PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements for Q2 2019 show net earnings of **$83.8 M** (vs. **$15.4 M** loss in 2018) driven by a **$61.2 M** investment gain, with total assets rising to **$2.54 B** and operating cash flow at **$73.5 M** [Consolidated Statements of Earnings](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings) Financial Metric | Financial Metric | 13 Weeks Ended June 30, 2019 | 13 Weeks Ended July 1, 2018 | | :--- | :--- | :--- | | Revenue from services | $1,367.5 M | $1,386.9 M | | Gross profit | $244.0 M | $240.5 M | | Earnings from operations | $34.8 M | $20.4 M | | Gain (loss) on investment in Persol Holdings | $61.2 M | $(52.5) M | | **Net earnings (loss)** | **$83.8 M** | **$(15.4) M** | | **Diluted earnings (loss) per share** | **$2.12** | **$(0.40)** | - The company's net earnings for Q2 2019 were significantly impacted by a **$61.2 M** gain on its investment in Persol Holdings, a stark contrast to the **$52.5 M** loss from the same investment in Q2 2018. This swing was the primary driver of the increase in net earnings and EPS year-over-year[12](index=12&type=chunk) [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Balance Sheet Item | Balance Sheet Item | June 30, 2019 | December 30, 2018 | | :--- | :--- | :--- | | **Total current assets** | **$1,392.9 M** | **$1,400.5 M** | | Goodwill | $127.8 M | $107.3 M | | Operating lease right-of-use assets | $66.9 M | $— M | | Investment in Persol Holdings | $213.7 M | $135.1 M | | **Total Assets** | **$2,542.3 M** | **$2,314.4 M** | | **Total current liabilities** | **$931.1 M** | **$897.5 M** | | Operating lease liabilities (noncurrent) | $49.3 M | $— M | | **Total stockholders' equity** | **$1,268.2 M** | **$1,159.5 M** | - Total assets increased primarily due to a **$20.5 M** increase in goodwill from acquisitions, a **$78.6 M** increase in the fair value of the Persol Holdings investment, and the recognition of **$66.9 M** in operating lease right-of-use assets upon adoption of the new lease standard (ASC 842)[17](index=17&type=chunk)[77](index=77&type=chunk)[102](index=102&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Item (26 Weeks Ended) | Cash Flow Item (26 Weeks Ended) | June 30, 2019 | July 1, 2018 | | :--- | :--- | :--- | | Net cash from operating activities | $73.5 M | $33.2 M | | Net cash used in investing activities | $(79.6) M | $(10.9) M | | Net cash from (used in) financing activities | $8.6 M | $(20.5) M | | **Net change in cash, cash equivalents and restricted cash** | **$2.4 M** | **$1.7 M** | - Cash used in investing activities for the first half of 2019 increased significantly to **$79.6 M**, primarily due to **$86.4 M** spent on acquisitions (NextGen and GTA), partially offset by **$13.8 M** in proceeds from asset sales[26](index=26&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - In Q1 2019, the company acquired NextGen Global Resources for **$51.0 M** and Global Technology Associates (GTA) for **$34.0 M** to increase market share in telecommunications and engineering solutions[48](index=48&type=chunk)[49](index=49&type=chunk)[51](index=51&type=chunk) - The company recorded a gain of **$74.4 M** on its investment in Persol Holdings for the first six months of 2019, compared to a loss of **$28.8 M** in the same period of 2018, due to changes in the investment's fair value[59](index=59&type=chunk) - Restructuring costs of **$5.7 M** were incurred in 2019, primarily for severance related to the transformation of U.S. branch-based staffing operations within the Americas Staffing segment[72](index=72&type=chunk) - The company adopted the new lease accounting standard (ASC 842) in Q1 2019, resulting in the recognition of **$74.1 M** of right-of-use assets and corresponding lease liabilities on the balance sheet[101](index=101&type=chunk)[102](index=102&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q2 2019 saw total revenue decline **1.4%** (up **0.2%** constant currency) with gross profit up **1.4%** and earnings from operations surging **70.7%** to **$34.8 M**, while operating cash flow reached **$73.5 M** despite acquisition-driven negative investing cash flow [Executive Overview](index=30&type=section&id=Executive%20Overview) - The company's strategy is focused on becoming a leading talent solutions provider by achieving leadership in scale or specialty, embracing the future of work, attracting top talent, and investing in innovation and efficiency[143](index=143&type=chunk) - In January 2019, Kelly acquired Global Technology Associates (GTA) and NextGen Global Resources to expand its engineering portfolio, positioning itself as a leader in the growing 5G telecommunications market[145](index=145&type=chunk) - In Q1 2019, the company restructured its U.S. commercial staffing operations to improve efficiency and focus on specialties, resulting in **$5.7 M** in restructuring charges for the first half of the year[148](index=148&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Total Company Performance - Q2 2019 vs Q2 2018 | Metric | 2019 | 2018 | Change | CC Change | | :--- | :--- | :--- | :--- | :--- | | Revenue from services | $1,367.5 M | $1,386.9 M | (1.4)% | (0.2)% | | Gross profit | $244.0 M | $240.5 M | 1.4% | 2.6% | | Earnings from operations | $34.8 M | $20.4 M | 70.7% | N/A | | Gross profit rate | 17.8% | 17.3% | +0.5 pts | N/A | - The acquisitions of NextGen and GTA in January 2019 added approximately **280 basis points** to the total revenue growth rate for Q2 2019 and accounted for **30 basis