KELYA 10-K & 10-Q changes, risk factors and insider trading

Historically, the general level of economic activity and employment in the United States and the other countries in which we operate has significantly affected the demand for staffing services. In periods of economic growth, employers often add temporary employees before hiring full-time employees. However, when economic activity declines, many employers reduce their use of temporary employees before laying off full-time employees. Customer responses to real or perceived economic conditions, including perceptions related to market conditions, labor supplysupply, international trade policy, and inflation, could negatively impact customer behavior. Historically, significant changes in economic activity have disproportionately impacted staffing industry volumes. We may not fully benefit from times of increased economic activity should we experience shortages in the supply of workers. We may also experience more competitive pricing pressure and slower customer payments during periods of economic decline. A substantial portion of our revenues and earnings are generated by our business operations in the United States. Any significant economic downturn in the United States or certain other countries in which we operate could have a material adverse effect on our business, financial condition and results of operations.

In addition, the stock market in general,general and the Nasdaq Global Market in particular, often experiences significant price and volume fluctuations that frequently are unrelated or disproportionate to the operating performance of listed companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. A securities class action suit against us arising out of stock volatility or other investor claims, could result in substantial costs, potential liabilities and the diversion of our management’s attention and resources. Further, our operating results may be below the expectations of securities analysts or investors. In such event, the price of our common stock may decline.

Technological advances, including advances in automation and artificial intelligence, may significantly disrupt the labor market and weaken demand for human capital.

Our success is directly dependent on our customers’ demand for talent. As technology continues to evolve, an increasing number of tasks currently performed by people may be replaced by automation, robotics, machine learning, artificial intelligence,intelligence (“AI”), and other technology advances outside of our control. These changes could result in a decreased demand for human labor. This trend poses a risk to the staffing industry, particularly in lower-skill job categories and to creative, administrative, customer support,support and clerical roles vulnerable to advances in artificial intelligence. Artificial intelligence is beginning to perform tasks previously handled by knowledge workers, including data entry, basic coding, document review, financial analysis, customer service, and administrative support. As these technologies become more sophisticated and widely adopted, demand for certain categories of professional and technical staff we provide may decline. While technology may create demand for new types of roles that increase the demand for our services, there is no guarantee that growth in emerging job categories will fully offset potential declines in overall staffing demand. If we are unsuccessful in responding to this potential shift in customer demand due to advancing technology, it could have a material adverse effect on our results of operations and financial condition.

The temporary employment industry is heavily regulated in many of the countries in which we operate. Changes in laws or government regulations may result in prohibition or restriction of certain types of services we can offer, increased delivery and operating complexity costs, or the imposition of new or additional pay, benefit, licensing or tax requirements that could reduce our revenues and earnings. In particular, we are subject to state unemployment taxes in the U.S., which typically increase during periods of increased levels of unemployment. Increased government regulation of the workplace, such as enhanced wage or labor protections, laws or regulations restricting the use of artificial intelligence in the employment lifecycle, or expansion of employee privacy rights, could adversely impact our business. Changes in the immigration policy in the United States could adversely impact our ability to recruit or retain non-citizen workers, including individuals employed by us on work visas, primarily H-1B, or eligible to work under temporary protected status, deferred enforcement decisions, or similar work authorizations. We also receive benefits, such as the work opportunity income tax credit in the U.S., that regularly expire and may not be reinstated. There can be no assurance that we will be able to increase the fees charged to our customers in a timely manner and in a sufficient amount to fully cover increased costs as a result of any changes in laws or government regulations. Any future changes in laws or government regulations, or interpretations or enforcement thereof, including additional laws and regulations enacted at a state or local level may make it more difficult or expensive for us to provide services and could have a material adverse effect on our business, financial condition and results of operations. In addition, as state and local jurisdictions expand their regulation of the workplace, we may be unable to adequately monitor or timely respond to changes in state and local regulations, which could result in significant fines and penalties, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business, damage to our reputation,reputation and other adverse consequences.

Unexpected changes in claim trends on our workers’ compensation, unemployment, disability anddisability, medical benefit plansplans, and other expenses may negatively impact our financial condition.

We self-insure, or otherwise bear financial responsibility for, a significant portion of expected losses under our workers’ compensation program, disability and medical benefits claims. Unexpected changes in claim trends, including the severity and frequency of claims, actuarial estimates and medical cost inflation, could result in costs that are significantly different than initially reported. If future claims-related liabilities increase due to unforeseen circumstances, or if we must make unfavorable adjustments to accruals for prior accident years, our costs could increase significantly. In addition, unemployment insurance costs are dependent on benefit claims experience from employees which may vary from current levels and result in increased costs. There can be no assurance that we will be able to increase the fees charged to our customers in a timely manner and in a sufficient amount to cover increased costs as a result of any changes in claims-related liabilities.

