Q1 2020 Earnings Call

Good day and welcome to the China first quarter 2020 conference call. All participants will be in listen-only mode. Should you need assistance, please stick on the conference specialist by pressing the star key after today's presentation will be an opportunity to ask questions to ask a question. You might press star than one on a touch-tone phone. We would charge you a question, please press * then two months. Please note. This event is being recorded. I would not like to turn the conference over to Alex Valor with investor relations, please go ahead. Thank you operator. Good afternoon everyone and welcome to juice and it's 2020 first quarter conference call joining me today are Burton M Goldfield our president and CEO Richard Becker or Chief Financial Officer in Michael Murphy or chief accounting officer.

Our prepared remarks were pre-recorded certain will begin with an overview of our first quarter operating and financial performance Richard will then review our financial results in more detail, Finally Michael will provide our forward-looking guidance. We will then open up the call for the Q&A session unique to this conference call. The four of us are in four different applications observing our covid-19 shelter-in-place mandates. We will make our best efforts to have a Q&A session executed as seamlessly as possible.

Before we begin, please don't that today's discussion will include or 20 20 second quarter and full-year guidance and other statements that are not historical in nature are predictive in nature or depend upon or refer to future events or conditions such as our expectations estimates predictions strategies beliefs or other statements that might be considered forward-looking.

We're looking statements are based on Management's current expectations and assumptions are inherently subject to risks and uncertainties and changes in circumstances that are difficult to predict that may cause actual results to differ materially from statements being made today or in the future except as may be required by law. We do not undertake to update any of these statements in light of new information future events or other dog encourage you to review or most recent public filings with the SEC including our 10-K and 10-q filings for more detailed discussion of the risks certainties and changing circumstances that may affect our future results or the market price of our stock.

In addition our discussion today will include non-gaap Financial measures including our forward-looking guidance or non-gaap net service revenues adjusted ebitda margin and adjusted net income per share impact from covid-19 has led us to revise our forward-looking guidance for second-quarter forward-looking guidance is especially impacted by covid-19 leading to a wider than typical guy down for reconciliations of our non-gaap financial measures to our gaap financial results. Please see our earnings release our 10-q filing for our first quarter, which is available on our website or through the SEC wage for reconciliation of our non-gaap forward-looking guidance to the most directly comparable gaap measures is also available on our website with that. I will turn the call over to Burton for his opening remarks.

Thank you, Alex over the past two months. We have witnessed the immense consequences of covid-19. Our thoughts are with those impacted by the box as well as those affected by the subsequent economic Fallout.

TriNet q1 Financial results, we're strong driven by volume growth and disciplined financial management.

Before I go into additional detail around these results. I want to address our market and our response to these unprecedented times.

As a leader in the small and medium-sized business segment. We have spent the last two months guiding our $18,000 plus customers through this difficult time. We are providing invaluable consultation feedback and direction in addition to our payroll benefits and HR Support at the same time. We are focused on our colleagues and all aspects of operating our business.

Smbs are critical to the US economy. They generate nearly half of the US gross domestic product while employing the majority of the the workforce.

Smbs are the innovators employing 43% of all scientists and Engineers as well as the organizations that are providing 15% more patents than any other business segment.

An example of one SMB innovator is biodesix a lung cancer Diagnostics company.

Biodesix is the first company to offer 5 non-invasive blood based tests for patients with lung disease.

Although virus detection has not been the focus of the company the leaders of biodesix felt compelled to leverage their technology and expertise to enter the fight against the coronavirus endemic.

They are now testing for covid-19 processing a thousand test kits per day and providing results in 48 hours.

I am proud that biodesix is a tryna customer and just one of our many customers who have converted their technology and know how to fight this pandemic off.

Our target market is these smbs which represent the backbone of our economy.

Notably small and medium-sized businesses will be the key to our nation's eventual economic recovery.

I am pleased with the impact that TriNet has achieved in support of our customers and they're valued employees. There has never been a more important time for us to leverage our expertise reach and scale in service of these amazing customers.

TriNet response with respect to the current pandemic began in mid-march as we instituted a shelter-in-place protocol.

We focus our resources on Guiding our SMB customers through the resulting economic dislocation and providing enhanced services.

