EDGAR 10-K Filing

Company CIK: 55135
Filing Year: 2024
Filename: 55135_10-K_2024_0000055135-24-000007.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS.
History and Development of Business
William Russell Kelly pioneered the staffing industry when he founded Kelly® in 1946, and we’ve been reinventing it ever since. Our inception helped usher in and embolden a workforce of women who kept the economy moving forward during World War II, opening doors and creating completely new opportunities. Over the next 77 years, as work evolved, Kelly continued to equip people with the skills to master new technologies as they emerged and the opportunity to put them to work in ways that enriched their lives.
As the world of work evolved so did Kelly's range of solutions, growing over the years to reflect the changing needs of employers and the desires and lifestyles of talent. In 1996, Kelly established the industry’s first Managed Service Provider (MSP) program. Three years later we launched specialized offerings in engineering, IT and education. Strategic acquisitions over the years broadened our solution offerings and included the Ayers Group, Teachers on Call, Global Technology Associates (GTA), NextGen, Greenwood/Asher & Associates, Softworld, RocketPower and Pediatric Therapeutic Services (PTS). Since 2020, we operate in five specialty business units - Kelly Education, Kelly Professional & Industrial, Kelly Science, Engineering & Technology, KellyOCG and Kelly International.
Business Objectives
We strive to empower businesses and talent to access limitless opportunities by enabling companies to recruit and manage skilled workers and help job seekers find great work. As experts in hiring experts, we ensure companies have the people they need when and where they’re needed most. We’re also using our position in the middle of the talent supply and demand equation to challenge outdated barriers that hold back far too many people from attaining meaningful work, supporting their families and contributing to the economy. Our Equity@Work initiative seeks to upend systemic barriers to employment and make the labor market more equitable and accessible for more people. While systemic change takes time, we continue to make progress with additional outreach, new alliances and partnerships and continued executive commitment.
We believe that delivering on these objectives will result in successful outcomes for customers and talent, and drive profitable growth for Kelly.
Description of Business Segments and Services
Kelly is a talent solutions company operating in five specialized business units, which are also our reportable segments. This structure enables us to serve the specialized needs of both talent and customers while building deep industry connections.
•Professional & Industrial - delivers staffing, outcome-based and permanent placement services providing administrative, accounting and finance, light industrial and contact center staffing and other workforce solutions in the U.S. and Canada, including our KellyConnect and Skilled Professional Solutions products
•Science, Engineering & Technology ("SET") - provides highly specialized skills to a variety of industries through staffing, outcome-based and permanent placement services. SET is focused on science and clinical research, engineering, technology and telecommunications specialties predominantly in the U.S. and Canada and includes Softworld, NextGen and GTA brands
•Education - delivers high quality education and therapy services talent through staffing, permanent placement and executive search services to Pre-K-12 school districts and education organizations across the U.S. and includes Teachers On Call, Greenwood/Asher and PTS brands
•Outsourcing & Consulting Group ("Outsourcing & Consulting," "OCG") - provides global talent supply chain and workforce solutions, including Managed Service Provider ("MSP"), Recruitment Process Outsourcing ("RPO"), Payroll Process Outsourcing ("PPO") and executive coaching programs to customers on a global basis and includes our RocketPower brand
•International - delivers staffing, RPO and permanent placement services in 14 countries in Europe, as well as services in Mexico. Our European staffing operations were sold on January 2, 2024
Financial information regarding our reportable segments is included in the Segment Disclosures footnote in the notes to our consolidated financial statements presented in Part II, Item 8 of this report.
Business Operations
Geographic Breadth of Services
Headquartered in the United States, Kelly provides workforce solutions to a diverse group of local, regional and global clients in the Americas, Europe and the Asia-Pacific region across a variety of industries.
In 2023, together with our supplier partners, we placed more than 500,000 workers with a variety of customers around the globe.
Service Marks
We own numerous service marks registered with the United States Patent and Trademark Office, the European Union Intellectual Property Office and numerous individual country trademark offices.
Seasonality and Economic Cycles
Our operating results have historically been affected by the cyclical response to both economic downturns and upswings. Customers use our services to supplement their existing workforce and generally hire permanent employees when long-term demand is expected to increase. As a consequence, our revenue from services tends to increase when the economy grows. During periods of increasing demand, we are generally able to improve our profitability and generate operating leverage. Conversely, our revenue from services decreases when the economy declines and customer demand for our services also declines. When demand drops, our operating profit is typically impacted unfavorably as we experience a deleveraging of our selling and administrative expense base which may not decline at the same pace as revenue. Our business also experiences seasonal fluctuations each year, particularly in our Education operating segment. Revenue in Education is generally lowest in the third quarter in line with schools’ summer break.
Working Capital
Our working capital requirements are primarily generated from our staffing businesses resulting from employee payroll which is generally paid weekly or monthly and customer accounts receivable which is generally outstanding for longer periods. When we operate as a managed service provider, our payment terms to suppliers are generally in line with payment terms from customers, which does not result in a significant use of working capital. Based on the nature of our business, accounts receivable is our most significant asset with days sales outstanding ("DSO") of 59 days as of December 31, 2023. Since receipts from customers lag payroll payments to temporary employees, working capital requirements increase and operating cash flows may decrease substantially in periods of growth. Conversely, when economic activity slows, working capital requirements may substantially decrease and operating cash flows increase. Such increases dissipate over time if the economic downturn continues for an extended period.
Customers
Kelly’s client portfolio spans employers of all sizes, ranging from local and mid-sized businesses to the Fortune 500. In 2023, an estimated 55% of total company revenue was attributed to our largest 100 customers. Our largest single customer accounted for approximately six percent of total revenue in 2023.
Government Contracts
Although we conduct business under various federal, state and local government contracts, no one contract represents more than three percent of total company revenue in 2023.
Competition
The worldwide workforce solutions industry is competitive and highly fragmented. In the United States, we compete with other firms that operate nationally and offer a breadth of service similar to ours, and with thousands of smaller regional or specialized companies that compete in varying degrees. Outside the United States, we face similar competition. In 2023, our largest competitors were Randstad, Adecco Group, ManpowerGroup Inc. and Allegis Group.
Key factors that influence our success are quality of service, price and breadth of service.
Quality of service is highly dependent on the availability of qualified talent, and our ability to promptly and effectively recruit, screen, retain and manage a pool of employees who match the skills required by our customers. We must balance competitive pricing pressures, which may intensify during an economic downturn, with the need to attract and retain a qualified workforce. Price competition in the staffing industry is intense, particularly for education, office clerical and light industrial personnel, and pricing pressure from customers and competitors continues to be significant.
Companies may seek a single supplier to manage all of their demand for contingent talent. To provide the breadth of service required, clients may need us to manage staffing suppliers and independent workers on their behalf. Kelly seeks to address this requirement for our clients, enabling us to deliver talent wherever and whenever they need it around the world.
Corporate Sustainability
Kelly is committed to the highest standards of corporate citizenship. Given the worldwide reach of our workers, clients, suppliers and partners, we recognize the global impact of our business practices and the importance of public accountability. We continue to advocate on behalf of the global workforce, improve our workplaces, contribute to the communities we serve and ensure our actions are socially, ethically and environmentally responsible. More information about our corporate sustainability initiatives is available in our Corporate Sustainability and ESG Report - Growing with Purpose report on kellyservices.com
Regulation
Our services are subject to a variety of complex federal and state laws and regulations in the countries where we operate. We continuously monitor legislation and regulatory changes for their potential effect on our business. We invest in technology and process improvements to implement required changes while minimizing the impact on our operating efficiency and effectiveness. Regulatory cost increases are passed through to our clients to the fullest extent possible. As a service business, we are not materially impacted by federal, state or local laws that regulate the discharge of materials into the environment.
Human Capital
We are a talent solutions company dedicated to connecting people to work in ways that enrich their lives, and our employees are critical to achieving this noble purpose. To succeed in our highly competitive and rapidly evolving market, we must attract and retain experienced internal employees, as well as talent we put to work for our customers. As part of these efforts, we strive to offer competitive total rewards programs, promote employee development, foster an inclusive and diverse environment and allow employees to give back to their communities and make a social impact.
We are committed to the health, safety and wellness of our employees and talent. The success of our business is fundamentally connected to the well-being of our people. Accordingly, we seek to implement policies and practices that align with applicable laws and regulations and are in the best interest of our employees, talent and the communities in which we operate.
Internal Employees
As of December 31, 2023, we employed approximately 3,700 staff members in the United States and an additional 2,500 in our international locations. Kelly retention rates for high performing and high potential employees align with our comparable benchmark.
Compensation and Benefits.  Kelly is committed to providing competitive, equitable and fiscally responsible total rewards programs to our employees.  Our compensation programs are designed to attract, retain and reward talented individuals with the skills necessary to achieve our strategic goals and create long-term value for our shareholders. We provide employees with competitive compensation opportunities, with strong pay-for-performance linkages that include a mix of base salary, short-term incentives and, in the case of our more senior employees, long-term equity awards. Our programs provide fair and
competitive opportunities that align employee and stockholder interests. In addition to cash and equity compensation, we offer employees competitive benefits such as life and health (medical, dental and vision) insurance, paid time off, wellness benefits and defined contribution retirement plans. We review our compensation and benefits programs annually and respond to changes in market practice. For example, recent enhancements to our U.S. benefits program include the addition of an advocacy/navigation partner to our medical plans and automatic enrollment in one of our 401(k) Plans. In addition, pay and benefits programs for our international employees align with competitive local practices.
Inclusion and Diversity. Since 1947, our founder fought to increase women's access to work, and we’ve continued to be an outspoken advocate for the value temporary and independent workers bring to the workplace. We are committed to fostering an inclusive and diverse workforce.  For example, most of Kelly's U.S. workforce is female, including a majority of director and above roles. We believe that an inclusive environment with diverse teams creates a workplace that is conducive to producing more creative solutions, results in better, more innovative products and services, and presents Kelly as a workplace leader, aiding our ability to attract and retain high-performing talent. We focus on fostering a culture of belonging, where everyone feels welcomed and respected and can thrive as we work together. Kelly promotes employee development and internal career mobility to enable our team to achieve their full potential and to ensure we have the evolving workforce capabilities that the future demands.
Community Involvement. We consider sustainability a guiding principle in strengthening the relationship with our global workforce, suppliers, customers, and other stakeholders. Through our programs and initiatives, we are dedicated to enhancing the well-being of our employees, their families and the communities they call home. Designed on the concept of social investment and nurturing shared values, our approach cultivates sustainable development capabilities for the future rather than aiding on isolated occasions. We empower our employees to actively participate in causes they are passionate about and are in line with our sustainability strategy. Through our Equity@Work efforts, we are living our commitment to ensure equitable access to work and growth by creating alliances with like-minded companies, policy groups and institutions to positively impact how companies hire, advance and help more people thrive.
For more information on our diversity and inclusion and community involvement initiatives, please see our Corporate Sustainability and ESG Report - Growing with Purpose, which is available at www.kellyservices.com.
Talent
In addition to our internal employees, Kelly recruits talent on behalf of our customers globally.  In 2023, we placed more than 500,000 individuals in positions with our customers.  When Kelly remains the employer of record for our employees working at our customer locations, we retain responsibility for all assignments (including ensuring appropriate health and safety protocols in conjunction with our customers), wages, benefits, workers’ compensation insurance, and the employer's share of applicable payroll taxes as well as the administration of the employees' share of these taxes.  We also offer our Kelly talent access to competitive health and benefit programs while they are working with us.
