What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-12 compared with 2021-11-10 · 157 added, 300 removed, 156 unchanged (75% of the section changed)

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Executive Overview

The COVID-19 pandemic, including the delta variant, related containment measures and the subsequent economic recovery have resulted in ongoing shifts in most aspects of the economy and how professional and private lives are conducted.

While the pace of change has been unprecedented and the resulting impacts are still being determined, our Noble Purpose, “We connect people to work in ways that enrich their lives,” will continue to guide our strategy and actions.

As we navigate a world of work now impacted by these changes, we will continue to demonstrate our expected behaviors and actions:

Kelly’s strategy and actions are guided by our simple yet powerful Noble Purpose:

“We connect people to work in ways that enrich their lives.” We are committed to being a leading talent solutions provider among the talent with whom we choose to specialize and in the global markets in which we choose to compete.

As we navigate the post-pandemic landscape, we will continue to demonstrate our expected behaviors and actions:

• Employ a talent-first mentality

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• Deliver efficiency and effectiveness in everything we do

Kelly remains committed to being a leading talent solutions provider among the talent with whom we choose to specialize and in the global markets in which we choose to compete.

By aligning ourselves with our Noble Purpose and executing against these behaviors, we have navigated the challenges of the pandemic and are emerging as a more agile and focused organization, prepared to achieve new levels of growth and profitability as we further develop our portfolio of specialty businesses.

By aligning ourselves with our Noble Purpose and executing against these behaviors, we are becoming a more agile and focused organization, prepared to achieve new levels of growth and profitability as we develop and reshape our portfolio of businesses.

The Talent Solutions Industry

Prior to the COVID-19 pandemic, labor markets were in the midst of change due to automation, secular shifts in labor supply and demand, and skills gaps, and the current economic situation is accelerating that change.

Global demographic trends are reshaping and redefining the way in which companies find and use talent, and the COVID-19 pandemic is changing where and how companies expect work to be performed.

Even before the COVID-19 pandemic, labor markets were in the midst of change due to automation, secular shifts in labor supply and demand and skills gaps.

Global demographic trends are reshaping and redefining the way in which companies find and use talent, and the COVID-19 pandemic changed where and how companies expect work to be performed—a shift we expect will carry over into the future.

In response, the talent solutions industry is adjusting how it sources, recruits, trains and places talent.

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And as the demand for skilled talent continues to climb, workers’ changing ideas about the integration of work into life are becoming more important.

In this increasingly talent-driven market, a diverse set of workers empowered by technology is seeking to take greater control over their career trajectories, and Kelly’s Talent Promise confirms our responsibility to workers in search of a better way to work.

2021 saw record-breaking employee resignations in the U.S.

as workers opted out of jobs that did not align with their needs.

In this increasingly talent-driven market, a diverse set of workers, empowered by technology, is seeking to take even greater control over their career trajectories.

Kelly is proud to be a career partner of choice for workers in search of a better way to work.

Kelly is a talent and global workforce solutions company serving customers of all sizes in a variety of industries.

We offer innovative outsourcing and consulting services, as well as staffing on a temporary and direct-hire basis.

In 2020, we adopted the Kelly Operating Model and realigned our business into five specialty business units which are also our reportable segments.

In 2020, we adopted a new operating model and realigned our business into five specialty business units, which are also our reportable segments.

• Professional & Industrial – delivers staffing, outcome-based and direct-hire services focused on office, professional, light industrial and contact center specialties in the U.S.

and Canada, including our KellyConnect product

• Science, Engineering & Technology – delivers staffing, outcome-based and direct-hire services focused on science and clinical research, engineering, information technology and telecommunications specialties predominantly in the U.S.

and Canada and includes our NextGen and Global Technology Associates subsidiaries, as well as our Softworld, Inc.

("Softworld") subsidiary as of the beginning of the second quarter of 2021

• Education – delivers staffing, direct-hire and executive search services to the K-12, early childhood and higher education markets in the U.S., and includes several acquisitions:

Teachers On Call, Insight Workforce Solutions and Greenwood/Asher & Associates

• Outsourcing & Consulting – delivers Master Service Provider ("MSP"), Recruitment Process Outsourcing ("RPO"), Payroll Process Outsourcing ("PPO") and Advisory Services to customers on a global basis

• International – operates in Mexico and 15 European countries where it delivers staffing, RPO and direct-hire services

In addition, we provide staffing services to customers in the Asia-Pacific region through PersolKelly Pte.

Ltd., our joint venture with Persol Asia Pacific Pte.

Ltd, a wholly owned subsidiary of Persol Holdings, a leading provider of HR solutions in Japan.

and Canada, including our KellyConnect and Skilled Professional Solutions products

• Science, Engineering & Technology – delivers staffing, outcome-based and direct-hire services focused on science and clinical research, engineering, technology and telecommunications specialties predominantly in the U.S.

and Canada and includes our NextGen and Global Technology Associates subsidiaries, as well as Softworld, a technology staffing and workforce solutions company acquired in 2021

• Education – delivers staffing, direct-hire and executive search services across the full education spectrum from early childhood to higher education in the U.S., and includes Teachers On Call and Greenwood/Asher & Associates

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

• International – delivers staffing, RPO and direct-hire services in 15 countries in Europe, as well as services in Mexico delivered in accordance with recent changes in labor market regulations

In addition, we hold a minority interest in PersolKelly Pte.

("PersolKelly"), which provides staffing and direct hire services to customers in the Asia-Pacific region.

We earn revenues from customers that procure the services of our temporary employees on a time and materials basis, that use us to recruit permanent employees, and that rely on our talent advisory and outsourcing services.

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Average days sales outstanding varies within and outside the U.S.

and was 63 days on a global basis as of the end of the third quarter of 2021 and 64 days as of the end of 2020.

and was 62 days on a global basis as of the end of the first quarter of 2022 and 60 days as of the end of the first quarter of 2021.

Since receipts from customers generally lag temporary employee payroll, working capital requirements increase substantially in periods of growth and decline in periods of economic contraction.

Our Perspective

The impacts of COVID-19 on the global economy, the talent solutions industry, our customers and our talent became clearer as 2020 progressed.

Beginning in mid-March 2020, our year-over-year revenues declined swiftly and substantially as governments and businesses reacted to the crisis.

In response, in April 2020 we took a series of proactive steps to reduce spending, minimize layoffs, and bolster the strength and flexibility of Kelly’s finances.

These actions included salary reductions for full-time salaried employees, including reduced CEO and senior leader compensation, temporary furloughing and/or redeployment of some employees.

Our actions generated substantial cost savings and allowed us the time necessary to assess the variety of impacts the crisis had on our business.

Most actions were in place until early in the fourth quarter of 2020.

In addition, we benefited in 2020 from CARES Act provisions allowing deferral of employer social security tax payments.

In connection with expiration of the temporary cost reduction measures noted above, management reduced staffing levels to align with expected revenue levels and recorded restructuring charges of $4.4 million for severance and related benefits for impacted employees in the fourth quarter of 2020.

