What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-20 compared with 2023-02-16 · 176 added, 188 removed, 239 unchanged (60% of the section changed)

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Executive Overview

In 2022, Kelly moved forward on its strategic growth journey amid a dynamic macroeconomic environment in the first half of the year.

As the year progressed, a mixed pattern of revenue growth and deceleration emerged and persisted through the balance of 2022 driven by rising inflation, increasing interest rates and heightened economic uncertainty.

Consequently, a growing number of employers scaled back or paused hiring – and in some cases reduced the size of their workforces – to align their costs with declining growth.

Notwithstanding these dynamics, the labor market remained tight.

The economy continued to add jobs – albeit at a slightly slower pace to end the year – and unemployment remained at historically low levels, which contributed to ongoing challenges with sourcing talent.

By executing our strategy in a disciplined manner and focusing on factors within our control, we managed through these ongoing headwinds and achieved solid growth over the prior year.

• We increased total company revenue driven by top-line growth in our Education, SET and OCG business units.

• Our more profitable outcome-based solutions demonstrated resilience amid macroeconomic headwinds and generated solid revenue and gross profit growth.

• Each of our five business units expanded its gross profit rate, reflecting our ongoing drive to shift toward a higher-margin, higher-value business mix.

• Excluding the impact of goodwill impairment charges and a loss on the disposal of our Russian operations, we improved earnings from operations, demonstrating our ability to effectively translate gross margin expansion to earnings growth.

2022 was also a year in which we accelerated our transformation and streamlined our portfolio.

• We ended the cross-ownership arrangement between Kelly and Persol Holdings – selling our investment in the common shares of Persol Holdings and repurchasing our Class A and B common shares held by Persol Holdings – and reduced our ownership interest in our PersolKelly joint venture, unlocking $235 million of liquidity.

• We redeployed a portion of the net proceeds from these transactions to advance our inorganic growth strategy, while preserving the remaining capital to pursue additional high-margin, high-growth acquisitions in the future.

• We monetized non-core real estate holdings, unlocking more capital to invest in growth initiatives.

• We acted decisively to transfer ownership of our Russian operations to a Russian company.

• We increased our dividend to its pre-pandemic level and authorized a $50 million repurchase of outstanding Class A common shares.

Together, these achievements and actions demonstrate our commitment to our specialty growth strategy and create long-term value for all our stakeholders.

As the macroeconomic situation unfolds in 2023, we will stay the course in our pursuit of profitable growth while proactively controlling costs to manage through this economic cycle.

In each of our chosen specialties, we will continue to shift toward a business mix characterized not only by higher margins and value, but greater resilience to lessen the impact of market fluctuations.

We also intend to drive inorganic growth using our available capital to pursue additional high-quality acquisitions in Education, SET and OCG.

Finally, we will continue to invest in technology and new products that will improve the talent and customer experience, increase efficiency and enable organic growth.

Together, these actions will ensure that we continue to move forward on our strategic journey in pursuit of profitable, specialty growth.

2023 marked a year of macroeconomic headwinds and challenging staffing market dynamics as employers in most sectors maintained a guarded approach to hiring and focused on retaining their current workforce amid ongoing economic uncertainty.

In more resilient pockets of the economy where employers are in need of talent, the supply of candidates to fill open roles remains constrained.

These dynamics put pressure on our business as the year progressed, and while we captured growth where it exists, their effects became more noticeable in certain parts of our portfolio.

• Our Education segment continued to report significant year-over-year growth driven by improved fill rates, strong demand from existing customers, and net new customer wins.

• Our higher margin outcome-based solutions in P&I delivered revenue growth as demand for these value-added solutions continues.

• We continued to experience a deceleration in demand for temporary and permanent placement services as well as talent solutions, which impacted results in our P&I, SET and OCG segments.

• We maintained a disciplined approach to managing expenses, including our transformation initiatives, while ensuring Kelly is well positioned to capture demand on the other side of the current economic cycle.

We have remained focused on the future and took aggressive action on our transformation journey to improve Kelly’s profitability and accelerate growth over the long term.

Since announcing the transformation in May, our business unit and enterprise function teams, together with the Transformation Management Office, have made substantial progress on multiple initiatives to drive organizational efficiency and effectiveness.

The actions we have taken to date include restructuring actions, which has reduced our full-time employee headcount, and renegotiated supplier agreements and real estate contracts to deliver structural cost savings.

We have also committed to finding new avenues of growth.

This includes a refreshed go-to-market strategy with a comprehensive approach to delivering the full suite of Kelly solutions to our large enterprise customers that is intended to capture a greater share of wallet as we move into 2024.

We also remain committed to delivering the highest quality of service to all customers regardless of spend or size.

In our P&I segment, for example, we have enhanced our local delivery model and rolled out our Kelly Now mobile application across the U.S to meet the needs of clients and talent.