Foreign Operations
For information regarding sales, earnings from operations and long-lived assets by domestic and foreign operations, please refer to the information presented in the Segment Disclosures footnote in the notes to our consolidated financial statements, presented in Part II, Item 8 of this report.
Access to Company Information
We electronically file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the Securities and Exchange Commission (“SEC”). The SEC maintains an Internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically.
We make available, free of charge, through our website, and by responding to requests addressed to our investor relations office, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports. These reports are available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Our website address is: www.kellyservices.com. The information contained on our website, or on other websites linked to our website, is not part of this report.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS.
Risks Related to Macroeconomic Conditions
Our business is significantly affected by fluctuations in general economic conditions.
Demand for staffing services is significantly affected by the general level of economic activity and employment in the United States and the other countries in which we operate. When economic activity increases, companies often add temporary employees before hiring full-time employees. As economic activity slows, however, many companies reduce their use of temporary employees before laying off full-time employees. Customer responses to real or perceived economic conditions, including perceptions related to market conditions, labor supply and inflation, could negatively impact customer behavior. Significant swings in economic activity historically have had a disproportionate impact on staffing industry volumes. We may not fully benefit from times of increased economic activity should we experience shortages in the supply of temporary employees. We may also experience more competitive pricing pressure and slower customer payments during periods of economic downturn. A substantial portion of our revenues and earnings are generated by our business operations in the United States. Any significant economic downturn in the United States or certain other countries in which we operate could have a material adverse effect on our business, financial condition and results of operations.
Our stock price may be subject to significant volatility and could suffer a decline in value.
The market price of our common stock may be subject to significant volatility. We believe that many factors, including several which are beyond our control, have a significant effect on the market price of our common stock. These include:
•actual or anticipated variations in our quarterly operating results;
•announcements of new services by us or our competitors;
•announcements relating to strategic relationships, acquisitions or divestitures;
•changes in financial estimates by securities analysts;
•changes in general economic conditions;
•actual or anticipated changes in laws and government regulations;
•commencement of, or involvement in, litigation;
•any major change in our board or management;
•changes in industry trends or conditions; and
•sales of significant amounts of our common stock or other securities in the market.
In addition, the stock market in general, and the NASDAQ Global Market in particular, experiences significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. A securities class action suit against us arising out of stock volatility or other investor claims, could result in substantial costs, potential liabilities and the diversion of our management’s attention and resources. Further, our operating results may be below the expectations of securities analysts or investors. In such event, the price of our common stock may decline.
Risks Related to our Industry Segment
We operate in a highly competitive industry with low barriers to entry and may be unable to compete successfully against existing or new competitors.
The worldwide staffing services market is highly competitive with limited barriers to entry. We compete in global, national, regional and local markets with full-service and specialized temporary staffing and consulting companies. Randstad, Adecco Group, ManpowerGroup Inc. and Allegis Group are considerably larger than we are and have more substantial marketing and financial resources. Additionally, the emergence of online staffing platforms or other forms of disintermediation may pose a competitive threat to our services, which operate under a more traditional staffing business model. Price competition in the staffing industry is intense, particularly for the provision of office clerical, light industrial and education personnel. We expect that the level of competition will remain high, which could limit our ability to maintain or increase our market share or profitability.
The number of customers distributing their staffing service purchases among a broader group of competitors continues to increase which, in some cases, may make it more difficult for us to obtain new customers, or to retain or maintain our current share of business, with existing customers. We also face the risk that our current or prospective customers may decide to
provide similar services internally. As a result, there can be no assurance that we will not encounter increased competition in the future.
Technological advances may significantly disrupt the labor market and weaken demand for human capital.
Our success is directly dependent on our customers’ demand for talent. As technology continues to evolve, more tasks currently performed by people may be replaced by automation, robotics, machine learning, artificial intelligence, and other technological advances outside of our control. This trend poses a risk to the staffing industry, particularly in lower-skill job categories that may be more susceptible to such replacement and to creative, administrative, customer support, and clerical roles due to advances in generative artificial intelligence. If we are unsuccessful in responding to this potential shift in customer demand due to advancing technology, it could have a material adverse effect on our results of operations and financial condition.
Competition rules arising from government legislation, litigation or regulatory activity may limit how we structure and market our services.
As a leading staffing and recruiting company, we are closely scrutinized by government agencies under U.S. and foreign competition laws. An increasing number of governments are regulating competition law activities, leading to increased scrutiny. Some jurisdictions also allow competitors or consumers to assert claims of anti-competitive conduct.
The European Commission and its various competition authorities have targeted industry trade associations in which we participate, resulting in the assessment of fines against our business in the past. Although we have safeguards in place to comply with competition laws, there can be no guarantee that such safeguards will be successful. Any government regulatory actions may result in fines and penalties or hamper our ability to provide cost-effective benefits to consumers and businesses, reducing the attractiveness of our services and the revenues that come from them. New competition law actions could be initiated. The outcome of such actions, or steps taken to avoid them, could adversely affect us in a variety of ways, including:
•We may have to choose between withdrawing certain services from certain geographies to avoid fines or designing and developing alternative versions of those services to comply with government rulings, which may entail a delay in a service delivery.
•Adverse rulings may act as precedent in other competition law proceedings.
Our business is subject to extensive government regulation, which may restrict the types of employment services we are permitted to offer or result in additional or increased taxes, including payroll taxes or other costs that reduce our revenues and earnings.
The temporary employment industry is heavily regulated in many of the countries in which we operate. Changes in laws or government regulations may result in prohibition or restriction of certain types of employment services we can offer or the imposition of new or additional pay, benefit, licensing or tax requirements that could reduce our revenues and earnings. In particular, we are subject to state unemployment taxes in the U.S., which typically increase during periods of increased levels of unemployment. We also receive benefits, such as the work opportunity income tax credit in the U.S., that regularly expire and may not be reinstated. There can be no assurance that we will be able to increase the fees charged to our customers in a timely manner and in a sufficient amount to fully cover increased costs as a result of any changes in laws or government regulations. Any future changes in laws or government regulations, or interpretations thereof, including additional laws and regulations enacted at a local level may make it more difficult or expensive for us to provide staffing services and could have a material adverse effect on our business, financial condition and results of operations.
Unexpected changes in claim trends on our workers’ compensation, unemployment, disability and medical benefit plans may negatively impact our financial condition.
We self-insure, or otherwise bear financial responsibility for, a significant portion of expected losses under our workers’ compensation program, disability and medical benefits claims. Unexpected changes in claim trends, including the severity and frequency of claims, actuarial estimates and medical cost inflation, could result in costs that are significantly different than initially reported. If future claims-related liabilities increase due to unforeseen circumstances, or if we must make unfavorable adjustments to accruals for prior accident years, our costs could increase significantly. In addition, unemployment insurance costs are dependent on benefit claims experience from employees which may vary from current levels and result in increased costs. There can be no assurance that we will be able to increase the fees charged to our customers in a timely manner and in a sufficient amount to cover increased costs as a result of any changes in claims-related liabilities.
We may have additional tax liabilities that exceed our estimates.
We are subject to multiple federal, state, local, and foreign taxes in the jurisdictions in which we operate. Our tax expense could be materially impacted by changes in tax laws in these jurisdictions, changes in the valuation of deferred tax assets and liabilities or changes in the mix of income by country. The overall size of our workforce and visibility of our industry may make it more likely we become a target of government investigations, and we are regularly subject to audit by tax authorities. Although we believe our tax estimates are reasonable, the final determination of audits and any related litigation could be materially different from our historical tax provisions and accruals. The results of an audit or litigation could materially harm our business.
Risks Related to Strategy and Execution
Our future performance depends on the Company’s effective execution of our business strategy.
The performance of the Company’s business is dependent on our ability to effectively execute our growth strategy. Our strategy includes targeted investments in select specialty areas, focusing on growth platforms and implementation of a cost-effective operating model to bridge our strategy to execution. If we are unsuccessful in executing our strategy, we may not achieve either our stated goal of revenue growth or the intended productivity improvements, which could negatively impact profitability. Even if effectively executed, our strategy may be insufficient considering changes in market conditions, technology, changes in customer buying behavior, competitive pressures or other external factors.
If we fail to successfully develop new service offerings, we may be unable to retain and acquire customers, resulting in a decline in revenues.
The Company’s successful execution of our growth strategy requires that we match evolving customer expectations with evolving service offerings. The development of new service offerings requires accurate anticipation of customer needs and emerging technology and workforce trends. We must make long-term investments in our information technology infrastructure and commit resources to development efforts before knowing whether these investments will result in service offerings that achieve customer acceptance and generate the revenues required to provide desired returns. If we fail to accurately anticipate and meet our customers’ needs through the development of new service offerings or do not successfully deliver new service offerings, our competitive position could weaken, causing a material adverse effect on our results of operations and financial condition.
A loss of major customers or a change in such customers’ buying behavior or economic strength could have a material adverse effect on our business.
We serve many large corporate customers through high volume service agreements. While we intend to maintain or increase our revenues and earnings from our major corporate customers, we are exposed to risks arising from the possible loss of major customer accounts. A change in labor strategy or the deterioration of the financial condition or business prospects of these customers could reduce their need for our services and result in a significant decrease in the revenues and earnings we derive from these customers. Such change could occur due to economic, social, climate, or political factors outside of our customers' control. Inability to meet customer demands in response to these factors could result in the decline in use of our service or outright loss of customers. Our customers are also exposed to third-party risk through their use of vendors and suppliers which, in the event of a third-party incident at a customer, could result in a deterioration in their financial condition. Continuing merger and acquisition activity involving our large corporate customers could put existing business at risk or impose additional pricing pressures. Since receipts from customers generally lag payroll to temporary employees, the bankruptcy of a major customer could have a material adverse impact on our ability to meet our working capital requirements. The expansion of payment terms may extend our working capital requirements and reduce available capital for investment. Additionally, most of our customer contracts can be terminated by the customer on short notice without penalty. This creates uncertainty with respect to the revenues and earnings we may recognize with respect to our customer contracts.
Our business with large customer accounts reflects a market-driven shift in buying behaviors in which reliance on a small number of staffing partners has shifted to reliance upon a network of talent providers. The movement from single-sourced to competitively sourced staffing contracts may also substantially reduce our future revenues from such customers. While Kelly has sought to address this trend, including providing MSP services within our OCG segment, we may not be selected or retained as the MSP by our large customers. This may result in a material decrease in the revenue we derive from providing staffing services to such customers. In addition, revenues may be materially impacted from our decision to exit customers due to pricing pressure or other business factors.
Our business with the federal government and government contractors presents additional risk considerations. We must comply with laws and regulations relating to the formation, administration and performance of federal government contracts. Failure to meet these obligations could result in civil penalties, fines, suspension of payments, reputational damage, disqualification from doing business with government agencies and other sanctions or adverse consequences. Government procurement practices may change in ways that impose additional costs or risks upon us or pose a competitive disadvantage. Our employees may be unable to obtain or retain the security clearances necessary to conduct business under certain contracts, or we could lose or be unable to secure or retain a necessary facility clearance. Government agencies may temporarily or permanently lose funding for awarded contracts, or there could be delays in the start-up of projects already awarded and funded.
We are at risk of damage to our brands, which are important to our success.
