What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-08 · 181 added, 131 removed, 683 unchanged (31% of the section changed)

5 unchanged sentences

13 Weeks Ended 39 Weeks Ended

2023 June 30,

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

Revenue from services $ 1,038.1 $ 1,118.0 $ 3,140.7 $ 3,603.5

3 unchanged sentences

Asset impairment charge — — 5.5 2.4

(Gain) loss on sale of EMEA staffing operations 10.0 — ( 1.6 ) —

Gain on sale of assets ( 5.5 ) — ( 5.5 ) —

Gain on sale of EMEA staffing operations — — ( 1.6 ) —

Loss (gain) on sale of assets 0.1 — ( 5.4 ) —

Earnings from operations 2.6 0.1 41.6 17.0

1 unchanged sentence

Other income (expense), net ( 4.4 ) 1.6 ( 9.1 ) 3.0

Earnings before taxes 5.7 5.6 35.5 18.3

Earnings (loss) before taxes ( 1.8 ) 1.7 33.7 20.0

Income tax expense (benefit) ( 2.6 ) ( 4.9 ) 2.5 ( 5.0 )

11 unchanged sentences

13 Weeks Ended 39 Weeks Ended

2023 June 30,

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

Net earnings $ 0.8 $ 6.6 $ 31.2 $ 25.0

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments, net of tax expense of $0.0, tax benefit of $0.1, tax expense of $0.0 and tax benefit of $0.1, respectively ( 2.0 ) 2.8 ( 2.5 ) 5.1

Foreign currency translation adjustments, net of tax benefit of $0.1, $0.0, $0.1 and $0.1, respectively 1.2 ( 4.3 ) ( 1.3 ) 0.8

Reclassification adjustments included in net earnings — — ( 0.6 ) —

10 unchanged sentences

(In millions)

September 29,

2024 December 31,

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Retirement plan assets 259.2 230.3

Goodwill, net 372.6 151.1

Goodwill 374.0 151.1

Intangibles, net 264.3 137.7

7 unchanged sentences

(In millions)

September 29,

2024 December 31,

1 unchanged sentence

Current Liabilities

Short-term borrowings $ 0.2 $ —

Accounts payable and accrued liabilities 604.7 646.1

33 unchanged sentences

13 Weeks Ended 39 Weeks Ended

2023 June 30,

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

Capital Stock

37 unchanged sentences

39 Weeks Ended

September 29,

2024 October 1,

Cash flows from operating activities:

19 unchanged sentences

Payment for settlement of forward contract ( 2.4 ) —

Proceeds from company-owned life insurance 1.7 —

Proceeds from equity securities — 2.0

23 unchanged sentences

39 Weeks Ended

September 29,

2024 October 1,

Reconciliation of cash, cash equivalents and restricted cash:

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There were no changes in accounting policies as disclosed in the Form 10-K.

The Company’s second fiscal quarter ended on June 30, 2024 and July 2, 2023, each of which contained 13 weeks.

The corresponding June year-to-date periods for 2024 and 2023 each contained 26 weeks.

The Company’s third fiscal quarter ended on September 29, 2024 and October 1, 2023, each of which contained 13 weeks.

The corresponding September year-to-date periods for 2024 and 2023 each contained 39 weeks.

Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year's presentation.

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The following table presents our segment revenues disaggregated by service type (in millions of dollars):

Second Quarter June Year to Date

Third Quarter September Year to Date

2024 2023 2024 2023

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Our P&I and Education segments operate in the Americas region, our SET segment operates in the Americas and Europe regions, and OCG operates in the Americas, Europe and Asia-Pacific regions.

In 2023, our International segment included our staffing operations in Europe as well as Mexico, which is included in the Americas region.

In 2023, our International segment included our staffing operations in Europe, as well as operations in Mexico, which is part of the Americas region.

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

Second Quarter June Year to Date

Third Quarter September Year to Date

2024 2023 2024 2023

16 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The below table presents revenues from our SET, OCG and former International segment, which previously included our Mexico operations, disaggregated by geographic region, (in millions of dollars):

Second Quarter June Year to Date

The below table presents revenues from our SET and OCG segments as well as our former International segment, which previously included our Mexico operations, disaggregated by geographic region, (in millions of dollars):

Third Quarter September Year to Date

2024 2023 2024 2023

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Deferred Costs

Deferred fulfillment costs, which are included in prepaid expenses and other current assets in the consolidated balance sheet, were $ 1.6 million as of second quarter-end 2024 and $ 3.4 million as of year-end 2023.

Amortization expense for the deferred costs in the second quarter and June year-to-date 2024 was $ 1.7 million and $ 4.1 million, respectively.

Amortization expense for the deferred costs in the second quarter and June year-to-date 2023 was $ 1.4 million and $ 3.8 million, respectively.

Deferred fulfillment costs, which are included in prepaid expenses and other current assets in the consolidated balance sheet, were $ 2.1 million as of third quarter-end 2024 and $ 3.4 million as of year-end 2023.

Amortization expense for the deferred costs in the third quarter and September year-to-date 2024 was $ 1.3 million and $ 5.4 million, respectively.

Amortization expense for the deferred costs in the third quarter and September year-to-date 2023 was $ 1.7 million and $ 5.5 million, respectively.

Credit Losses

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

June Year to Date

September Year to Date

Allowance for credit losses:

5 unchanged sentences

Ending balance $ 5.7 $ 7.7

Write-offs are presented net of recoveries, which were not material for second quarter-end 2024 or 2023.