We completed the sale of our European staffing operations on January 2, 2024.

We move forward with a further streamlined operating model focused on North American staffing and global MSP and RPO solutions.

Together these changes represent structural shifts in Kelly’s operations and are delivering meaningful improvement to the Company’s EBITDA margin which we expect to continue as we move into 2024 and beyond.

Financial Measures

The constant currency (“CC”) change amounts in the following tables refer to the year-over-year percentage changes resulting from translating 2022 financial data into U.S.

The constant currency (“CC”) change amounts refer to the year-over-year percentage changes resulting from translating 2023 financial data into U.S.

dollars using the same foreign currency exchange rates used to translate financial data for 2022.

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Additionally, substantially all of our foreign subsidiaries derive revenues and incur cost of services and selling, general and administrative (“SG&A”) expenses within a single country and currency which, as a result, provides a natural hedge against currency risks in connection with their normal business operations.

CC measures are non-GAAP measures and are used to supplement measures in accordance with GAAP (Generally Accepted Accounting Principles).

CC measures are non-GAAP (Generally Accepted Accounting Principles) measures and are used to supplement measures in accordance with GAAP.

Our non-GAAP measures may be calculated differently from those provided by other companies, limiting their usefulness for comparison purposes.

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Reported and CC percentage changes were computed based on actual amounts in thousands of dollars.

Return on sales (earnings from operations divided by revenue from services) and conversion rate (earnings from operations divided by gross profit) are ratios used to measure the Company’s operating efficiency.

EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA margin (EBITDA divided by revenue from services) are measures used for understanding the Company's ability to generate cash flow and for judging overall operating performance.

EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA margin (EBITDA divided by revenue from services) are measures used by management to compare the Company's operating performance to prior periods on a consistent basis by excluding items that management does not believe are indicative of our normal operations.

Free cash flow (operating cash flows less capital expenditures) is a measure used by management to indicate the change in cash balances arising from operating activities, net of working capital needs and expenditures on fixed assets.

NM (not meaningful) in the following tables is used in place of percentage changes where:

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Gross profit 961.4 1,011.8 (5.0)

SG&A expenses excluding restructuring charges 943.5 866.6 8.9

Restructuring charges — 4.0 NM

SG&A expenses excluding restructuring charges and transaction costs 892.3 942.1 (5.3)

Restructuring charges and transaction costs 42.4 1.4 NM

Total SG&A expenses 934.7 943.5 (0.9)

Asset impairment charge 2.4 — NM

Goodwill impairment charge — 41.0 NM

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Gain on sale of assets — (6.2) NM

Earnings (loss) from operations 14.8 48.6 (69.7)

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

Earnings from operations 24.3 14.8 65.0

Loss on investment in Persol Holdings — (67.2) NM

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

Gain on insurance settlement — 19.0 NM

Other income (expense), net 1.6 (3.6) 146.4

Earnings (loss) before taxes and equity in net earnings (loss) of affiliate (71.2) 185.8 NM

Income tax expense (benefit) (7.9) 35.1 (122.6)

Equity in net earnings (loss) of affiliate 0.8 5.4 (85.9)

Unrealized loss on forward contract (3.6) — NM

Other income, net 4.2 1.6 150.5

Earnings (loss) before taxes and equity in net earnings of affiliate 24.9 (71.2) NM

Income tax benefit (11.5) (7.9) (45.6)

Equity in net earnings of affiliate — 0.8 NM

Net earnings (loss) $ 36.4 $ (62.5) NM %

Gross profit rate 19.9 % 20.4 % (0.5) pts.

Conversion rate 1.5 5.3 (3.8)

The discussion that follows focuses on 2023 results compared to 2022.

For a discussion of 2022 results compared to 2021, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 1, 2023, filed on February 16, 2023.

Revenue from services increased 1.1% on a reported basis and 3.2% 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 first quarter 2021 acquisition of Softworld, a technology staffing and solutions firm, and our first quarter 2022 acquisition of RocketPower, an RPO solutions provider, and our second quarter 2022 acquisition of PTS, a specialty firm that provides in-school therapy services, added approximately 180 basis points to the revenue growth rate.

Revenue from services decreased 2.6% on a reported basis and 3.2% on a constant currency basis, and reflects revenue decreases in Professional & Industrial, Science, Engineering & Technology, Outsourcing & Consulting and International operating segments, partially offset by an increase in the Education segment.

Our first quarter 2022 acquisition of RocketPower, an RPO solutions provider, and our second quarter 2022 acquisition of PTS, a specialty firm that provides in-school therapy services, added approximately 40 basis points to the revenue growth rate.

Compared to 2022, revenue from staffing services decreased 2.8% and revenue from outcome-based services increased 5.9%.

