What changed in this filing

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Item 9A. Controls and Procedures

2023-02-16 compared with 2022-02-17 · 539 added, 447 removed, 1394 unchanged (41% of the section changed)

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Not applicable.

Information required by Part III with respect to Directors, Executive Officers and Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (Item 12), Certain Relationships and Related Transactions, and Director Independence (Item 13) and Principal Accounting Fees and Services (Item 14), except as set forth under the titles “Executive Officers of the Registrant,” which is included on pages 42-43, and “Code of Business Conduct and Ethics,” which is included on page 44, (Item 10), and except as set forth under the title “Equity Compensation Plan Information,” which is included on pages 44-45, (Item 12), is to be included in a definitive proxy statement filed not later than 120 days after the close of our fiscal year and the proxy statement, when filed, is incorporated in this report by reference.

Information required by Part III with respect to Directors, Executive Officers and Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (Item 12), Certain Relationships and Related Transactions, and Director Independence (Item 13) and Principal Accounting Fees and Services (Item 14), except as set forth under the titles “Executive Officers of the Registrant,” which is included on pages 38-39, and “Code of Business Conduct and Ethics,” which is included on page 40, (Item 10), and except as set forth under the title “Equity Compensation Plan Information,” which is included on page 40, (Item 12), is to be included in a definitive proxy statement filed not later than 120 days after the close of our fiscal year and the proxy statement, when filed, is incorporated in this report by reference.

EXECUTIVE OFFICERS OF THE REGISTRANT.

The following individuals serve as executive officers of the Company as of January 1, 2023:

Name/Office Age Served as an

Officer Since

Business Experience

During Last 5 Years

Name/Office Age Served as an Officer Since Business Experience During Last 5 Years

President and

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Served as officer of the Company.

January 2012 - June 2017

SVP Brand Marketing - Charles Schwab

& Co., San Francisco, CA

Senior Vice President

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President, Commercial Business -

November 2014 - November 2016

EVP & President - North America Staffing,

Senior Vice President and Chief

Digital Officer 52 2021 July 2021 - Present

Served as officer of the Company.

July 2020 - July 2021

President - RDI Global Solutions

May 2019 - July 2020

President - Cielo

May 2014 - April 2019

SVP and President - CDI

Senior Vice President

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Transportation - IHS Markit

February 2014 - December 2016

VP, Chief Legal Counsel & Global Privacy

Officer - IHS Markit

Vice President, Corporate Controller

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Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)

Equity compensation plans approved by security holders - Evergreen provision (1),(2)

Equity compensation plans approved by security holders - Fixed Share provision (1),(2)

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(1) The equity compensation plan approved by our stockholders is our Equity Incentive Plan.

(2) The Evergreen provision applied to shares granted prior to May 10, 2017, and the Equity Incentive Plan provided that the maximum number of shares available for grants, including restricted stock, was 15 percent of the outstanding Class A common stock, adjusted for plan activity over the preceding five years.

The Company has no plans to issue additional shares under the Evergreen provision that was in effect prior to May 10, 2017.

There are no restricted stock awards, financial measure performance awards, total shareholder return performance awards, or single financial measure performance awards to exclude as of January 2, 2022 or going forward as there are no longer any unvested/unearned shares related to the Evergreen provision.

(2) The Fixed Share provision applies to shares granted on and after May 10, 2017, and the amended Equity Incentive Plan provides that the maximum number of shares available for grants is 4,700,000.

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607,154 shares of restricted stock;

performance shares that have been earned but not yet vested totaling zero of financial measure performance awards, zero total shareholder return performance awards, and 12,776 single financial measure performance awards;

and performance shares granted to employees and not yet earned or vested totaling 104,436 shares of single financial measure performance awards and 873,343 shares of financial

measure performance awards, calculated using an assumed maximum award performance level of 200%, where applicable, at January 2, 2022.

performance shares that have been earned but not yet vested totaling 8,388 financial measure performance awards, and 82,996 single financial measure performance awards;

and performance shares granted to employees and not yet earned or vested totaling 893,573 shares of financial measure performance awards, calculated using an assumed maximum award performance level of 200%, where applicable, at January 1, 2023.

(3) The Non-Employee Directors Deferred Compensation Plan is an equity compensation plan that has not been approved by our stockholders.

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Notes to Consolidated Financial Statements

Financial Statement Schedule - Schedule II - Valuation Reserves at January 2 , 202 2 , January 3, 2021 and D ecember 29, 2019

Financial Statement Schedule - Schedule II - Valuation Reserves at January 1 , 202 3 , January 2 , 202 2 and January 3 , 2 021

Management’s Report on Internal Control Over Financial Reporting

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may change.

On April 5, 2021, we completed the acquisition of Softworld.

Given the significance of the Softworld acquisition and the complexity of systems and business processes, we have excluded the acquired Softworld business from our assessment of the effectiveness of internal control over financial reporting for the year ending January 2, 2022.

Softworld accounted for approximately 2% of the Company's total assets as of January 2, 2022 and approximately 2% of the Company's total revenue for the year ended 2021.

The Company completed the acquisition of RocketPower on March 7, 2022 and the acquisition of PTS on May 2, 2022.

Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company.

Accordingly, we have excluded the acquired RocketPower and PTS businesses from our assessment and report on internal control over financial reporting for the year ending January 1, 2023.

We are in the process of integrating RocketPower and PTS into our system of internal control over financial reporting.

RocketPower and PTS both individually accounted for less than 1% of the Company's total assets as of January 1, 2023 and less than 1% of the Company's total revenue for the year ended 2022.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of January 1, 2023.

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We have audited the accompanying consolidated balance sheets of Kelly Services, Inc.

and its subsidiaries (the “Company”) as of January 2, 2022 and January 3, 2021, and the related consolidated statements of earnings, comprehensive income, stockholders’ equity and cash flows for the years ended January 2, 2022, January 3, 2021, and December 29, 2019, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of January 1, 2023 and January 2, 2022, and the related consolidated statements of earnings, comprehensive income, stockholders’ equity and cash flows for the years ended January 1, 2023, January 2, 2022, and January 3, 2021, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of January 1, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 2, 2022 and January 3, 2021, and the results of its operations and its cash flows for the years ended January 2, 2022, January 3, 2021, and December 29, 2019 in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 1, 2023 and January 2, 2022, and the results of its operations and its cash flows for the years ended January 1, 2023, January 2, 2022, and January 3, 2021 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Softworld, Inc.

from its assessment of internal control over financial reporting as of January 2, 2022 because it was acquired by the Company in a purchase business combination during 2021.

We have also excluded Softworld, Inc.

from our audit of internal control over financial reporting.

Softworld, Inc.

is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting each represent approximately 2% of the related consolidated financial statement amounts as of and for the year ended January 2, 2022.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Rocket Power Holdings LLC and Rocket Power Ops LLC (collectively, RocketPower) and Pediatric Therapeutic Services (PTS) from its assessment of internal control over financial reporting as of January 1, 2023, because they were acquired by the Company in purchase business combinations during 2022.

We have also excluded RocketPower and PTS from our audit of internal control over financial reporting.

RocketPower and PTS are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting both individually represented less than 1% of the related consolidated financial statement amounts as of and for the year ended January 1, 2023.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

A company’s internal control over financial reporting includes those policies and procedures

that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Interim Impairment Assessment – RocketPower Reporting Unit

As described in Notes 1, 4, and 9 to the consolidated financial statements, the Company’s goodwill balance was $151.1 million as of January 1, 2023, and the goodwill allocated to the RocketPower reporting unit was $41.0 million upon its March 2022 acquisition and $0 as of January 1, 2023.

The Company performs its annual goodwill impairment testing in the fourth quarter each year and regularly assesses whenever events or circumstances make it more likely than not that an impairment may have occurred.

If the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of a reporting unit, goodwill is deemed impaired and is written down to the extent of the difference.

During the third quarter of 2022, customers within the high-tech industry vertical in which RocketPower specializes reduced or eliminated their full-time hiring, reducing demand for RocketPower’s services, and on-going economic uncertainty has more broadly impacted the growth in demand for Recruitment Process Outsourcing (RPO) in the near-term.

These changes in market conditions therefore caused a triggering event requiring an interim impairment test for goodwill.

Based on the result of management’s interim goodwill impairment test as of third quarter 2022, management recorded a goodwill impairment charge of $30.7 million to write off a portion of RocketPower’s goodwill.

Management determined the fair value of the RocketPower reporting unit using an income approach.

Under the income approach, estimated fair value is determined based on estimated future cash flows discounted by an estimated market participant weighted-average cost of capital.

Management’s analysis used the following significant assumptions:

expected future revenue growth rates, profit margins and discount rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the RocketPower reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to expected future revenue growth rates, profit margins and discount rate;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the RocketPower reporting unit.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting unit;

(ii) evaluating the appropriateness of the income approach;

(iii) testing the completeness and accuracy of underlying data used in the model;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to expected future revenue growth rates, profit margins, and discount rate.

Evaluating management’s assumptions related to expected future revenue growth rates and profit margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s income approach and the discount rate significant assumption.

Workers’ Compensation

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Management establishes the accrual for workers’ compensation claims utilizing actuarial methods to estimate the undiscounted future cash payments that will be made to satisfy the claims, including an allowance for incurred-but-not-reported claims.

Management retains an independent consulting actuary to establish loss development factors, based on historical claims experience as well as industry experience, and applies those factors to current claims information to derive an estimate of the ultimate claims liability.

retains an independent consulting actuary to establish loss development factors and loss rates, based on historical claims experience as well as industry experience, and applies those factors to current claims information to derive an estimate of the ultimate claims liability.

In preparing the estimates, the consulting actuary considers a number of assumptions and multiple generally accepted actuarial methods in the course of preparing the loss forecast for claims.

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The principal considerations for our determination that performing procedures relating to workers’ compensation is a critical audit matter are (i) the significant judgment by management when determining the actuarial methods and the significant assumptions to use in establishing the accrual for workers’ compensation claims;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s actuarial methods and significant assumptions related to the loss development factors;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

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Developing the independent estimate involved (i) testing the completeness and accuracy of underlying data provided by management;

(ii) evaluating management’s actuarial methods and significant assumptions related to the loss development factors;

and (iii) independently developing the loss development factors and actuarial methods used.

Acquisition of Softworld, Inc.

– Valuation of Trade Name and Customer Relationships

As described in Notes 1 and 4 to the consolidated financial statements, in 2021, the Company completed the acquisition of Softworld, Inc.

(Softworld) for $217.0 million, which resulted in $79.4 million of intangible assets being recorded.

Those intangible assets were comprised of a trade name of $23.1 million and customer relationships of $54.9 million.

Fair value of the trade name intangible asset was estimated by management using a relief-from-royalty valuation method and customer relationships intangible asset was estimated using a multi-period excess earnings valuation method.

Management’s determination of the fair value of the trade name included assumptions related to projected revenue growth rates, royalty rates and discount rates.

Management’s determination of the fair value of the customer relationships included assumptions related to projected revenue growth rates, customer attrition rates, profit margins and discount rates.

The principal considerations for our determination that performing procedures relating to the valuation of trade name and customer relationships acquired in the Softworld acquisition is a critical audit matter are (i) the significant judgment by management when determining the fair value of the intangibles;

(ii) a high degree of auditor judgment, subjectivity and effort in

performing procedures and evaluating management’s significant assumptions related to projected revenue growth rates, royalty rate and discount rate for the trade name intangible asset and projected revenue growth rates, customer attrition rate, profit margins and discount rate for the customer relationships intangible asset;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the intangible assets and controls over development of the significant assumptions related to projected revenue growth rates, royalty rate and discount rate for the trade name intangible asset and projected revenue growth rates, customer attrition rate, profit margins and discount rate for the customer relationships intangible asset.

These procedures also included, among others (i) reading the purchase agreement and (ii) testing management’s process for determining the fair value of the intangible assets.

Testing management’s process included evaluating the appropriateness of the valuation methods, testing the completeness and accuracy of underlying data used in the valuations, and evaluating the reasonableness of significant assumptions related to projected revenue growth rates, royalty rate and discount rate for the trade name intangible asset and projected revenue growth rates, customer attrition rate, profit margins and discount rate for the customer relationships intangible asset.

Evaluating the reasonableness of the projected revenue growth rates and profit margins involved considering the past performance of the acquired business, as well as economic and industry forecasts.

Evaluating the customer attrition rate involved considering the past performance of the acquired business.

The royalty rate and discount rate were evaluated by considering the royalty rates and cost of capital of comparable businesses and other industry factors.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the valuation methods and the royalty rate and discount rate significant assumptions.

(ii) evaluating management’s actuarial methods and significant assumptions related to the loss development factors and loss rates;

and (iii) independently developing the loss development factors and loss rates and actuarial methods used.

/s/ PricewaterhouseCoopers LLP

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Gain on sale of assets ( 6.2 ) — ( 32.1 )

Asset impairment charge — — 15.8

Loss on disposal 18.7 — —

Earnings (loss) from operations 14.8 48.6 ( 93.6 )

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Gain on insurance settlement — 19.0 —

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

Other income (expense), net 1.6 ( 3.6 ) 3.4

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Income tax expense (benefit) ( 7.9 ) 35.1 ( 34.0 )

Net earnings before equity in net earnings (loss) of affiliate 150.7 ( 72.8 ) 116.0

Net earnings (loss) before equity in net earnings (loss) of affiliate ( 63.3 ) 150.7 ( 72.8 )

Equity in net earnings (loss) of affiliate 0.8 5.4 0.8

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Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments, net of tax expense of $0.1 million, tax expense of $0.2 million and tax benefit of $0.1 million, respectively ( 24.2 ) 13.9 2.5

Reclassification adjustments included in net earnings — ( 1.5 ) —

Foreign currency translation adjustments, net of tax benefit of $0.2 million and tax expense of $0.1 million and $0.2 million, respectively ( 7.5 ) ( 24.2 ) 13.9

Reclassification adjustments included in net earnings (loss) - liquidation of Japan subsidiary 20.4 — —

Reclassification adjustments included in net earnings (loss) - equity method investment and other 4.7 — ( 1.5 )

Foreign currency translation adjustments 17.6 ( 24.2 ) 12.4

Pension liability adjustments, net of tax expense of $0.2 million, tax benefit of $0.1 million and tax benefit of $0.3 million, respectively 0.5 ( 0.9 ) ( 1.3 )

Pension liability adjustments, net of tax expense of $0.5 million and $0.2 million, respectively and tax benefit of $0.1 million 1.5 0.5 ( 0.9 )

Reclassification adjustments included in net earnings 0.1 0.2 0.1

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Class A common stock, 100.0 million shares authorized;

36.7 million shares issued at 2021 and 2020 36.7 36.7

35.1 million shares issued at 2022 and 36.7 million shares issued at 2021 35.1 36.7

Class B common stock, 10.0 million shares authorized;

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Treasury stock, at cost

Class A common stock, 0.7 million shares at 2021 and 0.8 million at 2020 ( 14.5 ) ( 16.5 )

Class A common stock, 1.0 million shares at 2022 and 0.7 million shares at 2021 ( 19.5 ) ( 14.5 )

Class B common stock ( 0.6 ) ( 0.6 )

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Conversions from Class B — — 0.1

Share retirement ( 1.6 ) — —

Balance at end of year 35.1 36.7 36.7

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Net issuance of stock awards 2.8 2.0 3.8

Purchase of treasury stock ( 7.8 ) — —

Balance at end of year ( 19.5 ) ( 14.5 ) ( 16.5 )

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Dividends ( 10.6 ) ( 4.0 ) ( 3.0 )

Share retirement ( 25.6 ) — —

Balance at end of year 1,216.3 1,315.0 1,162.9

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Deferred income taxes ( 72.1 ) 21.6 ( 57.1 )

Loss on disposal 18.7 — —

Depreciation and amortization 33.4 29.8 24.2

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(Gain) loss on investment in Persol Holdings 67.2 ( 121.8 ) 16.6

Loss on cumulative translation adjustment reversal 20.4 — —

Gain on foreign currency remeasurement ( 5.5 ) — —

Gain on insurance settlement — ( 19.0 ) —

Gain on sale of assets ( 6.2 ) — ( 32.1 )

Asset impairment charge — — 15.8

Equity in net (earnings) loss of PersolKelly Pte.