points** of the gross profit rate growth[156](index=156&type=chunk)[157](index=157&type=chunk) Segment Performance (Earnings from Operations) - Q2 2019 vs Q2 2018 | Segment | Q2 2019 | Q2 2018 | Change | | :--- | :--- | :--- | :--- | | Americas Staffing | $15.6 M | $17.8 M | (12.4)% | | Global Talent Solutions (GTS) | $25.4 M | $17.7 M | 43.0% | | International Staffing | $3.5 M | $6.4 M | (44.8)% | [Financial Condition](index=41&type=section&id=Financial%20Condition) - The company generated **$73.5 M** of net cash from operating activities in the first six months of 2019, a significant increase from **$33.2 M** in the same period of 2018, reflecting recurring working capital changes[198](index=198&type=chunk) - Global Days Sales Outstanding (DSO) was **57 days** at the end of Q2 2019, up from **55 days** at the end of Q2 2018[198](index=198&type=chunk) - The working capital position decreased by **$41.2 M** from year-end 2018 to **$461.8 M** at the end of Q2 2019, impacted by the acquisitions of NextGen and GTA[199](index=199&type=chunk) - As of Q2 2019, the company had **$150.0 M** available on its revolving credit facility and **$130.3 M** available on its securitization facility, providing committed funding capacity[209](index=209&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency fluctuations and interest rate changes, with a material yen-denominated investment in Persol Holdings whose fair value changes impact net earnings - The company faces foreign currency risk related to its foreign subsidiaries, which can impact the U.S. dollar value of reported earnings and investments. However, a natural hedge exists as subsidiaries primarily derive revenues and incur expenses in their local currency[215](index=215&type=chunk) - A significant market and currency risk exists with the investment in Persol Holdings. The investment is yen-denominated and stated at fair value, with changes in value recognized in net earnings, which can be material[217](index=217&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of Q2 2019, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO have concluded that the company's disclosure controls and procedures are effective at a reasonable assurance level as of the end of the second quarter of 2019[219](index=219&type=chunk) - No changes occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[220](index=220&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various ordinary course legal proceedings, including a Hungarian competition authority case, but management expects no material adverse effect on financial condition or operations - The company is continuously engaged in litigation arising from the ordinary course of business, including matters related to employment, contracts, and bankruptcy proceedings[222](index=222&type=chunk) - Management believes that the resolution of current legal proceedings will not have a material adverse effect on the company's financial condition or results of operations[223](index=223&type=chunk) - In January 2018, the Hungarian Competition Authority initiated proceedings against the company for alleged infringement of national competition regulations; the company is cooperating and does not expect a material adverse effect[225](index=225&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors from those previously disclosed in its Annual Report on Form 10-K for the year ended December 30, 2018 - There have been no material changes in the Company's risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 30, 2018[226](index=226&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q2 2019, the company had no unregistered equity sales but reacquired **2,800 shares** of Class A common stock at **$24.81** per share for employee tax withholdings Issuer Repurchases of Equity Securities - Q2 2019 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - May 5, 2019 | 329 | $22.70 | | May 6 - June 2, 2019 | 2,415 | $25.09 | | June 3 - June 30, 2019 | 56 | $25.26 | | **Total** | **2,800** | **$24.81** | - The company reacquired **2,800 shares** during the quarter to cover employee tax withholdings due upon the vesting of restricted stock and performance shares[228](index=228&type=chunk) [Item 3. Defaults Upon Senior Securities](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable as there were no defaults upon senior securities - Not applicable[229](index=229&type=chunk) [Item 4. Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - Not applicable[230](index=230&type=chunk) [Item 5. Other Information](index=45&type=section&id=Item%205.%20Other%20Information) This item is not applicable - Not applicable[231](index=231&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act and Inline XBRL data files - This section provides an index of all exhibits filed with the report, including CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL data files[232](index=232&type=chunk)[237](index=237&type=chunk)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-1088 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q KELLY SERVICES, INC. --------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 38-1510762 ...

Commission file number 0-1088 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K For the transition period from _________ to __________ [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 30, 2018 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 KELLY SERVICES, INC. (Exact Name of Registrant as specified in its Charter) Delaware 38-1510762 (State or other juri ...