Permanent placement revenue, which is included in revenue from services, increased 18.9% from 2021.

Gross profit increased 10.1% on a reported basis and 12.1% on a constant currency basis on higher revenue volume, combined with an increase in the gross profit rate.

The gross profit rate increased 170 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.

Permanent placement revenue, which is included in revenue from services, decreased 33.6% from 2022.

Gross profit decreased 5.0% on a reported basis and 5.3% on a constant currency basis on lower revenue volume, combined with a decrease in the gross profit rate.

The gross profit rate decreased 50 basis points due primarily to lower permanent placement income, partially offset by favorable business mix.

The gross profit rate decreased 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.

Total SG&A expenses increased 8.4% on a reported basis and 10.0% 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 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 RPO services primarily to customers in the high-tech industry, and is included in the Outsourcing & Consulting segment.

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

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

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.

Total SG&A expenses decreased 0.9% on a reported basis and 1.4% on a constant currency basis.

Included in SG&A expenses in 2023 was $35.5 million of transformation and restructuring charges and $6.9 million of transaction costs, which includes employee termination costs, incurred in the fourth quarter of 2023 directly related to the sale of the EMEA staffing operations in the first quarter of 2024.

In the first quarter of 2023, 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.

last three quarters of 2023, additional actions were taken that will further streamline the Company's operating model to enhance organizational efficiency and effectiveness as part of a comprehensive transformation initiative.

Excluding transformation and restructuring charges and transaction costs, SG&A expenses decreased 5.3% on a reported basis and 5.8% on a constant currency basis.

The decrease in SG&A expenses primarily related to lower performance-based incentive compensation expenses in response to lower revenue volume, lower salary expenses as a result of transformation-related workforce reductions, as well as reduced expenses from the sale of our Russian operations in 2022.

Impairment of assets in 2023 represents the second quarter impairment of right-of-use assets related to an unoccupied office space lease exited in the quarter.

The goodwill impairment charge in 2022 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 resulted in an impairment charge of $41.0 million.

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

Gain on sale of assets in the second quarter of 2022 related to the disposition of under-utilized real property located in the United States.

Earnings from operations for 2023 totaled $24.3 million, compared to earnings of $14.8 million in 2022.

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 2022 is approximately $14.4 million related to Softworld, RocketPower and PTS earnings from operations, inclusive of amortization of intangibles but excluding the RocketPower goodwill impairment charge, and $6.3 million in 2021 related to Softworld, inclusive of amortization of intangibles.

The increase is primarily related to the impact from the prior year goodwill impairment charge and loss on sale of our Russia operations, partially offset by the impact of our 2023 transformation and restructuring charges, transaction costs, asset impairment charge, and the impact of lower revenue compared to the prior year in addition to the impact of the 2022 gain on sale of assets.

The loss on investment in Persol Holdings in 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 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 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 $7.9 million for 2022 and income tax expense was $35.1 million for 2021.

2022 benefited from lower pretax earnings, changes in the fair value of the Company’s investment in Persol Holdings, and the impairment of tax deductible goodwill.

Unrealized loss on forward contract represents the non-cash, mark-to-market losses on the foreign currency forward contract the Company entered into in the fourth quarter of 2023 to mitigate the exchange rate risk associated with the future cash proceeds from the sale of the EMEA staffing operations.

Income tax benefit was $11.5 million for 2023 and 7.9 million for 2022.

Included in the 2023 benefit are a $15.0 million federal and state benefit on the outside basis difference of held for sale assets and a $6.5 million benefit from tax-exempt life insurance cash surrender value gains, offset by a net $4.4 million charge for valuation allowance changes.

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

These benefits were offset by the $7.8 charge associated with tax exempt life insurance cash surrender value losses.

Income tax expense for 2021 included charges from changes in the fair value of the Company’s investment in Persol Holdings and the gain on insurance settlement.

These amounts were offset by benefits from a change in tax rate in the United Kingdom and tax exempt life insurance cash surrender value gains.

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 could not be estimated.

The net loss for 2022 was $62.5 million, compared to net earnings of $156.1 million for 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 2022 and the gain on sale of under-utilized real property in the United States.

The net earnings for 2023 are $36.4 million, compared to a net loss of $62.5 million for 2022.

This change primarily reflects the prior year impact of the Persol Holdings investment, including the first quarter 2022 sale and related impacts, the 2022 goodwill impairment charge, and the 2022 loss on disposal related to the sale of our Russian operations which were partially offset by the 2023 transformation-related charges.

Operating Results By Segment

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International 884.8 932.2 (5.1)

Intersegment revenue (2.6) (0.9) 182.8

Intersegment revenue (19.6) (2.6) NM

Consolidated Total $ 4,835.7 $ 4,965.4 (2.6) %

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The decrease was due primarily to a 16.2% decline in staffing services resulting from lower hours volume, partially offset by higher bill rates.