We are subject to multiple federal, state, local,local and foreign taxes in the jurisdictions in which we operate. Our tax expense could be materially impacted by changes in tax laws in these jurisdictions, changes in the valuation of deferred tax assets and liabilities or changes in the mix of income by country. The overall size of our workforce and visibility of our industry may make it more likely we become a target of government investigations,investigations and we are regularly subject to audit by tax authorities. Although we believe our tax estimates are reasonable, the final determination of audits and any related litigation could be materially different from our historical tax provisions and accruals. The results of an audit or litigation could materially harm our business.

We serve many large corporate customers through high volume service agreements. While we intend to maintain or increase our revenues and earnings from our major corporate customers, we are exposed to risks arising from the possible loss of major customer accounts. A change in labor strategy or labor disruptions, including work stoppages or the deterioration of the financial condition or business prospects of these customers could reduce their need for our services and result in a significant decrease in the revenues and earnings we derive from these customers. Such change could occur due to economic, social, climate, or political factors outside of our customers' control. Inability to meet customer demands in response to these factors could result in the decline in use of our service or outright loss of customers. Our customers are also exposed to third-party risk through their use of vendors and suppliers which, in the event of a third-party incident at a customer, could result in a deterioration in their financial condition. Continuing merger and acquisition activity involving our large corporate customers could put existing business at risk or impose additional pricing pressures. Since receipts from customers generally lag payroll to temporary employees, the bankruptcy of a major customer could have a material adverse impact on our ability to meet our working capital requirements. The expansion of payment terms may extend our working capital requirements and reduce available capital for investment. Additionally, most of our customer contracts can be terminated by the customer on short notice without penalty. This creates uncertainty with respect to the revenues and earnings we may recognize with respect to our customer contracts.contracts and the loss of a large customer could have a material impact on revenue.

Our business with the federal government and government contractors presents additional risk considerations. We must comply with laws and regulations relating to the formation, administration and performance of federal government contracts. Failure to meet these obligations could result in civil penalties, fines, suspension of payments, reputational damage, disqualification from doing business with government agencies and other sanctions or adverse consequences. Government procurement practices may change in ways that impose additional costs or risks upon us or pose a competitive disadvantage. Our employees may be unable to obtain or retain the security clearances necessary to conduct business under certain contracts, or we could lose, or be unable to secure or retain, a necessary facility clearance. In the event of a security incident by us or our personnel, we may not be able to conduct future business for certain federal government clients. In addition, government agencies may temporarily or permanently lose funding for awarded contracts, reduce spending, or deprioritize future spending on contracts on which we participate, or there could be delays in the start-up of projects already awarded and funded. This creates uncertainty with respect to the revenues and earnings we may recognize with respect to our government contracts.

Our success depends, in part, on the value associated with our brands. Because we assign employees to work under the direction and supervision of our customer at work locations not under Kelly’s control, we are at risk of our employees engaging in unauthorized conduct that could harm our reputation. Our Education segment is particularly susceptible to this exposure. Our brand reputation could also be damaged by the actions of unrelated third parties with diverse or unclear motives. Political activists, social media posts, or traditional news media could reference the Kelly brand as part of a broader communication unrelated to our business, which could result in backlash against our business practices. In addition, undesirable actions by our competitors could adversely impact the reputation of the staffing industry as a whole, negatively impacting our brand. As we increasingly use artificial intelligence in our services, incidents of bias, hallucination, or error by artificial intelligence we use, or ethical objections to our use of artificial intelligence, could negatively impact our brand. Any incident, act or omission that damages Kelly’s reputation could cause the loss of current and future customers, additional regulatory scrutiny and liability to third parties, which could negatively impact profitability.

As we increasingly offer services outside the realm of traditional staffing, including outcome-based services, business process outsourcing, vendor and supplier management,management and services intended to connect independent talent to independent work, we are exposed to additional risks which could have a material adverse effect on our business.

Our business strategy focuses on driving profitable growth in key specialty areas, including through business process outsourcing arrangements, where we provide operational management of our customers’ non-core functions or departments. We also plan to expand the outcome-based services we provide, which increases our risk associated with product delivery. For outcome-based services, customers may impose specific requirements that limit our flexibility and control over service delivery and can increase operational complexity, introduce compliance and security risks, and which could have a material adverse effect on our business. This could expose us to certain risks unique to that business, including civil liability, product liability, or product recalls. As the nature of work changes, we deliver services that connect independent talent to independent work with our customers which could expose the Company to risks of misclassifying workers, which could result in regulatory audits and penalties. Although we have internal vetting processes intended to control such risks, there is no assurance that these processes will be effective or that we will be able to identify these potential risks in a timely manner. Our specialties also include professional services where errors or omissions by employees or independent contractors can result in substantial injury or damages. We attempt to mitigate and transfer such risks through contractual arrangements with our customers and suppliers; however, these services may give rise to liability claims and litigation. While we maintain insurance in types and amounts we believe are appropriate for the contemplated risks, there is no assurance that such insurance coverage will remain available on reasonable terms or be sufficient in amount or scope.

