based and direct-hire services focused on science and clinical research, engineering, ~~information~~ technology and telecommunications specialties predominantly in the U.S. and Canada and includes our NextGen and Global Technology Associates subsidiaries, as well as ~~our~~ Softworld, ~~Inc. ("Softworld") subsidiary as of the beginning of the second quarter of~~a technology staffing and workforce solutions company acquired in 2021

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•Education – delivers staffing, direct-hire and executive search services toacross the ~~K-12,~~full education spectrum from early childhood ~~and~~to higher education ~~markets~~ in the U.S., and includes ~~several acquisitions:~~ Teachers On Call, ~~Insight Workforce Solutions and~~ Greenwood/Asher & Associates and Pediatric Therapeutic Services ("PTS"), a specialty firm providing in-school therapy services, acquired in May 2022

•Outsourcing & Consulting – delivers Master Service Provider ("MSP"), Recruitment Process Outsourcing ("RPO"), which includes our March 2022 acquisition of RocketPower, Payroll Process Outsourcing ("PPO") and Talent Advisory Services to customers on a global basis

•International – ~~operates in Mexico and 15 European countries where it~~ delivers staffing, RPO and direct-hire services in 14 countries in Europe, as well as services in Mexico delivered in accordance with recent changes in labor market regulations. Effective July 20, 2022, we completed a transaction to transfer our business in Russia to an in-country provider and no longer operate in Russia.

In addition, we ~~provide~~hold a minority interest in PersolKelly Pte. Ltd. ("PersolKelly"), which provides staffing and direct hire services to customers in the Asia-Pacific ~~region through PersolKelly Pte. Ltd., our joint venture with Persol Asia Pacific Pte. Ltd, a wholly owned subsidiary of Persol Holdings, a leading provider of HR solutions in Japan.~~region.

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. and was 63 days on a global basis as of the end of the ~~third~~second quarter of ~~2021~~2022 and 6460 days as of the end of ~~2020.~~the second quarter of 2021. Since receipts from customers generally lag temporary employee payroll, working capital requirements increase substantially in periods of growth and decline in periods of economic contraction.

Our Perspective and Outlook on Growth

~~Looking Back~~

~~The impacts of COVID-19 on the global economy, the talent solutions industry, our customers and our talent became clearer as 2020 progressed.~~Beginning in mid-March 2020, our year-over-year revenues declined swiftly and substantially as governments and businesses reacted to the crisis. In response, in April 2020 we took a series of proactive steps to reduce spending, minimize layoffs, and bolster the strength and flexibility of Kelly’s finances. These actions included salary reductions for full-time salaried employees, including reduced CEO and senior leader compensation, temporary furloughing and/or redeployment of some employees. Our actions generated substantial cost savings and allowed us the time necessary to assess the variety of impacts the crisis had on our business.~~Most actions were in place until early in the fourth quarter of 2020.~~

~~In addition, we benefited in 2020~~We entered 2022 having shifted from ~~CARES Act provisions allowing deferral of employer social security tax payments.~~In connection with expiration of the temporary cost reduction measures noted above, management reduced staffing levels to align with expected revenue levels and recorded restructuring charges of $4.4 million for severance and related benefits for impacted employees in the fourth quarter of 2020.

~~Given the level of uncertainty surrounding the duration of~~recovery from the COVID-19 ~~crisis, Kelly’s board also voted~~pandemic to ~~suspend~~growth. Even with the ~~quarterly dividend~~economic uncertainty created by events in ~~May 2020~~Ukraine and ~~continued to assess economic and business conditions to determine future actions with respect to our dividend policy.~~

The negative market reaction to the COVID-19 crisis in March 2020 also resulted in a decline in our common stock price which caused our market capitalization to decline significantly at the end of the first quarter of 2020.~~This triggered an interim goodwill impairment test and resulted in a $147.7 million non-cash goodwill impairment charge in the first quarter of 2020.~~

~~Short Term~~

The early months of 2021 brought optimism for a slow but steady, sustained recovery. With that optimism, in August 2021 the Board of Directors reinstated the dividend at $0.05 per share. In the second quarter of 2021, as we passed the one-year anniversary of the crisis, it became apparent that progress would be slower than originally anticipated. Several headwinds continued throughout the third quarter, including the delta variant and its impact on talent availability and business operations, as well as ongoing global supply chain disruptions and uncertainty over vaccination requirements. ~~Despite these challenges, Kelly’s year-over-year revenue growth in the second and third quarters points to~~ a continuation of ~~the underlying recovery. We expect that~~inflation, demand for our services will continue to gradually recover from the economic slowdown and the effects of customer and talent concerns related to operating safely during a pandemic. The impact on the revenues of each segment will vary, given the differences in pandemic-related measures enacted in each geography, the customer industries served and the availability of the talent provided to our customers.~~We are proactively taking steps to address talent shortages and mismatches in our~~

businesses that were most impacted by the pandemic, including implementing new technologies, streamlining processes, adopting efficient recruiting models and collaborating with clients on innovative approaches to attract and retain talent. We currently expect a gradual return to pre-crisis levels of customer demand; however, the pace of such a return may be delayed if a resurgence in infections leads to additional containment measures, disruptions including the ongoing global supply chain disruption, or increased lack of available talent to matchremains strong. Our permanent placement fee growth points toward our customers’ ~~demand. As 2021 progresses~~investments in their future workforce, and increased demand in our staffing and outcome-based businesses reflects strong market demand for the specialty solutions we ~~enter 2022, we expect~~provide. Our business is arranged around specialties that ~~our revenue will reflect a continued gradual improvement in~~target these areas of strong demand, ~~and result in continued improvements in year-over-year gross profit and earnings from operations.~~

In November 2021, the Company initiated a series of cost management actions primarily designed to increase operational efficiencies within enterprise functions that provide centralized support to our operating units. The actions are designed to align expenses with current expectations for top-line growth. As a result, a restructuring charge of $3.5 to $4.5 million will be recorded in the 2021 fourth quarter, with expected expense savings of at least $10 million on an annual basis beginning in the first quarter of 2022.

~~Moving Forward~~

While the continuing economic and labor market recovery cannot be precisely predicted, we believe that the mid-term impacts on how people view, find and conduct work will continue to align with our strategic path.

As a result, we have continued to move forward with our specialization strategy, reinventing our operating model and reorganizing our business into five distinct reporting segments. These specialties represent areas where we see the most robust demand, the most promising growth opportunities, and ~~where we believe we excel in attracting and placing talent.~~Kelly’s proven ability to win. Our ~~current operating~~ segments also reflect our ~~desire~~intent to shift our portfolio toward high-margin, higher-value ~~specialties.~~specialties that deliver a competitive edge and increased shareholder value. We believe that an aggressive inorganic growth strategy will accelerate the achievement of these goals.

~~Kelly has done business in these specialties for many years, but~~As we continue our ~~current operating model represents a new approach – one that brings together both staffing and outcome-based pieces of a specialty under a single specialty leader and aggregates assets to accelerate~~strategic growth ~~and profitability. We believe this specialty structure gives us greater advantages~~journey in the ~~market, and~~year ahead, we ~~expect our disciplined focus to deliver profitable growth coming out of the crisis. In addition, we intend to~~will also invest in strategic, targeted M&A opportunities in our specialties, while optimizing our portfolio, as demonstrated by the recent acquisition of Softworld in the second quarter of 2021, the acquisition of Greenwood/Asher & Associates in the fourth quarter of 2020 and the sale of our operations in Brazil during the third quarter of 2020.

Faced with market conditions that may continue to be uneven in the near term, Kelly continues to focus on accelerating the execution of our strategic plan and making necessary investments to advance that strategy.key value drivers.

•We are ~~making strides in~~mapping our digital transformation journey, building a technology foundation to ~~sustain growth~~optimize our business, personalize the talent journey and improve the client experience. For example, in 2021 we launched Helix UX, an industry-leading talent management tool that is enabling our customers to ~~support our teams, clients~~better manage their global workforce across temporary, full-time and cloud-based talent ~~with powerful new technologies that make it faster and easier than ever to connect.~~pools.

•We are ~~using~~consistently striving to better understand and support our ~~platform,~~talent and their shifting needs. We have reallocated resources to be solely focused on the temporary worker experience, and our Equity@Work initiative is designed to break down long-standing, systemic barriers that make it difficult for many people to ~~secure enriching work. This powerful extension of our Noble Purpose uses our unique position~~participate in the ~~middle of the supply and demand equation to help more people flow into Kelly’s talent pools, while also helping families, communities and economies thrive.~~labor market.

•We are ~~committed to helping each Kelly team define the fastest, most efficient and creative paths to achieving their business goals by removing unnecessary work and refocusing efforts~~investing in the ~~right places~~talent experience of our full-time employees, taking action to ~~achieve~~ensure we have the people coaches and performance management systems that will help our ~~defined performance expectations~~employees thrive in ~~the most effective way possible.~~their Kelly careers. We know that our success is powered by our people, and we are aiming for industry-leading results.

