KELLY SERVICES INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Executive Overview 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 • Relentlessly deliver for customers • Grow through discipline and focus • Deliver efficiency and effectiveness in everything we do 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 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. Our industry is evolving to meet businesses’ growing demand for specialized talent, whether delivered as a single individual or as part of a total workforce solution. Companies in our industry are using novel sourcing approaches—including gig platforms, independent contractors and other talent pools—to create customized workforce solutions that are flexible and responsive to the labor market. In addition, today’s companies are elevating their commitment to talent, with the growing realization that meeting the changing needs and requirements of talent is essential to remain competitive. The ways in which people view, find and conduct work are undergoing fundamental shifts. And as the demand for skilled talent continues to climb, workers’ changing ideas about the integration of work into life are becoming more important. 2021 saw record-breaking employee resignations in the U.S. as workers opted out of jobs that did not align with their needs. In this increasingly talent-driven market, a diverse set of workers, empowered by technology, is seeking to take even greater control over their career trajectories. Kelly is proud to be a career partner of choice for workers in search of a better way to work. Our Business Kelly is a talent and global workforce solutions company serving customers of all sizes in a variety of industries. We offer innovative outsourcing and consulting services, as well as staffing on a temporary and direct-hire basis. In 2020, we adopted 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 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 28 • 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. Ltd. ("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. Our working capital requirements are primarily generated from temporary employee payroll and customer accounts receivable. The nature of our business is such that trade accounts receivable are our most significant asset. Average days sales outstanding varies within and outside the U.S. and was 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 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. 29 Financial Measures The constant currency (“CC”) change amounts refer to the year-over-year percentage changes resulting from translating 2022 financial data into U.S. dollars using the same foreign currency exchange rates used to translate financial data for 2021. We believe that CC measurements are a useful measure, indicating the actual trends of our operations without distortion due to currency fluctuations. We use CC results when analyzing the performance of our segments and measuring our results against those of our competitors. Additionally, substantially all of our foreign subsidiaries derive revenues and incur cost of services and selling, general and administrative (“SG&A”) expenses within a single country and currency which, as a result, provides a natural hedge against currency risks in connection with their normal business operations. CC measures are non-GAAP (Generally Accepted Accounting Principles) measures and are used to supplement measures in accordance with GAAP. Our non-GAAP measures may be calculated differently from those provided by other companies, limiting their usefulness for comparison purposes. Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Reported and CC percentage changes were computed based on actual amounts in thousands of dollars. Return on sales (earnings from operations divided by revenue from services) and conversion rate (earnings from operations divided by gross profit) are ratios used to measure the Company’s operating efficiency. EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA margin (EBITDA divided by revenue from services) are measures used for understanding the Company's ability to generate cash flow and for judging overall operating performance. NM (not meaningful) in the following tables is used in place of percentage changes where: the change is in excess of 500%, the change involves a comparison between earnings and loss amounts, or the comparison amount is zero. Days sales outstanding (“DSO”) represents the number of days that sales remain unpaid for the period being reported. DSO is calculated by dividing average net sales per day (based on a rolling three-month period) into trade accounts receivable, net of allowances at the period end. Although secondary supplier revenues are recorded on a net basis (net of secondary supplier expense), secondary supplier revenue is included in the daily sales calculation in order to properly reflect the gross revenue amounts billed to the customer. 30 Results of Operations Total Company (Dollars in millions) First Quarter 2022 2021 % Change Revenue from services $ 1,296.4 $ 1,205.9 7.5 % Gross profit 258.6 213.3 21.2 Total SG&A expenses 235.2 202.7 16.0 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) (13.0) 10.5 (223.9) Equity in net earnings (loss) of affiliate 0.8 (1.1) NM Net earnings (loss) $ (47.6) $ 25.6 NM % Gross profit rate 19.9 % 17.7 % 2.2 pts. 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 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. Total SG&A expenses increased 16.0% on a reported basis and 17.2% on a constant currency basis. 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 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. 31 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. 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 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. 32 Operating Results By Segment (Dollars in millions) First Quarter 2022 2021 % Change Revenue from Services: Professional & Industrial $ 444.3 $ 467.6 (5.0) % Science, Engineering & Technology 317.1 254.7 24.5 Education 173.4 111.6 55.4 Outsourcing & Consulting 109.1 99.3 9.8 International 252.8 272.9 (7.4) Less: Intersegment revenue (0.3) (0.2) 60.3 Consolidated Total $ 1,296.4 $ 1,205.9 7.5 % 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. 