Given the level of uncertainty surrounding the duration of the COVID-19 crisis, Kelly’s board also voted to suspend the quarterly dividend in May 2020 and continued to assess economic and business conditions to determine future actions with respect to our dividend policy.

The negative market reaction to the COVID-19 crisis in March 2020 also resulted in a decline in our common stock price which caused our market capitalization to decline significantly at the end of the first quarter of 2020.

This triggered an interim goodwill impairment test and resulted in a $147.7 million non-cash goodwill impairment charge in the first quarter of 2020.

The early months of 2021 brought optimism for a slow but steady, sustained recovery.

With that optimism, in August 2021 the Board of Directors reinstated the dividend at $0.05 per share.

In the second quarter of 2021, as we passed the one-year anniversary of the crisis, it became apparent that progress would be slower than originally anticipated.

Several headwinds continued throughout the third quarter, including the delta variant and its impact on talent availability and business operations, as well as ongoing global supply chain disruptions and uncertainty over vaccination requirements.

Despite these challenges, Kelly’s year-over-year revenue growth in the second and third quarters points to a continuation of the underlying recovery.

We expect that demand for our services will continue to gradually recover from the economic slowdown and the effects of customer and talent concerns related to operating safely during a pandemic.

The impact on the revenues of each segment will vary, given the differences in pandemic-related measures enacted in each geography, the customer industries served and the availability of the talent provided to our customers.

We are proactively taking steps to address talent shortages and mismatches in our

businesses that were most impacted by the pandemic, including implementing new technologies, streamlining processes, adopting efficient recruiting models and collaborating with clients on innovative approaches to attract and retain talent.

We currently expect a gradual return to pre-crisis levels of customer demand;

however, the pace of such a return may be delayed if a resurgence in infections leads to additional containment measures, disruptions including the ongoing global supply chain disruption, or increased lack of available talent to match our customers’ demand.

As 2021 progresses and we enter 2022, we expect that our revenue will reflect a continued gradual improvement in demand and result in continued improvements in year-over-year gross profit and earnings from operations.

In November 2021, the Company initiated a series of cost management actions primarily designed to increase operational efficiencies within enterprise functions that provide centralized support to our operating units.

The actions are designed to align expenses with current expectations for top-line growth.

As a result, a restructuring charge of $3.5 to $4.5 million will be recorded in the 2021 fourth quarter, with expected expense savings of at least $10 million on an annual basis beginning in the first quarter of 2022.

Moving Forward

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

As a result, we have continued to move forward with our specialization strategy, reinventing our operating model and reorganizing our business into five distinct reporting segments.

These specialties represent areas where we see the most robust demand, the most promising growth opportunities, and where we believe we excel in attracting and placing talent.

Our current operating segments also reflect our desire to shift our portfolio toward high-margin, higher-value specialties.

Kelly has done business in these specialties for many years, but our current operating model represents a new approach – one that brings together both staffing and outcome-based pieces of a specialty under a single specialty leader and aggregates assets to accelerate growth and profitability.

We believe this specialty structure gives us greater advantages in the market, and we expect our disciplined focus to deliver profitable growth coming out of the crisis.

In addition, we intend to invest in strategic, targeted M&A opportunities in our specialties, while optimizing our portfolio, as demonstrated by the recent acquisition of Softworld in the second quarter of 2021, the acquisition of Greenwood/Asher & Associates in the fourth quarter of 2020 and the sale of our operations in Brazil during the third quarter of 2020.

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

• We are making strides in our digital transformation journey, building a technology foundation to sustain growth and to support our teams, clients and talent with powerful new technologies that make it faster and easier than ever to connect.

• We are using our platform, Equity@Work, to break down long-standing, systemic barriers that make it difficult for many people to secure enriching work.

This powerful extension of our Noble Purpose uses our unique position in the middle of the supply and demand equation to help more people flow into Kelly’s talent pools, while also helping families, communities and economies thrive.

• We are committed to helping each Kelly team define the fastest, most efficient and creative paths to achieving their business goals by removing unnecessary work and refocusing efforts in the right places to achieve our defined performance expectations in the most effective way possible.

While the COVID-19 pandemic has resulted in uncertainty in the economy and the labor markets that will affect our near-term financial performance, we have determined long-term measures to gauge our progress, including:

• Revenue growth (both organic and inorganic)

• Gross profit rate improvement

• Conversion rate and EBITDA margin

Our Perspective and Outlook on Growth

We entered 2022 having shifted from recovery from the COVID-19 pandemic to growth.

Even with the economic uncertainty created by events in Ukraine and a continuation of inflation, particularly in the U.S., demand for our services remains strong.

Our permanent placement fee growth points toward our customers’ investments in their future workforce, and increased demand in our staffing and outcome-based businesses reflects strong market demand for the specialty solutions we provide.

Our business is arranged around specialties that target these areas of strong demand, promising growth opportunities, and Kelly’s proven ability to win.

Our segments also reflect our intent to shift our portfolio toward high-margin, higher-value specialties that deliver a competitive edge and increased shareholder value.

We believe that an aggressive inorganic growth strategy will accelerate the achievement of these goals.

As we continue our strategic growth journey in the year ahead, we will also invest in key value drivers.

• We are mapping our digital transformation journey, building a technology foundation to optimize our business, personalize the talent journey and improve the client experience.

For example, in 2021 we launched Helix UX, an industry-leading talent management tool that is enabling our customers to better manage their global workforce across temporary, full-time and cloud-based talent pools.

• We are consistently striving to better understand and support our talent and their shifting needs.

We have reallocated resources to be solely focused on the temporary worker experience, and our Equity@Work initiative is designed to break down long-standing, systemic barriers that make it difficult for many people to participate in the labor market.

• We are investing in the talent experience of our full-time employees, taking action to ensure we have the people coaches and performance management systems that will help our employees thrive in their Kelly careers.

We know that our success is powered by our people, and we are aiming for industry-leading results.

As we execute our specialty growth strategy, we are focused on both the speed and scope of change.

To that end, in February 2022 we completed transactions that have allowed us to strategically re-deploy resources to accelerate our growth in high-margin, high-growth specialties.

Specifically, we unwound our cross-ownership with Persol Holdings and reduced our ownership interest in our APAC joint venture, PersolKelly.

Monetizing our investments in Persol Holdings and PersolKelly provides us with additional capital, which we have already begun to use to accelerate our specialty growth strategy.

In March 2022, we completed the acquisition of RocketPower, a business that diversifies and strengthens Kelly’s RPO business and opens new access to the fast-growing high-tech market.

And in May 2022, we completed the acquisition of Pediatric Therapeutic Services, a specialty firm that expands our K-12 leadership position and provides in-school services for occupational, physical, speech and behavioral health therapies.

Both acquisitions expand Kelly’s presence in high-growth, high margin specialties.

As we move forward, we will continue to look for opportunities to grow both organically and inorganically in 2022 and beyond.

