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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 1, 2023
OR
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)
Delaware38-1510762
(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
----------------------------------------------------------------------
(Registrant’s telephone number, including area code)

No Change
-----------------------------------------------------------------------
(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 CommonKELYANASDAQ Global Market
Class B CommonKELYBNASDAQ 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 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 filerAccelerated filer
Non-accelerated filerSmaller 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 October 30, 2023, 31,953,850 shares of Class A and 3,321,601 shares of Class B common stock of the Registrant were outstanding.
2


KELLY SERVICES, INC. AND SUBSIDIARIES 
 Page Number

3


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 Ended39 Weeks Ended
 October 1,
2023
October 2,
2022
October 1,
2023
October 2,
2022
Revenue from services$1,118.0 $1,167.9 $3,603.5 $3,731.6 
Cost of services889.5 927.3 2,880.3 2,970.0 
Gross profit228.5 240.6 723.2 761.6 
Selling, general and administrative expenses228.4 231.1 703.8 707.3 
Asset impairment charge  2.4  
Goodwill impairment charge 30.7  30.7 
Loss on disposal 0.2  18.7 
Gain on sale of assets   (5.3)
Earnings (loss) from operations0.1 (21.4)17.0 10.2 
Loss on investment in Persol Holdings   (67.2)
Loss on currency translation from liquidation of subsidiary   (20.4)
Other income (expense), net1.6 0.2 3.0 1.9 
Earnings (loss) before taxes and equity in net earnings of affiliate1.7 (21.2)20.0 (75.5)
Income tax expense (benefit)(4.9)(5.0)(5.0)(13.1)
Net earnings (loss) before equity in net earnings of affiliate6.6 (16.2)25.0 (62.4)
Equity in net earnings of affiliate   0.8 
Net earnings (loss)$6.6 $(16.2)$25.0 $(61.6)
Basic earnings (loss) per share$0.18 $(0.43)$0.68 $(1.62)
Diluted earnings (loss) per share$0.18 $(0.43)$0.67 $(1.62)
Average shares outstanding (millions):  
Basic35.4 37.9 36.2 38.2 
Diluted35.8 37.9 36.5 38.2 
 See accompanying unaudited Notes to Consolidated Financial Statements.
4


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In millions of dollars)
 
 13 Weeks Ended39 Weeks Ended
 October 1,
2023
October 2,
2022
October 1,
2023
October 2,
2022
Net earnings (loss)$6.6 $(16.2)$25.0 $(61.6)
Other comprehensive income (loss), net of tax:  
Foreign currency translation adjustments, net of tax benefit of $0.0, $0.1, $0.1, and tax expense of $0.0, respectively(4.3)(8.8)0.8 (17.4)
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 1.9  4.6 
Foreign currency translation adjustments(4.3)(6.9)0.8 7.6 
Other comprehensive income (loss)(4.3)(6.9)0.8 7.6 
Comprehensive income (loss)$2.3 $(23.1)$25.8 $(54.0)

See accompanying unaudited Notes to Consolidated Financial Statements.
5


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
(UNAUDITED)
(In millions)
October 1,
2023
January 1,
2023
Assets
Current Assets  
Cash and equivalents$117.2 $153.7 
Trade accounts receivable, less allowances of $11.1 and $11.2 respectively1,388.2 1,491.6 
Prepaid expenses and other current assets86.1 69.9 
Total current assets1,591.5 1,715.2 
Noncurrent Assets
Property and equipment:
Property and equipment167.0 166.8 
Accumulated depreciation(138.2)(139.0)
Net property and equipment28.8 27.8 
Operating lease right-of-use assets59.9 66.8 
Deferred taxes315.3 299.7 
Goodwill, net151.1 151.1 
Other assets403.4 403.2 
Total noncurrent assets958.5 948.6 
Total Assets$2,550.0 $2,663.8 

See accompanying unaudited Notes to Consolidated Financial Statements.