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Changes in operating assets and liabilities, net of acquisitions ( 141.0 ) ( 10.2 ) 120.3

Net cash from operating activities 85.0 186.0 102.2

Net cash (used in) from operating activities ( 76.3 ) 85.0 186.0

Cash flows from investing activities:

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Acquisition of companies, net of cash received ( 143.1 ) ( 213.0 ) ( 39.2 )

Cash disposed from sale of Russia, net of proceeds ( 6.0 ) — —

Proceeds from sale of Persol Holdings investment 196.9 — —

Proceeds from sale of equity method investment 119.5 — —

Proceeds from company-owned life insurance 1.5 12.2 2.3

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Other investing activities 0.6 1.4 0.1

Net cash (used in) from investing activities ( 180.7 ) 9.8 ( 94.3 )

Net cash from (used in) investing activities 167.5 ( 180.7 ) 9.8

Cash flows from financing activities:

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Payments of tax withholding for stock awards ( 0.9 ) ( 0.6 ) ( 1.2 )

Buyback of common shares ( 27.2 ) — —

Purchase of treasury stock ( 7.8 ) — —

Contingent consideration payments ( 3.3 ) ( 1.6 ) —

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Fiscal Year The Company’s fiscal year ends on the Sunday nearest to December 31.

The three most recent years ended on January 2, 2022 (2021, which contained 52 weeks), January 3, 2021 (2020, which contained 53 weeks) and December 29, 2019 (2019, which contained 52 weeks).

The three most recent years ended on January 1, 2023 (2022, which contained 52 weeks), January 2, 2022 (2021, which contained 52 weeks) and January 3, 2021 (2020, which contained 53 weeks).

Period costs included in selling, general and administrative (“SG&A”) expenses are recorded on a calendar-year basis.

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The Company’s equity method investment in PersolKelly Pte.

is accounted for on a one-quarter lag (see Investment in PersolKelly Pte.

was accounted for on a one-quarter lag prior to the sale of the majority of the investment in the first quarter of 2022 (see Investment in PersolKelly Pte.

Any material transactions in the intervening period are disclosed or accounted for in the current reporting period.

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Certain prior period amounts have been reclassified to conform to the current presentation.

Investment in Persol Holdings The Company’s investment in Persol Holdings, as further described in the Investment in Persol Holdings footnote, is carried at fair value with the changes in fair value recognized in net earnings.

The fair value of the investment is based on the quoted market price.

Investment in Persol Holdings The Company’s previous investment in Persol Holdings, as further described in the Investment in Persol Holdings footnote, was carried at fair value with the changes in fair value recognized in net earnings.

The fair value of the investment was based on the quoted market price until the sale of the investment in the first quarter of 2022.

Investment in PersolKelly Pte.

The Company has a 49 % ownership interest in its equity affiliate, PersolKelly Pte.

Ltd., which is accounted for under the equity method.

The operating results of the equity affiliate are recorded on a one-quarter lag and included in equity in net earnings (loss) of affiliate in the consolidated statements of earnings.

The Company had a 49 % ownership interest in its equity affiliate, PersolKelly Pte.

Ltd., which was accounted for under the equity method.

The operating results of the equity affiliate were recorded on a one-quarter lag and included in equity in net earnings (loss) of affiliate in the consolidated statements of earnings, until the Company sold the majority of the investment in the first quarter of 2022 (see Investment in PersolKelly Pte.

The remaining investment is accounted for as an equity investment without a readily determinable fair value (see Fair Value Measurements footnote).

Foreign Currency Translation All of the Company’s international subsidiaries use their local currency as their functional currency, which is the currency in which they transact the majority of their activities.

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We record revenues from sales of services and the related direct costs in accordance with the accounting guidance on reporting revenue gross as a principal versus net as an agent.

When Kelly is the principal, we demonstrate control over the service by being the employer of record for the individuals performing the service, by being primarily responsible to our customers and by having a level of discretion in establishing pricing in which the gross amount is recorded as revenues.

When Kelly arranges for other contingent labor suppliers and/or service providers to perform services for the customer, we do not control those services before they are transferred, and therefore, the amounts billed to our customers are net of the amounts paid to the secondary suppliers/service providers and the net amount is recorded as revenues.

When Kelly is the principal, we demonstrate control over the service by being primarily responsible to our customers for fulfilling the contractual promise to provide the service.

When Kelly does not demonstrate control over the service, which may be evident through the arrangement of other contingent labor suppliers and/or service providers to perform services for the customer or by Kelly not holding primary responsibility for the fulfillment of the contractual promise to provide services to the customer, the amounts billed to our customers are net of the amounts paid to the secondary suppliers/service providers and the net amount is recorded as revenues.

Staffing Services Revenue

Staffing services contracts are short-term in nature.

Billings are generally negotiated and invoiced on a per-hour or per-unit basis as the temporary staffing services are transferred to the customer.

Staffing services contracts are generally negotiated and invoiced on a per-hour or per-unit basis as the temporary staffing services are transferred to the customer.

Revenue from the majority of our staffing services continues to be recognized over time as the customer simultaneously receives and consumes the services we provide.

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Talent Solutions Revenue

Talent Solution services include:

Talent Solutions services include:

overall program management of our client’s contingent workforce, external vendors and/or independent contractors, end-to-end talent acquisition, and payroll outsourcing.

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Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes.

Estimates are used for, but not limited to, the accounting for the allowance for uncollectible accounts receivable and credit losses, workers’ compensation, goodwill and long-lived asset impairment, valuation of acquired intangibles, impairment of equity affiliates, litigation costs and income taxes.

Actual results could differ materially from those estimates.

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Cost and estimated useful lives of property and equipment by function are as follows:

Category 2021 2020 Life

Category 2022 2021 Useful Life

(In millions of dollars)

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Total property and equipment $ 166.8 $ 205.1

The Company capitalizes external costs and internal payroll costs directly incurred in the development of software for internal use as required by the Internal-Use Software Subtopic of the Financial Accounting Standards Board (“FASB”) Accounting

Work in process represents capitalized costs for internal-use software not yet in service.

Depreciation expense was $ 13.6 million for 2022, $ 16.4 million for 2021 and $ 16.8 million for 2020.

KELLY SERVICES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Standards Codification (“ASC”).

Work in process represents capitalized costs for internal use software not yet in service.

Depreciation expense was $ 16.4 million for 2021, $ 16.8 million for 2020 and $ 25.3 million for 2019.

Cloud Computing Arrangements The Company has cloud computing arrangements that are comprised of internal-use software platforms that are accounted for as service contracts.

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Amortization is calculated on a straight-line basis and is a component of SG&A expenses in our consolidated statements of earnings.

Amortization expense was $ 2.2 million for 2021 and $ 1.0 million for 2020.

Amortization expense was $ 4.2 million for 2022, $ 2.2 million for 2021, and $ 1.0 million for 2020.

The related accumulated amortization totaled $ 7.3 million in 2022 and $ 3.2 million in 2021.

Capitalized amounts related to such arrangements are recorded within prepaid and other current assets and non-current other assets in the consolidated balance sheets.

As of year-end 2021 and 2020, the Company had $ 2.7 million and $ 2.9 million, respectively, recorded in prepaid expenses and other current assets in the consolidated balance sheets and $ 13.9 million and $ 7.2 million, respectively, recorded in non-current other assets in the consolidated balance sheets related to capitalized cloud computing arrangements (see Other Assets footnote).

Capitalized amounts related to such arrangements are recorded within prepaid and other current assets and non-current other assets in the consolidated balance sheet.

As of year-end 2022 and 2021, the Company had $ 2.7 million recorded in prepaid expenses and other current assets in the consolidated balance sheet and $ 21.0 million and $ 13.9 million, respectively, recorded in non-current other assets in the consolidated balance sheet related to capitalized cloud computing arrangements (see Other Assets footnote).

Leases Right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

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We may first use a qualitative assessment ("step zero test") for the annual impairment test if we have determined that it is more likely than not that the fair value for one or more reporting units is greater than their carrying value.

The step zero test includes making judgments and assessments to determine whether any events or circumstances have occurred that makes it more likely than not that the fair value of a reporting unit is less than its carrying amount.

In conducting the qualitative assessment, we assess the totality of relevant events and circumstances that affect the fair value or carrying value of the reporting unit.

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To derive the estimated fair value of reporting units, we primarily relied on an income approach.

For the step one quantitative test, we determine the fair value of our reporting units using the income approach.

Under the income approach, estimated fair value is determined based on estimated future cash flows discounted by an estimated market participant weighted-average cost of capital, which reflects the overall level of inherent risk of the reporting unit being measured.

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They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts.

Our analysis used significant assumptions by reporting unit, including:

Our analysis used the following significant assumptions:

expected future revenue growth rates, profit margins and discount rate.

We evaluate our equity method investment on a quarterly basis or whenever events or circumstances indicate the carrying amount may be other-than-temporarily impaired.

If we conclude that there is an other-than-temporary impairment of our equity method investment, we will adjust our carrying amount of our investment to the adjusted fair value.

Prior to the sale of the majority of our investment in our equity affiliate, we evaluated our equity method investment on a quarterly basis or whenever events or circumstances indicated the carrying amount may be other-than-temporarily impaired.

If we had concluded that there was an other-than-temporary impairment of our equity method investment, we would have adjusted our carrying amount of our investment to the adjusted fair value.

We evaluate our equity securities measured under the measurement alternative for indicators of impairment on a quarterly basis and whenever observable price changes occur.

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The value of the securities will be adjusted for any increases or decreases as a result of an observable price change.

Accounts Payable Included in accounts payable are book overdrafts, which are outstanding checks in excess of funds on deposit.

Accounts Payable Included in accounts payable balances are book overdrafts, which are outstanding checks in excess of funds on deposit.

Such amounts totaled $ 0.4 million and $ 5.4 million at year-end 2022 and 2021, respectively.

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taxes on global intangible low-taxed income (“GILTI”) are accounted for as incurred.

Stock-Based Compensation The Company may grant restricted stock awards and units (collectively, “restricted stock”) and performance awards to key employees associated with the Company’s Class A stock.

Stock-Based Compensation The Company may grant restricted stock awards and units (collectively, “restricted stock”) and performance awards of the Company's Class A stock to key employees.

The Company utilizes the market price on the date of grant as the fair value for restricted stock and the market price on the date of grant less the present value of the expected dividends not received during the vesting period for performance awards.

The Company also estimates the fair value of performance awards related to relative total shareholder return or awards with a total shareholder return modifier using a Monte Carlo simulation model.

The value of awards is recognized as expense, net of forfeitures as they occur, over the requisite service periods in SG&A expense in the Company’s consolidated statements of earnings.

Earnings Per Share Restricted stock that entitle their holders to receive nonforfeitable dividends before vesting are considered participating securities and, therefore, are included in the calculation of earnings per share using the two-class method.

KELLY SERVICES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings.

The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings.

Under this method, earnings from continuing operations (or net earnings) is reduced by the amount of dividends declared, and the remaining undistributed earnings is allocated to common stock and participating securities based on the proportion of each class’s weighted average shares outstanding to the total weighted average shares outstanding.

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The Company establishes accruals for workers’ compensation claims utilizing actuarial methods to estimate the undiscounted future cash payments that will be made to satisfy the claims, including an allowance for incurred-but-not-reported claims.

The Company retains an independent consulting actuary to establish loss development factors, based on historical claims experience as well as industry experience, and applies those factors to current claims information to derive an estimate of the ultimate claims liability.

The Company retains an independent consulting actuary to establish loss development factors and loss rates, based on historical claims experience as well as industry experience, and applies those factors to current claims information to derive an estimate of the ultimate claims liability.

In preparing the estimates, the consulting actuary considers a number of assumptions and multiple generally accepted actuarial methods in the course of preparing the loss forecast for claims.

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The International segment includes Europe and our Brazil and Mexico operations, which are included in the Americas region.

Our Brazil operations were sold in August 2020 (see Acquisitions and Disposition footnote).

Our Russian operations were sold in the third quarter of 2022 and our Brazil operations were sold in August 2020 (see Acquisitions and Dispositions footnote).

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

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Total Americas Region 3,998.6 3,863.2 3,591.1

France 223.1 198.2 248.6

Switzerland 222.8 222.2 200.4

France 199.4 223.1 198.2

Portugal 169.5 158.2 141.7

Russia 132.2 118.5 117.6

Italy 69.3 74.2 58.2

Russia 63.4 132.2 118.5

United Kingdom 57.1 68.3 73.7

Germany 34.0 30.1 41.6

Ireland 26.8 19.9 33.1

Other 143.2 128.8 104.6

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Credit Losses

On December 30, 2019, we adopted ASC Topic 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures, as applicable.

The rollforward of our allowance for credit losses related to trade accounts receivable, which is recorded in trade accounts receivable, less allowance in the consolidated balance sheet, is as follows (in millions of dollars):

December Year to Date

2022 2021 2020

Allowance for credit losses:

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Write-offs are presented net of recoveries, which were not material for December year to date 2022, 2021 and 2020.

We were engaged in litigation with a customer over a disputed accounts receivable balance for certain services rendered more than five years ago, which was recorded as a long-term receivable in other assets in the consolidated balance sheet.

We were engaged in litigation with a customer over a disputed accounts receivable balance for certain services rendered more than five years ago, which had been recorded as a long-term receivable in other assets in the consolidated balance sheet.

In September 2020, a ruling was issued in favor of the customer, which we appealed.

Upon receiving the ruling, we increased our

Upon receiving the ruling, we increased our allowance for credit losses by $ 9.2 million in the third quarter of 2020 to reflect the likelihood of collection, which was recorded in other assets in the consolidated balance sheet.

The related allowance for credit losses on this long-term customer receivable was $ 10.9 million as of year-end 2020 and represented the likelihood of collection.

In September 2021, a final

KELLY SERVICES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

allowance for credit losses by $ 9.2 million in the third quarter of 2020 to reflect the likelihood of collection, which was recorded in other assets in the consolidated balance sheet.

In September 2021, a final ruling in the case was entered in favor of the customer.

ruling in the case was entered in favor of the customer.

As a result, in the third quarter of 2021, we wrote off the entire receivable balance with this customer, including $ 0.6 million not previously reserved.

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Ending Balance $ — $ 10.9

No other allowances related to other receivables were material for December year to date 2021 and 2020.

Acquisitions and Disposition

There were no long-term customer receivables in 2022.

No allowances related to other receivables were material for December year to date 2022, 2021 and 2020.

Acquisitions and Dispositions

In the second quarter of 2022, Kelly Services USA, LLC ("KSU"), a wholly owned subsidiary of the Company, acquired Pediatric Therapeutic Services ("PTS"), as detailed below.

In the first quarter of 2022, the Company acquired Rocket Power Holdings LLC and Rocket Power Ops LLC (collectively, "RocketPower"), as detailed below.

In the second quarter of 2021, the Company acquired Softworld, Inc.

("Softworld"), as detailed below.

In the fourth quarter of 2020, Kelly Services USA, LLC ("KSU"), a wholly owned subsidiary of the Company, acquired Greenwood/Asher & Associates, LLC ("Greenwood/Asher"), as detailed below.