We quickly created and launched our covad TriNet business resiliency and preparedness Center. This web-enabled resource serves as an efficient service center for all TriNet covid-19 Communications and content. It allows our customers as well as our non-customer smbs to access relevant and timely information.

Over the past two weeks. We have seen on average just under a thousand daily visits to the site are 724 customer service team has been crucial as it allows customers to reach out to us on their schedule to tap our expertise and resources since the beginning of April. The team has been logging on average of just under 519 related cases per day roughly a 10% increase in our historic customer caseload.

two of them

Most frequent topics of inquiry have been assistance with the SBA loan applications and options around healthcare for their employees.

The passage of the cares act and specifically the payroll Protection Program administered through the SBA has been a key driver of customer inquiry.

Our investment in infrastructure and specifically Workforce analytics has paid off.

It is enabled us to provide customers with timely and properly formatted payroll information necessary to complete the loan applications additionally am delivering the subsequent tracking of required payroll data under the terms of the PPP loans. We have also leveraged the covet homepage to host a series of well-received how to vignettes walk-in customers through the loan process. Thus far just under half of our customers have access the relevant SBA loan data as expected customers have also been inquiring about options related to health care coverage. TriNet has proactively address this issue with improved access to Affordable Health Care.

We have actively communicated carrier plan changes such as waived co-pays and cost-sharing lab testing telemedicine am more to our customers with respect to telemedicine. We have seen a doubling of visits without significant increases in wait times.

We have also modified are sponsored plans to ensure we are best supporting furloughed and that have moved to part-time Employment Office. Finally. We are facilitating access to short-term medical plans for furrowed and laid off workers representing an affordable alternative to Cobra Lounge.

With respect to TriNet q1 Financial results. I am pleased with our strong first-quarter these results reflect. Try Nets return to growth coupled with discipline financial management notwithstanding these q1 results. The economic environment has changed and as such I will go through these results in Greater detail. However, I do want to highlight two items from q1 Arnett Insurance margin page and our average worksite employee growth.

Regarding Net Insurance. Margin, we delivered 14% in the first quarter largely due to health cost savings. We believed Health cost savings will persist in the coming quarters due to the trade-off between incremental covet costs and lower costs attributable to the decline in elective procedures overall health utilization.

It is important to once again state that TriNet prices to risk the health cost savings. We saw in q1 and expect to see in the coming quarters with our result of an unexpected drop in health utilization rather than higher than expected prices.

Should we generate a Net Insurance? Margin in excess of our annual historical experience when Health utilization returns we will look to return any cost savings to the TriNet installed customer base.

Michael Murphy who will be are acting CFO upon Richard's departure will wait or provide greater detail regarding our Net Insurance. Margin for Kathy.

Turning to double USC Cal in the first quarter average worksite employee count grew by 8% that growth was largely the result of effective customer service and our customer selection process which drove improved customer retention our customer selection process and specifically e r vertical Focus even during the current economic environment continues to pay dividends.

This focus is an important aspect of our business model and has resulted in our cie metric having a lower car relation to changes in the u.s. Unemployment rate when compared with a broader SMB Market or installed base is overweight in attractive growth verticals wage such as technology financial services and Life Sciences as such our current volume as of last week is in the range of 300000 to 305000 for a net attrition rate of 10% since March 31st.

We typically don't provide an intra quarter volume update but given the current circumstances. We felt it prudent to provide this data in a corner during this. Our Main Street vertical has had an attrition rate twice that of a white collar verticals. Notably. The trial book of business is now nearly 80% in the white collar vertical.

To service these critical customers TriNet move decisively to protect and enhance our business.

In mid-march, we executed our business continuity plan and transitioned our team to a work-from-home structure within one week. TriNet was serving thousand or eighteen thousand customers remotely. We successfully transitioned 97% of our Workforce almost 3000 colleagues to effective or we working remote.

This is an achievement. I am personally very proud of thank you to the entire TriNet team for successfully working remote while continuing your passion walk around our amazing customers and Company.

Trying to establish the cross-functional control tower to address the changing Regulatory and customer landscape as well as financial and operating wage.