6


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
(UNAUDITED)
(In millions)
October 1,
2023
January 1,
2023
Liabilities and Stockholders’ Equity
Current Liabilities  
Short-term borrowings$ $0.7 
Accounts payable and accrued liabilities647.5 723.3 
Operating lease liabilities13.2 14.7 
Accrued payroll and related taxes287.8 315.8 
Accrued workers’ compensation and other claims22.8 22.9 
Income and other taxes54.0 51.4 
Total current liabilities1,025.3 1,128.8 
Noncurrent Liabilities  
Operating lease liabilities51.5 55.0 
Accrued workers’ compensation and other claims40.5 40.7 
Accrued retirement benefits185.6 174.1 
Other long-term liabilities11.4 11.0 
Total noncurrent liabilities289.0 280.8 
Commitments and contingencies (see Contingencies footnote)
Stockholders’ Equity  
Capital stock, $1.00 par value  
Class A common stock, 100.0 shares authorized; 35.2 shares issued at 2023 and 35.1 shares issued at 202235.2 35.1 
Class B common stock, 10.0 shares authorized; 3.3 shares issued at 2023 and 3.4 shares issued at 20223.3 3.4 
Treasury stock, at cost 
Class A common stock, 3.2 shares at 2023 and 1.0 shares at 2022(56.8)(19.5)
Class B common stock(0.6)(0.6)
Paid-in capital29.3 28.0 
Earnings invested in the business1,233.0 1,216.3 
Accumulated other comprehensive income (loss)(7.7)(8.5)
Total stockholders’ equity1,235.7 1,254.2 
Total Liabilities and Stockholders’ Equity$2,550.0 $2,663.8 

See accompanying unaudited Notes to Consolidated Financial Statements.
7


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In millions of dollars)

 13 Weeks Ended39 Weeks Ended
 October 1,
2023
October 2,
2022
October 1,
2023
October 2,
2022
Capital Stock  
Class A common stock  
Balance at beginning of period$35.2 $35.1 $35.1 $36.7 
Conversions from Class B  0.1  
Share retirement   (1.6)
Balance at end of period35.2 35.1 35.2 35.1 
Class B common stock  
Balance at beginning of period3.3 3.4 3.4 3.4 
Conversions to Class A  (0.1) 
Balance at end of period3.3 3.4 3.3 3.4 
Treasury Stock  
Class A common stock  
Balance at beginning of period(50.7)(11.9)(19.5)(14.5)
Net issuance of stock awards and other1.3 0.1 4.9 2.7 
Purchase of treasury stock(7.4) (42.2) 
Balance at end of period(56.8)(11.8)(56.8)(11.8)
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 period29.0 24.9 28.0 23.9 
Net issuance of stock awards0.3 1.7 1.3 2.7 
Balance at end of period29.3 26.6 29.3 26.6 
Earnings Invested in the Business  
Balance at beginning of period1,229.1 1,239.2 1,216.3 1,315.0 
Net earnings (loss)6.6 (16.2)25.0 (61.6)
Dividends(2.7)(2.9)(8.3)(7.7)
Share retirement   (25.6)
Balance at end of period1,233.0 1,220.1 1,233.0 1,220.1 
Accumulated Other Comprehensive Income (Loss)  
Balance at beginning of period(3.4)(13.2)(8.5)(27.7)
Other comprehensive income (loss), net of tax(4.3)(6.9)0.8 7.6 
Balance at end of period(7.7)(20.1)(7.7)(20.1)
Stockholders’ Equity at end of period$1,235.7 $1,252.7 $1,235.7 $1,252.7 