Financial Measures

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(Dollars in millions)

Third Quarter September Year to Date

2021 2020 % Change 2021 2020 % Change

First Quarter

2022 2021 % Change

Revenue from services $ 1,296.4 $ 1,205.9 7.5 %

Gross profit 258.6 213.3 21.2

SG&A expenses excluding restructuring charges 220.0 193.5 13.7 640.0 582.6 9.8

Restructuring charges (0.1) (0.1) (15.4) (0.1) 8.4 (101.7)

Total SG&A expenses 235.2 202.7 16.0

Goodwill impairment charge — — NM — 147.7 NM

Gain on sale of assets — — NM — 32.1 NM

Earnings (loss) from operations 9.0 (2.4) NM 33.3 (103.1) NM

Earnings (loss) from operations 23.4 10.6 120.5

Gain (loss) on investment in Persol Holdings (67.2) 30.0 NM

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

Other income (expense), net 2.8 (3.4) 181.7

Earnings (loss) before taxes and equity in net earnings (loss) of affiliate (61.4) 37.2 NM

Income tax expense (benefit) 11.1 (1.2) NM 19.0 (36.5) 152.0

Income tax expense (benefit) (13.0) 10.5 (223.9)

Equity in net earnings (loss) of affiliate 0.8 (1.1) NM

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Gross profit rate 19.9 % 17.7 % 2.2 pts.

18.4 % 18.4 % — pts.

Conversion rate 3.9 (1.3) 5.2 4.9 (17.1) 22.0

Third Quarter Results

Revenue from services in the third quarter increased 15.1% on a reported basis and 14.5% on a constant currency basis, and reflects revenue increases in all operating segments.

Our acquisition of Softworld, a technology staffing and solutions firm, added approximately 320 basis points to the revenue growth rate.

Compared to the third quarter of 2020, revenue from staffing services increased 11.8% and revenue from outcome-based services increased 15.1%.

First Quarter Results

Revenue from services in the first quarter increased 7.5% on a reported basis and 9.0% on a constant currency basis, and reflects revenue increases in Education, Science, Engineering & Technology, and Outsourcing & Consulting operating segments, partially offset by declines in Professional & Industrial and International segments.

Our acquisition of Softworld, a technology staffing and solutions firm in the second quarter of 2021, added approximately 310 basis points to the revenue growth rate.

Compared to the first quarter of 2021, revenue from staffing services increased 5.9% and revenue from outcome-based services increased 7.9%.

Permanent placement revenue, which is included in revenue from services, increased 66.2% from the prior year.

Gross profit increased 19.8% on higher revenue volume, combined with an increase in the gross profit rate.

The gross profit rate increased primarily due to the impact of higher permanent placement income and the acquisition of Softworld, which generates higher gross profit rates, partially offset by unfavorable product mix and higher employee-related costs.

Increases in the gross profit rate for Science, Engineering & Technology and International were partially offset by decreases in Professional & Industrial, Education and Outsourcing & Consulting.

Gross profit increased 21.2% on a reported basis and 22.6% on a constant currency basis on higher revenue volume, combined with an increase in the gross profit rate.

The gross profit rate increased 220 basis points due primarily to the impact of higher permanent placement income and the acquisition of Softworld, which generates higher gross profit rates, coupled with lower employee-related costs and favorable product mix.

The gross profit rate increased in all operating segments, with the exception of Education, which declined slightly.

Included in gross profit for the first quarter of 2022 is a one-time permanent placement fee from a large customer, as well as an adjustment to prior periods worker’s compensation expenses, resulting in 40 basis points of favorable impact.

Permanent placement revenue, which is included in revenue from services and has very low direct costs of services, has a disproportionate impact on gross profit rates.

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SG&A expenses related to Softworld, including amortization of intangibles and other operating expenses, accounted for approximately 500 basis points of the year-over-year increase.

The increase in SG&A expenses also reflects increases in performance-based incentive compensation expenses and the impact of temporary expense mitigation efforts in the prior year.

In addition, 2020 expenses included a $9.5 million charge related to a customer dispute in the International segment.

Earnings from operations for the third quarter of 2021 totaled $9.0 million, compared to a loss of $2.4 million in the third quarter of 2020.

Included in total earnings from operations in the third quarter of 2021 is approximately $1.7 million related to

Softworld earnings from operations, inclusive of amortization of intangibles.

Included in earnings from operations in the third quarter of 2020 was a $9.5 million charge related to a customer dispute.

Gain (loss) on investment in Persol Holdings represents the gain or loss resulting from changes in the market price of our investment in the common stock of Persol Holdings.

The gains or losses fluctuate each quarter based on the quoted market price of the Persol Holdings common stock at period end.

Income tax expense was $11.1 million in the third quarter of 2021 and income tax benefit was $1.2 million for the third quarter of 2020.

These amounts were impacted by changes in the fair value of the Company's investment in Persol Holdings, which resulted in charges of $10.9 million and $5.2 million for the third quarter of 2021 and 2020, respectively.

The amounts were also impacted by improved earnings from operations in the third quarter of 2021.

Our tax expense is affected by recurring items, such as the amount of pretax income and its mix by jurisdiction, U.S.

work opportunity credits and the change in cash surrender value of tax exempt investments in life insurance policies.

It is also affected by discrete items that may occur in any given period but are not consistent from period to period, such as tax law changes, changes in judgment regarding the realizability of deferred tax assets, the tax effects of stock compensation, and changes in the fair value of the Company’s investment in Persol Holdings, which are treated as discrete since they cannot be estimated.

The net earnings for the period were $34.8 million, compared to net earnings of $16.7 million from the third quarter of 2020.

This change was due primarily to higher earnings from operations and higher gains on Persol Holdings common stock.

September Year-to-Date Results

Revenue from services in the first nine months of 2021 increased 11.8% on a reported basis and 10.3% on a constant currency basis, and reflects revenue increases in all operating segments.

Our acquisition of Softworld in early April 2021 added approximately 200 basis points to the revenue growth rate.

Compared to the first nine months of 2020, revenue from staffing services increased 9.9%, revenue from outcome-based services increased 9.0%, and permanent placement income increased 87.8%.

Gross profit increased 11.5% on higher revenue volume.

The gross profit rate was flat in comparison to the prior year primarily due to the impact of higher permanent placement income and the acquisition of Softworld, which generates higher gross profit rates, partially offset by unfavorable product mix and higher employee-related costs.

Decreases in the gross profit rate for Professional & Industrial and Outsourcing & Consulting were offset by increases in the gross profit rate for Science, Engineering & Technology, Education and International.

The April 2021 acquisition of Softworld accounted for approximately 30 basis points.

Government wage subsidies improved our 2020 gross profit rate by approximately 20 basis points.

Total SG&A expenses increased 8.3% compared to last year.

Excluding restructuring charges, SG&A expenses in all segments increased in comparison to the prior year.

SG&A expenses related to Softworld, including amortization of intangibles and other operating expenses, accounted for approximately 310 basis points to the year-over-year increase.

The increase in SG&A expenses also reflects increases in performance-based incentive compensation expenses and the impact of temporary expense mitigation efforts in the prior year.