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

Revenue from outcome-based services declined 0.3% due to lower demand for our call center specialty, partially offset by growth in other specialties.

Science, Engineering & Technology revenue from services increased 9.4% 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 6.1%, which was driven by increases in our outcome-based services as well as an increase in revenue in our staffing business coming from increases in bill rates and permanent placement income, partially offset by a decline in hours.

Revenue from outcome-based services increased 7.9% due to increased demand.

Science, Engineering & Technology revenue from services decreased 5.9% which was driven by a decline in staffing services resulting from declines in hours volume in our staffing specialties, partially offset by higher bill rates.

Permanent placement fees were down 40.2% and revenues from outcome-based services increased 3.7%.

Education revenue from services increased 32.3%.

The revenue increase includes the impact of the acquisition of PTS in May 2022.

On an organic basis, revenue increased 45.9% reflecting increased demand from existing customers, new customer wins and the impact of higher bill rates.

Outsourcing & Consulting revenue from services increased 8.3% on a reported basis, which includes the revenue from the acquisition of RocketPower in March 2022.

On an organic basis, revenue growth was 2.7% 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 29.8% reflecting an increased fill rate and an increased demand for our services from existing customers and from net new customer wins.

Outsourcing & Consulting revenue from services decreased 2.8% on a reported basis, which includes the revenue from the acquisition of RocketPower in March 2022.

On an organic basis, revenue decreased 3.4% due primarily to lower RPO and MSP revenue.

International revenue from services decreased 5.1% on a reported basis and decreased 8.9% in constant currency.

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

Revenue in Europe decreased 9.2% on a reported basis and decreased 0.3% in constant currency, with the impact of the sale of our Russian operations nearly offset by growth in most geographies.

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

Revenue in Europe decreased 8.4% on a reported basis and decreased 11.5% in constant currency, primarily due to the impact of the sale of our Russian operations and lower volume in several geographies.

Operating Results By Segment (continued)

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Consolidated Total 19.9 % 20.4 % (0.5) pts.

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

In comparison to the prior year, the gross profit rate increased 130 basis points.

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

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

The gross profit rate increased 160 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 20 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 360 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 4.3% on a reported basis and improved 4.6% 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 140 basis points, primarily due to improved business mix and higher permanent placement income.

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

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

This decrease reflects lower permanent placement income and higher employee-related costs, partially offset by favorable business mix.

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

The gross profit rate decreased 70 basis points due to lower permanent placement revenues, partially offset by favorable business mix.

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

The gross profit rate decreased 50 basis points due primarily to lower permanent placement fees and unfavorable customer mix, partially offset by lower employee-related costs.

Outsourcing & Consulting gross profit decreased on lower revenue volume, combined with a decrease in the gross profit rate.

The gross profit rate decreased 30 basis points primarily driven by declines in revenue in RPO and MSP, which generate higher margins.

International gross profit decreased 6.3% on a reported basis and decreased 10.0% on a constant currency basis.

The decrease was primarily the result of the sale of our Russian operations in July 2022 and the servicing of certain customer programs by OCG in 2023.

Partially offsetting these impacts was improving gross profit primarily driven by higher revenue volume in Mexico, Portugal and Germany.

Operating Results By Segment (continued)

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Consolidated Total $ 934.7 $ 943.5 (0.9) %

Total SG&A expenses in Professional & Industrial decreased 2.9%, 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 19.2%, 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 13.6%.

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

Total SG&A expenses in Education increased 31.7%, and includes the impact of the acquisition of PTS in May 2022.

Excluding the impact of the PTS acquisition, SG&A expenses increased 24.0%, due primarily to higher salary-related expenses as headcount has increased as revenues have grown.

Total SG&A expenses in Outsourcing & Consulting increased 22.1%, and includes the impact of the acquisition of RocketPower in March 2022.

Excluding the impact of the RocketPower acquisition, SG&A expenses increased 12.0%, due primarily to higher salary-related expenses as headcount has increased as revenues have grown.

Total SG&A expenses in International decreased 4.6% on a reported basis and increased 3.6% 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 6.6%, primarily due to higher performance-based incentive compensation expense.

Total SG&A expenses in Professional & Industrial decreased 12.4%, or 14.8% excluding restructuring charges of $6.7 million.

The decrease excluding restructuring charges is primarily due to lower salary-related and performance-based incentive compensation expenses due to transformation-related actions and in response to lower revenue volume.

Total SG&A expenses in Science, Engineering & Technology decreased 8.1% from the prior year, primarily due to lower performance-based incentive compensation expenses.

Total SG&A expenses in Education increased 13% from the prior year and includes the first quarter impact of the acquisition of PTS in May 2022.

