KELLY SERVICES, INC. Executive Overview
Over the past several weeks, the impact of COVID-19 has resulted in dramatic shifts in most aspects of the economy and how professional and private lives are conducted. While the pace of change is unprecedented and the resulting impacts are still being determined, our Noble Purpose, "We connect people to work in ways that enrich their lives," will continue to guide our strategy and actions. Kelly remains committed to being a leading talent solutions provider among the talent with whom we choose to specialize and in the markets in which we choose to compete. As we navigate the uncertainty over the next several quarters, we will continue to demonstrate our expected behaviors and actions:
•Employ a talent-first mentality
•Relentlessly deliver for customers
•Grow through discipline and focus
•Deliver efficiency and effectiveness in everything we do
By aligning ourselves with our Noble Purpose and executing against these behaviors, we intend to weather the current situation and emerge as a more agile and focused organization, prepared to achieve new levels of growth and profitability as we further develop our portfolio of businesses.
The Talent Solutions Industry
Labor markets are in the midst of change due to automation, secular shifts in labor supply and demand and skills gaps and we expect the current economic situation to further accelerate that change. Global demographic trends are reshaping and redefining the way in which companies find and use talent. In response, the talent solutions industry is adjusting how it sources, recruits, trains and places talent. Our industry is evolving to meet businesses' growing demand for talent, whether delivered as a single individual or as part of a total workforce solution. Companies in our industry are using novel sourcing approaches-including gig platforms, independent contractors and other talent pools-to create workforce solutions that are flexible, responsive to the labor market and tailored to meet clients' needs. In addition, today's companies are elevating their commitment to talent, with the growing realization that meeting the changing needs and requirements of talent is essential to remain competitive. The ways in which people view, find and conduct work are undergoing fundamental shifts. And as the demand for skilled talent continues to climb, workers' changing ideas about the integration of work into life are becoming more important. In this increasingly talent-driven market, a diverse set of workers, empowered by technology, is seeking to take greater control over their career trajectories.
Our Business
Kelly Services is a talent and global workforce solutions company serving customers of all sizes in a variety of industries. We offer innovative outsourcing and consulting services, as well as staffing on a temporary, temporary-to-hire and direct-hire basis. We provide commercial and professional/technical staffing through our branch networks in ourAmericas Staffing and International Staffing segments and, in APAC, we provide staffing solutions to customers throughPersolKelly Pte. Ltd. , our joint venture with Persol Holdings, a leading provider of HR solutions inJapan . For theU.S. education market, Kelly Education is the leading provider of substitute teachers to more than 7,000 schools nationwide. We also provide a suite of talent fulfillment and outcome-based solutions through our Global Talent Solutions ("GTS") segment, which delivers integrated talent management solutions on a global basis. GTS provides Contingent Workforce Outsourcing ("CWO"), Recruitment Process Outsourcing ("RPO"), Business Process Outsourcing ("BPO"), Advisory and Talent Fulfillment solutions to help customers plan for, manage and execute their acquisition of contingent labor, full-time labor and free agents, and gain access to service providers and qualified talent quickly, at competitive rates, with minimized risk. We earn revenues from customers that procure the services of our temporary employees on a time and materials basis, that use us to recruit permanent employees, and that rely on our talent advisory and outsourcing services. Our working capital requirements are primarily generated from temporary employee payroll and customer accounts receivable. The nature of our 27 -------------------------------------------------------------------------------- business is such that trade accounts receivable are our most significant asset. Average days sales outstanding varies within and outside theU.S. but was 59 days on a global basis as of the 2020 first quarter end and 58 days as of the 2019 year end and first quarter end. Since receipts from customers generally lag temporary employee payroll, working capital requirements increase substantially in periods of growth and decline in periods of economic contraction.
