What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-11 compared with 2022-11-10 · 134 added, 280 removed, 139 unchanged (75% of the section changed)

1 unchanged sentence

Executive Overview

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

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

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

• Employ a talent-first mentality

• Relentlessly deliver for customers

• Grow through discipline and focus

• Deliver efficiency and effectiveness in everything we do

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

The Talent Solutions Industry

Labor markets have been in the midst of change due to automation, secular shifts in labor supply and demand and skills gaps.

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

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

Our industry is evolving to meet businesses’ growing demand for specialized talent, whether delivered as a single individual or as part of a total workforce solution.

Companies in our industry are using novel sourcing approaches—including gig platforms, independent contractors and other talent pools—to create customized workforce solutions that are flexible and responsive to the labor market.

In addition, today’s companies are elevating their commitment to talent, with the growing realization that meeting the changing needs and requirements of talent is essential to remain competitive.

The ways in which people view, find and conduct work are undergoing fundamental shifts.

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

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

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

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

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

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

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

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

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

and Canada, including our KellyConnect and our Business and Professional Services products

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

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

• Education – delivers staffing, direct-hire and executive search services across the full education spectrum from early childhood to higher education in the U.S., and includes Teachers On Call, Greenwood/Asher & Associates and Pediatric Therapeutic Services ("PTS"), a specialty firm providing in-school therapy services, acquired in May 2022

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

• International – delivers staffing, RPO and direct-hire services in 14 countries in Europe, as well as services in Mexico delivered in accordance with recent changes in labor market regulations.

Effective July 20, 2022, we completed a transaction to sell our business in Russia to an in-country provider and no longer operate in Russia

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

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

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

Our working capital requirements are primarily generated from temporary employee payroll and customer accounts receivable.

The nature of our business is such that trade accounts receivable are our most significant asset.

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

and was 64 days on a global basis as of the end of the third quarter of 2022 and 63 days as of the end of the third quarter of 2021.

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

Our Perspective and Outlook on Growth

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

Demand for our services remains strong, although continued economic uncertainty, including inflation and rising interest rates, has created more variability in demand across industry verticals and customer size.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In March 2022, we completed the acquisition of RocketPower, a business that diversifies and strengthens Kelly’s RPO business by accessing the high-tech market.

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

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

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

We entered 2023 committed to continuing our pursuit of profitable growth, despite the ongoing macroeconomic and labor market headwinds.

As is typical during times of economic uncertainty, some segments of the economy are proving more resilient than others.

Likewise, Kelly’s specialty solutions—where we have intentionally focused our growth strategy—are proving more resilient than others.

Our specialty growth strategy paid off in several areas in the first quarter.

• Our Education segment continued to report significant top-line growth on improving fill rates and new customer wins.

• Our higher margin outcome-based solutions in P&I and SET continued to demonstrate resilient revenue and gross profit growth as customers continue to demand our value-added solutions.

• Our favorable organic business mix and higher-margin acquisitions continued to drive improvements in our gross profit rate.

• We proactively managed expenses, balancing cost management with ongoing investment in businesses that are delivering strong revenue growth.

• In the face of decreased demand for staffing services, we took action to reposition P&I staffing to capitalize on local market opportunities.

As we approach the three-year anniversary of Kelly’s operating model, it’s clear we have made progress on our growth journey.

We have grown gross profit and improved our gross margin percentage by shifting to a higher-margin, higher-growth business mix;

unlocked value by monetizing non-core assets;

and reinvested that capital in future growth through our inorganic and organic investments.

Now it is time for our progress to start yielding meaningful improvement to the bottom line.

To that end, we have initiated a comprehensive transformation initiative to optimize our business and functional operations in a sustainable manner;

unlock additional value-creating opportunities;

and accelerate profitable growth.

Specific milestones and targets will be established, and we are already underway:

• We are sharpening our focus on reducing organizational complexity and inefficiencies, and finding new avenues of growth.

• We have formed a Transformation Management Office and appointed a Chief Transformation Officer to identify value-creating opportunities across the enterprise and drive the necessary changes to realize these opportunities.

• We have engaged an outside consulting firm that brings deep business transformation expertise, world-class data and analytics capabilities, and a tested model to inform our efforts.

The business transformation initiative is a top priority in the year ahead and we expect to see improvement in our EBITDA margin in the near term.

Our goal is to build on the progress we’ve made in the last three years to create long-term structural improvements that will benefit our employees, the talent we place, our customers, and shareholders.