Included in SG&A expenses in the first nine months of 2020 was a $9.5 million charge related to a customer dispute and $8.4 million of restructuring charges.

Actions were taken in the first quarter of 2020 to position the Company to adopt the updated operating model and to align the U.S.

branch network facilities footprint with a more technology-enabled service delivery methodology.

During the first nine months of 2020, the negative reaction to the pandemic by the global equity markets also resulted in a decline in the Company's common stock price.

This triggered an interim goodwill impairment test, resulting in a $147.7 million goodwill impairment charge in the first quarter of 2020.

Gain on sale of assets of $32.1 million in 2020 represents the excess of the proceeds over the cost of the headquarters properties sold in the first quarter of 2020.

The main headquarters building was subsequently leased back by the Company during the first quarter of 2020.

Earnings from operations for the first nine months of 2021 totaled $33.3 million, compared to a loss from operations of $103.1 million in the first nine months of 2020.

The increase in earnings from operations from the prior year primarily reflects the

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

Gain (loss) on investment in Persol Holdings represents the gain or loss resulting from changes in the market price of our investment in the common stock of Persol Holdings.

The gains or losses fluctuate each quarter based on the quoted market price of the Persol Holdings common stock at period end.

Other expense for the first nine months of 2021 totaled $4.0 million, compared to other income of $3.6 million for the first nine months of 2020.

Included in the 2021 amount are transaction-related expenses from the April 2021 acquisition of Softworld and a one-time, non-cash write-down of an equity investment.

Income tax expense was $19.0 million in the first nine months of 2021 and income tax benefit was $36.5 million for the first nine months of 2020.

These amounts were impacted by changes in the fair value of the Company's investment in Persol Holdings, which resulted in a charge of $22.0 million and a benefit of $9.6 million for September year to date 2021 and 2020, respectively.

September year to date 2021 also included a benefit of $5.2 million from a change in United Kingdom tax rates.

September year to date 2020 includes a tax benefit of $23.0 million on the impairment of goodwill and a tax benefit of $7.7 million from Brazil outside basis differences.

The increase in SG&A expenses also reflects increases in performance-based incentive compensation expenses and higher salary and related costs.

Earnings from operations for the first quarter of 2022 totaled $23.4 million, compared to earnings of $10.6 million in the first quarter of 2021.

Included in total earnings from operations in the first quarter of 2022 is approximately $3.5 million related to Softworld earnings from operations, inclusive of amortization of intangibles.

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

The gain on the investment in Persol Holdings in the first quarter of 2021 resulted from changes in the quoted market price of the Persol Holdings common stock.

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

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

parent in the first quarter of 2022.

Income tax benefit was $13.0 million for the first quarter of 2022 and income tax expense was $10.5 million for the first quarter of 2021.

These amounts were impacted by changes in the fair value of the Company's investment in Persol Holdings, which resulted in a benefit of $18.4 million and a charge of $9.2 million for the first quarter of 2022 and 2021, respectively.

Our tax expense is affected by recurring items, such as the amount of pretax income and its mix by jurisdiction, U.S.

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The United Kingdom rate change benefit in the second quarter of 2021, the first quarter of 2020 impairment of goodwill and the second quarter of 2020 Brazil outside basis differences were treated as discrete.

The net earnings for the period were $84.4 million, compared to a net loss of $95.4 million for the first nine months of 2020.

This change was due primarily to higher earnings from operations and increased gains of Persol Holdings common stock, net of tax.

The net loss for the period was $47.6 million, compared to net earnings of $25.6 million from the first quarter of 2021.

This change was due to the Persol Holdings investment, including the first quarter 2022 sale and related impacts, partially offset by improved operating earnings in the first quarter of 2022.

During the first quarter of 2022 events in Ukraine have contributed to additional economic uncertainty in Europe.

The Company does not have operations in Ukraine and we did not experience any material impact on our revenues or earnings in the first quarter.

Subsequent to the end of the first quarter, Management initiated plans to actively explore an orderly transition of our operations in Russia in full compliance with International and Russian law.

We expect that revenues and earnings in the International segment will be unfavorably impacted beginning in the second quarter of 2022 and that we may recognize a loss upon the completion of a transition.

Operating Results By Segment

(Dollars in millions)

Third Quarter September Year to Date

2021 2020 % Change 2021 2020 % Change

First Quarter

2022 2021 % Change

Revenue from Services:

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Consolidated Total $ 1,296.4 $ 1,205.9 7.5 %

Third Quarter Results

Professional & Industrial revenue from services increased 1.4%.

The increase was due primarily to higher revenue in the staffing product due to an increase in the bill rate per hour as compared to last year, partially offset by a lower hours volume, reflecting the challenge to meet customers’ increasing demand for talent amid a tighter labor supply.

The increase in staffing revenue was coupled with higher permanent placement income, partially offset by a decrease in revenue from our outcome-based services as customer demand declined.

Science, Engineering & Technology revenue from services increased 25.5% on a reported basis, which includes revenues from the acquisition of Softworld.

On an organic basis, the revenue growth was 11.7%, which was driven by hours volume increases in our staffing business across most specialties as customer demand increased compared to last year, which was impacted by COVID-19, coupled with increases in outcome-based services and permanent placement income.

Education revenue from services increased 142.1%, reflecting the return to in-school instruction by many schools, resulting in increased demand for our services as compared to a year ago, as well as the impact of new customer wins.

In the third quarter of 2020, many districts were using virtual or hybrid instruction methods due to the impact of COVID-19, which decreased the demand for our services.

Outsourcing & Consulting revenue from services increased 29.1% due primarily to the increase in hours revenue volume in our PPO specialty, coupled with revenue growth in both RPO and MSP products.

International revenue from services increased 10.5% on a reported basis and increased 8.8% in constant currency.

Year-over-year revenue comparisons were unfavorably impacted by the sale of our staffing operations in Brazil in August 2020.

Excluding Brazil, revenue increased 11.4% on a reported basis and 9.7% on a constant currency basis.

The increase was primarily due to higher hours volume, particularly in France, Russia and Portugal.

This was partially offset by lower hours volume in Mexico, due to new labor legislation which became effective September 1, 2021 and prohibits staffing solutions not considered specialized services.

September Year-to-Date Results

Professional & Industrial revenue from services increased 3.0%, due primarily to a higher bill rate per hour on lower hours volume.

This increase was combined with an increase in revenue from permanent placement income and our outcome-based services.

Science, Engineering & Technology revenue from services increased 12.8% on a reported basis, which includes revenues from the acquisition of Softworld.

On an organic basis, the revenue growth was 4.4%, which was driven by hours increases in our staffing business across most specialties, coupled with an increase in permanent placement income.

Education revenue from services increased 45.6% reflecting the return to in-school instruction by many schools, resulting in increased demand for our services as compared to a year ago.

In the first nine months of 2020, many districts were using virtual or hybrid instruction methods due to the impact of COVID-19.

Outsourcing & Consulting revenue from services increased 22.6% due primarily to increased hours revenue volume in our PPO specialty, coupled with revenue growth in both RPO and MSP products.