In late March, we further strengthened our liquidity informed by our collective experience during the 2008 financial crisis. We felt it was prudent to age-wise our already strong liquidity and drawdown are revolving lines of credit. We now have over 700 million in cash available to us strengthening our already strong balance sheet.

Finally we continue to prudently invest in our strategic initiatives such as developing the modularity of our offering Automation and creating efficiencies in the long run TriNet and our customers will benefit from these continued Investments trying to future is about attracting and retaining the right customers in our core verticals a unique strategy in our industry that supported our momentum in the first quarter.

Presently our focus is on helping our customers navigate this complex economic and rapidly changing regulatory environment. We are united in our mission, which has never been more relevant and we are playing a crucial role in helping our SMB customers survive covid-19 off with that. I will turn the call over to Richard for the financial review Richard.

Thank you Burton as review the financials. I will focus on the gaap and non-gaap numbers where appropriate as Burton noted. We were quite pleased with our first quarter financial and operational performance package is it demonstrated are returned to growth paired with discipline financial management?

during the first quarter Gap total revenues increased 12% year-over-year to 1 billion dollars and net service revenues grew 13% year-over-year 283 million dollars wage the first quarter with approximately 337000 worksite employees showing 6% year-over-year growth averaged WSC account for the first quarter was approximately 336000 and 8% year-over-year increase

Professional Service revenues for the first quarter increased 15% year-over-year to $156.

Professional Service revenues in the quarter out performed our forecast by approximately $10 due to improved wse retention continued strong hiring from our install base and new sales rep.

Insurance Service revenues for the first quarter increased 12% year-over-year to $890 and Net Insurance Service revenues increased 10% year-over-year to $127.

The strength in debt insurance service revenues was driven by lower q1 costs particularly in March.

Our first quarter Gap effective tax rate was 25% higher than recent quarters as we did not receive a benefit from the tax treatment of employee Equity compensation for the quarter of non-gaap tax rate was 25.5%

Yep, net income increased 44% year-over-year 291 million dollars for a dollar $30 compared to $63.89 per share in the same quarter last.

Adjusted net income increased 41% year-over-year to $97 or a dollar forty cents per share compared to $69 or 98 cents per share in the same quarter last month.

Adjusted ebitda for the first quarter increased 34% year-over-year to $145 compared to $100 During the prior-year period for an adjusted ebitda margin of fifty wage.

We closed the first quarter with total cash or $521 as we drew down the balance of our revolving line of credit for $200 million and now have over 700 million wage that's available to us between cash or cash-equivalent unencumbered short and long-term Investments.

Working capital is $280 million dollars in the first quarter versus $229 in the fourth quarter of 2019.

Through the three months ending March 31st, 2020. We generated $119 of positive corporate cash flow from operating activities and used $401 price comprise the wse related payroll tax obligations as a result total Cash Out flow from operations was $280 million dollars. We spent approximately forty million dollars to recent purchase approximately 747000 shares of stock in the first quarter. I will now turn the call over to Michael Murphy to provide our Q2 and updated full-year guidance, Michael.

Thank you Richard turning to our 20 20 second quarter and full-year Outlook. I will provide both gaap and non-gaap guidance.

Before I begin with our guidance estimates, I would like to provide some intra quarter information. We typically don't share.

As well as some of our assumptions to better understand our earnings guidance in late of covid-19.

As button noted I'll current wse volume is in the range of 300 to 305,000 representing a sequential net attrition rate of 10% off. Our Main Street attrition is occurring at a rate twice that of a white collar verticals.

Within our Main Street vertical approximately 18 to 20% of our Main Street attrition is comprised of furloughed employees. Now turn to our guidance assumptions off. It presumes that US policy makers will continue to support employment by assistance to small businesses using legislation like the cares act and it's paycheck stub and program until the economy reopens.

We also assume shelter-in-place orders will gradually be lifted at different rates around the country as access to testing tracing and therapeutic Solutions broadens in the fourth quarter of our volume. And therefore our Gap Revenue guidance is informed by two economic outlooks both modeled in the shape of a check mark at the high end of range. We're assuming a steep economic drop, which we are currently experiencing followed by a recovery beginning in late Q3 and growing steadily through Thursday at the low end of guidance. We are assuming the current economic drop worsens in the near-term and the recovery in Q4 is lower.