We rely on third parties to support critical functions within our operations, including portions of our technology infrastructure, vendor management, customer relationship management, applicant tracking systems and in-country staffing services. If we are unable to contract with third parties having the specialized skills needed to support our growth strategies or integrate their products and services with our business, or if they fail to meet our performance requirements, the results of operations could be adversely impacted. We also rely on supplier partnerships to deliver certain services to customers. If our suppliers fail to meet our standards and expectations, or are unfavorably regarded by our customers, our ability to discontinue the relationship may be limited, which could result in reputational damage, customer loss,loss and adversely affect our results of operations. The failure or inability to adequately perform on the part of one or more of these critical vendors, suppliers, or partners could cause significant disruptions and increased costs. Moreover, these third parties are often subject to international laws and regulations regarding their conduct, including compliance with anti-bribery, anti-corruption, human trafficking, forced or child labor, trade sanctions, sustainability,sustainability and other compliance obligations ("“Global Compliance Obligations"”). While we maintain processes to monitor these third-parties for compliance to these standards, failure of these third-parties to adhere to Global Compliance Obligations could result in significant fines and penalties, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business, customer loss, and damage to our reputation.

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

The Foreign Corrupt Practices Act and other anti-bribery and anti-corruption laws and regulations ("“Anti-Corruption Laws"”) prohibit corrupt payments by our employees, vendors, or agents. Other international laws and compacts hold companies liable for human rights violations that occur within their supply chain,chain and impose obligations on companies to prohibit human trafficking, forced labor,labor and child labor ("“Human Rights and Supply Chain Laws"”). While we devote substantial resources to our global compliance programs and have implemented policies, training,training and internal controls designed to reduce the risk of corrupt payments and ensure compliance with human rights standards, our employees, directors, officers, vendors, or agents may violate our policies. Our failure to comply with Anti-Corruption Laws or Human Rights and Supply Chain Laws could result in significant fines and penalties, criminal sanctions against us, our directors, officers, employees, agents, or our vendors, prohibitions on the conduct of our business,business and damage to our reputation. Operations outside the United States may be affected by changes in trade protection laws, policies and measures,measures and other regulatory requirements affecting trade and investment. As a result, we may be subject to legal liability and reputational damage.

Events such as natural disasters, severe weather, terrorist attacks, war, pandemics,pandemics and other catastrophic events could decrease demand for our services in impacted areas.

We are subject to substantial pressure to meet external stakeholder’s sustainability and ESG requirements.

Influential investors, regulators, customers, and advocacy groups have increasingly focused on evaluating environmental,the social, and governance ("ESG")sustainability commitments of companies in which they invest. While we have made public sustainability commitments, our customers often require us to comply with their ESG requirements as part of their own practices. These enhanced expectations from our customers around ESGsustainability practices can increase operating costs and require incremental resources to satisfy. Our inability to meet customer ESG or sustainability requirements could also result in the possible loss of major customer accounts. Although we maintain a sustainability program that we believe currently matches or exceeds our customer demands, there can be no guarantee that our program will be able to adequately meet future regulatory or customer requirements or that we will meet our established commitments.

As we aim to expand the number of clients utilizing our higher margin specialty solutions in support of our growth strategy, we are highly reliant on individuals who possess specialized knowledge and skills to lead related specialty solutions and operations. Social, political and financial conditions can negatively impact the availability of qualified personnel. Competition for individuals with proven specialized knowledge and skills is intense,intense and demand for these individuals is expected to remain strong in the foreseeable future. Our success is dependent on our ability to attract, develop and retain these employees.

We depend on our and our suppliers' ability to attract qualified personnel who possess the skills and experience necessary to meet the workforce demands of our customers. We must continually evaluate our base of available qualified personnel and suppliers to keep pace with changing customer needs. Competition for individuals with established professional skills is fierce,fierce and demand for these individuals is anticipated to remain robust for the foreseeable future. Rapid evolution of technology may widen the skills gap, where the demand for expertise outpaces the availability of suitably skilled professionals. The shifts in workforce demographics, including new generations entering the labor market with different expectations around flexibility, career development, and work-life balance, may make it more difficult to attract and retain qualified talent. Low unemployment, periods of reduced job movement or hiring activity, as well as social, political and financial conditions can negatively impact the amount of qualified personnel available to meet the talent requirements of our customers. There can be no assurance that qualified personnel will continue to be available in sufficient numbers and on terms of employment acceptable to us and our customers.

