Q4 2021 TriNet Group Inc Earnings Call

Speaker 1: Good afternoon and welcome to the TriMet fourth quarter and full year 2021 earnings conference call. All participants, be in listen-only mode.iga.com.

Good afternoon, and welcome to the China fourth quarter and full year 2021 earnings conference call.

All participants B M as in North Dakota.

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Speaker 1: After today's presentation, there will be an opportunity to ask questions.

After today's presentation there'll be an opportunity to ask questions.

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Speaker 1: Please note this event is being recorded. I'd like to turn the conference over to Alex Bauer. Please go ahead. Thank you, operator. Good afternoon and welcome to TRINET's 2021 Fourth Quarter Conference.

Please note this event is being recorded.

I'd like to turn the conference over Alex Power. Please go ahead. Thank.

Thank you operator, good afternoon, and welcome to try and it's 2021 fourth quarter Conference call. My name is Alex Bauer and aimed joined today by C. E O bird named Goldfield, and our CFO Kelly to minelli.

Speaker 2: My name is Alex Bauer and I am joined today by CEO Burton M. Goldfield and our CFO Kelly Tuminelli.

Speaker 2: Before we begin, I would like to say a few words about forward-looking statements and our use of non-GAAP financial measures.

Before we begin I would like to say a few words about forward looking statements and our use of non-GAAP financial measures.

Speaker 2: Please note that today's discussion will include our 2022 first quarter and full year financial outlook 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 others.

Please know that today's discussion will include our 2022 first quarter and full year financial outlook and other statements that are not historical in nature are predictive in nature or depend upon are referred to future events or conditions, such as our expectations estimates predictions strategies beliefs or other statements.

Speaker 2: 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. Accept 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 laws.

It 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 and like new information future events or otherwise we encourage you to review our most recent public filings with the S. E C, including our 10-K and 10-Q filings for more detailed discussions of the risks uncertainties and changes in circumstances that may affect our future results or the market price for stock in addition.

Speaker 2: We encourage you to review our most recent public filings with the SEC, including our 10-K and 10-Q filings for more detailed discussions of the risks, uncertainties, and changes in circumstances that may affect our future results or the market price of our services.

Speaker 2: In addition, our discussion today will include non-GAAP financial measures, including our forward-looking guidance for adjusted net income per diluted share. For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see our earnings release, 10-Q filings, or 10-K filing, which are available on our website or through the SEC.

Our discussion today will include non-GAAP financial measures, including are forward looking guidance for adjusted net income per diluted share <unk>.

Conciliations of or non-GAAP financial measures tour GAAP financial results. Please see our earnings release, 10-Q filings or 10-K filing which are available on our website or through the S. E. C website with that I will turn the call over to Burton burden. Thank.

Speaker 2: With that, I will turn the call over to Burton. Burton? Thank you, Alex. In terms of financial and operating performance, TriNet's fourth quarter was an exceptional quarter, capping off an exceptional year.

Thank you Alex in terms of financial and operating performance Tryin', It's fourthquarter was an exceptional quarter capping off an exceptional year.

Speaker 3: 2021 was the strongest year in TriNet's history and pivotal for our company.

2021, what is the strongest year in China's history and pivotal for our company.

Speaker 3: In the fourth quarter, we delivered 16% year-over-year total revenues growth. And for the full year, we grew total revenues by 13%.

In the fourth quarter, we delivered 16% year over year total revenues growth and for the full year. We grew total revenues by 13%.

Speaker 3: We converted our strong organic revenue growth into tremendous earnings growth as we remain disciplined while managing our cost structure and systematically pricing our customers to risk.

We converted are strong organic revenue growth into tremendous earnings growth as we remain disciplined while managing our cost structure and systematically pricing our customers to risk.

Speaker 3: As a result, in the fourth quarter we tripled our gap EPS to $1.03 and more than doubled our adjusted net income per share to $1.13.

As a result in the fourth quarter, we tripled our gap P. P. S to one dollar and three cents and more than doubled are adjusted net income per share to one dollar and 13 cents for the year gap earnings per share came in at $5.07.

Speaker 3: For the year, GAAP earnings per share came in at $5.07, up 27%, while adjusted net income per share came in at $5.64, up 27%.

Up 27% well adjusted net income per share came in at $5.64 up 27%.

Speaker 3: strong cash generation in the quarter added to our already healthy balance.

Strong cash generation in the quarter added to our already healthy balance sheet.

Speaker 3: And our board has increased our share repurchase authorization by $300 million. So as of today, we have a repurchase capacity of more than $500 million.

And our board has increased our share repurchase authorization by $300 million. So as of today, we have a purchase capacity of more than $500 million.

Speaker 3: trying to finish 2021 with approximately 365,000 WSCs up 10% year over year.

Trying to finish 2021 with approximately 365000 W. S sees up 10% year over year.

Speaker 3: This WSE count represents an all-time high for our company.

This W. S E count represents an all time high for our company.

Speaker 3: Our growing, resilient customer base, comprised of SMBs in our core verticals of technology, life sciences, financial services, professional services, nonprofits, and select Main Street SMBs, were critical in driving TriNet's financial performance.

Our growing resilient customer base comprised of S. M. B's in our core verticals of technology Life Sciences financial services professional services non-profits and select main Street S. M. B's were critical in driving try.

Nuts financial performance.

Speaker 3: These clients continue to hire at an accelerated rate.

These clients continue to hire at an accelerated rate.

Speaker 3: This hiring is similar to the prior quarter Q3 2021.

This hiring is similar to the prior quarter Q3 2021.

Speaker 3: Furthermore, we realized increasing new sales volume and retention came in, in line with our Q4 internal expectation.

Furthermore, we realized increasing new sales volume and retention came in in line with our queue for internal expectations.

Speaker 3: At the start of the pandemic, the management team and I evaluated the changing market dynamic.

At the start of the pandemic the management team and I evaluated the changing market dynamics, we executed bold moves, including increasing investments and our verticalize customer acquisition strategy and customer service approach strengthening our tech platform.

Speaker 3: We executed bold moves, including increasing investments in our verticalized customer acquisition strategy and customer service approach.

Speaker 3: strengthening our tech platform and identifying inorganic opportunities to expand our total addressable mark.

And identifying inorganic opportunities to expand our total addressable market.

Speaker 3: Additionally, we benefited from consistently lower than forecast insurance cost ratios as the utilization of health services remained suppressed.

Additionally, we benefited from consistently lower than forecast insurance cost ratios as the utilization of health services remained suppressed we were able to positively impact customer retention by creating innovative.

Speaker 3: we were able to positively impact customer attention by creating innovative customer-centric programs such as our industry leading recovery credit program.

Customer centric programs, such as our industry, leading recovery credit programs.

Speaker 3: These programs return funds to customers at a time when it was needed most during the height of the COVID-19 pandemic.

These programs returned funds to customers at a time when it was needed most during the height of the COVID-19 pandemic.

Speaker 3: These programs were possible because of our approach to designing the risk construct of our plans and pricing our customers to re-

These programs where possible because of our approach to designing the risk construct of our plans and pricing our customers to risk.

Speaker 3: We believe our approach is unique in the industry, and there is no doubt that it allowed us to positively impact our customers in a very unique way.

We believe our approach is unique in the industry and there is no doubt that it allowed us to positively impact our customers in a very unique way.

Speaker 3: Turning to 2022 in the future, we have positioned TriNet for the next phase of growth beyond a pandemic.

Turning to 20 twenty-two in the future we have position trying it for the next phase of growth beyond the pandemic I want to spend the rest of my time today expanding on this by addressing what I am seeing in the market based on our direct experience with over 16000 S.

Speaker 3: I want to spend the rest of my time today expanding on this by addressing what I am seeing in the market based on our direct experience with over 16,000 SMBs and the evolving customer life cycle and how Trinet will continue to impact future growth of SMBs through our combined PEO HCM offering.

M B's and the evolving customer life cycle, and how trying it will continue to impact future growth of S. M. B's through our combined P. E O H T M offering I am passionate about the Americans small and midsize businesses and I believe the future.

Speaker 3: I am passionate about the American small and mid-sized businesses, and I believe the future of the SMB market is brighter than it has ever been.

<unk> of the S. M B market is brighter than it has ever been.

Speaker 3: I am confident the SMB market growth that we have experienced firsthand will continue for the foreseeable future.

I am confident B S. M b market growth that we have experienced firsthand will continue for the foreseeable future. However.

Speaker 3: However, SMBs are seeing no relief from increasing regulatory complexities and the acquisition and retention of key talent remains a challenge.

However, S. M. B's are seeing no relief from increasing regulatory complexities and the acquisition and retention of key talent remains a challenge.

Speaker 3: the landscape surrounding the state of the workforce and the way we work in America has changed inexorably during the COVID-19 pandemic.

The landscape surrounding the state of the work force and the way we work in America has changed inexorably during the COVID-19 pandemic.

Speaker 3: Employees are exhibiting greater agency over where they want to physically work. Employers are accommodating these requests.

Employees are exhibiting greater agency over where they want to physically work employers are accommodating. These request. This trend creates added complexity, such as filing payroll taxes, and ensuring HR compliance in multiple jurist.

Speaker 3: This trend creates added complexity, such as filing payroll taxes and ensuring HR compliance in multiple jurisdictions.

Speaker 3: Other new employment trends, such as the great resignation, are adding additional challenges.

Fictions other new employment trends such as the great resignation are adding additional challenges. This is reshaping the competitive landscape for talent and therefore also the business landscape.

Speaker 3: This is reshaping the competitive landscape for talent and therefore also the business landscape.

Speaker 3: My perspective is that rather than being the great resignation, what we are experiencing today is the great reevaluation.

My perspective is that rather than being the great resignation, what we're experiencing today is the great reevaluation people feel more empowered to take stock of their situation and evaluate what they want out of life.

Speaker 3: People feel more empowered to take stock of their situation and evaluate what they want out of life.

Speaker 3: This has created a greater willingness to make a career change.

This has created a greater willingness to make a career change trinet is in a unique position to help S. M B's with a cultural technological and compliance related support to allow our customers to be the beneficiaries of these revaluations as they.

Speaker 3: TriNet is in a unique position to help SMBs with the cultural, technological, and compliance-related support to allow our customers to be the beneficiaries of these re-evaluations as they aggressively compete for this town.

Aggressively compete for this talent.

Speaker 3: The strong employment growth in our installed customer base reaffirms that TriNet customers have successfully competed for talent and grown their organizations during this difficult period. Ultimately, TriNet strives to serve our customers throughout their entire business lifecycle.

The strong employment growth in our installed customer base reaffirms that try neck customers have successfully competed for talent and grown their organizations. During this difficult period ultimately trying to it strives to serve our customers through out there and.

Tire business life cycle. This includes bringing them in earlier and keeping them longer.

Speaker 3: This includes bringing them in earlier and keeping them longer.

Speaker 3: Importantly, a customer's life cycle is rarely a simple process of growing from small to medium to large as measured by employee count or gross revenue. Moving to a multi-state...

Importantly, a customer's life cycle is rarely a simple process of growing from small to medium to large as measured by employee count or gross revenue moving to a multi state workforce changes in growth rates or funding <unk>.

Speaker 3: Changes in growth rates or funding strategies and difficulty in hiring specific talent are examples of the types of complexities that SMBs experience.

<unk> and difficulty in hiring specific talent.

Are examples of the types of complexities that S. M. B's experience I believe that trying to P. E. O construct has a unique advantage over all other S. M. B H C M product offerings for a particular set of Smb's the co employment legal cause.

Speaker 3: I believe the TriNet PEO Construct has a unique advantage over all other SMB HCM product offerings for a particular set of SMBs.

Speaker 3: The co-employment legal construct, including our assumption of certain liabilities, continues to be a powerful growth and risk mitigation lever for SMBs who adopt this model. However, as customers grow, there is a heightened interest in transitioning from the PEO model because of either their scale or their global aspirations.

Instruct, including our assumption of certain liabilities continues to be a powerful growth and risk mitigation lever for S. M B's, who adopt this model. However, as customers grow there is a heightened interest in transitioning from the P E O model because.

As of either their scale or their global aspirations last month in January trying it saw this dynamic materialize at a higher rate than we have historically seen based on the changes in the growth and complexity that occurred during the pandemic on one hand.

Speaker 3: Last month, in January , Trina saw this dynamic materialize at a higher rate than we have historically seen based on the changes in the growth and complexity that occurred during the pandemic. On one hand, I celebrate their success, but on the other hand, I can no longer accept valued customers growing out of us without a compelling alternative solution.

I celebrate their success, but on the other hand, I can no longer accept valued customers growing out of us without a compelling alternative solution.

Speaker 3: Two wonderful customers embody this dynamic, beyond meat and tonal.

Two wonderful customers and body this dynamic beyond meat and tonal beyond meat is an innovative alternative protein company. The company went public in 2019 and enjoys a market capitalization in excess of $3 billion beyond me.

Speaker 3: Beyond Meat is an innovative alternative protein company.

Speaker 3: The company went public in 2019 and enjoys a market capitalization in excess of $3 billion.

Speaker 3: Beyond Meat grew tremendously with TriNet, but in recent years, their business scaled sharply and their workforce expanded internationally.

Grew tremendously with trying it but in recent years their business scaled sharply and their workforce expanded internationally.

Speaker 3: As such, Beyond Meat left TriNet. Having grown together for nearly 10 years, we wish them nothing but future success.

As such beyond meat left Trinet, having grown together for nearly 10 years, we wish them nothing but future success.

Speaker 3: Tonal is a fast-growing digital fitness company innovating the workout experience by leveraging technology for both the machine and the user experience.

<unk> is a fast growing digital fitness company innovating the workout experience by leveraging technology for both the machine and they user experience.

Speaker 3: Tonal's rapid growth and expansion necessitated a more customized platform to accommodate a global workforce.

Totals rapid growth and expansion necessitated a more customized platform to accommodate a global workforce. We were so pleased to have grown with tone all over the last six years and facilitate their growth.

Speaker 3: We were so pleased to have grown with Tonal over the last six years and facilitate their growth.

Speaker 3: As Beyond Meat and Tonal move on, I want to reiterate my gratitude for our wonderful partnership over so many years.

As beyond meat and tonal move on I want to re iterate my gratitude for our wonderful partnership over so many years.

Speaker 3: These relationships and a desire to serve these customers longer by providing a broader set of capabilities led directly to the pending acquisition of Zenefits, expected to close in the first quarter. Zenefits is a leading cloud-native human capital management software solution for SMBs.

These relationships and a desire to serve these customers longer by providing a broader set of capabilities led directly to the pending acquisition of Zenna fits expected to close in the first quarter Xenophilia is a weeding cloud native human capital management software solution.

<unk> for S M B's.

Speaker 3: through a centralized and highly scalable platform with modern consumer-like user interface, Zenefits is a complete HCM suite. The addition of this HCM software product to TriNet will allow us to address the opportunity to increase our ability to serve our addressable market, as well as providing optionality to our existing customers throughout their lives.

Through a centralized and highly scalable platform with modern consumer like user interface Zenna fades is a complete H C M sweet.

The addition of this H T M software product to try and it will allow us to address the opportunity to increase our ability to serve our addressable market as well as providing optionality to our existing customers throughout their life cycle.

Speaker 3: Ultimately, we view HCM software and the PEO offering as complementary with an opportunity to further leverage our scale in service of our customers.

Ultimately, we view H T M software and the P E O offering as complementary with an opportunity to further leverage our scale in service of our customers.

Speaker 3: To be clear, this scale can be measured in different ways, but is directly related to a combined customer base exceeding 23,000 clients and a workforce of more than 600,000 at the completion of the acquisition.

To be clear this scale can be measured in different ways, but is directly related to a combined customer base exceeding twenty-three thousand clients and a workforce of more than 600000 at the completion of the acquisition overtime [noise].

Speaker 3: Over time, we will work to evolve our platform to provide seamless, configurable access, allowing our customers greater optionality with respect to the services we offer.

We will work to evolve our platform to provide seamless configurable access, allowing our customers greater optionality with respect to the services we offer we.

Speaker 3: We will be in a position to address clients earlier in their lifecycle and provide services as they continue to grow. Importantly, the Zenefits acquisition will enable us to more effectively go after the entire SMB talent.

We will be in a position to address clients earlier in their life cycle and provide services as they continue to grow importantly, the Zen if its acquisition will enable us to more effectively go after the entire S. M. B T M. The combination of trying to.

Speaker 3: The combination of Trinet and Zenefits should generate product and go-to-market synergies across the near, medium, and longer term. In the near term, we will leverage our complementary marketing funnels and brand reach to present the best solution that meets the prospect's needs.

<unk> and Xenophilia should generate product and go to market synergies across the near medium and longer term in the near term. We will leverage are complimentary marketing funnels and brand reach to present, the best solution that meets the prospects needs we.

Speaker 3: We believe we will benefit from this efficient go-to-market approach as we align prospects by product fit. We will leverage technology throughout the process, which should yield higher close rates.

Believe we will benefit from this efficient go to market approach as we align prospects byproduct, then we will leverage technology throughout the process, which should yield higher clothes rates.

Speaker 3: This is complementary to the current Zenefits go-to-market strategy that leverages technology and will thrive when at scale.

This is complementary to the current Zenna fits go to market strategy that Leverages technology and will thrive when it's scale.

Speaker 3: In fact, they offer an easy-to-use user interface and a self-directed implementation.

In fact, they offer an easy to use user interface and a self directed implementation in the medium term, we see real opportunities as we aligned product capabilities to better serve our customers throughout their life cycle for example, Zenna faith.

Speaker 3: In the medium term, we see real opportunities as we align product capabilities to better serve our customers throughout their life cycle. For example, Zenefits offers a robust digital benefit broker solution and exceptional health benefits administration platform that were both created with the SMB in mind.

[noise] offers a robust digital benefit broker solution and exceptional health benefits administration platform that we're both created with the S. M. B in mind, we believe these will augment and compliment try nets, one strong health and welfare.

Speaker 3: We believe these will augment and complement TriNet's own strong health and welfare offer.

Speaker 3: In the long term, the combination of Trinet and Zenefits creates the opportunity for Trinet to become the leading technology solutions provider for SMB human capital management with and without the PEO consc...

Offerings in the longterm the combination of trying it in xenophilia creates the opportunity for trying it to become the leading technology solutions provider for S. M B human capital management with and without the P. E O construct our vision for trying it in Santa.

Speaker 3: Our vision for TriNet and Zenefits is to eventually offer HCM and PEO side by side with the same cloud-based technology stack. We intend to leverage technology from both companies and meet the diverse needs of all of our customers.

<unk> is to eventually offer H T M N P E O side by side with the same cloud based technology stack, we intend to leverage technology from both companies and meet the diverse needs of all of our customers. This vision includes the you.

Speaker 3: This vision includes the use case where a dynamic TriNet customer can move between HCM software only and the PEO construct as their complexity and growth dictate.

Use case, where a dynamic try neck customer can move between H T M software only and the P. E O construct as their complexity and growth dictates with the acquisition of Xenophilia try net is doing what no. Other H T. M software solution is doing.

Speaker 3: With the acquisition of Zenefits, Trinet is doing what no other HCM software solution is doing. Combining a contemporary software product with an already scaled and successful PEO legal construct and service model.

Combining our contemporary software product with an already scaled and successful P E O legal construct and service model.

Speaker 3: At TriNet, People Matter is about putting human back into human capital management with the customer at the center of everything we do.

At Trinet people matter is about putting human back into human capital management with a customer at the centre of everything we do we are excited to welcome the Zenna fits team to trying that they bring additional innovation and entrepreneurial spirit to our company.

Speaker 3: We are excited to welcome the Zenefits team to Trinet. They bring additional innovation and entrepreneurial spirit to our company.

Speaker 3: We have strategically positioned Trinet for our next phase of growth.

We have strategically position trinet for our next phase of growth. We look forward to updating you on these initiatives over time with that I will pass the call to Kelly for a review of our financials and our 20 twenty-two guidance Kelly.

Speaker 3: We look forward to updating you on these initiatives over time.

Speaker 3: With that, I will pass the call to Kelly for a review of our financials and our 2022 guidance.

Speaker 4: Thank you, Burton. Trinidad's fourth quarter results capped off a year of extremely robust growth and financial performance.

Thank you Burton train its fourth quarter results capped off a year and extremely robust growth in financial performance. We finished the year with a strong revenue and earnings ground, our highest ever W. S C count and significant operating cash flow, which enabled us to announce about the acquisition of the benefits.

Speaker 4: We finished the year with strong revenue and earnings growth, our highest ever WSE count, and significant operating cash flow, which enabled us to announce both the acquisition of Zenefits and an increase in our share repurchase authorization to over $500 million.

And an increase in our share repurchase authorization to over $500 million, we are well positioned to pursue our strategy and sustain our growth during the fourth quarter total revenue increased 16% year over year outperforming the top end of our guidance range by two percentage points.

Speaker 4: We are well positioned to pursue our strategy and sustain our growth.

Speaker 4: During the fourth quarter, total revenue increased 16% year over year, outperforming the top end of our guidance range by two percentage points.

Speaker 4: For the full year, we grew total revenue by 13%, also exceeding guidance.

For the full year, we grew total revenue by 13% also exceeding guidance.

Speaker 4: The outperformance in total revenue for the fourth quarter and the full year was driven by growth in WSEs from strong hiring within our installed base as well as an increase in net new sales, and we also had continued high health participation by our WSEs.

The outperformance in total revenue for the fourth quarter and the full year was driven by growth in Ws sees from strong hiring within our installed base as well as an increase in that new sales and we also had continued high health participation by or Ws sees professional service revenues in the quarter grew 23% year over.

Speaker 4: Professional service revenues in the quarter grew 23% year over year, exceeding the top end of our guidance range by three percentage points. For the full year, professional services revenue grew by 17%, also above the top end of guidance.

A year exceeding the tap and if our guidance range by three percentage points for the full year professional services revenue grew by 17% also above the top end of guidance.

Speaker 4: This growth in professional services revenue for the fourth quarter and full year was driven by a few factors. First, our year-over-year average volume growth of 10% for the quarter and 5% for the year reflected strong hiring, driven primarily by our technology, life sciences, and financial services verticals. We are looking at a growth in professional services revenue for the fourth quarter and 5% for the quarter and 5% for the year. The growth in professional services revenue for the quarter and 5% for the year reflected strong hiring, driven primarily by our technology, life sciences, and financial services verticals.

This growth and professional services revenue for the fourth quarter and full year was driven by a few factors first are year over year average volume growth of 10% for the quarter and 5% for the year reflected strong hiring driven primarily by our technology life Sciences and financial.

Services vertical.

Speaker 4: Second, professional services revenue benefited from 10% growth in rate for the quarter and 9% for the full year. Like last quarter, rate growth saw a meaningful contribution from our efforts to achieve a minimum price with our smallest customers to align with the cost to serve those clients.

Second professional services revenue benefited from 10 per cent growth and right for the corner and 9% for the full year like last quarter right growth <unk> meaningful contribution from our efforts to achieve a minimum price with our smallest customers to align with the costs to serve those clients. We are near the end.

Speaker 4: We are near the end of our efforts to raise minimums and now expect this to be largely incorporated in our overall rates and rate strategy going forward. Professional services revenue also benefited by 2% during the quarter versus Q4 2020 as last year's recovery credit accrual did not recur.

If our efforts to raise minimum and now expect this to be largely incorporated in our overall rates and <unk> strategy going forward professional services revenue also benefited by 2% during the quarter versus Q4 2020 as last year's recovery credit accrual did not recur.

Speaker 4: For the fourth quarter, our insurance cost ratio was 88.7 percent, lower than our forecasted range for the quarter of 92 to 94 percent. For the full year, our insurance cost ratio was 85.6 percent, also slightly lower than our forecasted range for the year of 86.5 to 87 percent. The lower insurance cost ratio versus our estimate was largely due to two factors.

For the fourth quarter, our insurance cost ratio was 88.7 per cent lower than our forecasted range for the quarter F 92% to 94% for the full year, our insurance cost ratio was 85.6% also slightly lower than our forecasted range for the year of 86 and a half.

287%, the lower insurance costs ratio versus our estimate was largely due to two factors first elected procedures remain suppressed versus forecasted due to the continued impact from the COVID-19 Delta variant early in the quarter and the emergence at the <unk>.

Speaker 4: First, elective procedures remain suppressed versus forecasted due to the continued impact from the COVID-19 Delta variant early in the quarter and the emergence of the Omicron variant later in the quarter.

<unk> later in the corner, while we did see a moderate spike until the testing and direct care claims during the quarter. These costs were more than offset by lower utilization second we benefited from additional workers compensation revenue given strong client grass as well as wages and bonuses increasing <unk>.

Speaker 4: While we did see a moderate spike in COVID testing and direct care claims during the quarter, these costs were more than offset by lower utilization.

Speaker 4: Second, we benefited from additional workers' compensation revenue, given strong client growth, as well as wages and bonuses increasing for our WSEs.

Or or Ws sees regarding our operating expenses, we were modestly lower than our expectations for Q4 and continue to grow at a lower rate than our revenue leveraging the scale of our operations <unk>.

Speaker 4: Regarding our operating expenses, we were modestly lower than our expectations for Q4 and continue to grow at a lower rate than our revenue, leveraging the scale of our operations. Now to.

Now to earnings per share fourth quarter net income per diluted share exceeded guidance by 63 cents to one dollar three cents more than tripling. Your over here. This brought our full year gap net income per diluted share to $5.07 at 27% versus.

Speaker 4: Fourth quarter net income per diluted share exceeded guidance by 63 cents to $1.03, more than tripling year over year.

Speaker 4: This brought our full year gap net income per diluted share to $5.07, up 27% versus 2020. Fourth quarter adjusted net income per diluted share exceeded guidance by 53 cents to $1.13, more than doubling year over year. This brought full year adjusted net income per share to $5.64, also up 27% versus 2020.

<unk>, 20th 24th quarter, adjusted net income per diluted share exceeded guidance by 53 cents to one dollar and 13 cents more than doubling your over here. This brat full your adjusted net income per share to $5.64 also at 27% versus 22.

Speaker 4: Our exceptional operating performance generated over $400 million in corporate operating cash flows and $565 million of adjusted EBITDA for the full year. This left us with over $600 million in corporate cash and positions us with an even stronger balance sheet poised to take advantage of strategic opportunities. Our capital priorities remain.

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Sure exceptional operating performance generated over $400 million in corporate operating cash flows and 565 million adjusted EBITDA for the full year. This left us with over $600 million in corporate cash and positions asked with an even stronger balance sheet place to <unk>.

Take advantage of strategic opportunities are capital priorities remain unchanged, we invest in our business for both organic and inorganic growth to take advantage of opportunities to grow train at and we return cash to shareholders to maintain an efficient balance sheet. Both the announcement of the.

Speaker 4: We invest in our business for both organic and inorganic growth to take advantage of opportunities to grow Trinet, and we return cash to shareholders to maintain an efficient balance sheet. Both the announcement of the Zenefits acquisition and the $300 million increase to our share repurchase authorization are consistent with these priorities and highlight the continued strength of our balance sheet.

[noise] benefits acquisition, and the 300 million dollar increase to our share repurchase authorization are consistent with these priorities and highlight the continued strength of our balance sheet.

Speaker 4: Turning to Zenefits, Burton walked you through the strategic intent and fit of Zenefits including how it fits within our overall product offering and how we believe it will accelerate our efforts to serve our customers throughout their lifecycle. I want to now take you through some of the financial aspects of the acquisition.

Turning design effects Burton walk you through the strategic intent and fit a benefits, including how it fits within our overall product offering and how we believe it will accelerate our efforts to serve our customers throughout their life cycle I want to now take you through some of the financial aspects of the acquisition.

Speaker 4: In our 10K filed after market, you will find that our purchase price of approximately $220 million is made up of approximately $200 million in cash and $20 million in stock.

And our 10-K filed aftermarket you will find that our purchase price of approximately $220 million is made up of approximately $200 million in cash and 20 million in stock.

Speaker 4: Given our debt restructuring in 2021, and our strong cash generation, we will be using cash on hand to purchase benefits.

Given our debt restructuring in 2021 and are strong cash generation, we will be using cash on hand to purchase benefits.

Speaker 4: An exciting opportunity with Benefits is for Trinet to capitalize on our strong brand and utilize more of our marketing lead funnel. In other words, we can capture a larger portion of the S&B market than we would have otherwise.

An exciting opportunity with benefits is for trying to capitalize on our strong brand and utilize more of our marketing lead funnel in other words, we can capture a larger portion of the S. M b market than we would have otherwise.

Speaker 4: We are also excited by the opportunity for platform development, and in a smaller way, leveraging back office support.

We are also excited by the opportunity for platform development, and then a smaller way leveraging back office support we believe benefits will ultimately provide mid teens return on invested capital before going into our 20 twenty-two outlook I want to share some of the preliminary estimates for what we see is.

Speaker 4: We believe Zenefits will ultimately provide mid-teens return on invested capital.

Speaker 4: Before going into our 2022 outlook, I want to share some of the preliminary estimates for what we see as Zenefits' contribution for 2022, recognizing we have yet to close the transaction. We expect Zenefits to contribute approximately $40 million to professional services revenue this year, assuming the transaction closes soon.

<unk> contribution for 2022, recognizing we have yet to close the transaction, we expect benefits to contribute approximately $40 million to professional services revenue. This year, assuming the transaction closed as soon as we pursue significant top line growth benefits, we anticipate a moderate.

Speaker 4: As we pursue significant top-line growth at Zenefits, we anticipate a moderate operating loss for the first few years.

<unk> loss for the first few years, we believe this benefits business can be EBITA breakeven by the third year and accretive on that basis. Thereafter for 2022, we estimate as an offense will reduce trenice adjusted net income per share by between 20 and 25 cents.

Speaker 4: We believe the Zenefits business can be EBITDA breakeven by the third year and accretive on that basis thereafter. For 2022, we estimate Zenefits will reduce Trinet's adjusted net income per share by between 20 and 25 cents, or roughly 6 to 7 cents per quarter. This estimate may be refined after the transaction is closed and purchase accounting is completed.

Or roughly six to seven cents per quarter. This estimate maybe refined after the transaction is closed and purchase accounting is completed finally, we estimate zenna fits integration costs to be between 40 and $50 million before taxes in 2022, given these costs are relatively one time and.

Speaker 4: Finally, we estimate Zenefits integration costs to be between $40 and $50 million before taxes in 2022. Given these costs are relatively one-time in nature, we do expect to exclude these costs from non-GAAP adjusted net income per diluted share.

Nature, we do expect to exclude these costs from non-GAAP adjusted net income per diluted share.

Speaker 4: Now let's turn to our 2022 first quarter and full year outlook, which excludes the numbers I just mentioned related to the acquisition of Zenefits. I will provide both GAAP and non-GAAP guidance.

Now, let's turn to our 2022 first quarter and full your outlook, which excludes the numbers I just mentioned related to the acquisition of the benefits I will provide both gap and non-GAAP guidance.

Speaker 4: Overall, when we look at 2022, we believe the fundamentals of our PEO business will remain strong. Client hiring will continue to be robust as the economy fully recovers and grows, but moderate somewhat from the record levels we saw in 2021.

<unk> when we look at 2022, we believe the fundamentals of our P O business will remain strong.

Hiring will continue to be robust as the economy fully recovers and gross but moderate somewhat from the record levels. We saw in 2021.

Speaker 4: As Burton mentioned earlier, we are anticipating attrition in 2022 to increase versus the very favorable rates we saw in 2020 and 2021. We anticipate returning closer to a pre-pandemic range as more of our largest clients that grew significantly during the pandemic graduate from the PEO model. In addition to the graduation of our largest clients, we expect to see continued elevated levels of M&A activity in IPOs. For more information visit www.FEMA.gov

Is Burton mentioned earlier, we are anticipating attrition in 2022 to increase versus the very favorable rates. We saw in 2020 and 2021, we anticipate returning closer to a prepandemic range as more of our largest clients that grew significantly during the pandemic graduate from that P O model.

In addition to the Gratulation of our largest clients. We expect to see continued elevated levels of M&A activity in I P. S. As a result, our volume forecast incorporates our anticipation of these ongoing trends, we expect to continue to optimize service prices at or above.

Speaker 4: As a result, our volume forecast incorporates our anticipation of these ongoing trends. We expect to continue to optimize service prices at or above our costs given continued product enhancements, and as a result, we expect to maintain strong margins with a more normalized insurance cost ratio.

<unk> given continued product enhancements and as a result, we expect to maintain strong margins with a more normalised insurance cost ratio as.

As we enter 20th 22 health experts have indicated the virus will become endemic we believe this will ultimately lead to return to a more historical insurance cost ratio arrange for us as routine care, an elective procedures gradually resume turning to the first quarter of 2020th.

Speaker 4: Turning to the first quarter of 2022, we expect total revenue growth to be in the range of 11 to 12 percent year-over-year and professional service revenue growth to be in a range of 16 to 17 percent year-over-year. This revenue growth reflects our strong finish to 2021 and the benefit of a higher ending WSE base.

<unk>, we expect total revenue growth to be in the range of 11% to 12% year over year and professional service revenue growth to be in a range of 16% to 17% year over year. This revenue growth reflects our strong finished to 20th 21 and the benefit of a higher ending W. S.

Speaker 4: In Q1, we expect healthcare utilization to continue to remain below historical averages, especially early in the quarter as the Omicron variant peaks.

Base in Q1, we expect health care utilization to continue to remain below historical averages, especially early in the quarter as the Omicron variant peaked this will result in a continued lower than normal insurance cost ratio of between 82 to 85 per.

Speaker 4: This will result in a continued lower-than-normal insurance cost ratio of between 82 to 85 percent in the first quarter. This brings our estimate of first-quarter GAAP net income per diluted share to be in the range of $1.71 to $2.03 per share and first-quarter adjusted net income per diluted share to be in the range of $1.89 to $2.22 per share.

Or sent in the first quarter. This brings our estimate at first quarter GAAP net income per diluted share to be in the range of one dollar and 71 cents to $2.03 per share and first quarter. Adjusted net income per diluted share to be in the range of one dollar and 89 cents to $2.

And 22 cents per share.

Speaker 4: Regarding our full year 2022 guidance, we're forecasting our year-over-year total revenue growth to be in a range of 4 to 7 percent, with our professional services revenue expected to grow between 6 and 9 percent.

Regarding our full year 20 twenty-two guidance, we're forecasting our year over year total revenue growth to be in a range of 4% to 7% with our professional services revenue expected to grow between six and 9%.

Speaker 4: We expect our insurance cost ratios to follow seasonal patterns with favorable cost ratios in the first and second quarters as members work through deductibles and with higher cost ratios in the third and fourth quarters as deductibles are exhausted and pooling limits reset in October . With this trend, we expect our full year insurance cost ratio to be in the range of 88 to 89%.

We expect our insurance cost ratios to follow sees no patterns with favorable cost ratios and the first and second quarters as members work through deductibles and with higher cost races, and the third and fourth quarters as deductibles are exhausted and pooling limits reset in October with this trend we.

Checked our full year insurance cost ratio to be in the range of 88% to 89%. This I see our projection is about three points higher than our 20th 21 result, reflecting health care utilization returning to arrange closer to historical levels as a rule of thumb every one point movement.

Speaker 4: This ICR projection is about three points higher than our 2021 result, reflecting healthcare utilization returning to a range closer to historical levels. As a rule of thumb, every one-point movement in our 2022 expected ICR translates into approximately 45 cents in adjusted EPS.

And our 20 twenty-two expected ICR translates into approximately 45 cents and adjusted EPS give.

Speaker 4: Given these anticipated trends, we expect full-year gap net income per diluted share to be in the range of $3.87 to $4.51 per share and adjusted net income per diluted share to be in the range of $4.55 to $5.20 per share.

Given these anticipated trends, we expect full year gap net income per diluted share to be in the range of $3.87 to $4.51 per share and adjusted net income per diluted share to be in the range of $4.55 to $5 and.

20 cents per share.

Speaker 4: These expected ranges assume we execute share repurchases to offset overall deletion.

He's expected ranges assume we execute share repurchases to offset overall deletion.

Speaker 4: With that, I will return the call to Burton for his closing remarks. Burton. Thank you, Kelly. As I said at the beginning, 2021 was the strongest year in Trinet's history and pivotal for our company.

With that I will return the call the Burton for his closing remarks Burton. Thank you Kelly as I said at the beginning 2021 was the strongest year in trying to its history and pivotal for our company. We have taken action to position trying it for the next decade of our growth.

Speaker 3: We have taken action to position Trinet for the next decade of our growth.

Speaker 3: I am confident we have a compelling and differentiated vision for the future of PEO and HCM offerings rooted in our deep history with the best SMBs in America.

I am confident we have a compelling and differentiated vision for the future of P. E O N H T M offerings rooted in our deep history with our best S. M. B as in America with the acquisition of Zenna fits trying it is doing with no. Other H T. M software solution is.

Speaker 3: With the acquisition of Zenefits, Trinit is doing what no other HCM software solution is doing, combining a contemporary software solution with an already scaled and successful PEO legal construct and service model.

Doing combining of contemporary software solution with an already scaled and successful P. E O legal construct and service model at Tri net people matter is about putting human back into human capital management with a customer at the center of everything we do.

Speaker 3: At Trinet, People Matter is about putting human back into human capital management with a customer at the center of everything we do. Over the past three years, which spans the pandemic, we have delivered exceptional earnings growth, top-line performance, and cash flow.

Do over the past three years, which spans the pandemic, we have delivered exceptional earnings growth topline performance and cash flow. We are committed to our discipline pricing approach, which drove are profitable growth and we will not compromise on this approach.

Speaker 3: We are committed to our disciplined pricing approach, which drove our profitable growth, and we will not compromise on this approach.

Speaker 3: Our resulting financial strength positioned us to opportunistically acquire Zenefits, which will now be part of the next chapter for Trinet, a chapter that includes the pursuit of the whole SMB TAM.

[noise] are resulting financial strength position does too opportunistically acquire zenna fits which will now be part of the next chapter for trying it a chapter that includes the pursuit of the whole S. M. B Tam, although 20 twenty-two sees is facing a year we're presuming.

Speaker 3: Although 2022 sees us facing a year where presumably medical utilization normalizes, I could not be more excited about what the new year brings strategically to Trinet. In the quarters ahead, we will further expand and share our vision for Trinet's future.

<unk> medical utilization normalizes I could not be more excited about what the new year brings strategically to trying it in the quarters ahead, we will further expand and share our vision for trying to its future.

Speaker 3: I am excited to welcome Zenefit's colleagues to TRINET and thank the TRINET colleagues for all their hard work and dedication that allowed us to deliver the best year in TRINET's history. Operator? We will now begin the call.

I am excited to welcome Zenna fits colleagues to try net and think they're trying to colleagues for all their hard work and dedication that allowed us to deliver the best year and try netz history operator.

We will now begin the question and answer session.

To ask a question you must have started the morning your telephone keypad if.

Speaker 1: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press start and 2.

If you're using a speaker phone please pick up your handset before pressing the keys.

To enjoy your question please could starting to.

At this time, we'll pause momentarily to somewhere officer.

Speaker 1: Our first question comes from Tin Jin Wong with J.P. Morgan. You may now go ahead.

Our first question comes from Tenjin, one with J P. Morgan you May now go ahead.

Alright, do you any good guys for all the.

Speaker 5: Thanks for all the details, a lot to go through.

If I can get a good afternoon. Good afternoon. Thanks for all the details will have to go through.

Speaker 5: One question on the outlook, and then one on benefits, if you don't mind. So on the outlook.

One question on the outlook and then one on Senate. If it's if you don't mind. So on the outlook with could you maybe sure a little bit more on your volume and and rate assumption here I I hear you loud and clear on on the the higher attrition assumption just trying to gauge how much of that is is conservatism versus something.

Speaker 5: Can you maybe share a little bit more on your volume?

Speaker 5: rate assumption here. I hear you loud and clear on the higher attrition assumption, just trying to gauge how much of that is conservatism versus something that you're actually seeing on the ground.

Something that you're actually seeing on the ground.

[noise] today.

Speaker 6: I appreciate the question, Tingen. This is Kelly. I'll take it. When I think about attrition and volume forecast, clearly it's all baked in.

I appreciate the questions engine. This is Kelly I'll take it when I think about attrition and volume forecasts clearly, it's all all day and.

Speaker 6: probably 40% of our attrition for the year happens in the first quarter, and we get an indication of it in advance. So, you know, I feel good about the volume forecast that we have as we're building our revenue forecast. You know, so I, you know, I think it's pretty solid.

Probably 40% of our attrition for the year happens in the first quarter and we get an indication of it in advance. So you know I I feel good about the volume forecast that we have is we're building our our revenue forecast yeah. That's all I.

You know I I think it's pretty solid.

Okay. Okay, Yeah, no I figured cause with enrollment season, I think I figured you'd get a little bit of visibility here. Okay. And then maybe for your burden on just on benefits.

Speaker 5: I figured with the enrollment season, I figured you'd get a little bit of visibility here. Okay. And then maybe for you, Burton, just on benefits.

I hear the Tan.

Speaker 5: I'm curious really about the integration, you know, and the cultural differences between the two companies and how you anticipate.

Or S. M. B I'm I'm curious really about the immigration you know and and the cultural differences between the two companies and and how you anticipate.

Speaker 5: you know, meshing the two companies together from an integration standpoint. Any thoughts on that that you could share? Yeah, absolutely. Absolutely. Recognizing Tenzin that it's not done yet, but look, I see several opportunities. First and foremost, they will be operated separately, but what I see is new opportunities to drive sales for both Trinet PEO and Zenefit.

Michigan, two coffees together for immigration standpoint at any thoughts on that that you can share yeah.

Yeah absolutely.

Recognizing tins and then it's not done yet, but well I see several opportunities first and foremost they will be operated separately, but what I see as new opportunities to drive sales for both trying at P. E O N xenophilia.

Speaker 3: Our brand is enjoying the highest recognition and the highest propensity to buy in my history here, according to Harris Toll. And the opportunity with leads coming in and efficiently sorting those leads so that the right product is delivered to the right customer at the right time makes me very optimistic about the near-term future to leverage our brand to provide leads to both companies.

Our brand is enjoying the highest recognition and the highest <unk> propensity to buy in my history here. According to Harris poll, and the opportunity with waves coming in and efficiently sorting knows Lee so that the right product is delivered to the right customer at the right time.

Makes me very optimistic about the the near term future to leverage our brand to provide leads to both companies I think as you move forward as I said in my prepared remarks, what gets me, particularly excited is the idea of having a totally integrated platform.

Speaker 3: I think as you move forward, as I said in my prepared remarks, what gets me particularly excited

Speaker 3: is the idea of having a totally integrated platform.

Speaker 3: that would allow customers to take a journey and no two customer journeys are the same.

It would allow customers to take a journey and no two customer journeys are the same where they could go from P. E O J a S O in back depending on the complexity they need for our single employer plan the need for the transfer risk to try that but using the same you why the same.

Speaker 3: where they could go from PEO to ASO and back, depending on the complexity, the need for our single employer plan, the need for the transfer of risk to Trinet, but using the same UI, the same backend payroll engine, the same reporting engine.

Back and payroll engine the same reporting engine and really have that capability. So you could serve a broader range of customers for far longer period of time like taking them in earlier, when it's not as complex and holding them longer as they so choose.

Speaker 3: and really have that capability so you could serve a broader range of customers for a far longer period of time by taking them in earlier when it's not as complex and holding them longer as they so choose to bring in their own medical plans, etc.

In their own medical plans et cetera.

Uh-huh.

Speaker 5: Yeah, no, it sounds compelling. Definitely excited to learn more. Thanks for the update, guys. Thank you. Yeah. Thanks for the update. Thank you.

Yeah, no it sounds compelling definitely excited to learn more thanks for you up there.

Yeah, Thanks for that too.

Do you.

[noise]. Our next question comes from Kevin Mcvey with Credit Suisse. You May now go ahead.

Speaker 1: Our next question comes from Kevin McVay with Credit Suisse. You may now go ahead.

Speaker 7: Great. Thanks so much. And let me add my congratulations on the transaction as well.

Great. Thanks, so much and let me add my congratulations on the transaction as well.

Uhm.

Speaker 7: I don't know if this is for Kelly or Burton, but just following up on the Zenefits, one quick question, does the 2022 guidance include that revenue benefit from Zenefits and the dilution, or is that something that gets adjusted after it's closed and then?

The city furniture Keller Burton, but just following up on the Xenofiction one quick question.

The 2022 guidance include that revenue benefit benefit to end the dilution or is that something that gets it just it after it's closed and then Kelly.

Speaker 7: Kelly, if I heard you right, it sounded like 40 million of professional services.

Kelly if I heard you right it sounded like 40 million of professional services.

Speaker 7: Is there any kind of cloud-based revenue in it today, and if so, what percentage is it?

There any kind of cloud based revenue in it today and if so what percentage does it.

[noise], Yeah, Kevin I'll take that for sure regarding guidance. If you look at our press release all of the guidance published in the press release exclude.

Speaker 6: Yeah, Kevin, I'll take that for sure. Regarding guidance, if you look at our press release, all of the guidance published in the press release excludes Zenefits. So Zenefits, my comment on roughly $0.20 to $0.25 loss would be added to that. Regarding their revenue, it's all really cloud-based. That's revenue as it's an ASO model.

So.

My comment on roughly 20 to 25 cent loss would be added to that regarding air revenue. It's all really cloud base as revenue uhm as as a national model.

[noise], Okay, and what's that been growing Kelly like a 40 million of you with that.

Speaker 7: And what's that been growing, Kelly, like the $40 million, if you were to... How's that been growing historically?

As as that been grown historically.

Speaker 6: Yeah, I'm not going to comment on their historical performance right now, but, you know, clearly we see them as a great growth opportunity for Trinet.

Yeah, I'm I'm not going to comment on their historical performance right now that you know clearly we see them as a great opportunity for China.

Speaker 7: No, without a doubt, without a doubt. And I guess my only other question was, it seems like you're seeing a lot of success on the pricing side, and you've been able to layer in really, really good WSE growth as well.

Now without a doubt without a doubt.

Uhm I guess my only other question was it seems like you see in a lot of success on the pricing side and he's been able to layer and really really good W extra growth as well.

Speaker 7: Is that a function of, you know, it sounds like you're repricing the Facebook. I thought you did some of that when you did the last integration. Is there just more potential upside there or just any thoughts on the pricing environment? And can you give us a sense of what pricing you have in the 2022 guidance?

Is that a function of you know it sounds like you re price and that Facebook I thought you'd get some of that when he did the last integration is they're just more potential upside there are just having thoughts on the pricing environment.

Can you give us a sense of what price and you have an at 2022 guidance.

Speaker 6: Happy to, happy to, Kevin. You know, when I think about what we were able to achieve, it's a little bit nuanced in the fact that, I think we got mid-single-digit price increases year over year, but we also got an overall benefit because one of the things I've talked about for a lot of this year, Kevin, is the fact that

Happy Happy to Heaven, you know what I think about what we were able to achieve I. It's it's a little bit nuanced and the fact that I think we got Nick.

Single digit price increases your over here, but we also got an overall benefit because one of the things I've talked about for a lot of this here. Kevin is the fact that we had smaller customers that frankly cost estimate arches service and we did reprice and put certain plant level minimum on the smaller customers.

Speaker 6: We had smaller customers that, frankly, cost us more to service. And we did reprice and put certain client-level minimums on those smaller customers to match the cost of serving them. And so that actually helped.

Match.

Lots of serving them in so that actually helps.

Speaker 6: push the average up a little and make sure that, you know, all the clients really need the PEO services and risk transfer. As we're looking forward, we kind of see pricing in a similar range, mid-single-digit increase, you know, as I'm thinking about professional service revenue particularly.

Push the average up a little and make sure that all of the clients really need the P O services and rest transfer them as we're looking forward we kind of.

See pricing in a similar arrangement single digit increase you know as as I'm thinking about professional service revenue scholarly and yeah, they're they're altogether mix changes and things like that because we do have different products for different vertical, but you know on average I I would anticipate.

Speaker 6: And, you know, there will be other mixed changes and things like that because we do have different products for different verticals.

Speaker 6: But, you know, on average, I would anticipate mid-single-digit price increase. And, Kevin, I just wanted to add on top of that, if you don't mind, on the risk side of the business.

[noise] and I just wanted to add on top of that if you don't mind on the rich side of the business. One thing I can promise you is that we will remain disciplined in our pricing to risk and I'm pretty proud of what the team this year and a barely from.

Speaker 3: One thing I can promise you is that we will remain disciplined in our pricing to risk.

Speaker 3: And I'm pretty proud of what the team did this year in a fairly tumultuous year, because the problem is that if you don't maintain a disciplined approach to pricing, somebody ultimately pays for that. And it's either the shareholders or the client. So on both sides of this, I'm particularly proud of the year in terms of the growth, but equally proud of the pricing discipline.

Ulch was year because the problem is that if you don't maintain a disciplined approach to pricing.

Ultimately pays for that.

Sure holders or the client so on both sides of this I'm, particularly proud of the year in terms of the growth, but equally proud of the pricing discipline.

Speaker 7: Well, you should be, Burton, because it looks really, really strong, particularly as you're calibrating that risk. So, congratulations.

Oh, they shouldn't be burdened because it looks really really strong, particularly your calibrate that risk so congratulations.

Thank you so much Kevin.

[noise] again, if you have a question.

Speaker 1: Again, if you have a question, please press star then 1.

<unk> started in one.

Speaker 1: Our next question comes from Andrew Nicholas with William Blair. You may now go ahead.

Our next question comes from Andrew Nicholas with William Blair You May not go ahead.

Thanks, and good afternoon <unk>.

Speaker 1: The first question I wanted to ask was just on increasing new sales volumes and momentum. Burton, would you mind kind of speaking to the drivers of that? Are win rates going up against competitive bake-offs? Is it about disruption post-COVID and maybe increased word of mouth and marketing? What under the hood is driving the new sales volumes? And is that a multi-year tailwind still in your view?

The first question I wanted to ask is just on an increasingly sales volumes and momentum Uhm Burton would you mind kind of speaking to the drivers of that or or when rates going up again competitive bake-offs is it is it about disruption post COVID-19 and maybe increased word of mouth.

And marketing just what under the Hood is driving a new sales volumes and how is that a multiyear tailwind still in your view.

Speaker 3: So, look, I can talk about Q4. We continued, Andrew, to see improvement in new sales during the fourth quarter. I'm particularly pleased that we saw continued year-over-year ACV growth, and I think there's more room for improvement.

Oh, well I can talk about you for we continued Andrew to see improvement new sales during the fourth quarter I'm, particularly pleased that we saw continue year over year, a C V growth and I think there's more room for improvement.

Speaker 3: What I am seeing is that the productivity on a per rep basis is better.

What I am saying is that the productivity you want a pro rata basis is better part of it and I mentioned it a little bit earlier in the questions is the brand awareness and brand recognition and propensity to buy has jumped dramatically year over year, whether you.

Speaker 3: Part of it, and I mentioned it a little bit earlier in the questions, is the brand awareness and brand recognition and propensity to buy has jumped dramatically year over year. Whether you equate that to people force, whether you equate that to getting the message out with a very professional and excellent sales force, whether you equate that to the customers we have today who use our product, referring us.

Wait that the people force, whether you equate that to getting the message out with a very professional and excellent salesforce, whether you equate got the customers we have today.

Do you use our product referring us.

Speaker 3: In my mind, there's still a fantastic opportunity in the PEO business, and it's hard to predict where it's going, but right now, the complexity is clearly driving an interest in the PEO model.

In my mind are still a fantastic opportunity and the PEO business and it's hard to predict where it's going but right now the complexity is clearly driving an interest in the PEO model.

Speaker 1: Makes sense. Thank you. And then maybe a follow up for Kelly. First, just to confirm, there's no recovery credit in place for 2022, correct?

Makes sense. Thank you and then maybe a follow up for for Kelly.

First just to confirm that there is no recovery credit in place for 2022 correct.

Speaker 6: You are correct, Andrew. We have not made a determination to do a recovery credit program.

You are correct, Andrew we have not made a determination send you a recovery credit program in 2022.

Speaker 1: Okay, and then somewhat related, but only a little, I guess, is it fair to assume now?

Okay, and then uhm somewhat related but but only a little I guess is it fair to assume now with the ICR. That's more of a longterm right I heard a bunch of color on kind of your assumptions and I think you mentioned.

Speaker 1: Um, with the, that's more of a long term rate. I, I heard a bunch of of color on kind of your assumptions. And I think you mentioned. Um, that that you're assuming coven becomes a bit more endemic here is, you know, the 88 to 89% a good kind of long term. Framework for us to think about, or is there still some noise that's specific to 2022 for us to keep in mind. Thank you happy to answer the question Andrew when I think about 2022, you know, I split it into right now in the 1st quarter.

That that you're assuming COVID-19 becomes a bit more endemic here.

Is the 80, 889% a good kind of long term framework for us to think about or is there still some noise that specific to 2022 for us to keep in mind. Thank you.

Happy to answer the question, Andrew when I think about 2022.

Split it into right now in the first quarter I expect a little bit of under utilization just given that continued omicron variant and and delayed.

Speaker 6: I expect a little bit of underutilization just given the continued Omicron variant and delay.

Speaker 6: delayed elective procedures. But as I think about 2023, 2024, those periods beyond, a few things I'd point out. One, we reprice to risk every single year. And so we will continue to look at experience and reprice to that risk. And given that, I would expect to be somewhere in the 88% to 90% range from an insurance cost ratio.

Delayed electric procedures, but as I think about you know 20 2023 2020 for those grades beyond a few things I'd point out one we repriced to risks every single year and so we will continue to look at experience and reprice to that risk and give.

That I would expect it to be you know somewhere in the 88 to 90 per cent range from insurance as ratio.

Great. Thank you.

Thank you Andrew.

Speaker 8: Our next question comes from David Grossman with Defo Financial. You may now go ahead.

Our next question comes from David Grossman with Stifel Financial you May now go ahead.

Speaker 2: Thank you, David. Hi, David. Good afternoon. Thank you. Thank you.

Thank David cause.

Good afternoon.

Speaker 9: I wonder if we just, if we could just go back to benefits for a minute, you know, now you're going to own.

I'm wondering <unk> just if we could just go back to the benefits for a minute you know now you're gonna on.

Speaker 2: you know, two technology platforms, you know, one built to service the PEO, you know, model and another built as more of a, a cons, a, a, a, a, a, a, a, a, a, a, a, a, a, a, a,

You know to technology platforms, one bill to service the P. O a model of another built is more of a a <unk>.

Speaker 2: you know, a software platform, you know, to be kind of a not totally self-service or more or less a self-service software platform. So, if you think about where, how that evolves going forward, maybe it could help us understand what the technology roadmap looks like and what segments, you know, each platform serves going forward. Or is the plan really to integrate the two so that as you, you know, you start on one platform and no matter, no matter how large you get, you stay on the same platform regardless?

You know a software platform you know to be kind of us that totally self service rep more or less of Salt service software platform.

So if you think about where how that evolves going forward.

Maybe he could help us understand what the technology road that looks like and what segments. You know each platform serves going forward or discipline them really to integrate the two so that as you. You know you started on one platform with no Burger no matter how large you get you stay on the same platform regardless.

Speaker 3: So, David, there will be a lot more about this after we close the acquisition, but as I mentioned before, the idea of a single user interface, a single app, a single payroll engine, a single reporting engine,

So David there'll be a lot more about this after we closed the acquisition, but as I mentioned before the idea of a single user interfaces single App a single payroll engine a single reporting engine is where I would like to go. So you can seamlessly transition from.

Speaker 3: is where I would like to go. So you could seamlessly transition from either legal model to the other and enjoy the benefits of familiar input screens, familiar reports.

Either we go model to the other and enjoy the benefits of familiar input screens familiar reports and the ability to take advantage of whichever legal construct you want because after all at the end of the day, they're all great. That's M B's and with our P. E O model, we service select gross.

Speaker 3: and the ability to take advantage of whichever legal construct you want because after all, at the end of the day, they're all great SMBs.

Speaker 3: And with our PEO model, we service the LEC group of those SMBs, and the Zenefits current platform serves another wider set of SMBs. So the idea of integrating them, obviously I've given it a lot of thought, and I'm happy to talk more about it, but first I want to get the deal closed.

A group of those Smbs and the Zen if its current platform <unk> another wider set of SMV. So the idea of integrating them, obviously I've given it a lot of thought and I'm happy to talk more about it but first I want to get the deal closed.

Got it and then I guess going back to come in Kelly was just made about really speaking to the kittens of the year I think I understand your comment about you know the the medical cost ratio is there anything else that happens on it you know that impacts the grocery cause.

Speaker 2: Going back to a comment Kelly you just made about really speaking to the cadence of the year. I think I understand your comment about the medical cost ratio. Is there anything else that?

Speaker 2: on it, you know, that impacts the growth rate because I haven't really built out a model yet, but to kind of see where the first quarter and how that impacts the implied growth for the balance of the year, but it seems obviously that it decelerates quite a bit. So

I I haven't really built out a model you put to kind of see where the first quarter and how that impacts the implied growth for the balance of the year, but it it seems obviously with it too so it's quite a bit. So do you is there anything else going on in twos, two to four that impact growth besides that cost dynamic in health care.

Speaker 2: Is there anything else going on in Qs 2-4 that impact growth besides that cost dynamic?

Speaker 6: We would expect to grow WSCs throughout the period. As I think about the pattern, like I mentioned,

We would expect to grow Ws east throughout the period as I think about that pattern like I mentioned.

Speaker 6: 40% of our attrition generally comes in the first quarter. It varies a little bit year to year, but we see the bulk of our attrition during the first quarter, and then we build back up as we add new clients onto our platform.

40 per cent of our attrition generally comes in the first order it varies a little bit ear to ear, but we see that the bulk of our attrition during the first quarter and then we build back up as we add new clients onto our platform. So as I think about that pattern I anticipate a city.

Speaker 6: So, as I think about that pattern, I anticipate us to be lower from a WSV perspective after the first quarter just like you saw last year, and then we would grow throughout the year.

Lower from a WMC perspective after the first quarter just like you saw last year and then we would grow throughout the year.

Got it and.

Speaker 2: I guess just one other financial question, if I missed it, sorry, did you mention what the tax rate you're assuming for 2022? We did not mention a tax rate.

I guess just one other financial question.

If I missed it sorry did you mention with the task for your survey for 2022.

We did not mention that tax rate.

Speaker 6: I wouldn't anticipate at this point that it would differ dramatically but again once we

Yeah, I I wouldn't anticipate at this point that it would differ dramatically that again once we.

Speaker 6: close the acquisition of Zenefits, we'll have to evaluate different state jurisdictions, et cetera, as we think about that going forward, but we're assuming for planning purposes a very similar.

What does the acquisition of benefits will have to evaluate different state jurisdictions et cetera, as we as we think about that going forward that we're we're assuming for planning purposes, a very similar past right.

Speaker 2: Got it. All right. Very good. Thank you, and good luck with the acquisition. Thanks, David.

Got it.

Alright, very good thank you and good luck with the acquisition. Thanks.

Thanks, David.

Speaker 8: This concludes our question and answer session, as well as the conference. Thank you for attending today's presentation.

This concludes our question and answer session as well as the conference.

Thank you for calling today's presentation you may now disconnect.