As of second quarter-end 2024, the Company has a receivable of $ 16.8 million related to the sale of our EMEA staffing operations (see Acquisition and Disposition footnote).

Write-offs are presented net of recoveries, which were not material for third quarter-end 2024 or 2023.

As of third quarter-end 2024 , the Company has a receivable of $ 17.6 million related to the sale of our EMEA staffing operations (see Acquisition and Disposition footnote).

The Company has determined that no credit loss provision is required on this receivable as it is consid ered collectible.

No other allowances related to other receivables were material as of second quarter-end 2024 or 2023.

No other allowances related to other receivables were material as of third quarter-end 2024 or 2023.

KELLY SERVICES, INC.

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("Littlejohn"), with Topco surviving the merger (the "Merger").

MRP is a parent company to a group of leading global talent solutions providers and the acquisition will strengthen the scale and capabilities of Kelly's solutions portfolio.

MRP is a parent company to a group of leading global talent solutions providers and the acquisition is expected to strengthen the scale and capabilities of Kelly's solutions portfolio.

Under terms of the merger agreement, the $ 425.0 million purchase price was adjusted for estimated cash held by MRP at the closing date and estimated working capital adjustments, resulting in the Company paying cash of $ 440.0 million.

The acquisition was funded with cash on hand and available credit facilities (see Debt footnote).

Total consideration includes $ 3.4 million of contingent consideration related to an earnout payment with a maximum potential cash payment of $ 60.0 million in the event certain financial metrics are met per the terms of the agreement.

Total consideration included $ 3.4 million of contingent consideration related to an earnout payment with a maximum potential cash payment of $ 60.0 million in the event certain financial metrics are met per the terms of the agreement.

The earnout payment is based on a multiple of gross profit in excess of an agreed-upon amount during the earnout period, defined as the 12 months ending March 31, 2025, and any necessary payment is due to the seller in the second quarter of 2025.

The initial fair value of the earnout was established using a Monte Carlo simulation model and will be reassessed on a quarterly basis (see Fair Value Measurements footnote).

The initial fair value of the earnout was established using a Monte Carlo simulation model and is reassessed on a quarterly basis (see Fair Value Measurements footnote).

In the third quarter of 2024, the Company recorded a payable in accounts payable and accrued liabilities in the consolidated balance sheet for a post-close net working capital adjustment of $ 1.4 million which will be paid in the fourth quarter of 2024.

The merger agreement contains representations and warranties and covenants customary for a transaction of this nature.

5 unchanged sentences

Additional consideration payable 3.4

Net working capital adjustment 1.4

Total consideration $ 444.8

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

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

4 unchanged sentences

Operating lease right-of-use assets 11.9

Goodwill, net 221.5

Goodwill 222.9

Intangibles, net 145.9

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Total consideration, including working capital adjustments $ 444.8

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The fair value of the acquired receivables represents the contractual value net of the allowance for potentially uncollectible accounts.

Included in the assets purchased in the MRP acquisition was $ 145.9 million of intangible assets, made up of $ 88.1 million in customer relationships, $ 56.5 million associated with MRP's trade names, and $ 1.3 million for non-compete agreements.

The customer relationships will be amortized over 15 years with no residual value, the trade names will be amortized over 10 - 15 years with no residual value, and the non-compete agreements will be amortized over four years with no residual value.

The customer relationships are amortized over 15 years with no residual value, the trade names are amortized over 10 - 15 years with no residual value, and the non-compete agreements are amortized over four years with no residual value.

Goodwill generated from the acquisition was primarily attributable to expanding market potential and the expected revenue and operational synergies and was assigned to the SET operating segment (see Goodwill footnote).

1 unchanged sentence

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

For the second quarter and June year-to-date 2024, our consolidated revenues and net earnings include $ 40.0 million and $ 1.6 million from MRP, respectively.

For the third quarter-end 2024, our consolidated revenues and net earnings include $ 124.6 million and $ 2.3 million from MRP, respectively.

For September year-to-date 2024, our consolidated revenues and net earnings include $ 164.6 million and $ 3.9 million from MRP, respectively.

Pro Forma Information

The following unaudited pro forma information presents a summary of the operating results as if the MRP acquisition had been completed as of January 2, 2023 (in millions of dollars):

Second Quarter June Year to Date

Third Quarter September Year to Date

2024 2023 2024 2023

Pro forma revenues $ 1,038.1 $ 1,254.0 $ 3,361.1 $ 4,023.9

Pro forma net earnings (loss) $ — $ 5.4 $ 23.2 $ 12.4

Pro forma net earnings $ 1.9 $ 6.8 $ 25.1 $ 19.2

The pro forma results for the periods above include adjustments to amortization expense for the intangible assets, reversal of MRP's interest expense on credit facilities that were settled upon completion of the acquisition, interest expense and associated amortization of debt issuance costs for financing the acquisition, reclassification of transaction expenses to the appropriate period, and applicable taxes.

The unaudited pro forma information presented has been prepared for comparative purposes only and is not necessarily indicative of the results of operations as they would have been had the acquisition occurred on the assumed date, nor is it necessarily an indication of future operating results.

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

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Disposition of EMEA Staffing Operations

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In the second quarter of 2024, the Company recorded negative working capital and other adjustments of $ 10.1 million, which reduced the net receivable from Gi to $ 16.8 million.