In the fourth quarter of 2020, KSU acquired Greenwood/Asher & Associates, LLC ("Greenwood/Asher"), as detailed below.

In the first quarter of 2020, KSU acquired Insight Workforce Solutions LLC and its affiliate, Insight EDU LLC (collectively, "Insight"), as detailed below.

In the first quarter of 2019, the Company acquired NextGen Global Resources LLC (“NextGen”) and Global Technology Associates, LLC (“GTA”), as detailed below.

We have accounted for these acquisitions under Accounting Standards Update (“ASU”) 2017-01, Business Combinations.

Pediatric Therapeutic Services

On May 2, 2022, KSU acquired 100 % of the membership interests of PTS for a purchase price of $ 82.1 million.

PTS is a specialty firm that provides and manages various state and federally mandated in-school therapy services.

This acquisition expands Education's K-12 solution offering in the education staffing market and serves as an entry point into the therapeutic services market.

Under terms of the purchase agreement, the purchase price was adjusted for cash held by PTS at the closing date and estimated working capital adjustments resulting in the Company paying cash of $ 85.7 million.

Total consideration includes $ 1.1 million of additional consideration that is payable to the seller related to employee retention credits and is recorded in accounts payable and accrued liabilities in the consolidated balance sheet.

In the third quarter of 2022, the Company paid $ 0.1 million of the employee retention credits and the remainder is expected to be paid in the first quarter of 2023.

The total consideration is as follows (in millions of dollars):

Cash consideration paid $ 85.7

Additional consideration payable 1.1

Total consideration $ 86.8

Due to the limited amount of time that has passed since acquiring PTS, the purchase price allocation for this acquisition is preliminary and could change.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars):

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Trade accounts receivable 10.0

Prepaid expenses and other current assets 1.6

Net property and equipment 0.4

Goodwill 36.3

Intangibles 40.3

Accounts payable and accrued liabilities, current ( 2.6 )

Accrued payroll and related taxes, current ( 0.1 )

Total consideration, including working capital adjustments $ 86.8

The fair value of the acquired receivables represents the contractual value.

Included in the assets purchased in the PTS acquisition was $ 40.3 million of intangibles, made up of $ 29.8 million in customer relationships, $ 9.3 million associated with PTS's trade names and $ 1.2 million for non-compete agreements.

Customer relationships will be amortized over 15 years with no residual value, trade names will be amortized over 15 years with no residual value, and the non-compete agreements will be amortized over five years with no residual value.

Goodwill generated from the acquisition was primarily attributable to expected synergies from combining operations and expanding market potential and was assigned to the Education operating segment (see Goodwill and Intangible Assets footnote).

All of the goodwill is expected to be deductible for tax purposes.

PTS's results of operations are included in the Education segment.

Our consolidated revenues and earnings from operations for the year ended 2022 included $ 28.5 million and $ 3.8 million, respectively, from PTS.

Pro forma results of operations for this acquisition have not been presented as the acquisition does not have a material impact to the consolidated statements of earnings.

On March 7, 2022, the Company acquired 100 % of the issued and outstanding membership interests of RocketPower for a purchase price of $ 59.3 million.

RocketPower is a leading provider of RPO and other outsourced talent solutions to U.S.

high-tech companies.

This acquisition expands OCG's RPO solution and delivery offering and enhances the specialty RPO strategy and expertise within the high-tech industry.

Under terms of the purchase agreement, the purchase price was adjusted for cash held by RocketPower at the closing date and estimated working capital adjustments resulting in the Company paying cash of $ 61.8 million.

Total consideration includes $ 1.1 million of additional consideration that is payable to the seller in 2023 related to employee retention credits and contingent consideration with an initial estimated fair value of $ 0.6 million related to an earnout payment with a maximum potential cash payment of $ 31.8 million in the event certain financial metrics are met per the terms of the agreement.

The initial fair value of the earnout was established using a Black Scholes model and it was reassessed throughout 2022 (see Fair Value Measurements footnote).

The total consideration is as follows (in millions of dollars):

Cash consideration paid $ 61.8

Additional consideration payable 1.1

Contingent consideration 0.6

Total consideration $ 63.5

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Due to the limited amount of time that has passed since acquiring RocketPower, the purchase price allocation for this acquisition is preliminary and could change.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars):

Trade accounts receivable 6.9

Prepaid expenses and other current assets 1.8

Net property and equipment 0.1

Goodwill 41.0

Intangibles 15.8

Accounts payable and accrued liabilities, current ( 2.9 )

Accrued payroll and related taxes, current ( 1.5 )

Other long-term liabilities ( 1.2 )

Total consideration, including working capital adjustments $ 63.5

The fair value of the acquired receivables represents the contractual value.

Included in the assets purchased in the RocketPower acquisition was $ 15.8 million of intangible assets, made up of $ 7.5 million in customer relationships, $ 6.6 million associated with RocketPower's trade names and $ 1.7 million for non-compete agreements.

Customer relationships will be amortized over three years with no residual value, trade names will be amortized over 10 years with no residual value, and the non-compete agreements will be amortized over six years with no residual value.

Goodwill generated from the acquisition was primarily attributable to expected synergies from combining operations and expanding market potential and was assigned to the OCG operating segment.

The amount of goodwill expected to be deductible for tax purposes is approximately $ 27.5 million.

In the third and fourth quarters of 2022, changes in market conditions triggered interim impairment tests for both long-lived assets and goodwill, resulting in the Company recording a goodwill impairment charge of $ 41.0 million (see Goodwill and Intangible Assets footnote).

RocketPower's results of operations are included in the OCG segment in 2022.

Our consolidated revenues and earnings from operations for the year ended 2022 included $ 24.3 million and a loss of $ 43.5 million, which includes the $ 41.0 million goodwill impairment charge, respectively, from RocketPower.

Pro forma results of operations for this acquisition have not been presented as the acquisition does not have a material impact to the consolidated statements of earnings.

On April 5, 2021, the Company acquired 100 % of the shares of Softworld for a purchase price of $ 215.0 million.

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Under terms of the purchase agreement, the purchase price was adjusted for cash held by Softworld at the closing date and estimated working capital adjustments resulting in the Company paying cash of $ 220.4 million.

Total consideration includes $ 2.6 million of additional consideration that is payable to the seller in 2022.

Total consideration included $ 2.6 million of additional consideration that was paid to the seller in the fourth quarter of 2022.

In the third quarter of 2021, the Company received cash for a post-close working capital adjustment of $ 6.0 million.

The total consideration is as follows (in millions of dollars):

The total consideration was as follows (in millions of dollars):

Cash consideration paid $ 220.4

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Total consideration $ 217.0

The purchase price allocation for this acquisition is preliminary and could change.

As of first quarter-end 2022, the purchase price allocation for this acquisition was final.

KELLY SERVICES, INC.

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In the fourth quarter of 2021, the Company reached a settlement with the insurer for $ 19.0 million and received the payment.

The payment is recorded entirely in gain on insurance settlement in the consolidated statements of earnings and included within cash flows from investing activities in the consolidated statements of cash flows.

Softworld's results of operations are included in the SET segment in 2021.

The payment was recorded entirely in gain on insurance settlement in the consolidated statements of earnings and included within cash flows from investing activities in the consolidated statements of cash flows.

Softworld's results of operations are included in the SET segment.

For the year ended 2021, our consolidated revenues and net earnings included $ 98.0 million and $ 4.7 million from Softworld, respectively.

The date of the acquisition was the first day of our second quarter, therefore, our first quarter results do not include any revenue or earnings from Softworld.

The date of the acquisition was the first day of our second quarter, therefore, our first quarter results of 2021 do not include any revenue or earnings from Softworld.

Pro Forma Information

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Pro forma net earnings (loss) $ 157.7 $ ( 70.8 )

The pro forma results for 2021 and 2020 reflect amortization of the intangible assets of $ 2.0 million per quarter, a non-recurring adjustment to reclassify $ 1.3 million of transaction expenses from 2021 to 2020, deferred compensation from 2020 and applicable taxes.

The unaudited pro forma information presented has been prepared for comparative purposes only and is not

The pro forma results for 2021 and 2020 reflects amortization of the intangible assets of $ 2.0 million per quarter, a non-recurring adjustment to reclassify $ 1.3 million of transaction expenses from 2021 to 2020, deferred compensation from 2020 and applicable taxes.

The unaudited pro forma information presented has been prepared for comparative purposes only and is

KELLY SERVICES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed date, nor is it necessarily an indication of future operating results.

not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed date, nor is it necessarily an indication of future operating results.

Greenwood/Asher

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Under terms of the purchase agreement, the purchase price was adjusted for cash held by Greenwood/Asher at the closing date and estimated working capital adjustments resulting in the Company paying cash of $ 5.2 million.

The purchase price of the acquisition also includes contingent consideration with an estimated fair value of $ 2.1 million related to an earnout payment in the event certain conditions are met per the terms of the agreement.

The initial fair value of the earnout was established using a Black Scholes model and the liability is recorded in accounts payable and accrued liabilities and other non-current liabilities in the consolidated balance sheet (see Fair Value Measurements footnote).

The earnout is revalued quarterly, resulting in a net increase of $ 2.5 million to the liability in 2021.

The earnout is expected to be paid in 2022 and 2023 after each earn-out year pursuant to the terms of the purchase agreement.

The purchase price of the acquisition also includes contingent consideration with an initial estimated fair value of $ 2.1 million related to an earnout payment in the event certain conditions are met per the terms of the agreement.

The initial fair value of the earnout was established using a Black Scholes model and it is revalued quarterly, resulting in a net increase of $ 2.5 million to the liability in 2021, and an increase of $ 1.0 million to the liability in 2022 (see Fair Value Measurements footnote).

During the first quarter of 2022, the Company paid the first year earnout payment of $ 2.3 million.

The earnout liability as of year-end 2022 is $ 3.3 million, which is recorded in accounts payable and accrued liabilities in the consolidated balance sheet, and is expected to be paid in the first quarter of 2023 pursuant to the terms of the purchase agreement.

As of third quarter-end 2021, the purchase price allocation for this acquisition was final.

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Pro forma results of operations for this acquisition have not been presented as they are not material to the consolidated statements of earnings.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars):

Trade accounts receivable 0.4

Property and equipment 0.2

Deferred taxes 0.2

Intangibles 1.9

Other noncurrent assets 0.3

Current liabilities ( 1.2 )

Noncurrent liabilities ( 0.4 )

Assets acquired net of liabilities assumed $ 7.3

The fair value of the acquired receivables represents the contractual value.

Included in the assets purchased in the Greenwood/Asher acquisition was approximately $ 1.9 million of intangible assets, made up of $ 1.3 million of customer relationships and $ 0.6 million associated with Greenwood/Asher's trade name.

The customer relationships will be amortized over 10 years with no residual value and the trade name will be amortized over 10 years with no residual value.

Goodwill generated from the acquisition was primarily attributable to the expected synergies from combining operations and expanding market potential, and was assigned to the Education reporting unit (see Goodwill footnote).

All of the goodwill is expected to be deductible for tax purposes.

On January 14, 2020, KSU acquired 100 % of the membership interests of Insight, an educational staffing company in the U.S., for a purchase price of $ 34.5 million.

Under terms of the purchase agreement, the purchase price was adjusted for cash held by Insight at the closing date and estimated working capital adjustments resulting in the Company paying cash of $ 38.1 million.

The purchase price of the acquisition also includes contingent consideration with an estimated fair value of $ 1.6 million related to an earnout payment in the event certain conditions are met per the terms of the agreement.

The initial fair value of the earnout was established using a Monte Carlo simulation and the liability is recorded in accounts payable and accrued liabilities in the consolidated balance sheet (see Fair Value Measurements footnote).

Subsequently, the earnout was revalued, resulting in a net increase to the liability of $ 0.1 million in 2020 and a further increase of $ 0.1 million in the second quarter of 2021.

The purchase price of the acquisition also included contingent consideration with an estimated fair value of $ 1.6 million related to an earnout payment in the event certain conditions were met per the terms of the agreement.

The initial fair value of the earnout was established using a Monte Carlo simulation and the liability was recorded in accounts payable and accrued liabilities in the consolidated balance sheet (see Fair Value Measurements footnote).

Subsequently, the earnout was revalued, resulting in a net increase to the liability of $ 0.1 million in 2020 and a further increase of $ 0.1 million in 2021.

In the third quarter of 2021, the Company paid the final earnout amount of $ 1.8 million in cash.

In our consolidated statements of cash flows, $ 1.6 million of the payment is reflected as a financing activity representing the initial fair value of the earnout, with the remainder flowing through operating activities.

There is no remaining liability for the earnout as of year-end 2021.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

second quarter of 2020, the Company paid a working capital adjustment of $ 0.1 million.

There was no remaining liability for the earnout as of year-end 2022 or 2021.

In the second quarter of 2020, the Company paid a working capital adjustment of $ 0.1 million.

As of year-end 2020, the purchase price allocation was final.

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Pro forma and actual results of operations for this acquisition have not been presented as it is not material to the consolidated statements of earnings.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars):

Trade accounts receivable 9.6

Other current assets 0.2

Property and equipment 0.2

Goodwill 19.9

Intangibles 10.6

Other noncurrent assets 0.2

Current liabilities ( 2.6 )

Noncurrent liabilities ( 0.1 )

Assets acquired net of liabilities assumed $ 39.8

The fair value of the acquired receivables represents the contractual value.

Included in the assets purchased in the Insight acquisition was approximately $ 10.6 million of intangible assets, made up entirely of customer relationships.

The customer relationships will be amortized over 10 years with no residual value.

All of the goodwill is expected to be deductible for tax purposes.

NextGen Global Resources

On January 2, 2019, the Company acquired 100 % of the membership interests of NextGen, a leading provider of telecommunications staffing services, for a purchase price of $ 51.0 million.

Under terms of the purchase agreement, the purchase price was adjusted for cash held by NextGen at the closing date and estimated working capital adjustments resulting in the Company paying cash of $ 54.3 million.

Due to the date of the acquisition, the December year to date 2019 actual results represent the December year to date 2019 pro forma results.

Our consolidated revenues and net earnings for the year ended 2019 included $ 78.3 million and $ 4.5 million, respectively, from NextGen.

This acquisition is intended to increase our presence and market share in the telecommunications industry within the engineering staffing solutions market.

NextGen’s results of operations are included in the Science, Engineering & Technology segment.

Global Technology Associates

On January 2, 2019, in a separate transaction, the Company acquired 100 % of the membership interests of GTA, a leading provider of engineering, technology and business consulting solutions in the telecommunications industry, for a purchase price of $ 34.0 million.

Under terms of the purchase agreement, the purchase price was adjusted for cash held by GTA at the closing date and estimated working capital adjustments resulting in the Company paying cash of $ 35.7 million.

Due to the date of the acquisition, the December year to date 2019 actual results represent the December year to date 2019 pro forma results.

Our consolidated revenues and net earnings for the year ended 2019 included $ 62.8 million and $ 4.5 million, respectively, from GTA.

This acquisition is intended to increase our presence and market share in the telecommunications industry within the engineering outcome-based solutions market.

GTA’s results of operations are included in Science, Engineering & Technology segment.

Russia operations

On July 20, 2022, the Company completed the sale of its Russia operations ("disposal group"), which was included in the Company's International operating segment.

The Company received cash proceeds of $ 7.4 million, which is less than the cash disposed of in the sale, resulting in investing cash outflows of $ 6.0 million in the consolidated statements of cash flows.

The disposal group was previously reported as held for sale as of our second quarter-end 2022 with an $ 18.5 million impairment charge associated with the transaction.

