What changed in this filing

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Item 1A. Risk Factors

2023-02-16 compared with 2022-02-17 · 36 added, 47 removed, 265 unchanged (24% of the section changed)

12 unchanged sentences

Our business has been adversely impacted by the novel coronavirus (COVID-19) outbreak and could be impacted by future outbreaks.

The COVID-19 outbreak and related containment and mitigation efforts negatively impacted the economies and general welfare in the countries in which we operate, as well as in the countries where our customers provide goods and services.

This resulted in a decline in demand for our services.

The overall threat of COVID-19 in the countries in which we operate has been reduced with the advent of health and safety measures, effective vaccines, and treatment regimens to combat current known strains of COVID-19 and demand for our services has increased.

The emergence of new strain(s) of COVID-19 that are more deadly, contagious, or vaccine resistant, or a decline in the effectiveness of vaccines or treatment regimens could result in another economic downtown or a decline in demand for our services.

Likewise, the financial viability of third parties on which we rely to provide staffing services or manage critical business functions could also be impacted by further negative COVID-19 developments.

Future government actions or business decisions by customers made in response to the COVID-19 pandemic, including automation, social distancing and remote work, and vaccination and testing programs could negatively impact customer demand for our services.

Our stock price may be subject to significant volatility and could suffer a decline in value.

4 unchanged sentences

• announcements of new services by us or our competitors;

• announcements relating to strategic relationships or acquisitions;

• announcements relating to strategic relationships, acquisitions or divestitures;

• changes in financial estimates by securities analysts;

15 unchanged sentences

We compete in global, national, regional and local markets with full-service and specialized temporary staffing and consulting companies.

Randstad, Adecco Group, ManpowerGroup Inc., Recruit Holdings and Allegis Group are considerably larger than we are and have more substantial marketing and financial resources.

Additionally, the emergence of online staffing platforms or other forms of disintermediation may pose a competitive threat to our services, which operate under a more traditional staffing business model.

Randstad, Adecco Group, ManpowerGroup Inc.

and Allegis Group are considerably larger than we are and have more substantial marketing and financial resources.

Additionally, the emergence of online staffing platforms or other forms of disintermediation may pose a

competitive threat to our services, which operate under a more traditional staffing business model.

Price competition in the staffing industry is intense, particularly for the provision of office clerical, light industrial and education personnel.

24 unchanged sentences

In particular, we are subject to state unemployment taxes in the U.S., which typically increase during periods of increased levels of unemployment.

We also receive benefits, such as the work opportunity income tax credit in the U.S., that regularly expire

and may not be reinstated.

We also receive benefits, such as the work opportunity income tax credit in the U.S., that regularly expire and may not be reinstated.

There can be no assurance that we will be able to increase the fees charged to our customers in a timely manner and in a sufficient amount to fully cover increased costs as a result of any changes in laws or government regulations.

7 unchanged sentences

We may have additional tax liabilities that exceed our estimates.

We are subject to a multitude of federal, state, local, and foreign taxes in the jurisdictions we operate in, including the tax provisions of the U.S.

Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010.

We are subject to a multitude of federal, state, local, and foreign taxes in the jurisdictions in which we operate.

Our tax expense could be materially impacted by changes in tax laws in these jurisdictions, changes in the valuation of deferred tax assets and liabilities or changes in the mix of income by country.

5 unchanged sentences

The performance of the Company’s business is dependent on our ability to effectively execute our growth strategy.

Our strategy includes targeted investments in select specialty areas, focusing on growth platforms and implementation of a robust operating model to bridge our strategy to execution.

Our strategy includes targeted investments in select specialty areas, focusing on growth platforms and implementation of a cost-effective operating model to bridge our strategy to execution.

If we are unsuccessful in executing our strategy, we may not achieve either our stated goal of revenue growth or the intended productivity improvements, which could negatively impact profitability.

2 unchanged sentences

The Company’s successful execution of our growth strategy requires that we match evolving customer expectations with evolving service offerings.

The development of new service offerings requires accurate anticipation of customer needs and emerging technology trends.

The development of new service offerings requires accurate anticipation of customer needs and emerging technology and workforce trends.

We must make long-term investments in our information technology infrastructure and commit resources to development efforts before knowing whether these investments will result in service offerings that achieve customer acceptance and generate the revenues required to provide desired returns.

4 unchanged sentences

A change in labor strategy or the deterioration of the financial condition or business prospects of these customers could reduce their need for our services and result in a significant decrease in the revenues and earnings we derive from these customers.

Such change could occur due to factors in our customers' control but also could occur due to economic,

social, climate, or political factors outside of our customers' control.

Such change could occur due to factors in our customers' control but also could occur due to economic, social, climate, or political factors outside of our customers' control.

Our customers are also exposed to third-party risk through their use of vendors and suppliers which, in the event of a third-party incident at a customer, could result in a deterioration in their financial condition.

1 unchanged sentence

Since receipts from customers generally lag payroll to temporary employees, the bankruptcy of a major customer could have a material adverse impact on our ability to meet our working capital requirements.

