Q4 2023 TriNet Group Inc Earnings Call

Operator: Good day, and welcome to the TriNet First Quarter 2023 Earnings Conference. All participants will be in listen-only mode.

Good day and welcome to the China first quarter 'twenty to 'twenty three earnings conference call.

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Operator: If you would like to ask a question, please press start. Please note, this event is being recorded. I'd now like to turn the conference over to Alex Bauer, Head of Investor Relations. Please go ahead.

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Alex Bauer: I'd now like to turn the conference over to Alex Bauer head of Investor Relations. Please go ahead. Thank you operator. Good afternoon. My name is Alex Bauer and I am trying to its head of Investor Relations. Thank you for joining us and welcome to <unk> 2023 fourth quarter Conference call I am joined today by our current president.

Alex Bauer: Thank you, operator. Good afternoon. My name is Alex Bauer, and I am TriNet's head of investor relations. Thank you for joining us, and welcome to TriNet's 2023 fourth quarter conference call. I am joined today by our current president and CEO, Burton M. Goldfield, our CFO, Kelly Tuminelli, and our future president and CEO, effective tomorrow, Mike Simons.

Alex Bauer: The CEO Burton M Goldfield, our CFO, Kelly to minnelli, and or future President and CEO effective tomorrow, Mike Simonds before we begin I would like to address our use of forward looking statements and non-GAAP financial measures.

Alex Bauer: Before we begin, I would like to address our use of forward-looking statements in non-GAAP financial measures. Please note that today's discussion will include our 2024 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 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 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.

Alex Bauer: Please note that today's discussion will include our 2020 for 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.

Alex Bauer: 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 to.

Alex Bauer: Day 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 S. E C, including our 10-K and 10-Q filings for a more detailed discussion of the risks uncertainties and changes in.

Alex Bauer: We encourage you to review our most recent public filings with the SEC, including our 10-K and 10-Q filings, for a more detailed discussion of the risks, 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 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 our 10-K filing, which is available on our website or through the SEC website. With that, I will turn the call over to Burton. Burton?

Alex Bauer: 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 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.

Alex Bauer: <unk> 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 Burton. Thank you Alex fiscal year, 2023 including the fourth quarter was highlighted by strong and accelerating new sales growth near.

Burton M. Goldfield: Fiscal year 2023, including the fourth quarter, was highlighted by strong and accelerating new sales growth, near-record customer retention, and prudent expense management. I am particularly pleased with these results given that we successfully executed in the areas that are under our direct control. By emphasizing our value proposition, expanding our sales force, and improving our go-to-market efforts, fourth quarter new sales growth exceeded our forecast and my high expectations. We successfully executed on our plan to enhance customer service, which resulted in near record customer and WSC retention rates across all customer sites. In the difficult 2023 economic environment, we responded by managing our expenses prudently and making every dollar of investment count. Given our strong execution across all facets of our business, we believe our stock in 2023 represents significant long-term value. We bought back over 1.1 billion shares of TriNet stock. As you know by now, today I announce my retirement as CEO of TriNet, effective midnight tonight.

Burton: A record customer retention and prudent expense management I am, particularly pleased with these results given we successfully executed in the areas that are under our direct control by emphasizing our value proposition expanding our sales force and improving our.

Burton: Our go to market efforts fourth quarter, new sales growth exceeded our forecast and my high expectations. We successfully executed on our plan to enhance customer service, which resulted in near record customer and Ws see retention rates across all.

Burton: All customer sizes with the difficult 20 twenty-three economic environment. We responded by managing our expenses prudently and made every dollar of investment count given our strong execution across all facets of our business, we believe our stock in 'twenty 'twenty.

Speaker Change: Three represented significant long term value, we bought back over 1.1 billion in Tri net stock as you know by now today I announced my retirement as CEO of Tri net effective midnight Tonight as CEO of Tri net for over 15 years.

Burton M. Goldfield: As CEO of TriNet for over 15 years, my overarching vision was to build an enduring company, one that thrives for decades, and one that is fundamentally different. I view this as a very high standard, but more importantly, it is achievable by every colleague at TriNet. This standard impacts who we hire, how we train and invest in our colleagues' growth and development, the balance of short-term versus long-term investment to achieve our strategic plans for the future, and most importantly, how we treat our customers and partners, providing them unparalleled value and a vision for a long-term relationship. TriNet introduced to the PEO industry a vertical go-to-market strategy where we focused our sales and services on six core dynamic industries: technology, financial services, professional services, life sciences, nonprofits, and Mainstreet.