The Company expects to finalize all adjustments to the transaction proceeds and settle the net receivable from Gi by the end of 2024.

As of the third quarter-end 2024, the net receivable is $ 17.6 million, with the change of $ 0.8 million from the second quarter reflecting the foreign currency remeasurement.

The Company is actively reconciling the receivable in accordance with the purchase agreement and expects it to be settled upon completion of this process.

The receivable is included in prepaid expenses and other current assets in the consolidated balance sheet and included in the gain on the transaction.

The total gain on the transaction through second quarter-end 2024 is $ 1.6 million, which is recorded in the (gain) loss on sale of EMEA staffing operations in the consolidated statements of earnings.

The total gain on the transaction through third quarter-end 2024 is $ 1.6 million, which is recorded in the gain on sale of EMEA staffing operations in the consolidated statements of earnings.

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

Our consolidated earnings from operations for the second quarter 2023 and June year-to-date 2023 included a loss of $ 0.6 million and $ 1.9 million, respectively, from the EMEA staffing operations.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our consolidated earnings from operations for the third quarter 2023 and September year-to-date 2023 included earnings of $ 0.8 million and a loss of $ 1.1 million, respectively, from the EMEA staffing operations.

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

24 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present assets and liabilities measured at fair value on a recurring basis as of second quarter-end 2024 and year-end 2023 in the consolidated balance sheet by fair value hierarchy level, as described below.

The following tables present assets and liabilities measured at fair value on a recurring basis as of third quarter-end 2024 and year-end 2023 in the consolidated balance sheet by fair value hierarchy level, as described below.

Level 1 measurements consist of unadjusted quoted prices in active markets for identical assets or liabilities.

1 unchanged sentence

Level 3 measurements include significant unobservable inputs.

As of Second Quarter-End 2024

As of Third Quarter-End 2024

Description Total Level 1 Level 2 Level 3

1 unchanged sentence

Money market funds $ 6.9 $ 6.9 $ — $ —

Foreign currency forward contract, net 0.2 — 0.2 —

Total assets at fair value $ 6.9 $ 6.9 $ — $ —

Foreign currency forward contract, net $ ( 0.6 ) $ — $ ( 0.6 ) $ —

Interest rate swaps ( 0.8 ) — ( 0.8 ) —

Brazil indemnification ( 2.7 ) — — ( 2.7 )

11 unchanged sentences

Money market funds

Money market funds represent investments in money market funds that hold government securities, of which $ 7.7 million as of second quarter-end 2024 and $ 8.0 million as of year-end 2023 are restricted as to use and are included in other assets in the consolidated balance sheet.

Money market funds represent investments in money market funds that hold government securities, of which $ 6.9 million as of third quarter-end 2024 and $ 8.0 million as of year-end 2023 are restricted as to use and are included in other assets in the consolidated balance sheet.

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

2 unchanged sentences

Forward contracts

On February 8, 2024, the Company entered into a foreign currency forward contract with a notional amount of € 17.0 million to manage the foreign currency risk associated with the additional expected proceeds in the third quarter of 2024 related to the sale of our EMEA staffing operations (see Acquisition and Disposition footnote).

The expected proceeds are recorded as a euro-denominated receivable which is remeasured each period.

The forward contract was designated as a fair value hedge, with the mark-to-market changes of the forward contract offsetting the mark-to-market changes of the receivable in the (gain) loss on sale of EMEA staffing operations in the consolidated statements of earnings.

The contract was valued using observable inputs,

On February 8, 2024, the Company entered into a foreign currency forward contract with a notional amount of € 17.0 million to manage the foreign currency risk associated with expected additional proceeds related to the sale of our EMEA staffing operations (see Acquisition and Disposition footnote).

The expected proceeds are recorded as a euro-denominated receivable

KELLY SERVICES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

such as foreign currency exchange rates, and is considered a level 2 liability.

In the first six months of 2024, the Company has recorded an unrealized gain of $ 0.2 million with a net receivable associated with the forward contract of $ 0.2 million recorded in prepaid expenses and other current assets on the consolidated balance sheet as of second quarter-end 2024.

which is remeasured each period.

The forward contract was designated as a fair value hedge, with the mark-to-market changes of the forward contract offsetting the mark-to-market changes of the receivable in the gain on sale of EMEA staffing operations in the consolidated statements of earnings.

The contract was valued using observable inputs, such as foreign currency exchange rates, and is considered a level 2 liability.

In the first nine months of 2024, the Company has recorded an unrealized loss of $ 0.6 million with a net payable associated with the forward contract of $ 0.6 million recorded in accounts payable and accrued liabilities on the consolidated balance sheet as of third quarter-end 2024.

On November 2, 2023, the Company entered into a foreign currency forward contract with a notional amount of € 90.0 million to manage the foreign currency risk associated with the sale of our EMEA staffing operations, which was completed on January 2, 2024.

1 unchanged sentence

therefore, it was marked-to-market and the changes in fair value were recognized in earnings.

The Company's foreign currency forward contract was valued using observable inputs, such as foreign currency exchange rates, and is considered a level 2 liability.

The Company's foreign currency forward contract was valued using observable inputs, such as foreign currency exchange rates, and was considered a level 2 liability.

The Company recorded an unrealized loss of $ 3.6 million for the year-ended 2023 and had a net liability associated with the forward contract of $ 3.6 million as of year-end 2023.