International revenue from services increased 14.0% on a reported basis and increased 9.0% in constant currency.

Year-over-year revenue comparisons were unfavorably impacted by the sale of our staffing operations in Brazil in August 2020.

Excluding Brazil, revenue increased 16.8% on a reported basis and 11.6% on a constant currency basis.

The increase was primarily due to higher hours volume, particularly in France, Portugal and Switzerland.

First Quarter Results

Professional & Industrial revenue from services decreased 5.0%.

The decrease was due primarily to a 9.9% decline in revenue from outcome-based services due to lower demand for our call center specialty, partially offset by growth in other specialties.

Revenue from staffing services also declined by 3.5% resulting from lower hours volume, partially offset by higher bill rates.

Science, Engineering & Technology revenue from services increased 24.5% on a reported basis, which includes revenues from the acquisition of Softworld in the second quarter of 2021.

On an organic basis, the revenue growth was 9.6%, which was driven by increases in our outcome-based services as well as increases in bill rates and permanent placement income in our staffing business.

Education revenue from services increased 55.4%, reflecting the return to in-school instruction, resulting in increased demand for our services as compared to a year ago, as well as the impact of new customer wins and an increased fill rate of the demand of existing customers.

Outsourcing & Consulting revenue from services increased 9.8% due primarily to strong demand for RPO services coupled with revenue growth in MSP, partially offset by declines in PPO revenue.

International revenue from services decreased 7.4% on a reported basis and decreased 1.0% in constant currency.

The decrease was primarily the result of revenue declines in Mexico due to the impact of legislation enacted in the third quarter of 2021, which placed restrictions on the staffing industry.

Revenue in Europe increased 1.7% on a reported basis and increased 9.0% in constant currency with growth in most geographies.

Operating Results By Segment (continued)

(Dollars in millions)

Third Quarter September Year to Date

2021 2020 Change 2021 2020 Change

First Quarter

2022 2021 Change

Gross Profit:

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Professional & Industrial 18.7 % 16.2 % 2.5 pts.

16.4 % 17.9 % (1.5) pts.

Science, Engineering & Technology 23.3 20.9 2.4

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Consolidated Total 19.9 % 17.7 % 2.2 pts.

18.4 % 18.4 % — pts.

Third Quarter Results

Gross profit for the Professional & Industrial segment decreased due to a decline in the gross profit rate, partially offset by higher revenue volume.

In comparison to the prior year, the gross profit rate decreased 40 basis points.

This decrease reflects increased costs associated with our outcome-based services, and an increase in employee-related costs.

These decreases were partially offset by the impact of increased permanent placement income this year.

The Science, Engineering & Technology gross profit increased on higher revenue volume and an increase in the gross profit rate.

The gross profit rate increased 150 basis points due to improved specialty mix, including the acquisition of Softworld which generates higher gross profit margins, coupled with increased permanent placement income, partially offset by higher employee-related costs.

Gross profit for the Education segment increased on higher revenue volume, partially offset by a decrease in the gross profit rate.

The gross profit rate decreased 10 basis points due primarily to higher employee-related costs, partially offset by an increase in permanent placement income from Greenwood/Asher, our acquisition in late 2020.

The Outsourcing & Consulting gross profit increased on higher revenue volume, partially offset by a decrease in the gross profit rate.

The gross profit rate decreased 30 basis points primarily due to a change in product mix within this segment, as revenues increased in our PPO product, which generates lower profit margins.

International gross profit increased on higher revenue volume and an increase in the gross profit rate.

The gross profit rate increased 150 basis points primarily due to customer mix and higher permanent placement income.

September Year-to-Date Results

Gross profit for the Professional & Industrial segment decreased due to a decrease in the gross profit rate, partially offset by higher revenue volume.

In comparison to the prior year, the gross profit rate decreased 150 basis points.

This decrease reflects the unfavorable year-over-year impact of government wage subsidies, increased costs associated with our outcome-based services, higher employee-related costs in the staffing product and a shift in product mix compared to the prior year as demand

for staffing services increased.

These decreases were partially offset by the impact of increased permanent placement income this year.

First Quarter Results

Gross profit for the Professional & Industrial segment increased due to an increase in the gross profit rate, partially offset by lower revenue volume.

In comparison to the prior year, the gross profit rate increased 250 basis points.

This increase reflects higher permanent placement income, including one-time conversion fees for staffing talent hired directly by a large customer, lower employee-related costs and improved business mix.

The Science, Engineering & Technology gross profit increased on higher revenue volume and an increase in the gross profit rate.

The gross profit rate increased 140 basis points due to increased permanent placement income, coupled with improved specialty mix, including the acquisition of Softworld in April 2021.

Gross profit for the Education segment increased on higher revenue volume and an increase in the gross profit rate.

The gross profit rate increased 70 basis points due primarily to higher permanent placement income from Greenwood/Asher, our acquisition in late 2020.

This increase was partially offset by the unfavorable year-over-year impact of government wage subsidies and higher employee-related costs.

The Outsourcing & Consulting gross profit increased on higher revenue volume, partially offset by a decrease in the gross profit rate.

The gross profit rate decreased 110 basis points primarily due to a change in product mix within this segment, as revenues increased in our PPO product, which generates lower profit margins.

International gross profit increased on higher revenue volume and an increase in the gross profit rate.

The gross profit rate increased 90 basis points primarily due to customer mix.

The gross profit rate increased 240 basis points due to increased permanent placement income and improved specialty mix, including the acquisition of Softworld which generates higher gross profit margins, partially offset by higher employee-related costs.

Gross profit for the Education segment increased on higher revenue volume.

The gross profit rate decreased 10 basis points due primarily to unfavorable customer mix, partially offset by higher permanent placement income and lower employee-related costs.

The Outsourcing & Consulting gross profit increased on higher revenue volume, combined with an increase in the gross profit rate.

The gross profit rate increased 270 basis points primarily due to a change in product mix within this segment.

Growth in RPO and MSP with higher margins was coupled with decreased revenues in our PPO product, which generates lower profit margins.

International gross profit increased due to an increase in the gross profit rate, partially offset by lower revenue volume.

In comparison to the prior year, the gross profit rate increased 190 basis points primarily due to customer mix and higher permanent placement income.

Operating Results By Segment (continued)

(Dollars in millions)

Third Quarter September Year to Date

2021 2020 % Change 2021 2020 % Change

First Quarter

2022 2021 % Change

SG&A Expenses:

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Consolidated Total $ 235.2 $ 202.7 16.0 %

Third Quarter September Year to Date

2021 2020 % Change 2021 2020 % Change

Restructuring Charges Included in SG&A Expenses:

Professional & Industrial $ — $ (0.1) NM % $ — $ 4.3 NM %

Science, Engineering & Technology — — NM — 0.5 NM

Education — — NM — 0.8 NM

Outsourcing & Consulting — — NM — — NM

International — — NM — 1.1 NM

Corporate expenses (0.1) — NM (0.1) 1.7 (103.7)

Consolidated Total $ (0.1) $ (0.1) (15.4) % $ (0.1) $ 8.4 (101.7) %

Third Quarter Results

Total SG&A expenses in Professional & Industrial increased 6.2% from the prior year.