Excluding the impact of the PTS acquisition, SG&A expenses increased 10.4% from the prior year, due primarily to higher salary-related and performance-based incentive compensation expenses as headcount has increased as revenues have grown.

Total SG&A expenses in Outsourcing & Consulting increased 3.1% from the prior year, or 1.3% excluding restructuring charges of $3.0 million, and includes the first quarter impact of the acquisition of RocketPower in March 2022.

Excluding restructuring charges and the impact of the RocketPower acquisition, SG&A expenses were flat to prior year.

Total SG&A expenses in International decreased 0.9% on a reported basis and 4.7% on a constant currency basis.

This decrease was primarily due to the impact of the sale of our Russian operations in July 2022, partially offset by employee termination costs related to the sale of the EMEA staffing operations in the first quarter of 2024.

Corporate expenses increased 29.8%, primarily due to restructuring and transformation charges as well as transaction costs related to the sale of the EMEA staffing operations in the first quarter of 2024.

Excluding restructuring and transformation charges of $23.0 million and transaction costs of $3.8 million, expenses increased 1.8% year-over-year.

The increase excluding these charges is primarily due to litigation-related costs.

Operating Results By Segment (continued)

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2023 2022 % Change

Earnings (Loss) from Operations:

Earnings from Operations:

Professional & Industrial $ 26.6 $ 32.0 (16.9) %

Science, Engineering & Technology 74.3 82.1 (9.5)

Education 18.5 3.0 NM

Education 36.3 18.5 96.6

Outsourcing & Consulting 6.9 (21.2) NM

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Consolidated Total $ 24.3 $ 14.8 65.0 %

Professional & Industrial reported earnings of $32.0 million, a 1.8% increase from 2021.

The increase was due to effective cost management as gross profit declined.

Science, Engineering & Technology reported earnings of $82.1 million, an 11.4% increase from 2021.

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

In addition, increases in gross profit in our outcome-based and telecom specialties were partially offset by increases in certain expenses in most of our specialties in the SET business unit, including those related to additional headcount and increased performance-based incentive compensation.

Professional & Industrial reported earnings of $26.6 million, a 16.9% decrease from 2022.

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

Science, Engineering & Technology reported earnings of $74.3 million, a 9.5% decrease from 2022.

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

Education reported earnings of $36.3 million in 2023, compared to earnings of $18.5 million in 2022.

The change was primarily due to the increase in revenue resulting from improved demand for our services as compared to 2021, coupled with operating leverage.

2022 results also include earnings of $3.8 million from PTS acquired in May 2022.

Outsourcing & Consulting reported a loss of $21.2 million in 2022, compared to earnings of $18.7 million in 2021, due primarily to a charge of $41.0 million related to the impairment of goodwill of RocketPower in 2022.

International reported earnings of $9.9 million in both 2022 and 2021.

The decline in earnings due to the sale of operations in Russia was nearly offset by growth in most geographies.

The change was primarily due to the increase in revenue and gross profit, coupled with good cost management.

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

Outsourcing & Consulting reported earnings of $6.9 million in 2023, compared to a loss of $21.2 million in 2022.

The increase in earnings was primarily due to the impact of the prior year $41.0 million charge related to the impairment of goodwill of RocketPower, partially offset by the first quarter 2023 loss of $2.6 million from RocketPower, acquired in March 2022, the impact of a $2.4 million right-of-use asset impairment charge in the second quarter of 2023, the impact of 2023 restructuring charges and the impact of lower revenue and gross profit.

International reported earnings of $2.1 million in 2023, compared to earnings of $9.9 million a year ago.

The decrease in earnings was primarily due to the transfer of certain customer programs to Outsourcing & Consulting, the impact of the sale of our Russian operations and employee termination costs related to the sale of the EMEA staffing operations in the first quarter of 2024.

Corporate expenses increased $27.9 million year-over-year primarily due to restructuring and transformation charges of $23.0 million and transaction costs of $3.8 million.

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

Gain on sale of assets in 2022 related to the disposition of under-utilized real property located in the United States.

Results of Operations

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Our working capital requirements are primarily generated from temporary employee payroll, which is generally paid weekly or monthly, and customer accounts receivable, which is generally outstanding for longer periods.

Since receipts from customers lag payroll paid to temporary employees, working capital requirements increase substantially in periods of growth.

Conversely, when economic activity slows, working capital requirements may substantially decrease.

This may result in an increase in our operating cash flows;

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

Since receipts from customers lag payroll payments to temporary employees, working capital requirements increase and operating cash flows may decrease substantially in periods of growth.

Conversely, when economic activity slows, working capital requirements may substantially decrease and operating cash flows increase.

Such increases dissipate over time if the economic downturn continues for an extended period.

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 $162.4 million at year-end 2022, compared to $119.5 million at year-end 2021.