~~While~~As we execute our specialty growth strategy, we are focused on both the ~~COVID-19 pandemic has resulted~~speed and scope of change. To that end, in ~~uncertainty~~February 2022, we completed transactions that have allowed us to strategically re-deploy resources to accelerate our growth in ~~the economy~~high-margin, high-growth specialties. Specifically, we unwound our cross-ownership with Persol Holdings and ~~the labor markets that will affect~~reduced our ~~near-term financial performance,~~ownership interest in our APAC joint venture, PersolKelly. Monetizing our investments in Persol Holdings and PersolKelly provides us with additional capital, which we have ~~determined long-term measures~~already begun to ~~gauge~~use to accelerate our ~~progress, including:~~

•~~Revenue~~specialty growth ~~(both organic~~strategy. In March 2022, we completed the acquisition of RocketPower, a business that diversifies and ~~inorganic)~~

•~~Gross profit rate improvement~~

•~~Conversion rate~~strengthens Kelly’s RPO business and ~~EBITDA~~opens new access to the fast-growing high-tech market. And in May 2022, we completed the acquisition of PTS, a specialty firm that expands our K-12 leadership position and provides in-school services for occupational, physical, speech and behavioral health therapies. Both acquisitions expand Kelly’s presence in high-growth, high margin specialties. As we move forward, we will continue to look for opportunities to grow both organically and inorganically in 2022 and beyond.

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Financial Measures

The constant currency (“CC”) change amounts refer to the year-over-year percentage changes resulting from translating ~~2021~~2022 financial data into U.S. dollars using the same foreign currency exchange rates used to translate financial data for ~~2020.~~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. 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 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) 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.

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Results of Operations

Total Company

(Dollars in millions)
Third Quarter September Year to Date
2021 2020 % Change 2021 2020 % Change
Revenue from services $ 1,195.4 $ 1,038.2 15.1 % $ 3,659.4 $ 3,274.6 11.8 %
Gross profit 228.9 191.0 19.8 673.2 603.5 11.5
SG&A expenses excluding restructuring charges 220.0 193.5 13.7 640.0 582.6 9.8
Restructuring charges (0.1) (0.1) (15.4) (0.1) 8.4 (101.7)
Total SG&A expenses 219.9 193.4 13.7 639.9 591.0 8.3
Goodwill impairment charge — — NM — 147.7 NM
Gain on sale of assets — — NM — 32.1 NM
Earnings (loss) from operations 9.0 (2.4) NM 33.3 (103.1) NM
Gain (loss) on investment in Persol Holdings 35.5 16.8 112.0 71.8 (31.4) NM
Other income (expense), net (0.3) (0.7) 50.1 (4.0) 3.6 (211.5)
Earnings (loss) before taxes and equity in net earnings (loss) of affiliate 44.2 13.7 222.8 101.1 (130.9) NM
Income tax expense (benefit) 11.1 (1.2) NM 19.0 (36.5) 152.0
Equity in net earnings (loss) of affiliate 1.7 1.8 (3.6) 2.3 (1.0) NM
Net earnings (loss) $ 34.8 $ 16.7 108.9 % $ 84.4 $ (95.4) NM %
Gross profit rate 19.2 % 18.4 % 0.8 pts. 18.4 % 18.4 % — pts.
Conversion rate 3.9 (1.3) 5.2 4.9 (17.1) 22.0

~~Third~~


	Second Quarter								June Year to Date
	2022			2021			% Change		2022			2021			% Change
Revenue from services	$	1,267.3		$	1,258.1		0.7	%	$	2,563.7		$	2,464.0		4.0	%
Gross profit	262.4			231.0			13.6		521.0			444.3			17.3


Total SG&A expenses	240.1			217.3			10.6		476.2			420.0			13.4

Impairment of assets held for sale	(18.5)			—			NM		(18.5)			—			NM
Gain on sale of assets	4.4			—			NM		5.3			—			NM
Earnings (loss) from operations	8.2			13.7			(40.6)		31.6			24.3			29.8
Gain (loss) on investment in Persol Holdings	—			6.3			NM		(67.2)			36.3			NM
Loss on currency translation from liquidation of subsidiary	—			—			NM		(20.4)			—			NM
Other income (expense), net	(1.1)			(0.3)			(350.6)		1.7			(3.7)			147.2
Earnings (loss) before taxes and equity in net earnings (loss) of affiliate	7.1			19.7			(64.1)		(54.3)			56.9			NM
Income tax expense (benefit)	4.9			(2.6)			282.9		(8.1)			7.9			(204.0)
Equity in net earnings (loss) of affiliate	—			1.7			NM		0.8			0.6			35.7
Net earnings (loss)	$	2.2		$	24.0		(90.8)	%	$	(45.4)		$	49.6		NM	%

Gross profit rate	20.7		%	18.4		%	2.3	pts.	20.3		%	18.0		%	2.3	pts.

Second Quarter Results

Revenue from services in the ~~third~~second quarter increased ~~15.1%~~0.7% on a reported basis and ~~14.5%~~2.7% on a constant currency basis, and reflects revenue increases in ~~all~~Education, Science, Engineering & Technology, and Outsourcing & Consulting operating segments, partially offset by declines in Professional & Industrial and International segments. Our ~~acquisition~~2022 acquisitions of ~~Softworld,~~RocketPower, an RPO solutions provider, and PTS, a ~~technology staffing and solutions~~specialty firm that provides in-school therapy services, added approximately ~~320~~150 basis points to the revenue growth rate. Compared to the ~~third~~second quarter of ~~2020,~~2021, revenue from staffing services ~~increased 11.8%~~decreased 2.8% and revenue from outcome-based services increased ~~15.1%~~5.9%. Permanent placement revenue, which is included in revenue from services, increased ~~118.0%~~33.2% from the prior year.

Gross profit increased ~~19.8%~~13.6% on a reported basis and 15.6% on a constant currency basis on higher revenue volume, combined with an increase in the gross profit rate. The gross profit rate increased 230 basis points due primarily ~~due~~ to favorable product mix, and lower employee-related costs, coupled with the impact of higher permanent placement income and the ~~acquisition~~acquisitions of ~~Softworld,~~RocketPower and PTS which ~~generates~~generate higher ~~gross profit rates, partially offset by unfavorable product mix and higher employee-related costs. Increases in the~~margins. The gross profit rate ~~for Science, Engineering & Technology and International were partially offset by decreases~~increased in ~~Professional & Industrial, Education and Outsourcing & Consulting.~~all operating segments. Permanent placement revenue, which is included in revenue from services and has very low direct costs of services, has a disproportionate impact on gross profit rates.

Total SG&A expenses increased ~~13.7%~~10.6% on a reported basis and ~~13.2%~~12.3% on a constant currency basis. SG&A expenses related to ~~Softworld,~~RocketPower and PTS, including intangible asset amortization ~~of intangibles~~expense and other operating expenses, accounted for approximately ~~500~~240 basis points of the year-over-year increase. The increase in SG&A expenses also reflects higher salary and related costs, as well as increases in performance-based incentive compensation ~~expenses and the impact of temporary expense mitigation efforts in the prior year. In addition, 2020 expenses included a $9.5 million charge related to a customer dispute in the International segment.~~expenses.

Impairment of assets held for sale relates to our decision to transition our business in Russia in May 2022. As a result, our Russian operations have been classified as a held for sale disposal group, and an impairment loss representing the excess carrying value over the fair value of the net assets, less costs to sell, has been recognized in the second quarter of 2022. Gain on sale of assets relates to the disposition of under-utilized real property located in the United States.

Earnings from operations for the ~~third~~second quarter of ~~2021~~2022 totaled ~~$9.0~~$8.2 million, compared to earnings of $13.7 million in the second quarter of 2021. The decline is related to the impairment of assets held for sale, partially offset by the gain on sale of assets and improving gross profit, net of higher SG&A expenses.

Income tax expense was $4.9 million for the second quarter of 2022 and income tax benefit was $2.6 million for the second quarter of 2021. The 2021 amount benefited $5.2 million from a ~~loss~~change in United Kingdom tax rates, and from tax exempt gains on life insurance policies. The second quarter 2022 amount had no tax benefit from losses on life insurance policies and was impacted by changes in earnings from operations.

Our tax expense is affected by recurring items, such as the amount of ~~$2.4~~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 and the tax effects of stock compensation, which are treated as discrete since they cannot be estimated.

The net earnings for the period was $2.2 million, compared to net earnings of $24.0 million from the second quarter of 2021.

Recent events in Ukraine have contributed to additional economic uncertainty in Europe. The Company does not have operations in Ukraine and we did not experience any material impact on our revenues or earnings in the second quarter. Subsequent to the end of the second quarter, we have completed a transaction to transfer our business in Russia to a local firm within the country and are no longer operating in Russia. Revenues and earnings in the International segment will be unfavorably impacted beginning in the third quarter of ~~2020.~~2022, but we do not expect to incur significant additional losses upon the completion of a transaction in the third quarter.