Our Perspective
Short Term
Over the next several months we will have greater clarity on the impact of COVID-19 on the global economy, the talent solutions industry, our customers and our talent. InApril 2020 , we took a series of proactive actions in response to the crisis. These actions were designed to reduce spending, minimize layoffs, and bolster the strength and flexibility of Kelly's finances. These actions include: •a 10% pay cut for full-time salaried employees in theU.S. ,Puerto Rico andCanada , in addition to certain actions in EMEA and APAC; •substantially reduced CEO compensation and reduced compensation of 10% or more for senior leaders; •temporary furloughing and/or redeployment of some employees until business conditions improve; •suspension of the Company match to certain retirement accounts in theU.S. andPuerto Rico ; •reduction of discretionary expenses and projects, including capital expenditures; and •a hiring freeze with the exception of critical revenue-generating positions. Given the level of uncertainty surrounding the duration of the COVID-19 crisis, Kelly's board also voted to suspend the quarterly dividend until conditions improve. To enhance financial flexibility, we have drawn down additional cash borrowings from Kelly's existing credit facility subsequent to the 2020 first quarter end. The impact of the pandemic on our first quarter results began inMarch 2020 with the limitations on public life in theU.S. and the European markets we serve. We do expect that there will be a material decline in our revenues during the period of time in which stay-at-home orders and other limitations on activities are in place. The impact on the revenues of each segment will vary given the differences in pandemic-related measures enacted in each geography, the customer industries served and the skill sets of the talent provided to our customers and their ability to work remotely. We currently expect a gradual return to pre-crisis levels of customer demand over the next several quarters. While our cost reductions efforts are expected to reduce year-over-year expenses significantly in the second quarter, they will not be enough to offset declines in revenue and gross profit. As a result, we expect our second quarter and full year earnings to decline year-over-year. In addition, negative market reaction to the COVID-19 crisis inMarch 2020 , including declines in our common stock price, caused our market capitalization to decline significantly. This triggered an interim goodwill impairment test and resulted in a$147.7 million non-cash goodwill impairment charge in the first quarter of 2020. Moving Forward While the severity of the economic impacts and the duration of these impacts cannot be precisely measured at this time, we do believe that the mid-term impacts on how people view, find and conduct work will continue to align with our current strategic path. We continue to pursue a specialized talent solutions strategy and have identified several specialty growth platforms for investment. We expanded our engineering portfolio with theJanuary 2, 2019 acquisitions ofGlobal Technology Associates, LLC ("GTA") andNextGen Global Resources LLC ("NextGen"), leaders in the growing 5G telecommunications market. These position Kelly as one of the leading engineering workforce solutions companies in this fast-growing market. OnJanuary 14, 2020 , we acquiredInsight Workforce Solutions LLC ("Insight"), an educational staffing company, to expand our leadership position in theU.S. education talent solutions industry. We intend to further accelerate our efforts to drive revenue and earnings growth through additional inorganic growth platforms, making smart acquisitions that align with Kelly's focus on specialization as market conditions improve. We continue to make investments in technology, particularly those which support greater efficiency in finding talent to answer customer needs. We are accelerating the implementation of our front office platforms which, when fully deployed in mid-2020, will streamline the processes and workflows associated with recruiting, onboarding and reassigning workers. This investment will create the platform from which we will deploy additional operational improvements over the next several years that will enhance the experience of the hundreds of thousands of job seekers who interact and work with Kelly each year. 28 -------------------------------------------------------------------------------- In the first quarter of 2020, we completed a review of theU.S. branch network of physical locations and reduced the number of branch locations utilized. In addition, we took similar actions on branch locations in International Staffing. We recorded$4.8 million of lease termination costs and fixed asset write-offs related to those actions. In addition, we took cost reduction actions in Americas Staffing, GTS, International Staffing and corporate support functions which resulted in$3.9 million of severance costs and eliminated 123 positions. We expect that the expense savings from the first quarter of 2020 actions will be approximately$20 million on an annual basis. While faced with market conditions that may temporarily delay our efforts, Kelly continues to focus on accelerating the execution of our strategic plan and making the necessary investments and adjustments to advance that strategy. Our objective is to become an even more agile, consultative and profitable company, and we are reshaping our business to make that goal a reality. While the COVID-19 pandemic has resulted in uncertainty in the economy and the labor markets that will affect our near term financial performance, we will measure our progress using financial measures, including:
•Revenue growth (both organic and inorganic);
•Gross profit rate improvement; and
•Conversion rate and EBITDA margin.