See accompanying unaudited Notes to Consolidated Financial Statements.
8


KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions of dollars)
 39 Weeks Ended
 October 1,
2023
October 2,
2022
Cash flows from operating activities:  
Net earnings (loss)$25.0 $(61.6)
Adjustments to reconcile net earnings (loss) to net cash from operating activities:  
Asset impairment charge2.4  
Goodwill impairment charge 30.7 
Deferred income taxes on goodwill impairment charge (5.3)
Loss on disposal 18.7 
Depreciation and amortization25.6 24.7 
Operating lease asset amortization12.4 14.2 
Provision for credit losses and sales allowances1.4 1.7 
Stock-based compensation7.9 5.9 
Gain on sale of equity securities(2.0) 
Loss on investment in Persol Holdings 67.2 
Loss on currency translation from liquidation of subsidiary 20.4 
Gain on foreign currency remeasurement (5.5)
Gain on sale of assets (5.3)
Equity in net earnings of PersolKelly Asia Pacific (0.8)
Other, net0.5 3.5 
Changes in operating assets and liabilities, net of acquisition(39.8)(220.2)
Net cash from (used in) operating activities33.4 (111.7)
Cash flows from investing activities:  
Capital expenditures(12.4)(5.6)
Proceeds from sale of assets 4.5 
Acquisition of company, net of cash received (143.1)
Cash disposed from sale of Russia, net of proceeds (6.0)
Proceeds from company-owned life insurance 1.5 
Proceeds from sale of Persol Holdings investment 196.9 
Proceeds from sale of equity method investment 119.5 
Proceeds from equity securities2.0  
Other investing activities(0.4) 
Net cash (used in) from investing activities(10.8)167.7 
Cash flows from financing activities:  
Net change in short-term borrowings(0.7)0.2 
Financing lease payments(1.0)(1.2)
Dividend payments(8.3)(7.7)
Payments of tax withholding for stock awards(1.7)(0.9)
Buyback of common shares(42.2)(27.2)
Contingent consideration payments(2.5)(0.7)
Other financing activities(0.2)0.1 
Net cash used in financing activities(56.6)(37.4)
Effect of exchange rates on cash, cash equivalents and restricted cash(1.9)(7.4)
Net change in cash, cash equivalents and restricted cash(35.9)11.2 
Cash, cash equivalents and restricted cash at beginning of period162.4 119.5 
Cash, cash equivalents and restricted cash at end of period (1)
$126.5 $130.7 
9



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
October 1,
2023
October 2,
2022
Reconciliation of cash, cash equivalents and restricted cash:
Current assets:
Cash and cash equivalents$117.2 $122.4 
Restricted cash included in prepaid expenses and other current assets0.9 0.8 
Noncurrent assets:
Restricted cash included in other assets8.4 7.5 
Cash, cash equivalents and restricted cash at end of period$126.5 $130.7 

See accompanying unaudited Notes to Consolidated Financial Statements.
10

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 1, 2023, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 16, 2023 (the 2022 consolidated financial statements). There were no changes in accounting policies as disclosed in the Form 10-K. The Company’s third fiscal quarter ended on October 1, 2023 and October 2, 2022, each of which contained 13 weeks. The corresponding September year-to-date periods for 2023 and 2022 each contained 39 weeks.

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

11

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
2.  Revenue
Revenue Disaggregated by Service Type

Kelly has five 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 QuarterSeptember Year to Date
2023202220232022
Professional & Industrial
Staffing services$253.8 $297.9 $785.6 $942.3 
Permanent placement3.1 6.1 10.9 24.0 
Outcome-based services107.6 104.6 334.8 302.4 
Total Professional & Industrial364.5 408.6 1,131.3 1,268.7 
Science, Engineering & Technology
Staffing services197.7 220.6 601.2 664.3 
Permanent placement4.3 7.1 14.1 23.6 
Outcome-based services93.7 93.6 288.2 274.8 
Total Science, Engineering & Technology295.7 321.3 903.5 962.7 
Education
Staffing services126.6 103.0 578.3 427.4 
Permanent placement1.5 1.3 5.6 5.8 
Total Education128.1 104.3 583.9 433.2 
Outsourcing & Consulting
Talent solutions114.1 118.5 342.4 352.0 
Total Outsourcing & Consulting114.1 118.5 342.4 352.0 
International
Staffing services214.5 205.8 639.3 684.7 
Permanent placement5.7 5.3 17.2 17.8 
Talent solutions0.4 4.4 1.0 13.4 
Total International220.6 215.5 657.5 715.9 
Total Intersegment(5.0)(0.3)(15.1)(0.9)
Total Revenue from Services$1,118.0 $1,167.9 $3,603.5 $3,731.6 

12

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. Our International segment includes our staffing operations in Europe as well as Mexico, which is included in the Americas region.