The expansion of payment terms may extend our working capital requirements and reduce available capital for

Additionally, most of our customer contracts can be terminated by the customer on short notice without penalty.

2 unchanged sentences

The movement from single-sourced to competitively sourced staffing contracts may also substantially reduce our future revenues from such customers.

While Kelly has sought to address this trend, including providing Managed Service Provider ("MSP") services within our Outsourcing & Consulting ("OCG") segment, we may not be selected or retained as the MSP by our large customers.

While Kelly has sought to address this trend, including providing MSP services within our OCG segment, we may not be selected or retained as the MSP by our large customers.

This may result in a material decrease in the revenue we derive from providing staffing services to such customers.

6 unchanged sentences

Government agencies may temporarily or permanently lose funding for awarded contracts, or there could be delays in the start-up of projects already awarded and funded.

We are at risk of damage to our brand, which is important to our success.

Our success depends, in part, on the goodwill associated with our brand.

We are at risk of damage to our brands, which are important to our success.

Our success depends, in part, on the value associated with our brands.

Because we assign employees to work under the direction and supervision of our customer at work locations not under Kelly’s control, we are at risk of our employees engaging in unauthorized conduct that could harm our reputation.

6 unchanged sentences

Although we have internal vetting processes intended to control such risks, there is no assurance that these processes will be effective or that we will be able to identify these potential risks in a timely manner.

Our specialties also include professional engineering services where design, construction or systems failures and project delays can result in substantial injury or damages.

We attempt to mitigate and transfer such risks through contractual arrangements with our customers;

Our specialties also include professional services where errors or omissions by employees or independent contractors can result in substantial injury or damages.

We attempt to mitigate and transfer such risks through contractual arrangements with our customers and suppliers;

however, these services may give rise to liability claims and litigation.

5 unchanged sentences

If our suppliers fail to meet our standards and expectations or are unfavorably regarded by our customers, our ability to discontinue the relationship may be limited and could result in reputational damage, customer loss, and adversely affect our results of operations.

For example, in the Asia-Pacific region, we rely on third parties and partners to provide certain back office and administrative services to our operations

in that region.

The failure or inability to perform on the part of one or more of these critical suppliers or partners could cause significant disruptions and increased costs.

Our information technology strategy may not yield its intended results.

Our information technology strategy includes improvements to our applicant onboarding and tracking systems, order management, and improvements to financial processes such as billing and accounts payable through system consolidation and upgrades.

We do not use a single enterprise resource planning system, which limits our ability to react to evolving technology and customer expectations and increases the amount of investment and effort necessary to provide global service integration to our customers.

9 unchanged sentences

In the event that we determine that there is an impairment, we may be required to record a significant non-cash charge to earnings that could adversely affect our results of operations.

Investments in equity affiliates expose us to additional risks and uncertainties.

We participate, or may participate in the future, in certain investments in equity affiliates, such as joint ventures or other equity method investments with strategic partners, including PersolKelly Pte.

These arrangements expose us to a number of risks, including the risk that the management of the combined venture may not be able to fulfill their performance obligations under the management agreements or that the joint venture parties may be incapable of providing the required financial support.

Additionally, improper, illegal or unethical actions by the venture management could have a negative impact on the reputation of the venture and our Company.

In 2022, changes in market conditions related to demand in hiring in the high-tech industry and slowing growth in RPO more broadly, resulted in a goodwill impairment charge of $41.0 million.

Certain equity investments may expose us to additional risks and uncertainties.

We participate, or may participate in the future, in certain investments in equity affiliates, such as joint ventures or other investments with strategic partners, including PersolKelly Pte.

These investments or arrangements expose us to a number of risks, including the risk that the management of the investment or combined venture may not be able to fulfill their performance obligations under the management agreements or that the joint venture parties may be incapable of providing the required financial support.

Additionally, improper, illegal or unethical actions by the investment or venture management could have a negative impact on the reputation of the investment or venture and our Company.

Risks Related to Operating a Global Enterprise

5 unchanged sentences

• government intrusions including asset seizures, expropriations or de facto control;

• varying economic and political conditions;

• varying economic and geopolitical conditions;

• differences in cultures and business practices;

9 unchanged sentences

dollar and these fluctuations may have an adverse or favorable effect on our operating results when translating foreign currencies into U.S.

Our investment in Persol Holdings exposes us to potential market and currency exchange risks.

We are exposed to market and currency risks on our investment in Persol Holdings.

The investment is stated at fair value and is marked to market through net earnings.

Changes in the market price are based on the Persol Holdings stock price as listed in the Tokyo stock exchange, and such changes may be material.

Foreign currency fluctuations on this yen-denominated investment are reflected as a component of other comprehensive income and, accordingly, the exchange rate fluctuations may have a material adverse or favorable effect on our financial statements.

Our international operations subject us to potential liability under anti-corruption, trade protection, and other laws and regulations.

15 unchanged sentences

Competition for individuals with proven professional skills is intense, and demand for these individuals is expected to remain strong for the foreseeable future.