Year-over-year comparisons were impacted by temporary expense mitigation actions in place in the third quarter of 2020 as a result of lower revenue volume due to the COVID-19 disruption.

This increase was combined with an increase in performance-based incentive compensation as compared to the prior year.

First Quarter Results

Total SG&A expenses in Professional & Industrial increased 2.8% from the prior year, primarily due to higher performance-based incentive compensation expenses.

Total SG&A expenses in Science, Engineering & Technology increased 49.0% from the prior year, and includes the impact of the acquisition of Softworld in the second quarter of 2021.

On an organic basis, SG&A expenses increased 20.4% from the prior year.

Year-over-year increases in salaries and related costs result from higher headcount in sales and recruiting talent, and an increase in performance-based incentive compensation.

These increases were combined with the impact of temporary expense mitigation actions in place in the third quarter of 2020 as a result of lower revenue volume due to the COVID-19 disruption.

Total SG&A expenses in Education increased 46.1% from the prior year, primarily due to higher salary and incentives expense related to improving revenues.

In addition, year-over-year comparisons of salaries and related costs were impacted by temporary expense mitigation actions in place in the third quarter of 2020 to mitigate the impact of the lower revenue volume as a result of the COVID-19 disruption.

Expenses in the third quarter of 2021 include a charge to adjust the contingent consideration due to the former owners of Greenwood/Asher & Associates as a result of better than anticipated performance.

Total SG&A expenses in Outsourcing & Consulting increased 20.5% from the prior year.

Year-over-year comparisons of salaries and related costs were impacted by temporary expense mitigation actions taken in the second quarter of 2020 to mitigate the impact of the lower revenue volume as a result of the COVID-19 disruption.

These increases were combined with an increase in salaries and performance-based incentive compensation, reflecting improving revenue.

Total SG&A expenses in International decreased 13.6% on a reported basis and decreased 14.8% on a constant currency basis.

The prior year included a specific customer provision in Mexico following a negative outcome of litigation over a disputed accounts receivable balance for certain services rendered several years ago.

Excluding this one-time charge, SG&A expenses increased 13.6% on a reported basis and 12.0% on a constant currency basis.

This increase was due to higher performance-based incentive compensation as compared to the prior year and higher salary-related expenses due to increased headcount, mainly in our branch network.

September Year-to-Date Results

Total SG&A expenses in Professional & Industrial decreased 1.2% and increased 0.8% excluding restructuring charges.

Year-over-year comparisons were impacted by temporary expense mitigation actions enacted in 2020 as a result of lower revenue volume due to the COVID-19 disruption.

This increase was combined with an increase in salaries and performance-based incentive compensation and was partially offset by reduced facilities expense as we continue to evaluate and reduce our branch footprint.

Total SG&A expenses in Science, Engineering & Technology increased 32.2%, or 32.9% excluding restructuring charges.

Excluding restructuring charges and the acquisition of Softworld, SG&A expenses increased 14.7%.

Year-over-year comparisons of salaries and related costs were impacted by temporary expense mitigation actions taken in response to the COVID-19 disruption in 2020.

These increases were combined with higher headcount in sales and recruiting talent, and an increase in performance-based incentive compensation.

Total SG&A expenses in Education increased 23.1%, or 26.0% excluding restructuring charges, primarily due to higher salary and incentives expense related to improving revenues.

In addition, year-over-year comparisons of salaries and related costs were impacted by temporary expense mitigation actions taken in 2020 in response to the COVID-19 disruption.

Expenses in 2021 include a charge to adjust the contingent consideration due to the former owners of Greenwood/Asher & Associates as a result of better than anticipated performance.

Total SG&A expenses in Outsourcing & Consulting increased 12.6% in comparison to the prior year.

Year-over-year comparisons of salaries and related costs were impacted by temporary expense actions taken in 2020 in response to the impact of the COVID-19 disruption.

These increases were combined with an increase in salaries and performance-based incentive compensation reflecting improving revenue.

Total SG&A expenses in International increased 0.7% on a reported basis and decreased 3.9% on a constant currency basis.

The prior year included a charge related to a customer dispute in Mexico, SG&A expenses related to our staffing operations in Brazil which were sold in August 2020 and restructuring charges.

Excluding these items, SG&A expenses increased 16.1% on a reported basis and 10.8% on a constant currency basis.

This increase was primarily due to higher performance-based compensation and higher salary-related expenses due to increased headcount, primarily in our branch network.

The increase in organic SG&A expenses are due primarily to higher performance-based incentive compensation expense and higher salary-related costs from increasing headcount.

Total SG&A expenses in Education increased 31.2% from the prior year, primarily due to higher salary related expenses as headcount has increased as revenues have grown.

Total SG&A expenses in Outsourcing & Consulting increased 20.5% from the prior year, primarily due to higher salary-related expenses as a result of headcount and salary increases.

Total SG&A expenses in International increased 0.4% on a reported basis and increased 6.6% on a constant currency basis.

This increase was due to higher salary-related expenses driven by an increase in headcount, reflecting improving revenue in Europe.

Corporate expenses increased 11.9% primarily due to higher performance-based incentive compensation expense.

Operating Results By Segment (continued)

(Dollars in millions)

Third Quarter September Year to Date

2021 2020 % Change 2021 2020 % Change

First Quarter

2022 2021 % Change

Earnings (Loss) from Operations:

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Outsourcing & Consulting 3.0 2.9 4.3

International 2.4 (9.9) NM 8.1 (10.9) NM

International 4.6 2.6 75.2

Corporate (24.5) (21.9) (11.9)

Consolidated Total $ 9.0 $ (2.4) NM % $ 33.3 $ (103.1) NM %

Third Quarter Results

Professional & Industrial reported earnings of $7.2 million for the quarter, a 38.1% decrease from a year ago.

The decrease in earnings was primarily due to increased costs of services reducing our gross profit rate in our outcome-based products, as well as increasing expenses.

These were partially offset by increased revenues in our staffing product and an increase in our permanent placement income.

Science, Engineering & Technology reported earnings of $19.7 million for the quarter, a 1.7% increase from a year ago.

The increase in earnings was primarily due to the impact of the Softworld acquisition, coupled with increases in organic staffing and permanent placement revenues in most of our specialties within the SET business unit.

These increases were offset by increases in certain expenses, including those related to additional full-time employees and increased performance-based incentive compensation.

Education reported a loss of $7.0 million for the quarter, compared to a loss of $7.5 million a year ago.

The change was primarily due to the increase in revenue, reflecting the return to in-school instruction by many schools, resulting in increased demand for our services as compared to a year ago.

In 2020, many districts were using virtual or hybrid instruction methods due to the impact of COVID-19.

Partially offsetting this improvement is a charge to adjust the contingent consideration due to the former owners of Greenwood/Asher & Associates.