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

Third QuarterSeptember Year to Date
2023202220232022
Americas
United States$795.5 $861.0 $2,647.1 $2,746.5 
Canada50.9 43.3 142.2 122.7 
Puerto Rico26.5 28.3 81.1 84.8 
Mexico18.4 10.9 55.1 32.4 
Total Americas Region891.3 943.5 2,925.5 2,986.4 
Europe
Switzerland57.0 55.2 165.9 165.5 
Portugal48.6 41.9 142.3 125.8 
France47.0 45.8 145.0 150.8 
Italy16.1 16.4 49.5 54.3 
Russia 5.0  63.4 
Other47.1 49.8 142.4 152.8 
Total Europe Region215.8 214.1 645.1 712.6 
Total Asia-Pacific Region10.9 10.3 32.9 32.6 
Total Kelly Services, Inc.$1,118.0 $1,167.9 $3,603.5 $3,731.6 



















13

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 QuarterSeptember Year to Date
2023202220232022
Science, Engineering & Technology
Americas$292.0 $317.2 $891.4 $951.4 
Europe3.7 4.1 12.1 11.3 
Total Science, Engineering & Technology$295.7 $321.3 $903.5 $962.7 
Outsourcing & Consulting
Americas$94.1 $103.1 $281.2 $302.5 
Europe9.1 5.1 28.3 16.9 
Asia-Pacific10.9 10.3 32.9 32.6 
Total Outsourcing & Consulting$114.1 $118.5 $342.4 $352.0 
International
Americas$17.6 $10.6 $52.8 $31.5 
Europe203.0 204.9 604.7 684.4 
Total International$220.6 $215.5 $657.5 $715.9 

Deferred Costs

Deferred fulfillment costs, which are included in prepaid expenses and other current assets in the consolidated balance sheet, were $3.3 million as of third quarter-end 2023 and $2.7 million as of year-end 2022. Amortization expense for the deferred costs in the third quarter and September year-to-date 2023 was $1.7 million and $5.5 million, respectively. Amortization expense for the deferred costs in the third quarter and September year-to-date 2022 was $3.2 million and $7.0 million, respectively.

3. Credit Losses
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
20232022
Allowance for credit losses:
Beginning balance$7.7 $9.4 
Current period provision1.4 1.3 
Currency exchange effects0.1 (0.4)
Write-offs(1.5)(1.8)
Ending balance$7.7 $8.5 

Write-offs are presented net of recoveries, which were not material for third quarter-end 2023 or 2022. No other allowances related to other receivables were material as of third quarter-end 2023 or year-end 2022.

14

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
4.  Acquisitions and Disposition
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 Rocket Power Ops LLC (collectively, "RocketPower"), as detailed below.

Pediatric Therapeutic Services

On May 2, 2022, KSU acquired 100% of the 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 expands Education's K-12 solution offering in the education staffing market and serves 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 included $1.1 million of additional consideration that was payable to the seller related to employee retention credits and was recorded in accounts payable and accrued liabilities in the consolidated balance sheet. In the third quarter of 2022, the Company paid $0.1 million of the employee retention credits and the remaining $1.0 million was paid in the second quarter of 2023. There is no remaining liability related to the additional consideration as of third quarter-end 2023. The total consideration at the time of purchase was as follows (in millions of dollars):

Cash consideration paid$85.7 
Additional consideration payable1.1 
Total consideration$86.8 

As of May 2023, the purchase price allocation for this acquisition was final. PTS's results of operations are included in the Education segment. Our consolidated revenues for September year-to-date 2023 included $37.4 million from PTS. Our consolidated earnings from operations for September year-to-date 2023 included $5.2 million from PTS. 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. All of the goodwill is expected to be deductible for tax purposes.