1 unchanged sentence

Accordingly, the Company recognized a gain of $ 1.2 million in the first quarter of 2024 in gain on forward contract on the consolidated statements of earnings, which partially offsets the $ 3.6 million loss recognized in 2023, for a total loss of $ 2.4 million on the contract.

Interest Rate Swaps

On July 17, 2024, the Company entered into two interest rate swaps with a notional value of $ 50.0 million each to manage fluctuations on our securitization facility due to Secured Overnight Financing Rate ("SOFR") variances (see Debt footnote).

These contracts were not designated as hedging instruments;

therefore, the mark-to-market fair value changes and the cash settlements on the swaps are recognized in earnings.

The Company's interest rate swaps were valued with assistance from a third party based on pricing models using observable inputs, such as SOFR forward rates, and are considered level 2 liabilities, which will be remeasured quarterly.

As of third quarter-end 2024, the Company recorded a liability totaling $ 0.8 million related to the mark-to-market fair value change of the interest rate swaps with $ 0.6 million in accounts payable and accrued liabilities and $ 0.2 million in other long-term liabilities in the consolidated balance sheet.

In the third quarter of 2024, the Company recorded a total loss of $ 0.7 million.

This loss includes $ 0.8 million related to mark-to-market changes in fair value, which was partially offset by the impact of cash settlements of $ 0.1 million, in other income (expense), net in the consolidated statements of earnings.

Indemnification liabilities

As of second quarter-end 2024, the Company had an indemnification liability totaling $ 2.0 million relating to the sale of our EMEA staffing operations in January 2024.

The liability is included in other long-term liabilities in the consolidated balance sheet and the associated expense is included in the (gain) loss on sale of EMEA staffing operations in the consolidated statements of earnings.

As of third quarter-end 2024, the Company had an indemnification liability totaling $ 2.1 million relating to the sale of our EMEA staffing operations in January 2024.

The liability is included in other long-term liabilities in the consolidated balance sheet and the associated expense is included in the gain on sale of EMEA staffing operations in the consolidated statements of earnings.

As part of the sale, the Company agreed to indemnify the buyer for losses and costs incurred in connection with certain events or occurrences for an indefinite term.

3 unchanged sentences

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

During the second quarter of 2024, the Company recognized a decrease of $ 0.1 million to the indemnification liability related to exchange rate fluctuations.

As of second quarter-end 2024, the Company had an indemnification liability totaling $ 2.6 million with $ 0.1 million in accounts payable and accrued liabilities and $ 2.5 million in other long-term liabilities, and $ 3.0 million at year-end 2023, with $ 0.1 million in accounts payable and accrued liabilities and $ 2.9 million in other long-term liabilities in the consolidated balance sheet related to the 2020 sale of the Brazil operations.

During the third quarter of 2024, the Company recognized an increase of $ 0.1 million to the indemnification liability related to exchange rate fluctuations.

As of third quarter-end 2024, the Company had an indemnification liability totaling $ 2.7 million with $ 0.1 million in accounts payable and accrued liabilities and $ 2.6 million in other long-term liabilities, and $ 3.0 million at year-end 2023, with $ 0.1 million in accounts payable and accrued liabilities and $ 2.9 million in other long-term liabilities in the consolidated balance sheet related to the 2020 sale of the Brazil operations.

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

2 unchanged sentences

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

During June year-to-date 2024 and 2023, the Company recognized a decrease of $ 0.3 million and an increase of $ 0.3 million, respectively, to the indemnification liability related to exchange rate fluctuations in other income (expense), net in the consolidated statements of earnings.

During September year-to-date 2024 and 2023, the Company recognized

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

an increase of $ 0.1 million to the indemnification liability related to exchange rate fluctuations in other income (expense), net in the consolidated statements of earnings.

Earnout liabilities

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In the consolidated statements of cash flows, $ 1.4 million of the payment is reflected as a financing activity representing the initial fair value of the earnout liability, with the remainder flowing through operating activities.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Equity Investment Without Readily Determinable Fair Value

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

The investment totaled $ 6.4 million as of second quarter-end 2024, representing total cost plus observable price changes to date.

The investment totaled $ 6.4 million as of third quarter-end 2024, representing total cost plus observable price changes to date.

Restructuring and Transformation Activities

The Company incurred restructuring charges and transformation fees of $ 4.3 million in the second quarter of 2024 and $ 6.6 million in June year-to-date 2024 as a continuation of the actions that were announced in the second quarter of 2023 as part of the comprehensive transformation initiative.

The transformation activities include severance charges of $ 2.4 million and $ 3.5 million for the second quarter and June year-to-date 2024, respectively, and costs to execute the transformation including the use of an external consultant of $ 1.9 million and $ 3.1 million for the second quarter and June year-to-date 2024, respectively.

The Company had no restructuring or transformation charges during the third quarter of 2024.

Restructuring and transformation charges for the nine months ended September 29, 2024 were $ 6.4 million as a continuation of the actions that were announced in the second quarter of 2023 as part of the comprehensive transformation initiative.

The transformation activities consisted of $ 3.3 million of severance charges and $ 3.1 million of costs to execute the transformation.

The severance and transformation costs are recorded in selling, general and administrative ("SG&A") expenses in the consolidated statements of earnings.

Additionally, in the second quarter of 2024, the Company recognized an impairment charge of $ 5.5 million for certain right-of-use assets related to our leased headquarters facility reflecting adjustments as to how we are utilizing the building as a part of our ongoing transformation efforts.