June Year-to-Date Results

Revenue from services in the first six months of 2022 increased 4.0% on a reported basis and 5.8% on a constant currency basis, and reflects revenue increases in Education, Science, Engineering & Technology, and Outsourcing & Consulting operating segments, partially offset by declines in Professional & Industrial and International segments. Our acquisition of Softworld, a technology staffing and solutions firm in the second quarter of 2021 and our 2022 acquisitions of RocketPower, a RPO solutions provider, and PTS, a specialty firm that provides in-school therapy services, added approximately 230 basis points to the revenue growth rate. Compared to the first six months of 2021, revenue from staffing services increased 1.5% and revenue from outcome-based services increased 6.9%. Permanent placement revenue, which is included in revenue from services, increased 48.5% from the prior year.

Gross profit increased 17.3% on a reported basis and 19.0% on a constant currency basis on higher revenue volume, combined with an increase in the gross profit rate. The gross profit rate increased 230 basis points due primarily to favorable product mix, lower employee-related costs and coupled with the impact of higher permanent placement income and the acquisition of Softworld, RocketPower and PTS which generate higher gross profit rates. The gross profit rate increased in all operating segments. Included in gross profit for the first six months of 2022 is a one-time permanent placement fee from a large customer, as well as an adjustment to prior periods workers' compensation expenses, resulting in 30 basis points of favorable impact. Permanent placement revenue, which is included in revenue from services and has very low direct costs of services, has a disproportionate impact on gross profit rates.

Total SG&A expenses increased 13.4% on a reported basis and 14.8% on a constant currency basis. Approximately 370 basis points of the year-over-year increase is attributable to the first quarter SG&A expenses for Softworld and the second quarter SG&A expenses for RocketPower and PTS, including amortization of intangibles and other operating expenses. The increase in SG&A expenses also reflects increases in salary and related costs and increases in performance-based incentive compensation expenses.

Impairment of assets held for sale relates to our decision to transition our business in Russia in May 2022. As a result, our Russian operations have been classified as a held for sale disposal group and an impairment loss representing the excess carrying value over the fair value of the net assets, less costs to sell, has been recognized in the second quarter of 2022. Gain on sale of assets relates to the disposition of under-utilized real property located in the United States.

Earnings from operations for the first six months of 2022 totaled $31.6 million, compared to earnings of $24.3 million in the first six months of 2021. Improvement is due primarily to higher gross profit, net of increased SG&A expenses and gain on sale of assets, partially offset by the impairment of assets held for sale. Included in total earnings from operations in the ~~third quarter of 2021 is approximately $1.7 million related to~~first

3335

six months of 2022 and 2021 is approximately $8.6 million and $2.3 million, respectively, related to Softworld, RocketPower and PTS earnings from operations, inclusive of amortization of intangibles.~~Included in earnings from operations in the third quarter of 2020 was a $9.5 million charge related to a customer dispute.~~

~~Gain (loss)~~The loss on investment in Persol Holdings ~~represents~~in the ~~gain or~~first six months of 2022 represented the $52.4 million loss resulting from changes in the market price of our investment in the common stock of Persol ~~Holdings.~~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 ~~gains or losses fluctuate each quarter based~~gain on the investment in Persol Holdings in the first six months of 2021 resulted from changes in the quoted market price of the Persol Holdings common ~~stock at period end.~~stock.

Loss on currency translation from liquidation of subsidiary represents the impact of the substantial 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 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 ~~expense~~benefit was ~~$11.1~~$8.1 million infor the ~~third quarter~~first six months of ~~2021~~2022 and income tax ~~benefit~~expense was ~~$1.2~~$7.9 million for the ~~third quarter~~first six months of ~~2020.~~2021. These amounts were impacted by changes in the fair value of the Company's investment in Persol Holdings, which resulted in ~~charges~~a benefit of ~~$10.9~~$18.4 million and a charge of $11.1 million for June year-to-date 2022 and 2021, respectively. The 2021 amount benefited $5.2 million ~~for the third quarter of 2021~~from a change in United Kingdom tax rates, and ~~2020, respectively.~~from tax exempt gains on life insurance policies. The 2022 amounts ~~were also impacted by improved earnings~~had no tax benefit from ~~operations in the third quarter of 2021.~~losses on life insurance policies.

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 ~~are~~were treated as discrete since they cannot be estimated.

The net ~~earnings~~loss for the period ~~were $34.8~~was $45.4 million, compared to net earnings of ~~$16.7~~$49.6 million from the first six months of 2021. This change was due to the Persol Holdings investment, including the first quarter 2022 sale and related impacts, partially offset by improved operating earnings in the first six months of 2022.

Recent events in Ukraine have contributed to additional economic uncertainty in Europe. The Company does not have operations in Ukraine and we did not experience any material impact on our revenues or earnings. Subsequent to the end of the second quarter of 2022, we have completed a transaction to transfer our business in Russia to a local firm within the country and are no longer operating in Russia. Revenues and earnings in the International segment will be unfavorably impacted beginning in the third quarter of ~~2020. This change was due primarily~~2022, but we do not expect to ~~higher earnings from operations and higher gains on Persol Holdings common stock.~~

~~September Year-to-Date Results~~

~~Revenue from services~~incur significant additional losses upon the completion of a transaction in the first nine months of 2021 increased 11.8% on a reported basis and 10.3% on a constant currency basis, and reflects revenue increases in all operating segments. Our acquisition of Softworld in early April 2021 added approximately 200 basis points to the revenue growth rate.~~Compared to the first nine months of 2020, revenue from staffing services increased 9.9%, revenue from outcome-based services increased 9.0%, and permanent placement income increased 87.8%.~~

Gross profit increased 11.5% on higher revenue volume. The gross profit rate was flat in comparison to the prior year primarily due to the impact of higher permanent placement income and the acquisition of Softworld, which generates higher gross profit rates, partially offset by unfavorable product mix and higher employee-related costs. Decreases in the gross profit rate for Professional & Industrial and Outsourcing & Consulting were offset by increases in the gross profit rate for Science, Engineering & Technology, Education and International. The April 2021 acquisition of Softworld accounted for approximately 30 basis points. Government wage subsidies improved our 2020 gross profit rate by approximately 20 basis points.

Total SG&A expenses increased 8.3% compared to last year. Excluding restructuring charges, SG&A expenses in all segments increased in comparison to the prior year. SG&A expenses related to Softworld, including amortization of intangibles and other operating expenses, accounted for approximately 310 basis points to the year-over-year increase. The increase in SG&A expenses also reflects increases in performance-based incentive compensation expenses and the impact of temporary expense mitigation efforts in the prior year.

Included in SG&A expenses in the first nine months of 2020 was a $9.5 million charge related to a customer dispute and $8.4 million of restructuring charges. Actions were taken in the first quarter of 2020 to position the Company to adopt the updated operating model and to align the U.S. branch network facilities footprint with a more technology-enabled service delivery methodology.

During the first nine months of 2020, the negative reaction to the pandemic by the global equity markets also resulted in a decline in the Company's common stock price. This triggered an interim goodwill impairment test, resulting in a $147.7 million goodwill impairment charge in the first quarter of 2020.

Gain on sale of assets of $32.1 million in 2020 represents the excess of the proceeds over the cost of the headquarters properties sold in the first quarter of 2020. The main headquarters building was subsequently leased back by the Company during the first quarter of 2020.

Earnings from operations for the first nine months of 2021 totaled $33.3 million, compared to a loss from operations of $103.1 million in the first nine months of 2020. The increase in earnings from operations from the prior year primarily reflects thethird quarter.

~~impact of the goodwill impairment charge, the customer dispute charge and a restructuring charge in 2020, partially offset by the 2020 gain on sale of assets.~~

Gain (loss) on investment in Persol Holdings represents the gain or loss resulting from changes in the market price of our investment in the common stock of Persol Holdings. The gains or losses fluctuate each quarter based on the quoted market price of the Persol Holdings common stock at period end.

Other expense for the first nine months of 2021 totaled $4.0 million, compared to other income of $3.6 million for the first nine months of 2020. Included in the 2021 amount are transaction-related expenses from the April 2021 acquisition of Softworld and a one-time, non-cash write-down of an equity investment.

Income tax expense was $19.0 million in the first nine months of 2021 and income tax benefit was $36.5 million for the first nine months of 2020. These amounts were impacted by changes in the fair value of the Company's investment in Persol Holdings, which resulted in a charge of $22.0 million and a benefit of $9.6 million for September year to date 2021 and 2020, respectively. September year to date 2021 also included a benefit of $5.2 million from a change in United Kingdom tax rates. September year to date 2020 includes a tax benefit of $23.0 million on the impairment of goodwill and a tax benefit of $7.7 million from Brazil outside basis differences.

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 changes in the fair value of the Company’s investment in Persol Holdings, which are treated as discrete since they cannot be estimated. The United Kingdom rate change benefit in the second quarter of 2021, the first quarter of 2020 impairment of goodwill and the second quarter of 2020 Brazil outside basis differences were treated as discrete.

The net earnings for the period were $84.4 million, compared to a net loss of $95.4 million for the first nine months of 2020. This change was due primarily to higher earnings from operations and increased gains of Persol Holdings common stock, net of tax.