Many business processes critical to our continued operation are hosted in outsourced facilities in America, Europe and Asia, hosted at our corporate headquarters or, increasingly, occur in cloud-based computer environments. We rely on key cloud and Software as a Service (“SaaS”) providers to support critical business processes. These critical processes include, but are not limited to, payroll, customer reporting,reporting and order management. Although we have taken steps to protect such instances by establishing data backup and disaster recovery capabilities, thea losssecurity incident, outage, or inabilityoperational failure affecting these providers, or a misconfiguration or integration issue involving our environments, impair our ability to accessserve ofcustomers thisand datacandidates, or cloud environment couldand create a substantial risk of business interruption which could have a material adverse effect on our business, financial condition and results of operations.

In the normal course of business we control, process, or have access to personal data regarding candidates and persons employed or engaged by us, our customers, certain customer employees,employees and managed suppliers. Information concerning these individuals may also reside in systems controlled by third parties for purposes such as employee benefits, assignment information,information and payroll administration. The legal and regulatory environment concerning data privacy is becoming more complex and challenging,challenging and the potential consequences of non-compliance have become more severe. The European Union’s General Data Protection Regulation, the California Consumer Privacy Act, the Health Insurance Portability and Accountability Act of 1996 ("“HIPAA"”), and similar laws impose additional compliance requirements related to the collection, use, processing, transfer, disclosure, security,security and retention of personal or protected health information ("“PHI"”), which can increase operating costs and resources to accomplish. The further expansion of privacy laws,laws and litigation for violations of those laws, including at a state-level in the United States, could make it more difficult or expensive for us to provide services and could have a material adverse effect on our business, financial condition and results of operations.

Any failure to abide by these regulations or to protect such personal information or PHI from inappropriate access or disclosure, whether through social engineering or by accident or other cause, could have severe consequences including fines, litigation, regulatory sanctions, reputational damage,damage and loss of customers or employees. Although we have a privacy compliance program designed to preserve the privacy and rights of the individuals whose personal data we control or process, as well as personal data that we entrust to third parties, there can be no assurance that our program will meet all current and future regulatory requirements, anticipate all potential methods of unauthorized access, or prevent all inappropriate disclosures. Our insurance coverage may not be sufficient to cover all such costs or consequences,consequences and there can be no assurance that any insurance that we now maintain will remain available under acceptable terms.

We rely upon multiple information technology systems and networks, some of which are web-based or managed by third parties or open source, to process, transmit,transmit and store electronic information and to manage or support a variety of critical business processes and activities. Our networks and applications are increasingly accessed from locations and by devices not within our physical control,control and the specifics of our technology systems and networks may vary by geographic region. In the course of ordinary business, we may store or process proprietary or confidential information concerning our business and financial performance and current, past or prospective employees, customers, vendors and managed suppliers. The secure and consistent operation of these systems, networks and processes is critical to our business operations. Moreover, our workers may be exposed to, or have access to, similar information in the course of their customer assignments. We routinely experience cyberattacks, which may include the use or attempted use of malware, ransomware, computer viruses, phishing, social engineering schemes and other means of attempted disruption or unauthorized access. Advanced social engineering and impersonation techniques by criminal organizations and nation-state adversaries for the purposes of espionage, data theft, or system disruption have sought to exploit information technology job opportunities at many companies. Although we have not experienced a material attack of this nature, because our services involve providing talent solutions for theseinformation technology roles, we are at increased risk for this advanced type of attack, whether directly or through a supplier in our MSP services.

Additionally, the rapid pace of change in information security and cyber security threats could result in a heightened threat level for us or companies in our industry without notice. The potential risk increases as we expand and publicize new services. In addition to cyberattacks, our systems and services are vulnerable to damage or disruption from technology or software failures, errors by our employees or our vendors, power outages, natural disasters, extreme weather, conflicts, or other unforeseen events, which could disrupt our business operations. Our relationships with third parties, including suppliers we manage, customers,customers and vendors, create potential avenues for malicious actors to initiate a supply chain attack. Even in instances where we are not a target of a malicious actor, we could be exposed to risk due to our relationships and business processes with these third parties.

The actions we take to reduce the risk of impairments to our operations or systems and breaches of confidential or proprietary data may not be sufficient to prevent or repel future cyber events or other impairments of our networks or information technologies, especially as cyberattacks become more sophisticated with advances in artificial intelligence. An event involving the destruction, modification, accidental or unauthorized release, or theft of sensitive information from systems related to our business, or an attack that results in damage to or unavailability of our key technology systems or those of critical vendors (e.g., ransomware), could result in damage to our reputation, fines, regulatory sanctions or interventions, contractual or financial liabilities, additional compliance and remediation costs, loss of employees or customers, loss of payment card network privileges, operational disruptions and other forms of costs, losses or reimbursements, any of which could materially adversely affect our operations or financial condition. Our cyber security and business continuity plans,plans and those of our third parties with whom we do business, may not be effective in anticipating, preventing and effectively responding to all potential cyber risk exposures. Cyberattacks, even if unsuccessful, may damage or disrupt our systems and services or require us to take actions to protect our systems that could have a material adverse effect on our business, financial condition and results of operations. Our insurance coverage may not be sufficient to cover all such costs or consequences,consequences and there can be no assurance that any insurance that we now maintain will remain available under acceptable terms.