33 Operating Results By Segment (continued) (Dollars in millions) First Quarter 2022 2021 Change Gross Profit: Professional & Industrial $ 83.1 $ 75.9 9.4 % Science, Engineering & Technology 73.8 53.2 38.8 Education 26.6 17.2 54.8 Outsourcing & Consulting 37.3 31.3 19.0 International 37.8 35.7 6.0 Consolidated Total $ 258.6 $ 213.3 21.2 % Gross Profit Rate: Professional & Industrial 18.7 % 16.2 % 2.5 pts. Science, Engineering & Technology 23.3 20.9 2.4 Education 15.3 15.4 (0.1) Outsourcing & Consulting 34.2 31.5 2.7 International 15.0 13.1 1.9 Consolidated Total 19.9 % 17.7 % 2.2 pts. 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 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. 34 Operating Results By Segment (continued) (Dollars in millions) First Quarter 2022 2021 % Change SG&A Expenses: Professional & Industrial $ 71.4 $ 69.4 2.8 % Science, Engineering & Technology 53.2 35.7 49.0 Education 18.6 14.2 31.2 Outsourcing & Consulting 34.3 28.4 20.5 International 33.2 33.1 0.4 Corporate expenses 24.5 21.9 11.9 Consolidated Total $ 235.2 $ 202.7 16.0 % 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. 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. 35 Operating Results By Segment (continued) (Dollars in millions) First Quarter 2022 2021 % Change Earnings (Loss) from Operations: Professional & Industrial $ 11.7 $ 6.5 79.6 % Science, Engineering & Technology 20.6 17.5 18.0 Education 8.0 3.0 166.1 Outsourcing & Consulting 3.0 2.9 4.3 International 4.6 2.6 75.2 Corporate (24.5) (21.9) (11.9) 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, 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. 36 Financial Condition Historically, we have financed our operations through cash generated by operating activities and access to credit markets. Our working capital requirements are primarily generated from temporary employee payroll, which is generally paid weekly or monthly, and customer accounts receivable, which is generally outstanding for longer periods. Since receipts from customers lag payroll to temporary employees, working capital requirements increase substantially in periods of growth. Conversely, when economic activity slows, working capital requirements may substantially decrease. This may result in an increase in our operating cash flows; however, any such increase would not be sustainable in the event that an economic downturn continued for an extended period. The impact of the 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: 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 $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 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 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. Ltd. 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 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 first quarter of 2022 and at year-end 2021. 37 New Accounting Pronouncements See New Accounting Pronouncements footnote in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q for a description of new accounting pronouncements. Critical Accounting Estimates For a discussion of our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Form 10-K. Contractual Obligations and Commercial Commitments There were no significant changes to our contractual obligations and commercial commitments from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Form 10-K. We have no material unrecorded commitments, losses, contingencies or guarantees associated with any related parties or unconsolidated entities. 38 Liquidity We expect to meet our ongoing short-term and long-term cash requirements principally through cash generated from operations, available cash and equivalents, securitization of customer receivables and committed unused credit facilities. Additional funding sources could include asset-based lending, additional bank facilities or sale of non-core assets. To meet significant cash requirements related to our nonqualified retirement plan, we may utilize proceeds from Company-owned life insurance policies. During 2020, cash generated from operations was supplemented by the deferral of payments of the Company's U.S. social security taxes as allowed by the Coronavirus Aid, Relief, and Economic Security Act. 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. We periodically review our foreign subsidiaries’ cash balances and projected cash needs. As part of those reviews, we may identify cash that we feel should be repatriated to optimize the Company’s overall capital structure. As of the end of the 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. A cash pooling arrangement (the “Cash Pool”) is available to fund general corporate needs internationally. The Cash Pool is a set of cash accounts maintained with a single bank that must, as a whole, maintain at least a zero balance; individual accounts may be positive or negative. This allows countries with excess cash to invest and countries with cash needs to utilize the excess cash. As of the 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. Together, the revolving credit and securitization facilities provide the Company with committed funding capacity that may be used for general corporate purposes subject to financial covenants and restrictions. While we believe these facilities will cover our working capital needs over the short term, if economic conditions or operating results change significantly from our current expectations, we may need to seek additional sources of funds. As of the end of the 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. As our cash balances build, we tend to pay down debt as appropriate. Conversely, when working capital needs grow, we tend to use corporate cash and cash available in the Cash Pool first, and then access our borrowing facilities. We expect our working capital requirements to increase over the next several quarters if demand for our services continues to increase and to pay the 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. 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. 39 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, 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. Certain risk factors are discussed more fully under “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K. 40