The total loss on the sale is $ 18.7 million, resulting from an additional $ 0.2 million loss on the transaction in the third quarter of 2022, which is recorded in loss on disposal in the consolidated statements of earnings.

The loss on disposal includes the liquidation of the cumulative translation adjustment of $ 1.4 million.

The disposal group does not meet the requirements to be classified as discontinued operations as the sale does not have a material effect on the Company's operations and does not represent a strategic shift in the Company's strategy.

Our consolidated revenue for the year ended 2022, 2021 and 2020 includes $ 63.4 million, $ 132.2 million, and $ 118.5 million, respectively, from the Russia operations and our consolidated earnings before taxes for the year ended 2022, 2021 and 2020 includes $ 1.4 million, $ 3.2 million and $ 2.4 million, respectively, from the Russia operations.

KELLY SERVICES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Assets divested

Cash and equivalents $ 13.4

Trade accounts receivable, net 22.8

Prepaid expenses and other current assets 0.7

Property and equipment, net 0.7

Deferred taxes 0.4

Other assets 0.3

Assets divested 38.3

Liabilities divested

Accounts payable and accrued liabilities ( 0.6 )

Accrued payroll and related taxes ( 7.3 )

Income and other taxes ( 5.7 )

Liabilities divested ( 13.6 )

Disposal group, net $ 24.7

Brazil operations

On August 18, 2020, the Company sold its Brazil operations for a purchase price of $ 1.4 million.

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The aggregate losses for which the Company will provide indemnification shall not exceed $ 8.8 million.

Accordingly, the Company recorded an indemnification liability of $ 2.5 million in other long-term liabilities in the consolidated balance sheet, which represented the fair value of the liability at the time of disposition and completely offset the gain on the sale.

Accordingly, the Company recorded an indemnification liability of $ 2.5 million, which represented the fair value of the liability at the time of disposition and completely offset the gain on the sale.

The indemnification liability is revalued on a quarterly basis (see Fair Value Measurements footnote).

Investment in Persol Holdings

The Company has a yen-denominated investment through the Company's subsidiary, Kelly Services Japan, Inc., in the common stock of Persol Holdings Co., Ltd.

Prior to February 2022, the Company had a yen-denominated investment through the Company's subsidiary, Kelly Services Japan, Inc., in the common stock of Persol Holdings Co., Ltd.

("Persol Holdings"), the 100% owner of Persol Asia Pacific Pte.

Ltd., the Company’s joint venture partner in PersolKelly Pte.

As our investment is a noncontrolling interest in Persol Holdings, this investment is recorded at fair value based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange as of the period end (see Fair Value Measurements footnote).

A gain on the investment of $ 121.8 million, a loss on the investment of $ 16.6 million, and a gain on the investment of $ 35.8 million for the years ended 2021, 2020 and 2019, respectively, was recorded entirely in gain (loss) on investment in Persol Holdings in the consolidated statements of earnings.

Refer to Subsequent Event footnote for a description of transactions with Persol Holdings.

In February 2022, the Company's board approved a series of transactions that ended the cross-shareholding agreement with Persol Holdings.

On February 14, 2022, the Company repurchased 1,576,169 Class A and 1,475 Class B common shares held by Persol Holdings for $ 27.2 million.

The purchase price was based on the average closing price of the last five business days prior to the transaction.

The shares were subsequently retired and returned to an authorized, unissued status.

In accordance with the Company's policy, the amount paid to repurchase the shares in excess of par value of $ 25.6 million was recorded to earnings invested in the business in the consolidated balance sheet at the time of the share retirement.

On February 15, 2022, Kelly Services Japan, Inc.

sold the investment in the common stock of Persol Holdings in an open-market transaction for proceeds of $ 196.9 million, net of transaction fees.

As our investment was a noncontrolling interest in Persol Holdings, the investment was recorded at fair value based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange through the date of the transaction (see Fair Value Measurements footnote).

The $ 67.2 million loss in the first quarter of 2022 recorded in gain (loss) on investment in Persol Holdings in the consolidated statements of earnings included $ 52.4 million for losses related to changes in fair value up to the date of the transaction and $ 14.8 million for the discount from the market price on the date of the sale and transaction costs.

A gain on the investment of $ 121.8 million and a loss on the investment of $ 16.6 million for the years ended 2021 and 2020, respectively, was recorded in gain (loss) on investment in Persol Holdings in the consolidated statements of earnings.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Subsequent to the transaction discussed above, the Company commenced the dissolution process of its Kelly Services Japan, Inc.

subsidiary, which was considered substantially liquidated as of first quarter-end 2022.

As a result, the Company recognized a $ 20.4 million cumulative translation adjustment loss in the first quarter of 2022, which is recorded in loss on currency translation from liquidation of subsidiary in the consolidated statements of earnings.

The Company also recognized a $ 5.5 million foreign exchange gain related to U.S.-denominated cash equivalents held by Kelly Services Japan, Inc.

following the sale of the Persol Holdings shares and prior to a dividend payment to the Company in the first quarter of 2022.

The foreign exchange gain is recorded in other income (expense), net in the consolidated statements of earnings.

The dissolution of the Kelly Services Japan, Inc.

subsidiary was completed in the fourth quarter of 2022.

Investment in PersolKelly Pte.

The Company has a 49 % ownership interest in the JV (see Investment in Persol Holdings footnote above), a staffing services business operating in ten geographies in the Asia-Pacific region.

The operating results of the Company’s interest in the JV are accounted for on a one-quarter lag under the equity method and are reported in equity in net earnings (loss) of affiliate in the consolidated statements of earnings, which amounted to earnings of $ 5.4 million in 2021, earnings of $ 0.8 million in 2020 and a loss of $ 3.6 million in 2019.

This investment is evaluated for indicators of impairment on a quarterly basis or whenever events or circumstances indicate the carrying amount may be other-than-temporarily impaired.

If we conclude that there is an other-than-temporary impairment of this equity method investment, we will adjust the carrying amount of the investment to the current fair value.

The investment in equity affiliate on the Company’s consolidated balance sheet totaled $ 123.4 million as of year-end 2021 and $ 118.5 million as of year-end 2020.

The Company made loans in prior years, proportionate to its 49 % ownership, to the JV to fund working capital requirements as a result of their sustained revenue growth.

Prior to February 2022, the Company had a 49 % ownership interest in the JV (see Investment in Persol Holdings footnote above), a staffing services business operating in ten geographies in the Asia-Pacific region.

On February 14, 2022, the Company entered into an agreement to sell 95 % of the Company's shares in the JV to Persol Asia Pacific Pte.

On March 1, 2022, the Company received cash proceeds of $ 119.5 million.

The carrying value of the shares sold was $ 117.6 million.

In addition, the Company had $ 1.9 million of accumulated other comprehensive income representing the Company's share of the JV's other comprehensive income over time related to the shares sold that was realized upon the sale, offsetting the $ 1.9 million gain that resulted from the proceeds in excess of the carrying value.

The operating results of the Company’s interest in the JV were accounted for on a one-quarter lag under the equity method and were reported in equity in net earnings (loss) of affiliate in the consolidated statements of earnings through the date of the sale.

Such amounts were earnings of $ 0.8 million in 2022 representing the results through the date of the sale, $ 5.4 million in 2021 and $ 0.8 million in 2020.

After the sale, the Company has a 2.5 % ownership interest in the JV and discontinued its use of equity method accounting.

The remaining investment is accounted for as an equity investment without a readily determinable fair value (see Fair Value Measurements footnote).

The equity investment, included in other assets on the Company's consolidated balance sheet, totaled $ 6.4 million as of year-end 2022 and the investment in equity affiliate on the Company’s consolidated balance sheet totaled $ 123.4 million as of year-end 2021.

The Company made loans to the JV in prior years, proportionate to its 49 % ownership, to fund working capital requirements as a result of their sustained revenue growth.

In the fourth quarter of 2020, the JV repaid $ 5.6 million of the outstanding loan balance and in the second quarter of 2021, the JV repaid the remaining $ 5.8 million of the loan balance.

As of year-end 2022, there is no outstanding loan balance or accrued interest receivable relating to the loan.

The net amount due to the JV, a related party, was not material as of year-end 2021 and the net amount due from the JV was $ 5.6 million as of year-end 2020.

Accrued interest receivable, which is included in prepaid expenses and other current assets in the consolidated balance sheet, was not material at year-end 2021 or year-end 2020.

The JV is a supplier to certain MSP programs in the region and the amounts for services provided to the Company, which are included in accounts payable and accrued liabilities in the consolidated balance sheet, are not material.

Prior to receiving full repayment of the loans, the expected credit losses were estimated over the contractual term of the loans.

The net amount due to the JV, a related party, was not material as of year-end 2022 or 2021.

Prior to receiving full repayment of the loans in 2021, the expected credit losses were estimated over the contractual term of the loans.

The required allowance was based on current and projected financial information from the JV, market-specific information and other relevant data available to the Company, as applicable.

The allowance was not material at year-end 2021.

The Company had accrued interest receivable from our loan to the JV.

If applicable, we write off the uncollectible accrued interest receivable balance related to our loan to the JV within the same quarter the interest is determined to be uncollectible, which is considered timely.

As such, an allowance for credit losses was not deemed necessary.

Any write offs, if necessary, are recorded by reversing interest income.

On April 1, 2020, 100 % of the shares of Kelly Services Australia Pty Ltd and Kelly Services (New Zealand) Limited, both subsidiaries of the JV, were sold to an affiliate of Persol Holdings.

The JV received proceeds of $ 17.5 million upon the sale and the Company received a direct royalty payment of $ 0.7 million.

Refer to Subsequent Event footnote for a description of transactions with Persol Holdings.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair Value Measurements

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Level 3 measurements include significant unobservable inputs.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair Value Measurements on a Recurring Basis As of Year-End 2022

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Greenwood/Asher earnout ( 3.3 ) — — ( 3.3 )

Insight earnout — — — —

RocketPower earnout — — — —

Total liabilities at fair value $ ( 6.7 ) $ — $ — $ ( 6.7 )

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Greenwood/Asher earnout ( 4.6 ) — — ( 4.6 )

Insight earnout ( 1.7 ) — — ( 1.7 )

Total liabilities at fair value $ ( 7.0 ) $ — $ — $ ( 7.0 )

Money market funds represent investments in money market funds that hold government securities, of which $ 8.6 million as of year-end 2022 and $ 6.5 million as of year-end 2021, are restricted as to use and are included in other assets in the consolidated balance sheet.

The money market funds that are restricted as to use account for the majority of our restricted cash balances and represent cash balances that are required to be maintained to fund disability claims in California.

The remaining money market funds as of year-end 2021 and 2020 are included in cash and equivalents in the consolidated balance sheet.

The money market funds that are restricted as to use account for the majority of our restricted cash balances and represents cash balances that are required to be maintained to fund disability claims in California.

The remaining money market funds as of year-end 2022 and year-end 2021 are included in cash and equivalents in the consolidated balance sheet.

The valuations of money market funds were based on quoted market prices of those accounts as of the respective period end.

The valuation of the investment in Persol Holdings is based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange as of the period end, and the related changes in fair value are recorded in the consolidated statements of

On February 15, 2022, Kelly Services Japan, Inc.

sold the investment in the common stock of Persol Holdings in an open-market transaction.

The valuation of the investment was based on the quoted market price of Persol Holdings stock on the Tokyo Stock Exchange as of year-end 2021, and the related changes in fair value were recorded in the consolidated statements of earnings (See Investments in Persol Holdings footnote).

The cost of this yen-denominated investment, which fluctuated based on foreign exchange rates, was $ 18.0 million as of year-end 2021.

As of year-end 2022, the Company had an indemnification liability totaling $ 3.4 million with $ 0.3 million in accounts payable and accrued liabilities and $ 3.1 million in other long-term liabilities, and $ 2.4 million at year-end 2021 in other long-term liabilities on the consolidated balance sheet related to the sale of the Brazil operations.

As part of the sale, the Company agreed to indemnify the buyer for losses and costs incurred in connection with certain events or occurrences initiated within a six-year period after closing.

The aggregate losses for which the Company will provide indemnification will not exceed $ 8.8 million.

The valuation of the indemnification liability was established using a discounted cash flow methodology based on probability weighted-average cash flows discounted by weighted-average cost of capital.

The valuation, which represents the fair value, is considered a level 3 liability, and is being measured on a recurring basis.

During 2022, the Company reassessed the value of the indemnification liability and determined it was necessary to record an increase to the liability of $ 0.8 million.

Additionally, in 2022, the Company recognized an increase of $ 0.2 million to the indemnification liability related to exchange rate fluctuations in other income (expense), net in the consolidated statements of earnings.

The Company recorded an earnout liability relating to the 2020 acquisition of Greenwood/Asher, totaling $ 3.3 million at year-end 2022 in accounts payable and accrued liabilities and $ 4.6 million at year-end 2021 with $ 2.3 million in accounts payable and accrued liabilities and $ 2.3 million in other long-term liabilities in the consolidated balance sheet.

The initial valuation of

KELLY SERVICES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

earnings (see Investment in Persol Holdings footnote).

The cost of this yen-denominated investment, which fluctuates based on foreign exchange rates, was $ 18.0 million at year-end 2021 and $ 20.1 million at year-end 2020.

As of year-end 2021 and year-end 2020, the Company had an indemnification liability of $ 2.4 million and $ 2.6 million in other long-term liabilities on the consolidated balance sheet related to the sale of the Brazil operations (see Acquisitions and Disposition footnote).

The valuation, which represents the fair value, is considered a level 3 liability, and is being measured on a recurring basis.

During year to date 2021, the Company recognized a decrease of $ 0.2 million, to the indemnification liability related to exchange rate fluctuations in other income (expense), net in the consolidated statements of earnings.

During year to date 2020, the Company recognized $ 2.6 million, including foreign currency fluctuations, in expenses related to the indemnification liability in other income (expense), net in the consolidated statements of earnings.

The Company recorded an earnout liability relating to the 2020 acquisition of Greenwood/Asher, totaling $ 4.6 million at year-end 2021 with $ 2.3 million in accounts payable and accrued liabilities and $ 2.3 million in other long-term liabilities in the consolidated balance sheet and $ 2.1 million at year-end 2020 in other long-term liabilities in the consolidated balance sheet (see Acquisitions and Dispositions footnote).

The initial valuation of the earnout liability was established using a Black Scholes model and represents the fair value and is considered a level 3 liability.

During year to date 2021, the Company recorded an increase of $ 2.5 million to the earnout liability in SG&A expenses in the consolidated statements of earnings.

the earnout liability was established using a Black Scholes model and represents the fair value and is considered a level 3 liability.

During the first quarter of 2022, the Company paid the one year portion of the earnout totaling $ 2.3 million.

In the consolidated statements of cash flows, $ 0.7 million is reflected as a financing activity representing the initial fair value of the investment, with the remainder flowing through operating activities.

During 2022, the Company reassessed the value of the earnout liability and determined that it was necessary to record an increase to the liability of $ 1.0 million.

The company recorded an initial earnout liability relating to the 2022 acquisition of RocketPower, totaling $ 0.6 million, with $ 0.5 million in accounts payable and accrued liabilities and $ 0.1 million in other long-term liabilities in the consolidated balance sheet (see Acquisitions and Dispositions footnote).

The initial valuation of the earnout liability was established using a Black Scholes model and represented the fair value and was considered a level 3 liability.

In the third quarter of 2022, we reassessed the value and determined that the fair value was zero .

The maximum total cash payments which may be due related to the earnout liability is $ 31.8 million.

The Company recorded an earnout liability relating to the 2020 acquisition of Insight, totaling $ 1.7 million as of year-end 2020 in accounts payable and accrued liabilities in the consolidated balance sheet (see Acquisitions and Dispositions footnote).