Financial Measures
The constant currency ("CC") change amounts in the following tables refer to the
year-over-year percentage changes resulting from translating 2020 financial data
into U.S. dollars using the same foreign currency exchange rates used to
translate financial data for 2019. We believe that CC measurements are a useful
measure, indicating the actual trends of our operations without distortion due
to currency fluctuations. We use CC results when analyzing the performance of
our segments and measuring our results against those of our competitors.
Additionally, substantially all of our foreign subsidiaries derive revenues and
incur cost of services and selling, general and administrative ("SG&A") expenses
within a single country and currency which, as a result, provides a natural
hedge against currency risks in connection with their normal business
operations.
CC measures are non-GAAP (Generally Accepted Accounting Principles) measures and
are used to supplement measures in accordance with GAAP. Our non-GAAP measures
may be calculated differently from those provided by other companies, limiting
their usefulness for comparison purposes. Non-GAAP measures should not be
considered a substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP.
Reported and CC percentage changes in the following tables were computed based
on actual amounts in thousands of dollars.
Return on sales (earnings from operations divided by revenue from services) and
conversion rate (earnings from operations divided by gross profit) are ratios
used to measure the Company's operating efficiency.
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 the period end. Although 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.
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Results of Operations
Total Company - First Quarter
(Dollars in millions)
CC
2020 2019 Change Change
Revenue from services $ 1,261.1 $ 1,382.6 (8.8) % (8.3) %
Gross profit 223.3 251.6 (11.3) (10.9)
SG&A expenses excluding restructuring charges 210.8 228.5 (7.7) (7.5)
Restructuring charges 8.7 6.3 38.1 38.5
Total SG&A expenses 219.5 234.8 (6.5) (6.3)
Goodwill impairment charge 147.7 - NM
Gain on sale of assets 32.1 - NM
Earnings (loss) from operations (111.8) 16.8 NM
Diluted earnings (loss) per share (3.91) 0.56 NM
Permanent placement income (included in
revenue from services) 12.3 15.9 (22.9) (22.1)
Gross profit rate 17.7 % 18.2 % (0.5) pts.
Total Company revenue from services for the first quarter of 2020 declined 8.8%
in comparison to the prior year and declined 8.3% on a CC basis. As noted in the
following discussions, revenue decreased in Americas Staffing and International
Staffing, and increased in GTS. The economic slow-down resulting from COVID-19
began in March 2020 . The impact of the current unfavorable economic conditions
on our results of operations for the first quarter of 2020 came primarily from
lower demand during that period, resulting in a 2.7% decline in year-over-year
revenues for the quarter. Revenue from services for the first quarter of 2020
includes the results of the Insight acquisition, which added approximately 110
basis points to the total revenue growth rate.
The gross profit rate decreased by 50 basis points from the prior year. As noted
in the following discussions, the gross profit rate decreased in all operating
segments, but primarily in the Americas Staffing segment.
Total SG&A expenses decreased 6.5% on a reported basis and 6.3% on a CC basis.
Included in total SG&A expenses are restructuring charges of $8.7 million in the
first quarter of 2020 related to actions taken to position the Company to adopt
a new operating model later in 2020 and to align the U.S. branch network
facilities footprint with a more technology-enabled service delivery
methodology. Restructuring charges of $6.3 million in the first quarter of 2019
represent severance costs primarily related to U.S. branch-based staffing
operations.