Our success depends, in part, on the value associated with our brands. Because we assign employees to work under the direction and supervision of our customer at work locations not under Kelly’s control, we are at risk of our employees engaging in unauthorized conduct that could harm our reputation. Our Education segment is particularly susceptible to this exposure. Any incident, act or omission that damages Kelly’s reputation could cause the loss of current and future customers, additional regulatory scrutiny and liability to third parties, which could negatively impact profitability.
As we increasingly offer services outside the realm of traditional staffing, including business process outsourcing and services intended to connect talent to independent work, we are exposed to additional risks which could have a material adverse effect on our business.
Our business strategy focuses on driving profitable growth in key specialty areas, including through business process outsourcing arrangements, where we provide operational management of our customers’ non-core functions or departments. This could expose us to certain risks unique to that business, including product liability or product recalls. As the nature of work changes, we deliver services that connect talent to independent work with our customers and expose the Company to risks of misclassifying workers, which could result in regulatory audits and penalties. Although we have internal vetting processes intended to control such risks, there is no assurance that these processes will be effective or that we will be able to identify these potential risks in a timely manner. Our specialties also include professional services where errors or omissions by employees or independent contractors can result in substantial injury or damages. We attempt to mitigate and transfer such risks through contractual arrangements with our customers and suppliers; however, these services may give rise to liability claims and litigation. While we maintain insurance in types and amounts we believe are appropriate for the contemplated risks, there is no assurance that such insurance coverage will remain available on reasonable terms or be sufficient in amount or scope.
We are increasingly dependent on third parties for the execution of critical functions and could be liable for their inability to adhere to global compliance standards.
We rely on third parties to support critical functions within our operations, including portions of our technology infrastructure, vendor management, customer relationship management, applicant tracking systems and in-country staffing services. If we are unable to contract with third parties having the specialized skills needed to support our growth strategies or integrate their products and services with our business, or if they fail to meet our performance requirements, the results of operations could be adversely impacted. We also rely on supplier partnerships to deliver our services to customers in certain territories. If our suppliers fail to meet our standards and expectations or are unfavorably regarded by our customers, our ability to discontinue the relationship may be limited and could result in reputational damage, customer loss, and adversely affect our results of operations. The failure or inability to perform on the part of one or more of these critical vendors, suppliers, or partners could cause significant disruptions and increased costs. Moreover, these third parties are often subject to international laws and regulations regarding their conduct, including compliance with anti-bribery, anti-corruption, human trafficking, forced or child labor, trade sanctions, sustainability, and other compliance obligations (“Global Compliance Obligations”). While we maintain processes to monitor these third-parties for compliance to these standards, failure of these third-parties to adhere to Global Compliance Obligations could result in significant fines and penalties, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business, and damage to our reputation.
Our information technology strategy may not yield its intended results.
Our information technology strategy includes improvements to our applicant onboarding and tracking systems, order management, and improvements to financial processes such as billing and accounts payable through system consolidation and upgrades. We do not use a single enterprise resource planning system, which limits our ability to react to evolving technology and customer expectations and increases the amount of investment and effort necessary to provide global service integration to our customers. Although the technology strategy is intended to increase productivity and operating efficiencies, these initiatives may not yield their intended results. Any delays in completing, or an inability to successfully complete, these technology
initiatives, or an inability to achieve the anticipated efficiencies, could adversely affect our operations, liquidity and financial condition. Some of the initiatives are dependent on the products and services of third-party vendors. If our vendors are unable to provide these services, or fail to meet our standards and expectations, we could experience business interruptions or data loss which could have a material adverse effect on our business, financial condition and results of operations.
Past and future acquisitions may not be successful.
As a part of our growth strategy, we continue to monitor the market for acquisition targets to bolster our inorganic growth aspirations. Acquisitions involve a number of risks, including the diversion of management’s attention from its existing operations, the failure to retain key personnel or customers of an acquired business, the failure to realize anticipated benefits such as cost savings and revenue enhancements, potential substantial transaction costs associated with acquisitions, the assumption of unknown liabilities of the acquired business and the inability to successfully integrate the business into our operations. There can be no assurance that any past or future acquired businesses will generate anticipated revenues or earnings.
Further, acquisitions result in goodwill and intangible assets which have the risk of impairment if the future operating results and cash flows of such acquisitions are lower than our initial estimates. In the event of an impairment determination, we may be required to record a significant non-cash charge to earnings that could adversely affect our results of operations.
Risks Related to Operating a Global Enterprise
We conduct a portion of our operations outside of the United States and we are subject to risks relating to our international business activities, including fluctuations in currency exchange rates and numerous legal and regulatory requirements.
We conduct our business in major staffing markets throughout the world. Our operations outside the United States are subject to risks inherent in international business activities, including:
•fluctuations in currency exchange rates;
•restrictions or limitations on the transfer of funds;
•government intrusions including asset seizures, expropriations or de facto control;
•varying economic and geopolitical conditions;
•differences in cultures and business practices;
•differences in employment and tax laws and regulations;
•differences in accounting and reporting requirements;
•differences in labor and market conditions;
•compliance with trade sanctions;
•changing and, in some cases, complex or ambiguous laws and regulations; and
•litigation, investigations and claims.
Our operations outside the United States are reported in the applicable local currencies and then translated into U.S. dollars at the applicable currency exchange rates for inclusion in our consolidated financial statements. Exchange rates for currencies of these countries may fluctuate in relation to the U.S. dollar and these fluctuations may have an adverse or favorable effect on our operating results when translating foreign currencies into U.S. dollars.
Our international operations subject us to potential liability under anti-bribery, anti-corruption, anti-trafficking, supply chain, trade protection, and other laws and regulations.
The Foreign Corrupt Practices Act and other anti-bribery and anti-corruption laws and regulations (“Anti-Corruption Laws”) prohibit corrupt payments by our employees, vendors, or agents. Other international laws and compacts hold companies liable for human rights violations that occur within their supply chain, and impose obligations on companies to prohibit human trafficking, forced labor, and child labor ("Human Rights and Supply Chain Laws"). While we devote substantial resources to our global compliance programs and have implemented policies, training, and internal controls designed to reduce the risk of corrupt payments and ensure compliance with human rights standards, our employees, vendors, or agents may violate our policies. Our failure to comply with Anti-Corruption Laws or Human Rights and Supply Chain Laws could result in significant fines and penalties, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business, and damage to our reputation. Operations outside the U.S. may be affected by changes in trade protection laws, policies and measures, and other regulatory requirements affecting trade and investment. As a result, we may be subject to legal liability and reputational damage.
Risks Related to Human Capital
We depend on our ability to attract, develop and retain qualified permanent full-time employees.
As we aim to expand the number of clients utilizing our higher margin specialty solutions in support of our growth strategy, we are highly reliant on individuals who possess specialized knowledge and skills to lead related specialty solutions and operations. Social, political and financial conditions can negatively impact the availability of qualified personnel. Competition for individuals with proven specialized knowledge and skills is intense, and demand for these individuals is expected to remain strong in the foreseeable future. Our success is dependent on our ability to attract, develop and retain these employees.
We depend on our ability to attract and retain qualified temporary personnel (employed directly by us or through third-party suppliers).
We depend on our ability to attract qualified temporary personnel who possess the skills and experience necessary to meet the staffing requirements of our customers. We must continually evaluate our base of available qualified personnel to keep pace with changing customer needs. Competition for individuals with proven professional skills is intense, and demand for these individuals is expected to remain strong for the foreseeable future. Rapid evolution of technology may worsen this skills gap, where the demand for expertise outpaces the availability of suitably skilled professionals. Low unemployment, as well as social, political and financial conditions can negatively impact the amount of qualified personnel available to meet the staffing requirements of our customers. There can be no assurance that qualified personnel will continue to be available in sufficient numbers and on terms of employment acceptable to us and our customers. Our success is substantially dependent on our ability to recruit and retain qualified temporary personnel.
We may be exposed to employment-related claims and losses, including class action lawsuits and collective actions, which could have a material adverse effect on our business.
We employ and assign personnel in the workplaces of other businesses. The risks of these activities include possible claims relating to:
•discrimination and harassment;
•wrongful termination or retaliation;
•violations of employment rights related to employment screening or privacy issues;
•apportionment between us and our customer of legal obligations as an employer of temporary employees;
•classification of workers as employees or independent contractors;
•employment of unauthorized workers;
•violations of wage and hour requirements;
•entitlement to employee benefits, including health insurance and retroactive benefits;
•failure to comply with leave policy and other labor requirements; and
•errors and omissions by our temporary employees, particularly for the actions of professionals such as engineers, therapists, accountants, teachers and scientists.
We are also subject to potential risks relating to misuse of customer proprietary information, misappropriation of funds, death or injury to our employees, damage to customer facilities due to negligence of temporary employees, criminal activity and other similar occurrences. We may incur fines and other losses or negative publicity with respect to these risks. In addition, these occurrences may give rise to litigation, which could be time-consuming and expensive. In the U.S. and certain other countries in which we operate, new employment and labor laws and regulations have been proposed or adopted that may increase the potential exposure of employers to employment-related claims and litigation. In addition, such laws and regulations are arising with increasing frequency at the state and local level in the U.S. and the resulting inconsistency in such laws and regulations results in additional complexity. There can be no assurance that the corporate policies and practices we have in place to help reduce our exposure to these risks will be effective or that we will not experience losses as a result of these risks. Although we maintain insurance in types and amounts we believe are appropriate in light of the aforementioned exposures, there can also be no assurance that such insurance policies will remain available on reasonable terms or be sufficient in amount or scope of coverage. Additionally, should we have a material inability to produce records as a consequence of litigation or a government investigation, the cost or consequences of such matters could become much greater.
Risks Related to Cyber Security and Data Privacy
Damage to our key data centers could affect our ability to sustain critical business applications.
Many business processes critical to our continued operation are hosted in outsourced facilities in America, Europe and Asia. Certain other processes are hosted at our corporate headquarters or occur in cloud-based computer environments. These critical processes include, but are not limited to, payroll, customer reporting, and order management. Although we have taken steps to protect such instances by establishing data backup and disaster recovery capabilities, the loss of these data centers or access to the cloud-based environments could create a substantial risk of business interruption which could have a material adverse effect on our business, financial condition and results of operations.
A failure to maintain the privacy of information entrusted to us could have significant adverse consequences.
In the normal course of business we control, process, or have access to personal information regarding our own employees or employment candidates, as well as that of employees of our customers and managed suppliers. Information concerning these individuals may also reside in systems controlled by third parties for purposes such as employee benefits and payroll administration. The legal and regulatory environment concerning data privacy is becoming more complex and challenging, and the potential consequences of non-compliance have become more severe. The European Union’s General Data Protection Regulation, the California Consumer Privacy Act and similar laws impose additional compliance requirements related to the collection, use, processing, transfer, disclosure, and retention of personal information, which can increase operating costs and resources to accomplish. Any failure to abide by these regulations or to protect such personal information from inappropriate access or disclosure, whether through social engineering or by accident or other cause, could have severe consequences including fines, litigation, regulatory sanctions, reputational damage, and loss of customers or employees. Although we have a program designed to preserve the privacy rights of the personal data that we control or process, as well as personal data that we entrust to third parties, there can be no assurance that our program will meet all current and future regulatory requirements, anticipate all potential methods of unauthorized access, or prevent all inappropriate disclosures. Our insurance coverage may not be sufficient to cover all such costs or consequences, and there can be no assurance that any insurance that we now maintain will remain available under acceptable terms.
Cyberattacks or other breaches of network or information technology security could have an adverse effect on our systems, services, reputation and financial results.