The impairment charge related to the right-of-use assets is recorded in the asset impairment charge in the consolidated statements of earnings.

The restructuring and transformation costs included in SG&A are detailed below for the second quarter and June year-to-date 2024 (in millions of dollars):

Second Quarter 2024 June Year to Date 2024

Costs Transformation Costs Total Severance

The impairment charge related to the right-of-use assets was recorded in the asset impairment charge in the consolidated statements of earnings.

The restructuring and transformation costs included in SG&A are detailed below for September year-to-date 2024 (in millions of dollars):

September Year-to-Date 2024

Costs Transformation Costs Total

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Total $ 3.3 $ 3.1 $ 6.4

In the second quarter of 2023, the Company announced a comprehensive transformation initiative that includes actions that will further streamline the Company's operating model to enhance organizational efficiency and effectiveness.

The total costs incurred related to these transformation activities in the second quarter of 2023 totaled $ 8.0 million.

The transformation activities included $ 4.5 million of costs to execute the transformation initiatives through the use of an external consultant, a $ 2.4 million impairment charge for right-of-use assets related to an unoccupied office space lease and additional severance of $ 1.1 million, net of adjustments.

The impairment charge related to the right-of-use assets is recorded in the asset impairment charge in the consolidated statements of earnings.

The costs to execute and severance are included in the $ 5.6 million of restructuring costs incurred in the second quarter of 2023, net of prior period adjustments, and are recorded in SG&A expenses in the consolidated statements of earnings, as detailed further below.

In the first quarter of 2023, the Company undertook restructuring actions to further our cost management efforts in response to the current demand levels and reflect a repositioning of our P&I staffing business to better capitalize on opportunities in local markets.

Restructuring costs incurred in the first quarter of 2023 totaled $ 6.6 million and were recorded entirely in SG&A expenses in the consolidated statements of earnings.

KELLY SERVICES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The restructuring and transformation costs included in SG&A are detailed below for the second quarter and June year-to-date 2023 (in millions of dollars):

Second Quarter 2023 June Year to Date 2023

In the first quarter of 2023, the Company undertook restructuring actions to further our cost management efforts in response to the demand levels and to reflect a repositioning of our P&I staffing business to better capitalize on opportunities in local markets.

Restructuring costs incurred in the first quarter of 2023 totaled $ 6.6 million and were recorded entirely in SG&A expenses in the consolidated statements of earnings.

In the second quarter of 2023, the Company announced a comprehensive transformation initiative that included actions to further streamline the Company's operating model to enhance organizational efficiency and effectiveness.

The total costs incurred related to these transformation activities in the second quarter of 2023 totaled $ 8.0 million.

The impairment charge related to the right-of-use assets was recorded in the asset impairment charge in the consolidated statements of earnings.

The costs to execute and severance were included in the $ 5.6 million of restructuring costs incurred in the second quarter of 2023, net of prior period adjustments, and were recorded in SG&A expenses in the consolidated statements of earnings, as detailed further below.

In the third quarter of 2023, the Company incurred $ 15.4 million of restructuring charges and transformation fees as a continuation of the actions that were announced in the second quarter of 2023 as part of the comprehensive transformation initiative.

The third quarter transformation activities included $ 10.4 million of additional severance, $ 4.5 million of costs to execute the transformation through the use of an external consultant, and $ 0.5 million of lease termination costs.

The severance, costs to execute, and lease termination costs were recorded in SG&A expenses in the consolidated statements of earnings.

The restructuring and transformation costs included in SG&A are detailed below for the third quarter and September year-to-date 2023 (in millions of dollars):

Third Quarter 2023 September Year-to-Date 2023

Costs Lease Termination Costs,

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Total $ 10.4 $ 5.0 $ 15.4 $ 16.1 $ 11.5 $ 27.6

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accrual Summary

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Balance as of second quarter-end 2024 4.6

The remaining balance of $ 4.6 million as of second quarter-end 2024 primarily represents the costs to execute the transformation initiatives and severance costs, and the majority is expected to be paid by the end of 2024.

Reductions for cash payments ( 2.0 )

Accrual adjustments ( 0.2 )

Balance as of third quarter-end 2024 $ 2.4

The remaining balance of $ 2.4 million as of third quarter-end 2024 primarily represents the costs to execute the transformation initiatives and severance costs, and the majority is expected to be paid by the end of 2024.

No material adjustments are expected to be recorded.

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The changes in the carrying amount of goodwill through June year-to-date 2024 are included in the table below.

The goodwill resulting from the acquisition of MRP during the second quarter of 2024 was allocated to the SET reportable segment (see Acquisition and Disposition footnote).

Year-End 2023 Additions to Goodwill Impairment Adjustments As of Second

The changes in the carrying amount of goodwill through September year-to-date 2024 are included in the table below (in millions of dollars).

The goodwill of $ 221.5 million resulting from the acquisition of MRP during the second quarter of 2024 was allocated to the SET reportable segment.

During the third quarter of 2024, the company recorded a $ 1.4 million liability for a net working capital adjustment related to the acquisition of MRP.

The adjustment resulted in a $ 1.4 million addition of goodwill, which was allocated to the SET reportable segment (see Acquisition and Disposition footnote).

Year-End 2023 Additions to Goodwill Impairment Adjustments As of Third

Quarter-End 2024

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trade accounts receivable.