We have a controlling stockholder that beneficially owns 92.2% of our outstanding Class B shares. Our Class B common stock is the only class of our common stock entitled to voting rights. The trusteesvoting rights of Trustour KClass B common stock are thereforeperpetual and our Class B common stock is not subject to transfer restrictions or mandatory conversion obligations under our certificate of incorporation or bylaws. Our controlling shareholder therefore, is able to exercise voting control with respect to all matters requiring stockholder approval, including the election or removal from office of all members of the Company’s board of directors.

We are not subject to certain of the listing standards that normally apply to companies whose shares are quoted on the Nasdaq Global Select Market.

Our Class A and Class B common stock are quoted on the Nasdaq Global Select Market. Under the listing standards of the Nasdaq Global Select Market, we are deemed to be a “controlled company” due to Trustour Kcontrolling shareholder having voting power with respect to more than fifty percent of our outstanding voting stock. A controlled company is not required to have a majority of its board of directors comprised of independent directors. Director nominees are not required to be selected or recommended for the board’s selection by a majority of independent directors or a nominations committee comprised solely of independent directors, nor do the Nasdaq Global Select Market listing standards require a controlled company to certify the adoption of a formal written charter or board resolution, as applicable, addressing the nominations process. A controlled company is also exempt from the Nasdaq Global Select Market’s requirements regarding the determination of officer compensation by a majority of independent directors or a compensation committee comprised solely of independent directors. A controlled company is required to have an audit committee composed of at least three directors who are independent as defined under the rules of both the SEC and the Nasdaq Global Select Market. The Nasdaq Global Select Market further requires that all members of the audit committee have the ability to read and understand fundamental financial statements and that at least one member of the audit committee possess financial sophistication. The independent directors must also meet at least twice a year in meetings at which only they are present.

In the segment level discussions that follow the total company discussion, the comparative results for 20232024 and 20222023 have been recast to conform to the new structurestructure. inOur operating segments, which also represent our Mexicoreportable operationssegments, wereare transferredbased on the organizational structure for which financial results are regularly evaluated by our chief operating decision-maker (“CODM”, our CEO) to ourdetermine Professionalresource & Industrial ("P&I") segment following the sale of our EMEA staffing operationsallocation and toassess reflect our updated corporate allocation method.performance.

Revenue from services decreased 10.4%,1.9% whichyear-over-year primarilywith reflectsdecreases in the JanuaryETM 2,and 2024SET sale of our EMEA staffing operations,segments, partially offset by an increase relatedin tothe Education segment and by the acquisition of MRP in May 2024. Excluding the impact from the sale and the acquisition, revenue from services increaseddecreased 0.5%. This increase reflects revenue increases in the Education and Outsourcing & Consulting ("OCG") segments, partially offset by declines in the P&I and Science, Engineering & Technology ("SET") segments.6.2%. Compared to 2023last year and excluding the impact from the sale and acquisition, revenue from staffing services increaseddecreased 1.7%6.0% and revenue from outcome-based services decreased 3.2%.9.4% Infrom addition,the revenueprior year. Revenue from talent solutions increased 3.0%1.1% and permanent placement revenue decreased 24.2%20.9% from the prior year, excluding the impact from the sale and the acquisition.

Gross profit decreased 8.2%3.4% largelyon drivenlower byrevenue the sale of our EMEA staffing operations,volume, partially offset by an increase related to the acquisition of MRP. Excluding the impact from the sale and the acquisition, gross profit decreased 4.7%.9.7%. The gross profit rate increaseddecreased 0.530 basis points to 20.4%20.1% and was favorably impacted by the sale of our EMEA staffing operations and the acquisition of MRP. Excluding the impact from the sale and the acquisition, the gross profit rate declined 11070 basis points. The decrease is due primarily to changes in business mixmix, higher employee-related costs and a decrease inlower permanent placement revenue. Permanent placement revenue has higher gross profit due to very low direct costs of services and thus has a disproportionate impact on gross profit rates. The gross profit rate decreased in allthe ETM and SET segments excludingand had a slight increase in the saleEducation and the acquisition.segment.