RocketPower

On March 7, 2022, the Company acquired 100% of the issued and outstanding membership interests of RocketPower for a purchase price of $59.3 million. RocketPower is a provider of RPO and other outsourced talent solutions to customers including U.S. technology companies. This acquisition expands OCG's RPO solution and delivery offering. 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 included $1.1 million of additional consideration that was payable to the seller in 2023 related to employee retention credits and was settled in the second quarter of 2023 and there is no remaining liability. The total consideration also included contingent consideration with an initial 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 the Fair Value Measurements footnote for information regarding subsequent reassessments. The total consideration at the time of purchase was as follows (in millions of dollars):

Cash consideration paid$61.8 
Additional consideration payable1.1 
Contingent consideration0.6 
Total consideration$63.5 

As of first quarter-end 2023, the purchase price allocation for this acquisition was final. RocketPower's results of operations are included in the OCG segment. Our consolidated revenues for September year-to-date 2023 included $5.8 million from
15

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
RocketPower and our consolidated earnings from operations for September year-to-date 2023 included a loss of $4.5 million from RocketPower. 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. The amount of goodwill expected to be deductible for tax purposes is approximately $27.5 million. In the third and fourth quarters of 2022, changes in market conditions triggered interim impairment tests for both long-lived assets and goodwill, resulting in the Company recording a goodwill impairment charge of $41.0 million.

Disposition

On July 20, 2022, the Company completed the sale of its Russia operations, which was included in the Company's International operating segment. The Company received cash proceeds of $7.4 million, which was less than the cash disposed of in the sale, resulting in investing cash outflows of $6.0 million in the consolidated statements of cash flows. The disposal group was previously reported as held for sale as of our second quarter-end 2022 with an $18.5 million impairment charge associated with the transaction. The total loss on the sale was $18.7 million, resulting from an additional $0.2 million loss on the transaction in the third quarter of 2022, which was recorded in loss on disposal in the consolidated statements of earnings. The loss on disposal includes the liquidation of the cumulative translation adjustment of $1.4 million.

The disposal group did not meet the requirements to be classified as discontinued operations as the sale did not have a material effect on the Company's operations and did not represent a strategic shift in the Company's strategy. Our consolidated earnings before taxes for the third quarter and September year-to-date 2022 included $0.3 million and $1.4 million, respectively, from the Russia operations.

The major classes of divested assets and liabilities were as follows (in millions of dollars):

Assets divested
Cash and equivalents$13.4 
Trade accounts receivable, net22.8 
Prepaid expenses and other current assets0.7 
Property and equipment, net0.7 
Deferred taxes0.4 
Other assets0.3 
Assets divested38.3 
Liabilities divested
Accounts payable and accrued liabilities(0.6)
Accrued payroll and related taxes(7.3)
Income and other taxes(5.7)
Liabilities divested(13.6)
Disposal group, net$24.7 
16

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
5. Investment in Persol Holdings
Prior to February 2022, the Company 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 was a noncontrolling interest in Persol Holdings, the investment was recorded at fair value based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange through the date of the transaction. The $67.2 million loss in the first quarter of 2022 recorded in 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.

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 was 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 was recorded in other income (expense), net in the consolidated statements of earnings. The dissolution of the Kelly Services Japan, Inc. subsidiary was completed in the fourth quarter of 2022.

6.  Investment in PersolKelly Pte. Ltd.

Prior to February 2022, the Company had a 49% ownership interest in the JV (see Investment in Persol Holdings footnote above), a staffing services business currently operating in ten 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 were accounted for on a one-quarter lag under the equity method and were reported in equity in net earnings of affiliate in the consolidated statements of earnings through the date of the sale. Such amounts were earnings of $0.8 million in the first quarter of 2022, representing the results through the date of the sale.