Consolidated Total $ 23.4 $ 10.6 120.5 %

First Quarter Results

Professional & Industrial reported earnings of $11.7 million for the quarter, a 79.6% increase from a year ago.

The increase in earnings was primarily due to improved gross profit, including conversion fees related to a large customer.

Science, Engineering & Technology reported earnings of $20.6 million for the quarter, an 18.0% increase from a year ago.

The increase in earnings was primarily due to the impact of the Softworld acquisition.

Increases in organic staffing and permanent placement revenues in most of our specialties within the SET business unit were partially offset by increases in certain expenses, including those related to additional full-time employees and increased performance-based incentive compensation.

Education reported earnings of $8.0 million for the quarter, compared to earnings of $3.0 million a year ago.

The change was primarily due to the increase in revenue, reflecting the return to in-school instruction, resulting in increased demand for our services as compared to a year ago, coupled with good cost management.

Outsourcing & Consulting reported earnings of $3.0 million for the quarter, a 4.3% increase from a year ago.

The increase in earnings was primarily due to the impact of increased revenue volumes within the segment.

International reported earnings of $2.4 million for the quarter, compared to a loss of $9.9 million a year ago.

The increase in earnings was primarily due to the favorable comparison related to the charge for a customer dispute in Mexico in the prior year.

September Year-to-Date Results

Professional & Industrial reported earnings of $19.9 million, a 34.9% decrease from a year ago.

The decrease in earnings was primarily due to increased costs of services reducing our gross profit rate in our outcome-based product lines and the year-over-year impact of the government wage subsidies we received in 2020.

These were partially offset by increased revenues in our staffing product and an increase in our permanent placement income.

Science, Engineering & Technology reported earnings of $56.8 million, a 0.2% decrease from a year ago.

The decrease in earnings was primarily due to higher expenses related to performance-based incentive compensation and higher salaries due to investment in additional sales and recruiting resources, which exceeded revenue and gross margin growth.

This was partially offset by earnings from Softworld, which was acquired in April 2021.

Education reported a loss of $2.5 million, compared to a loss of $8.9 million a year ago.

The change was primarily due to an increase in revenue, reflecting the return to in-school instruction by many schools, resulting in increased demand for our

services as compared to a year ago.

In 2020, many districts were using virtual or hybrid instruction methods due to the impact of COVID-19.

Partially offsetting this improvement is a charge to adjust the contingent consideration due to the former owners of Greenwood/Asher & Associates.

Outsourcing & Consulting reported earnings of $14.2 million, a 79.0% increase compared to a year ago.

The increase in earnings was primarily due to the impact of increased revenue volumes within the segment.

International reported earnings of $8.1 million, compared to a loss of $10.9 million a year ago.

The increase in earnings was primarily due to the favorable comparison related to the charge for a customer dispute in Mexico and restructuring charges in the prior year, combined with improving revenue in Europe.

The increase in earnings was primarily due to the impact of increased revenue volumes within the segment, partially offset by increased costs related to additional full-time employees.

International reported earnings of $4.6 million for the quarter, compared to earnings of $2.6 million a year ago.

The increase in earnings was primarily due to improving revenue in Europe.

Financial Condition

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however, any such increase would not be sustainable in the event that an economic downturn continued for an extended period.

The impact of the current economic slow-down resulting from the COVID-19 crisis began in March 2020.

While we have yet to return to pre-crisis revenue levels, we are seeing continued economic momentum and sustainable recovery in the third quarter of 2021.

The impact of the COVID-19 crisis on our business began in March 2020.

While we have yet to return to pre-crisis revenue levels, we have experienced improving demand for our services and expect a sustained recovery throughout 2022.

As highlighted in the consolidated statements of cash flows, our liquidity and available capital resources are impacted by four key components:

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Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash totaled $51.1 million at the end of the third quarter of 2021 and $228.1 million at year-end 2020.

As further described below, we generated $31.0 million of cash from operating activities, used $198.4 million of cash for investing activities and used $5.7 million of cash for financing activities.

Cash, cash equivalents and restricted cash totaled $238.1 million at the end of the first quarter of 2022 and $119.5 million at year-end 2021.

As further described below, we used $106.1 million of cash for operating activities, generated $257.1 million of cash from investing activities and used $30.7 million of cash for financing activities.

Operating Activities

In the first nine months of 2021, we generated $31.0 million of net cash from operating activities, as compared to generating $216.5 million in the first nine months of 2020, primarily due to increased working capital requirements as revenue levels continue to recover or surpass pre-COVID levels in certain segments.

Trade accounts receivable totaled $1.4 billion at the end of the third quarter of 2021.

Global DSO was 63 days at the end of the third quarter of 2021, 64 days at year-end 2020 and 61 days at the end of the third quarter of 2020.

Our working capital position (total current assets less total current liabilities) was $460.4 million at the end of the third quarter of 2021, a decrease of $163.6 million from year-end 2020.

Excluding the decrease in cash, working capital increased $15.9 million from year-end 2020.

The current ratio (total current assets divided by total current liabilities) was 1.4 at the end of the third quarter of 2021 and 1.7 at year-end 2020.

In the first three months of 2022, we used $106.1 million of net cash for operating activities, as compared to generating $10.5 million in the first three months of 2021, primarily due to increased working capital requirements as revenue levels continue to recover or surpass pre-COVID levels in certain segments and as a result, in increasing days sales outstanding due to customer payment terms.

Trade accounts receivable totaled $1.5 billion at the end of the first quarter of 2022.

Global DSO was 62 days at the end of the first quarter of 2022, 60 days at year-end 2021 and 60 days at the end of the first quarter of 2021.

Our working capital position (total current assets less total current liabilities) was $630.0 million at the end of the first quarter of 2022, an increase of $136.5 million from year-end 2021.

Excluding the increase in cash, working capital increased $18.9 million from year-end 2021.

The current ratio (total current assets divided by total current liabilities) was 1.5 at the end of the first quarter of 2022 and at year-end 2021.

Investing Activities

In the first nine months of 2021, we used $198.4 million of cash for investing activities, as compared to generating $10.3 million in the first nine months of 2020.

Included in cash used for investing activities in the first nine months of 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.

Included in cash from investing activities in the first nine months of 2020 is $55.5 million of proceeds representing the cash received, net of transaction expenses, for the sale of three headquarters properties as a part of a sale and leaseback transaction.

This was partially offset by $36.4 million of cash used for the acquisition of Insight in January 2020, net of the cash received and including working capital adjustments.

In the first three months of 2022, we generated $257.1 million of cash from investing activities, as compared to generating $7.9 million in the first three months of 2021.

Included in cash generated from investing activities in the first three months of 2022 is $196.9 million of proceeds from the sale of the investment in Persol Holdings and $119.5 million of proceeds from the sale of almost all of the Company's shares in our equity investment in PersolKelly Pte.

This was partially offset by $58.3 million of cash used for the acquisition of RocketPower in March 2022, net of cash received.

Included in cash generated from investing activities in the first three months of 2021 is $10.4 million of proceeds from company-owned life insurance.