3536

Operating Results By Segment

(Dollars in millions)

Third Quarter September Year to Date
2021 2020 % Change 2021 2020 % Change
Revenue from Services:
Professional & Industrial $ 452.6 $ 446.5 1.4 % $ 1,386.7 $ 1,346.7 3.0 %
Science, Engineering & Technology 306.2 244.0 25.5 859.1 761.5 12.8
Education 66.6 27.5 142.1 284.1 195.1 45.6
Outsourcing & Consulting 113.4 87.9 29.1 320.0 261.0 22.6
International 256.8 232.4 10.5 810.1 710.6 14.0
Less: Intersegment revenue (0.2) (0.1) 103.4 (0.6) (0.3) 91.6
Consolidated Total $ 1,195.4 $ 1,038.2 15.1 % $ 3,659.4 $ 3,274.6 11.8 %


	Second Quarter						June Year to Date
	2022		2021		% Change		2022		2021		% Change
Revenue from Services:
Professional & Industrial	$	415.8	$	466.5	(10.9)	%	$	860.1	$	934.1	(7.9)	%
Science, Engineering & Technology	324.3		298.2		8.7		641.4		552.9		16.0
Education	155.5		105.9		46.8		328.9		217.5		51.2
Outsourcing & Consulting	124.4		107.3		16.0		233.5		206.6		13.0
International	247.6		280.4		(11.7)		500.4		553.3		(9.5)
Less: Intersegment revenue	(0.3)		(0.2)		116.7		(0.6)		(0.4)		83.6
Consolidated Total	$	1,267.3	$	1,258.1	0.7	%	$	2,563.7	$	2,464.0	4.0	%

~~Third~~Second Quarter Results

Professional & Industrial revenue from services ~~increased 1.4%~~decreased 10.9%. The ~~increase~~decrease was due primarily to ~~higher~~a 14.0% decline in revenue ~~in the~~from staffing ~~product due to an increase in the bill rate per hour as compared to last year,~~services resulting from lower hours volume, partially offset by higher bill rates. Included in the decline in hours was the impact of a shift of a large staffing customer to a direct hire model which resulted in lower ~~hours volume, reflecting the challenge~~staffing volume. Revenue from outcome-based services declined by 2.7% due to ~~meet customers’ increasing~~lower demand for ~~talent amid a tighter labor supply.The increase in staffing revenue was coupled with higher permanent placement income,~~our call center specialty, partially offset by ~~a decrease~~growth in ~~revenue from our outcome-based services as customer demand declined.~~other specialties.

Science, Engineering & Technology revenue from services increased ~~25.5% on a reported basis, which includes revenues from the acquisition of Softworld. On an organic basis, the~~8.7%. The revenue growth was ~~11.7%, which was~~ driven by ~~hours volume~~ increases in our ~~staffing business across most specialties~~outcome-based product as ~~customer demand increased compared to last year, which was impacted by COVID-19, coupled with~~well as increases in ~~outcome-based services~~bill rates and permanent placement ~~income.~~income in our staffing specialties.

Education revenue from services increased ~~142.1%~~46.8%, reflecting ~~the return to in-school instruction by many schools, resulting in~~an increased demand for our services as compared to a year ago, as well as the impact of ~~new customer wins. In~~ the ~~third quarter~~acquisition of ~~2020, many districts were using virtual or hybrid instruction methods due~~PTS in May 2022 which added 680 basis points to the ~~impact of COVID-19, which decreased the~~year-over-year revenue growth. Increased demand for our ~~services.~~services reflects the return to in-school instruction as compared to the prior year, as well as new customer wins and an increased fill rate of the demand of existing customers.

Outsourcing & Consulting revenue from services increased ~~29.1%~~16.0% on a reported basis, which includes the revenue from the acquisition of RocketPower in March 2022. On an organic basis, revenue growth was 5.3% due primarily to ~~the increase in hours revenue volume in our PPO specialty,~~strong demand for RPO services coupled with revenue growth in ~~both RPO and~~ MSP, ~~products.~~partially offset by declines in PPO revenue.

International revenue from services ~~increased 10.5%~~decreased 11.7% on a reported basis and decreased 4.3% in constant currency. The decrease was primarily the result of 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 4.4% on a reported basis and increased ~~8.8%~~4.0% in constant currency. Year-over-year revenue comparisons were unfavorably impacted by the sale of our staffing operations in Brazil in August 2020. Excluding Brazil, revenue increased 11.4% on a reported basis and 9.7% on acurrency with constant currency ~~basis. The increase was primarily due to higher hours volume, particularly~~growth in France, Russia and Portugal. This was partially offset by lower hours volume in Mexico, due to new labor legislation which became effective September 1, 2021 and prohibits staffing solutions not considered specialized services.most geographies.

~~September~~June Year-to-Date Results

Professional & Industrial revenue from services ~~increased 3.0%,~~decreased 7.9%. The decrease was due primarily to a 9.5% decline in staffing services resulting from lower hours volume, partially offset by higher bill ~~rate per hour on~~rates. Included in the decline in hours was the impact of a shift of a large staffing customer to a direct hire model which resulted in lower ~~hours~~staffing volume. ~~This increase was combined with an increase~~Revenue from outcome-based services declined 6.5% due to lower demand for our call center specialty, partially offset by growth in ~~revenue from permanent placement income and our outcome-based services.~~other specialties.

Science, Engineering & Technology revenue from services increased ~~12.8%~~16.0% on a reported basis, which includes ~~revenues~~revenue from the acquisition of ~~Softworld. On an organic basis,~~Softworld in the second quarter of 2021. Excluding the impact of the addition of Softworld revenue in the first quarter of 2022, the revenue growth was ~~4.4%~~9.1%, which was driven by ~~hours~~ increases in our ~~staffing business across most specialties, coupled with an increase~~outcome-based services as well as increases in bill rates and permanent placement ~~income.~~income in our staffing business.

Education revenue from services increased ~~45.6%~~51.2%, reflecting ~~the return to in-school instruction by many schools, resulting in~~an increased demand for our services as compared to a year ~~ago. In the first nine months of 2020, many districts were using virtual or hybrid instruction methods due to~~ago, as well as the impact of ~~COVID-19.~~the acquisition of PTS in May 2022 which added 330 basis points to the year-over-year revenue growth. Increased demand for our services reflects the return to in-school instruction as compared to the prior year, as well as new customer wins and an increased fill rate of the demand of existing customers.

Outsourcing & Consulting revenue from services increased ~~22.6%~~13.0% on a reported basis, which includes the revenue from the acquisition of RocketPower in March 2022. On an organic basis, revenue growth was 7.5% due primarily to ~~increased hours revenue volume in our PPO specialty,~~strong demand for RPO services coupled with revenue growth in ~~both RPO and~~ MSP, ~~products.~~partially offset by declines in PPO revenue.

International revenue from services ~~increased 14.0%~~decreased 9.5% on a reported basis and decreased 2.7% in constant currency. The decrease was primarily the result of 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 1.4% on a reported basis and increased ~~9.0%~~6.4% in constant ~~currency. Year-over-year revenue comparisons were unfavorably impacted by the sale of our staffing operations~~currency with growth in Brazil in August 2020. Excluding Brazil, revenue increased 16.8% on a reported basis and 11.6% on a constant currency basis. The increase was primarily due to higher hours volume, particularly in France, Portugal and Switzerland.

most geographies.

3738

Operating Results By Segment (continued)

(Dollars in millions)

Third Quarter September Year to Date
2021 2020 Change 2021 2020 Change
Gross Profit:
Professional & Industrial $ 76.6 $ 77.1 (0.5) % $ 227.7 $ 241.1 (5.5) %
Science, Engineering & Technology 68.1 50.7 34.5 187.8 156.0 20.4
Education 10.0 4.1 139.7 44.0 28.8 52.5
Outsourcing & Consulting 37.3 29.1 27.9 103.4 87.1 18.7
International 36.9 30.0 22.7 110.3 90.5 21.8
Consolidated Total $ 228.9 $ 191.0 19.8 % $ 673.2 $ 603.5 11.5 %
Gross Profit Rate:
Professional & Industrial 16.9 % 17.3 % (0.4) pts. 16.4 % 17.9 % (1.5) pts.
Science, Engineering & Technology 22.3 20.8 1.5 21.9 20.5 1.4
Education 15.1 15.2 (0.1) 15.5 14.8 0.7
Outsourcing & Consulting 32.8 33.1 (0.3) 32.3 33.4 (1.1)
International 14.4 12.9 1.5 13.6 12.7 0.9
Consolidated Total 19.2 % 18.4 % 0.8 pts. 18.4 % 18.4 % — pts.