After the sale, the Company has a 2.5% ownership interest in the JV and discontinued its use of equity method accounting. The remaining investment is accounted for as an equity investment without a readily determinable fair value (see Fair Value Measurements footnote). The equity investment, included in other assets on the Company’s consolidated balance sheet, totaled $6.4 million as of third quarter-end 2023 and year-end 2022.

17

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 quarter-end 2023 and year-end 2022 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 2023
DescriptionTotalLevel 1Level 2Level 3
 (In millions of dollars)
Money market funds$45.0 $45.0 $ $ 
Total assets at fair value$45.0 $45.0 $ $ 
Brazil indemnification$(2.9)$ $ $(2.9)
Total liabilities at fair value$(2.9)$ $ $(2.9)
 As of Year-End 2022
DescriptionTotalLevel 1Level 2Level 3
 (In millions of dollars)
Money market funds$108.3 $108.3 $ $ 
Total assets at fair value$108.3 $108.3 $ $ 
Brazil indemnification$(3.4)$ $ $(3.4)
Greenwood/Asher earnout(3.3)  (3.3)
Total liabilities at fair value$(6.7)$ $ $(6.7)

Money market funds represent investments in money market funds that hold government securities, of which $8.3 million as of third quarter-end 2023 and $8.6 million as of year-end 2022 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 third quarter-end 2023 and year-end 2022 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.

As of third quarter-end 2023, the Company had an indemnification liability totaling $2.9 million with $0.1 million in accounts payable and accrued liabilities and $2.8 million in other long-term liabilities, and $3.4 million at year-end 2022, with $0.3 million in accounts payable and accrued liabilities and $3.1 million in other long-term liabilities in the consolidated balance sheet related to the 2020 sale of the Brazil operations. As part of the sale, the Company 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. 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. The Company made a $0.6 million payment to settle various indemnification claims in the second quarter of 2023. During September year-to-date 2023 and 2022, the Company recognized 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.
18

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)

The Company recorded an earnout liability relating to the 2020 acquisition of Greenwood/Asher, with a remaining liability of $3.3 million at year-end 2022 in accounts payable and accrued liabilities in the consolidated balance sheet. The initial valuation of the earnout liability was established using a Black Scholes model and represented the fair value and was considered a Level 3 liability. During the first quarter of 2023, the Company paid the remaining earnout liability totaling $3.3 million, representing the year two portion of the earnout. In the consolidated statements of cash flows, $1.4 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 earnout liability as of third quarter-end 2023. 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 initial earnout liability relating to the 2022 acquisition of RocketPower, totaling $0.6 million, with $0.5 million in accounts payable and accrued liabilities and $0.1 million in other long-term liabilities in the consolidated balance sheet as of second quarter-end 2022 (see Acquisitions and Disposition footnote). The initial valuation of the earnout liability was established using a Black Scholes model and represented the fair value and was considered a Level 3 liability. In the third quarter of 2022, we reassessed the value of the earnout liability and determined that the fair value was zero. There have been no changes to the value as a result of third quarter 2023 assessments and there is no related liability as of third quarter-end 2023. The maximum total cash payments which may be due related to the earnout liability is $12.9 million, which represents the second year earnout period. There is no longer a maximum cash payment or liability associated with the first year earnout as the corresponding period has concluded.

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 third quarter-end 2023, representing total cost plus observable price changes to date.

Assets Measured at Fair Value on a Nonrecurring Basis

During the third quarter of 2022, customers within the high-tech industry vertical in which RocketPower specializes reduced or eliminated their full-time hiring, reducing demand for RocketPower’s services, and on-going economic uncertainty has more broadly impacted the growth in demand for RPO in the near-term. These changes in market conditions therefore caused a triggering event requiring an interim impairment test for both long-lived assets and goodwill.

As a result of the long-lived asset recoverability test for RocketPower’s intangible assets, we determined that undiscounted future cash flows exceeded the carrying amount of the asset group and were recoverable. As a result of the quantitative assessment for goodwill, we determined that the estimated fair value of the RocketPower reporting unit no longer exceeded the carrying value, and recorded a goodwill impairment charge of $30.7 million in the third quarter of 2022 (see Goodwill and Intangible Assets footnote).