Financial Measures

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(Dollars in millions)

Third Quarter September Year to Date

2022 2021 % Change 2022 2021 % Change

First Quarter

2023 2022 % Change

Revenue from services $ 1,268.3 $ 1,296.4 (2.2) %

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SG&A expenses excluding restructuring charges 237.7 234.4 1.4

Restructuring charges — (0.1) NM — (0.1) NM

Restructuring charges 5.7 1.7 238.2

Total SG&A expenses 243.4 236.1 3.1

Goodwill impairment charge 30.7 — NM 30.7 — NM

Loss on disposal 0.2 — NM 18.7 — NM

Gain on sale of assets — — NM (5.3) — NM

Earnings (loss) from operations (21.4) 9.0 NM 10.2 33.3 (69.4)

Gain (loss) on investment in Persol Holdings — 35.5 NM (67.2) 71.8 NM

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

Gain on sale of assets — (0.9) NM

Earnings (loss) from operations 10.7 23.4 (54.4)

Loss on investment in Persol Holdings — (67.2) NM

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

Other income (expense), net 2.0 2.8 (27.5)

Earnings (loss) before taxes and equity in net earnings (loss) of affiliate (21.2) 44.2 NM (75.5) 101.1 NM

Earnings (loss) before taxes and equity in net earnings (loss) of affiliate 12.7 (61.4) NM

Income tax expense (benefit) 1.8 (13.0) 113.5

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

Net earnings (loss) $ (16.2) $ 34.8 NM % $ (61.6) $ 84.4 NM %

Net earnings (loss) $ 10.9 $ (47.6) NM %

Gross profit rate 20.0 % 19.9 % 0.1 pts.

20.4 % 18.4 % 2.0 pts.

Third Quarter Results

Revenue from services in the third quarter decreased 2.3% on a reported basis and increased 0.3% on a constant currency basis, and reflects revenue increases in Education, Science, Engineering & Technology, and Outsourcing & Consulting operating segments, partially offset by declines in Professional & Industrial and International segments.

First Quarter Results

Revenue from services in the first quarter decreased 2.2% on a reported basis and 1.4% on a constant currency basis, and reflects revenue declines in Professional & Industrial, International, and Science, Engineering & Technology segments, partially offset by increases in Education and Outsourcing & Consulting segments.

Our 2022 acquisitions of RocketPower, an RPO solutions provider, and PTS, a specialty firm that provides in-school therapy services, added approximately 140 basis points to the revenue growth rate, while the sale of our Russian operations in July 2022 resulted in a 230 basis points year-over-year decline in constant currency.

Compared to the third quarter of 2021, revenue from staffing services decreased 5.0% and revenue from outcome-based services increased 6.1%.

Permanent placement revenue, which is included in revenue from services, increased 0.7% from the prior year.

Gross profit increased 5.1% on a reported basis and 7.6% on a constant currency basis due to an increase in the gross profit rate.

The gross profit rate increased 140 basis points due primarily to favorable product mix, and lower employee-related costs, coupled with the impact of the acquisitions of RocketPower and PTS which generate higher margins, as well as higher permanent placement income.

The gross profit rate increased in all operating segments.

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

Compared to the first quarter of 2022, revenue from staffing services decreased 4.3% and revenue from outcome-based services increased 13.3%.

In addition, revenue from talent solutions increased 1.4% and permanent placement revenue decreased 34.2% from the prior year.

Gross profit decreased 1.7% on a reported basis and 0.8% on a constant currency basis.

The gross profit rate increased 10 basis points due primarily to favorable product mix partially offset by a decrease in permanent placement revenue.

Permanent placement revenue has very low direct costs of services and has a disproportionate impact on gross profit rates.

The acquisitions of RocketPower and PTS, which generate higher margins, contributed to the favorable product mix.

Increases in the gross profit rate for Outsourcing & Consulting and Education were partially offset by a decrease in the gross profit rate in Professional & Industrial.

Total SG&A expenses increased 3.1% on a reported basis and 3.8% on a constant currency basis.

Included in SG&A expenses in the first quarter of 2023 was $5.7 million of restructuring charges.

Actions were taken to further our cost management efforts in response to current demand levels and to reposition our P&I staffing business to better capitalize on opportunities in local markets.

Excluding restructuring, SG&A expenses increased 1.4% on a reported basis and 2.1% on a constant currency basis.

SG&A expenses related to RocketPower and PTS, including intangible asset amortization expense and other operating expenses, accounted for approximately 220 basis points of the year-over-year increase.

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

The goodwill impairment charge relates to our RocketPower business, which delivers recruitment process outsourcing services primarily to customers in the high-tech industry and is included in the OCG segment.

Changes in market conditions related to demand in hiring in the high-tech industry and slowing growth in RPO more broadly triggered an interim goodwill impairment test which resulted in an impairment charge of $30.7 million.

Loss on disposal relates to the completion of the sale of our Russia operations in July 2022.

We have completed the sale of our business in Russia to a local firm within the country and are no longer operating in Russia.

Loss from operations for the third quarter of 2022 totaled $21.4 million, compared to earnings of $9.0 million in the third quarter of 2021.

The decline is primarily related to the goodwill impairment charge.

Income tax benefit was $5.0 million for the third quarter of 2022 and income tax expense was $11.1 million for the third quarter of 2021.

These amounts were impacted by changes in earnings from operations.