Total selling, general and administrative ("“SG&A"”) expenses decreasedincreased 12.4%,0.9%, includingprimarily thedue sale of our EMEA staffing operations andto the acquisition of MRP. Excluding thesethe impacts,impact of the acquisition, SG&A expenses decreased 8.6%.4.8%. Included in SG&A expenses in 2025 were $27.8 million of integration and realignment costs related to initiatives to integrate MRP and other prior acquisitions, consolidating operating segments and further aligning processes and technology. Also included in SG&A was $2.7 million of executive transition charges and $0.8 million of transaction costs. Included in SG&A expenses in 2024 and 2023 were $6.1 million and $38.6 million of restructuring and transformation charges, respectively. Actions taken in both periods were a continuation of the actions that were announced in the second quarter of 2023 as part of the comprehensive transformation initiative. In addition, restructuring actions taken in the first quarter of 2023 reflected management undertaking actions to further our cost management efforts in response to the demand levels and reflected a repositioning of our P&I staffing business to better capitalize on opportunities in local markets. SG&A expenses in 2024 also include $17.9 million of transaction-relatedtransaction costs arising from the sale of our EMEA staffing operations and acquisition of MRP, $10.0 million of integration costs related to initiatives to integrate MRP and aligning Company processes and technology, $6.1 million of restructuring and transformation costs and $2.3 million of executive transition charges. Excluding the impact of the sale and acquisition, as well as transaction, integration, restructuring and executive transition charges—and excluding depreciation and amortization—SG&A expenses decreased 8.5%4.7% primarily due to momentum on structural workforceand reductionsdemand-driven asexpense partoptimization of our transformation initiatives, as well as proactive resource managementinitiatives and lower variable, performance-based incentive compensation expenses in response to lower revenue volume. Depreciation and amortization represents the total company depreciation and amortization of intangibles, including the amortization of hosted software.

ImpairmentThe goodwill impairment charge in 2025 was primarily driven by reduced demand, integration of assetsMRP and Softworld acquisitions and the realignment of reporting units in 2024 represents the impairmentSET of certain right-of-use ("ROU") assets related to our leased headquarters facility.segment. The goodwill impairment charge in 2024 relatesrelated to our Softworld reporting unit which delivers technology staffing and workforce services and is included in the SET segment. Changes in internal projections of financial performance due to continued challenging market conditions resulted in a lower estimated fair value for the reporting unit and an impairment charge of $102.0 million and $72.8 million.million Impairmentfor 2025 and 2024, respectively. The impairment of assets in 20232024 represents the impairment of certain right-of-use (“ROU”) assets related to anour unoccupiedleased officeheadquarters space lease exited in the second quarter.facility.

Loss from operations in 20242025 totaled $15.1$69.8 million, compared to earningsa loss from operations of $24.3$15.1 million in 2023.2024. The decrease is primarily related to the goodwill impairment charge,charges, higherincreased assetcosts impairmentfor chargesintegration, realignment and restructuring activities, the impact of lower revenue comparedand togross theprofits priorand year, partially offset by the impact of lowerhigher SG&A as compared to the prior year, the gain on sale of Ayers Group and the gain on sale of our EMEA staffing operations.year.

The increase in SET revenue from services was primarily driven by the acquisition of MRP instaffing Mayand 2024.outcome-based solutions businesses. Excluding the acquisition, revenue from services decreased 4.5%,9.3%, primarily duedriven by lower staffing services demand related to declinesU.S. infederal hoursgovernment volume in our staffing specialties, partially offset by higher bill rates.contractors. Excluding the acquisition, revenuesrevenue fromin our outcome-based services decreased 5.5%. Permanent placement fees decreased, reflecting continued lower market demand.

International reflects the sale of our EMEA staffing operations in January 2024 and the transfer of our Mexico operations to our P&IETM segment. The P&I segment information for 2023 has been recast to conform to the new structure.

Gross profit for the P&IETM segment decreased on lower revenue volumevolume. combinedFactors with a decrease in the gross profit rate. In comparison to the prior year,impacting the gross profit rate decreased 30 basis points. This decrease reflects lower permanent placement income andincluded higher employee-related costs,costs partiallyand offsetchanges in business mix, which reduced the gross profit rate by favorable70 businessbasis mix.points.

SET grossGross profit decreasedfor the Education segment increased on lowerhigher revenue volume. The gross profit rate decreasedincreased 7010 basis points due to lower permanentemployee-related placement revenues,costs, partially offset by favorablechanges in business mix.

Gross profit for the EducationETM segment increaseddecreased on higherlower revenue volume. TheIn comparison to the prior year, the gross profit rate decreased 5070 basis points primarily due primarilyto tochanges in business mix and lower permanent placement fees and unfavorable customer mix,revenue, partially offset by lower employee-related costs.