19

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
8. Restructuring and Transformation Activities
2023 Actions

In the first quarter of 2023, the Company undertook restructuring actions to further our cost management efforts in response to the current demand levels and reflect a repositioning of our P&I staffing business to better capitalize on opportunities in local markets. Restructuring costs incurred in the first quarter of 2023 totaled $6.6 million and were recorded entirely in selling, general and administrative ("SG&A") expenses in the consolidated statements of earnings.

In the second quarter of 2023, the Company announced a comprehensive transformation initiative that includes actions that will further streamline the Company's operating model to enhance organizational efficiency and effectiveness. The total costs incurred related to these transformation activities in the second quarter of 2023 totaled $8.0 million. The transformation activities included $4.5 million of costs to execute the transformation initiatives through the use of an external consultant, a $2.4 million impairment charge for right-of-use assets related to an unoccupied office space lease and additional severance of $1.1 million, net of adjustments. The impairment charge related to the right-of-use assets is recorded in the asset impairment charge in the consolidated statements of earnings. The costs to execute and severance are included in the $5.6 million of restructuring costs incurred in the second quarter of 2023, net of prior period adjustments, and are recorded in SG&A expenses in the consolidated statements of earnings, as detailed further below.

In the third quarter of 2023, the Company incurred $15.4 million of restructuring charges and transformation fees as a continuation of the actions that were announced in the second quarter of 2023 as part of the comprehensive transformation initiative. The third quarter transformation activities include $10.4 million of additional severance, $4.5 million of costs to execute the transformation through the use of an external consultant, and $0.5 million of lease termination costs. The severance, costs to execute, and lease termination costs are recorded in SG&A expenses in the consolidated statements of earnings.

The restructuring and transformation costs included in SG&A are detailed below for the third quarter and September year-to-date 2023 (in millions of dollars):
Third QuarterSeptember Year to Date
Severance
Costs
Lease Termination Costs,
Transformation
and Other
TotalSeverance
Costs
Lease Termination Costs,
Transformation
and Other
Total
Professional & Industrial$3.6 $0.4 $4.0 $6.6 $0.7 $7.3 
Science, Engineering & Technology0.6 0.1 0.7 1.0 0.2 1.2 
Education0.6  0.6 1.0  1.0 
Outsourcing & Consulting1.8  1.8 2.3  2.3 
International   0.6  0.6 
Corporate3.8 4.5 8.3 4.6 10.6 15.2 
Total$10.4 $5.0 $15.4 $16.1 $11.5 $27.6 


20

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
2022 Actions

In the first quarter of 2022, the Company took restructuring actions designed to increase efficiency. There were no restructuring charges in the second or third quarters of 2022. Restructuring costs incurred in the first quarter of 2022 totaled $1.7 million and were recorded entirely in SG&A expenses in the consolidated statements of earnings, as detailed below (in millions of dollars):
Severance CostsLease Termination CostsTotal
Professional & Industrial$0.1 $0.2 $0.3 
Education0.4  0.4 
Outsourcing & Consulting0.2  0.2 
Corporate0.8  0.8 
Total$1.5 $0.2 $1.7 

Accrual Summary

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 2022$0.3 
Accruals6.6 
Reductions for cash payments(1.0)
Balance as of first quarter-end 20235.9 
Accruals5.9 
Reductions for cash payments(3.0)
Accrual adjustments(0.3)
Balance as of second quarter-end 20238.5 
Accruals15.4 
Reductions for cash payments(13.0)
Accrual adjustments and write-offs(0.3)
Balance as of third quarter-end 2023$10.6 

The remaining balance of $10.6 million as of third quarter-end 2023 primarily represents the costs to execute the transformation initiatives and severance costs, and the majority is expected to be paid by first quarter-end 2024. No material adjustments are expected to be recorded.