We rely upon multiple information technology systems and networks, some of which are web-based or managed by third parties, to process, transmit, and store electronic information and to manage or support a variety of critical business processes and activities. Our networks and applications are increasingly accessed from locations and by devices not within our physical control, and the specifics of our technology systems and networks may vary by geographic region. In the course of ordinary business, we may store or process proprietary or confidential information concerning our business and financial performance and current, past or prospective employees, customers, vendors and managed suppliers. The secure and consistent operation of these systems, networks and processes is critical to our business operations. Moreover, our temporary employees may be exposed to, or have access to, similar information in the course of their customer assignments. We routinely experience cyberattacks, which may include the use or attempted use of malware, ransomware, computer viruses, phishing, social engineering schemes and other means of attempted disruption or unauthorized access. Additionally, the rapid pace of change in information security and cyber security threats could result in a heightened threat level for us or companies in our industry with little notice. Our relationships with third parties, including suppliers we manage, customers, and vendors creates potential avenues for malicious actors to initiate a supply chain attack. Even in instances where we are not a target of a malicious actor, we could be exposed to risk due to our relationships and business processes with these third parties.
The actions we take to reduce the risk of impairments to our operations or systems and breaches of confidential or proprietary data may not be sufficient to prevent or repel future cyber events or other impairments of our networks or information technologies. An event involving the destruction, modification, accidental or unauthorized release, or theft of sensitive information from systems related to our business, or an attack that results in damage to or unavailability of our key technology systems or those of critical vendors (e.g., ransomware), could result in damage to our reputation, fines, regulatory sanctions or interventions, contractual or financial liabilities, additional compliance and remediation costs, loss of employees or customers, loss of payment card network privileges, operational disruptions and other forms of costs, losses or reimbursements, any of which could materially adversely affect our operations or financial condition. Our cyber security and business continuity plans, and those of our third parties with whom we do business, may not be effective in anticipating, preventing and effectively responding to all potential cyber risk exposures. Our insurance coverage may not be sufficient to cover all such costs or consequences, and there can be no assurance that any insurance that we now maintain will remain available under acceptable terms.
Risks Related to Our Capital Structure
Our controlling stockholder exercises voting control over our company and has the ability to elect or remove from office all of our directors.
The Terence E. Adderley Revocable Trust K (“Trust K”) which became irrevocable upon the death of Terence E. Adderley on October 9, 2018, is our controlling stockholder. In accordance with the provisions of Trust K, William U. Parfet, David M. Hempstead and Andrew H. Curoe were appointed as successor trustees of the trust. Mr. Parfet is the brother of Donald R. Parfet, a member of the board of directors of the Company. The trustees, acting by majority vote, have sole investment and voting power over the shares of Class B common stock held by Trust K, which represent approximately 93.5% of the outstanding Class B shares. The voting rights of our Class B common stock are perpetual, and our Class B common stock is not subject to transfer restrictions or mandatory conversion obligations under our certificate of incorporation or bylaws.
Our Class B common stock is the only class of our common stock entitled to voting rights. The trustees of Trust K are therefore able to exercise voting control with respect to all matters requiring stockholder approval, including the election or removal from office of all members of the Company’s board of directors.
We are not subject to certain of the listing standards that normally apply to companies whose shares are quoted on the NASDAQ Global Market.
Our Class A and Class B common stock are quoted on the NASDAQ Global Market. Under the listing standards of the NASDAQ Global Market, we are deemed to be a “controlled company” due to Trust K having voting power with respect to more than fifty percent of our outstanding voting stock. A controlled company is not required to have a majority of its board of directors comprised of independent directors. Director nominees are not required to be selected or recommended for the board’s selection by a majority of independent directors or a nominations committee comprised solely of independent directors, nor do the NASDAQ Global Market listing standards require a controlled company to certify the adoption of a formal written charter or board resolution, as applicable, addressing the nominations process. A controlled company is also exempt from NASDAQ Global Market’s requirements regarding the determination of officer compensation by a majority of independent directors or a compensation committee comprised solely of independent directors. A controlled company is required to have an audit committee composed of at least three directors who are independent as defined under the rules of both the SEC and the NASDAQ Global Market. The NASDAQ Global Market further requires that all members of the audit committee have the ability to read and understand fundamental financial statements and that at least one member of the audit committee possess financial sophistication. The independent directors must also meet at least twice a year in meetings at which only they are present.
We currently comply with the listing standards of the NASDAQ Global Market that do not apply to controlled companies. Our compliance is voluntary, however, and there can be no assurance that we will continue to comply with these standards in the future.
Provisions in our certificate of incorporation and bylaws and Delaware law may delay or prevent an acquisition of our Company.
Our certificate of incorporation and bylaws contain provisions that could make it harder for a third party to acquire us without the consent of our board of directors. For example, if a potential acquirer were to make a hostile bid for us, the acquirer would not be able to call a special meeting of stockholders to remove our board of directors or act by written consent without a meeting. The acquirer would also be required to provide advance notice of its proposal to replace directors at any annual meeting and would not be able to cumulate votes at a meeting, which would require the acquirer to hold more shares to gain representation on the board of directors than if cumulative voting were permitted.
Our board of directors also has the ability to issue additional shares of common stock which could significantly dilute the ownership of a hostile acquirer. In addition, Section 203 of the Delaware General Corporation Law limits mergers and other business combination transactions involving 15 percent or greater stockholders of Delaware corporations unless certain board or stockholder approval requirements are satisfied. These provisions and other similar provisions make it more difficult for a third party to acquire us without negotiation.
Our board of directors could choose not to negotiate with an acquirer that it did not believe was in our strategic interests. If an acquirer is discouraged from offering to acquire us or prevented from successfully completing a hostile acquisition by these or other measures, our shareholders could lose the opportunity to sell their shares at a favorable price.
The holders of shares of our Class A common stock are not entitled to voting rights.
Under our certificate of incorporation, the holders of shares of our Class A common stock are not entitled to voting rights, except as otherwise required by Delaware law. As a result, Class A common stockholders do not have the right to vote for the election of directors or in connection with most other matters submitted for the vote of our stockholders, including mergers and certain other business combination transactions involving the Company.
We may not be able to realize value from, or otherwise preserve and utilize, our tax credit and net operating loss carryforwards.
Provisions in U.S. and foreign tax law could limit the use of tax credit and net operating loss carryforwards in the event of an ownership change. In general, an ownership change occurs under U.S. tax law if there is a change in the corporation’s equity ownership that exceeds 50% over a rolling three-year period. If we experience an ownership change, inclusive of our Class A and Class B common stock, our tax credit and net operating loss carryforwards generated prior to the ownership change may be subject to annual limitations that could reduce, eliminate or defer their utilization. Such limitation could materially impact our financial condition and results of operations.
Failure to maintain specified financial covenants in our bank credit facilities, or credit market events beyond our control, could adversely restrict our financial and operating flexibility and subject us to other risks, including risk of loss of access to capital markets.
Our bank credit facilities contain covenants that require us to maintain specified financial ratios and satisfy other financial conditions. During 2023, we met all of the covenant requirements. Our ability to continue to meet these financial covenants, particularly with respect to interest coverage (see Debt footnote in the notes to our consolidated financial statements), cannot be assured. If we default under this or any other of these requirements, the lenders could declare all outstanding borrowings, accrued interest and fees to be due and payable or significantly increase the cost of the facility. Additionally, our credit facilities contain cross-default provisions. In these circumstances, there can be no assurance that we would have sufficient liquidity to repay or refinance this indebtedness at favorable rates or at all. Events beyond our control could result in the failure of one or more of our banks, reducing our access to liquidity and potentially resulting in reduced financial and operating flexibility. If broader credit markets were to experience dislocation, our potential access to other funding sources would be limited.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES.
Our headquarters is a leased facility located in Troy, Michigan and is available to our corporate, subsidiary and divisional employees. We also conduct business operations in both the U.S. and international locations in additional leased facilities. Since 2020, the majority of our internal employees have also conducted business remotely as part of our flexible work policy.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS.
The Company is continuously engaged in litigation, threatened ligation, claims, audits or investigations arising in the ordinary course of its business, such as matters alleging employment discrimination, wage and hour violations, claims for indemnification or liability, violations of privacy rights, anti-competition regulations, commercial and contractual disputes, and 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 and other assets in the consolidated balance sheet.
While the outcome of these matters currently pending cannot be predicted with certainty, we believe that the resolution of any such proceedings will not have a material adverse effect on our financial condition, results of operations or cash flows.
In January 2018, the Hungarian Competition Authority initiated proceedings against 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 liability placed on the 20 member companies. The Competition Authority apportioned secondary liability against us as a member company to be approximately $300,000. Certain member companies exercised their right to challenge the decision in Court. On or about October 3, 2023, the Court issued its decision which repealed the Competition Authority's decision and ordered a repeated procedure to determine the amount of the imposed fine as well as the allocation between the parties. 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.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information and Dividends
Our Class A and Class B common stock is traded on the NASDAQ Global Market under the symbols “KELYA” and “KELYB,” respectively. The high and low selling prices for our Class A common stock and Class B common stock as quoted by the NASDAQ Global Market and the dividends paid on the common stock for each quarterly period in the last two fiscal years are reported in the table below. Our ability to pay dividends is subject to compliance with certain financial covenants contained in our debt facilities, as described in the Debt footnote in the notes to our consolidated financial statements.
Per share amounts (in dollars)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Year
Class A common
High $ 19.01 $ 19.43 $ 19.29 $ 22.11 $ 22.11
Low 15.23 15.53 16.80 17.40 15.23
Class B common
High 18.62 18.36 18.95 21.65 21.65
Low 15.28 14.86 17.23 18.17 14.86
Dividends 0.075 0.075 0.075 0.075 0.30
Class A common
High $ 23.00 $ 21.69 $ 22.56 $ 18.78 $ 23.00
Low 16.22 16.73 13.41 13.64 13.41
Class B common
High 22.30 21.77 26.64 18.63 26.64
Low 16.74 17.01 13.64 14.04 13.64
Dividends 0.05 0.075 0.075 0.075 0.275
Holders
The number of holders of record of our Class A and Class B common stock were approximately 9,600 and 600, respectively, as of February 1, 2024.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
During the fourth quarter of 2023, 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)
October 2, 2023 through November 5, 2023 779 $ 18.35 - $ -
November 6, 2023 through December 3, 2023 323 20.38 - -
December 4, 2023 through December 31, 2023 2,046 20.99 - -
Total 3,148 $ 20.27 -
We may reacquire shares sold to cover employee tax withholdings due upon the vesting of restricted stock held by employees. Accordingly, 3,148 shares were reacquired during the Company’s fourth quarter.
Performance Graph
The following graph compares the cumulative total return of our Class A common stock with that of the S&P SmallCap 600 Index and the S&P 1500 Human Resources and Employment Services Index for the five years ended December 31, 2023. The graph assumes an investment of $100 on December 31, 2018 and that all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Assumes Initial Investment of $100
December 31, 2018 - December 31, 2023
2018 2019 2020 2021 2022 2023
Kelly Services, Inc. $ 100.00 $ 111.63 $ 102.08 $ 83.66 $ 85.56 $ 111.23
S&P SmallCap 600 Index $ 100.00 $ 122.78 $ 136.64 $ 173.29 $ 145.39 $ 168.73
S&P 1500 Human Resources and Employment Services Index $ 100.00 $ 122.79 $ 123.83 $ 187.16 $ 139.81 $ 148.84

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Executive Overview
2023 marked a year of macroeconomic headwinds and challenging staffing market dynamics as employers in most sectors maintained a guarded approach to hiring and focused on retaining their current workforce amid ongoing economic uncertainty. In more resilient pockets of the economy where employers are in need of talent, the supply of candidates to fill open roles remains constrained. These dynamics put pressure on our business as the year progressed, and while we captured growth where it exists, their effects became more noticeable in certain parts of our portfolio.