As further described below, during 2022, we used $76.3 million of cash for operating activities, generated $167.5 million of cash from investing activities and used $50.6 million of cash for financing activities.

Cash, cash equivalents and restricted cash, totaled $167.6 million, including $33.5 million held for sale, at year-end 2023, compared to $162.4 million at year-end 2022.

As further described below, during 2023, we generated $76.7 million of cash for operating activities, used $14.1 million of cash for investing activities and used $59.6 million of cash for financing activities.

Operating Activities

In 2022, we used $76.3 million of net cash for operating activities, as compared to generating $85.0 million in 2021 and generating $186.0 million in 2020.

In 2023, we generated $76.7 million of net cash for operating activities, as compared to using $76.3 million in 2022 and generating $85.0 million in 2021, primarily due to decreased working capital requirements.

Accounts receivable have decreased in 2023 as a result of lower revenue.

Net cash used for operating activities in 2022 and 2021 included $86.8 million and $29.7 million, respectively, of cash outflows related to the repayment of U.S.

payroll taxes originally deferred in 2020.

Net cash from operating activities in 2020 benefited from the deferral of $117.0 million of U.S.

payroll taxes.

In addition, in 2022 we paid $48.4 million of income taxes related to the sale of Persol Holdings common stock.

Trade accounts receivable, excluding $200.9 million held for sale, totaled $1.2 billion at year-end 2023 and $1.5 billion at year-end 2022.

Accounts receivable have decreased as a result of lower revenue and lower DSO.

Global DSO for the fourth quarter was 59 days for 2023, which includes held for sale, compared to 61 days for 2022.

Accounts payable and accrued liabilities was $646.1 million, excluding $24.5 million held for sale, and decreased from year-end 2022 as a result of a decrease in supplier payables and timing of customer payments .

The change from 2021 to 2022 was primarily due to the impact of payments related to the payroll tax deferral, income tax payments related to the sale of Persol Holdings common stock and increased working capital requirements.

Trade accounts receivable totaled $1.5 billion at year-end 2022 and $1.4 billion at year-end 2021.

Global DSO for the fourth quarter was 61 days for 2022, compared to 60 days for 2021.

Accounts payable and accrued liabilities was $723.3 million and increased from year-end 2021 as a result of increased MSP supplier payables.

The change from 2020 to 2021 was primarily due to the deferral of payroll tax payments, partially offset by the impact of higher global DSO.

Our working capital position (total current assets less total current liabilities) was $586.4 million at year-end 2022, an increase of $92.9 million from year-end 2021.

Excluding the increase in cash, working capital increased $51.9 million from year-end 2021.

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

Our working capital position, (total current assets less total current liabilities), was $606.7 million, excluding held for sale, at year-end 2023, an increase of $20.3 million from year-end 2022.

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

Investing Activities

In 2022, we generated $167.5 million of net cash from investing activities, compared to using $180.7 million in 2021 and generating $9.8 million in 2020.

In 2023, we used $14.1 million of net cash from investing activities, compared to generating $167.5 million in 2022 and using $180.7 million in 2021.

Included in cash used for investing activities in 2023 is $15.3 million of cash used for capital expenditures, 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 2022 is $196.9 million of proceeds from the sale of the investment in Persol Holdings, $119.5 million of proceeds from the sale of almost all of the Company's shares in our equity investment in PersolKelly and $10.1 million of proceeds from the sale of land and other real property.

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Included in cash used for investing activities in 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.

This was partially offset by $19.0 million of proceeds from an insurance settlement that represented a payment received in the fourth quarter of 2021 related to the settlement of claims under a representations and warranties insurance policy purchased by the Company in connection with the acquisition of Softworld.

Included in cash generated from investing activities in 2020 is $55.5 million of proceeds representing the cash received, net of transaction expenses, for the sale of three headquarters properties as a part of a sale and leaseback transaction and $5.6 million received from a payment on the loans to PersolKelly Pte.

This was partially offset by cash used for the acquisitions of

Insight in January 2020 and Greenwood/Asher in November 2020.

Cash used for the acquisition of Insight totaled $36.4 million, net of the cash received and including working capital adjustments.

Cash used for the acquisition of Greenwood/Asher totaled $2.8 million, net of the cash received and including working capital adjustments.

This was partially offset by $19.0 million of proceeds from an insurance settlement that represented a payment received in the fourth quarter of 2021 related to the settlement of

claims under a representations and warranties insurance policy purchased by the Company in connection with the acquisition of Softworld.

Capital expenditures totaled $15.3 million in 2023, $12.0 million in 2022 and $11.2 million in 2021.

Capital expenditures in both 2022 and 2021 primarily related to the Company's IT infrastructure, technology programs and headquarters furniture and fixtures.