During the first quarter of 2020, the negative reaction to the pandemic by the
global equity markets also resulted in a decline in the Company's common stock
price. This triggered an interim goodwill impairment test, resulting in a $147.7
million goodwill impairment charge in the first quarter of 2020.
Gain on sale of assets of $32.1 million represents the excess of the proceeds
over the cost of the headquarters properties sold in the first quarter of 2020.
The main headquarters building was subsequently leased back to the Company
during the first quarter of 2020.
Diluted loss per share for the first quarter of 2020 was $3.91 , as compared to
diluted earnings per share of $0.56 for the first quarter of 2019. The 2020
first quarter diluted loss per share was impacted by a loss, net of tax, of
approximately $1.38 per share related to the investment in Persol Holdings. The
2019 first quarter diluted earnings per share were impacted by a gain, net of
tax, of approximately $0.23 per share related to the gain on the investment in
Persol Holdings.
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Americas Staffing - First Quarter
(Dollars in millions)
CC
2020 2019 Change Change
Revenue from services $ 533.4 $ 626.5 (14.9) % (14.6) %
Gross profit 93.6 117.2 (20.2) (20.0)
SG&A expenses excluding restructuring charges 87.9 94.9 (7.4) (7.4)
Restructuring charges 5.6 6.3 (10.6) (10.6)
Total SG&A expenses 93.5 101.2 (7.6) (7.6)
Earnings from operations 0.1 16.0 (99.5)
Earnings from operations excluding
restructuring charges 5.7 22.3 (74.4)
Gross profit rate 17.5 % 18.7 % (1.2) pts.
The change in Americas Staffing revenue from services reflects a 15% decrease in
hours volume and a 3% decrease in average bill rates (a 2.4% decrease on a CC
basis), partially offset by the impact of the January 2020 acquisition of
Insight. The decrease in hours volume was primarily due to the disruption
resulting from the restructure of the U.S. branch-based staffing in the first
quarter of 2019 and slower achievement of the related benefits. Additionally,
the decline reflects an approximately 5% decline in revenues in Americas
Staffing from the more challenging market conditions resulting from COVID-19,
primarily in education related to school closures, and in manufacturing from the
temporary closure of customer facilities. The decrease in average bill rates was
related to customer mix in commercial, education and engineering products.
Americas Staffing represented 42% of total Company revenue in the first quarter
of 2020 and 45% in the first quarter of 2019.
From a product perspective, the change in revenue reflects lower volume in commercial, including light industrial and office services, as well as education, engineering and science products.
The Americas Staffing gross profit rate decreased in comparison to the prior year. The gross profit rate was negatively impacted by higher employee benefit costs, workers' compensation costs, payroll taxes and lower permanent placement income. Permanent placement income, which is included in revenue from services and has very low direct costs of services, has a disproportionate impact on gross profit rates. Total SG&A expenses decreased 7.6% from the prior year, due primarily to lower administrative salaries and performance-based compensation. Included in total SG&A expenses are$5.6 million related to restructuring costs in the first quarter of 2020 and$6.3 million in the first quarter of 2019. The restructuring costs in the first quarter of 2020 primarily represent facilities lease buy-out costs and severance costs related toU.S. branch-based staffing operations. The restructuring costs in the first quarter of 2019 primarily represent severance costs related toU.S. branch-based staffing operations. 31 --------------------------------------------------------------------------------
GTS - First Quarter
(Dollars in millions)
CC
2020 2019 Change Change
Revenue from services $ 503.2 $ 501.0 0.4 % 0.6 %
Gross profit 100.2 100.4 (0.2) 0.1
SG&A expenses excluding restructuring charges 72.8 74.7 (2.5) (2.2)
Restructuring charges 0.9 - NM NM
Total SG&A expenses 73.7 74.7 (1.3) (1.0)
Earnings from operations 26.5 25.7 2.9
Earnings from operations excluding
restructuring charges 27.4 25.7 6.4
Gross profit rate 19.9 % 20.0 % (0.1) pts.