The valuation of the earnout liability was initially established using a Monte Carlo simulation and represented the fair value and is considered a level 3 liability.

During year to date 2020, the Company recognized $ 0.1 million of expenses related to the earnout liability within SG&A expenses in the consolidated statements of earnings.

The valuation of the earnout liability was initially established using a Monte Carlo simulation and represented the fair value and was considered a level 3 liability.

During 2021, the Company recognized $ 0.1 million of expenses related to the earnout liability within SG&A expenses in the consolidated statements of earnings.

During the third quarter of 2021, the Company paid the earnout totaling $ 1.8 million.

Equity Investments Without Readily Determinable Fair Value

Prior to April 2021, the Company had a minority investment in Business Talent Group, LLC, which was included in other assets in the consolidated balance sheet.

This investment was measured using the measurement alternative for equity investments without a readily determinable fair value.

On March 1, 2022, the Company sold the majority of its investment in the JV (see Investment in PersolKelly Pte.

footnote), with the remaining 2.5 % interest now being measured using the measurement alternative for equity investments without a readily determinable fair value.

The measurement alternative represents cost, less impairment, plus or minus observable price changes.

In the second quarter of 2021, BTG entered into a merger agreement which resulted in all of the Company's shares of BTG being automatically canceled upon approval of the merger and resulted in the receipt of $ 5.0 million in cash, which is equal to the carrying value and purchase price of the BTG investment.

The sale of the shares of the JV represented an observable transaction requiring the Company to calculate the current fair value based on the purchase price of the shares, in which the resulting adjustment was not material.

The investment totaled $ 6.4 million as of year-end 2022, representing total cost plus observable price changes to date.

Prior to April 2021, the Company had a minority investment in Business Talent Group, LLC, which was included in other assets in the consolidated balance sheet.

This investment was measured using the measurement alternative for equity investments without a readily determinable fair value as described above.

In the second quarter of 2021, BTG entered into a merger agreement which resulted in all of the Company's shares of BTG being automatically canceled upon approval of the merger and resulted in the receipt of $ 5.0 million in cash, which was equal to the carrying value and purchase price of the BTG investment.

Prior to March 2021, the Company had a minority investment in Kenzie Academy Inc., which was included in other assets in the consolidated balance sheet.

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On March 8, 2021, Kenzie entered into a transaction to sell its assets.

As of the date of the sale and year-end 2020, the investment had a carrying value of $ 1.4 million, representing total cost plus observable price changes to date.

The asset was written down as a result of the sale and the loss of $ 1.4 million was recorded in other income (expense), net in the year to date consolidated statements of earnings.

As of the date of the sale, the investment had a carrying value of $ 1.4 million, representing total cost plus observable price changes to date.

In the first quarter of 2021, the asset was written down as a result of the sale and the loss of $ 1.4 million was recorded in other income (expense), net in the consolidated statements of earnings.

Assets Measured at Fair Value on a Nonrecurring Basis

In the fourth quarter of 2021, we performed a step one quantitative goodwill impairment test for the Softworld reporting unit.

The estimated fair value of the reporting unit tested exceeded its related carrying value.

As a result of the quantitative assessment, we determined it was more likely than not that the fair value of the Softworld reporting unit was more than its carrying value.

Additionally, we performed a qualitative analysis for the Education reporting unit to determine whether a further quantitative analysis was necessary.

As a result of the qualitative assessment, we determined it was more likely than not that the fair value of the Education reporting unit was more than its carrying value and a further quantitative assessment was not necessary (see Goodwill and Intangible Assets footnote).

Due to the negative market reaction to the COVID-19 crisis, including declines in our common stock prices, management determined that a triggering event occurred during the first quarter of 2020.

We therefore performed an interim step one quantitative impairment test for both of our previous reporting units with goodwill.

As a result of this quantitative assessment, we determined that the estimated fair value of the reporting units no longer exceeded the carrying value, and recorded a goodwill impairment charge of $ 147.7 million in the first quarter of 2020.

In the fourth quarter of 2022, we performed our annual goodwill impairment testing, which included a step one quantitative test for the Softworld and PTS reporting units.

As a result of the quantitative assessments, we determined that the estimated fair value of the Softworld and PTS reporting units was more than its carrying value.

Additionally, we performed a step zero qualitative analysis for the Education reporting unit to determine whether a further quantitative analysis was necessary and concluded that a step one quantitative analysis was not necessary.

As a result of the quantitative and qualitative assessments, the Company determined goodwill related to these reporting units was not impaired as of year-end 2022.

During 2022, customers within the high-tech industry vertical, in which RocketPower specializes, reduced or eliminated their full-time hiring, reducing demand for RocketPower's services, and on-going economic uncertainty has more broadly impacted the growth in demand for RPO in the near-term.

These changes in market conditions therefore caused a triggering event requiring interim impairment tests for both long-lived assets and goodwill as of third quarter of 2022.

Job eliminations in the high-tech industry vertical continued during the fourth quarter of 2022, indicating a broad, sustained reduction in hiring was likely and is now expected to last through much of 2023, directly impacting RocketPower and the demand for RocketPower's

KELLY SERVICES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

services in this vertical.

These changes in market conditions caused another triggering event requiring interim impairment tests for both long-lived assets and goodwill as of year-end 2022.

We performed a long-lived asset recoverability test for RocketPower and determined that undiscounted future cash flows exceeded the carrying amount of the asset group and were recoverable as of third quarter-end and year-end 2022.

We performed an interim step one quantitative test for RocketPower’s goodwill and determined that the estimated fair value of the reporting unit no longer exceeded the carrying value as of third quarter-end and year-end 2022.

Based on the results of our interim goodwill impairment tests, we recorded a goodwill impairment charge of $ 30.7 million in the third quarter of 2022 and we recorded an additional goodwill impairment charge of $ 10.3 million in the fourth quarter of 2022 to write off the remaining balance of RocketPower’s goodwill as of year-end, for a total goodwill impairment charge of $ 41.0 million as of year-end 2022 (see Goodwill and Intangible Assets footnote).

Restructuring

In the first quarter of 2022, the Company took restructuring actions designed to increase efficiency.

Restructuring costs incurred in 2022 totaled $ 1.7 million and were recorded entirely in SG&A expenses in the consolidated statements of earnings, as detailed below (in millions of dollars):

Severance Costs Lease Termination Costs Total

Professional & Industrial $ 0.1 $ 0.2 $ 0.3

Education 0.4 — 0.4

Outsourcing & Consulting 0.2 — 0.2

Corporate 0.8 — 0.8

Total $ 1.5 $ 0.2 $ 1.7

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

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Restructuring costs incurred in 2020 totaled $ 12.8 million and were recorded entirely in SG&A expenses in the consolidated statements of earnings, as detailed below (in millions of dollars):

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Lease Termination Costs Severance Costs Total

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Total $ 4.8 $ 8.0 $ 12.8

Restructuring costs incurred in 2019 totaled $ 5.5 million.

Professional & Industrial incurred $ 5.1 million and Science, Engineering & Technology incurred $ 0.4 million.

The restructuring costs, which were all severance related, were recorded in SG&A expenses in the consolidated statements of earnings.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accrual Summary

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Balance as of year-end 2020 $ 3.5

Additions charged to Professional & Industrial 6.0

Additions charged to Science, Engineering & Technology 0.6

Additions charged to Education 1.0

Additions charged to Outsourcing & Consulting 0.3

Additions charged to International 1.2

Additions charged to Corporate 2.8

Reductions for lease termination costs related to fixed assets ( 0.6 )

Reductions for cash payments related to all restructuring activities ( 4.6 )

Balance as of year-end 2021 2.9

Additions charged to International 1.2

Additions charged to Professional & Industrial 0.3

Additions charged to Outsourcing & Consulting 0.2

Additions charged to Education 0.4

Additions charged to Corporate 0.8

Reductions for cash payments related to all restructuring activities ( 4.0 )

Accrual adjustments ( 0.3 )

Balance as of year-end 2022 $ 0.3

The remaining balance of $ 2.9 million as of year-end 2021 primarily represents severance costs and the majority is expected to be paid by the second quarter-end 2022.

The remaining balance of $ 0.3 million as of year-end 2022 primarily represents severance costs and the majority is expected to be paid by the first quarter-end 2023.

No material adjustments are expected to be recorded.

Goodwill and Intangible Assets

The goodwill resulting from the acquisition of Softworld during the second quarter of 2021 (see Acquisitions and Disposition footnote) was allocated to the SET reportable segment and Softworld was deemed to be a separate reporting unit.

The goodwill resulting from the acquisition of Greenwood/Asher during the fourth quarter of 2020 (see Acquisitions and Disposition footnote) was allocated to the Education reportable segment, which was deemed to be a reporting unit.

In performing the step one quantitative test and consistent with our prior practice, we determined the fair value of the reporting unit using the income approach.

Under the income approach, estimated fair value was determined based on estimated future cash flows discounted by an estimated market participant weighted-average cost of capital, which reflects the overall level of inherent risk of the reporting unit being measured.

Estimated future cash flows were based on our internal projection model and reflects management’s outlook for the reporting unit.

Assumptions and estimates about future cash flows and discount rates are complex and often subjective.

Our analysis used significant assumptions for the reporting unit, including:

expected future revenue growth rates, profit margins and discount rate.

In the fourth quarter of 2021, we performed a step one quantitative test for the Softworld reporting unit.

As a result of the quantitative assessment, we determined that the estimated fair value of the Softworld reporting unit was more than its carrying value.

As a result of the quantitative and qualitative assessments, the Company determined goodwill was not impaired as of year-end 2021.

KELLY SERVICES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

During the first quarter of 2020, negative market reaction to the COVID-19 crisis, including declines in our common stock price, caused our market capitalization to decline significantly compared to the fourth quarter of 2019, causing a triggering event.

Therefore, we performed an interim step one quantitative test for our previous reporting units with goodwill, Americas Staffing and GTS, and determined that the estimated fair values of both reporting units no longer exceeded their carrying values.

Based on the result of our interim goodwill impairment test as of the first quarter of 2020, we recorded a goodwill impairment charge of $ 147.7 million to write off goodwill for both reporting units.

A portion of the goodwill balance was deductible for tax purposes.

During the fourth quarter of 2020, the Company performed a step zero qualitative analysis for the Education reporting unit to determine whether a further quantitative analysis was necessary.

The step zero test included making judgments and assessments to determine whether any events or circumstances have occurred that makes it more likely than not that the fair value of a reporting unit is less than its carrying amount.

As a result of this qualitative assessment, a step one quantitative analysis was not deemed necessary, and the Company determined goodwill was not impaired as of year-end 2020.

The changes in the carrying amount of goodwill for the fiscal years 2021 and 2020 are included in the tables below.

See Acquisitions and Disposition footnote for a description of the additions to goodwill.

Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the fiscal years 2022 and 2021 are included in the tables below (in millions of dollars):

As of Year-End 2021 Additions to Goodwill Impairment Adjustments As of Year-End 2022

(In millions of dollars)

Science, Engineering & Technology $ 111.3 $ — $ — $ 111.3

Education 3.5 36.3 — 39.8

Outsourcing & Consulting — 41.0 ( 41.0 ) —

Total $ 114.8 $ 77.3 $ ( 41.0 ) $ 151.1

As of Year-End 2020 Additions to Goodwill Impairment Adjustments As of Year-End 2021

(In millions of dollars)

Americas Staffing $ 58.5 $ 19.9 $ ( 78.4 ) $ —

Global Talent Solutions 69.3 — ( 69.3 ) —

Science, Engineering & Technology $ — $ 111.3 $ — $ 111.3

Education 3.5 — — 3.5

Total $ 3.5 $ 111.3 $ — $ 114.8

The goodwill resulting from the acquisition of RocketPower during the first quarter of 2022 was allocated to the OCG reportable segment and RocketPower was deemed to be a separate reporting unit.

The goodwill resulting from the acquisition of PTS during the second quarter of 2022 was allocated to the Education reportable segment and PTS was deemed to be a separate reporting unit.

The goodwill resulting from the acquisition of Softworld during the second quarter of 2021 was allocated to the SET reportable segment and Softworld was deemed to be a separate reporting unit.

(See Additions to Goodwill column in the table above and the Acquisitions and Dispositions footnote for more details regarding each acquisition.)

We also perform a qualitative review on a quarterly basis of our long-lived assets, comprised of net property and equipment and definite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

During the third quarter of 2022, customers within the high-tech industry vertical, in which RocketPower specializes, reduced or eliminated their full-time hiring, reducing demand for RocketPower’s services, and on-going economic uncertainty has more broadly impacted the growth in demand for RPO in the near-term.

These changes in market conditions therefore caused a triggering event requiring an interim impairment test for both long-lived assets and goodwill.

RocketPower has definite-lived intangible assets, consisting of trades names, customer relationships and non-compete agreements, which are amortized over their estimated useful lives.

We performed a long-lived asset recoverability test for RocketPower and determined that undiscounted future cash flows exceeded the carrying amount of the asset group and were recoverable.

We performed an interim step one quantitative test for RocketPower’s goodwill and determined that the estimated fair value of the reporting unit no longer exceeded the carrying value.

Based on the result of our interim goodwill impairment test as of third quarter-end 2022, we recorded a goodwill impairment charge of $ 30.7 million to write off a portion of RocketPower’s goodwill, with $ 10.3 million goodwill remaining in the OCG reportable segment as of third quarter-end 2022.

In the fourth quarter of 2022, we performed our annual goodwill impairment testing, which included a step one quantitative test for the Softworld and PTS reporting units.

As a result of the quantitative assessment, we determined that the estimated fair value of the Softworld and PTS reporting units was more than its carrying value.

Additionally, we performed a step zero qualitative analysis for the Education and RocketPower reporting units to determine whether a further quantitative analysis was necessary and concluded that a step one quantitative analysis was not necessary at that time.

As a result of the quantitative and qualitative assessments, the Company determined goodwill related to these reporting units was not impaired at that time.

Subsequent to our annual goodwill impairment testing, job eliminations in the high-tech industry vertical continued, indicating a broad, sustained reduction in hiring was likely and is now expected to last through much of 2023, directly impacting RocketPower and the demand for RocketPower's services in this vertical.

These changes in market conditions caused a triggering event requiring another interim impairment test for both long-lived assets and goodwill as of year-end 2022.

We performed a long-lived asset recoverability test for RocketPower and determined that undiscounted future cash flows exceeded the carrying amount of the asset group and were recoverable.

We performed an interim step one quantitative test for

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

RocketPower’s goodwill and determined that the estimated fair value of the reporting unit no longer exceeded the carrying value.

Based on the result of our interim goodwill impairment test as of year-end 2022, we recorded an additional goodwill impairment charge of $ 10.3 million in the fourth quarter of 2022 to write off the remaining balance of RocketPower’s goodwill, for a total goodwill impairment charge of $ 41.0 million as of year-end 2022.

(See Impairment Adjustments column in the table above.)

If current expectations of future revenue and profit margins are not met, or if market factors outside of our control change significantly, including discount rate, it could result in an impairment charge, which would decrease operating income and result in lower asset values on our consolidated balance sheet.

Intangible assets, excluding fully-amortized intangibles, are included within other assets on our consolidated balance sheet and consist of the following (in millions of dollars):

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Customer relationships 10 years $ 141.1 $ 32.9 $ 108.2 $ 106.9 $ 22.2 $ 84.7

Candidate database 4 years 1.5 1.5 — 1.5 1.3 0.2

Trade names 10-15 years 51.7 8.3 43.4 35.8 4.2 31.6

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Total $ 203.6 $ 44.9 $ 158.7 $ 150.6 $ 28.6 $ 122.0

The year-over-year change in total intangible assets was due to the intangibles purchased in connection with the Softworld acquisition (see Acquisitions and Disposition footnote).