	Second Quarter								June Year to Date
	2022			2021			Change		2022			2021			Change
Gross Profit:
Professional & Industrial	$	77.8		$	75.2		3.6	%	$	160.9		$	151.1		6.5	%
Science, Engineering & Technology	75.2			66.5			13.1		149.0			119.7			24.5
Education	26.0			16.8			55.0		52.6			34.0			54.9
Outsourcing & Consulting	46.2			34.8			32.8		83.5			66.1			26.3
International	37.2			37.7			(1.5)		75.0			73.4			2.1

Consolidated Total	$	262.4		$	231.0		13.6	%	$	521.0		$	444.3		17.3	%

Gross Profit Rate:
Professional & Industrial	18.7		%	16.1		%	2.6	pts.	18.7		%	16.2		%	2.5	pts.
Science, Engineering & Technology	23.2			22.3			0.9		23.2			21.6			1.6
Education	16.7			15.8			0.9		16.0			15.6			0.4
Outsourcing & Consulting	37.2			32.5			4.7		35.8			32.0			3.8
International	15.0			13.4			1.6		15.0			13.3			1.7
Consolidated Total	20.7		%	18.4		%	2.3	pts.	20.3		%	18.0		%	2.3	pts.

~~Third~~Second Quarter ~~Results~~

~~Gross profit for the Professional & Industrial segment decreased due to a decline in the gross profit rate, partially offset by higher revenue volume.In comparison to the prior year, the gross profit rate decreased 40 basis points.This decrease reflects increased costs associated with our outcome-based services, and an increase in employee-related costs.These decreases were partially offset by the impact of increased permanent placement income this year.~~

~~The Science, Engineering & Technology gross profit increased on higher revenue volume and an increase in the gross profit rate.~~The gross profit rate increased 150 basis points due to improved specialty mix, including the acquisition of Softworld which generates higher gross profit margins, coupled with increased permanent placement income, partially offset by higher employee-related costs.

Gross profit for the Education segment increased on higher revenue volume, partially offset by a decrease in the gross profit rate. The gross profit rate decreased 10 basis points due primarily to higher employee-related costs, partially offset by an increase in permanent placement income from Greenwood/Asher, our acquisition in late 2020.

The Outsourcing & Consulting gross profit increased on higher revenue volume, partially offset by a decrease in the gross profit rate. The gross profit rate decreased 30 basis points primarily due to a change in product mix within this segment, as revenues increased in our PPO product, which generates lower profit margins.

International gross profit increased on higher revenue volume and an increase in the gross profit rate. The gross profit rate increased 150 basis points primarily due to customer mix and higher permanent placement income.

~~September Year-to-Date~~ Results

Gross profit for the Professional & Industrial segment ~~decreased~~increased due to ~~a decrease~~an increase in the gross profit rate, partially offset by ~~higher~~lower revenue volume. In comparison to the prior year, the gross profit rate ~~decreased 150~~increased 260 basis points. This ~~decrease~~increase reflects ~~the unfavorable year-over-year impact of government wage subsidies, increased costs associated with our outcome-based services, higher~~improved business mix, lower employee-related costs ~~in the staffing product~~ and ~~a shift in product mix compared to the prior year as demand~~

~~for staffing services increased. These decreases were partially offset by the impact of increased~~higher permanent placement ~~income this year.~~income.

The Science, Engineering & Technology gross profit increased on higher revenue volume and an increase in the gross profit rate. The gross profit rate increased ~~140~~90 basis points due to ~~increased~~improved specialty mix and higher permanent placement income, ~~coupled with improved specialty mix, including the acquisition of Softworld in April 2021.~~partially offset by higher employee-related costs.

Gross profit for the Education segment increased on higher revenue volume and an increase in the gross profit rate. The gross profit rate increased 7090 basis points due primarily to the acquisition of PTS which generates higher margins, and higher permanent placement income ~~from~~at Greenwood/~~Asher, our acquisition in late 2020. This increase was partially offset by the unfavorable year-over-year impact of government wage subsidies and higher employee-related costs.~~Asher.

The Outsourcing & Consulting gross profit increased on higher revenue volume, ~~partially offset by a decrease~~combined with an increase in the gross profit rate. The gross profit rate ~~decreased 110~~increased 470 basis points primarily due to a change in product mix within this ~~segment, as~~segment. Growth in RPO, including the acquisition of RocketPower, and MSP with higher margins was coupled with decreased revenues ~~increased~~ in our PPO product, which generates lower profit margins.

International gross profit decreased 1.5% on a reported basis due to the impact of currency exchange rates. On a constant currency basis, gross profit increased 7.3%. The increase was due to a higher gross profit rate, partially offset by lower revenue volume. In comparison to the prior year, the gross profit rate increased 160 basis points primarily due to higher margin specialized solutions in Mexico following the legislative change, improved customer mix and higher permanent placement income.

June Year-to-Date Results

Gross profit for the Professional & Industrial segment increased due to an increase in the gross profit rate, partially offset by lower revenue volume. In comparison to the prior year, the gross profit rate increased 250 basis points. This increase reflects higher permanent placement income, including conversion fees related to a large customer, lower employee-related costs and improved business mix.

Science, Engineering & Technology gross profit increased on higher revenue volume and an increase in the gross profit rate. The gross profit rate increased 90160 basis points due to improved specialty mix, including the acquisition of Softworld which generates higher gross profit margins, and increased permanent placement income, partially offset by higher employee-related costs.

Gross profit for the Education segment increased on higher revenue volume and an increase in the gross profit rate. The gross profit rate increased 40 basis points due primarily to the acquisition of PTS which generates higher margins and higher permanent placement income.

Outsourcing & Consulting gross profit increased on higher revenue volume, combined with an increase in the gross profit rate. The gross profit rate increased 380 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 increased due to an increase in the gross profit rate, partially offset by lower revenue volume. In comparison to the prior year, the gross profit rate increased 170 basis points primarily due to higher margin specialized solutions in Mexico following the legislative change, customer ~~mix.~~mix and higher permanent placement income.

3940

Operating Results By Segment (continued)

(Dollars in millions)

Third Quarter September Year to Date
2021 2020 % Change 2021 2020 % Change
SG&A Expenses:
Professional & Industrial $ 69.4 $ 65.3 6.2 % $ 207.8 $ 210.4 (1.2) %
Science, Engineering & Technology 48.4 31.3 54.8 131.0 99.1 32.2
Education 17.0 11.6 46.1 46.5 37.7 23.1
Outsourcing & Consulting 30.7 25.4 20.5 89.2 79.1 12.6
International 34.5 39.9 (13.6) 102.2 101.4 0.7
Corporate expenses 19.9 19.9 0.8 63.2 63.3 (0.1)
Consolidated Total $ 219.9 $ 193.4 13.7 % $ 639.9 $ 591.0 8.3 %
Third Quarter September Year to Date
2021 2020 % Change 2021 2020 % Change
Restructuring Charges Included in SG&A Expenses:
Professional & Industrial $ — $ (0.1) NM % $ — $ 4.3 NM %
Science, Engineering & Technology — — NM — 0.5 NM
Education — — NM — 0.8 NM
Outsourcing & Consulting — — NM — — NM
International — — NM — 1.1 NM
Corporate expenses (0.1) — NM (0.1) 1.7 (103.7)
Consolidated Total $ (0.1) $ (0.1) (15.4) % $ (0.1) $ 8.4 (101.7) %


	Second Quarter						June Year to Date
	2022		2021		% Change		2022		2021		% Change
SG&A Expenses:
Professional & Industrial	$	67.4	$	69.0	(2.2)	%	$	138.8	$	138.4	0.3	%
Science, Engineering & Technology	54.8		46.9		16.9		108.0		82.6		30.8
Education	20.4		15.3		33.4		39.0		29.5		32.4
Outsourcing & Consulting	39.8		30.1		32.5		74.1		58.5		26.7
International	34.6		34.6		(0.1)		67.8		67.7		0.2

Corporate expenses	23.1		21.4		7.9		48.5		43.3		12.0
Consolidated Total	$	240.1	$	217.3	10.6	%	$	476.2	$	420.0	13.4	%

~~Third~~Second Quarter Results

Total SG&A expenses in Professional & Industrial ~~increased 6.2%~~decreased 2.2% from the prior ~~year. Year-over-year comparisons were impacted by temporary expense mitigation actions in place in the third quarter of 2020 as a result of lower revenue volume~~year, primarily due to ~~the COVID-19 disruption. This increase was combined with an increase~~lower expenses in ~~performance-based incentive compensation~~our outcome-based call center specialty as volume has declined compared to the prior ~~year.~~year period.

Total SG&A expenses in Science, Engineering & Technology increased ~~54.8%~~16.9% from the prior year, primarily due to higher performance-based incentive compensation expense and higher salary-related costs from higher headcount and salary increases.

Total SG&A expenses in Education increased 33.4% from the prior year, and includes the impact of the acquisition of PTS in May 2022. Excluding the impact of the PTS acquisition, SG&A expenses increased 25.0% from the prior year, due primarily to higher salary-related expenses as headcount has increased as revenues have grown.

Total SG&A expenses in Outsourcing & Consulting increased 32.5% from the prior year, and includes the impact of the acquisition of RocketPower in March 2022. Excluding the impact of the RocketPower acquisition, SG&A expenses increased 19.5% from the prior year, due primarily due to higher salary-related expenses as a result of headcount and salary increases.

Total SG&A expenses in International decreased 0.1% on a reported basis and increased 8.2% on a constant currency basis. This increase was due to higher salary-related expenses driven by an increase in headcount, reflecting improving revenue in Europe.

