Q3 2020 TriNet Group Inc Earnings Call

Today and welcome to the try net third quarter 2020 earnings conference call all participants will be in listen-only mode. Should you need assistance, please ignore Conference Specialists are pressing the star key followed by zero after today's presentation. There will be an opportunity to ask questions to ask a question. You may press * then 1 on your touchtone phone to withdraw your question, please press the star then to block his note. This event is being recorded. And now now would like to turn the conference over to Alex power of investor relations, please go ahead sir. Thank you operator. Good afternoon everyone. Welcome to China. It's 2025 order, install joining me today a bird named Goldfield our president and CEO Kelly. Tuminelli our Chief Financial Officer immediately following the filing of our third quarter form 10-q and Michael interim Chief Financial Officer are prepared remarks were pre-recorded Burton will begin with an overview of our third quarter operating performance. Mike will then provide a review of our third quarter Financial resolved.

Finally Kelly will provide our forward-looking guidance will then open up the call for the Q&A session before we begin please note that today's discussion will include our 2020 fourth-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 STG predictions strategies beliefs or other statements that might be considered forward-looking. These forward-looking statements are based on Management's current expectations and assumptions and are inherently subject to risks uncertainties and changes in circumstances that are difficult to predict and 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 otherwise, we encourage you to review our most recent public filings with the SEC including our 10-K. Ohm.

Thank you filings for a more detailed discussion of the risks and uncertainties and changes in 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 Net Insurance margin adjusted ebitda margin and adjusted net income per diluted share for reconciliations of our non-gaap measures to our gaap financial results. Please see our earnings release or our 10-q filing for our third quarter, which is available on our website or through the SEC website with that. I will turn the call over to Burton. Please review of our operating performance and Market environment Burton. Thank you Alex. I am extremely proud of trying its operating and financial performance during the third quarter after navigating a difficult second quarter where we felt the full impact of COVID-19. We entered the third quarter resolved.

Make the best of a chat.

Challenging operating environment our customer base operating model and prospecting processes were all disrupted and still face uncertainty Thursday. We are responding to this uncertainty by doing what we are passionate about putting smbs at the Centre of everything. We do specific high life since our last earnings report include we realize strong wse volume in Q3 and growth in our volume over Q2 off this compared favorably to the broader economic environment and our own forecast.

We implemented the industry's leading recovery credit program and share the program details with the first cohort of TriNet customers. It was greeted with widespread appreciation and we hosted our first ever conference focused on small and medium-sized Business Leaders that TriNet people for Scott conference in the face of COVID-19. We delivered strong financial performance due to a resilient customer base, which has been acquired through a vertical eyes go to market strategy and a unique business model that adds significant value across a wide range of strategic and operational issues facing small businesses in America during the third quarter Gap total revenues increased 1% year-over-year while gaap earnings per share wage.

Declined 38% year-over-year, please note that are reported financial performance in the quarter includes a revenue accrual for a recovery credit program, which Mike will address later. The recovery credit program is our effort to share with our customers the excess cost savings we generated from underutilized Health Services primarily in April historically. Our business model has been to assume a deductible layer for the majority of our health plans. We are able to take this layer in part due to our strong balance sheet because of this plan construct we had access to the significant savings generated in April leveraging those savings. We created the recovery credit program are explicit effort wage.

To ensure a portion of these savings are used for the benefit of our customers all within one year set another way to recovery credit from insurers that those customers who are committed to us and our partnership have access to the savings when they need them most we believe the recovery credit program represents the best usage of these savings through this program. We are investing in the success of our customers rather than choosing to subsidize new customers or set and low expectations for ongoing Health costs importantly the first customer cohort received notice of their recovery credit during the third quarter.

these are

Whose contracts renewed with us on October 1st, the preliminary response rates were very encouraging and indications for future retention r-pod. We will be able to report on the full benefits of the program in 2021. Despite the ongoing economic uncertainty. Our third quarter of was distinguished by stable volumes. We ended the quarter with approximately $321,000 down 3% year-over-year wage, but up 2% sequentially versus the second quarter.

Our acquisition of little bird H are accounted for approximately 1% of incremental wse volume in the quarter. We attribute our volume outperform to our amazing customer base and our unique approach to customer selection the install base continues to be comprised of nearly eighty percent of white collar workers, which thus far have withstood the impact from the pandemic better than our Blue Collar verticals continuing a trend. We saw emerge in June June White Collar verticals continue to add new employees throughout the third quarter. In fact during the third quarter our installed base hired more knowledge that new wsc's then they did in the same quarter last year.

The hiring was consistent across all of our White Collar verticals with technology being the leader Additionally the overall return of economic activity across the country positively impacted our installed base and served to mitigate the lack of additional PPP funding new sales remained challenge during the third quarter relative to last year. We continued to close net new business in the quarter. However at lower volumes than last year significant, we we have not yet returned to face-to-face sales calls. We are leveraging our installed base for referral business are closed rates are higher when jobs are referred by our current customer base last week. We hosted the first annual TriNet people Force virtual conference.

TriNet people force is our Forum to provide smbs with real insights thought leadership and recommendations for the challenges. They face off. Additionally. We highlighted the depth of the TriNet leadership team. This well-attended event allowed thousands of smbs, which included trying to customers and Prospects to participate in discussions around critical issues facing their companies with a diverse group of business experts public official and thought leaders these speakers included former President George HW Bush former Attorney General Eric Holder former White House Deputy Chief of Staff Mona sutphen American pathogen preparedness expert Dr. Zaira m'dad, and current wage.

a customer's

For achieving amazing results and so many others over a three-day period TriNet people Force tackled key challenges such as busy as resiliency diversity equity and inclusion in the Workplace Health Care, including cost management and employee access legislative update and access to government programs and stimulus and finally an economic outlook for smbs examples were given by speakers like Samantha wage slaves around the challenges her company ri3d faces and try Nets involvement in helping her company grow. I am pleased that trying to page leverage our Market position, which has been gained over a thirty-year period to provide this critical information for the benefit of our customers and the SME.

Community-at-large the try net value proposition continues to resonate as demonstrated by events like TriNet people Force. We are optimistic growth will return as the economic environment improves still our Outlook remains cautious until either a vaccine or improved therapy are generally available and economic confidence is restored or additional stimulus packages are approved smbs will face an uncertain fall and winter over the last two quarters TriNet demonstrated its commitment to our customers by our enhanced service model.

Recovery credit program and the TriNet people Force conference for our customers and Prospects TriNet represents a comprehensive differentiated solution. That is so much more than payroll HR software or access to benefits. We are passionate about our customer success with specifically we're using TriNet scale as one of the largest single Employers in the United States to provide an always-on service mod with instant access to information and support for small businesses.

Access to a wide variety of Large Group Health and Welfare plans, not generally available to small businesses and investments in technology that benefits smbs currently and in the future, we believe this holistic approach, which is resonating in the market will become even more valuable in the future as companies return to growth Post COVID-19. Finally. I would like to formally welcome Kelly to Manali to try net off Kelley was appointed as our Chief Financial Officer immediately following the filing of our third quarter form 10-q, Kelly brings significant experience and engine size with her insurance background and tremendous leadership skills over the past six weeks. I've enjoyed working with her as together we drive off.

growth and

Success Kelly's Edition represents a further strengthening of our management team and as such I believe we are well-positioned for growth as an economic environment improves.

With that I will pass the call over to Mike to provide review of our third quarter financial performance Mike. Thank you bud during the third month Gap total revenues increased 1% year-over-year and Professional Service revenues declined 3% year-over-year Gap total revenues out performed the top of our guidance range full percent a wac volume out performed with a mix of wacs remaining it nearly 80% white collar workers Gap total revenue growth was driven by a 5% wage growth in total price or rate combined with 5% growth from a change in mixing W, which is the proportion of w in each vertical and the offerings that they enroll in this was offset by a 4% year-over-year decline in average W-2 318,000 which include the impact of our acquisition of little bird h r and also a phone number

Percent or 48 million dollar reduction in revenue from our continued accrual for our recovery credit program over the last two quarters. We have accrued 104 million month free credit program and we continue to see net savings from the underutilization of Health Services broadly from what we reported previously net service revenues in the quarter decreased to page here at the year outperforming the top end of our guidance range by fifteen points for the third quarter. We delivered a Net Insurance margin of 11% versus our Q3 guided group of six to eight percent the outperformance in Net Insurance margin during the third quarter was again driven by reduced Health utilization and a change in the pattern of our expected incremental investment in our customers as a result of COVID-19. We saw two Trends emerge during the third quarter first while we saw a returned to some normalization of doctor visits and outpatient procedures dead.

Excluding COVID-19 Services the frequency of all services and notably inpatient procedures remained depressed over all our utilization is at 98% of prior-year volume II we continue to see direct covet the costs which totaled approximately 3% of overall health costs in the quarter about half of these costs were attributable to testing in addition. We have changed somewhat the value and timing of our commitment to reinvesting with our clients. This change reduced our anticipated recovery credit of cruel in the. And contributed not a 1% Improvement to each element of Gap revenues and 1% Improvement to Net Insurance. Margin in the third quarter. We delivered an adjusted ebitda margin of 32% off performing our expectations as volume strength drove Revenue growth Health costs remain lower and Opex remains constrained we spent approximately thirty-five million dollars wage.

to repurchase 520

See 1,000 shares of stock in the third quarter. Our third quarter effective tax rate was 14% in the quarter. We benefited from improvement in our state taxes. And from the tax treatment of employee wage compensation are per-share results in the third quarter significantly outperformed. Guidance and reflect the impact of the access cost savings generated cat. Net income for Chef decreased 38% to $0.48 compared to seventy eight cents per share in the same quarter last year adjusted net income per share decreased 31% 25066 compared to $0.81 per share in the same quarter last year. I will now turn the call over to Kelly to provide our fourth-quarter Outlook Kelly. Thank you Mike and very exciting that during this time understanding the impact we can make on our client base. I'm particularly passionate about leveraging my background and prior experience to work across the organization to age.

Online enterprise pricing processes enhance Enterprise analytics and enable a consistent 360 degree view of customer lifetime value, which I believe will be critical to TriNet strategy am moving forward. Now, let's turn to our twenty twenty fourth quarter and full-year Outlook as Burton discussed while we are pleased with the recovery and our WSC base driving down volume performance. We remain cautious in our forward Outlook the high end of our fourth quarter guidance reflects an environment where the nascent economic recovery continues with different applications for employment and consumer activity the states impose localized lockdowns or virus surges or being experience rather than broad sweeping lockdowns and a stimulus package is passed and November the low end of our range reflects an environment where the economic recovery stalls is we experience Regional Cove and case surges and related charge indirect COVID-19.

Additional stimulus is delayed until much later in the fourth quarter and bankruptcies increase as a cohort of customers finally capitulated to the difficult operating environment a low-end. We anticipate the try net would realize lower revenues and last year partially offset by reduced Health Care utilization, even with higher direct COVID-19. The costs are often reflects and Recovery credit of cruel, totaling 2 to 3% of fourth-quarter Gap Revenue as mentioned in Prior Quarters on a full year basis. We will experience significant 1,000 benefits The Net Insurance margin from COVID-19, which we believe will not recur in 2021. Our recovery credit program extends into twenty Twenty-One and we anticipate control over that. We are not planning to further discuss 20-21 Net Insurance margin or guidance today as we think it's important to evaluate the progression of COVID-19 over the next few months.

for the fourth quarter of 20

We expect you up Revenue to be in the range of flat to up 2% as our strong third-quarter sequential average WSC Improvement boosts our fourth quarter above our prayer for Cathy. We expect our fourth quarter net service Revenue to be in the range of down 27% to down 12% year-over-year. We expect our fourth quarter Net Insurance money in the in the range of 48% reflecting the recovery credit of cruel and incremental coded cost partly offset by suppress Health Care utilization.

We expect to realize and adjusted ebitda margin range in the quarter of 8 to 21%

We expect Q4 gaap earnings per share to be in the range of -13 cents to positive $0.19 or down 119% to down to the 2% off and adjusted net income per share is expected to be in the range of Breakeven to up thirty-two cents or down 100% to down 62% year-over-year office regarding a full year 2020 guidance given three quarters of performance are better than expected volume increased cost savings and our first quarter guidance. We are raising this full year guidance. We now expect to grow Gap revenue and the range of up three to four percent up from Flat to 100% driven by the recovery in our average wsdcam inconsistent with our economic Outlook net service revenues are now forecast to grow 8% to 11% year-over-year up from Flat to 5% growth dead.

Expect our for your 2029 Insurance margin to be approximately 14% tightened from our previous range of 12 to 14%

For your 2020 adjusted ebitda margin is expected to be in the range of 43 to 44% raised from a previous range of 38 to 41% wage. Gap earnings-per-share is now expected to grow you're over a year in the range of 18 to 29% or a $3.53 to $3.85 per share raised from down 8% to up 9% Year-over-year adjusted net income per share is now also expected to grow you're over year in the range of up to 90% to up 30% or $3.99 to $4.32 per share raised from down 3% to up 14% year-over-year.

Overall, we're pleased is the signs of economic recovery and the resilience of our business model and white colored vertical Focus as well as the containment of costs associated with COVID-19 month. We do remain focused on the range of potential outcomes for 20 21 insurance cost performance given various ways in which COVID-19 may cause wfc's to delay preventative and non-urgent Medical Services as well as the potential for a balance back and utilization or additional direct COVID-19 cost next year with that. I will return the call the Burton for his closing remarks. Thank you Kelly. I was pleased with our performance during the third quarter and in fact our financial performance during the first three quarters of this unique given the significant disruptions that the pandemic has brought to our customers.

our clients are

Small and mid-sized businesses driving America's growth. They are resilient. They hired during the quarter in greater numbers than during the same quarter last year with the recovery credit program TriNet people force and all of our other initiatives are intended to best serve and retain our customers while driving profitable growth as we look forward. I'm excited to work with Kelly and our broader leadership team. I am proud of the entire TriNet team and one thank them for what they do. This team has responded effectively during the COVID-19 has there is a tremendous Desire by smbs for guidance and partnership try that is passionate about this desire and uniquely positioned to fill this need operator.

Ladies and gentlemen, we will now begin the question-and-answer session. You ask a question. You may press the stars and one on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys off. If you would like to withdraw your question, please press the star then too and her first question today will come from changing home with JPMorgan, please go ahead.

I think so much Kelly welcome to the call. So I'll ask you the first question. If you don't mind just just curious with you coming over with an insurance background what she needs you to the to the trying to business and any surprises on the on the quality of the book and how trying to maybe can better engage with with the cares. You're coming over from that side of it. I heard the the 360 see you on on the TV which is interesting. So maybe it was something you can elaborate there. That would be great to thanks great engine. Thanks. It's great to be a net. You know, really what choice acted me to try and that is I think it's a tremendous growth opportunity. Frankly. You know when I look at the market and I see how you know from my perspective how under-penetrated it is. I I I think we've got a lot of of room there, you know, it's it's hard to to call anything from an insurance perspective in this environment with with COVID-19 because Trends are not dead.

What you would expect from a normal Trend perspective so, you know, I I think it's you know, that that's kind of tough. You know, what I would say is, you know with insurance background, you know, it's about looking at the data looking at the the customers the underwriting experience et cetera and and continuing to to evaluate that but you're not trying to you know, a price for risk and will always continue to do that regarding a 360 view of of customer lifetime value. You know, I think the team has done a really good job at trying to understand its customers. I think in this environment. It's really played out in terms of focusing on white-collar verticals just given the fact that they were less impact Life by the COVID-19 pandemic, but

you know, I I think

Like anything, you know, we've been investing in process Improvement and I think we can continue to invest in you know, our processes overall and really refine our view with data, but we think that longer-term value from the customer customer is so, you know, I'm six weeks in so, you know still still getting up to speed for sure, but that's real to be here and very exciting opportunity.

I'm great. Thanks for that is my quick follow-up then just on the the whole team the recovery credit program and they gave a lot of info there in your rolled it out to the first cohort and that customers so given what you've learned so far. Is there anything else you can share in terms of what the impact might be on improving retention as you roll out to talk to the rest of the the customer base here great follow-up question, you know, I I think in terms of the recovery credit, you know, and and as we look forward, you know, we've just got really early view. He's like Burton mentioned we've rolled it out to the really the first cohort with renewals coming up in October. We're not going to really call, you know, the impact on twenty Twenty-One yet cuz we really want to change as you know, most of the renewals happen with the calendar year and we really want to see that January performance before we get any any further specifics on that is absolutely dead.

To give you more of an update on the fourth quarter call but it's you know, the reception's favorable. You know, I think Burton mention not in his prepared remarks that it's very favorable Burton anything you want to add depends upon. How are you?

Great, not good to hear from you guys. Yeah, you know, it's great to hear from you as well. What I would add to that being in the middle of it is the feedback from the recovery credit program really highlighted. It were invested in our customer success and that their success is our success. I believe in this customer base as you've heard me say over many many years and we will be part of the recovery and we will help them recover and ultimately this help coming in a very critical time in their existence has a significant impact on these stakeholders. So ultimately, I believe all of our stakeholders were benefit from it and it's a pretty unique program, which I'm excited about

Yeah, that will said it'll be interesting to see how it goes. Thank you for the update guys. Thank you. Yeah, exactly.

And our next question will come from Andrew Nicholas with William Blair, please go ahead. Hi good afternoon. Just just a little bit of a follow-up long as we kind of look towards next year and I know you're not giving guidance, but I did want to ask just if we're in the unfortunate position of you know, it's a country of of facing another wave of cold, but over the next couple of quarters and and you experienced similar Health Care utilization and and cost Dynamics in the first half of next year. Would you expect to react similarly in terms of rebates or credit programs or maybe just ask the different way. How do you expect your approach to change if faced with similar circumstances and twenty twenty-one?

Yes, great question again.

You know, we're really going to watch the progression of the next three or four months just to be able to see where it's going and what we think's going to happen to healthcare you take reservation right now. We've not discussed anything further on that and you know, we'd obviously give you more updates as we see more experience develop but you know, there's there's currently no plans at this point in time. Maybe I'll throw it back over to Burton as well. Say Andrew great question. This is a one-time program from our vantage point. I believe that the vertically Oregon and business model we're using which focuses on attractive Industries where our value proposition is particularly. Well suited gives us opportunity to help those customers succeed in this environment, but next year will be another interesting year and we will help our customers achieve wage.

they are trying to achieve in these verticals that we serve as

Great that that's helpful. And then as I follow up I was hoping we could just been a little bit more time talking about the sales environment. You did obviously touch on it in your prepared remarks. But any more comes on kind of how you're thinking about the pipeline conversion rates length of the sales cycle and in any indications at this point, I know it's it's still October, but how long that might evolve over the next couple of months. Obviously you're getting into to Peak selling season. Any any more color there would be great. Thank you. Absolutely. So what we're seeing is a lot of activity deep conversations, but deferred the decision making and ruin the simplest form. What we're seeing is prospects are frankly more concerned about the front of the shop right now. They're concerned about staying in business while I believe we can help with that. It's difficult for them to make a back and change in the current environment dead.

We're focused on servicing our customers and we know there's a direct correlation between the customer sat referrals and net new business which should pay off over time. I think ultimately these opportunities to have the Deep conversations will be meaningful as things really accelerate in the future. Also talking a little bit about the people for his conference. The feedback that we got was absolutely incredible both from the value that people got out of it, but also equally importantly the community that they felt around smbs brought together by trying it. So I'm optimistic. I'm optimistic the economy will return I can't give you that day, but I do believe we are investing heavily in making sure that these companies do as best as they can in this particular environment. I'll yep.

the one comment that I got from

People Force which was pretty personal where somebody said your conference really helped my morale. I felt supported and I felt somewhat actually understood the wrong pressure. I've been under to maintain cash flow and keep paying payroll. Thank you very much. So I do believe we're building a community and we're going to try to provide leadership necessary to evolve out of this situation. But again, as you said these are conversations and the close rate. Hopefully, we'll come back to normal once things get back to normal in the economy.

Great. Thanks again.

And our next question will come from Kevin mcvea with Credit Suisse, please go ahead.

Great. Thank you and congratulations on the results. Hey, I wonder this bridge you're very welcome. Listen to tough environment out there. I guess the 11% off from each you three versus kind of the range is a 48 for Q4 any sense of you know, how much of that is the recovery crew vs higher expense and are there any other factors to consider just a way to frame kind of some vets Bridge from 23224?

Yeah, Kevin, this is Kelly. I'll take that one, you know, take a couple of things a couple of things that I'd remind you is really the seasonality that we face. So, you know what I am I mentioned in my prepared remarks that were, you know, originally wait assumed there would be somewhat of a surge in the third quarter which we frankly didn't seem I said we had you know about 2% wage lower utilization were about ninety-eight percent of the utilization excluding kovich to see the cost. So it's it's not anything unusual that we're thinking about in terms of the fourth quarter, but when you talk about the Ford to 8% and that insurance margin, you know, I did mention where the recovery of cruel would be between two and 3% of Gap Revenue. So if you you project a program where you can see what the impact on the recovery credit would be on an entrance margin, but I really view that Morris seasonality than anything else that we typically see better off.

French margin in the first quarter just given deductibles and things like that when People's Health Plan is renew and then and it degrades throughout the year, as you know, people burn through their divorce.

That's so full. And then just in terms of any thoughts on the retention in the corner and then you know, I know we're not talking about twenty twenty one in particular but you know with the recovery credit it all things equal. It should probably help to retention in 2021. But is there any way to think about just the impact of recovery credits and in the impact on retention overall?

Yeah, let me through it over to Mike to talk about retention in the quarter and then I'll give you a view going forward.

Pull the cool to we saw that our attrition very definitely improved and therefore our attention approved. We don't give out that number. So in addition to that we saw that our clients in the third quarter really followed the pattern that they had in June and all of the verticals returned to net hiring particularly strong growth in that hiring in both technical, excuse me technology and Life Sciences vertical but as I said all of them improved

Yeah, and and regarding the fourth quarter, you know, we would anticipate that the recovery credit does, you know move the needle related to retention. So we took we will have strong retention. You know, like we we said we're not going to really forecast 20 21 or give you a view on twenty Twenty-One. But I do think that you know how long it will see how January comes through but given all the indications we've got so far. It's definitely a good tool and let me let me give it to Burton to any other remarks. I would just add on the last call we talked about the growth in June and hiring the fact that that continued throughout the quarter was a very positive trend that frankly. We had not counted on in the guidance we given

It's helpful. It's helpful. Thank you.

And our next question will come from Sam England with berenberg, please go ahead guys. I just made the first one you talked about how well the white collar side of things is holding on just wanted to know how much variation you've been seeing between different industry verticals whether there's been any particularly strong or weak verticals from sort of a retention perspective also any New Jersey or petitions or WUSA additions?

Yeah.

So what we saw in the third quarter as I said previously was strong growth in technology and life sciences. And then we saw although we saw some growth in hiring in Professional Services and in Mainstreet. It's not growing at the same rate. I would also say that that change in relative growth wasn't significant enough to really change the overall mix between white color and the blue collar vertical.

Okay, great. Thanks. And then you obviously finished the quarter again with sort of strong balance sheet position. I just wondered how you're thinking about m&a at the moment and what the m&a landscape looks like. I got studies more broadly. You know how you thinking about Capital allocation priorities over the next six to twelve months right. Now, I have happy to answer that Sam, you know regarding your life, you know, we're definitely focused on it where the rates are returned and cost of acquiring wsu's are attractive will pursue it in in those instances. Also where the strategy makes sense. I think they're m&a approach is is changing that if there's geographies or verticals that we particularly like we'll we'll pursue them, you know or technology or or tucking so, you know, the m&a really, you know, our our approach towards m&a really hasn't changed. But in terms of capital allocation overall kind of the first priority is is organic growth dead.

second would be m&a and then thirdly as we think about, you know, returning Capital to shareholders would obviously

Continue with with our repurchase program. So that's that's kind of how we're thinking about it.

Okay, great. Thanks very much. Thank you. Next question will come from David Grossman with Depot Financial, please go ahead. Thank you. Good afternoon. Good afternoon, David giving up some great information about you know, kind of positive Trends in hiring and you know retention and then offset by what looks like a more challenging new sales environment and I know you don't want to provide any context or guidance for twenty Twenty-One. But can you give us any sense for how we balance those because you know, the hiring sounds like it's going better than planned. You know, you've got the the credit app place to help with retention but sales are off and it's kind of hard to really get a sense for you know, how we should think of relative weightings as we you know as we go into next year.

Yeah, let me take it and then I'm going to pass it to Burton to give you know a view on, you know, just his View at a very top level on the environment. But in terms of you know, I I think he said it will in his prepared remarks when he said that you know, the back office is a little bit not the priority at this point in time and so long, you know it we're also seeing it's not the priority which is helping retention as well. So, you know, I I think we've been pleased with the net hiring that that we got in the back order and the high end of our guidance for four fourth-quarter assumes modest net hiring as well. The low end would assume you know, that really that that some of these companies just can't make it through the environment given worsening COVID-19.

Perspective on sales and then conversations going on.

Yes, sir, David three things. I would point out one is you know very well that I've been in maniacally focused on the verticals that we serve and the community that we're involved in that appears to be doing better than the overall smv community. So I'm very pleased with that aspect of our business. I also believe the fact that we've narrowed down to the the communities were able to give him better service and be more focused on helping them in these difficult times as you're aware complexity is our friend here and I believed that the overall situation is allowing our full-service solution to show very very well. I think tangentially is this issue deferred decision May there is a significant amount of activity. There is a significant amount of business interests as we saw from the people for its conference how to handicap that will Direct

We car.

482 what happens in the return of the economy? So for me, it's a timing issue. It's not a matter of if it's a matter of when and I simply don't know how to handicap. That's what I do know is by helping our current customers by having them grow and be retained by TriNet. I have a bird in the hand that can grow my business while the recovery of the new sales takes place.

Got it, and and just Burton just for historical context. You know, my recollection is that you had some kind of program in place. Maybe not exactly what you in place now back in 2018, then am I remembering that correctly? And if I am, uh, can you help us remember what the impact was on retention from that program?

Mike could you help out with that sure in 2017 at the end of 2017 into 2018. We did have a fee credit program that represented less than 1% of revenues and we learned a lot from that program and we we learned a lot about how our customers see these kind of programs and we learned a lot about the structure and how may we want to the timing of when we give these amounts to them? So I I would say that this is quite a different program in its Simplicity of design in the amount. We're giving to each customer and how it's more meaningful and how we're approaching the conversation with them. So whereas we we got some reward from the prior program. We see the effectiveness of this one being very different.

Got it, and then save the answer is I'll be excited to give you the results at the end of you know, for the end of the year for the program in the next life, you know earnings calls. So we will now at that point in a much more definitive fashion as as I said in a prepared remarks, I'm really pleased with feedback and the uptake but as you say in the end the retention particularly, the start of 2021 is a significant issue and I believe we're addressing it in a absolute proper manner. We didn't take these dollars and put it towards new sales. We are rewarding our customers.

Right and then and then just one last thing just really more on kind of the ability to expand geographically is you know, how cuz something like the pandemic impact the carrier's willingness to work, you know with a new CEO in the new geography or is it really no change at all? That's a really not have any impact.

Yeah, I I'm not real focused on the other peo to tell you the truth. So I'm not sure I can answer the question David. I have thought well, I think yeah, it's really directed at you. I'm just wondering okay. Yeah, whether you know the current environment, you know may make a carrier more like, you know to engage with you in a new geography or whether it really has no no bearing at all.

I don't think

I would say from my experience. It doesn't have a bearing especially with the amount of plans that we have. I'm not looking for massive expansion into new plan wage and our scale provides, you know, a tremendous, you know, that scale was tremendous. I think it's a good question for the carriers that I just don't know the answer to that. We have a great relationship with our carriers. As you know, we're we're a large a partner too many of those I'm dealing directly at the very senior levels and I haven't heard anything like that.

All right. Good enough. Thanks for your thanks for joining us. Appreciate it. Good luck.

And ladies and gentlemen, this will conclude our question-and-answer session, and also today's conference would like to thank you for attending today's presentation. And at this time you may now disconnect your lines and have a great day.

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Thursday Thursday

off off

dead dead dead dead.

Dead dead dead dead dead.