The increase in SG&A expenses was partially offset by decreases in performance-based incentive compensation expenses and lower expenses resulting from the sale of our Russian operations in 2022.

Earnings from operations for the first quarter of 2023 totaled $10.7 million, compared to earnings of $23.4 million in the first quarter of 2022.

The decline is primarily related to the impact of our 2023 restructuring charge and the impact of lower revenue compared to the prior year.

The loss on investment in Persol Holdings and loss on currency translation from liquidation of subsidiary in 2022 are non-cash charges related to changes in the fair value of our investment in the common stock of Persol Holdings, the completion of the sale of the investment in the first quarter of 2022 and the liquidation of our Japanese subsidiary following the sale.

Income tax expense was $1.8 million for the first quarter of 2023 and income tax benefit was $13.0 million for the first quarter of 2022.

The variance primarily relates to the 2022 loss on investment in Persol Holdings.

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

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

The net loss for the period was $16.2 million, compared to net earnings of $34.8 million for the third quarter of 2021.

The 2022 net loss includes the goodwill impairment charge, net of tax, and the 2021 period includes a gain on the sale of Persol Holdings common shares, net of tax.

September Year to Date Results

Revenue from services in the first nine months of 2022 increased 2.0% on a reported basis and 4.0% on a constant currency basis, and reflects revenue increases in Education, Science, Engineering & Technology, and Outsourcing & Consulting operating segments, partially offset by declines in Professional & Industrial and International segments.

Our acquisition of Softworld, a technology staffing and solutions firm in the second quarter of 2021 and our 2022 acquisitions of RocketPower, an RPO solutions provider, and PTS, a specialty firm, that provides in-school therapy services, added approximately 200 basis points to the revenue growth rate.

Compared to the first nine months of 2021, revenue from staffing services decreased 0.6% and revenue from outcome-based services increased 6.6%.

Permanent placement revenue, which is included in revenue from services, increased 31.2% from the prior year.

Gross profit increased 13.1% on a reported basis and 15.1% on a constant currency basis on higher revenue volume, combined with an increase in the gross profit rate.

The gross profit rate increased 200 basis points due primarily to favorable product mix, lower employee-related costs, higher permanent placement income and the impact of the acquisitions of Softworld, RocketPower and PTS which generate higher gross profit rates.

The gross profit rate increased in all operating segments.

Included in gross profit for the first nine months of 2022 is a one-time permanent placement fee from a large customer, as well as an adjustment to prior periods workers' compensation expenses, resulting in 20 basis points of favorable impact.

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

Total SG&A expenses increased 10.5% on a reported basis and 12.2% on a constant currency basis.

Approximately 320 basis points of the year-over-year increase is attributable to the first quarter SG&A expenses for Softworld and the second and third quarter SG&A expenses for RocketPower and PTS, including amortization of intangibles and other operating expenses.

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

The goodwill impairment charge relates to our RocketPower business which delivers recruitment process outsourcing services primarily to customers in the high-tech industry and is included in the OCG segment.

Loss on disposal relates to our decision to sell our business in Russia in May 2022.

As a result, our Russian operations were classified as a held for sale disposal group and an impairment loss of $18.5 million representing the excess carrying value over the fair value of the net assets, less costs to sell, was recognized in the second quarter of 2022 with an additional loss of $0.2

million recognized in the third quarter upon completion of the transaction.

Gain on sale of assets relates to the disposition of under-utilized real property located in the United States.

Earnings from operations for the first nine months of 2022 totaled $10.2 million, compared to earnings of $33.3 million in the first nine months of 2021.

The decline is due primarily to the goodwill impairment charge and the loss on disposal, partially offset by higher gross profit, net of increased SG&A expenses and gain on sale of assets.

Included in total earnings from operations in the first nine months of 2022 is approximately $12.5 million related to Softworld, RocketPower and PTS earnings from operations, inclusive of amortization of intangibles, and $4.1 million in the first nine months of 2021 related to Softworld, inclusive of amortization of intangibles.

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

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

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

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

parent in the first quarter of 2022.

Income tax benefit was $13.1 million for the first nine months of 2022 and income tax expense was $19.0 million for the first nine months of 2021.

These amounts were impacted by changes in earnings from operations and from non-taxable returns on life insurance policies.

The second quarter of 2021 also benefited $5.2 million from a change in United Kingdom tax rates.

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

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

It is also affected by discrete items that may occur in any given period but are not consistent from period to period, such as tax law changes, changes in judgment regarding the realizability of deferred tax assets, the tax effects of stock compensation and, prior to February 2022, changes in the fair value of the Company’s investment in Persol Holdings, which were treated as discrete since they cannot be estimated.

The net loss for the period was $61.6 million, compared to net earnings of $84.4 million for the first nine months of 2021.