Corporate expenses increased 7.9% primarily due to higher performance-based incentive compensation expense.

June Year-to-Date Results

Total SG&A expenses in Professional & Industrial increased 0.3% from the prior year, primarily due to higher performance-based incentive compensation expenses mostly offset by lower expenses to support lower volumes in our outcome-based call center specialty.

Total SG&A expenses in Science, Engineering & Technology increased 30.8% from the prior year, and includes the impact of the acquisition of Softworld in the second quarter of 2021. ~~On an organic basis,~~Excluding the impact of the addition of Softworld expenses in the first quarter of 2022, SG&A expenses increased ~~24.0%~~18.4% from the prior year. ~~Year-over-year increases in salaries and related costs result from higher headcount in sales and recruiting talent, and an~~The increase in organic SG&A expenses are due primarily to higher performance-based incentive ~~compensation. These increases were combined with the impact of temporary~~compensation expense ~~mitigation actions in place in the third quarter of 2020 as a result of lower revenue volume due to the COVID-19 disruption.~~and higher salary-related costs from increasing headcount.

Total SG&A expenses in Education increased ~~46.1%~~32.4% from the prior year, ~~primarily due to higher salary~~ and incentives expense related to improving revenues. In addition, year-over-year comparisons of salaries and related costs were impacted by temporary expense mitigation actions in place in the third quarter of 2020 to mitigateincludes the impact of the ~~lower revenue volume as a result~~acquisition of ~~the COVID-19 disruption. Expenses~~PTS in ~~the third quarter of 2021 include a charge to adjust the contingent consideration due to the former owners of Greenwood/Asher & Associates as a result of better than anticipated performance.~~

Total SG&A expenses in Outsourcing & Consulting increased 20.5% from the prior year. Year-over-year comparisons of salaries and related costs were impacted by temporary expense mitigation actions taken in the second quarter of 2020 to mitigateMay 2022. Excluding the impact of the ~~lower revenue volume~~PTS acquisition, SG&A expenses increased 28.0% from the prior year, due primarily to higher salary-related expenses as ~~a result of the COVID-19 disruption. These increases were combined with an increase in salaries and performance-based incentive compensation, reflecting improving revenue.~~headcount has increased as revenues have grown.

4041

Total SG&A expenses in Outsourcing & Consulting increased 26.7% from the prior year, and includes the impact of the acquisition of RocketPower in March 2022. Excluding the impact of the RocketPower acquisition, SG&A expenses increased 20.0% from the prior year, due primarily to higher salary-related expenses as headcount has increased as revenues have grown.

Total SG&A expenses in International ~~decreased 13.6%~~increased 0.2% on a reported basis and decreased 14.8% on a constant currency basis. The prior year included a specific customer provision in Mexico following a negative outcome of litigation over a disputed accounts receivable balance for certain services rendered several years ago. Excluding this one-time charge, SG&A expenses increased ~~13.6% on a reported basis and 12.0%~~7.4% on a constant currency basis. This increase was due to higher ~~performance-based incentive compensation as compared to the prior year and higher~~ salary-related expenses ~~due to increased~~driven by an increase in headcount, ~~mainly~~reflecting improving revenue in ~~our branch network.~~Europe.

~~September Year-to-Date Results~~

Total SG&A expenses in Professional & Industrial decreased 1.2% and increased 0.8% excluding restructuring charges. Year-over-year comparisons were impacted by temporary expense mitigation actions enacted in 2020 as a result of lower revenue volume due to the COVID-19 disruption. This increase was combined with an increase in salaries and performance-based incentive compensation and was partially offset by reduced facilities expense as we continue to evaluate and reduce our branch footprint.

~~Total SG&A expenses in Science, Engineering & Technology increased 32.2%, or 32.9% excluding restructuring charges. Excluding restructuring charges and the acquisition of Softworld, SG&A~~Corporate expenses increased 14.7%. Year-over-year comparisons of salaries and related costs were impacted by temporary expense mitigation actions taken in response to the COVID-19 disruption in 2020. These increases were combined with higher headcount in sales and recruiting talent, and an increase in performance-based incentive compensation.

Total SG&A expenses in Education increased 23.1%, or 26.0% excluding restructuring charges, primarily due to higher salary and incentives expense related to improving revenues. In addition, year-over-year comparisons of salaries and related costs were impacted by temporary expense mitigation actions taken in 2020 in response to the COVID-19 disruption. Expenses in 2021 include a charge to adjust the contingent consideration due to the former owners of Greenwood/Asher & Associates as a result of better than anticipated performance.

Total SG&A expenses in Outsourcing & Consulting increased 12.6% in comparison to the prior year. Year-over-year comparisons of salaries and related costs were impacted by temporary expense actions taken in 2020 in response to the impact of the COVID-19 disruption. These increases were combined with an increase in salaries and performance-based incentive compensation reflecting improving revenue.

Total SG&A expenses in International increased 0.7% on a reported basis and decreased 3.9% on a constant currency basis. The prior year included a charge related to a customer dispute in Mexico, SG&A expenses related to our staffing operations in Brazil which were sold in August 2020 and restructuring charges. Excluding these items, SG&A expenses increased 16.1% on a reported basis and 10.8% on a constant currency basis. This increase was12.0% primarily due to higher performance-based incentive compensation ~~and higher salary-related expenses due to increased headcount, primarily in our branch network.~~

expense.

4142

Operating Results By Segment (continued)

(Dollars in millions)

Third Quarter September Year to Date
2021 2020 % Change 2021 2020 % Change
Earnings (Loss) from Operations:
Professional & Industrial $ 7.2 $ 11.8 (38.1) % $ 19.9 $ 30.7 (34.9) %
Science, Engineering & Technology 19.7 19.4 1.7 56.8 56.9 (0.2)
Education (7.0) (7.5) 6.6 (2.5) (8.9) 72.1
Outsourcing & Consulting 6.6 3.7 79.1 14.2 8.0 79.0
International 2.4 (9.9) NM 8.1 (10.9) NM
Corporate (19.9) (19.9) (0.8) (63.2) (178.9) 64.6
Consolidated Total $ 9.0 $ (2.4) NM % $ 33.3 $ (103.1) NM %


	Second Quarter						June Year to Date
	2022		2021		% Change		2022		2021		% Change
Earnings (Loss) from Operations:
Professional & Industrial	$	10.4	$	6.2	68.6	%	$	22.1	$	12.7	74.2	%
Science, Engineering & Technology	20.4		19.6		3.8		41.0		37.1		10.5
Education	5.6		1.5		278.6		13.6		4.5		203.1
Outsourcing & Consulting	6.4		4.7		34.5		9.4		7.6		23.1
International	2.6		3.1		(16.3)		7.2		5.7		25.7
Corporate	(23.1)		(21.4)		(7.9)		(48.5)		(43.3)		(12.0)
Impairment of assets held for sale	(18.5)		—		NM		(18.5)		—		NM
Gain on sale of assets	4.4		—		NM		5.3		—		NM
Consolidated Total	$	8.2	$	13.7	(40.6)	%	$	31.6	$	24.3	29.8	%

~~Third~~Second Quarter Results

Professional & Industrial reported earnings of ~~$7.2~~$10.4 million for the quarter, a ~~38.1% decrease from a year ago.~~The decrease in earnings was primarily due to increased costs of services reducing our gross profit rate in our outcome-based products, as well as increasing expenses. These were partially offset by increased revenues in our staffing product and an increase in our permanent placement income.

~~Science, Engineering & Technology reported earnings of $19.7 million for the quarter, a 1.7%~~68.6% increase from a year ago. The increase in earnings was primarily due to improved gross profit and lower SG&A expense.

Science, Engineering & Technology reported earnings of $20.4 million for the ~~impact of the Softworld acquisition, coupled with~~quarter, a 3.8% increase from a year ago. The increase in earnings was primarily due to increases in ~~organic staffing and permanent placement~~ revenues in most of our specialties within the SET business ~~unit. These increases~~unit that were partially offset by increases in certain expenses, including those related to additional full-time employees and increased performance-based incentive compensation.

Education reported ~~a loss~~earnings of ~~$7.0~~$5.6 million for the quarter, compared to ~~a loss~~earnings of ~~$7.5~~$1.5 million a year ago. The change was primarily due to the increase in revenue, reflecting the return to in-school instruction, ~~by many schools,~~ resulting in increased demand for our services as compared to a year ~~ago. In 2020, many districts were using virtual or hybrid instruction methods due to the impact~~ago, coupled with good cost management. 2022 results also include earnings of ~~COVID-19. Partially offsetting this improvement is a charge to adjust the contingent consideration due to the former owners of Greenwood/Asher & Associates.~~$0.9 million from PTS acquired in May 2022.

Outsourcing & Consulting reported earnings of ~~$6.6~~$6.4 million for the quarter, a ~~79.1%~~34.5% increase from a year ago. The increase in earnings was primarily due to the impact of increased revenue volumes within the ~~segment.~~segment, partially offset by increased costs related to additional full-time employees. 2022 results also include earnings of $1.0 million from RocketPower acquired in March 2022.