Speaker Change: My overarching vision was to build an enduring company one that thrives for decades, and one that is fundamentally different I view. This as a very high standard but more importantly, it is actionable by every colleague at Tri net this standard impacts.

Speaker Change: Who we hire how we train and invest in our colleagues growth and development the balance of short term versus long term investment to achieve our strategic plans for the future and most importantly, how we treat our customers and partners providing them unparalleled value.

Speaker Change: And a vision for a long term relationship trying to introduce to the PEO industry, a vertical go to market strategy, where we focused our sales and services on six core dynamic industries technology financial services professional services lifestyle.

Speaker Change: <unk> says nonprofits and main street. This remains a hugely successful approach to the market and is given tri net a customer base consisting of the most dynamic smbs in the U S economy because of this approach and the effectiveness of our execution we have.

Burton M. Goldfield: This remains a hugely successful approach to the market and has given TriNet a customer base consisting of the most dynamic SMBs in the U.S. economy. Because of this approach and the effectiveness of our execution, we have been able to attract dynamic salespeople, keep them longer, and ultimately grow our team. During the fourth quarter, we leveraged our go-to-market approach, benefited from our larger, more mature sales force, and we delivered new sales ACV growth of 55% year-over-year. I am pleased to report that this drove 2023 full-year new sales ACV growth to 32% year-over-year. More importantly, our sales momentum continued into January 2024, where we realized the best new ACV performance in our company's history. New sales in the month of January grew by 56% when compared to the previous year.

Been able to attract dynamic salespeople keep them longer and ultimately grow our team during the fourth quarter, we leveraged our go to market approach benefited from our larger more mature sales force and we delivered new sales ACB growth up 55.

Speaker Change: Per cent year over year I am pleased to report that this drove 20 twenty-three full year, new sales ACB growth to 32% year over year more importantly, our sales momentum continued into January 'twenty, 'twenty, four where we realized the best new.

Speaker Change: A C V performance in our company's history, new sales in the months of January grew by 56% when compared to the previous year I look forward to continued new sales momentum, which is not only driven by strong sales execution, but also <unk>.

Burton M. Goldfield: I look forward to continued new sales momentum, which is not only driven by strong sales execution but also exceptional service and a very strong brand. Enduring companies are associated with strong brands, and at TriNet, we have built the strongest brand in the PEO industry. In recent Harris polling, TriNet's aided awareness was 82%, the highest in our company's history. But for me, it is not enough to have brand awareness.

Speaker Change: <unk> service and a very strong brand enduring companies are associated with strong brands and a tri net we have built the strongest brand in the PEO industry in recent Harris polling Tri net aided awareness was 82% the highest in our company's here.

Speaker Change: Tree, but for me it is not enough to have brand awareness I have always wanted try not to be viewed as the trusted adviser for our customers I was pleased to find that in the same Harris polling try knits reputation is the strongest in our industry trying to add brand.

Burton M. Goldfield: I have always wanted TriNet to be viewed as a trusted advisor for our customers. I was pleased to find that in the same Harris polling, TriNet's reputation is the strongest in our industry. The TriNet brand triggered the highest positive emotional response of all the key players in the PEO industry. Said differently, our strategy is working, and I am very proud. We have come a long way with our brand, and TriNet is in an excellent position to leverage this brand now and in the future. Just this week, we were informed by Newsweek that we were ranked number one in the Excellent 1000 Index for 2024. The global companies listed in this index exhibit a firm commitment to best practices in business and financial growth. Newsweek partnered with the Best Practice Institute to conduct this index.

Speaker Change: It triggered the highest positive emotional response of all the key players in the PEO industry said differently. Our strategy is working and I am very proud we have come a long way with our brand and Tri net is in an excellent position to leverage this brand now and.

Speaker Change: In the future just this week, we were informed by Newsweek that we were ranked number one in the excellent 1000 index for 'twenty 'twenty four the global companies listed in this index exhibited a firm commitment to best practices and business and financial growth Newsweek partner.