Capital expenditures in 2020 primarily related to the Company's headquarters leasehold improvements, IT infrastructure and technology programs.

Capital expenditures in both 2023 and 2022 primarily related to the Company's IT infrastructure and technology programs.

Capital expenditures in 2021 primarily related to the Company's IT infrastructure, technology programs and headquarters building improvements.

Financing Activities

In 2022, we used $50.6 million of cash for financing activities, as compared to using $8.1 million in both 2021 and 2020.

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 February 2022, $7.8 million in share repurchases of the Company's Class A common stock in the fourth quarter of 2022 and the year-over-year change in dividend payments.

In 2023, we used $59.6 million of cash for financing activities, as compared to using $50.6 million in 2022 and using $8.1 million in 2021.

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 2023, the buyback of $42.2 million represents repurchases of the Company's Class A common stock as part of the shares repurchase program compared to $7.8 million in shares repurchased of the Company's Class A common stock in 2022 and $27.2 million for the buyback of the Company's common shares held by Persol Holdings in February 2022.

Dividends paid per common share were $0.30 in 2023, $0.275 in 2022 and $0.10 in 2021.

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Details of this restriction are contained in the Debt footnote in the notes to our consolidated financial statements.

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

Debt totaled $0.7 million at year-end 2022, which represented local borrowings, compared to no debt at year-end 2021.

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

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

In 2022, the net change in short-term borrowings was primarily due to borrowings on local lines of credit.

In 2021 and 2020, the net change in short-term borrowings was primarily due to payments on local lines of credit.

Contractual Obligations and Commercial Commitments

Summarized below are our obligations and commitments to make future payments as of year-end 2022:

Summarized below are our obligations and commitments to make future payments as of year-end 2023 (in millions of dollars):

Payment due by period

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1-3 Years 3-5 Years More than

(In millions of dollars)

Leases $ 85.9 $ 19.1 $ 23.3 $ 13.2 $ 30.3

Short-term borrowings 0.7 0.7 — — —

$ 79.1 $ 17.1 $ 23.6 $ 12.7 $ 25.7

Accrued workers’ compensation 63.0 22.1 19.5 8.2 13.2

Accrued retirement benefits (1)

235.4 16.3 32.6 32.5 154.0

Other liabilities (1)

6.4 0.9 1.8 1.6 2.1

Uncertain income tax positions 0.8 0.3 — 0.4 0.1

Purchase obligations (1)

61.2 41.2 19.2 0.8 —

Total $ 445.9 $ 97.9 $ 96.7 $ 56.2 $ 195.1

(1) Includes future payments for held for sale obligations and commitments.

See Held for Sale footnote in the notes to our consolidated financial statements for more information.

Purchase obligations above represent unconditional commitments relating primarily to technology services and online tools which we expect to utilize generally within the next three fiscal years, in the ordinary course of business.

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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 the $117.0 million deferred payroll tax balances, including $29.5 million in the first quarter of 2022 and $57.3 million in the fourth quarter of 2022.

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

We periodically review our foreign subsidiaries’ cash balances and projected cash needs.

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

As of the 2022 year end, 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.

A cash pooling arrangement (the “Cash Pool”) is available to fund general corporate needs internationally.

We assess and monitor our liquidity and capital resources globally.

We use a global cash pooling arrangement (the "Cash Pool"), intercompany loans, dividends, capital contributions, redemptions and local lines of credit to meet funding needs and allocate our capital resources among our various subsidiaries.

The Cash Pool is a set of cash accounts maintained with a single bank that must, as a whole, maintain at least a zero balance;

individual accounts may be positive or negative.

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

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

We periodically review our foreign subsidiaries’ cash balances and projected cash needs.

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

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

In addition, as of year-end 2023, $33.5 million of our international cash balances are classified as held for sale related to the sale of our EMEA staffing operations in the first quarter of 2024 (see Held for Sale footnote in the notes to our consolidated footnotes for more details).

The Company will continue to provide MSP, RPO and Functional Service Provider solutions in the EMEA region.

Therefore, we expect much of our international cash, excluding cash classified as held for sale, will be needed to fund working capital growth in our local operations.

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

As our cash balances build, we tend to pay down debt as appropriate.

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

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

At year-end 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.

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Throughout 2023 and as of the 2023 year end, we met the debt covenants related to our revolving credit facility and securitization facility.

At year-end 2022, we also had additional unsecured, uncommitted short-term credit facilities totaling $5.9 million, under which we had $0.7 million of borrowings.

At year-end 2023, we had additional unsecured, uncommitted short-term local credit facilities totaling $11.5 million, under which we had no borrowings.

Details of our debt facilities as of the 2023 year end are contained in the Debt footnote in the notes to our consolidated financial statements.

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

As our cash balances build, we tend to pay down debt as appropriate.