The year-over-year change in total intangible assets was due to the intangibles purchased in connection with the RocketPower and PTS acquisitions (see Acquisitions and Dispositions footnote).

Intangible amortization expense, which is included in SG&A expense in the consolidated statements of earnings, was $ 19.4 million, $ 13.0 million and $ 6.8 million in 2022, 2021 and 2020, respectively.

The amortization expense will be $ 14.6 million in 2022 and 2023, $ 14.3 million in 2024 and 2025 and $ 14.1 million in 2026.

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Included in other assets are the following:

(In millions of dollars)

The amortization expense will be $ 20.8 million in 2023, $ 20.5 million in 2024, $ 18.5 million in 2025, $ 17.8 million in 2026 and $ 17.2 million in 2027.

Included in other assets are the following (in millions of dollars):

Life insurance cash surrender value (see Retirement Benefits footnote) $ 194.3 $ 232.9

Intangibles, net of accumulated amortization of $55.5 million in 2022 and $39.1 million in 2021 (1)

Long-term hosted software (2)

Long-term customer receivable (3)

Long-term hosted software, net of accumulated amortization of $7.3 million in 2022 and $3.2 million in 2021 (2)

Noncurrent restricted cash 8.6 6.6

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(2) Long-term hosted software represents cloud computing arrangements that are comprised of internal-use software platforms that are accounted for as service contracts (see Summary of Significant Accounting Policies footnote).

(3) The long-term customer receivable was written off in 2021 (see Credit Losses footnote).

(3) Workers’ compensation and other claims receivable represents receivables from the insurance company for U.S.

workers’ compensation and automobile liability claims in excess of the applicable loss limits.

(5) The investment in BTG of $ 5.0 million was cancelled in 2021 (see Fair Value Measurements footnote).

The Company has operating and financing leases for field offices and various equipment.

Our leases have remaining lease terms of one year to 10 years.

(4) Other in 2022 includes $ 6.4 million related to our equity investment in the JV (see Investment in PersolKelly Pte.

Ltd footnote).

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company has operating and financing leases for headquarters and field offices and various equipment.

Our leases generally have remaining lease terms of one year to 10 years.

We determine if an arrangement is a lease at inception.

The components of lease expense were as follows (in millions of dollars):

The components of lease expense are as follows (in millions of dollars):

December Year to Date

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Total lease cost $ 31.1 $ 35.7 $ 39.1

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Supplemental consolidated balance sheet information related to leases was as follows (in millions of dollars):

Supplemental consolidated balance sheet information related to leases is as follows (in millions of dollars):

Description Balance Sheet Location As of Year-End 2022 As of Year-End 2021

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Total lease liabilities $ 70.9 $ 82.0

Weighted average remaining lease terms and discount rates were as follows:

Weighted average remaining lease terms and discount rates are as follows:

December Year to Date

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Financing leases 5.4 % 5.3 %

Other information related to leases was as follows (in millions of dollars):

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other information related to leases is as follows (in millions of dollars):

December Year to Date

6 unchanged sentences

Financing leases — — 3.1

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Maturities of lease liabilities as of year-end 2021 were as follows (in millions of dollars):

Maturities of lease liabilities as of year-end 2022 are as follows (in millions of dollars):

Operating Leases Financing Leases

2023 $ 17.8 $ 1.3

2023 14.7 0.9

Thereafter 30.3 —

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Total $ 69.6 $ 1.2

During the first quarter of 2020, the Company sold its main headquarters building and entered into a leaseback agreement, which is accounted for as an operating lease (see Sale of Assets footnote).

During the first quarter of 2020, the Company sold three of four headquarters properties and entered into a leaseback agreement, which is accounted for as an operating lease (see Sale of Assets footnote).

As of first quarter-end 2020, we recognized $ 37.6 million of ROU assets within operating lease right-of-use assets, $ 1.2 million of current lease liabilities within operating lease liabilities, current and $ 36.1 million of noncurrent lease liabilities within operating lease liabilities, noncurrent in the consolidated balance sheet, with a discount rate of 4.8 % over a 15 -year lease term related to this lease.

Short-Term Debt

The Company has a $ 200.0 million, five-year revolving credit facility (the "Facility") with a termination date of December 5, 2024.

The Facility allows for borrowings in various currencies and is available to be used to fund working capital, acquisitions and general corporate needs.

On November 4, 2022, the Company entered into an agreement with its lenders to amend and restate its existing $ 200.0 million, five-year revolving credit facility (the "Facility"), with a termination date of December 5, 2024.

The amendment increased the limit on restricted payments from $ 50.0 million to $ 115.0 million and changed certain of the terms and conditions.

The Facility is available to be used to fund working capital, acquisitions and general corporate needs.

The Facility is secured by certain assets of the Company, excluding U.S.

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• We must maintain a certain minimum ratio of earnings before interest, taxes, depreciation, amortization (“EBITDA”) and certain cash and non-cash charges that are non-recurring in nature to interest expense (“Interest Coverage Ratio”) as of the end of any fiscal quarter.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

• We must maintain a certain maximum ratio of total indebtedness to the sum of net worth and total indebtedness at all times.

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• We must adhere to other operating restrictions relating to the conduct of business, such as certain limitations on asset sales and the type and scope of investments.

On December 30, 2021, the Company and Kelly Receivables Funding, LLC, a wholly owned bankruptcy remote special purpose subsidiary of the Company (the “Receivables Entity”), amended the Receivables Purchase Agreement related to its $ 150.0 million, three-year, securitization facility (the “Securitization Facility”).

The amendment changed certain of the terms and conditions, including that the Securitization Facility will bear interest at a rate based on the applicable Bloomberg Short-Term Bank Yield Index ("BSBY"), and extended the maturity date to December 5, 2024.

On September 21, 2022, the Company and Kelly Receivables Funding, LLC, a wholly owned bankruptcy remote special purpose subsidiary of the Company (the “Receivables Entity”), amended the Receivables Purchase Agreement related to its $ 150.0 million, three-year , securitization facility (the “Securitization Facility”).

The amendment changed certain of the terms and conditions, including extending the DSO terms from 65 days to 70 days.

The Receivables Purchase Agreement will terminate December 5, 2024, unless terminated earlier pursuant to its terms.

Under the Securitization Facility, the Company will sell certain trade receivables and related rights (“Receivables”), on a revolving basis, to the Receivables Entity.

The Receivables Entity may from time to time sell an undivided variable percentage

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

ownership interest in the Receivables.

The Receivables Entity may from time to time sell an undivided variable percentage ownership interest in the Receivables.

The Securitization Facility, which contains a cross-default clause that could result in termination if defaults occur under our other loan agreements, also allows for the issuance of standby letters of credit (“SBLC”) and contains certain restrictions based on the performance of the Receivables.

As of year-end 2021 and 2020, the Securitization Facility had no short-term borrowings, SBLCs of $ 53.0 million related to workers’ compensation at a rate of 0.90 % and a remaining capacity of $ 97.0 million.

As of year-end 2021, the rate for short-term borrowings includes the applicable BSBY rate and a utilization rate on the amount of our borrowings.

As of year-end 2020, the rate for short-term borrowings included the LIBOR interest rate and a utilization rate on the amount of our borrowings.

As of year-end 2022, the Securitization Facility had no short-term borrowings, SBLCs of $ 49.5 million related to workers’ compensation at a rate of 0.90 % and a remaining capacity of $ 100.5 million.

As of year-end 2021, the Securitization Facility had no short-term borrowings, SBLCs of $ 53.0 million related to workers’ compensation at a rate of 0.90 % and a remaining capacity of $ 97.0 million.

The rate for short-term borrowings includes the Bloomberg Short-Term Bank Yield Index rate and a utilization rate on the amount of our borrowings.

The rates for the SBLCs represent a utilization rate on the outstanding amount of the SBLCs.

6 unchanged sentences

The Company had total unsecured, uncommitted short-term local credit facilities of $ 5.9 million as of year-end 2022.

There were no borrowings under these lines at year-end 2021, compared to $ 0.3 million at year-end 2020.

The weighted average interest rate for these borrowings, which was related to Malaysia, was 4.13 % at year-end 2020.

There were $ 0.7 million borrowings under these lines at year-end 2022, compared to no borrowings under these lines at year-end 2021.

The weighted average interest rate for these borrowings, which was related to India, was 8.50 % at year-end 2022.

Retirement Benefits

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The liability for the nonqualified plans was $ 196.6 million and $ 237.2 million as of year-end 2022 and 2021, respectively, and is included in current accrued payroll and related taxes and noncurrent accrued retirement benefits in the consolidated balance sheet.

The cost of participants’ earnings or loss on this liability, which were included in SG&A expenses in the consolidated statements of earnings, were earnings of $ 27.0 million in 2021, earnings of $ 23.0 million in 2020 and earnings of $ 32.5 million in 2019.

The cost of participants’ earnings or loss on this liability, which were included in SG&A expenses in the consolidated statements of earnings, was a loss of $ 36.3 million in 2022, earnings of $ 27.0 million in 2021 and earnings of $ 23.0 million in 2020.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In connection with the administration of these plans, the Company has purchased company-owned variable universal life insurance policies insuring the lives of certain current and former officers and key employees.

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During 2022, 2021 and 2020, proceeds of $ 1.5 million, $ 12.2 million and $ 2.3 million, respectively, were received in connection with these policies.

Tax-free earnings or loss on these assets, which were included in SG&A expenses in the consolidated statements of earnings and which offset the related earnings or loss on the liability, were earnings of $ 26.0 million in 2021, earnings of $ 23.1 million in 2020 and earnings of $ 32.2 million in 2019.

Tax-free earnings or loss on these assets, which were included in SG&A expenses in the consolidated statements of earnings and which offset the related earnings or loss on the liability, were a loss of $ 36.0 million in 2022, earnings of $ 26.0 million in 2021 and earnings of $ 23.1 million in 2020.

The net expense for retirement benefits for the qualified and nonqualified plans, including Company-matching contributions for full-time employees, totaled $ 9.4 million in 2022, $ 10.0 million in 2021 and $ 3.2 million in 2020, and is included in total SG&A expenses in the consolidated statements of earnings.

The 2020 expense reflects the temporary suspension of Company-matching contributions from April to December, 2020 to mitigate the impact of the COVID-19 pandemic on the results of our

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The 2020 expense reflects the temporary suspension of Company-matching contributions from April to December 2020 to mitigate the impact of the COVID-19 pandemic on the results of our operations.

The expense related to retirement plan contributions for temporary employees, which is included in cost of services, is reimbursed by our customers.

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As a result, a cash dividend may be declared on the Class A shares without declaring a cash dividend on the Class B shares.

On November 9, 2022, the Company's board of directors approved a plan for the Company to repurchase shares of its Class A common stock with a market value not to exceed $ 50.0 million through transactions executed in the open market within one year.

During 2022, the Company repurchased 474,644 Class A shares for $ 7.8 million.

A total of $ 42.2 million remains available under the share repurchase program as of year-end 2022.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component, net of tax, during 2021, 2020 and 2019 are included in the table below.

The changes in accumulated other comprehensive income (loss) by component, net of tax, during 2022, 2021 and 2020 are included in the table below (in millions of dollars).

Amounts in parentheses indicate debits.

2022 2021 2020

(In millions of dollars)

Foreign currency translation adjustments:

1 unchanged sentence

Other comprehensive income (loss) before classifications ( 7.5 ) ( 24.2 ) 13.9

Amounts reclassified from accumulated other comprehensive income — (1)

Amounts reclassified from accumulated other comprehensive income (loss) - liquidation of Japan subsidiary 20.4 (1)

Amounts reclassified from accumulated other comprehensive income (loss) - equity method investment and other 4.7 (2)

Net current-period other comprehensive income (loss) 17.6 ( 24.2 ) 12.4

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Total accumulated other comprehensive income (loss) $ ( 8.5 ) $ ( 27.7 ) $ ( 4.2 )

(1) Amount was recorded in the other income (expense), net line item in the consolidated statements of earnings.

(1) Amount was recorded in the loss on currency translation from liquidation of subsidiary in the consolidated statements of earnings.

(2) Of the amount included in this line item $ 1.9 million in 2022 was recorded in the other income (expense), net line item in the consolidated statements of earnings related to the investment in PersolKelly Pte.

Ltd., (see Investment in PersolKelly Pte.

footnote for more details).

In addition, $ 1.4 million in 2022 was recorded in the other income (expense), net line item in the consolidated statements of earnings related to other activities and $ 1.4 million in 2022 was recorded in loss on disposal line item in the consolidated statements of earnings related to the liquidation of the cumulative translation adjustment for the sale of our Russia operations, (see Acquisitions and Dispositions footnote for more details).

All amounts in prior years were recorded in the other income (expense), net line item in the consolidated statements of earnings.

(3) Amount was recorded in the SG&A expenses line item in the consolidated statements of earnings.

3 unchanged sentences

Earnings (Loss) Per Share

The reconciliation of basic earnings (loss) per share on common stock for the year-end 2021, 2020 and 2019 follows (in millions of dollars except per share data).

The reconciliation of basic earnings (loss) per share on common stock for 2022, 2021 and 2020 follows (in millions of dollars except per share data):

2022 2021 2020

8 unchanged sentences

Diluted earnings (loss) per share $ ( 1.64 ) $ 3.91 $ ( 1.83 )

Potentially dilutive shares outstanding for 2021 are primarily related to deferred common stock related to non-employee directors deferred compensation plan.

Potentially dilutive shares outstanding for 2019 are primarily related to performance shares (see Stock-Based Compensation footnote for a description of performance shares).

Potentially dilutive shares outstanding for 2021 are primarily related to deferred common stock related to the non-employee directors deferred compensation plan.

Due to our net loss in 2022 and 2020, potentially dilutive shares outstanding, primarily related to deferred common stock associated with the non-employee directors deferred compensation plan, of 0.2 million shares in 2022 and 0.1 million shares in 2020, had an anti-dilutive effect on diluted earnings per share and were excluded from the computation.

We have presented earnings per share for our two classes of common stock on a combined basis.

The two-class method is an earnings allocation formula which determines earnings per share for each class of common stock according to the dividends declared (or accumulated) and participation rights in the undistributed earnings.

This presentation is consistent with the earnings per share computations that result for each class of common stock utilizing the two-class method as described in ASC Topic 260, “Earnings Per Share.” The two-class method is an earnings allocation formula which determines earnings per share for each class of common stock according to the dividends declared (or accumulated) and participation rights in the undistributed earnings.

In applying the two-class method, we have determined that the undistributed earnings should be allocated to each class on a pro rata basis after consideration of all of the participation rights of the Class B shares (including voting and conversion rights) and our history of paying dividends equally to each class of common stock on a per share basis.

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Stock-Based Compensation

Under the Equity Incentive Plan, amended and restated February 15, 2017 and approved by the stockholders of the Company on May 10, 2017 (the “EIP”), the Company may grant restricted stock and performance awards associated with the Company’s Class A stock to key employees.

For shares granted prior to May 10, 2017, the EIP provides that the maximum number of shares available for grants is 15 % of the outstanding Class A Stock, adjusted for EIP activity over the preceding five years .

For shares granted after May 10, 2017, the amended EIP provides that the maximum number of shares available for grants is 4.7 million.

The Company has no plans to issue additional shares under the provision that was in effect prior to May 10, 2017.

Under the provision that was in effect for shares granted after May 10, 2017, shares available for future grants at year-end 2021 were 2.9 million.

The Company issues shares out of treasury stock to satisfy stock-based awards.

Under the Equity Incentive Plan, amended and restated February 15, 2017 and approved by the stockholders of the Company on May 10, 2017 (the “EIP”), the Company may grant to key employees restricted stock and performance awards associated with the Company’s Class A stock.