Armed with the best practice Institute to conduct this index I am, particularly proud of this recognition and it highlights Tri net success in balancing employee satisfaction R&D investment ethical impact and customer excellence among other factors try now.

Burton M. Goldfield: I am particularly proud of this recognition, and it highlights TriNet's success in balancing employee satisfaction, R&D investment, ethical impact, and customer excellence, among other factors. TriNet will always work to keep our customers at the center of everything we do. We are continually evolving and enhancing our service model, striving to ensure that our customers are being served in a fashion that exceeds their expectations. As I discussed in our last earnings call, our net promoter score saw a significant year-over-year improvement. And for 2023, we realized the second highest customer retention rate in company history across all customer sites.

Speaker Change: Always work to keep our customers at the center of everything we do we are continually evolving and enhancing our service model striving to ensure that our customers are being served in a fashion that exceeds their expectations as I discussed on our last earnings call our net promoter score.

Speaker Change: <unk> saw a significant year over year improvement and for 2023 we realize the second highest customer retention rate in company history across all customer sizes throughout my years at Tri net I've stressed the importance of technology innovation.

Burton M. Goldfield: Throughout my years at TriNet, I have stressed the importance of technological innovation and the importance of owning our own technology. This is strategically important so that TriNet is in control of its future as the market continues to evolve. There are few examples of organizations in any industry that have fallen behind the technological curve and have been able to maintain predictable growth and profitability.

Speaker Change: And the importance of owning our own technology. This is strategically important so they try net is in control of our future as the market continues to evolve there are a few examples of organizations in any industry that have fallen behind the technology curve and.

Speaker Change: <unk> been able to maintain predictable growth and profitability at Tri net technologies, the bedrock that provide scale in service of our exceptional customer base. It enhances the accuracy expediency and breadth of value our service team deliver.

Burton M. Goldfield: At TriNet, technology is the bedrock that provides scale in the service of our exceptional customer base. It enhances the accuracy, expediency, and breadth of value our service team delivers. With the acquisition of Zenefits, we accelerated our commitment to technological innovation, specifically around API integration, benefits administration, and advanced payroll constructs that are flexible and easy to adopt. TriNet is well on the path to developing a unified platform with an advanced data model that can serve our customers throughout their business lifecycle, including PEO and HRIS. I am proud of the many acquisitions over the years and particularly proud of the colleagues from these acquisitions who, still today, are an integral part of TriNet's value. This trend started with Jevity in 2009, and many of our current senior leaders came from this acquisition 15 years ago.

With the acquisition of <unk>, we accelerated our commitment to technology innovation, specifically around API integration benefits administration and advanced payroll construct that are flexible and easy to adopt try and it is well on the path to develop.

Speaker Change: Eloping a unified platform with an advanced data model that can serve our customers throughout their business lifecycle, including P. E O and H R. I S. I am proud of the many acquisitions over the years and particularly proud of the colleagues from these acquisitions who stilted.

Speaker Change: Day are an integral part of Tri nets value. This trend started with jeopardy in 2009, and many of our current senior leaders came from this acquisition 15 years ago. This is the embodiment of an enduring company, where colleagues can grow and prosper.

Mike Simons: This is the embodiment of an enduring company where colleagues can grow and prosper, personally and professionally, by committing to our mission. TriNet is exceptionally well positioned as a tech-enabled business services company, with growth, predictability, profitability, and strong free cash flow. This can only be provided by a company with dynamic technology, complemented by extraordinary service, delivered by an incredible team. All of this to say, I am confident that TriNet's best days are ahead. I feel the company is in an excellent position, with strong momentum, to facilitate my retirement. With today's announcement of Mike Simons as TriNet's next CEO, TriNet took another extraordinary step on our journey as an enduring company. Mike brings extensive SMB market and insurance experience, as well as strong credentials across all facets of management. I am confident Mike is the right leader for TriNet as we enter into the next phase of our growth. I will still be here working with the company through the end of March 2025 to ensure a smooth transition. With that, I will pass the call to Mike so he can share a few words with you. Mike?

Speaker Change: Suddenly and professionally by committing to our mission try Nate is exceptionally well positioned as a tech enabled business services company with growth predictability profitability and strong free cash flow. This can only be provided by a company with dynamic technology.

Speaker Change: Complemented by extraordinary service delivered by an incredible team.

Speaker Change: All of this is to say I am confident that trying its best days are ahead I feel the company is in an excellent position with strong momentum to facilitate my retirement with today's announcement of Mike Simonds as try nets next CEO trying it took another extraordinary staff.

Speaker Change: On our journey as an enduring company might brings extensive SMB market and insurance experience as well as strong credentials across all facets of management I'm confident Mike is the right leader for Tri net as we enter into the next phase of our growth I will stick.

Speaker Change: They'll be here working with the company through the end of March 'twenty 'twenty five to ensure a smooth transition with that I will pass the call to Mike. So he can share a few words with you Mike.

Mike Simons: Thank you, Burton, for your extraordinary leadership at TriNet these past 15 years. Yours are going to be big shoes to fill, and I very much appreciate your commitment to stay on as an advisor to ensure a seamless transition. I've spent much of my career working with insurance benefits and HR technology and certainly have always appreciated TriNet's excellent reputation in the market. The more time I spent in conversation with the company and others in the market, my excitement grew about this business. A strong brand and culture, excellent cash generation, and a large market opportunity still in front of us. My primary focus initially will be supporting the team as we onboard the customers associated with our record January, as well as getting out to meet with colleagues, customers, marketplace partners, and our investors. I look forward to opening up a dialogue with all of you in the coming weeks and months. Now, I'll pass it on to Kelly to take you through our financial results and guidance. Kelly?

Mike Simonds: You burden for your extraordinary leadership had tried at these past 15 years yours are going to be big shoes to fill and I very much appreciate your commitment to stay on as an advisor to ensure a seamless transition I've spent much of my career working with insurance benefits and HR technology, and certainly have always appreciated.

Mike Simonds: <unk> excellent reputation in the market the more time I spent in conversation with the company and others in the market. My excitement grew about this business a strong brand and culture excellent cash generation and a large market opportunity still in front of US My primary focus initially will be supporting the team as we onboard the customers associate.

Mike Simonds: With a record January as well as getting out to meet with colleagues customers marketplace partners and our investors I look forward to opening up a dialogue with all of you in the coming weeks and months now I'll pass it onto Kelly to take you through our financial results and guidance Kelly. Thanks, Mike I know I speak for our colleagues and welcome.

Kelly Tuminelli: Thanks, Mike. I know I speak for all colleagues in welcoming you to TriNet. During 2023, TriNet continued to excel in the areas we controlled. We accelerated new sales growth, we kept customers longer, and we managed our expenses prudently while still investing in our growth and digital transformation. As it relates to capital, we published our financial policy and capital allocation approach to our investors, we issued $400 million of bonds and renegotiated and borrowed on our revolving line of credit, and we repurchased over $1.1 billion of our stock. This execution reflects the continued maturation of the company's financial management. We built towards these actions over several years, having negotiated borrowing terms, issuing long-term debt, and enhancing our forecasting capabilities. To top it off, we just announced today the initiation of a quarterly dividend of $0.25 per share. The initiation of our dividend signifies two things for TriNet.

Kelly Minnelli: They need to train them during 2023 train it continued to excel in the areas. We control we accelerated net sales growth, we kept customers longer and we manage our expenses prudently, while still investing in our growth and digital transformation as it relates to capital we publish our finance.

Kelly Minnelli: Policy and capital allocation approach to our investors, we issued $400 million of bonds and renegotiated and borrowed on a revolving line of credit and we repurchased over $1.1 billion of our stock. This execution reflects the continued maturation of the company's financial manager.

Kelly Minnelli: We built towards these actions over several years, having negotiated borrowing terms issuing long term debt and enhancing our forecasting capabilities to top it off we just announced today the initiation of a quarterly dividend of 25 cents per share.

Kelly Minnelli: The initiation of our dividend signifies to things for training one we manage a business that generates significant and predictable corporate cash flows which enable the funding of the dividend and two with that dividend. We now have diversified capital return options for shareholders consistent with our financial policy now let's dive.

Kelly Tuminelli: One, we manage a business that generates significant and predictable corporate cash flows, which enable the funding of a dividend, and two, with that dividend, we now have diversified capital return options for shareholders consistent with our financial policy. Now, let's dive into our fourth quarter and full year financial performance in greater detail. Total revenues grew 2% year-over-year for the fourth quarter and 1% for the year in line with our guidance range. However, total revenue performance for the year was largely characterized by the offsetting impacts from lower average WSC volumes and higher rate and mix contributions. Our lower overall average WSC volumes were due to workforce reductions in some verticals of our installed customer base and a lack of hiring in others throughout 2023. This was a result of the challenging economic environment, particularly in the technology sector. Professional service revenues in the quarter and for the full year were flat year over year, in line with our guidance.

Kelly Minnelli: Our fourth quarter and full year financial performance in greater detail.

Kelly Minnelli: Total revenues grew 2% year over year for the fourth quarter and 1% for the year in line with our guidance range total revenues performance for the year was largely characterized by the offsetting impacts from lower average ws see volumes and higher rate and mix contributions are lower overall app.

Kelly Minnelli: Fridge WMC volumes was due to work force reductions in some verticals of our installed customer base and a lack of hiring and others. Throughout 2023. This was a result of the challenging economic environment, particularly in the technology sector professional service revenues in the quarter and for the full year were flat year over year in.

In line with our guidance consistent with our total revenues performance professional services revenues were impacted by lower volumes largely driven by the lack of customer hiring offset by a modest rate increases in HRS performance. Our HRS performance for the year was driven by three factors first.

Kelly Tuminelli: Consistent with our total revenues performance, professional services revenues were impacted by lower volumes largely driven by the lack of customer hiring, offset by modest rate increases in HRAS performance. Our HRIS performance for the year was driven by three factors. First, the renegotiation of certain broker arrangements during the third quarter. Second, our success at lifting prices to properly reflect the value of our HRIS services provided. And finally, our HRIS performance benefited from a full year of revenue in 2023 when compared with the timing of our acquisition in February of 2022. Regarding WSE volume, we finished the year with approximately 348,000 WSEs, slightly down year over year.

The renegotiation of certain broker arrangements during the third quarter second our success at lifting price to properly reflect the value of our HRS services provided and finally, our HRS performance benefited from a full year of revenue in 2023, when compared with the timing of our acquisition in February.

Kelly Minnelli: Ori of 2022.

Kelly Minnelli: Regarding ws he volume we finished the year with approximately 348000 to be lessees slightly down year over year. This reflected a continuation of the trends we experienced throughout 2023.

Kelly Tuminelli: This reflected a continuation of the trends we experienced throughout 2023. We saw net positive contributions from new sales. Customer hiring was significantly lower than historical levels, but modestly positive, and retention remained strong.

Kelly Minnelli: We saw net positive contributions from new sales customer hiring was significantly lower than historical levels, but modestly positive and retention remains strong.

Kelly Tuminelli: Last quarter, we introduced a broader WSE definition that reflects those receiving PEO services and using the value of our PEO platform. As we build our new platform and think through the opportunities to drive revenue by delivering value to an even broader base, we will continue to work through our existing categorizations and adjust as appropriate. We do earn revenue on each of these WSEs at varying levels. As we refine our processes and expand our product offerings, the incremental service fees we receive on these WSEs will be additive to PSR. The recategorization of WSEs added just under 12,000 to our final tally.

Kelly Minnelli: Last quarter, we introduced a broader ws see definition, which reflects those receiving PEO services and using the value of our P. O platform as we build our new platform and think through the opportunities to drive revenue by delivering value to an even broader base. We will continue to work through our existing categorization.

Kelly Minnelli: <unk> and adjust as appropriate we do earn revenue on each of these ws sees at varying levels as we refine our processes and expand our product offerings. The incremental service fees. We receive on these ws CS will be additive to P. S. R. The re categorization of Ws sees added <unk>.

Kelly Minnelli: Just under 12000 to our final tally on our legacy apples to apples comparison, we finished the fourth quarter with 336000, Ws six down 4% year over year and flat sequentially for the fourth quarter, our insurance cost ratio was approximately 87% lower than our forecasted.

Kelly Tuminelli: On a legacy apples-to-apples comparison, we finished the fourth quarter with 336,000 WSEs, down 4% year over year and flat sequentially. For the fourth quarter, our insurance cost ratio was approximately 87%, lower than our forecasted range for the quarter of 88% to 92%. For the full year, our insurance cost ratio was 84.3%, slightly lower than our latest guidance range for the year of 84.5% to 85.5%

Kelly Minnelli: For the quarter of 88% to 92% for the full year, our insurance cost ratio was 84.3% slightly lower than our latest guidance range for the year of 84, and a half to 85, 5% the lower insurance cost ratio in the quarter reflected an uptick in health care utilization.