Revenue from services increased 0.4% compared to last year. Increases from
program expansions and new customer contracts in our BPO and KellyConnect
products were partially offset by lower demand from a number of customers in
centrally delivered staffing and PPO products. The impact of COVID-19 on GTS
revenues was not significant in the first quarter of 2020. Many of GTS'
customers are in essential industries, were able to facilitate remote work or
continued to maintain, rather than lay off, their talent including talent
provided by the Company. GTS revenue represented 40% of total Company revenue in
the first quarter of 2020 and 36% in the first quarter of 2019.
The decrease in the GTS gross profit rate was due to an increase in employee-related costs, partially offset by our continued structural improvement in our product mix.
Total SG&A expenses decreased 1.3% from the prior year, due to effective cost management, as we continue to align our resources and spending levels with volumes and gross profit in our products. Included in total SG&A expenses are$0.9 million related to restructuring charges, representing primarily employee separation costs. 32 -------------------------------------------------------------------------------- International Staffing - First Quarter (Dollars in millions) CC 2020 2019 Change Change Revenue from services$ 227.6 $ 258.9 (12.1) % (10.7) % Gross profit 29.9 34.6 (13.4) (11.8) SG&A expenses excluding restructuring charges 28.2 31.3 (9.7) (8.5) Restructuring charges 1.1 - NM NM Total SG&A expenses 29.3 31.3 (6.2) (5.0) Earnings from operations 0.6 3.3 (81.7) Earnings from operations excluding restructuring charges 1.7 3.3 (48.8) Gross profit rate 13.2 % 13.3 % (0.1) pts. In comparison to the prior year, International Staffing revenue from services decreased 12.1% on a reported basis and 10.7% on a CC basis. The decline was primarily due to a decrease in hours volume inFrance ,Switzerland andItaly , market conditions, as well as the impact of COVID-19 disruption. These decreases were partially offset by increased revenue inRussia , due to higher hours volume combined with higher average bill rates. Overall, the impact of unfavorable market conditions as a result of COVID-19 was approximately 2% in the first quarter of 2020. International Staffing represented 18% of total Company revenue in the first quarter of 2020 and 19% in the first quarter of 2019. The International Staffing gross profit rate decreased primarily due to unfavorable customer mix, as well as lower permanent placement income. Total SG&A expenses decreased 6.2% due to continued cost management focused on increased productivity in our branch network. Included in total SG&A are$1.1 million of restructuring charges, which primarily related toFrance staffing operations to reposition our operating model to pursue growth through specialized staffing business. 33 -------------------------------------------------------------------------------- Financial Condition 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 and customer accounts receivable. Since receipts from customers generally 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. The impact of the current economic slow-down resulting from the COVID-19 crisis did not begin untilmid-March 2020 in theU.S. As a result, the impact of the current economic conditions on our financial condition and cash flows was limited in our financial results as of the end of the first quarter. As highlighted in the consolidated statements of cash flows, our liquidity and available capital resources are impacted by four key components: cash, cash equivalents and restricted cash, operating activities, investing activities and financing activities. Cash, Cash Equivalents and Restricted Cash Cash, cash equivalents and restricted cash totaled$53.5 million at the end of the first quarter of 2020 and$31.0 million at year-end 2019. As further described below, we generated$8.4 million of cash from operating activities, generated$15.9 million of cash from investing activities and used$4.6 million of cash for financing activities. Operating Activities In the first three months of 2020, we generated$8.4 million of net cash from operating activities, as compared to generating$21.2 million in the first three months of 2019, due to recurring working capital changes. Trade accounts receivable totaled$1.2 billion at the end of the first quarter of 2020. Global DSO was 59 days at the end of the first quarter of 2020 and 58 days at the end of the first quarter of 2019. Our working capital position (total current assets less total current liabilities) was$523.0 million at the end of the first quarter of 2020, an increase of$1.4 million from year-end 2019. The current ratio (total current assets divided by total current liabilities) was 1.6 at the end of the first quarter of 2020 and at year-end 2019. Investing Activities In the first three months of 2020, we generated$15.9 million of cash from investing activities, as compared to using$90.3 million in the first three months of 2019. Included in cash from investing activities in the first three months of 2020 is$55.5 million of proceeds representing the cash received, net of transaction expenses, for the sale of three headquarters