International reported earnings of ~~$2.4~~$2.6 million for the quarter, compared to earnings of $3.1 million a year ago. The decrease in earnings was primarily due to transitioning our Russian operations.

Impairment of assets held for sale relates to our decision to transition our business in Russia in May 2022. As a result, our Russian operations have been classified as a held for sale disposal group, and an impairment loss representing the excess carrying value over the fair value of ~~$9.9~~the net assets, less costs to sell, has been recognized in the second quarter of 2022. Gain on sale of assets relates to the disposition of under-utilized real property located in the United States.

June Year-to-Date Results

Professional & Industrial reported earnings of $22.1 million for the first six months of 2022, a 74.2% increase from a year ago. The increase in earnings was primarily due to improved gross profit, including conversion fees related to a large customer.

Science, Engineering & Technology reported earnings of $41.0 million for the first six months of 2022, a 10.5% increase from a year ago. The increase in earnings was primarily due to the ~~favorable comparison related to the charge for a customer dispute in Mexico in the prior year.~~

~~September Year-to-Date Results~~

Professional & Industrial reported earnings of $19.9 million, a 34.9% decrease from a year ago. The decrease in earnings was primarily due to increased costs of services reducing our gross profit rate in our outcome-based product lines and the year-over-year impact of the ~~government wage subsidies we received~~Softworld acquisition. Increases in ~~2020. These~~revenues in most of our specialties within the SET business unit were partially offset by increases in certain expenses, including those related to additional full-time employees and increased ~~revenues in our staffing product and an increase in our permanent placement income.~~performance-based incentive compensation.

~~Science, Engineering & Technology~~

Education reported earnings of ~~$56.8~~$13.6 million a 0.2% decrease from a year ago. The decrease in earnings was primarily due to higher expenses related to performance-based incentive compensation and higher salaries due to investment in additional sales and recruiting resources, which exceeded revenue and gross margin growth.~~This was partially offset by earnings from Softworld, which was acquired in April 2021.~~

~~Education reported a loss~~for the first six months of ~~$2.5 million,~~2022, compared to ~~a loss~~earnings of ~~$8.9~~$4.5 million a year ago. The change was primarily due to anthe increase in revenue, reflecting the return to in-school instruction, ~~by many schools,~~ resulting in increased demand for our

services as compared to a year ~~ago. In 2020, many districts were using virtual or hybrid instruction methods due to the impact~~ago, coupled with good cost management. 2022 results also include earnings of ~~COVID-19. Partially offsetting this improvement is a charge to adjust the contingent consideration due to the former owners of Greenwood/Asher & Associates.~~$0.9 million from PTS acquired in May 2022.

Outsourcing & Consulting reported earnings of ~~$14.2~~$9.4 million for the first six months of 2022, a ~~79.0%~~23.1% increase ~~compared to~~from a year ago. The increase in earnings was primarily due to the impact of increased revenue volumes within the ~~segment.~~segment, partially offset by increased costs related to additional full-time employees. 2022 results also include earnings of $1.0 million from RocketPower acquired in March 2022.

International reported earnings of ~~$8.1~~$7.2 million for the first six months of 2022, compared to ~~a loss~~earnings of ~~$10.9~~$5.7 million a year ago. The increase in earnings was primarily due to ~~the favorable comparison related to the charge for a customer dispute in Mexico and restructuring charges in the prior year, combined with~~ improving revenue, on a constant currency basis, in ~~Europe.~~Europe, partially offset by the impact of transitioning our Russian operations.

4344

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, which is generally outstanding for longer periods. Since receipts from customers lag payroll 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. The impact of the ~~current economic slow-down resulting from the~~ COVID-19 crisis on our business began in March 2020. While we have yet to return to pre-crisis revenue levels, we ~~are seeing continued economic momentum~~have experienced improving demand for our services and ~~sustainable~~expect a sustained recovery ~~in the third quarter of 2021.~~throughout 2022.

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, including cash held for sale, totaled ~~$51.1~~$154.0 million at the end of the ~~third~~second quarter of ~~2021~~2022 and ~~$228.1~~$119.5 million at year-end ~~2020.~~2021. As further described below, we used $107.3 million of cash for operating activities, generated ~~$31.0~~$175.6 million of cash from ~~operating activities, used $198.4 million of cash for~~ investing activities and used ~~$5.7~~$33.9 million of cash for financing activities.

Operating Activities

In the first ~~nine~~six months of ~~2021,~~2022, we ~~generated $31.0~~used $107.3 million of net cash ~~from~~for operating activities, as compared to generating ~~$216.5~~$47.6 million in the first ~~nine~~six months of ~~2020,~~2021, primarily due to increased working capital requirements as revenue levels continue to recover or surpass pre-COVID levels in certain ~~segments.~~segments and as a result, in increasing days sales outstanding. As of the end of the second quarter of 2022, Global DSO has increased primarily as a result of an increase in the mix of MSP and other customers with extended terms and, to a lesser extent, the timing of customer payments. Accounts payable and accrued liabilities was $734.7 million and increased from year-end 2021 as a result of increased MSP supplier payables. In addition, we paid $50.1 million of income taxes related to the sale of Persol Holdings common stock in 2022.

Trade accounts receivable totaled ~~$1.4~~$1.5 billion at the end of the ~~third~~second quarter of ~~2021.~~2022. Global DSO was 63 days at the end of the ~~third~~second quarter of ~~2021, 64~~2022, 60 days at year-end ~~2020~~2021 and 6160 days at the end of the ~~third~~second quarter of ~~2020.~~2021.

Our working capital position (total current assets less total current liabilities) was ~~$460.4~~$576.0 million at the end of the ~~third~~second quarter of ~~2021, a decrease~~2022, an increase of ~~$163.6~~$82.5 million from year-end ~~2020.~~2021. Excluding the ~~decrease~~increase in cash, working capital increased ~~$15.9~~$61.3 million from year-end ~~2020.~~2021. The current ratio (total current assets divided by total current liabilities) was ~~1.4~~1.5 at the end of the ~~third~~second quarter of ~~2021~~2022 and ~~1.7~~ at year-end ~~2020.~~2021.

Investing Activities

In the first ~~nine~~six months of ~~2021,~~2022, we ~~used $198.4~~generated $175.6 million of cash ~~for~~from investing activities, as compared to ~~generating $10.3~~using $201.7 million in the first ~~nine~~six months of ~~2020.~~2021. Included in cash generated from investing activities in the first six months of 2022 is $196.9 million of proceeds from the sale of the investment in Persol Holdings and $119.5 million of proceeds from the sale of almost all of the Company's shares in our equity investment in PersolKelly. This was partially offset by $58.3 million of cash used for the acquisition of RocketPower in March 2022, net of cash received and $84.8 million of cash used for the acquisition of PTS in May 2022, net of cash received. Included in cash used for investing activities in the first ~~nine~~six months of 2021 is ~~$213.0~~$219.0 million of cash used for the acquisition of Softworld in April 2021, net of cash received and including working capital adjustments. Included in cash from investing activities in the first nine months of 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. This was partially offset by $36.4 million of cash used for the acquisition of Insight in January 2020, net of the cash received and including working capital adjustments.received.

Financing Activities

In the first ~~nine~~six months of ~~2021,~~2022, we used ~~$5.7~~$33.9 million of cash for financing activities, as compared to using ~~$6.8~~$1.0 million in the first ~~nine~~six months of ~~2020.~~2021. The change in cash ~~from~~used for financing activities was primarily related to the buyback of the Company's common shares held by Persol Holdings for $27.2 million in the first six months of 2022 and the year-over-year ~~decrease~~change in dividend payments. Dividends paid per common share were $0.125 in the first six months of ~~$1.3 million~~2022 and $0.00 in first six months of 2021.

Changes in net cash used for financing activities are also impacted by short-term borrowing activities. There was no change in short-term borrowings and lower dividend payments during the first nine months of 2021 as compared to the same period in the prior year. These decreases were partially offset by $1.6 million, representing a portion of the contingent consideration payment made in the first ~~nine~~six months of ~~2021 related to our 2020 acquisition of Insight.~~

2022. The change in short-term borrowings in the first ~~nine~~six months of 2021 ~~and the first nine months of 2020~~ was primarily due to payments on local lines of credit. ~~Dividends paid per common share were $0.05 in the first nine months of 2021 and $0.075 in first nine months of 2020.~~

There was no debt at the end of the ~~third~~second quarter of ~~2021, compared to $0.3 million~~2022 and at year-end ~~2020, which represented local borrowings.~~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 0.0% at the end of the ~~third~~second quarter of ~~2021~~2022 and at year-end ~~2020.~~2021.

New Accounting Pronouncements

See New Accounting Pronouncements footnote in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q for a description of new accounting pronouncements.

Critical Accounting Estimates

For a discussion of our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2020~~2021 Form 10-K.