In both cases we have assumed new sales will be low in the second and third quarters before recovering in the fourth quarter.

The slope of the second half economic recovery will determine the strength of our fourth quarter new sales.

Our second quarter and full-year Net Insurance margin guidance assumes that we will be significantly impacted by the timing and cost of health coverage endemic prevents anything other than Essential Medical Services from being provided.

As noted should we generate an annual net Insurance? Margin in excess of our historical experience? We will look to return these cost saving to our installed base.

If we do see these cost savings develop most of the benefits should be incurred in the second quarter before we begin to approve for the return of these savings over time as such we expect to report significant timing differences in our health costs across the second quarter and the year.

As a result, we are expecting our second quarter Net Insurance margin to be in the range of 19 to 23% for the full year twenty-twenty. We are raising a Net Insurance margin forecast by approximately three percentage points.

No, I'd like to set out our financial guidance.

For the second quarter of 2020 we expect gaap Revenue to be in the range of down 11% and down 5% and we expect net service revenues to grow in the rain up 7% to 27% year-over-year. We are forecasting and adjusted ebitda margin range in the quarter of $39 to 49% off.

we

Thank you to gaap earnings per share to grow year-over-year in the range of 20 to 96% and adjusted net income per share to grow year of a years in the range of 27 to 97%

turning to our full year 2020 guidance. We are revising our guidance lower for Gap Revenue. We now expect the year-over-year change to be in the range of down 8% to down 3% change from our previous guidance of 10 to 13% year-over-year growth. We now forecast our net service Revenue to be flat to Aaj full percent year-over-year versus our previous guidance of six to 10% growth our full-year 2020 adjusted ebitda. Margin is now targeting a range between 38 and 39% down from our original guidance of approximately 40%

Gaap earnings per share are now expected to be down 8% to down 1% year-over-year lowered from our previous guidance of 4 to 12% growth.

Adjusted net income per share is now expected to be down 3% to up 4% year-over-year lowered from our previous guidance of seven to 14% growth along with that. I will return the call to button for his closing remarks button.

Thank you, Michael. The SMB segment is enduring significant economic dislocation and TriNet remains here to help our value proposition is especially compelling as we are leveraging our scale for the benefit of our customers in ways independent smbs struggled to mimic. I am pleased with our first quarter results these results reflect. Try Nets return to growth coupled with discipline financial management.

We remain focused on our business and we have taken the necessary steps to ensure we can thrive on behalf of all of our stakeholders off. Finally. I want to say again a special thanks to my TriNet colleagues. I am awed by your ability to navigate this uncertain and changing environment. I am proud of how you've remained focused and kept our customers at the Centre of everything we do.

Most importantly I wish for your continued health and safety operator.

Thank you. We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using the speaker phone, we ask that you please pick up your handset before pressing the key to enjoy your question, please press star them to.

His first question comes from TN sent home of JP Morgan, please go ahead.

Hey, thank you so much. And thanks for all this detail. It's really good still still trying to digest it makes sense around the manager is margin guidance and and giving back the same things, but given all the moving pieces in in the recovery assumptions that you've made how do you plan to sort of layer those savings and take a view of when you'll be ready to give that back? I mean is it could this extend into twenty Twenty-One when you have a firmer picture cuz it feels like you may not know much until we get through the third into the fourth quarter. It sounds like

Clearly there are a lot of moving pieces right now. And we you know guidance anticipated the current covid-19 and even a more extreme cold environment effects of those savings, which we believe could come to us from the suspension of elective procedures and a lower utilization of Services. Of course workers compensation is another piece that will need to change it to the uncertainty. We don't know when it will finally evolved but we believe that we will have an understanding of that before the end of the year and I think that wage when we know more about that we will be able to determine when to return it. We've done this sort of program in the past.

Okay. Now I trust that's the case the looks like you had a good sales and retention Trend going into you know into mid-march here, given the change of know again a lot of a lot of moving pieces but the Professional Services Revenue per employee you you mentioned 80% now White Collar, you know, things are evolving quickly. How do you think that would behave relative to going forward here? How should we model that that Professional Services line relative to work site employee grown. So the way we're seeing that right now is that we believe that will be a mix change in the full year and we believe that we've contemplated in that price range, which is why we've set our range at annual range of between

-3 to -8 and our best estimate of that mix is as we described in buttons prepared remarks

Got you. Got you one quick glass one just and thanks for the time just your ability to protect the bottom line here on the expense side should things get get worse or he extends a little bit longer than what you're anticipating. How how do you feel about the levers that you have available to to pull on the expense front? Thank you.