Financing Activities

In the first nine months of 2021, we used $5.7 million of cash for financing activities, as compared to using $6.8 million in the first nine months of 2020.

The change in cash from financing activities was primarily related to the year-over-year decrease of $1.3 million in short-term borrowings and lower dividend payments during the first nine months of 2021 as compared to the same period in the prior year.

These decreases were partially offset by $1.6 million, representing a portion of the contingent consideration payment made in the first nine months of 2021 related to our 2020 acquisition of Insight.

The change in short-term borrowings in the first nine months of 2021 and the first nine months of 2020 was primarily due to payments on local lines of credit.

Dividends paid per common share were $0.05 in the first nine months of 2021 and $0.075 in first nine months of 2020.

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

In the first three months of 2022, we used $30.7 million of cash for financing activities, as compared to generating $0.1 million in the first three months of 2021.

The change in cash used for financing activities was primarily related to the buyback of the Company's common shares held by Persol Holdings for $27.2 million in the first three months of 2022 and the year-over-year change in dividend payments.

Dividends paid per common share were $0.05 in the first three months of 2022 and $0.00 in first three months of 2021.

Changes in net cash used for financing activities are also impacted by short-term borrowing activities.

The change in short-term borrowings in the first three months of 2022 and the first three months of 2021 was primarily due to borrowings on local lines of credit.

Debt totaled $0.2 million at the end of the first quarter of 2022, which represented local borrowings, compared to no debt at year-end 2021.

Debt-to-total capital (total debt reported in the consolidated balance sheet divided by total debt plus stockholders’ equity) is a common ratio to measure the relative capital structure and leverage of the Company.

Our ratio of debt-to-total capital was 0.0% at the end of the third quarter of 2021 and at year-end 2020.

Our ratio of debt-to-total capital was 0.0% at the end of the first quarter of 2022 and at year-end 2021.

New Accounting Pronouncements

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social security taxes as allowed by the Coronavirus Aid, Relief, and Economic Security Act.

Such deferrals are required to be repaid by the end of 2021 and 2022.

The remaining deferrals of $57.6 million are required to be repaid by January 3, 2023.

We utilize intercompany loans, dividends, capital contributions and redemptions to effectively manage our cash on a global basis.

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As part of those reviews, we may identify cash that we feel should be repatriated to optimize the Company’s overall capital structure.

As of the end of the third quarter of 2021, these reviews have resulted in plans to repatriate targeted amounts of foreign subsidiary cash.

As of the end of the first quarter of 2022, these reviews have not resulted in plans to repatriate foreign subsidiary cash.

We expect much of our international cash will be needed to fund working capital growth in our local operations as working capital needs, primarily trade accounts receivable, increase during periods of growth.

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This allows countries with excess cash to invest and countries with cash needs to utilize the excess cash.

As of the third quarter of 2021, we had $200.0 million of available capacity on our $200.0 million revolving credit facility and $97.0 million of available capacity on our $150.0 million securitization facility.

As of the first quarter of 2022, we had $200.0 million of available capacity on our $200.0 million revolving credit facility and $97.0 million of available capacity on our $150.0 million securitization facility.

The securitization facility carried no short-term borrowings and $53.0 million of standby letters of credit related to workers’ compensation.

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While we believe these facilities will cover our working capital needs over the short term, if economic conditions or operating results change significantly from our current expectations, we may need to seek additional sources of funds.

As of the end of the third quarter of 2021, we met the debt covenants related to our revolving credit facility and securitization facility.

As of the end of the first quarter of 2022, we met the debt covenants related to our revolving credit facility and securitization facility.

We have historically managed our cash and debt closely to optimize our capital structure.

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Conversely, when working capital needs grow, we tend to use corporate cash and cash available in the Cash Pool first, and then access our borrowing facilities.

We expect our working capital requirements to increase over the next several quarters if demand for our services continues to increase and to pay the deferred payroll tax balances, 50% of which are due in the fourth quarter of both 2021 and 2022.

We expect our working capital requirements to increase over the next several quarters if demand for our services continues to increase and to pay the deferred payroll tax balances, of which $29.5 million was paid on January 3, 2022 and another $57.6 million is due on January 3, 2023.

In February 2022, we completed transactions to monetize a substantial portion of our assets in the Asia-Pacific region which will allow us to strategically redeploy resources to accelerate our growth.

Specifically, we unwound our cross-shareholding arrangement with Persol Holdings and reduced our ownership interest in PersolKelly, our APAC joint venture.

We sold our investment in Persol Holdings common stock in an open-market transaction.

We repurchased the 1.6 million Kelly Class A and 1,475 Kelly Class B common shares owned by Persol Holdings at a price based on the last five trading days prior to the transaction.

We sold almost all of our ownership interest in PersolKelly to our joint venture partner.

The payment of income taxes due as a result of the sale of the Persol Holdings shares of approximately $50 million will be made by the end of 2022.

We monitor the credit ratings of our major banking partners on a regular basis and have regular discussions with them.

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Forward-Looking Statements

Certain statements contained in this report are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995.

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.

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Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors.

Ltd., risks associated with conducting business in foreign countries, including foreign currency fluctuations, the exposure to potential market and currency exchange risks relating to our investment in Persol Holdings, risks associated with violations of anticorruption, trade protection and other laws and regulations, availability of qualified full-time employees, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, our ability to sustain critical business applications through our key data centers, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyberattacks or other breaches of network or information technology security, our ability to realize value from our tax credit and net operating loss carryforwards, our ability to maintain specified financial covenants in our bank facilities to continue to access credit markets, and other risks, uncertainties and factors discussed in this report and in our other filings with the Securities and Exchange Commission.

The principal important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, changing market and economic conditions, the impact of the novel coronavirus (COVID-19) outbreak, competitive market pressures including pricing and technology introductions and disruptions, disruption in the labor market and weakened demand for human capital resulting from technological advances, competition law risks, the impact of changes in laws and regulations (including federal, state and international tax laws), unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, or the risk of additional tax liabilities in excess of our estimates, our ability to achieve our business strategy, our ability to successfully develop new service offerings, material changes in demand from or loss of large corporate customers as well as changes in their buying practices, risks particular to doing business with government or government contractors, the risk of damage to our brand, our exposure to risks associated with services outside traditional staffing, including business process outsourcing, services of licensed professionals and services connecting talent to independent work, our increasing dependency on third parties for the execution of critical functions, our ability to effectively implement and manage our information technology strategy, the risks associated with past and future acquisitions, including risk of related impairment of goodwill and intangible assets, risks associated with conducting business in foreign countries, including foreign currency fluctuations, risks associated with violations of anticorruption, trade protection and other laws and regulations, availability of qualified full-time employees, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, our ability to sustain critical business applications through our key data centers, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyberattacks or other breaches of network or information technology security, our ability to realize value from our tax credit and net operating loss carryforwards, our ability to maintain specified financial covenants in our bank facilities to continue to access credit markets, and other risks, uncertainties and factors discussed in this report and in our other filings with the Securities and Exchange Commission.

Actual results may differ materially from any forward-looking statements contained herein, and we undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis