TriNet Group Files Q3 2024 10-Q

Ticker: TNET · Form: 10-Q · Filed: Oct 25, 2024 · CIK: 937098

Trinet Group, INC. 10-Q Filing Summary
FieldDetail
CompanyTrinet Group, INC. (TNET)
Form Type10-Q
Filed DateOct 25, 2024
Risk Levellow
Pages15
Reading Time18 min
Key Dollar Amounts$0.000025, $700 million, $500 million, $400 million, $0.25
Sentimentneutral

Sentiment: neutral

Topics: 10-Q, financials, quarterly-report

Related Tickers: TNET

TL;DR

TriNet Q3 2024 10-Q is in. Financials and operations detailed.

AI Summary

TriNet Group, Inc. filed its 10-Q for the period ending September 30, 2024. The filing details financial performance and operational updates for the third quarter and the first nine months of the year. Key financial figures and segment performance are presented, reflecting the company's ongoing business activities in providing HR solutions.

Why It Matters

This filing provides investors and stakeholders with the latest financial results and operational insights for TriNet Group, Inc., crucial for understanding the company's current performance and future outlook.

Risk Assessment

Risk Level: low — This is a standard quarterly financial filing with no immediate red flags or significant new risks disclosed.

Key Players & Entities

FAQ

What is the reporting period for this 10-Q filing?

The reporting period for this 10-Q filing is the nine months ended September 30, 2024.

When was this 10-Q filed with the SEC?

This 10-Q was filed on October 25, 2024.

What is the company's Central Index Key (CIK)?

The company's Central Index Key (CIK) is 0000937098.

What is the Standard Industrial Classification (SIC) code for TriNet Group, Inc.?

The SIC code for TriNet Group, Inc. is 7389, categorized under SERVICES-BUSINESS SERVICES, NEC.

What is the fiscal year end for TriNet Group, Inc.?

The fiscal year end for TriNet Group, Inc. is December 31.

Filing Stats: 4,580 words · 18 min read · ~15 pages · Grade level 19.6 · Accepted 2024-10-25 08:20:28

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. 46

Part II, Item 3. 46 Mine Safety Disclosures

, Item 4. 46

Part II, Item 4. 46 Other Information

, Item 5. 46

Part II, Item 5. 46 Exhibits

, Item 6. 47

Part II, Item 6. 47 TRINET 2 2024 Q3 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, as amended on August 16, 2023 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 EPLI Employment Practices Liability Insurance EPS Earnings Per Share ERISA Employee Retirement Income Security Act ERP Enterprise resource planning ETR Effective tax rate FASB Financial Accounting Standards Board 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) ICR Insurance cost ratio ISR Insurance service revenues MD&A Management's Discussion and Analysis of Financial Condition and Results of Operations OE Operating expenses PEO Professional Employer Organization PEO Platform Users Individuals authorized by our client

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 services we provide and 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 obligations pursuant to our Senior 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

FORWARD LOOKING STATEMENTS AND OTHER FINANCIAL INFORMATION Table of Contents

FORWARD LOOKING STATEMENTS AND OTHER FINANCIAL INFORMATION Table of Contents changing laws and regulations governing health insurance and employee benefits; our ability to be recognized as an employer of worksite employees and for our benefits plans to satisfy all requirements under federal and state regulations; changes in the laws and regulations that govern what it means to be an employer, employee or independent contractor; the impact of new and changing laws regarding remote work; our ability to 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 2021 Credit Agreement and meet our debt obligations; the impact of concentrated ownership in our stock by Atairos and other large stockholders; and our ability to manage risks associated with our international operations. 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

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 nine months ended September 30, 2024 reflect our continuing efforts to serve our clients, attract new clients and invest in our platform. So far in 2024, we: improved PEO sales performance and customer retention, continued to grow total revenues with disciplined expense management in light of rising insurance costs, repurchased approximately 1.46 m

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents Performance Highlights Our results for the third quarter and nine months ended September 30, 2024, when compared to the same periods of 2023, are noted below: Q3 2024 $1.2B $58M 90% Total revenues Operating income Insurance cost ratio 1 % increase (50) % decrease 6 % increase $45M $0.89 $59M Net income Diluted EPS Adjusted Net income * (52) % decrease (45) % decrease (46) % decrease 355,948 356,137 183,410 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 higher Average co-employed WSEs and rate increases, partially offset by lower HRIS revenue. During the third 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 6 points higher compared to the same period in 2023, driven by a shift in more severe medical service utilization, higher rates paid for outpatient services, and increasing specialty drug utilization. Our increase in ICR for the nine months ended September 30, 2024 set forth in the table below was partially offset by favorable workers' compensation prior period claims development during the second quarter of 2024. Higher i

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents YTD 2024 $3.7B $261M 88% Total revenues Operating income Insurance cost ratio 1 % increase (32) % decrease 5 % increase $196M $3.87 $247M Net income Diluted EPS Adjusted Net income * (36) % decrease (26) % decrease (32) % decrease 351,856 356,137 189,929 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 Q3 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 third quarter and nine months ended September 30, 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 September 30, Nine Months Ended September 30, (in millions, except operating metrics data) 2024 2023 % Change 2024 2023 % Change Income Statement Data: Professional service revenues $ 184 $ 185 0 % $ 584 $ 567 3 % Insurance service revenues 1,053 1,037 2 3,143 3,110 1 Total revenues 1,237 1,222 1 3,727 3,677 1 Insurance costs 949 874 9 2,772 2,594 7 Operating expenses 230 232 (1) 694 701 (1) Total costs and operating expenses 1,179 1,106 7 3,466 3,295 5 Operating income 58 116 (50) 261 382 (32) Other income (expense): Interest expense, bank fees and other (15) (10) 50 (47) (23) 104 Interest income 15 18 (17) 49 57 (14) Income before provision for income taxes 58 124 (53) 263 416 (37) Income taxes 13 30 (57) 67 108 (38) Net income $ 45 $ 94 (52) % $ 196 $ 308 (36) % Cash Flow Data: Net cash used in operating activities (276) (43) 542 Net cash used in investing activities (25) (57) (56) Net cash used in financing activities (217) (523) (59) % Non-GAAP measures (1) : Adjusted EBITDA 109 172 (37) 425 557 (24) Adjusted Net income 59 109 (46) 247 365 (32) Corporate Operating Cash Flows 213 386 (45) % Operating Metrics: Insurance Cost Ratio 90 % 84 % 6 88 % 83 % 5 Average WSEs (2) 355,948 333,286 7 351,856 329,257 7 Total WSEs (2) 356,137 335,741 6 356,137 335,741 6 Average HRIS Users 183,410 210,863 (13) % 189,929 219,058 (13) % (1) Refer to Non-GAAP measures definitions and reconciliations from GAAP measures under the heading " Non-GAAP Financial Measures ". (

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 September 30, Nine Months Ended September 30, (in millions) 2024 2023 2024 2023 Net income $ 45 $ 94 $ 196 $ 308

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