Yes, we we clearly have already pulled some of our initiatives and directed them to the coded projects. We we've also maintained our employee count to support our clients. We are being prudent on expenses right now, and we're comfortable we have the financial levers that we need to pull.

Okay, very good. Hope you all are safe. Thank you. Hi, good afternoon. Just just to start maybe a higher level question. I was hoping you could speak a bit to the ability of your sales force to sell new business over the past month or so, I would imagine not being able to meet with with new clients face-to-face is is a pretty big hindrance and also the fact that you know, I would imagine a lot of the SMB employees are are focused on the day-to-day. So, any other color that you can provide outside of what you said in the prepared remarks on the selling environment in Canada without look over the next couple of quarters would be helpful.

Great question and obviously sales will be difficult through 2020 and we're experiencing what I expect to be most sales in a 2 and 2/3 from my vantage point. It has created a tremendous opportunity for us to have meaningful conversation with new prospects and existing customers. A lot of our business comes from the existing customers. And what we've done is invested in our marketing particularly argh handing which is increased the recognition around TriNet and trying its ability to have an impact on these small medium businesses conversations were having with prospects are much more detailed than they've been in the in the past people have a little bit more time and they are more interested in understanding all the Dynamics of how TriNet is dead.

In scale in service of the small medium businesses. The pipeline is growing and I expect is this trend evolved and the Palm Cove at environment a base that these conversations will continue and give us opportunities in the future.

Great. Thanks. That's helpful. And then in terms of of business makes I appreciate you calling out about 80% being white collar now from a vertical perspective or any more detail you can provide. I know you mentioned being overweight text and financial services and Life Sciences. Could you break out your exposure at that level and then also offer a similar question from a regional perspective? Obviously, it seems like you know certain regions appear to be a bit bit harder hit than others. So any color on on Regional exposure of helpful.

Hi, this is Rich. Thanks for the question. Let's just recount what we had set right now coming into about last week this account. We are between $300 and $305,000 a month down approximately 10% We had talked about also is inside of that number of the what has come out is about a third of those have been furloughed. We're actually happy and trying to help our customers a low to the degree that their business is come back online is very easy to go from a furloughed employee back to being a regular employee think of it is just going being out on leave and coming back from leave home. So to the degree, we have a roughly a third behaving in that way. That's a positive sign inside of Main Street as you can imagine where you have Hospitality, they're harder hit and they only have about twenty percent of their wages. This is Perla when you asked about it from a regional standpoint, as you know, we don't give out Regional information, but what we can tell you is that inside the tech it really is only affected in their very very small start off.

And in general it's kind of neat.

During across the board of how the install base ones.

Yeah, thanks a lot.

Ladies and gentlemen, as a reminder, please, press star than one. If you have a question, our next question comes from Sam England. Let's go ahead.

I got it's just a couple of me the first one. I just find it with that customer attrition number that you gave cuz that been accelerating throughout April or do you think we've sort of had a steady-state here for the time being after the initial shock? So then mid-to-late March?

So how we would answer that is our business will be really see is it's more around payroll runs. So although you see at the macro level you see things are slowly coming across every single week the same. We didn't we saw it a little more lumpy around particular payroll ones. That being said no, we can't say that we've actually seen an acceleration. It's been fairly steady, um long as it goes around the payroll runs. And as I said earlier what you see for our install base is since it's predominantly white collar and we have a lesser degree of hotels restaurants and things of that nature. A lot of this part of that book has already played out.

And if I can add to that as far as the guidance goes, we do anticipate in both the top and bottom of our range that are attrition will continue through Q2 and in the top end of our guidance, we would see recovery in the late Q3 into Q4 and the top end of the rain and the bottom end of the range. We would see recovery later into Q4.