OCG grossGross profit decreasedfor the Education segment increased on lowerhigher revenue volume, combined with a decrease in the gross profit rate.volume. The gross profit rate decreased 3090 basis points due primarily drivento by declineschanges in business mix, lower permanent placement revenue in RPO and MSP, which generate higher margins.employee-related costs.

The increasedecrease in totalETM SG&A expenses excluding depreciation and amortization in SET is due to the MRP acquisition. Excluding the impact from the acquisition, expenses decreased 9.8% from the prior yearwas primarily due to lower shared servicesalary-related costs whichand areperformance-based includedincentive incompensation otheras segmenta expensesresult of operating efficiencies and lowerexpense directmanagement salariesactions reflecting thein response to lower revenue volume compared to the prior year, aspartially welloffset asby the impactaddition of transformation-relatedthe actions.Sevenstep business and integration and realignment charges. Excluding the acquisition, expenses decreased 4.5% from the prior year.

Our ability to stabilizedeliver sequential improvement across the businessenterprise while driving progress on our strategic initiatives in the firstsecond quarter reflects our enhanced focus on execution and operational discipline. As demand trends improve, ourOur progress will position us to capitalize,capitalize on improving demand trends, and driving profitable growth and long-term value creation.

Days sales outstanding (“DSO”) represents the number of days that sales remain unpaid for the period being reported. DSO is calculated by dividing average net sales per day (based on a rolling three-month period) into trade accounts receivable, net of allowances at period end. AlthoughWhere secondary supplier revenues are recorded on a net basis (net of secondary supplier expense), secondary supplier revenue is included in the daily sales calculation in order to properly reflect the gross revenue amounts billed to the customer.

Revenue from services in the firstsecond quarter decreased 10.7%5.8% year-over-year with decreases in the ETM, SET, and Education segments. Compared to the firstsecond quarter of 2025, the decrease is primarily due to declines in revenue from staffing services andof outcome-based9.5%, servicespartially decreasedoffset 12.9%by andincreases 9.7%,in respectively. Revenuerevenue from talent solutions increasedof 3.0% and permanent placement revenue decreased 5.2%6.3% from the prior year.

Gross profit decreased 17.0%6.0% year-over-year, primarily driven by lower revenue volume. The gross profit rate decreased 1.4%10 basis points (“bps”) to 18.9%,20.4%, primarily due to higherchanges in business mix, partially offset by lower employee-related costscosts. The gross profit rate decreased in the beginningSET partand ofEducation segments and increased in the year.ETM segment.

Total SG&A expenses decreased 11.7%5.5% year-over-year, primarily due to expense management actions to reduce volume-related costscosts, and reflects the benefits of the ongoing structural actions including integration and realignment efforts. SG&A expenses in the firstsecond quarter of 2026 include $4.7$2.9 million of integration and realignment costs related to continuation of ongoing initiatives,initiatives $1.5and $0.3 million of executive transition charges and $0.8 million of transaction costs primarily related to costs incurred in connection with our controlling shareholder change in the first quarter of 2026.charges. Included in SG&A expenses in the firstsecond quarter of 2025 were $10.7$6.0 million of integration and realignment costs related to initiatives to integrate MRP and align our processesprocesses, and $0.3$0.2 million of executive transition chargescharges, and $0.3$0.1 million of transaction-related costs arising from the sale of our EMEA staffing operations. Excluding integration and realignment, transaction, executive transition charges, and depreciation and amortization, SG&A expenses decreased 9.5%4.0% from the prior year.

Income tax benefitexpense was $0.8$2.2 million for the first quartersix months of 2026 compared to income tax expense of $1.8$2.7 million for the first quartersix months of 2025, with the change primarily driven by changes in pretax income and the benefit of work opportunity tax credits in the first quartersix months of 2025.

The decrease in Education revenue from services of 4.8%4.4% was driven primarily by the impact of delayed contract decisions, weather-related school closures and a reduction in demand in key markets due to declines in student enrollment.

The 16.6%4.4% decrease in SETETM SG&A expenses excluding depreciation and amortization was primarily due to lower salary-related costs and performance-based incentive compensation as a result of operating efficiencies and expense management actions in response to lower revenue volume compared to the prior year.

The 0.7%7.8% decrease in EducationSET SG&A expenses excluding depreciation and amortization was primarily relateddue to lower performance-basedsalary-related incentivecosts compensation.as a result of operating efficiencies and expense management actions in response to lower revenue volume compared to the prior year.

The 3.1%11.3% increasedecrease in Corporate expenses was primarily driven by investment in the Growth Office and other corporate initiatives and increases in our nonqualified compensation plan expense, partially offset by lower integration, realignment, and restructuring charges and performance-based incentive compensation in the firstsecond quarter of 2026 as compared to the prior year.