•Our Education segment continued to report significant year-over-year growth driven by improved fill rates, strong demand from existing customers, and net new customer wins.
•Our higher margin outcome-based solutions in P&I delivered revenue growth as demand for these value-added solutions continues.
•We continued to experience a deceleration in demand for temporary and permanent placement services as well as talent solutions, which impacted results in our P&I, SET and OCG segments.
•We maintained a disciplined approach to managing expenses, including our transformation initiatives, while ensuring Kelly is well positioned to capture demand on the other side of the current economic cycle.
We have remained focused on the future and took aggressive action on our transformation journey to improve Kelly’s profitability and accelerate growth over the long term. Since announcing the transformation in May, our business unit and enterprise function teams, together with the Transformation Management Office, have made substantial progress on multiple initiatives to drive organizational efficiency and effectiveness. The actions we have taken to date include restructuring actions, which has reduced our full-time employee headcount, and renegotiated supplier agreements and real estate contracts to deliver structural cost savings.
We have also committed to finding new avenues of growth. This includes a refreshed go-to-market strategy with a comprehensive approach to delivering the full suite of Kelly solutions to our large enterprise customers that is intended to capture a greater share of wallet as we move into 2024. We also remain committed to delivering the highest quality of service to all customers regardless of spend or size. In our P&I segment, for example, we have enhanced our local delivery model and rolled out our Kelly Now mobile application across the U.S to meet the needs of clients and talent.
We completed the sale of our European staffing operations on January 2, 2024. We move forward with a further streamlined operating model focused on North American staffing and global MSP and RPO solutions.
Together these changes represent structural shifts in Kelly’s operations and are delivering meaningful improvement to the Company’s EBITDA margin which we expect to continue as we move into 2024 and beyond.
Financial Measures
The constant currency (“CC”) change amounts refer to the year-over-year percentage changes resulting from translating 2023 financial data into U.S. dollars using the same foreign currency exchange rates used to translate financial data for 2022. 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.
EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA margin (EBITDA divided by revenue from services) are measures used by management to compare the Company's operating performance to prior periods on a consistent basis by excluding items that management does not believe are indicative of our normal operations.
Free cash flow (operating cash flows less capital expenditures) is a measure used by management to indicate the change in cash balances arising from operating activities, net of working capital needs and expenditures on fixed assets.
NM (not meaningful) in the following tables is used in place of percentage changes where: the change is in excess of 500%, the change involves a comparison between earnings and loss amounts, or the comparison amount is zero.
Days sales outstanding (“DSO”) represents the number of days that sales remain unpaid for the period being reported. DSO is calculated by dividing average net sales per day (based on a rolling three-month period) into trade accounts receivable, net of allowances at the period end. Although secondary supplier revenues are recorded on a net basis (net of secondary supplier expense), secondary supplier revenue is included in the daily sales calculation in order to properly reflect the gross revenue amounts billed to the customer.
Results of Operations
Total Company
(Dollars in millions)
2023 2022 Change
Revenue from services $ 4,835.7 $ 4,965.4 (2.6) %
Gross profit 961.4 1,011.8 (5.0)
SG&A expenses excluding restructuring charges and transaction costs 892.3 942.1 (5.3)
Restructuring charges and transaction costs 42.4 1.4 NM
Total SG&A expenses 934.7 943.5 (0.9)
Asset impairment charge 2.4 - NM
Goodwill impairment charge - 41.0 NM
Loss on disposal - 18.7 NM
Gain on sale of assets - (6.2) NM
Earnings from operations 24.3 14.8 65.0
Loss on investment in Persol Holdings - (67.2) NM
Loss on currency translation from liquidation of subsidiary - (20.4) NM
Unrealized loss on forward contract (3.6) - NM
Other income, net 4.2 1.6 150.5
Earnings (loss) before taxes and equity in net earnings of affiliate 24.9 (71.2) NM
Income tax benefit (11.5) (7.9) (45.6)
Equity in net earnings of affiliate - 0.8 NM
Net earnings (loss) $ 36.4 $ (62.5) NM %
Gross profit rate 19.9 % 20.4 % (0.5) pts.
The discussion that follows focuses on 2023 results compared to 2022. For a discussion of 2022 results compared to 2021, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 1, 2023, filed on February 16, 2023.
2023 vs. 2022
Revenue from services decreased 2.6% on a reported basis and 3.2% on a constant currency basis, and reflects revenue decreases in Professional & Industrial, Science, Engineering & Technology, Outsourcing & Consulting and International operating segments, partially offset by an increase in the Education segment. Our first quarter 2022 acquisition of RocketPower, an RPO solutions provider, and our second quarter 2022 acquisition of PTS, a specialty firm that provides in-school therapy services, added approximately 40 basis points to the revenue growth rate. Compared to 2022, revenue from staffing services decreased 2.8% and revenue from outcome-based services increased 5.9%. Permanent placement revenue, which is included in revenue from services, decreased 33.6% from 2022.
Gross profit decreased 5.0% on a reported basis and 5.3% on a constant currency basis on lower revenue volume, combined with a decrease in the gross profit rate. The gross profit rate decreased 50 basis points due primarily to lower permanent placement income, partially offset by favorable business mix. The gross profit rate decreased in 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 decreased 0.9% on a reported basis and 1.4% on a constant currency basis. Included in SG&A expenses in 2023 was $35.5 million of transformation and restructuring charges and $6.9 million of transaction costs, which includes employee termination costs, incurred in the fourth quarter of 2023 directly related to the sale of the EMEA staffing operations in the first quarter of 2024. In the first quarter of 2023, actions were taken to further our cost management efforts in response to current demand levels and to reposition our P&I staffing business to better capitalize on opportunities in local markets. In the
last three quarters of 2023, additional actions were taken that will further streamline the Company's operating model to enhance organizational efficiency and effectiveness as part of a comprehensive transformation initiative. Excluding transformation and restructuring charges and transaction costs, SG&A expenses decreased 5.3% on a reported basis and 5.8% on a constant currency basis. The decrease in SG&A expenses primarily related to lower performance-based incentive compensation expenses in response to lower revenue volume, lower salary expenses as a result of transformation-related workforce reductions, as well as reduced expenses from the sale of our Russian operations in 2022.
Impairment of assets in 2023 represents the second quarter impairment of right-of-use assets related to an unoccupied office space lease exited in the quarter. The goodwill impairment charge in 2022 relates to our RocketPower business which delivers recruitment process outsourcing services primarily to customers in the high-tech industry and is included in the OCG segment. Changes in market conditions related to demand in hiring in the high-tech industry and slowing growth in RPO more broadly resulted in an impairment charge of $41.0 million.
Loss on disposal related to the completion of the sale of our Russia operations in July 2022. Gain on sale of assets in the second quarter of 2022 related to the disposition of under-utilized real property located in the United States.
Earnings from operations for 2023 totaled $24.3 million, compared to earnings of $14.8 million in 2022. The increase is primarily related to the impact from the prior year goodwill impairment charge and loss on sale of our Russia operations, partially offset by the impact of our 2023 transformation and restructuring charges, transaction costs, asset impairment charge, and the impact of lower revenue compared to the prior year in addition to the impact of the 2022 gain on sale of assets.
The loss on investment in Persol Holdings in 2022 represented the $52.4 million loss resulting from changes in the market price of our investment in the common stock of Persol Holdings up until the date of the transaction and the $14.8 million loss on sale, including transaction costs from the sale of the investment in an open-market transaction.
Loss on currency translation from liquidation of subsidiary represents the impact of the liquidation of our Kelly Japan subsidiary following the sale of the company’s investment in Persol Holdings and the return of capital through a dividend payment to its U.S. parent.
Unrealized loss on forward contract represents the non-cash, mark-to-market losses on the foreign currency forward contract the Company entered into in the fourth quarter of 2023 to mitigate the exchange rate risk associated with the future cash proceeds from the sale of the EMEA staffing operations.
Income tax benefit was $11.5 million for 2023 and 7.9 million for 2022. Included in the 2023 benefit are a $15.0 million federal and state benefit on the outside basis difference of held for sale assets and a $6.5 million benefit from tax-exempt life insurance cash surrender value gains, offset by a net $4.4 million charge for valuation allowance changes. 2022 benefited from lower pretax earnings, a $16.9 million benefit from changes in the fair value of the Company’s investment in Persol Holdings, and a $7.1 million benefit from the impairment of tax-deductible goodwill. These benefits were offset by the $7.8 charge associated with tax exempt life insurance cash surrender value losses.
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 and the tax effects of stock compensation.
The net earnings for 2023 are $36.4 million, compared to a net loss of $62.5 million for 2022. This change primarily reflects the prior year impact of the Persol Holdings investment, including the first quarter 2022 sale and related impacts, the 2022 goodwill impairment charge, and the 2022 loss on disposal related to the sale of our Russian operations which were partially offset by the 2023 transformation-related charges.
Operating Results By Segment
(Dollars in millions)
2023 2022 % Change
Revenue From Services:
Professional & Industrial $ 1,483.1 $ 1,666.2 (11.0) %
Science, Engineering & Technology 1,190.8 1,265.4 (5.9)
Education 841.9 636.2 32.3
Outsourcing & Consulting 454.7 468.0 (2.8)
International 884.8 932.2 (5.1)
Less: Intersegment revenue (19.6) (2.6) NM
Consolidated Total $ 4,835.7 $ 4,965.4 (2.6) %
2023 vs. 2022
Professional & Industrial revenue from services decreased 11.0%. The decrease was due primarily to a 16.2% decline in staffing services resulting from lower hours volume, partially offset by higher bill rates. Revenue from outcome-based services increased 7.9% due to increased demand.
Science, Engineering & Technology revenue from services decreased 5.9% which was driven by a decline in staffing services resulting from declines in hours volume in our staffing specialties, partially offset by higher bill rates. Permanent placement fees were down 40.2% and revenues from outcome-based services increased 3.7%.
Education revenue from services increased 32.3%. The revenue increase includes the impact of the acquisition of PTS in May 2022. On an organic basis, revenue increased 29.8% reflecting an increased fill rate and an increased demand for our services from existing customers and from net new customer wins.
Outsourcing & Consulting revenue from services decreased 2.8% on a reported basis, which includes the revenue from the acquisition of RocketPower in March 2022. On an organic basis, revenue decreased 3.4% due primarily to lower RPO and MSP revenue.
International revenue from services decreased 5.1% on a reported basis and decreased 8.9% in constant currency. The decrease was primarily the result of the sale of our Russian operations in July 2022. Revenue in Europe decreased 8.4% on a reported basis and decreased 11.5% in constant currency, primarily due to the impact of the sale of our Russian operations and lower volume in several geographies.
Operating Results By Segment (continued)
(Dollars in millions)
2023 2022 Change
Gross Profit:
Professional & Industrial $ 263.9 $ 302.5 (12.7) %
Science, Engineering & Technology 272.0 297.0 (8.4)
Education 128.7 100.3 28.4
Outsourcing & Consulting 163.5 169.6 (3.7)
International 133.3 142.4 (6.3)
Consolidated Total $ 961.4 $ 1,011.8 (5.0) %
Gross Profit Rate:
Professional & Industrial 17.8 % 18.2 % (0.4) pts.