Okay, great. And the next one. I just wondered what assumptions you're making about the numbers of White Collar work for employees for H2 as clients potentially get back in the office start revisiting cost bath cetera. Given most businesses on the white-collar side. Probably haven't made too many adjustments so far so their Workforce

Yeah, we don't give out volume forecasts on the general basis the best way to think about understanding that is to look to our Gap Revenue growth. That's our guide catalog the way we're thinking about volume.

Okay, cool. Thanks.

Next question today comes from Palmer with Credit Suisse, please go ahead Hey Kevin McDonald the first month super super detailed and obviously it pretty fluid environment anyway, and to give a lot of detail. How are you thinking about the progression of the wse on a quarterly basis? I try to get a sense of if we're 3 to 3:05 today. What does that look like in kind of a key to Q3? And then as we exit the Year? Yes, ma'am. I was saying that to Sam. We we don't really want to we don't really give out volume forecasts. I I think that the shape of our check marks or the same shape of our guidance between a month later recovery in the bottom end of our guidance and an earlier recovery in the top end that combined with our Gap guide is probably the best way you can understand how we're thinking about that.

Got it.

And then is there a way they just think about how many wacs have covid-19?

So it's it's too early to tell right now we the data coming in from the provider networks is incomplete, and we normally only get that data on a paid basis. We expect to see that probably in about three or four weeks time. Okay. Awesome. Thank you again. Nice job.

Thank you.

And our next question comes from David Grossman. What's the full Financial please? Go ahead.

Thank you. Good afternoon, David.

You know, I just first off I sorry. I didn't catch all the guidance. Is there a chance you could just quickly run through the non-gaap guide for the second quarter and for the year?

Sure for the second quarter 2020. We've got adjusted net income per share.

To grow year of the year in the range of 27 to 97% and adjusted ebitda for the second quarter to be in the range of 39 to 49% off.

Okay, and for the full year.

For the full-year are adjusted ebitda. Margin is targeting a range of 38 to 39%

Another adjusted net income per share is now expected to be down 3% to up 4% year-over-year.

Okay, and your your Revenue was -8 to -3 for the right?

Correct. Okay. Okay, great. Thank you. And I'm wondering if I could just go back to your comments about retention cuz I think you're talking about employee retention. Is that is that accurate? This is Rich. Now we're actually talking about our wse retention and your recall we started months ago working on ways that we could improve customer satisfaction anything from onboarding all the way through their first payroll run and then supporting them there after what we have found is suggesting in the back up the last year and now clearly through all the q1 we've had much better retention, uh building every quarter. So we're pretty happy with how the retention has been. So January being the biggest issue that we had a very strong retention quarter.

So what would the if he's look at that, you know 6% growth and 8% average. Would you characterize retention as being really the key driver of that truck across acceleration order a quarter of the truth? Because you have January being such a large month of when people would normally leave the company cuz they try to tie that out with their annual between insurance and you know, their payroll stubs.

And I just I don't know if you can answer this question. But you know, you think about, you know, the risk of bankruptcies and things like that, which is obviously on everybody's Minds the small business Community. What what did you see in in terms of it's probably too early to really gauge this but have you seen any signs of you know, how client attrition or retention is tracking versus WC retention or do they look very similar?

Yes, and that was why we tried to give you a little color around the furloughs and that we saw people that were leaving due to the epidemic or pandemic a third of them being furloughed and that's a pretty good indication that they plan on retiring those people in those companies aren't going we only actually had one company that size that the pandemic took down and monthly we already knew that they were in financial trouble before the pandemic ever started and we actually had them on our watch list and in our forecast earlier in the year that they probably would not be here due to their own issues on General. It hasn't been anything. Other than when you look at hospitality and some of those types of subverting calls were hit much harder. If you look inside the white collar business clearly am not nearly to that degree. There will be a knock-on effect. And as you heard Mike say earlier, you know, there's you have the shallower and the steeper checkmarks and I think he went through that red

Right. So in in terms of when you when you look at it again, it's probably too early to really reflect on this and detail, but do you have any sense of how you know for the few small businesses that actually got you know stimulus money, you know how it's being deployed.