This change was due to the Persol Holdings investment, including the first quarter 2022 sale and related impacts, the goodwill impairment charge, the loss on disposal related to the sale of our Russian operations, partially offset by improved gross profit in the first nine months of 2022 and the gain on sale of under-utilized real property in the United States.

The net earnings for the period were $10.9 million, compared to a net loss of $47.6 million for the first quarter of 2022.

The 2023 net earnings includes the restructuring charges, net of tax, and 2022 includes a loss on the sale of Persol Holdings and related loss on currency translation from liquidation of subsidiary, net of tax.

Operating Results By Segment

(Dollars in millions)

Third Quarter September Year to Date

2022 2021 % Change 2022 2021 % Change

First Quarter

2023 2022 % Change

Revenue from Services:

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International 211.8 252.8 (16.2)

Intersegment revenue (0.3) (0.2) 21.5 (0.9) (0.6) 58.1

Intersegment revenue (3.7) (0.3) NM

Consolidated Total $ 1,268.3 $ 1,296.4 (2.2) %

Third Quarter Results

First Quarter Results

Professional & Industrial revenue from services decreased 12.3%.

The decrease was due primarily to a 18.9% decline in revenue from staffing services resulting from lower hours volume, partially offset by higher bill rates.

Included in the decline in hours was the impact of a shift of a large staffing customer to a direct hire model which resulted in lower staffing volume.

Revenue from outcome-based services increased by 3.4%, as the decline in demand for our call center specialty was more than offset by an increase in demand for other outcome-based specialties.

Science, Engineering & Technology revenue from services increased 5.0%.

The revenue growth was driven by increases in our outcome-based product, bill rates and permanent placement income, partially offset by lower hours volume in our staffing specialties.

Education revenue from services increased 56.6%, reflecting an increased demand for our services as compared to a year ago, as well as the impact of the acquisition of PTS in May 2022.

On an organic basis, revenue increased 44.5% reflecting new customer wins, increased demand from existing customers and the impact of higher fill rates.

Outsourcing & Consulting revenue from services increased 4.5% on a reported basis, which includes the revenue from the acquisition of RocketPower in March 2022.

On an organic basis, revenue declined 1.7% in nominal currency and 0.3% in constant currency, as declines in PPO revenue partially offset revenue growth in higher margin MSP and RPO products.

International revenue from services decreased 16.1% on a reported basis and decreased 5.4% in constant currency.

The decrease was primarily the result of the sale of our Russian operations in July 2022, partially offset by the favorable impact of higher hours volume in Portugal, Switzerland and Germany.

September Year to Date Results

Professional & Industrial revenue from services decreased 8.5%.

The decrease was due primarily to a 10.8% decline in staffing services resulting from lower hours volume, partially offset by higher bill rates.

Included in the decline in hours was the impact of a shift of a large staffing customer to a direct hire model which resulted in lower staffing volume.

Revenue from outcome-based services declined 3.3% due to lower demand for our call center specialty, partially offset by growth in other specialties.

Science, Engineering & Technology revenue from services increased 12.1% on a reported basis, which includes revenue from the acquisition of Softworld in the second quarter of 2021.

Excluding the impact of the addition of Softworld revenue in the first quarter of 2022, the revenue growth was 7.7%, which was driven by increases in our outcome-based services as well as increases in bill rates and permanent placement income in our staffing business.

Revenue from outcome-based services increased by 14.9% as all specialties experienced an increase in demand.

Science, Engineering & Technology revenue from services decreased 3.4%.

The revenue decline was driven by declines in hours volume in our staffing specialties and lower permanent placement fees, partially offset by higher outcome-based services revenue and higher bill rates in our staffing specialties.

Education revenue from services increased 43.9%, reflecting an increased demand for our services as compared to a year ago, as well as the impact of the acquisition of PTS in May 2022.

On an organic basis, revenue increased 47.1% reflecting new customer wins, increased demand from existing customers and the impact of higher fill rates.

On an organic basis, revenue increased 34.8% reflecting the impact of higher fill rates, new customer wins and increased demand from existing customers.

Outsourcing & Consulting revenue from services increased 5.0% on a reported basis, which includes the revenue from the acquisition of RocketPower in March 2022.

On an organic basis, revenue growth was 4.2% due primarily to strong demand for RPO services, coupled with revenue growth in MSP, partially offset by declines in PPO revenue.

On an organic basis, revenue increased 2.6% in nominal currency and 4.0% in constant currency, as revenue growth in higher margin RPO and MSP products were partially offset by declines in PPO revenue.

International revenue from services decreased 16.2% on a reported basis and decreased 13.8% in constant currency.

The decrease was primarily the result of revenue declines in Mexico due to the impact of legislation enacted in the third quarter of 2021, which placed restrictions on the staffing industry, combined with the impact of the sale of our Russian operations in July 2022.

Revenue in Europe decreased 6.1% on a reported basis and increased 2.9% in constant currency with growth in most geographies.

The decrease was primarily the result of the sale of our Russian operations in July 2022.