Science, Engineering & Technology 22.8 23.5 (0.7)
Education 15.3 15.8 (0.5)
Outsourcing & Consulting 36.0 36.3 (0.3)
International 15.1 15.3 (0.2)
Consolidated Total 19.9 % 20.4 % (0.5) pts.
2023 vs. 2022
Gross profit for the Professional & Industrial segment decreased on lower revenue volume combined with a decrease in the gross profit rate. In comparison to the prior year, the gross profit rate decreased 40 basis points. This decrease reflects lower permanent placement income and higher employee-related costs, partially offset by favorable business mix.
Science, Engineering & Technology gross profit decreased on lower revenue volume. The gross profit rate decreased 70 basis points due to lower permanent placement revenues, partially offset by favorable business mix.
Gross profit for the Education segment increased on higher revenue volume. The gross profit rate decreased 50 basis points due primarily to lower permanent placement fees and unfavorable customer mix, partially offset by lower employee-related costs.
Outsourcing & Consulting gross profit decreased on lower revenue volume, combined with a decrease in the gross profit rate. The gross profit rate decreased 30 basis points primarily driven by declines in revenue in RPO and MSP, which generate higher margins.
International gross profit decreased 6.3% on a reported basis and decreased 10.0% on a constant currency basis. The decrease was primarily the result of the sale of our Russian operations in July 2022 and the servicing of certain customer programs by OCG in 2023. Partially offsetting these impacts was improving gross profit primarily driven by higher revenue volume in Mexico, Portugal and Germany.
Operating Results By Segment (continued)
(Dollars in millions)
2023 2022 % Change
SG&A Expenses:
Professional & Industrial $ 237.0 $ 270.5 (12.4) %
Science, Engineering & Technology 197.6 214.9 (8.1)
Education 92.4 81.8 13.0
Outsourcing & Consulting 154.6 149.8 3.1
International 131.2 132.5 (0.9)
Corporate expenses 121.9 94.0 29.8
Consolidated Total $ 934.7 $ 943.5 (0.9) %
2023 vs. 2022
Total SG&A expenses in Professional & Industrial decreased 12.4%, or 14.8% excluding restructuring charges of $6.7 million. The decrease excluding restructuring charges is primarily due to lower salary-related and performance-based incentive compensation expenses due to transformation-related actions and in response to lower revenue volume.
Total SG&A expenses in Science, Engineering & Technology decreased 8.1% from the prior year, primarily due to lower performance-based incentive compensation expenses.
Total SG&A expenses in Education increased 13% from the prior year and includes the first quarter impact of the acquisition of PTS in May 2022. Excluding the impact of the PTS acquisition, SG&A expenses increased 10.4% from the prior year, due primarily to higher salary-related and performance-based incentive compensation expenses as headcount has increased as revenues have grown.
Total SG&A expenses in Outsourcing & Consulting increased 3.1% from the prior year, or 1.3% excluding restructuring charges of $3.0 million, and includes the first quarter impact of the acquisition of RocketPower in March 2022. Excluding restructuring charges and the impact of the RocketPower acquisition, SG&A expenses were flat to prior year.
Total SG&A expenses in International decreased 0.9% on a reported basis and 4.7% on a constant currency basis. This decrease was primarily due to the impact of the sale of our Russian operations in July 2022, partially offset by employee termination costs related to the sale of the EMEA staffing operations in the first quarter of 2024.
Corporate expenses increased 29.8%, primarily due to restructuring and transformation charges as well as transaction costs related to the sale of the EMEA staffing operations in the first quarter of 2024. Excluding restructuring and transformation charges of $23.0 million and transaction costs of $3.8 million, expenses increased 1.8% year-over-year. The increase excluding these charges is primarily due to litigation-related costs.
Operating Results By Segment (continued)
(Dollars in millions)
2023 2022 % Change
Earnings from Operations:
Professional & Industrial $ 26.6 $ 32.0 (16.9) %
Science, Engineering & Technology 74.3 82.1 (9.5)
Education 36.3 18.5 96.6
Outsourcing & Consulting 6.9 (21.2) NM
International 2.1 9.9 (79.1)
Corporate (121.9) (94.0) (29.8)
Loss on disposal - (18.7) NM
Gain on sale of assets - 6.2 NM
Consolidated Total $ 24.3 $ 14.8 65.0 %
2023 vs. 2022
Professional & Industrial reported earnings of $26.6 million, a 16.9% decrease from 2022. The decrease in earnings was primarily due to lower revenue and gross profit, partially offset by lower SG&A expenses.
Science, Engineering & Technology reported earnings of $74.3 million, a 9.5% decrease from 2022. The decrease in earnings was primarily due to lower revenue and gross profit, partially offset by lower SG&A expenses.
Education reported earnings of $36.3 million in 2023, compared to earnings of $18.5 million in 2022. The change was primarily due to the increase in revenue and gross profit, coupled with good cost management. 2023 results also include the impact of first quarter earnings of $2.7 million from PTS acquired in May 2022.
Outsourcing & Consulting reported earnings of $6.9 million in 2023, compared to a loss of $21.2 million in 2022. The increase in earnings was primarily due to the impact of the prior year $41.0 million charge related to the impairment of goodwill of RocketPower, partially offset by the first quarter 2023 loss of $2.6 million from RocketPower, acquired in March 2022, the impact of a $2.4 million right-of-use asset impairment charge in the second quarter of 2023, the impact of 2023 restructuring charges and the impact of lower revenue and gross profit.
International reported earnings of $2.1 million in 2023, compared to earnings of $9.9 million a year ago. The decrease in earnings was primarily due to the transfer of certain customer programs to Outsourcing & Consulting, the impact of the sale of our Russian operations and employee termination costs related to the sale of the EMEA staffing operations in the first quarter of 2024.
Corporate expenses increased $27.9 million year-over-year primarily due to restructuring and transformation charges of $23.0 million and transaction costs of $3.8 million.
Loss on disposal related to the completion of the sale of our Russia operations in July 2022. Gain on sale of assets in 2022 related to the disposition of under-utilized real property located in the United States.
Results of Operations
Financial Condition
Historically, we have financed our operations through cash generated by operating activities and access to credit markets. Our working capital requirements are primarily generated from temporary employee payroll, which is generally paid weekly or monthly, and customer accounts receivable, which is generally outstanding for longer periods. Since receipts from customers lag payroll payments to temporary employees, working capital requirements increase and operating cash flows may decrease substantially in periods of growth. Conversely, when economic activity slows, working capital requirements may substantially decrease and operating cash flows increase. Such increases dissipate over time if the economic downturn continues for an extended period.
As highlighted in the consolidated statements of cash flows, our liquidity and available capital resources are impacted by four key components: cash, cash equivalents and restricted cash, operating activities, investing activities and financing activities.
Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash, totaled $167.6 million, including $33.5 million held for sale, at year-end 2023, compared to $162.4 million at year-end 2022. As further described below, during 2023, we generated $76.7 million of cash for operating activities, used $14.1 million of cash for investing activities and used $59.6 million of cash for financing activities.
Operating Activities
In 2023, we generated $76.7 million of net cash for operating activities, as compared to using $76.3 million in 2022 and generating $85.0 million in 2021, primarily due to decreased working capital requirements. Accounts receivable have decreased in 2023 as a result of lower revenue. Net cash used for operating activities in 2022 and 2021 included $86.8 million and $29.7 million, respectively, of cash outflows related to the repayment of U.S. payroll taxes originally deferred in 2020. In addition, in 2022 we paid $48.4 million of income taxes related to the sale of Persol Holdings common stock.
Trade accounts receivable, excluding $200.9 million held for sale, totaled $1.2 billion at year-end 2023 and $1.5 billion at year-end 2022. Accounts receivable have decreased as a result of lower revenue and lower DSO. Global DSO for the fourth quarter was 59 days for 2023, which includes held for sale, compared to 61 days for 2022. Accounts payable and accrued liabilities was $646.1 million, excluding $24.5 million held for sale, and decreased from year-end 2022 as a result of a decrease in supplier payables and timing of customer payments. The change from 2021 to 2022 was primarily due to the impact of payments related to the payroll tax deferral, income tax payments related to the sale of Persol Holdings common stock and increased working capital requirements.
Our working capital position, (total current assets less total current liabilities), was $606.7 million, excluding held for sale, at year-end 2023, an increase of $20.3 million from year-end 2022. The current ratio (total current assets divided by total current liabilities) was 1.6 at year-end 2023 and 1.5 at year end 2022.
Investing Activities
In 2023, we used $14.1 million of net cash from investing activities, compared to generating $167.5 million in 2022 and using $180.7 million in 2021. Included in cash used for investing activities in 2023 is $15.3 million of cash used for capital expenditures, partially offset by $2.0 million for the receipt of the final payment in connection with an investment that was sold in 2021.
Included in cash generated from investing activities in 2022 is $196.9 million of proceeds from the sale of the investment in Persol Holdings, $119.5 million of proceeds from the sale of almost all of the Company's shares in our equity investment in PersolKelly and $10.1 million of proceeds from the sale of land and other real property. This was partially offset by $58.3 million of cash used for the acquisition of RocketPower in March 2022, net of cash received, $84.8 million of cash used for the acquisition of PTS in May 2022, net of cash received, and $6.0 million of cash disposed from the sale of our operations in Russia in July 2022, net of proceeds.
Included in cash used for investing activities in 2021 is $213.0 million of cash used for the acquisition of Softworld in April 2021, net of cash received and including working capital adjustments. This was partially offset by $19.0 million of proceeds from an insurance settlement that represented a payment received in the fourth quarter of 2021 related to the settlement of
claims under a representations and warranties insurance policy purchased by the Company in connection with the acquisition of Softworld.
Capital expenditures totaled $15.3 million in 2023, $12.0 million in 2022 and $11.2 million in 2021. Capital expenditures in both 2023 and 2022 primarily related to the Company's IT infrastructure and technology programs. Capital expenditures in 2021 primarily related to the Company's IT infrastructure, technology programs and headquarters building improvements.
Financing Activities
In 2023, we used $59.6 million of cash for financing activities, as compared to using $50.6 million in 2022 and using $8.1 million in 2021. The change in cash used for financing activities was primarily related to the year-over-year change in the buyback of the Company's common shares and the year-over-year change in dividend payments. In 2023, the buyback of $42.2 million represents repurchases of the Company's Class A common stock as part of the shares repurchase program compared to $7.8 million in shares repurchased of the Company's Class A common stock in 2022 and $27.2 million for the buyback of the Company's common shares held by Persol Holdings in February 2022. Dividends paid per common share were $0.30 in 2023, $0.275 in 2022 and $0.10 in 2021. Payments of dividends are restricted by the financial covenants contained in our debt facilities. Details of this restriction are contained in the Debt footnote in the notes to our consolidated financial statements.
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 year-end 2023 and 0.1% at year-end 2022.