We have seen that we have seen some, you know, the in some cases they ask for a unique bank account so they can track it so they can be in compliance. We help them set that up company did a great job and doing a lot of videos and telecoms for them. So that people could understand how would work and what the rules were depending on the banks. A lot of banks asked for it to be completely separated and we did that with them. So we have an idea doesn't mean everyone did it but there were a fair amount that did that and we were able to do all that for them, which I think was very helpful for a small and medium business office, right? But have you seen have you seen any of the resources being deployed yet? How it's being are they really, you know, retaining people or they just bankrolling it or off the majority of it has to go towards payroll. So that's the answer, right? Okay, so we haven't been seen it. I guess what I'm trying to understand is if we see the impact of the stimulus money yet.

On the WC or is it really just starting just within the last week or so?

In terms of hospitality and travel. I know it's embedded in and did you say that that now main streets 20% of Revenue is did I hear that right?

It's drifting down to that area, correct? Okay, how big should we think you know kind of now that we're into this? How big is Hospitality in travel now is a month wasn't loading little single digits of the install base. So it was never a big part. I think we should remind everyone on the call when we went through the SOI migration and we repriced everyone needs to rest a lot of people that had maybe looking for cheap insurance had moved on. So we sort of took that thing for a lot of those industries that are now suffering due to the the pandemic so our book of business you see that in our PE p.m. As an example is higher than you just in how long and how well we're doing with our annual Miles because the renewal also tended to be more around Main Street left much more often than the rest of the White Collar.

Got it, and then just one last thing and it really is both on sales and and backlog conversion. So have you the business that you sold last year that would have come on in the March quarter did the vast majority, you know since March and June, I believe are the bigger seasonal quarters for onboarding new clients did most of that new business come on as planned or she did some of that or a large chunk of that get deferred out.

No, that all came out on us plan. The only deferral that we saw was really a very tail end of March as the as the pandemic was starting to really surface there were some transactions where people want to do more of a wait and see.

Got it, and then similarly is you know, you think about your sales cycle, you know, I don't know if you can think out loud in terms of cuz you do have two different markers out there in terms of how long you know, this this goes on for how we should think about at what point do you really start maturely impacting 20-21 if things don't get better in sales State kind of wage to expect them to be somewhat depressed.

So we're still hi. This is Mike. So we are still working on making sure that our sales force is well trained and that they are productive as I said in the guidance office. We're going to have a very depressed Q2 and Q3. And I think that we're still focused on long-term Investments and adding to the sales force carefully imprudently overtime. Well, I guess really wow, it's really a question Michael. When and what point in the year. Does it become you know difficult to sell into the new year or our new clients start up, you know kind of pro rata three-year. So it really doesn't have a material impact. Just trying to get a sense for when 21 becomes really difficult based on your inability to get people decision.

Okay, and then

so David, I've never seen anything like

Just before obviously the model is showing tremendously. Well with the existing customers the ability to get referrals will be better based on our ability to help a customer survive. The pipeline is growing but I don't know what the drop dead date is going to look like as far as impacting twenty. Twenty-One conversations are meaningful. People are talking on the phone. The marketing campaign is working as expected the brand new campaign. I've been absolutely thrilled with so we'll just have to wait and see this is off. This is the day that we have today and we're trying to be as transparent as possible.

Got it. All right guys. Good luck. Thanks very much.

No, next question is a follow-up from JP Morgan, please thanks for getting me back on. I just had one longer-term question for Burton. If you don't mind, just your thoughts on demand for outsourcing and peo once we move beyond the pandemic which hopefully sooner rather than later, but just your thoughts in general about how structurally demand might change for services.

Yeah tens in obviously I'm focused on TriNet and not the overall industry. But as I said, I'm really proud of the ability to use Skagen to have an impact on these small and mid-sized businesses. And this is across the board. It has to do with information. It has to do with digesting and disseminating legislative information. It has to do with the loan process that has to do with the insurance both for existing wse's as well as Pharaoh door off left. So I am optimistic about the ability of TriNet to have an impact on its existing and future clients and particularly thrilled with the way the TriMet team has switched to this issue and addressed it meaningfully for the the customer base. So it's hard to tell

Obviously the variable cost model of a peo may be looked at as we move forward in this particular situation.

Understood make sense. Thank you. Thank you.

I was in gentlemen. This concludes today's question-and-answer session and today's conference. We thank you all for attending today's presentation. You may not expect your minds and have a wonderful evening.