properties as a part of a sale and leaseback transaction, partially offset by$36.3 million of cash used for the acquisition of Insight inJanuary 2020 , net of the cash received. Included in cash used for investing activities in the first three months of 2019 is$50.8 million for the acquisition of NextGen inJanuary 2019 , net of the cash received, and$35.6 million for the acquisition of GTA inJanuary 2019 , net of the cash received. Financing Activities In the first three months of 2020, we used$4.6 million of cash for financing activities, as compared to generating$66.7 million in the first three months of 2019. The change in cash used in financing activities was primarily related to short-term borrowing activities. Debt totaled$1.7 million at the end of the first quarter of 2020 and was$1.9 million at year-end 2019. Debt-to-total capital (total debt reported in the consolidated balance sheet divided by total debt plus stockholders' equity) is a common ratio to measure the relative capital structure and leverage of the Company. Our ratio of debt-to-total capital was 0.2% at the end of the first quarter of 2020 and 0.1% at year-end 2019. The change in short-term borrowings in the first three months of 2020 was primarily due to payments on local lines of credit. The change in short-term borrowings in the first three months of 2019 was primarily due to borrowings on our securitization facility. We made dividend payments of$3.0 million in the first three months of 2020 and 2019. 34 -------------------------------------------------------------------------------- New Accounting Pronouncements See New Accounting Pronouncements footnote in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q for a description of new accounting pronouncements. Critical Accounting Estimates For a discussion of our critical accounting estimates, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2019 Form 10-K. For a discussion of the goodwill impairment charge recognized during the first quarter of 2020, see theGoodwill footnote in the Notes to our Consolidated Financial Statements of this Quarterly Report on Form 10-Q for more information. Contractual Obligations and Commercial Commitments During the first quarter of 2020, there were no significant changes to our contractual obligations and commercial commitments from those disclosed in the section "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2019 Form 10-K, other than the sale and leaseback of the main headquarters building. Details of the lease payments by year are disclosed in the Leases footnote in the Notes to Consolidated Financial Statements in this Form 10-Q filing. We have no material unrecorded commitments, losses, contingencies or guarantees associated with any related parties or unconsolidated entities.
Liquidity
We expect to meet our ongoing short-term and long-term cash requirements principally through cash generated from operations, available cash and equivalents, securitization of customer receivables and committed unused credit facilities. During 2020, cash generated from operations will be supplemented by recent enactment of laws providing COVID-19 relief, most notably the Coronavirus Aid, Relief, and Economic Security Act which allows for the deferral of payments of the Company'sU.S. social security taxes. We are reviewing other potential sources of liquidity, such as wage subsidy receivables outside theU.S. , in an effort to potentially monetize such sources. Additional funding sources could include asset-based lending or additional bank facilities. We utilize intercompany loans, dividends, capital contributions and redemptions to effectively manage our cash on a global basis. We periodically review our foreign subsidiaries' cash balances and projected cash needs. As part of those reviews, we may identify cash that we feel should be repatriated to optimize the Company's overall capital structure. As of the 2020 first quarter end, these reviews have not resulted in any specific plans to repatriate a majority of our international cash balances. We expect much of our international cash will be needed to fund working capital growth in our local operations. The majority of our international cash is concentrated in a cash pooling arrangement (the "Cash Pool ") and is available to fund general corporate needs internationally.The Cash Pool is a set of cash accounts maintained with a single bank that must, as a whole, maintain at least a zero balance; individual accounts may be positive or negative. This allows countries with excess cash to invest and countries with cash needs to utilize the excess cash. As of the end of the first quarter of 2020, we had$200.0 million of available capacity on our$200.0 million revolving credit facility and$96.8 million of available capacity on our$150.0 million securitization facility. The securitization facility carried no short-term borrowings and$53.2 million of standby letters of credit related to workers' compensation. Together, the revolving credit and securitization facilities provide the Company with committed funding capacity that may be used for general corporate purposes subject to financial covenants and restrictions. While we believe these facilities will cover our working capital needs over the