Contractual Obligations and Commercial Commitments
Summarized below are our obligations and commitments to make future payments as of year-end 2023 (in millions of dollars):
Payment due by period
Total Less than
1 year
1-3 Years 3-5 Years More than
5 years
Leases(1)
$ 79.1 $ 17.1 $ 23.6 $ 12.7 $ 25.7
Accrued workers’ compensation 63.0 22.1 19.5 8.2 13.2
Accrued retirement benefits(1)
235.4 16.3 32.6 32.5 154.0
Other liabilities(1)
6.4 0.9 1.8 1.6 2.1
Uncertain income tax positions 0.8 0.3 - 0.4 0.1
Purchase obligations(1)
61.2 41.2 19.2 0.8 -
Total $ 445.9 $ 97.9 $ 96.7 $ 56.2 $ 195.1
(1)Includes future payments for held for sale obligations and commitments. See Held for Sale footnote in the notes to our consolidated financial statements for more information.
Purchase obligations above represent unconditional commitments relating primarily to technology services and online tools which we expect to utilize generally within the next three fiscal years, in the ordinary course of business. We have no material, unrecorded commitments, losses, contingencies or guarantees associated with any related parties or unconsolidated entities.
Liquidity
We expect to meet our ongoing short-term and long-term cash requirements principally through cash generated from operations, available cash and equivalents, securitization of customer receivables and committed unused credit facilities. Additional funding sources could include 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.
We assess and monitor our liquidity and capital resources globally. We use a global cash pooling arrangement (the "Cash Pool"), intercompany loans, dividends, capital contributions, redemptions and local lines of credit to meet funding needs and allocate our capital resources among our various subsidiaries. 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 subsidiaries with excess cash to invest and subsidiaries with cash needs to utilize the excess cash. 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 year-end 2023, these reviews have not resulted in specific plans to repatriate a majority of our international cash balances. In addition, as of year-end 2023, $33.5 million of our international cash balances are classified as held for sale related to the sale of our EMEA staffing operations in the first quarter of 2024 (see Held for Sale footnote in the notes to our consolidated footnotes for more details). The Company will continue to provide MSP, RPO and Functional Service Provider solutions in the EMEA region. Therefore, we expect much of our international cash, excluding cash classified as held for sale, will be needed to fund working capital growth in our local operations.
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 if demand for our services increases.
At year-end 2023, we had $200.0 million of available capacity on our $200.0 million revolving credit facility and $100.6 million of available capacity on our $150.0 million securitization facility. The securitization facility carried no short-term borrowings and $49.4 million of standby letters of credit related to workers’ compensation. Together, the revolving credit and securitization facilities provide the Company with committed funding capacity that may be used for general corporate purposes subject to financial covenants and restrictions. While we believe these facilities will cover our working capital needs over the short term, if economic conditions or operating results change significantly from our current expectations, we may need to seek additional sources of funds. Throughout 2023 and as of the 2023 year end, we met the debt covenants related to our revolving credit facility and securitization facility.
At year-end 2023, we had additional unsecured, uncommitted short-term local credit facilities totaling $11.5 million, under which we had no borrowings. Details of our debt facilities as of the 2023 year end are contained in the Debt footnote in the notes to our consolidated financial statements.
We repurchased $42.2 million of the Company's Class A common stock in fiscal 2023 pursuant to the $50.0 million share repurchase program, which was approved by the Company's board of directors in November 2022 and completed in August 2023.
On January 2, 2024, subsequent to the year ended 2023, the Company completed the sale of its EMEA staffing operations to Gi Group Holdings S.P.A. and received cash proceeds of $110.6 million. The foreign currency forward contract that the Company entered into on November 2, 2023 to manage the foreign currency risk associated with the transaction was settled on January 5, 2024. A total loss of $2.4 million was realized upon settlement. See the Subsequent Event footnote in the notes to our consolidated financial statements for more details.
We monitor the credit ratings of our banking partners on a regular basis and have regular discussions with them. Based on our reviews and communications, we believe the risk of one or more of our banks not being able to honor commitments is insignificant. We also review the ratings and holdings of our money market funds and other investment vehicles regularly to ensure high credit quality and access to our invested cash.
Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States. In this process, it is necessary for us to make certain assumptions and related estimates affecting the amounts reported in the consolidated financial statements and the attached notes. Actual results can differ from assumed and estimated amounts.
Critical accounting estimates are those that we believe require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Judgments and uncertainties affecting the application of those estimates may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following estimates to be most critical in understanding the judgments involved in preparing our consolidated financial statements.
Workers’ Compensation
In the U.S., we have a combination of insurance and self-insurance contracts under which we effectively bear the first $1.0 million of risk per single accident. There is no aggregate limitation on our per-accident exposure under these insurance and self-insurance programs. We establish accruals for workers’ compensation utilizing actuarial methods to estimate the undiscounted future cash payments that will be made to satisfy the claims, including an allowance for incurred-but-not-reported claims. We retain an independent consulting actuary to establish ultimate loss forecasts for the current and prior accident years of our insurance and self-insurance programs. The consulting actuary establishes loss development factors and loss rates, based on our historical claims experience as well as industry experience, and applies those factors to current claims information to derive an estimate of our ultimate claims liability. In preparing the estimates, the consulting actuary may consider factors such as the nature, frequency and severity of the claims; reserving practices of our third party claims administrators; performance of our medical cost management and return to work programs; changes in our territory and business line mix; and current legal, economic and regulatory factors such as industry estimates of medical cost trends. Where appropriate, multiple generally accepted actuarial techniques are applied and tested in the course of preparing the loss forecast. We use the ultimate loss forecasts, as developed by the consulting actuary, to establish total expected program costs for each accident year by adding our estimates of non-loss costs such as claims handling fees and excess insurance premiums. When claims exceed the applicable loss limit or self-insured retention and realization of recovery of the claim from existing insurance policies is deemed probable, we record a receivable from the insurance company for the excess amount.
We evaluate the accrual quarterly and make adjustments as needed. The ultimate cost of these claims may be greater than or less than the established accrual. While we believe that the recorded amounts are reasonable, there can be no assurance that changes to our estimates will not occur due to limitations inherent in the estimation process. In the event we determine that a smaller or larger accrual is appropriate, we would record a credit or a charge to cost of services in the period in which we made such a determination. The accrual for workers’ compensation, net of related receivables which are included in prepaid expenses and other current assets and other assets in the consolidated balance sheet, was $43.6 million and $43.3 million at year-end 2023 and 2022, respectively.
Business Combinations
We account for business combinations using the acquisition method of accounting, in which the purchase price is allocated for assets acquired and liabilities assumed and recorded at the estimated fair values at the date of acquisition. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Management is required to make significant assumptions and estimates in determining the fair value of the assets acquired, particularly intangible assets. Purchased intangible assets are primarily comprised of acquired trade names and customer relationships that are recorded at fair value at the date of acquisition. We utilize third-party valuation specialists to assist us in the determination of the fair value of the intangibles. The fair value of trade name intangibles is determined using the relief-from-royalty method, which relies on the use of estimates and assumptions about projected revenue growth rates, royalty rates and discount rates. The fair value of customer relationship intangibles is determined using the multi-period excess earnings method, which relies on the use of estimates and assumptions about projected revenue growth rates, customer attrition rates, profit margins and discount rates. Determining the useful lives of intangible assets also requires judgment and are inherently uncertain. There is a measurement period of up to one year in which to finalize the fair value determinations and preliminary fair value estimates may be revised if new information is obtained during this period.
Income Taxes
Income tax expense is based on expected income and statutory tax rates in the various jurisdictions in which we operate. Judgment is required in determining our income tax expense.
Our effective tax rate includes the impact of accruals and changes to accruals that we consider appropriate, as well as related interest and penalties. A number of years may lapse before a particular matter, for which we have or have not established an accrual, is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our accruals are appropriate under generally accepted accounting principles. Favorable or unfavorable adjustments of the accrual for any particular issue would be recognized as an increase or decrease to our income tax expense in the period of a change in facts and circumstances. Our current tax accruals are presented in income and other taxes in the consolidated balance sheet and long-term tax accruals are presented in other long-term liabilities in the consolidated balance sheet.
Tax laws require items to be included in the tax return at different times than the items are reflected in the consolidated financial statements. As a result, the income tax expense reflected in our consolidated financial statements is different than the liability reported in our tax return. Some of these differences are permanent, which are not deductible or taxable on our tax return, and some are temporary differences, which give rise to deferred tax assets and liabilities. We establish valuation allowances for our deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. Our net deferred tax asset is recorded using currently enacted tax laws, and may need to be adjusted in the event tax laws change.
The U.S. work opportunity credit is allowed for wages earned by employees in certain targeted groups. The actual amount of creditable wages in a particular period is estimated, since the credit is only available once an employee reaches a minimum employment period and the employee’s inclusion in a targeted group is certified by the applicable state. As these events often occur after the period the wages are earned, judgment is required in determining the amount of work opportunity credits accrued for in each period. We evaluate the accrual regularly throughout the year and make adjustments as needed.
Goodwill
We test goodwill for impairment annually and whenever events or circumstances make it more likely than not that an impairment may have occurred. GAAP requires that goodwill be tested for impairment at a reporting unit level. For segments with a goodwill balance, we have determined that our reporting units are the same as our operating and reportable segments based on our organizational structure or one level below our operating segments (the component level).
We may first use a qualitative assessment ("step zero test") for the annual impairment test if we have determined that it is more likely than not that the fair value for one or more reporting units is greater than their carrying value. In conducting the qualitative assessment, we assess the totality of relevant events and circumstances that affect the fair value or carrying value of the reporting unit. Such events and circumstances may include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, entity-specific events and events affecting a reporting unit.
If we elect to forgo the qualitative assessment for a reporting unit, goodwill is tested for impairment by comparing the estimated fair value of a reporting unit to its carrying value ("step one test"). If the estimated fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is not considered impaired and no further testing is required. If the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of a reporting unit, goodwill is deemed impaired and is written down to the extent of the difference.
For the step one quantitative test, we determine the fair value of our reporting units using the income approach. Under the income approach, estimated fair value is determined based on estimated future cash flows discounted by an estimated market participant weighted-average cost of capital, which reflects the overall level of inherent risk of the reporting unit being measured. Estimated future cash flows are based on our internal projection model and reflects management’s outlook for the reporting units. Assumptions and estimates about future cash flows and discount rates are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. Our analysis used significant assumptions by reporting unit, including: expected future revenue growth rates, profit margins and discount rate.
The goodwill resulting from the acquisition of Softworld during the second quarter of 2021 was allocated to the SET reportable segment and Softworld was deemed to be a separate reporting unit. The goodwill resulting from the acquisition of PTS during the second quarter of 2022 was allocated to the Education reportable segment and PTS was deemed to be a separate reporting unit. The goodwill resulting from the acquisition of RocketPower during the first quarter of 2022 was allocated to the OCG reportable segment and RocketPower was deemed to be a separate reporting unit, which was fully impaired by year-end 2022. See the Acquisitions and Dispositions footnote in the notes to our consolidated financial statements for more information.
We completed our annual impairment test for all reporting units with goodwill in the fourth quarter for the fiscal year ended 2023. We performed a step one quantitative test for the Softworld and PTS reporting units. As a result of the quantitative assessment, we determined that the estimated fair value of the Softworld and PTS reporting units was more than its carrying value. Additionally, we performed a step zero qualitative analysis for the Education reporting unit to determine whether a further quantitative analysis was necessary and concluded that a step one quantitative analysis was not necessary. As a result of the quantitative and qualitative assessments, the Company determined goodwill was not impaired as of year-end 2023.