The amended EIP provides that the maximum number of shares available for grants is 4.7 million.

Shares available for future grants at year-end 2022 are 2.7 million.

The Company issues shares out of treasury stock to satisfy stock-based awards, if available;

otherwise new shares of common stock are issued from authorized shares.

The Company presently has no intent to repurchase additional shares for the purpose of satisfying stock-based awards.

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The Company utilizes the market price of its Class A stock on the date of grant as the fair value of restricted stock and expenses the fair value on a straight-line basis over the vesting period.

A summary of the status of nonvested restricted stock under the EIP as of year-end 2021 and changes during this period is presented as follows below (in thousands of shares except per share data):

A summary of the status of nonvested restricted stock as of year-end 2022 and changes during this period is presented as follows below (in thousands of shares except per share data):

Nonvested at year-end 2021 403 $ 21.24

9 unchanged sentences

During 2022, 2021 and 2020, the Company granted performance awards associated with the Company’s Class A stock to certain senior officers.

The payment of performance awards, which will be satisfied with the issuance of shares out of treasury stock, is contingent upon the achievement of specific performance goals unique to each grant ("financial measure performance awards") over a stated period of time or may be earned based on the Company’s total shareholder return (“TSR”) relative to the S&P SmallCap 600 Index (“TSR performance awards”).

Additionally, the Company also granted single financial measure performance shares to certain senior officers, which will be satisfied with the issuance of shares out of treasury stock, and is contingent upon the achievement of one performance measure with a one-year performance period.

1 unchanged sentence

On May 18, 2021, the Compensation Committee approved a modification to the performance goals of our 2021 and 2020 financial measure performance awards to increase the goals to reflect the results of the acquisition of Softworld.

We accounted for this change as a Type I modification under ASC 718 as the expectation of the achievement of certain performance conditions related to these awards remained a probable-to-probable post-modification.

We accounted for this change as a Type I modification under ASC 718 as the expectation of the achievement of certain performance conditions related to these awards remained probable-to-probable post-modification.

The Company did not record any incremental stock compensation expense since the fair value of the modified awards immediately after the modification was not greater than the fair value of the original awards immediately before the modification.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The annual 2022 performance share grant ("2022 grant") consisted of 186,000 financial measure performance awards, which are contingent upon achievement of specific revenue growth and EBITDA margin performance goals.

The maximum number of performance shares that may be earned is 200 % of the target shares originally granted.

These awards have three one-year performance periods:

2022, 2023 and 2024, with the payout for each performance period based on separate financial measure goals that are set in February of each of the three performance periods.

Earned shares during each performance period will cliff vest in February 2025 after approval of the financial results by the Compensation Committee, if not forfeited by the recipient.

No dividends are paid on these performance shares.

Based upon the level of achievement of specific financial performance goals for the 2022 annual grant, participants had the ability to receive up to 200 % of the target number of shares originally granted.

On February 14, 2023, the Compensation Committee approved the actual performance achievement for the 2022 performance period of the annual 2022 grant.

Actual performance resulted in participants achieving 72 % of target.

All of the shares earned for the 2022 performance period will vest in 2025 after the approval of the Compensation Committee, if not forfeited by the recipient.

The 2022 financial measure performance awards have a weighted average grant date fair value of $ 21.19 , which was determined by the market price on the date of grant less the present value of the expected dividends not received during the vesting period.

The total nonvested shares related to 2022 financial measure performance awards at year-end 2022 is 186,000 .

The annual 2021 performance share grant ("2021 grant") consisted of 180,000 financial measure performance awards, which are contingent upon the achievement of specific revenue growth and EBITDA margin performance goals.

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Half of the shares earned for the 2022 performance period will vest in 2023 after the approval of the Compensation Committee and the remaining half of the shares earned will vest in early 2024, if not forfeited by the recipient.

In December 2021, the Compensation Committee approved an additional retention-based grant of 308,000 financial measure performance awards to certain senior officers and may be earned upon achievement of three financial goals over a performance period beginning in fiscal 2022 through third quarter of 2024, with each goal having a unique projected achievement date.

In December 2021, the Compensation Committee approved an additional retention-based grant of 308,000 financial measure performance awards to certain senior officers and may be earned upon achievement of three financial goals over a performance period beginning in fiscal 2022 through the third quarter of 2024, with each goal having a unique projected achievement date.

Each goal can be earned independent of the other two goals.

3 unchanged sentences

These awards earn dividends once the goal is achieved, but are not paid until the awards vest.

On February 14, 2023, the Compensation Committee approved the actual performance achievement of one of the financial goals related to the 2021 retention-based grant.

At the same meeting, the Compensation Committee approved a modification to accelerate the vesting for the goal earned, where half of these awards will vest immediately upon approval of the results and the remaining half will vest in August 2023, if not forfeited by the recipient.

We will account for this change as a Type I modification under ASC 718 as the expectation of vesting remained probable-to-probable post-modification.

The Company did

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

not record any incremental stock compensation expense since the fair value of the modified awards immediately after the modification was not greater than the fair value of the original awards immediately before the modification.

The Company will recognize the remaining stock compensation expense over the remaining portion of the modified service requisite period.

The 2021 financial measure performance awards have a weighted average grant date fair value of $ 18.21 , which was determined by the market price on the date of grant less the present value of the expected dividends not received during the vesting period.

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The total nonvested shares related to 2020 single financial performance awards at year-end 2022 is 78,000 .

The 2019 performance share grant (“2019 grant”), consisted of a total target number of performance shares granted of 260,000 , of which 207,000 shares were eligible to earn up to the maximum number of performance shares of 413,000 , which assumes 200 % of the target shares originally granted, and may be earned upon achievement of two financial goals.

The 2019 financial measure performance awards were granted with a market condition in the form of a relative TSR modifier, which could have impacted the number of shares earned as determined at the end of the performance period.

The number of shares earned based on financial measures’ results could have been reduced, increased or remain the same based on the Company’s TSR relative to the S&P SmallCap 600 Index.

The maximum number of performance shares that could have been earned was 200 % of the target shares originally granted and the TSR modifier could not increase payouts above the maximum.

No dividends were paid on these performance shares.

The 2019 grant also included 53,000 single financial measure performance shares.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The 2019 financial measure performance awards had a weighted average grant date fair value of $ 25.54 per share, which was determined using a Monte Carlo valuation model incorporating assumptions for inputs of expected stock price volatility, dividend yield and risk-free interest rate.

The total nonvested shares related to 2019 financial measure performance awards at year-end 2021 is 113,000 .

Based upon the level of achievement of specific financial performance goals for the 2019 grant, participants had the ability to receive up to 200 % of the target number of shares originally granted.

On February 15, 2022, the Compensation Committee approved the actual performance achievement of the financial measure performance awards, which was below the threshold level and resulted in no payout for the 2019 grant.

A summary of the status of all nonvested performance shares at target for 2022 is presented as follows below (in thousands of shares except per share data).

The vesting adjustment in the table below represents the 2018 financial measure performance shares and the 2018 Total Shareholder Return ("TSR") performance shares that did not vest because actual achievement was below the threshold level and resulted in no payout.

The vesting adjustment in the table below represents the 2019 and a portion of the 2021 performance period of the 2021 financial measure performance shares that did not vest because actual achievement was below the threshold level and resulted in no payout.

Financial Measure

Performance Shares

Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value

Shares Weighted Average Grant Date Fair Value

Nonvested at year-end 2021 708 $ 20.03

4 unchanged sentences

Nonvested at year-end 2022 692 $ 19.41

As of year-end 2021, unrecognized compensation cost related to all unvested financial measure performance shares and TSR performance shares totaled $ 8.7 million and $ 0.0 million , respectively.

The weighted average period over which the costs are expected to be recognized is approximately 3.5 years for financial measure performance shares and 0 years for TSR performance shares.

The total fair value of financial measure performance shares and TSR performance shares, which vested during 2021, was $ 0.3 million and $ 0.0 million , respectively.

As of year-end 2022, unrecognized compensation cost related to all unvested financial measure performance shares totaled $ 8.4 million.

The weighted average period over which the costs are expected to be recognized is approximately 2.4 years for financial measure performance shares.

The total fair value of financial measure performance shares, which vested during 2022, 2021 and 2020, was $ 0.9 million, $ 0.3 million and $ 1.8 million, respectively.

Sale of Assets

In October 2022, Kelly Properties, LLC, a wholly owned subsidiary of the Company, sold real property located in Troy, Michigan for a purchase price of $ 6.0 million, subject to final closing adjustments.

The Company received cash proceeds of $ 5.6 million in the fourth quarter of 2022, net of commissions and transaction expenses.

As of the date of the sale, the property had a carrying value of $ 4.7 million, resulting in a $ 0.9 million gain on the sale, which is recorded in gain on sale of assets in the consolidated statements of earnings.

In June 2022, the Company sold an under-utilized real property for a purchase price of $ 4.5 million, subject to final closing adjustments.

The Company received cash proceeds of $ 3.6 million in the second quarter of 2022 and previously received cash proceeds of $ 0.8 million as a deposit in 2021 when the contract was first executed.

As of the date of the sale, the land had insignificant carrying value;

as such, the resulting gain on the sale was $ 4.4 million, which is recorded in gain on sale of assets in the consolidated statements of earnings.

In January 2022, the Company sold a property for a purchase price of $ 0.9 million, subject to final closing adjustments.

The Company received cash proceeds of $ 0.9 million in the first quarter of 2022.

As of the date of the sale, the property had an immaterial carrying value;

as such, the resulting gain on the sale of the property was $ 0.9 million, which is recorded in gain on sale of assets in the consolidated statements of earnings.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In the second quarter of 2020, the Company monetized wage subsidy receivables outside the U.S.

10 unchanged sentences

see the Leases footnote for discussion of the sale and leaseback transaction.

Gain on sale of assets of $ 12.3 million in 2019 primarily represents the sale of unused land located near the Company headquarters in the second quarter of 2019, and includes the excess of the $ 11.7 million sale proceeds over the cost of the parcel.

The gain on sale of assets also includes proceeds of $ 2.1 million from the transfer of customer contracts related to the Company’s legal specialty operations to a third party during the second quarter of 2019.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Asset Impairment Charge

During the fourth quarter of 2019, a triggering event for the evaluation of a certain long-lived asset for impairment occurred related to our corporate U.S.

front and middle office technology development project.

We determined that we would not complete a technology project for which we had previously capitalized certain development costs in order to enhance and expand a technology platform already in existence.

To determine the amount of the impairment charge, we aggregated all capitalized costs related to the project that could not be transferred to the expansion and enhancement of the existing platform.

As a result, we recorded a $ 15.8 million asset impairment charge on the 2019 consolidated statements of earnings.

Other Income (Expense), Net

8 unchanged sentences

Other Income (Expense), Net $ 1.6 $ ( 3.6 ) $ 3.4

Included in Other for 2021 is a loss from the sale of the assets related to our minority investment in Kenzie Academy (see Fair Value Measurements footnote) and transaction-related expenses from the April 2021 acquisition of Softworld (see Acquisitions and Disposition footnote).

The decrease in dividend income in 2022 reflects the sale of the investment in the common stock of Persol Holdings during the first quarter of 2022.

Included in foreign exchange gains (losses) for 2022 is a $ 5.5 million foreign exchange gain on a U.S.

dollar-denominated cash balance held by the Company's Japan entity (see Investment in Persol Holdings footnote).

Included in Other for 2022 are transaction-related expenses for the 2022 acquisitions of RocketPower and PTS and sale of our Russia operations (see Acquisitions and Dispositions footnote) and expense related to the remeasurement of the Brazil indemnification liability (see Fair Value Measurements footnote).

Included in Other for 2021 is a loss from the sale of the assets related to our minority investment in Kenzie Academy (see Fair Value Measurements footnote) and transaction-related expenses for the April 2021 acquisition of Softworld (see Acquisitions and Dispositions footnote).

Earnings (loss) before taxes and equity in net earnings (loss) of affiliate for the years 2022, 2021 and 2020 were taxed under the following jurisdictions:

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(In millions of dollars)

Depreciation and amortization $ ( 9.5 ) $ ( 10.5 )

Fixed assets and right-of-use assets $ ( 21.8 ) $ ( 25.8 )

Intangible assets and goodwill 20.7 16.3

Employee compensation and benefit plans 62.0 70.4

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The Company has U.S.

general business credit carryforwards of $ 166.5 million which will expire from 2034 to 2041, foreign tax credit carryforwards of $ 8.4 million which will expire from 2022 to 2031 and $ 0.1 million of state credit carryforwards which will expire from 2026 to 2041.

The net tax effect of state and foreign loss carryforwards at year-end 2021 totaled $ 36.4 million, $ 2.6 million of which expire between 2022 to 2041, and $ 33.8 million of which have no expiration.

general business credit carryforwards of $ 177.1 million which will expire from 2034 to 2042, foreign tax credit carryforwards of $ 23.6 million which will expire from 2023 to 2032 and minimal state carryforwards which will expire from 2026 to 2042.

The net tax effect of state and foreign loss carryforwards at year-end 2022 totaled $ 33.4 million, $ 2.7 million of which expires between 2023 to 2042, and $ 30.7 million of which have no expiration.

The Company has established a valuation allowance for loss carryforwards and future deductible items in certain foreign jurisdictions, and for U.S.

foreign tax credit carryforwards.

The valuation allowance is determined in accordance with the provisions of ASC 740, which requires an assessment of both negative and positive evidence when measuring the need for a valuation allowance.

The Company’s recent losses in these foreign jurisdictions, and its recent lack of adequate U.S.

foreign source income to fully utilize foreign tax credit carryforwards, represented sufficient negative evidence to require a valuation allowance under ASC 740.

The Company intends to maintain a valuation allowance until sufficient positive evidence exists to

The increase in the valuation allowance in 2022 was primarily due to foreign tax credits generated from the sale of the Company's investment in Persol Holdings.

The valuation allowance is determined in accordance with the provisions of ASC 740, "Income Taxes," which requires an assessment of both negative and positive evidence when measuring the need for a valuation allowance.

The Company’s recent losses in these foreign

KELLY SERVICES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

support realization of the foreign deferred tax assets.

At this time, we have no valuation allowance against our Mexican deferred tax asset of $ 3.8 million, though it is possible this may change as we continue to assess the impact of the new labor laws that became effective in the third quarter of 2021 on our Mexican business operations.

jurisdictions, and its recent lack of adequate U.S.

foreign source income to fully utilize foreign tax credit carryforwards, represented sufficient negative evidence to require a valuation allowance under ASC 740.

The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support realization of the foreign deferred tax assets.

The differences between income taxes from continuing operations for financial reporting purposes and the U.S.

statutory rate of 21 % in 2021, 2020, and 2019 as follows:

statutory rate of 21 % in 2022, 2021, and 2020 are as follows:

2022 2021 2020

6 unchanged sentences

Foreign items 0.2 1.7 ( 1.8 )

Sale of Brazil operations — ( 6.6 ) —

Sale of foreign subsidiaries 3.9 — ( 6.6 )

Foreign business taxes 1.8 2.1 3.0

Tax law change — ( 5.2 ) ( 1.7 )

Change in deferred tax realizability ( 0.7 ) 0.4 ( 10.6 )

Non-deductible goodwill impairment 2.7 — 11.9

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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 or changes in judgment regarding the realizability of deferred tax assets.

Changes in the fair value of the Company’s investment in Persol Holdings are recognized in the consolidated statements of earnings.

These investment gains or losses are treated as discrete since they cannot be estimated.

Changes in the fair value of the Company’s investment in Persol Holdings were recognized in the consolidated statements of earnings.