Excluding this impact, revenue decreased 5.1% on a reported basis and 2.3% in constant currency, reflecting overall lower hours volume primarily in France and Switzerland, partially offset by revenue growth in Mexico, Portugal and Germany.

Operating Results By Segment (continued)

(Dollars in millions)

Third Quarter September Year to Date

2022 2021 Change 2022 2021 Change

First Quarter

2023 2022 Change

Gross Profit:

7 unchanged sentences

Professional & Industrial 17.9 % 18.7 % (0.8) pts.

18.2 % 16.4 % 1.8 pts.

Science, Engineering & Technology 23.3 23.3 —

3 unchanged sentences

Consolidated Total 20.0 % 19.9 % 0.1 pts.

20.4 % 18.4 % 2.0 pts.

Third Quarter Results

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

In comparison to the prior year, the gross profit rate increased 30 basis points.

This increase reflects lower employee-related costs.

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

The gross profit rate increased 140 basis points due to improved specialty mix, partially offset by higher employee-related costs.

First Quarter Results

Gross profit for the Professional & Industrial segment decreased on lower revenue volume and a decrease in the gross profit rate.

In comparison to the prior year, the gross profit rate decreased 80 basis points.

This decrease reflects lower permanent placement revenues and higher employee-related costs, partially offset by improved product mix.

The Science, Engineering & Technology gross profit decreased on lower revenue volume.

The gross profit rate was flat to prior year.

Improved product mix was offset by lower permanent placement revenues and higher employee-related costs.

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

The gross profit rate increased 80 basis points due primarily to the acquisition of PTS which generates higher margins, lower employee-related costs and higher permanent placement income at Greenwood/Asher.

The gross profit rate increased 50 basis points due primarily to the acquisition of PTS which generates higher margins, partially offset by unfavorable customer mix.

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

1 unchanged sentence

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

International gross profit decreased 9.6% on a reported basis and increased 2.0% in constant currency.

The decrease on a reported basis resulted from lower revenue volume, partially offset by an improved gross profit rate.

On a constant currency basis, the improved gross profit rate more than offset the lower revenue volume.

The gross profit rate increased 110 basis points primarily due to improved customer mix and higher permanent placement income.

September Year to Date Results

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

In comparison to the prior year, the gross profit rate increased 180 basis points.

This increase reflects higher permanent placement income, including conversion fees related to a large customer, lower employee-related costs and improved business mix.

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

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

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

The gross profit rate increased 50 basis points due primarily to the acquisition of PTS which generates higher margins, and higher permanent placement income at Greenwood/Asher.

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

The gross profit rate increased 400 basis points primarily due to a change in product mix within this segment.

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

International gross profit decreased 1.8% on a reported basis and improved 7.4% on a constant currency basis.

On a reported basis, lower revenue volume was partially offset by an improved gross profit rate.

On a constant currency basis, the improved gross profit rate more than offset the impact of lower revenue volume.

In comparison to the prior year, the gross profit rate increased 150 basis points primarily due to improved customer mix and higher permanent placement income.

International gross profit decreased 14.9% on a reported basis and 12.2% in constant currency.

The decrease was primarily the result of the sale of our Russian operations in July 2022, and lower revenue volume in France and Switzerland.

Operating Results By Segment (continued)

(Dollars in millions)

Third Quarter September Year to Date

2022 2021 % Change 2022 2021 % Change

First Quarter

2023 2022 % Change

SG&A Expenses:

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Consolidated Total $ 243.4 $ 236.1 3.1 %

Third Quarter Results

Total SG&A expenses in Professional & Industrial decreased 6.0% from the prior year, primarily due to cost management in response to lower revenue volume compared to the prior year.

Total SG&A expenses in Science, Engineering & Technology increased 10.2% from the prior year, primarily due to higher performance-based incentive compensation expense and higher salary-related costs from higher headcount and salary increases.

Total SG&A expenses in Education increased 25.6% from the prior year, and includes the impact of the acquisition of PTS in May 2022.

Excluding the impact of the PTS acquisition, SG&A expenses increased 15.5% from the prior year, due primarily to higher salary-related expenses as headcount has increased as revenues have grown, partially offset by the prior year impact of a charge to adjust the earnout liability due to the former owners of Greenwood/Asher & Associates.

Total SG&A expenses in Outsourcing & Consulting increased 23.4% from the prior year, and includes the impact of the acquisition of RocketPower in March 2022.

Excluding the impact of the RocketPower acquisition, SG&A expenses increased 12.6% from the prior year, primarily due to higher salary-related expenses as a result of headcount related to higher MSP and RPO revenue and salary increases.

Total SG&A expenses in International decreased 9.1% on a reported basis and increased 1.5% on a constant currency basis.

The constant currency increase was due to higher salary-related expenses driven by an increase in headcount, reflecting improving revenue in Europe, partially offset by the impact of the sale of our Russian operations in July 2022.

