KELLY SERVICES INCKELYA
KELLY SERVICES INC Fair Value Disclosure
5. Fair Value Measurements
Trade accounts receivable, short-term borrowings, accounts payable, accrued liabilities and accrued payroll and related taxes approximate their fair values due to the short-term maturities of these assets and liabilities. Long-term debt is related to revolving credit agreements and their carrying values approximate fair value as the interest rates are variable and reflect current market rates.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present assets and liabilities measured at fair value on a recurring basis as of year-end 2025 and 2024 in the consolidated balance sheet by fair value hierarchy level, as described below.
Level 1 measurements consist of unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 measurements include quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 3 measurements include significant unobservable inputs. There were no transfers between Level 1, Level 2 and Level 3 assets or liabilities in 2025 or 2024.
| As of Year-End 2025 | ||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||||
| Money market funds | $ | 4.7 | $ | 4.7 | $ | — | $ | — | ||||||
| Total assets at fair value | $ | 4.7 | $ | 4.7 | $ | — | $ | — | ||||||
| Liabilities | ||||||||||||||
| EMEA staffing indemnification | $ | (1.4) | $ | — | $ | — | $ | (1.4) | ||||||
| Brazil indemnification | (0.9) | — | — | (0.9) | ||||||||||
| Total liabilities at fair value | $ | (2.3) | $ | — | $ | — | $ | (2.3) | ||||||
| As of Year-End 2024 | ||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||||
| Money market funds | $ | 6.4 | $ | 6.4 | $ | — | $ | — | ||||||
| Total assets at fair value | $ | 6.4 | $ | 6.4 | $ | — | $ | — | ||||||
| Liabilities | ||||||||||||||
| Interest rate swaps | $ | (0.4) | $ | — | $ | (0.4) | $ | — | ||||||
| EMEA staffing indemnification | (2.0) | — | — | (2.0) | ||||||||||
| Brazil indemnification | (1.7) | — | — | (1.7) | ||||||||||
| Total liabilities at fair value | $ | (4.1) | $ | — | $ | (0.4) | $ | (3.7) | ||||||
Money market funds
Money market funds represent investments in money market funds that hold government securities, all of which are restricted as of year-end 2025 and year-end 2024 and are included in other assets in the consolidated balance sheet. These restricted funds represent cash balances that are required to be maintained to fund disability claims in California. The valuations of money market funds are based on quoted market prices of those accounts as of the respective period end.
Forward contracts
In fiscal 2024 and 2023, the Company entered into and settled a €17.0 million and €90.0 million, respectively, foreign currency forward contracts related to the sale of the Company’s EMEA staffing operations. The settlements resulted in a net gain of $1.2 million and net loss of $3.6 million for 2024 and 2023, respectively. There were no forward contracts outstanding as of fiscal year-end 2025.
Interest rate swaps
On July 17, 2024, the Company entered into a $50.0 million 12-month interest rate swap and a $50.0 million 18-month interest rate swap to manage interest risk exposure on the Company’s securitization facility. The swaps were not designated as hedges and are marked to market through earnings. The swaps are valued using observable market inputs and are classified as level 2 liabilities. As of year-end 2024, the Company recorded a liability $0.4 million liability in accounts payable and accrued liabilities and recognized a net loss of $0.2 million in other income (expense), net in the consolidated statements of earnings during 2024. The 12-month contract matured in the second quarter of 2025 and the results to the consolidated balance sheet and statements of earnings were not significant. As of year-end 2025, the liability related to the 18-month interest rate swap was not significant.
Indemnification liabilities
As of year-end 2025, the Company recorded indemnification liabilities totaling $2.3 million, consisting of $1.4 million related to the January 2024 sale of the EMEA staffing operations, with $0.1 million in accounts payable and accrued liabilities and $1.3 million in other long-term liabilities, and $0.9 million related to the 2020 sale of the Brazil operations included in other long-term liabilities in the consolidated balance sheet. As of year-end 2024, the indemnification liability totaled $2.0 million for the EMEA staffing operations and $1.7 million for the Brazil sale.
For the EMEA staffing sale, the Company agreed to indemnify the buyer for certain losses and costs for an indefinite term. The maximum exposure is not estimable due to uncertainties in potential outcomes; however, the Company believes the risk of exposure is remote. During 2025, the Company made payments of $0.5 million and recorded a $0.1 million remeasurement adjustment to the liability in gain on sale of EMEA staffing operations in the consolidated statements of earnings. Exchange rate impacts recorded in other income (expense), net in the consolidated statements of earnings were not significant.
For the Brazil sale, indemnification claims may be initiated within six years after closing, with aggregate losses capped at $8.8 million. During 2025, the Company made a $0.9 million payment, with the remaining change in the liability primarily attributable to exchange rate fluctuations recorded in other income (expense), net in the consolidated statements of earnings.
The indemnification liabilities were initially measured at fair value using discounted probability-weighted cash flows and are classified as Level 3 liabilities, remeasured on a recurring basis. Changes in fair value related to reassessments and foreign currency movements are recognized in earnings.
Earnout liabilities
In the second quarter of 2024, the Company recorded an earnout liability relating to the 2024 acquisition of MRP totaling $3.4 million in accounts payable and accrued liabilities in the consolidated balance sheet (see the Acquisitions and Dispositions footnote). The valuation of the earnout liability was initially established using the Monte Carlo simulation model and represented the fair value and is considered a level 3 liability. The maximum total cash payment which may be due related to the earnout liability is $60.0 million. In the fourth quarter 2024, the liability was reassessed and the fair value was determined to be zero. The earnout period concluded in the first quarter of 2025 and no further liability will be recognized.
Equity Investments Without Readily Determinable Fair Value
The Company previously held a 49% ownership interest in PersolKelly Pte. Ltd., which was accounted for under the equity method until the Company sold a majority interest in the first quarter of 2022. The remaining 2.5% interest was subsequently accounted for as an equity investment without readily determinable fair value using the measurement alternative (cost, less impairment, plus or minus observable price changes) in other assets in the consolidated balance sheet. In the first quarter of 2025, the Company sold its remaining interest in PersolKelly Pte. Ltd. for cash proceeds of $6.4 million. The investment had a carrying value of $6.4 million as of year-end 2024 and at the time of the sale, and therefore no gain or loss was recognized.
In 2022, the Company invested in equity securities with an initial investment of $0.4 million, classified in other assets in the consolidated balance sheet and measured using the measurement alternative. In fiscal year 2024, the Company sold a portion of this investment with a carrying value of $0.1 million and recognized a $0.6 million gain in other income (expense), net in the consolidated statements of earnings. The investment was remeasured using the observable prices to $3.5 million, resulting in an unrealized gain of $3.2 million recorded in other income (expense), net in the consolidated statements of earnings. As of year-end 2025, the carrying value of the investment was $3.5 million.
Assets Measured at Fair Value on a Nonrecurring Basis
In addition to assets that are recorded at fair value on a recurring basis, annual and interim impairment tests may subject the Company's reporting units with goodwill and long-lived assets to nonrecurring fair value measurement. The Company performs the annual impairment test for goodwill in the fourth quarter of each year and for long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
During the third quarter of 2025, the Company concluded that there was a triggering event due to declines in the business performance related to the MRP and Softworld reporting units as a result of dynamic macroeconomic conditions and projected growth rates were revised accordingly. As a result of the MRP and Softworld quantitative assessments, the Company determined that both MRP and Softworld’s estimated fair value of the reporting units no longer exceeded the carrying value. The Company recorded goodwill impairment charges of $102.0 million.
These changes in circumstances were also indicators that the respective long-lived assets may not be recoverable. The Company performed long-lived asset recoverability test for MRP and Softworld and determined that undiscounted future cash flows exceeded the carrying amount of the asset groups and were recoverable.
The various inputs to the fair value models are considered level 3. The Company engaged third-party valuation specialists and used industry accepted valuation models and criteria that were reviewed and approved by various levels of management. Refer to the Summary of Significant Accounting Policies footnote for additional details on the valuation methodologies and inputs used to measure fair value.
Refer to the Goodwill and Intangible Assets footnote for additional details on impairment charges related to years-ended 2025 and 2024 as well as the valuation methodologies and inputs used to measure fair value. There were no goodwill or intangible asset impairment charges recorded in 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 17, 2022 | |
| 2021 | Feb 18, 2021 | |
| 2019 | Feb 13, 2020 | |
| 2018 | Feb 14, 2019 | |
| 2017 | Feb 20, 2018 | |
| 2016 | Feb 18, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.