At the end of the second quarter of 2024, there were $ 63.0 million of long-term borrowings on the term benchmark line under the Facility and a remaining borrowing capacity of $ 87.0 million.

The rate for these borrowings, which varies based on the Company's leverage ratio as defined in the agreement, includes either (i) the Prime rate plus the applicable margin for the floating line or (ii) a term Secured Overnight Financing Rate ("SOFR") for 1-, 3-, or 6-months dependent on the interest election plus a 0.10 % margin and the applicable margin for the term benchmark line.

At the end of the third quarter of 2024, there were $ 40.0 million of long-term borrowings on the term benchmark line under the Facility and a remaining borrowing capacity of $ 110.0 million.

The rate for these borrowings, which varies based on the Company's leverage ratio as defined in the agreement, includes either (i) the Prime rate plus the applicable margin for the

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

floating line or (ii) a term SOFR for 1-, 3-, or 6-months dependent on the interest election plus a 0.10 % margin and the applicable margin for the term benchmark line.

At year-end 2023, there were no borrowings under the Facility and a remaining borrowing capacity of $ 200.0 million.

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The facility fee varies based on the Company’s leverage ratio as defined in the agreement.

The Facility, which contains a cross-default clause that could result in termination if defaults occur under our other loan agreements, had a facility fee of 15.0 basis points at the end of the second quarter of 2024 and year-end 2023.

The Facility’s financial covenants and restrictions are described below, all of which were met at the end of the second quarter of 2024:

The Facility, which contains a cross-default clause that could result in termination if defaults occur under our other loan agreements, had a facility fee of 20.0 basis points at the end of the third quarter of 2024 and 15.0 basis points at year-end 2023.

The Facility’s financial covenants and restrictions are described below, all of which were met at the end of the third quarter of 2024:

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

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On May 29, 2024, the Company and Kelly Receivables Funding, LLC, a wholly owned bankruptcy remote special purpose subsidiary of the Company (the “Receivables Entity”), amended the Receivables Purchase Agreement related to its $ 150.0 million, three-year , securitization facility (the “Securitization Facility”).

The amendment (i) increased the current borrowing capacity to $ 250.0 million, (ii) includes the ability to increase the borrowing capacity to an aggregate of

KELLY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

$ 350.0 million and (iii) changed certain of the terms and conditions.

The amendment (i) increased the current borrowing capacity to $ 250.0 million, (ii) includes the ability to increase the borrowing capacity to an aggregate of $ 350.0 million and (iii) changed certain of the terms and conditions.

The Receivables Purchase Agreement will terminate May 28, 2027, unless terminated earlier pursuant to its terms.

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

At the end of the second quarter of 2024, the Securitization Facility had $ 147.4 million of long-term borrowings, SBLCs of $ 46.1 million related to workers’ compensation and a remaining capacity of $ 56.5 million.

At the end of the third quarter of 2024, the Securitization Facility had $ 188.2 million of long-term borrowings, SBLCs of $ 46.1 million related to workers’ compensation and a remaining capacity of $ 15.7 million.

The rate for these borrowings includes the adjusted daily SOFR plus a 0.10 % margin and a 1.10 % utilization rate on the amount of our borrowings.

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In addition, we paid a commitment fee of 40.0 basis points on the unused capacity in 2023.

On July 17, 2024, we entered into a $ 50.0 million 12-month interest rate swap and a $ 50.0 million 18-month interest rate swap that effectively locked in the variable SOFR component of our interest rate for a portion of the long-term borrowings on the Securitization Facility at a fixed rate of 4.772 % and 4.468 % from the July 17, 2024 effective date through July 17, 2025 and January 17, 2026, respectively.

At the end of the third quarter of 2024, the Company recorded a loss and corresponding liability of $ 0.8 million related to mark-to-market changes in fair value of the interest rate swaps (see Fair Value Measurements footnote).

The Receivables Entity’s sole business consists of the purchase or acceptance through capital contributions of trade accounts receivable and related rights from the Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Local Credit Facilities

The Company had total unsecured, uncommitted short-term local credit facilities of $ 3.2 million at the end of the third quarter of 2024.

The Company had $ 0.2 million of borrowings under these lines at the end of the third quarter of 2024, as compared to no borrowings under these lines at year-end 2023.

The weighted average interest rate for these borrowings, which was related to Malaysia, was 5.10 % at the end of the third quarter of 2024.

Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component, net of tax, for the second quarter and June year-to-date 2024 and 2023 are included in the table below.

The changes in accumulated other comprehensive income (loss) by component, net of tax, for the third quarter and September year-to-date 2024 and 2023 are included in the table below.

Amounts in parentheses indicate debits.

Second Quarter June Year to Date

Third Quarter September Year to Date

2024 2023 2024 2023

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Earnings Per Share

The reconciliation of basic and diluted earnings per share on common stock for the second quarter and June year-to-date 2024 and 2023 follows (in millions of dollars except per share data):

Second Quarter June Year to Date

The reconciliation of basic and diluted earnings per share on common stock for the third quarter and September year-to-date 2024 and 2023 follows (in millions of dollars except per share data):

Third Quarter September Year to Date

2024 2023 2024 2023

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Diluted earnings per share $ 0.02 $ 0.18 $ 0.85 $ 0.67

Potentially dilutive share awards are related to deferred common stock related to the non-employee directors deferred compensation plan and performance shares for the second quarter and June year-to-date 2024 and 2023 (see Stock-Based Compensation footnote for a description of performance shares).