21

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
9. Goodwill and Intangible Assets
As of third quarter-end 2023, there were no changes in the carrying amount of goodwill from year-end 2022.
2022 Goodwill Impairment

The Company performs its annual goodwill impairment testing in the fourth quarter each year and regularly assesses whenever events or circumstances make it more likely than not that an impairment may have occurred. We also perform a qualitative review on a quarterly basis of our long-lived assets, comprised of net property and equipment and definite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The goodwill resulting from the acquisition of RocketPower during the first quarter of 2022 was allocated to the OCG reportable segment. (See Acquisitions and Disposition footnote for more details.)

During the third quarter of 2022, customers within the high-tech industry vertical in which RocketPower specializes reduced or eliminated their full-time hiring, reducing demand for RocketPower’s services, and on-going economic uncertainty has more broadly impacted the growth in demand for RPO in the near-term. These changes in market conditions therefore caused a triggering event requiring an interim impairment test for both long-lived assets and goodwill.

RocketPower has definite-lived intangible assets, consisting of trades names, customer relationships and non-compete agreements, which are amortized over their estimated useful lives. We performed a long-lived asset recoverability test for RocketPower and determined that undiscounted future cash flows exceeded the carrying amount of the asset group and were recoverable.

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

In performing the step one quantitative test and consistent with our prior practice, we determined the fair value of the RocketPower reporting unit using the income approach. Under the income approach, estimated fair value is determined based on estimated future cash flows discounted by an estimated market participant weighted-average cost of capital, which reflects the overall level of inherent risk of the reporting unit being measured. Estimated future cash flows are based on our internal projection model and reflects management’s outlook for the reporting unit. Assumptions and estimates about future cash flows and discount rates are complex and often subjective. Our analysis used the following significant assumptions: expected future revenue growth rates, profit margins and discount rate.
22

KELLY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
10.  Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) by component, net of tax, for the third quarter and September year-to-date 2023 and 2022 are included in the table below. Amounts in parentheses indicate debits.


Third QuarterSeptember Year to Date
2023202220232022
(In millions of dollars)
Foreign currency translation adjustments:
Beginning balance$(2.3)$(10.5)$(7.4)$(25.0)
Other comprehensive income (loss) before reclassifications(4.3)(8.8)0.8 (17.4)
Amounts reclassified from accumulated other comprehensive income (loss) - liquidation of Japan subsidiary   20.4 
(1)
Amounts reclassified from accumulated other comprehensive income (loss) - equity method investment and other 1.9  4.6 
(2)
Net current-period other comprehensive income (loss)(4.3)(6.9)0.8 7.6 
Ending balance(6.6)(17.4)(6.6)(17.4)
Pension liability adjustments:
Beginning balance(1.1)(2.7)(1.1)(2.7)
Other comprehensive income (loss) before reclassifications    
Amounts reclassified from accumulated other comprehensive income (loss)    
Net current-period other comprehensive income (loss)    
Ending balance(1.1)(2.7)(1.1)(2.7)
Total accumulated other comprehensive income (loss)$(7.7)$(20.1)$(7.7)$(20.1)

(1)Amount was recorded in the loss on currency translation from liquidation of subsidiary in the consolidated statements of earnings.
(2)Of the amount included in this line item, $1.9 million was recorded in the other income (expense), net in the consolidated statement of earnings related to the investment in PersolKelly Pte. Ltd., (see Investment in PersolKelly Pte. Ltd. footnote for more details).

23

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 quarter and September year-to-date 2023 and 2022 follows (in millions of dollars except per share data):
 Third QuarterSeptember Year to Date
 2023202220232022
Net earnings (loss)$6.6 $(16.2)$25.0 $(61.6)
Less: earnings allocated to participating securities(0.1) (0.5) 
Net earnings (loss) available to common shareholders$6.5 $(16.2)$24.5 $(61.6)
Average shares outstanding (millions):
Basic35.4 37.9 36.2 38.2 
Dilutive share awards0.4  0.3  
Diluted35.8 37.9