Corporate expenses increased 9.9% primarily due to higher performance-based incentive compensation expense.

September Year to Date Results

Total SG&A expenses in Professional & Industrial decreased 1.8% from the prior year, primarily due to lower expenses to support lower volumes in our staffing and outcome-based call center specialties, partially offset by higher performance-based incentive compensation expense.

Total SG&A expenses in Science, Engineering & Technology increased 23.2% from the prior year, and includes the impact of the acquisition of Softworld in the second quarter of 2021.

Excluding the impact of the addition of Softworld expenses in the first quarter of 2022, SG&A expenses increased 15.4% from the prior year.

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

First Quarter Results

Total SG&A expenses in Professional & Industrial decreased 5.4% from the prior year, or 9.2% excluding restructuring charges of $3.0 million.

The decrease excluding restructuring charges is primarily due to cost management in response to lower revenue volume compared to the prior year as well as lower performance-based incentive compensation expenses.

Total SG&A expenses in Science, Engineering & Technology decreased 0.9% from the prior year, primarily due to lower performance-based incentive compensation expenses.

Total SG&A expenses in Education increased 28.2% from the prior year and includes the impact of the acquisition of PTS in May 2022.

Excluding the impact of the PTS acquisition, SG&A expenses increased 23.4% from the prior year, due primarily to higher salary-related expenses as headcount has increased as revenues have grown.

Excluding the impact of the PTS acquisition, SG&A expenses increased 17.0% from the prior year, due primarily to higher salary-related expenses as headcount has increased as revenues have grown as well as increased performance-based incentive compensation expenses.

Total SG&A expenses in Outsourcing & Consulting increased 18.0% from the prior year and includes the impact of the acquisition of RocketPower in March 2022.

Excluding the impact of the RocketPower acquisition, SG&A expenses increased 17.4% from the prior year, due primarily to higher salary-related expenses as headcount has increased as revenues have grown.

Excluding the impact of the RocketPower acquisition, SG&A expenses increased 9.2% from the prior year, primarily due to higher salary-related expenses as a result of headcount related to higher RPO and MSP revenue.

Total SG&A expenses in International decreased 2.3% on a reported basis and increased 0.5% on a constant currency basis.

The increase in constant currency was primarily due to higher salary-related expenses driven by an increase in headcount, reflecting improving revenue in Europe, partially offset by the impact of the sale of our Russian operations in July 2022.

Corporate expenses increased 11.3% primarily due to higher performance-based incentive compensation expense.

The constant currency increase was mainly due to higher salary-related expenses, partially offset by the impact of the sale of our Russian operations in July 2022.

Corporate expenses increased 4.3% compared to the prior year primarily due to litigation-related costs.

Operating Results By Segment (continued)

(Dollars in millions)

Third Quarter September Year to Date

2022 2021 % Change 2022 2021 % Change

First Quarter

2023 2022 % Change

Earnings (Loss) from Operations:

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Science, Engineering & Technology 18.5 20.6 (10.2)

Education (4.8) (7.0) 31.8 8.8 (2.5) NM

Outsourcing & Consulting (24.3) 6.6 NM (14.9) 14.2 NM

International 1.9 2.4 (16.9) 9.1 8.1 13.4

Education 15.5 8.0 93.6

Outsourcing & Consulting 1.1 3.0 (63.7)

International (0.3) 4.6 NM

Corporate (26.4) (25.4) (4.3)

Loss on disposal (0.2) — NM (18.7) — NM

Gain on sale of assets — — NM 5.3 — NM

Consolidated Total $ (21.4) $ 9.0 NM % $ 10.2 $ 33.3 (69.4) %

Third Quarter Results

Professional & Industrial reported earnings of $5.0 million for the quarter, a 30.7% decrease from a year ago.

The decrease in earnings was primarily due to lower gross profit, partially offset by lower SG&A expense.

Science, Engineering & Technology reported earnings of $22.9 million for the quarter, a 16.2% increase from a year ago.

The increase in earnings was primarily due to increases in revenues in most of our specialties within the SET business unit that were partially offset by increases in certain expenses, including those related to additional headcount and increased performance-based incentive compensation.

Education reported a loss of $4.8 million for the quarter, compared to a loss of $7.0 million a year ago.

The change was primarily due to the increase in revenue resulting from improved demand for our services as compared to a year ago, coupled with good operating leverage.

2022 results also include earnings of $0.7 million from PTS acquired in May 2022.

Outsourcing & Consulting reported a loss of $24.3 million for the quarter, compared to earnings of $6.6 million a year ago, due primarily to a $30.7 million charge related to the impairment of goodwill of RocketPower.

Excluding the goodwill impairment charge, earnings decreased from a year ago as a result of increasing costs, partially offset by higher revenue and gross profit.

International reported earnings of $1.9 million for the quarter, compared to earnings of $2.4 million a year ago.

The decrease in earnings was primarily due to the sale of our Russian operations in July 2022.