Dividends paid per share for Class A and Class B common stock were $ 0.075 for the second quarter of 2024 and 2023 and $ 0.15 for June year-to-date 2024 and 2023 .

Potentially dilutive share awards are related to deferred common stock related to the non-employee directors deferred compensation plan and performance shares for the third quarter and September year-to-date 2024 and 2023 (see Stock-Based Compensation footnote for a description of performance shares).

Dividends paid per share for Class A and Class B common stock were $ 0.075 for the third quarter of 2024 and 2023 and $ 0.225 for September year-to-date 2024 and 2023 .

In November 2022, the Company's board of directors authorized a $ 50.0 million Class A share repurchase program, which was completed in August 2023.

The Company repurchased 982,565 shares for $ 16.5 million during the second quarter of 2023 and 2,082,293 shares for $ 34.8 million through June year-to-date 2023.

The Company repurchased 414,534 shares for $ 7.4 million during the third quarter of 2023 and 2,496,827 shares for $ 42.2 million through September year-to-date 2023.

A total of 2,971,471 shares were repurchased under the share repurchase program at an average price of $ 16.83 per share.

Stock-Based Compensation

For the second quarter of 2024, the Company recognized stock compensation expense of $ 2.4 million and a related tax benefit of $ 0.6 million.

For the second quarter of 2023, the Company recognized stock compensation expense of $ 2.5 million and a related tax benefit of $ 0.4 million.

For June year-to-date 2024, the Company recognized stock compensation expense of $ 5.2 million and a related tax benefit of $ 1.3 million.

For June year-to-date 2023, the Company recognized stock compensation expense of $ 5.6 million and a related tax benefit of $ 0.7 million.

For the third quarter of 2024, the Company recognized stock compensation expense of $ 3.3 million and a related tax benefit of $ 0.7 million.

For the third quarter of 2023, the Company recognized stock compensation expense of $ 2.3 million and a related tax benefit of $ 0.4 million.

For September year-to-date 2024, the Company recognized stock compensation expense of $ 8.5 million and a related tax benefit of $ 2.0 million.

For September year-to-date 2023, the Company recognized stock compensation expense of $ 7.9 million and a related tax benefit of $ 1.1 million.

Performance Shares

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On May 7, 2024, the Compensation Committee confirmed the actual performance achievement for the final financial goal related to the 2021 retention-based grant, which was not achieved before the end of the performance period and resulted in no payout.

A summary of the status of all nonvested performance shares at target as of second quarter-end 2024 and year-to-date changes is presented as follows below (in thousands of shares except per share data).

The vesting adjustment in the table below

represents 2021 financial measure performance shares that did not vest because actual achievement was below the threshold level or was not achieved, and resulted in no payout.

A summary of the status of all nonvested performance shares at target as of third quarter-end 2024 and September year-to-date 2024 changes is presented as follows below (in thousands of shares except per share data).

The vesting adjustment in the table below represents 2021 financial measure performance shares that did not vest because actual achievement was below the threshold level or was not achieved, and resulted in no payout.

Financial Measure

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Vesting adjustment ( 107 ) 16.52

Nonvested at second quarter-end 2024 568 $ 18.66

Nonvested at third quarter-end 2024 568 $ 18.66

Restricted Stock

A summary of the status of nonvested restricted stock as of second quarter-end 2024 and year-to-date changes is presented as follows below (in thousands of shares except per share data).

A summary of the status of nonvested restricted stock as of third quarter-end 2024 and September year-to-date 2024 changes is presented as follows below (in thousands of shares except per share data).

Shares Weighted Average Grant Date Fair Value

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Forfeited ( 71 ) 19.01

Nonvested at second quarter-end 2024 859 $ 19.46

Nonvested at third quarter-end 2024 888 $ 19.65

KELLY SERVICES, INC.

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On June 10, 2024, the Company sold Ayers Group, a division of our OCG segment, for a purchase price of $ 7.5 million, subject to final closing adjustments.

The Company received cash proceeds of $ 4.5 million in the second quarter of 2024, representing the purchase price less the value of rights to certain receivables and deferred revenue retained by the Company, net of working capital adjustments in accordance with the agreement.

As of the date of the sale, the net carrying value of the assets was a credit balance of $ 1.0 million, resulting in a gain on the sale of $ 5.5 million which was recorded in gain on sale of assets in the consolidated statements of earnings.

The sale is a part of the Company's ongoing strategy to further optimize its operating model.

The Company received cash proceeds of $ 4.5 million in the second quarter of 2024 for assets sold with a net carrying value of $ 1.0 million.

In the third quarter of 2024, a post-close net working capital adjustment of $ 0.1 million was recorded in loss (gain) on sale of assets in the consolidated statements of earnings for the third quarter of 2024.

A gain of $ 5.4 million was recorded in loss (gain) on sale of assets for the nine months ended September 29, 2024 in the consolidated statements of earnings.

The sale was a part of the Company's ongoing strategy to further optimize its operating model.

Other Income (Expense), Net

Included in other income (expense), net for the second quarter and June year-to-date 2024 and 2023 are the following:

Second Quarter June Year to Date

Included in other income (expense), net for the third quarter and September year-to-date 2024 and 2023 are the following:

Third Quarter September Year to Date

2024 2023 2024 2023

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Other income (expense), net $ ( 4.4 ) $ 1.6 $ ( 9.1 ) $ 3.0

Included in Other for second quarter and June year-to-date 2024 is $ 7.8 million of transaction costs related to the acquisition of MRP (see Acquisition and Disposition footnote).