Gains and losses from this investment, which was sold in the first quarter of 2022, were treated as discrete since they could not be estimated.

Several items have contributed to the variance in our income tax benefit or expense over the last three years.

Income tax expense for 2021 included $ 37.3 million from the gain on our investment in Persol Holdings and $ 4.8 million from the gain on insurance settlement, and benefited $ 5.2 million from a change in tax rate in the United Kingdom.

The 2020 income tax benefited from lower pretax earnings and included $ 5.1 million from the loss on our investment in Persol Holdings, $ 6.6 million from the sale of Brazil operations and $ 23 million from the impairment of tax deductible goodwill.

Income tax expense for 2019 included an $ 11.0 million expense from the gain on our investment in Persol Holdings, in addition to a $ 3.9 million charge to establish valuation allowances in Germany, offset by a $ 14.3 million benefit on the release of valuation allowances in the United Kingdom.

2022 benefited from lower pretax earnings, benefits of $ 16.9 million from changes in the fair value of the Company's investment in Persol Holdings and $ 7.1 million from the impairment of tax deductible goodwill.

These benefits were offset by a $ 7.8 million charge from tax exempt life insurance cash surrender value losses.

Income tax expense for 2021 included charges of $ 37.3 million from changes in the fair value of the Company's investment in Persol Holdings and $ 4.8 million from the gain on insurance settlement, offset by benefits of $ 5.2 million from a change in tax rate in the United Kingdom and $ 5.2 million from tax exempt life insurance cash surrender value gains.

The 2020 income tax benefited from lower pretax earnings and benefits of $ 5.1 million from the loss on our investment in Persol Holdings, $ 6.6 million from the sale of Brazil operations, $ 23 million from the impairment of tax deductible goodwill and $ 4.6 million from tax exempt life insurance cash surrender value gains.

General business credits primarily represent U.S.

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Foreign items include foreign tax credits, foreign non-deductible expenses and non-taxable income.

Foreign business taxes include the French business tax and other taxes based on revenue less certain expenses and are classified as income taxes under ASC 740 (“ASC 740”), Income Taxes.

Provision has not been made for additional income taxes on an estimated $ 167.8 million of undistributed earnings which are indefinitely reinvested.

Foreign business taxes include the French business tax and other taxes based on revenue less certain expenses and are classified as income taxes under ASC 740.

Provision has not been made for additional income taxes on an estimated $ 156.5 million of foreign subsidiary undistributed earnings which are indefinitely reinvested.

If these earnings were to be repatriated, the Company could be subject to foreign withholding tax, federal and state income tax, net of federal benefit, and income taxes on foreign exchange gains or losses, of $ 9.8 million.

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The Company recognizes both interest and penalties as part of the income tax provision.

The benefit recognized in 2022 was not significant.

The Company recognized expense of $ 0.1 million in 2021 and a benefit of $ 0.1 million in 2020 for interest and penalties.

Interest and penalties expense in 2019 was not significant.

Accrued interest and penalties were $ 0.1 million at year-end 2022 and $ 0.2 million at year-end 2021.

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The tax periods open to examination by the major taxing jurisdictions to which the Company is subject include the U.S.

for fiscal years 2018 forward, Canada for fiscal years 2014 forward, France for fiscal years 2013 forward, Portugal for fiscal years 2018 forward, Puerto Rico for fiscal years 2017 forward, Russia for fiscal years 2019 forward, and Switzerland for fiscal years 2012 forward.

for fiscal years 2019 forward, Canada for fiscal years 2015 forward, France for fiscal years 2014 forward, Netherlands for fiscal years 2017 forward, Portugal for fiscal years 2019 forward, Puerto Rico for fiscal years 2018 forward and Switzerland for fiscal years 2013 forward.

The Company and its subsidiaries have various income tax returns in the process of examination.

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Non-cash capital accruals totaled $ 1.2 million, $ 1.0 million and $ 1.4 million at year-end 2022, 2021 and 2020, respectively.

In addition to lease agreements (see Leases footnote) and the indemnification agreement related to the sale of our Brazil operations (see Acquisitions and Dispositions footnote), the Company has entered into noncancelable purchase obligations totaling $ 53.0 million.

These obligations relate primarily to technology services and online tools which the Company expects

KELLY SERVICES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In addition to lease agreements (see Leases footnote) and the indemnification agreement related to the sale of our Brazil operations (see Acquisitions and Disposition footnote), the Company has entered into noncancelable purchase obligations totaling $ 69.7 million.

These obligations relate primarily to technology services and online tools which the Company expects to utilize generally within the next two fiscal years, in the ordinary course of business.

to utilize generally within the next three fiscal years, in the ordinary course of business.

The Company has no material unrecorded commitments, losses, contingencies or guarantees associated with any related parties or unconsolidated entities.

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Such accruals are recorded in accounts payable and accrued liabilities and in accrued workers’ compensation and other claims in the consolidated balance sheet.

The gross accrual for litigation costs amounted to $ 1.4 million at both year-end 2021 and 2020.

At year-end 2022 and 2021, the gross accrual for litigation costs amounted to $ 2.3 million and $ 1.4 million, respectively.

The Company maintains insurance coverage which may cover certain losses.

When losses exceed the applicable policy deductible and realization of recovery of the loss from existing insurance policies is deemed probable, the Company records receivables from the insurance company for the excess amount, which are included in prepaid expenses and other current assets in the consolidated balance sheet.

At year-end 2021 and 2020, there were no related insurance receivables.

At year-end 2022 and 2021, the related insurance receivables amounted to $ 0.6 million and zero , respectively.

During the third quarter of 2021, the Company filed a claim under a representations and warranties insurance policy purchased by the Company in connection with the acquisition of Softworld.

1 unchanged sentence

During the fourth quarter of 2021, the Company entered into a settlement agreement and mutual release with the insurer resolving all claims under the policy in exchange for a payment of $ 19.0 million, which was received prior to year-end 2021.

The Company estimates the aggregate range of reasonably possible losses, in excess of amounts accrued, is $ 0.7 million to $ 9.3 million as of year-end 2021.

The Company estimates the aggregate range of reasonably possible losses, in excess of amounts accrued, is zero to $ 5.6 million as of year-end 2022.

This range includes matters where a liability has been accrued but it is reasonably possible that the ultimate loss may exceed the amount accrued and for matters where a loss is believed to be reasonably possible, but a liability has not been accrued.

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Intersegment revenue represents revenue earned between the reportable segments and is eliminated from total segment revenue from services.

Professional & Industrial delivers staffing, outcome-based and direct-hire services focused on office, Professional, Light Industrial and Contact Center specialties in the U.S.

Professional & Industrial delivers staffing, outcome-based and permanent placement 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.

Education delivers staffing, direct-hire and executive search services across the full education spectrum from early childhood to higher education in the U.S.

Outsourcing & Consulting is focused on providing MSP, RPO, PPO and Talent

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

Education delivers staffing, permanent placement and executive search services across the full education spectrum from early childhood to higher education in the U.S.

Outsourcing & Consulting is focused on providing MSP, RPO, PPO and Talent Advisory Services to customers on a global basis.

International delivers staffing, RPO and permanent placement services in Europe, as well as services in Mexico in accordance with recent changes in labor market regulations and, prior to August 2020, Brazil (see Acquisitions and Dispositions footnote).

KELLY SERVICES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Advisory Services to customers on a global basis.

International delivers staffing, RPO and direct-hire services in Europe, as well as services in Mexico in accordance with recent changes in labor market regulations and, prior to August 2020, Brazil (see Acquisitions and Disposition footnote).

Corporate expenses that directly support the operating units have been allocated to Professional & Industrial, Science, Engineering & Technology, Education, Outsourcing & Consulting and International based on work effort, volume or, in the absence of a readily available measurement process, proportionately based on gross profit realized.

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Outsourcing & Consulting SG&A expenses ( 149.8 ) ( 122.7 ) ( 108.3 )

Goodwill impairment charge ( 41.0 ) — —

Outsourcing & Consulting earnings (loss) from operations ( 21.2 ) 18.7 11.5

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Corporate ( 94.0 ) ( 88.1 ) ( 203.8 )

Loss on disposal ( 18.7 ) — —

Gain on sale of assets 6.2 — —

Consolidated Total 14.8 48.6 ( 93.6 )

Gain (loss) on investment in Persol Holdings ( 67.2 ) 121.8 ( 16.6 )

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

Other income (expense), net 1.6 15.4 3.4

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Recently Adopted

In October 2021, the FASB issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, to require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers.

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

The amendments in this update are effective for fiscal years beginning after December 15 ,2022, including interim periods within those fiscal years and should be applied prospectively to business combinations that occur after the effective date.

We early adopted this standard in the first quarter of 2022 and the adoption did not have a material impact to our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

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The guidance clarifies how to account for the transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative.

The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted.

The adoption of this standard did not have a material impact to our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12 simplifying various aspects related to the accounting for income taxes.

The guidance removes exceptions to the general principles in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted.

The ASU was effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted.

The adoption of this standard did not have a material impact to our consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In December 2019, the FASB issued ASU 2019-12 simplifying various aspects related to the accounting for income taxes.

The ASU was effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted.

The adoption of this standard did not have a material impact to our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

The ASU is effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual periods, with early adoption permitted.

The ASU was effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual periods, with early adoption permitted.

Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively.

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The standard also requires additional quantitative and qualitative disclosures regarding credit risk inherent in a reporting entity's portfolio, how management monitors this risk, management's estimate of expected credit losses, and the changes in the estimate that has taken place during the period.

This ASU is effective for interim and annual reporting periods beginning after December 15, 2019 with early adoption permitted for annual reporting periods beginning after December 15, 2018.

This ASU was effective for interim and annual reporting periods beginning after December 15, 2019 with early adoption permitted for annual reporting periods beginning after December 15, 2018.

We adopted this ASU using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures, as applicable.

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In August 2018, the FASB issued ASU 2018-13 which eliminates, adds and modifies certain fair value measurement disclosures.

The ASU is effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual periods, with early adoption permitted.

The ASU was effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual periods, with early adoption permitted.

The adoption of this standard did not have a material impact to our consolidated financial statements.

Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to business combinations that occur after the effective date.

We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures.

Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.

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footnote for a description of related party activity with PersolKelly Pte.

Subsequent Events

On February 11, 2022, the Company’s board of directors approved transactions related to our investments in the Asia-Pacific region.

Investment in Persol Holdings

As of January 2, 2022, the investment in Persol Holdings was recorded at its fair value of $ 264.3 million based on quoted market prices of the stock on the Tokyo Stock Exchange.

In addition, a deferred income tax liability of $ 70.9 million has been provided.

On February 15, 2022, the Company’s Kelly Services Japan subsidiary sold the investment in the common stock of Persol Holdings in an open market transaction.

The proceeds were $ 197.4 million, less transaction expenses.

The investment was purchased in 2005 and 2006 at a cost of $ 33.9 million.

The February 15, 2022 transaction will result in a taxable gain in Japan.

Since the beginning of fiscal year 2022 through the date of transaction, we recorded losses of $ 52.4 million related to changes in the fair value of the investment.

The estimated total loss on Persol common stock, of $ 46.5 million, net of tax, including losses related to changes in the fair value up to the date of the transaction, will be reflected in our statement of earnings in the first quarter of 2022.

Investment in PersolKelly Pte.

As of January 2, 2022, the investment in the JV, accounted for under the equity method, was recorded at $ 123.4 million and a deferred income tax liability of $ 13.3 million has been provided.

On February 14, 2022, the Company entered into an agreement to sell 95 % of its shares in the JV to our partner, Persol Asia Pacific Pte.

Ltd., for $ 119.5 million.

After this transaction, the Company will have a remaining ownership interest in the JV of 2.5 %.

The gain or loss on the sale in the first quarter of 2022 is not expected to be material.

The transaction will result in a taxable gain in the U.S.

Share repurchase

The Company repurchased its 1,576,169 Class A and 1,475 Class B common shares held by Persol Holdings on February 14, 2022 at a price based on the average closing price of the last 5 business days prior to the transaction.

The cost of the shares was $ 27.2 million.

The shares were subsequently retired and returned to authorized but unissued status.

KELLY SERVICES, INC.

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Deferred tax assets valuation allowance $ 20.2 0.5 — ( 0.8 ) ( 0.9 ) $ 19.0

Fiscal year ended December 29, 2019

Fiscal year ended January 3, 2021

Reserve deducted in the balance sheet from the assets to which it applies -

Allowance for doubtful accounts - trade accounts receivable $ 13.2 3.4 0.7 (1) — ( 4.4 ) $ 12.9

Deferred tax assets valuation allowance $ 19.0 3.7 — 0.5 ( 3.0 ) $ 20.2

(1) Adjustment to provision for sales allowances charged to revenue from services.

INDEX TO EXHIBITS

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Non-Employee Directors Deferred Compensation Plan (Reference is made to Exhibit 10.5 to the Form 10-K filed with the Commission on February 13, 2020, which is incorporated herein by reference).

Third Amended and Restated Credit Agreement, dated December 5, 2019 (Reference is made to Exhibit 10.6 to the Form 8-K filed with the Commission on December 9, 2019, which is incorporated herein by reference).

First Amendment to Third Amended and Restated Credit Agreement, dated November 4, 2022 (Reference is made to Exhibit 10.8 to the Form 8-K filed with the Commission on November 10, 2022, which is incorporated herein by reference).

Agreement of Purchase and Sale, A.F.J.

Development Company and Kelly Properties, LLC (Reference is made to Exhibit 10.7 to the Form 10-K filed with the Commission on February 13, 2020, which is incorporated herein by reference).

Employment Agreement between Kelly Services Management Sarl and Olivier Thirot (Reference is made to Exhibit 10.8 to the Form 10-Q filed with the Commission on May 12, 2022, which is incorporated herein by reference).

Second Addendum to Employment Agreement between Kelly Services Management Sarl and Berendina Maria Bekhuis Koolhaas (Reference is made to Exhibit 10.9 to the Form 10-Q filed with the Commission on August 11, 2022, which is incorporated herein by reference).

Kelly Services, Inc.

Management Retirement Plan as amended and restated January 1, 2020 (Reference is made to Exhibit 10.12 to the Form 10-K filed with the Commission on February 18, 2021, which is incorporated herein by reference).

Amended and Restated Pledge and Security Agreement, dated December 5, 2019 (Reference is made to Exhibit 10.14 to the Form 8-K filed with the Commission on December 9, 2019, which is incorporated herein by reference).

First Amended and Restated Receivables Purchase Agreement Amendment No.

2, dated December 30, 2021 (Reference is made to Exhibit 10.15 to the Form 8-K filed with the Commission on January 5, 2022, which is incorporated herein by reference).

INDEX TO EXHIBITS

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REGULATION S-K (continued)

First Amended and Restated Receivables Purchase Agreement Amendment No.

2, dated December 30, 2021 (Reference is made to Exhibit 10.15 to the Form 8-K filed with the Commission on January 5, 2022, which is incorporated herein by reference).

First Amended and Restated Receivables Purchase Agreement Amendment No.

3, dated September 21, 2022 (Reference is made to Exhibit 10.16 to the Form 10-Q filed with the Commission on November 10, 2022, which is incorporated herein by reference).

Code of Business Conduct and Ethics, revised August 2022 (Reference is made to Exhibit 14 to the Form 10-Q filed with the commission on November 10, 2022, which is incorporated herein by reference).

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Chairman of the Board and Director

February 17, 2022 * /s/ C.

February 16, 2023 * /s/ G.

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February 16, 2023 * /s/ A.

February 17, 2022 * /s/ J.

February 16, 2023 * /s/ I.

11 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 9A. Controls and Procedures