short term, if economic conditions or operating results change significantly from our current expectations, we may need to seek additional sources of funds. As of the end of the first quarter of 2020, we met the debt covenants related to our revolving credit facility and securitization facility. We have historically managed our cash and debt very closely to optimize our capital structure. As our cash balances build, we tend to pay down debt as appropriate. Conversely, when working capital needs grow, we tend to use corporate cash and cash available in theCash Pool first, and then access our borrowing facilities. Given the level of uncertainty surrounding the duration of the COVID-19 crisis and to enhance financial flexibility, we may maintain a higher level of cash than our prior practice, including additional borrowings from our existing revolving credit and securitization facilities. While we may adjust our practices in the future, as ofMay 4, 2020 , we have borrowed$70 million under the securitization facility to build on our existing cash balance as disclosed atMarch 29, 2020 . We monitor the credit ratings of our major banking partners on a regular basis and have regular discussions with them. Based on our reviews and communications, we believe the risk of one or more of our banks not being able to honor commitments is 35 -------------------------------------------------------------------------------- insignificant. We also review the ratings and holdings of our money market funds and other investment vehicles regularly to ensure high credit quality and access to our invested cash. Forward-Looking Statements Certain statements contained in this report are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, or which include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," or variations or negatives thereof or by similar or comparable words or phrases. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions by us that may be provided by management, including oral statements or other written materials released to the public, are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and assumptions about our Company and economic and market factors in the countries in which we do business, among other things. These statements are not guarantees of future performance, and we have no specific intention to update these statements. Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, the recent novel coronavirus (COVID-19) outbreak, competitive market pressures including pricing and technology introductions and disruptions, changing market and economic conditions, our ability to achieve our business strategy, the risk of damage to our brand, the risk our intellectual property assets could be infringed upon or compromised, our ability to successfully develop new service offerings, our exposure to risks associated with services outside traditional staffing, including business process outsourcing and services connecting talent to independent work, our increasing dependency on third parties for the execution of critical functions, the risks associated with past and future acquisitions, exposure to risks associated with investments in equity affiliates includingPersolKelly Pte. Ltd. , material changes in demand from or loss of large corporate customers as well as changes in their buying practices, risks particular to doing business with the government or government contractors, risks associated with conducting business in foreign countries, including foreign currency fluctuations, the exposure to potential market and currency exchange risks relating to our investment in Persol Holdings, risks associated with violations of anti-corruption, trade protection and other laws and regulations, availability of qualified full-time employees, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyberattacks or other breaches of network or information technology security, our ability to sustain critical business applications through our key data centers, our ability to effectively implement and manage our information technology projects, our ability to maintain adequate financial and management processes and controls, risk of potential impairment charges triggered by adverse industry developments or operational circumstances, unexpected changes in claim trends on workers' compensation, unemployment, disability and medical benefit plans, the impact of changes in laws and regulations (including federal, state and international tax laws), competition law risks, the risk of additional tax or unclaimed property liabilities in excess of our estimates, our ability to realize value from our tax credit and net operating loss carryforwards, our ability to maintain specified financial covenants in our bank facilities to continue to access credit markets, and other risks, uncertainties and factors discussed in this report and in our other filings with theSecurities and Exchange Commission . Actual results may differ materially from any forward-looking statements contained herein, and we have no intention to update these statements. Certain risk factors are discussed more fully under "Risk Factors" in Part I, Item 1A of the Company's Annual Report on Form 10-K. 36
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