September Year to Date Results

Professional & Industrial reported earnings of $27.1 million for the first nine months of 2022, a 36.1% increase from a year ago.

The increase was due to improved gross profit, including conversion fees related to a large customer and good cost management.

Science, Engineering & Technology reported earnings of $63.9 million for the first nine months of 2022, a 12.5% increase from a year ago.

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

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

Education reported earnings of $8.8 million for the first nine months of 2022, compared to a loss of $2.5 million a year ago.

Gain on sale of assets — 0.9 NM

Consolidated Total $ 10.7 $ 23.4 (54.4) %

First Quarter Results

Professional & Industrial reported earnings of $2.3 million for the quarter, an 80.0% decrease from a year ago.

The decrease in earnings was primarily due to lower revenue and gross profit, partially offset by lower SG&A expense.

Science, Engineering & Technology reported earnings of $18.5 million for the quarter, a 10.2% decrease from a year ago.

The decrease in earnings was primarily due to declines in revenues and gross profit in most of our specialties within the SET business unit that were partially offset by lower expenses.

Education reported earnings of $15.5 million for the quarter, compared to earnings of $8.0 million a year ago.

The change was primarily due to the increase in revenue resulting from improved demand for our services as compared to a year ago, coupled with good operating leverage.

2023 results also include earnings of $2.7 million from PTS acquired in May 2022.

Outsourcing & Consulting reported a loss of $14.9 million for the first nine months of 2022, compared to earnings of $14.2 million from a year ago, due primarily to a $30.7 million charge related to the impairment of goodwill of RocketPower.

International reported earnings of $9.1 million for the first nine months of 2022, compared to earnings of $8.1 million a year ago.

The increase in earnings was primarily due to gross profit growth in most geographies, partially offset by the impact of the sale of our Russian operations in July 2022.

Outsourcing & Consulting reported earnings of $1.1 million for the quarter, compared to earnings of $3.0 million a year ago, due primarily to increasing costs, partially offset by higher revenue and gross profit.

2023 results also include a loss of $2.6 million from RocketPower acquired in March 2022.

International reported a loss of $0.3 million for the quarter, compared to earnings of $4.6 million a year ago.

The decrease in earnings was primarily due to lower hours volume in higher margin countries, higher salary-related expenses and the sale of our Russian operations in July 2022.

Financial Condition

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

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

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

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

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Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash, totaled $130.7 million at the end of the third quarter of 2022 and $119.5 million at year-end 2021.

As further described below, we used $111.7 million of cash for operating activities, generated $167.7 million of cash from investing activities and used $37.4 million of cash for financing activities.

Cash, cash equivalents and restricted cash, totaled $121.1 million at the end of the first quarter of 2023 and $162.4 million at year-end 2022.

As further described below, we used $13.5 million of cash for operating activities, used $2.2 million of cash for investing activities and used $24.8 million of cash for financing activities.

Operating Activities

In the first nine months of 2022, we used $111.7 million of net cash for operating activities, as compared to generating $31.0 million in the first nine months of 2021, primarily due to increased working capital requirements.

As revenue levels continue to recover or surpass pre-COVID levels in certain segments, days sales outstanding increased.

As of the end of the third quarter of 2022, global DSO has increased primarily as a result of an increase in the mix of MSP and other customers with extended terms and, to a lesser extent, the timing of customer payments.

Accounts payable and accrued liabilities was $735.2 million and increased from year-end 2021 as a result of increased MSP supplier payables.

This increase partially mitigated the impact of higher global DSO on net cash from operating activities.

In addition, we paid $50.1 million of income taxes related to the sale of Persol Holdings common stock and $29.5 million related to deferred U.S.

payroll taxes in 2022.

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

Global DSO was 64 days at the end of the third quarter of 2022, 60 days at year-end 2021 and 63 days at the end of the third quarter of 2021.

Our working capital position (total current assets less total current liabilities) was $587.1 million at the end of the third quarter of 2022, an increase of $93.6 million from year-end 2021.

Excluding the increase in cash, working capital increased $83.9 million from year-end 2021.

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

In the first three months of 2023, we used $13.5 million of net cash for operating activities, as compared to using $106.1 million in the first three months of 2022, primarily due to decreased working capital requirements.

Accounts receivable have decreased in the first quarter of 2023 as a result of lower revenue and lower DSO.

In addition, we paid $29.5 million related to deferred U.S.

payroll taxes in the first quarter of 2022.

Trade accounts receivable totaled $1.4 billion at the end of the first quarter of 2023.

Global DSO was 59 days at the end of the first quarter of 2023, 61 days at year-end 2022 and 62 days at the end of the first quarter of 2022.

Our working capital position (total current assets less total current liabilities) was $581.6 million at the end of the first quarter of 2023, a decrease of $4.8 million from year-end 2022.

Excluding the decrease in cash, working capital increased $37.2 million from year-end 2022.