ETM reportedbusiness aunit lossprofit of $1.3 millionincreased compared to profit of $6.3 million in the prior year.year due to lower SG&A expenses. SET and Education reportedbusiness unit profit of $12.0 million and $12.3 million, respectively, which decreased compared to the prior year. Declines in business unit profit (loss) areyear primarily due to lower revenue and gross profit, partially offset by lower SG&A expenses.

Historically, we have financed our operations through cash generated by operating activities and access to credit markets. Our working capital requirements are primarily generated from temporary employee payroll, which is generally paid weekly, and customer accounts receivable, which is generally outstanding for longer periods. Since receipts from customers lag payroll 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. We also experience material seasonal fluctuations in working capital in our Education segment due to schools being mostly out of session during the summer.

Cash, cash equivalents and restricted cash totaled $29.5$28.0 million at the end of the firstsecond quarter of 2026 and $37.7 million at year-end 2025. As further described below, we generated $23.8 million of cash from operating activities, generated $0.2 million of cash from investing activities and used $25.4$31.2 million of cash for operating activities, used $1.2 million of cash for investing activities and generated $24.2 million of cash from financing activities.

In the first threesix months of 2026, we usedgenerated $25.4$23.8 million of net cash forfrom operating activities, as compared to generating $23.9$119.3 million in the first threesix months of 2025,2025. The decrease was primarily due to increasedhigher working capital requirements as compared to the same period of the prior year.

Trade accounts receivable totaled $1.2 billion at the end of the firstsecond quarter of 2026. Global DSO was 64 days for the first quarter of 2026 and 61 days at both second quarter-end 2026 and year-end 2025.

Our working capital position (total current assets less total current liabilities) was $480.2$429.9 million at the end of the firstsecond quarter of 2026, ana increasedecrease of $33.7$16.6 million from year-end 2025. The current ratio (total current assets divided by total current liabilities) was 1.61.5 at the end of the firstsecond quarter of 2026 and 1.5 at year-end 2025.

In the first threesix months of 2026, we usedgenerated $1.2$0.2 million of cash forfrom investing activities, as compared to generating $3.2$24.7 million in the first threesix months of 2025. Cash usedgenerated inby investing activities in the first threesix months of 2026 is primarily driven by $1.1$2.7 million of proceeds from company-owned life insurance, partially offset by $2.6 million of capital expenditures. Included in the cash generated forby investing activities in the first threesix months of 2025 is $21.8 million of proceeds from the sale of our EMEA staffing operations, $6.4 million of cash from the sale of the PersolKelly investment,investment and $1.6 million of proceeds from company-owned life insurance, partially offset by $2.5$4.5 million of cash used for capital expenditures.

We generatedused $24.2$31.2 million of cash fromfor financing activities in the first threesix months of 2026, as compared to using $39.5$172.7 million in the first threesix months of 2025. The change in cash generatedused from financing activities was primarily driven by lower net proceedsrepayments of $28.6$23.8 million on our credit facilities in 2026 compared to net repayments of $34.8$165.1 million on our credit facilities in 2025. Dividends paid per common share were $0.075 in each of the first two quarters of 2026 and 2025.

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 11.9%7.4% at the end of the firstsecond quarter of 2026 and 9.4% at year-end 2025.

As of firstsecond quarter-end 2026, we had $150.0 million of available capacity on our $150.0 million revolving credit facility and $76.9$129.3 million of available capacity on our $250.0 million securitization facility. The revolving credit facility carried no long-term borrowings on the floating or term benchmark lines of credit. The securitization facility carried $130.5$78.1 million of long-term borrowings and $42.6 million of standby letters of credit related to workers’ compensation. The credit facilities also include anprovisions accordionthat featurewould toallow increasefor expansion of our combined borrowing capacity by $250.0 million.

Together, the revolving credit and securitization facilities provide us with committed funding capacity that may be used for general corporate purposes subject to financial covenants and restrictions. We believe our cash flow from operations, the availability of liquidity under our credit facilities, including the accordionexpansion featureprovisions which allows us to increase our borrowing capacity and our ability to access capital from financial markets will be sufficient to meet our anticipated cash requirements, while maintaining sufficient liquidity for normal operating purposes. As of firstsecond quarter-end 2026, we met the debt covenants related to our revolving credit facility and securitization facility.

As of firstsecond quarter-end of 2026, we had additional unsecured, uncommitted short-term local credit facilities totaling $3.1 million, under which we had no borrowings. Details of our debt facilities are contained in the Debt footnote in the notes to our consolidated financial statements.

Actual events and results may differ materially from those expressed or implied by forward-looking statements due to a number of factors. The principal 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, competitive pressures and pricing, 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) dependence 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, including those discussed under “Risk Factors” in Part I, Item 1A of the Company’sour Annual Report on Form 10-K for the year ended December 28, 2025. Actual results may differ materially from any forward-looking statements contained herein, and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.