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

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

We also expect to use $42.2 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.

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 2022, the Company paid $48.4 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 repurchased $42.2 million of the Company's Class A common stock in fiscal 2023 pursuant to the $50.0 million share repurchase program, which was approved by the Company's board of directors in November 2022 and completed in August 2023.

On January 2, 2024, subsequent to the year ended 2023, the Company completed the sale of its EMEA staffing operations to Gi Group Holdings S.P.A.

and received cash proceeds of $110.6 million.

The foreign currency forward contract that the Company entered into on November 2, 2023 to manage the foreign currency risk associated with the transaction was settled on January 5, 2024.

A total loss of $2.4 million was realized upon settlement.

See the Subsequent Event footnote in the notes to our consolidated financial statements for more details.

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

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.

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 RocketPower during the first quarter of 2022 was allocated to the OCG reportable segment and RocketPower was deemed to be a separate reporting unit, which was fully impaired by year-end 2022.

See the Acquisitions and Dispositions footnote in the notes to our consolidated financial statements for more information.

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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.

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 an interim impairment test for goodwill as of the 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 services in this vertical.

These changes in market conditions caused another triggering event requiring an interim impairment test for goodwill as of 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 result of our interim goodwill impairment test, 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 to write off the remaining balance of RocketPower’s goodwill in the fourth quarter of 2022, for a total goodwill impairment charge of $41.0 million as of year-end 2022.

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 was not impaired as of year-end 2023.

Our analysis used significant assumptions, including:

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Different assumptions of the anticipated future results and growth from our business could result in an impairment charge, which would decrease operating income and result in lower asset values on our consolidated balance sheet.

The estimated fair value of the Softworld and PTS reporting units exceeds the carrying value by more than 10%.

As a measure of sensitivity of the fair value for the Softworld and PTS reporting units, while holding all other assumptions constant, an increase in the discount rate of 100 basis points or a decrease of 100 basis points in the revenue growth rate assumptions for each forecasted period used to determine the fair value of both reporting units would not result in an impairment of goodwill.

The estimated fair value of the PTS reporting unit exceeds the carrying value by more than 10%.

The estimated fair value of the Softworld reporting unit exceeds the carrying value by less than 10%.

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, and other market factors, then the goodwill of the Softworld reporting unit may be impaired in the future, resulting in goodwill impairment charges.

We completed our annual impairment test for all reporting units with goodwill in the fourth quarter for the fiscal year ended 2022.

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.

At year-end 2022 and 2021, total goodwill amounted to $151.1 million and $114.8 million, respectively.

We performed 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.

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

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 had 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 goodwill as of the 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 was 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 another triggering event requiring an interim impairment test for goodwill as of year-end 2022.

At year-end 2023 and 2022, total goodwill amounted to $151.1 million for each year.

See the Goodwill and Intangible Assets footnote in the notes to our consolidated financial statements for more information.

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For further discussion, see the Contingencies footnote in the notes to our consolidated financial statements.

At year-end 2022 and 2021, the gross accrual for litigation costs amounted to $2.3 million and $1.4 million, respectively, which is included in accounts payable and accrued liabilities and in accrued workers’ compensation and other claims in the consolidated balance sheet.

At year-end 2023 and 2022, the gross accrual for litigation costs amounted to $6.4 million, of which $1.5 million is held for sale, and $2.3 million, respectively, which is included in accounts payable and accrued liabilities and in accrued workers’ compensation and other claims in the consolidated balance sheet.

See the Held for Sale footnote in the notes to our consolidated financial statements for more information.

NEW ACCOUNTING PRONOUNCEMENTS

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained herein and in our investor conference call related to these results are “forward-looking” statements within the meaning of the applicable securities laws and regulations.

These forward-looking statements are based on current expectations and assumptions and are subject to a number of significant risks and uncertainties.

Certain statements contained in this report and in our investor conference call related to these results are “forward-looking” statements within the meaning of the applicable securities laws and regulations.

Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, or which include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or variations or negatives thereof or by similar or comparable words or phrases.

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

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.

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, (i) changing market and economic conditions, (ii) disruption in the labor market and weakened demand for human capital resulting from technological advances, loss of large corporate customers and government contractor requirements, (iii) the impact of laws and regulations (including federal, state and international tax laws), (iv) unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, (v) litigation and other legal liabilities (including tax liabilities) in excess of our estimates, (vi) our ability to achieve our business's anticipated growth strategies, (vii) our future business development, results of operations and financial condition, (viii) damage to our brands, (ix) dependency on third parties for the execution of critical functions, (x) conducting business in foreign countries, including foreign currency fluctuations, (xi) availability of temporary workers with appropriate skills required by customers, (xii) cyberattacks or other breaches of network or information technology security, and (xiii) 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-K

Item 7. Management’s Discussion and Analysis