Our analysis used significant assumptions, including: expected future revenue growth rates, profit margins and discount rate. Although we believe the assumptions and estimates we have made are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results. Different assumptions of the anticipated future results and growth from our business could result in an impairment charge, which would decrease operating income and result in lower asset values on our consolidated balance sheet. As a measure of sensitivity of the fair value for the Softworld and PTS reporting units, while holding all other assumptions constant, an increase in the discount rate of 100 basis points or a decrease of 100 basis points in the revenue growth rate assumptions for each forecasted period used to determine the fair value of both reporting units would not result in an impairment of goodwill. The estimated fair value of the PTS reporting unit exceeds the carrying value by more than 10%. The estimated fair value of the Softworld reporting unit exceeds the carrying value by less than 10%. If current expectations of future revenue and profit margins are not met, or if market factors outside of our control change significantly, including discount rate, and other market factors, then the goodwill of the Softworld reporting unit may be impaired in the future, resulting in goodwill impairment charges.
We completed our annual impairment test for all reporting units with goodwill in the fourth quarter for the fiscal year ended 2022. We performed a step one quantitative test for the Softworld and PTS reporting units. As a result of the quantitative assessment, we determined that the estimated fair value of the Softworld and PTS reporting units was more than its carrying value. Additionally, we performed a step zero qualitative analysis for the Education and RocketPower reporting units to determine whether a further quantitative analysis was necessary and concluded that a step one quantitative analysis was not necessary at that time. As a result of the quantitative and qualitative assessments, the Company determined goodwill related to these reporting units was not impaired at that time.
During 2022, customers within the high-tech industry vertical, in which RocketPower specializes, reduced or eliminated their full-time hiring, reducing demand for RocketPower's services, and on-going economic uncertainty had more broadly impacted the growth in demand for RPO in the near-term. These changes in market conditions therefore caused a triggering event requiring an interim impairment test for goodwill as of the third quarter of 2022. Job eliminations in the high-tech industry vertical continued during the fourth quarter of 2022, indicating a broad, sustained reduction in hiring was likely and was expected to last through much of 2023, directly impacting RocketPower and the demand for RocketPower's services in this vertical. These changes in market conditions caused another triggering event requiring an interim impairment test for goodwill as of year-end 2022.
We performed an interim step one quantitative test for RocketPower’s goodwill and determined that the estimated fair value of the reporting unit no longer exceeded the carrying value as of third quarter-end and year-end 2022. Based on the result of our interim goodwill impairment test, we recorded a goodwill impairment charge of $30.7 million in the third quarter of 2022 and we recorded an additional goodwill impairment charge of $10.3 million to write off the remaining balance of RocketPower’s goodwill in the fourth quarter of 2022, for a total goodwill impairment charge of $41.0 million as of year-end 2022.
At year-end 2023 and 2022, total goodwill amounted to $151.1 million for each year. See the Goodwill and Intangible Assets footnote in the notes to our consolidated financial statements for more information.
Litigation
Kelly is subject to legal proceedings, investigations and claims arising out of the normal course of business. Kelly routinely assesses the likelihood of any adverse judgments or outcomes to these matters, as well as ranges of probable losses. A determination of the amount of the accruals required, if any, for these contingencies is made after analysis of each known issue. Development of the analysis includes consideration of many factors including: potential exposure, the status of proceedings, negotiations, discussions with our outside counsel and results of similar litigation. The required accruals may change in the future due to new developments in each matter. For further discussion, see the Contingencies footnote in the notes to our consolidated financial statements. At year-end 2023 and 2022, the gross accrual for litigation costs amounted to $6.4 million, of which $1.5 million is held for sale, and $2.3 million, respectively, which is included in accounts payable and accrued liabilities and in accrued workers’ compensation and other claims in the consolidated balance sheet. See the Held for Sale footnote in the notes to our consolidated financial statements for more information.
NEW ACCOUNTING PRONOUNCEMENTS
See New Accounting Pronouncements footnote in the notes to our consolidated financial statements presented in Part II, Item 8 of this report for a description of new accounting pronouncements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this report and in our investor conference call related to these results are “forward-looking” statements within the meaning of the 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, (i) changing market and economic conditions, (ii) disruption in the labor market and weakened demand for human capital resulting from technological advances, loss of large corporate customers and government contractor requirements, (iii) the impact of laws and regulations (including federal, state and international tax laws), (iv) unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, (v) litigation and other legal liabilities (including tax liabilities) in excess of our estimates, (vi) our ability to achieve our business's anticipated growth strategies, (vii) our future business development, results of operations and financial condition, (viii) damage to our brands, (ix) dependency on third parties for the execution of critical functions, (x) conducting business in foreign countries, including foreign currency fluctuations, (xi) availability of temporary workers with appropriate skills required by customers, (xii) cyberattacks or other breaches of network or information technology security, and (xiii) 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 this report.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to foreign currency risk primarily related to our foreign subsidiaries. Exchange rates impact the U.S. dollar value of our reported earnings, our investments in and held by subsidiaries, local currency denominated borrowings and intercompany transactions with and between subsidiaries. Our foreign subsidiaries primarily derive revenues and incur expenses within a single country and currency which, as a result, provide a natural hedge against currency risks in connection with normal business operations. Accordingly, changes in foreign currency rates vs. the U.S. dollar, euro or Swiss franc generally do not impact local cash flows. Intercompany transactions which create transactional foreign currency risk include services, royalties, loans, contributions and distributions.
On November 2, 2023, the Company entered into a foreign currency forward contract with a notional amount of €90 million to manage the foreign currency risk associated with the sale of our EMEA staffing operations, which was completed in the first quarter of 2024. This contract is not designated as a hedging instrument; therefore, it is marked-to-market and the changes in fair value are recognized in earnings. A total loss of $2.4 million was realized upon settlement on January 5, 2024. An unrealized loss of $3.6 million associated with the forward contract was recorded as of December 31, 2023; therefore, the Company will record a gain of $1.2 million in the first quarter of 2024.
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 2023 earnings.
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.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required by this Item are set forth in the accompanying index on page 43 of this filing and are presented in pages 44-98.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Based on their evaluation as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective at a reasonable assurance level.
Management’s Report on Internal Control Over Financial Reporting
Management’s report on internal control over financial reporting is presented preceding the consolidated financial statements on page 44 of this report.
Attestation Report of Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP, independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2023, as stated in their report which appears herein.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION.
Securities Trading Plans of Directors and Executive Officers
During the fourth quarter ended December 31, 2023, none of the Company's directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement."

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following individuals serve as executive officers of the Company as of December 31, 2023:
Name/Office Age Served as an Officer Since Business Experience During Last 5 Years
Peter W. Quigley
President and
Chief Executive Officer
62 2004 Served as officer of the Company.
Olivier G. Thirot
Executive Vice President
and Chief Financial Officer
62 2008 Served as officer of the Company.
Amy J. Bouque
Senior Vice President
Chief People Officer 54 2020 September 2020 - Present
Served as officer of the Company.
January 2016 - August 2020
Executive Director - Talent Management -
Ally Financial, Detroit Michigan
Tammy L. Browning
Senior Vice President
President, KellyOCG
50 2018 October 2018 - Present
Served as officer of the Company.
October 2010 - April 2018
SVP Global Operations - Yoh
Timothy L. Dupree
Senior Vice President
President, Kelly Professional &
Industrial
47 2014 Served as officer of the Company.
Dinette Koolhaas
Senior Vice President
President, Kelly International
54 2008 Served as officer of the Company.(1)
(1) In conjunction with the completion of the sale of our EMEA staffing operations and a transition period, Ms. Koolhaas will depart the Company on March 31, 2024.
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
Name/Office Age Served as an
Officer Since
Business Experience
During Last 5 Years
Daniel Hugo Malan
Senior Vice President
President, Kelly Science,
Engineering & Technology
54 2020 March 2020 - Present
Served as officer of the Company.
December 2019 - February 2020
Managing Partner - Talent Capital Advisors
August 2018 - November 2019
Chief Operating Officer - Employbridge
December 2016 - July 2018
President, Commercial Business -
Employbridge
Nicola M. Soares
Senior Vice President
President, Kelly Education
55 2011 Served as officer of the Company.
Vanessa P. Williams
Senior Vice President
General Counsel
Corporate Secretary
52 2020 October 2020 - Present
Served as officer of the Company.
February 2020 - September 2020
SVP, Division General Counsel -
Transportation and Third Party
Risk Management and Compliance -
IHS Markit
December 2016 - February 2020
VP, Division General Counsel -
Transportation - IHS Markit
CODE OF BUSINESS CONDUCT AND ETHICS.
We have adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller or persons performing similar functions. The Code of Business Conduct and Ethics is included as Exhibit 14 in the Index to Exhibits on page 99. We have posted our Code of Business Conduct and Ethics on our website at www.kellyservices.com. We intend to post any changes in or waivers from our Code of Business Conduct and Ethics applicable to any of these officers on our website.

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ITEM 11. EXECUTIVE COMPENSATION

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.
Equity Compensation Plan Information
The following table shows the number of shares of our Class A common stock that may be issued upon the exercise of outstanding options, warrants and rights, the weighted-average exercise price of outstanding options, warrants and rights, and the number of securities remaining available for future issuance under our equity compensation plans as of the fiscal year end for 2023.
Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders - Fixed Share provision(1),(2)
- $ - 1,956,085
Equity compensation plans not approved by security holders(3)
- - -
Total - $ - 1,956,085
(1)The equity compensation plan approved by our stockholders is our Equity Incentive Plan.
(2)The Fixed Share provision applies to shares granted on and after May 10, 2017, and the amended Equity Incentive Plan provides that the maximum number of shares available for grants is 4,700,000.
The number of shares to be issued upon exercise of outstanding options, warrants and rights under the Fixed Share provision excludes: 784,132 shares of restricted stock; performance shares that have been earned but not yet vested totaling 115,182 financial measure performance awards, and 47,752 single financial measure performance awards; and performance shares granted to employees and not yet earned or vested totaling 876,363 shares of financial measure performance awards, calculated using an assumed maximum award performance level of 200%, where applicable, at December 31, 2023.
(3)The Non-Employee Directors Deferred Compensation Plan is an equity compensation plan that has not been approved by our stockholders. This plan provides non-employee directors with the opportunity to defer all or a portion of the fees they receive. Participants may elect to have director fees that are paid in either cash or common stock, deferred into the plan. Participants choose from a list of investment funds as determined by the Company for their deferrals of cash. Deferrals of common stock must remain in common stock. Amounts deferred under the plan are subject to applicable tax withholding. The plan is intended to be a non-qualified deferred compensation arrangement in compliance with Section 409A of the Code. Shares acquired by participants in this plan will be issued from the share reserve stated in the Equity Incentive Plan.
PART IV

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)The following documents are filed as part of this report:
(i)Financial statements:
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Statements of Earnings for the three fiscal years ended December 31, 2023
Consolidated Statements of Comprehensive Income for the three fiscal years ended December 31, 2023
Consolidated Balance Sheets at December 31, 2023 and January 1, 2023
Consolidated Statements of Stockholders’ Equity for the three fiscal years ended December 31, 2023
Consolidated Statements of Cash Flows for the three fiscal years ended December 31, 2023
Notes to Consolidated Financial Statements
(ii)Financial Statement Schedule -
For the three fiscal years ended December 31, 2023:
Schedule II - Valuation Reserves
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(iii)The Exhibits are listed in the Index to Exhibits included beginning at page 99, which is incorporated herein by reference.
(b)The Index to Exhibits and required Exhibits are included following the Financial Statement Schedule beginning at page 99 of this filing.
(c)None.