Included in Other for June year-to-date 2023 is a gain of $ 2.0 million for the receipt of earnout proceeds in connection with an investment that was sold in 2021.

Income tax expense was $ 1.1 million for the second quarter of 2024 and income tax benefit was $ 1.9 million for the second quarter of 2023.

Income tax expense was $ 5.1 million for June year-to-date 2024 and income tax benefit was $ 0.1 million for June year-to-date 2023.

The quarterly variance primarily relates to non-deductible transaction costs and a valuation allowance on the tax benefit from the reduction in the EMEA staffing operations sale proceeds in 2024.

The year-to-date variance primarily relates to changes in pretax income.

The increase in Interest expense for the third quarter of 2024 reflects the increase in the Company's long-term debt (see Debt footnote).

Included in Other for September year-to-date 2024 is $ 7.8 million of transaction costs related to the acquisition of MRP (see Acquisition and Disposition footnote).

Included in Other for September year-to-date 2023 is a gain of $ 2.0 million for the receipt of earnout proceeds in connection with an investment that was sold in 2021.

Income tax benefit was $ 2.6 million for the third quarter of 2024 and income tax benefit was $ 4.9 million for the third quarter of 2023.

Income tax expense was $ 2.5 million for September year-to-date 2024 and income tax benefit was $ 5.0 million for September year-to-date 2023.

The quarterly and year-to-date changes are primarily driven by the release of Germany’s valuation allowance in the third quarter of 2023.

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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Such accruals are recorded in accounts payable and accrued liabilities and in accrued workers’ compensation and other claims in the consolidated balance sheet.

At second quarter-end 2024 and year-end 2023, the gross accrual for litigation costs amounted to $ 4.1 million and $ 6.4 million, respectively, of which $ 1.5 million was held for sale at year-end 2023.

At third quarter-end 2024 and year-end 2023, the gross accrual for litigation costs amounted to $ 3.8 million and $ 6.4 million, respectively, of which $ 1.5 million was held for sale at year-end 2023.

The Company maintains insurance coverage which may cover certain losses.

When losses exceed the applicable policy deductible and realization of recovery of the loss from existing insurance policies is deemed probable, the Company records receivables from the insurance company for the excess amount, which are included in prepaid expenses and other current assets and other assets in the consolidated balance sheet.

At second quarter-end 2024, there were no related insurance receivables.

At year-end 2023, the related insurance receivables amounted to $ 0.2 million.

The Company estimates the aggregate range of reasonably possible losses, in excess of amounts accrued, is zero to $ 5.2 million as of second quarter-end 2024.

At third quarter-end 2024 and year-end 2023, the related insurance receivables amounted to $ 1.1 million and $ 0.2 million, respectively.

The Company estimates the aggregate range of reasonably possible losses, in excess of amounts accrued, is $ 0.1 million to $ 1.4 million as of third quarter-end 2024.

This range includes matters where a liability has been accrued but it is reasonably possible that the ultimate loss may exceed the amount accrued and for matters where a loss is believed to be reasonably possible, but a liability has not been accrued.

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In the first quarter of 2024, the Company changed the primary segment profitability measure from earnings from operations to a business unit profit measure that excludes depreciation and amortization.

This change will provide management greater visibility into the financial performance of the segments and how they contribute to the Company's overall performance.

This change provides management greater visibility into the financial performance of the segments and how they contribute to the Company's overall performance.

Prior periods have been recast to reflect the current period allocation method and new segment profitability measurement.

The update had no impact on the consolidated financial information.

The following tables present information about the reported revenue from services and gross profit of the Company by reportable segment, along with a reconciliation to earnings before taxes, for the second quarter and June year-to-date 2024 and 2023.

The following tables present information about the reported revenue from services and gross profit of the Company by reportable segment, along with a reconciliation to earnings before taxes, for the third quarter and September year-to-date 2024 and 2023.

Asset information by reportable segment is not presented, since the Company does not produce such information internally nor does it use such information to manage its business.

Second Quarter June Year to Date

Third Quarter September Year to Date

2024 2023 2024 2023

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Second Quarter June Year to Date

Third Quarter September Year to Date

2024 2023 2024 2023

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Asset impairment charge — — ( 5.5 ) —

(Loss) gain on sale of EMEA staffing operations ( 10.0 ) — 1.6 —

Gain on sale of assets 5.5 — 5.5 —

Gain on sale of EMEA staffing operations — — 1.6 —

(Loss) gain on sale of assets ( 0.1 ) — 5.4 —

Depreciation and amortization ( 14.5 ) ( 10.0 ) ( 37.2 ) ( 29.7 )

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The depreciation and amortization amounts by segment are as follows:

Second Quarter June Year to Date

Third Quarter September Year to Date

2024 2023 2024 2023

8 unchanged sentences

Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Comprehensive income (Topic 220):

Disaggregation of Income Statement Expenses.

This ASU requires additional information about certain expense categories in the notes to financial statements.

The new guidance will be effective for annual periods beginning after December 15, 2026, with early adoption permitted.

We are currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures.

In October 2023, the FASB issued Accounting Standards Update ("ASU") 2023-06, Disclosure Improvements:

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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 1. Financial Statements