Contractual Obligations and Commercial Commitments

There were no significant changes to our contractual obligations and commercial commitments from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2020~~2021 Form 10-K. 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.Additional funding sources could include asset-based lending, additional bank facilities or sale of non-core assets. To meet significant cash requirements related to our nonqualified retirement plan, we may utilize proceeds from Company-owned life insurance policies. During 2020, cash generated from operations was supplemented by the deferral of payments of the Company's U.S. social security taxes as allowed by the Coronavirus Aid, Relief, and Economic Security Act. ~~Such~~We have repaid $59.4 million, including $29.5 million in the first quarter of 2022 and the remaining deferrals of $57.6 million are required to be repaid by ~~the end of 2021 and 2022.~~

January 3, 2023.

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 end of the ~~third~~second quarter of ~~2021,~~2022, these reviews have not resulted in specific plans to repatriate ~~targeted amounts~~a majority of ~~foreign subsidiary cash.~~our international cash balances. We expect much of our international cash will be needed to fund working capital growth in our local operations as working capital needs, primarily trade accounts receivable, increase during periods of growth. A cash pooling arrangement (the “Cash Pool”) 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.

As of the ~~third~~second quarter of ~~2021,~~2022, we had $200.0 million of available capacity on our $200.0 million revolving credit facility and $97.0 million of available capacity on our $150.0 million securitization facility. The securitization facility carried no short-term borrowings and $53.0 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. As of the end of the ~~third~~second quarter of ~~2021,~~2022, we met the debt covenants related to our revolving credit facility and securitization facility.

We have historically managed our cash and debt 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 over the next several quarters if demand for our services continues to increase and to pay the remaining deferred payroll tax balances ~~50%~~noted above by January 3, 2023.

In February 2022, we completed transactions to monetize a substantial portion of ~~which are due~~our assets in the ~~fourth~~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 our ownership interest in PersolKelly to our joint venture partner. In the second quarter of ~~both 2021 and 2022.~~2022, the Company paid $50.1 million in taxes resulting from the sale of the 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.

4547

Forward-Looking Statements

Certain statements contained in this report and in our investor conference call related to these results are “forward-looking” statements within the meaning of the ~~Private Securities Litigation Reform Act of 1995.~~applicable securities laws and regulations. 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 ~~recent~~impact of the novel coronavirus (COVID-19) outbreak, competitive market pressures including pricing and technology introductions and disruptions, disruption in the labor market and 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, our ability to successfully develop new service offerings, 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 government or government contractors, the risk of damage to our brand, 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 investments in equity affiliates including PersolKelly Pte. Ltd.,~~ 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 anticorruption, 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 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 undertake no duty to update 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 the Company’s Annual Report on Form 10-K.

4648

Item 3. 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 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 ~~2021 third~~2022 second quarter 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 (loss). See Fair Value Measurements footnote in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q 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 4. Controls and Procedures.

Based on their evaluation as of the end of the period covered by this Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s 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.

On ~~April 5, 2021, we~~March 7, 2022, the Company completed the acquisition of ~~Softworld~~RocketPower and on May 2, 2022 our KSU subsidiary completed the acquisition of PTS (see Acquisitions ~~and Disposition~~ footnote) ~~and have implemented new processes and~~. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal ~~controls to assist us in~~control over financial reporting during the ~~preparation and disclosure~~first year of ~~financial information. Given~~an acquisition while integrating the ~~significance of the Softworld acquisition and the complexity of systems and business processes,~~acquired company. Accordingly, we intend to exclude the acquired ~~Softworld business~~RocketPower and PTS businesses from our assessment and report on internal control over financial reporting for the year ending January ~~2, 2022.~~1, 2023. We are in the process of integrating RocketPower and PTS into our system of internal control over financial reporting.

~~With the exception of the integration activities in connection with the Company's acquisition of Softworld,~~Except as noted above, there ~~were~~was no ~~changes~~change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

4749

PART II. OTHER INFORMATION

Item 1. 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, violations of privacy rights, anti-competition regulations, commercial and contractual disputes, and ~~tax related~~tax-related 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 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.

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. The Authority announced its decision on December 18, 2020, levying a fine against the trade association with joint and several secondary ~~liabilities~~liability placed on the 20 member companies. ~~Our apportioned secondary liability is approximately $300,000.~~ Certain ~~other~~ member companies exercised their right to challenge the ~~decision, which could~~decision. Publication of the judgement by the court will impact the ~~apportionment. The~~apportionment of secondary liability initially announced by the Competition Authority. However, 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 1A. Risk Factors.

~~The following risk factor has~~There have been ~~updated from~~no material changes in the Company's risk factors previously disclosed in Part I, Item 1A of the Company's Annual Report filed on ~~the~~ Form 10-K for the year ended January ~~3, 2021.~~

~~Our business has been adversely impacted by the recent novel coronavirus (COVID-19) outbreak and we expect adverse business and economic conditions will continue in the future.~~

The outbreak of the novel coronavirus across the globe negatively impacted the economies and general welfare in the countries in which we operate, as well as in the countries where our customers provide goods and services. In addition, health concerns related to the outbreak and in some cases the lack of access to childcare have negatively impacted talent supply. ~~Throughout the pandemic, we maintained our focus on the health and safety of our employees, contractors, customers and suppliers around the world.~~Our emergency management team tracks the impact of COVID-19, including the deployment of vaccines, implementation of health and safety measures across our various business segments, and development of plans for safely continuing operations.

~~The demand for staffing services is significantly affected by general economic conditions.~~The economic downturn and uncertainties related to the duration of the COVID-19 pandemic adversely impacted, and continues to impact, the staffing industry and the Company’s ability to forecast its financial performance.

The COVID-19 outbreak and related containment and mitigation efforts resulted in a substantial decline in our revenues. We expect that our revenues will continue to be impacted until demand for our services and the labor supply recover. The impact on our business, financial condition and results of operations could be material. Likewise, the financial viability of third parties on which we rely to provide staffing services or manage critical business functions could also be impacted by COVID-19. Due to the ongoing nature of the pandemic, we are not able to predict with certainty the timing or the extent of the recovery. Business decisions by customers made in response to the COVID-19 pandemic, including automation, social distancing and remote work, if sustained in a post-pandemic business environment, could negatively impact customer demand for our services.

2, 2022.

4850

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) Sales of Equity Securities Not Registered Under the Securities Exchange Act of 1933

None.

During the ~~third~~second quarter of ~~2021,~~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)
July 5, 2021 through August 8, 2021 454 $ 22.52 — $ —
August 9, 2021 through September 5, 2021 215 22.33 — $ —
September 6, 2021 through October 3, 2021 172 20.37 — $ —
Total 841 $ 22.03 —


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)
April 4, 2022 through May 8, 2022	891	$	19.81	—	$	—

May 9, 2022 through June 5, 2022	184	18.12			$	—

June 6, 2022 through July 3, 2022	525	18.50		—	$	—

Total	1,600	$	19.18

We may reacquire shares sold to cover employee tax withholdings due upon the vesting of restricted stock and performance shares held by employees. Accordingly, ~~841~~1,600 shares were reacquired in transactions during the quarter.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

See Index to Exhibits required by Item 601, Regulation S-K, set forth on page 5052 of this filing.

4951

INDEX TO EXHIBITS

REQUIRED BY ITEM 601,

REGULATION S-K


Exhibit No.						Description
~~10.8~~10.9 *						~~Letter~~Second Addendum to Employment Agreement ~~Regarding 2021 LIBOR Cessation, dated October 25, 2021.~~

14						~~Code of Business Conduct~~between Kelly Services Management Sarl and ~~Ethics, revised August 2021.~~Berendina Maria Bekhuis Koolhaas.

31.1						Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended.

31.2						Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended.

32.1						Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

*Indicates a management contract or compensatory plan or arrangement.

SIGNATURES

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


			KELLY SERVICES, INC.

Date: ~~November 10, 2021~~August 11, 2022

			/s/ Olivier G. Thirot
			Olivier G. Thirot

			Executive Vice President and
			Chief Financial Officer
			(Principal Financial Officer)


Date: ~~November 10, 2021~~August 11, 2022

			/s/ Laura S. Lockhart
			Laura S. Lockhart

			Vice President, Corporate Controller
			and Chief Accounting Officer
			(Principal Accounting Officer)

5153


	As of Year-End 2020
Description	Total		Level 1		Level 2		Level 3
	(In millions of dollars)
Money market funds	$	120.3	$	120.3	$	—	$	—
Investment in Persol Holdings	164.2		164.2		—		—

Total assets at fair value	$	284.5	$	284.5	$	—	$	—

Brazil indemnification	$	(2.6)	$	—	$	—	$	(2.6)
Greenwood/Asher earnout	(2.1)		—		—		(2.1)
Insight earnout	(1.7)		—		—		(1.7)

Total liabilities at fair value	$	(6.4)	$	—	$	—	$	(6.4)


	As of Year-End 2020		Additions to Goodwill		Impairment Adjustments		As of Third Quarter-End 2021
	(In millions of dollars)
Science, Engineering & Technology	$	—	$	111.3	$	—	$	111.3
Education	3.5		—		—		3.5
Total	$	3.5	$	111.3	$	—	$	114.8