The current ratio (total current assets divided by total current liabilities) was 1.6 at the end of the first quarter of 2023 and 1.5 at year-end 2022.

Investing Activities

In the first nine months of 2022, we generated $167.7 million of cash from investing activities, as compared to using $198.4 million in the first nine months of 2021.

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

This was partially offset by $58.3 million of cash used for the acquisition of RocketPower in March 2022, net of cash received, $84.8 million of cash used for the acquisition of PTS in May 2022, net of cash received, and $6.0 million of cash disposed from the sale of Russia in July 2022, net of proceeds.

Included in cash used for investing activities in the first nine months of 2021 is $213.0 million of cash used for the acquisition of Softworld in April 2021, net of cash received and including working capital adjustments.

In the first three months of 2023, we used $2.2 million of cash for investing activities, as compared to generating $257.1 million in the first three months of 2022.

Included in cash used for investing activities in the first three months of 2023 is $4.4 million of cash used for capital expenditures primarily related to technology programs and IT infrastructure, partially offset by $2.0 million for the receipt of the final payment in connection with an investment that was sold in 2021.

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

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

Financing Activities

We used $37.4 million of cash for financing activities in the first nine months of 2022, as compared to using $5.7 million in the first nine months of 2021.

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

Dividends paid per common share were $0.20 in the first nine months of 2022 and $0.05 in first nine months of 2021.

We used $24.8 million of cash for financing activities in the first three months of 2023, as compared to using $30.7 million in the first three months of 2022.

The change in cash used for financing activities was primarily related to the year-over-year change in the buyback of the Company's common shares and the year-over-year change in dividend payments.

In the first quarter of 2023, the buyback of $18.3 million represents repurchases of the Company's Class A common stock as part of the share repurchase program.

In the first quarter of 2022, the $27.2 million represents the buyback of the Company's common shares held by Persol Holdings.

Dividends paid per common share wer e $0.075 in the first three months of 2023 and $0.05 in the first three months of 2022.

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

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

The change in short-

term borrowings in the first nine months of 2021 was primarily due to payments on local lines of credit.

Debt totaled $0.1 million at the end of the third quarter of 2022, which represented local borrowings, compared to no debt at year-end 2021.

There was no debt at the end of the first quarter of 2023 and debt totaled $0.7 million at year-end 2022, which represented local borrowings.

The changes in short-term borrowings in the first three months of 2023 and 2022 were primarily due to payments and borrowings on local lines of credit, respectively.

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

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

Our ratio of debt-to-total capital was 0.0% at the end of the first quarter of 2023 and 0.1% at year-end 2022.

New Accounting Pronouncements

See New Accounting Pronouncements footnote in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q for a description of new accounting pronouncements.

Management has evaluated 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.

Critical Accounting Estimates

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We expect to meet our ongoing short-term and long-term cash requirements principally through cash generated from operations, available cash and equivalents, securitization of customer receivables and committed unused credit facilities.

Additional funding sources could include asset-based lending, additional bank facilities or sale of non-core assets.

Additional funding sources could include additional bank facilities or sale of non-core assets.

To meet significant cash requirements related to our nonqualified retirement plan, we may utilize proceeds from Company-owned life insurance policies.

During 2020, cash generated from operations was supplemented by the deferral of payments of the Company's U.S.

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

We have repaid $59.4 million, including $29.5 million in the first quarter of 2022 and the remaining deferrals of $57.6 million are required to be repaid by January 3, 2023.

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

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

As of the end of the third quarter of 2022, these reviews have not resulted in specific plans to repatriate a majority of our international cash balances.

As of the end of the first quarter of 2023, these reviews have not resulted in specific plans to repatriate a majority of our international cash balances.

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

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

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

As of the first quarter of 2023, we had $200.0 million of available capacity on our $200.0 million revolving credit facility and $100.6 million of available capacity on our $150.0 million securitization facility.

The securitization facility carried no short-term borrowings and $49.4 million of standby letters of credit related to workers’ compensation.

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

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

As of the end of the first quarter of 2023, we met the debt covenants related to our revolving credit facility and securitization facility.

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

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

We expect our working capital requirements to increase over the next several quarters if demand for our services increases, to pay the remaining deferred payroll tax balances noted above by January 3, 2023, and to fund future share repurchases.

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

Specifically, we concluded our cross-shareholding

arrangement with Persol Holdings and reduced our ownership interest in PersolKelly, our APAC joint venture.

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

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

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

In the second quarter of 2022, the Company paid $50.1 million in taxes resulting from the sale of the Persol Holdings shares.

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

We expect our working capital requirements to increase if demand for our services increases.

We also expect to use $23.9 million of cash for repurchases of the Company's Class A common stock during 2023 pursuant to the $50.0 million plan approved by the Company's board of directors on November 9, 2022.

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

Based on our reviews and communications, we believe the risk of one or more of our banks not being able to honor commitments is insignificant.

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

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

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

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis