Trinet Group, INC. 10-Q Filing

Ticker: TNET · Form: 10-Q · Filed: Jul 26, 2024 · CIK: 937098

Trinet Group, INC. 10-Q Filing Summary
FieldDetail
CompanyTrinet Group, INC. (TNET)
Form Type10-Q
Filed DateJul 26, 2024
Pages15
Reading Time18 min
Key Dollar Amounts$0.000025, $700 million, $500 million, $400 million, $0.25
Sentimentneutral

Sentiment: neutral

FAQ

What type of filing is this?

This is a 10-Q filing submitted by Trinet Group, INC. (ticker: TNET) to the SEC on Jul 26, 2024.

What are the key financial figures in this filing?

Key dollar amounts include: $0.000025 (hich registered Common stock par value $0.000025 per share TNET New York Stock Exchang); $700 million (ly August 16, 2023. 2021 Revolver Our $700 million revolving line of credit included in ou); $500 million (2021 Credit Agreement 2029 Notes Our $500 million senior unsecured notes maturing in Marc); $400 million (maturing in March 2029 2031 Notes Our $400 million senior unsecured notes maturing in Augu); $0.25 (rogram, paid common stock dividends of $0.25 per share in April and July 2024, welc).

How long is this filing?

Trinet Group, INC.'s 10-Q filing is 15 pages with approximately 4,606 words. Estimated reading time is 18 minutes.

Where can I view the full 10-Q filing?

The complete filing is available on SEC EDGAR. You can also read the AI-decoded analysis with risk assessment and key highlights on ReadTheFiling.

Filing Stats: 4,606 words · 18 min read · ~15 pages · Grade level 19.2 · Accepted 2024-07-26 08:19:49

Key Financial Figures

Filing Documents

, Item 1. 31

Part I, Item 1. 31 Condensed Consolidated Statements of Income and Comprehensive Income 31 Condensed Consolidated Balance Sheets 32 Condensed Consolidated Statements of Stockholders' Equity 33 Condensed Consolidated Statements of Cash Flows 34 Notes to Condensed Consolidated Financial Statements 35 Note 1. Description of Business and Significant Accounting Policies 35 Note 2. Cash, Cash Equivalents and Investments - Unrestricted and Restricted 39 Note 3. Financial Instruments and Fair Value Measurements 39 Note 4. Accrued Workers' Compensation Costs 42 Note 5. Commitments and Contingencies 42 Note 6. Stock Based Compensation 43 Note 7. Stockholders' Equity 43 Note 8. Income Taxes 44 Note 9. Earnings Per Share 44

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk

Controls and Procedures

Controls and Procedures

, Item 1A. 45

Part II, Item 1A. 45 Unregistered Sales of Equity Securities and Use of Proceeds

, Item 2. 45

Part II, Item 2. 45 Defaults Upon Senior Securities

, Item 3. 45

Part II, Item 3. 45 Mine Safety Disclosures

, Item 4. 45

Part II, Item 4. 45 Other Information

, Item 5. 45

Part II, Item 5. 45 Exhibits

, Item 6. 46

Part II, Item 6. 46 TRINET 2 2024 Q2 FORM 10-Q GLOSSARY Table of Contents Glossary of Acronyms and Abbreviations Acronyms and abbreviations are used throughout this report, particularly in Part I, Item 1. Unaudited Condensed Consolidated Financial Statements and Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 2021 Credit Agreement Our credit agreement dated February 26, 2021, as amended, supplemented or modified from time to time, most recently August 16, 2023. 2021 Revolver Our $700 million revolving line of credit included in our 2021 Credit Agreement 2029 Notes Our $500 million senior unsecured notes maturing in March 2029 2031 Notes Our $400 million senior unsecured notes maturing in August 2031 AFS Available-for-sale CEO Chief Executive Officer CFO Chief Financial Officer COBRA Consolidated Omnibus Budget Reconciliation Act Colleague TriNet's internal employees (as distinguished from WSEs and HRIS Users) COPS Cost of providing services D&A Depreciation and amortization expenses EBITDA Earnings before interest expense, taxes, depreciation and amortization of intangible assets EPS Earnings Per Share ERISA Employee Retirement Income Security Act ERP Enterprise resource planning ESAC Employer Services Assurance Corporation ESPP Employee stock purchase plan ETR Effective tax rate FASB Financial Accounting Standards Board FFCRA Families First Coronavirus Response Act G&A General and administrative GAAP Generally Accepted Accounting Principles in the United States HCM Human capital management HR Human Resources HRIS Human resources information system HRIS User A client employee who is a user of our HR Platform (for example, employees of an HRIS client) IRS Internal Revenue Service ICR Insurance cost ratio ISR Insurance service revenues LIBOR London Inter-bank Offered Rate MD&A Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS AND OTHER FINANCIAL INFORMATION Table of Contents

FORWARD LOOKING STATEMENTS AND OTHER FINANCIAL INFORMATION Table of Contents Cautionary Note Regarding Forward-Looking Statements For purposes of this Quarterly Report on Form 10-Q (Form 10-Q), the terms "TriNet," "the Company," "we," "us" and "our" refer to TriNet Group, Inc., and its subsidiaries. This Form 10-Q contains statements that are not historical in nature, are predictive in nature, or that depend upon or refer to future events or conditions or otherwise contain forward-looking statements within the meaning of Section 21 of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often identified by the use of words such as, but not limited to, "ability," "anticipate," "believe," "can," "continue," "could," "design," "estimate," "expect," "forecast," "hope," "impact," "intend," "may," "outlook," "plan," "potential," "predict," "project," "seek," "should," "strategy," "target," "value," "will," "would" and similar expressions or variations intended to identify forward-looking statements. Examples of forward-looking statements include, among others, TriNet's expectations regarding: our ability to successfully diversify our overall service and technology offerings to support SMBs throughout their lifecycle; our plans and ability to grow our client base; the impact of our ongoing efforts to ensure that our billing practices best match the expectations of our customers and the impact on our WSE count; our expectations regarding medical utilization rates by our WSEs and the impact of inflation on our insurance costs; the effect that our stock repurchase program will have on our business; the impact of our notes; our ability to leverage our scale and industry HR experience to deliver vertical focused offerings; the impact of planned improvements to our technology platform and HRIS software and whether they will meet the needs of our current clients and attract new ones; the impl

FORWARD LOOKING STATEMENTS AND OTHER FINANCIAL INFORMATION Table of Contents

FORWARD LOOKING STATEMENTS AND OTHER FINANCIAL INFORMATION Table of Contents comply with the licensing requirements that govern our solutions; the outcome of existing and future legal and tax proceedings; fluctuation in our results of operations and stock price due to factors outside of our control; our ability to comply with the restrictions of our credit facility and meet our debt obligations; and the impact of concentrated ownership in our stock by Atairos and other large stockholders. Any of these factors could cause our actual results to differ materially from our anticipated results. Forward-looking statements are not guarantees of future performance but are based on management's expectations as of the date of this Form 10-Q and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from our current expectations and any past results, performance or achievements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The information provided in this Form 10-Q is based upon the facts and circumstances known as of the date of this Form 10-Q, and any forward-looking statements made by us in this Form 10-Q speak only as of the date of this Form 10-Q. We undertake no obligation to revise or update any of the information provided in this Form 10-Q, except as required by law. The MD&A of this Form 10-Q includes references to our performance measures presented in conformity with GAAP and other non-GAAP financial measures that we use to manage our business, to make planning decisions, to allocate resources and to use as performance measures in our executive compensation plans. Refer to the Non-GAAP Financial Measures within our MD&A for definitions and rec

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations Executive Summary Overview TriNet is a leading provider of comprehensive and flexible HCM solutions designed to address a wide range of SMB needs as they change over time. Our flexible HCM solutions free SMBs from HR complexities and empower SMBs to focus on what matters most - growing their business and enabling their people. TriNet offers access to human capital expertise, benefits, payroll, risk mitigation and compliance, all enabled by industry leading technology capabilities. TriNet's suite of products also includesservices and software-based solutions to help streamline workflows by connecting HR, benefits, payroll, time and attendance, and employee engagement. Clients can use our industry tailored PEO services and technology platform to receive the full benefit of our HCM services enabling their WSEs to participate in our TriNet-sponsored employee benefit plans. Clients can alternatively choose to use our self-directed, cloud-based HRIS software solution and add HR services such as payroll and access to benefits management as needed. By providing PEO and HRIS services, we believe that we can support a wider range of SMBs and create a pipeline of HRIS clients that may be able to benefit from and transition to TriNet's higher-touch PEO services at future points in their business lifecycle. In order to better serve TriNet's customers throughout their business lifecycle, we are investing in our technology platform so that it can accommodate both PEO and HRIS customers. Operational Highlights Our consolidated results for the first half of 2024 reflect our continuing efforts to serve our clients, attract new clients and invest in our platform. So far in 2024, we: improved sales performance and customer retention, continued to grow total revenues with disciplined expense management in light of rising insurance costs, repurchased approximately 1.25 million shares of our c

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents Performance Highlights Our results for the second quarter and first half of 2024, when compared to the same periods of 2023, are noted below: Q2 2024 $1.2B $80M 88% Total revenues Operating income Insurance cost ratio 1 % increase (18) % decrease 4 % increase $60M $1.20 $78M Net income Diluted EPS Adjusted Net income * (28) % decrease (13) % decrease (26) % decrease 351,455 354,028 191,220 Average WSEs ** Total WSEs ** Average HRIS Users 7 % increase 6 % increase (13) % decrease * Non-GAAP measure. See definitions below under the heading " Non-GAAP Financial Measures ". ** Total WSEs and Average WSEs include incremental WSEs that were charged a platform user access fee and incremental additional service recipients. These were identified as a result of our ongoing effort to ensure that our billing practices best match the expectations of our customers. For details, refer to the heading "Operating Metrics – Worksite Employees (WSEs)." Our total revenues increased 1% compared to the same period in 2023, driven by rate increases partially offset by lower health plan enrollment. During the second quarter of 2024, our Average WSEs and Total WSEs increased 7% and 6%, respectively, compared to the same period in 2023, primarily due to additional PEO Platform Users and additional service recipients identified as a result of our ongoing effort to ensure that our billing practices best match the expectations of our customers. Our ICR was 4 points higher compared to the same period in 2023, driven by increased health benefits utilization rates and inflation in health costs, partially offset by favorable workers' compensation prior period claims development. Higher insurance costs and interest expense, partially offset by higher revenues and lower operating expenses, resulted in decreases of net income and Adjusted Net income of 28% and 26%, respectively, as compared to the same period in 2023. TRI

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents YTD 2024 $2.5B $202M 87% Total revenues Operating income Insurance cost ratio 1 % increase (24) % decrease 4 % increase $152M $2.98 $189M Net income Diluted EPS Adjusted Net income * (29) % decrease (16) % decrease (26) % decrease 349,810 354,028 193,188 Average WSEs ** Total WSEs ** Average HRIS Users 7 % increase 6% increase (13) % decrease * Non-GAAP measure. See definitions below under the heading " Non-GAAP Financial Measures ". ** Total WSEs and Average WSEs include incremental WSEs that were charged a platform user access fee and incremental additional service recipients. These were identified as a result of our ongoing effort to ensure that our billing practices best match the expectations of our customers. For details, refer to the heading "Operating Metrics – Worksite Employees (WSEs)." TRINET 9 2024 Q2 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents Results of Operations The following table summarizes our results of operations for the second quarter and first half of 2024, when compared to the same periods of 2023. For details of the critical accounting judgments and estimates that could affect our Results of Operations, see the Critical Accounting Judgments and Estimates section within the MD&A in Item 7 of our 2023 Form 10-K. Three Months Ended June 30, Six Months Ended June 30, (in millions, except operating metrics data) 2024 2023 % Change 2024 2023 % Change Income Statement Data: Professional service revenues $ 186 $ 177 5 % $ 400 $ 382 5 % Insurance service revenues 1,040 1,032 1 2,090 2,073 1 Total revenues 1,226 1,209 1 2,490 2,455 1 Insurance costs 916 868 6 1,823 1,720 6 Operating expenses 230 244 (6) 465 468 (1) Total costs and operating expenses 1,146 1,112 3 2,288 2,188 5 Operating income 80 97 (18) 202 267 (24) Other income (expense): Interest expense, bank fees and other (16) (6) 167 (32) (13) 146 Interest income 17 20 (15) 35 38 (8) Income before provision for income taxes 81 111 (27) 205 292 (30) Income taxes 21 28 (25) 53 78 (32) Net income $ 60 $ 83 (28) % $ 152 $ 214 (29) % Cash Flow Data: Net cash provided by (used in) operating activities (245) 67 (466) Net cash used in investing activities (49) (31) 58 Net cash used in financing activities (178) (100) 78 % Non-GAAP measures (1) : Adjusted EBITDA 136 161 (16) 316 385 (18) Adjusted Net income 78 105 (26) 189 256 (26) Corporate Operating Cash Flows 130 255 (49) % Operating Metrics: Insurance Cost Ratio 88 % 84 % 4 87 % 83 % 4 Average WSEs (2) 351,455 327,376 7 349,810 327,242 7 Total WSEs (2) 354,028 334,046 6 354,028 334,046 6 Average HRIS Users 191,220 219,026 (13) % 193,188 223,155 (13) % (1) Refer to Non-GAAP measures definitions and reconciliations from GAAP measures under the heading " Non-GAAP Financial Measures ". (2) Total WSEs and Ave

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents Non-GAAP Financial Measures In addition to financial measures presented in accordance with GAAP, we monitor other non-GAAP financial measures that we use to manage our business, to make planning decisions, to allocate resources and to use as performance measures in our executive compensation plan. These key financial measures provide an additional view of our operational performance over the long-term and provide information that we use to maintain and grow our business. The presentation of these non-GAAP financial measures is used to enhance the understanding of certain aspects of our financial performance. It is not meant to be considered in isolation from, superior to, or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Non-GAAP Measure Definition How We Use The Measure Adjusted EBITDA Net income, excluding the effects of: - income tax provision, - interest expense, bank fees and other, - depreciation, - amortization of intangible assets, - stock based compensation expense, - amortization of cloud computing arrangements, and - transaction and integration costs. Provides period-to-period comparisons on a consistent basis and an understanding as to how our management evaluates the effectiveness of our business strategies by excluding certain non-recurring costs, which include transaction and integration costs, as well as certain non-cash charges such as depreciation and amortization, and stock-based compensation and certain impairment charges recognized based on the estimated fair values. We believe these charges are either not directly resulting from our core operations or not indicative of our ongoing operations. Enhances comparisons to the prior period and, accordingly, facilitates the development of future projections and earnings growth prospects. Provides a measure, among others, used in the determination of incentive compensation for manage

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents Reconciliation of GAAP to Non-GAAP Measures The table below presents a reconciliation of Net income to Adjusted EBITDA: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2024 2023 2024 2023 Net income $ 60 $ 83 $ 152 $ 214 Provision for income taxes 21 28 53 78 Stock based compensation 18 17 38 28 Interest expense, bank fees and other 16 6 32 13 Depreciation and amortization of intangible assets 19 18 37 36 Amortization of cloud computing arrangements 2 2 4 4 Transaction and integration costs — 7 — 12 Adjusted EBITDA $ 136 $ 161 $ 316 $ 385 Adjusted EBITDA Margin 11.1 % 13.3 % 12.7 % 15.7 % The table below presents a reconciliation of Net income to Adjusted Net Income: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2024 2023 2024 2023 Net income $ 60 $ 83 $ 152 $ 214 Effective income tax rate adjustment — — 1 3 Stock based compensation 18 17 38 28 Amortization of other intangible assets, net 5 5 10 11 Non-cash interest expense 1 1 1 1 Transaction and integration costs — 7 — 12 Income tax impa

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