Social, political and financial conditions can negatively impact the amount of qualified personnel available to meet the staffing requirements of our customers.

Low unemployment, as well as social, political and financial conditions can negatively impact the amount of qualified personnel available to meet the staffing requirements of our customers.

There can be no assurance that qualified personnel will continue to be available in sufficient numbers and on terms of employment acceptable to us and our customers.

10 unchanged sentences

• violations of wage and hour requirements;

• retroactive entitlement to employee benefits, including health insurance;

• failure to comply with leave policy requirements;

• errors and omissions by our temporary employees, particularly for the actions of professionals such as attorneys, accountants, teachers and scientists.

• entitlement to employee benefits, including health insurance and retroactive benefits;

• failure to comply with leave policy and other labor requirements;

• errors and omissions by our temporary employees, particularly for the actions of professionals such as engineers, therapists, accountants, teachers and scientists.

We are also subject to potential risks relating to misuse of customer proprietary information, misappropriation of funds, death or injury to our employees, damage to customer facilities due to negligence of temporary employees, criminal activity and other similar occurrences.

2 unchanged sentences

and certain other countries in which we operate, new employment and labor laws and regulations have been proposed or adopted that may increase the potential exposure of employers to employment-related claims and litigation.

In addition, such laws and regulations are arising with increasing frequency at the state and local level in the U.S.

In addition, such laws and regulations are arising

with increasing frequency at the state and local level in the U.S.

and the resulting inconsistency in such laws and regulations results in additional complexity.

4 unchanged sentences

Damage to our key data centers could affect our ability to sustain critical business applications.

Many business processes critical to our continued operation are hosted in outsourced facilities in America and Europe.

Many business processes critical to our continued operation are hosted in outsourced facilities in America, Europe and Asia.

Certain other processes are hosted at our corporate headquarters complex or occur in cloud-based computer environments.

8 unchanged sentences

Although we have a program designed to preserve the privacy rights of the personal data that we control or process, as well as personal data that we entrust to third parties, there can be no assurance that our program will meet all current and future regulatory requirements, anticipate all potential methods of unauthorized access, or prevent all inappropriate disclosures.

Our insurance coverage may

not be sufficient to cover all such costs or consequences, and there can be no assurance that any insurance that we now maintain will remain available under acceptable terms.

Our insurance coverage may not be sufficient to cover all such costs or consequences, and there can be no assurance that any insurance that we now maintain will remain available under acceptable terms.

Cyberattacks or other breaches of network or information technology security could have an adverse effect on our systems, services, reputation and financial results.

9 unchanged sentences

The actions we take to reduce the risk of impairments to our operations or systems and breaches of confidential or proprietary data may not be sufficient to prevent or repel future cyber events or other impairments of our networks or information technologies.

An event involving the destruction, modification, accidental or unauthorized release, or theft of sensitive information from systems related to our business, or an attack that results in damage to or unavailability of our key technology systems or those of critical vendors (e.g., ransomware), could result in damage to our reputation, fines, regulatory sanctions or interventions, contractual or financial liabilities, additional compliance and remediation costs, loss of employees or customers, loss of payment card network privileges, operational disruptions and other forms of costs, losses or reimbursements, any of which could materially adversely affect our operations or financial condition.

systems or those of critical vendors (e.g., ransomware), could result in damage to our reputation, fines, regulatory sanctions or interventions, contractual or financial liabilities, additional compliance and remediation costs, loss of employees or customers, loss of payment card network privileges, operational disruptions and other forms of costs, losses or reimbursements, any of which could materially adversely affect our operations or financial condition.

Our cyber security and business continuity plans, and those of our third parties with whom we do business, may not be effective in anticipating, preventing and effectively responding to all potential cyber risk exposures.

19 unchanged sentences

A controlled company is not required to have a majority of its board of directors comprised of independent directors.

nor do the NASDAQ Global Market listing standards require a controlled company to certify the adoption of a formal written charter or board resolution, as applicable, addressing the nominations process.

Director nominees are not required to be selected or recommended for the board’s selection by a majority of independent directors or a nominations committee comprised solely of independent directors, nor do the NASDAQ Global Market listing standards require a controlled company to certify the adoption of a formal written charter or board resolution, as applicable, addressing the nominations process.

A controlled company is also exempt from NASDAQ Global Market’s requirements regarding the determination of officer compensation by a majority of independent directors or a compensation committee comprised solely of independent directors.

27 unchanged sentences

Our ability to continue to meet these financial covenants, particularly with respect to interest coverage (see Debt footnote in the notes to our consolidated financial statements), cannot be assured.

If we default under this or any other of these requirements, the lenders could declare all outstanding borrowings,

accrued interest and fees to be due and payable or significantly increase the cost of the facility.

If we default under this or any other of these requirements, the lenders could declare all outstanding borrowings, accrued interest and fees to be due and payable or significantly increase the cost of the facility.

Additionally, our credit facilities contain cross-default provisions.

4 unchanged sentences

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-K

Item 1A. Risk Factors