Kelly Tuminelli: The lower insurance cost ratio in the quarter reflected an uptick in healthcare utilization, particularly in November, more than offset by favorable workers' compensation prior period claims development. This workers' compensation trend was consistent with our full year experience. Turning to operating expenses in the quarter, we continued to prudently manage our expenses in response to the challenging economic environment. We saw that client hiring would remain choppy throughout the quarter, and therefore, we began to scale back or cancel some of our discretionary hiring and project spending while still ensuring we were investing in critical go-to-market capabilities. The recalibration of our expense run rate strengthens our cash flow position as we wait for our clients to resume hiring. As such, for the fourth quarter, operating expenses declined 6% year over year, and for the full year, operating expenses grew a modest 2%.

Kelly Minnelli: <unk> in November more than offset by favorable workers compensation. Prior period claims development. This workers' compensation trend was consistent with our full year experience.

Kelly Minnelli: Turning to operating expenses in the quarter, we continued to prudently manage our expenses in response to the challenging economic environment. We saw that our plant hiring would remain choppy throughout the quarter and therefore, we began to scale back or cancel some of our discretionary hiring and project spending while still ensuring we were investing.

Kelly Minnelli: And critical go to market capabilities, the recalibration of our expense run rate strengthens our cash flow position as we wait for our clients to resume hiring and search for the fourth quarter operating expenses declined 6% year over year and for the full year operating expenses grew a modest 2% now let's move on to <unk>.

Kelly Tuminelli: Now let's move on to earnings per share. Fourth quarter gap net income per diluted share exceeded the top end of our guidance by $0.31 to $1.31, up 68% year over year. Our fourth-quarter earnings outperformance versus our guidance was driven by expense favorability and the workers' compensation performance I just discussed. This brought full-year GAAP net income per diluted share to $6.56, up 17% when compared to 2022. Fourth quarter adjusted net income per diluted share also exceeded the high end of guidance by $0.27 to $1.60, up 44% year-over-year.

Kelly Minnelli: Earnings per share fourth quarter GAAP net income per diluted share exceeded the top end of our guidance by 31 cents to one dollar and 31 cents up 68% year over year, our fourth quarter earnings out performance versus our guidance was driven by expense favorability and the workers' compensation performance I just discussed.

Kelly Minnelli: This brought full year GAAP net income per diluted share to $6.56 up 17% when compared to 2022 fourth quarter. Adjusted net income per diluted share also exceeded the high end of guidance by 27 cents to one dollar and 60 cents up 44% year over year.

Kelly Minnelli: This brought our full year adjusted net income per share to $7.81 up 10% versus 2022 exceeding the top end of guidance by 26 cents.

Kelly Tuminelli: This brought our full-year adjusted net income per share to $7.81, up 10% versus 2022, exceeding the top end of guidance by $0.26. Turning to capital allocation, today we announced the institution of a quarterly dividend of 25 cents. The record date will be April 1st, payable on April 22nd.

Turning to capital allocation today, we announced the institution of a quarterly dividend of 25 cents. The record date will be April 1st payable on April 22nd.

Kelly Tuminelli: With the institution of our new dividend, TriNet capped off an extraordinary year as it relates to our capital allocation strategy. Our capital priorities will remain unchanged. We will always invest in our business for growth, we will explore accretive M&A, and we will return capital to shareholders through both share repurchases and our newly instituted, During 2023, we publicly articulated our financial policy, which included our commitment to manage our business at a leverage ratio of one and a half to two times adjusted EBITDA and return up to 75% of free cash flow to investors. For the year, we generated $539 million in corporate operating cash flow, an 8% year-over-year increase, and we generated $697 million in adjusted EBITDA, representing one percent year-over-year growth.

Kelly Minnelli: With the institution of our new dividend train it capped off an extraordinary year as it relates to our capital allocation strategy. Our capital priorities remain unchanged, we will always invest in our business for growth, we will explore accretive M&A and we will return capital to shareholders through both share repurchase.

Kelly Minnelli: Says and our newly instituted dividend.

Kelly Minnelli: During 2023 we publicly articulated our financial policy, which included our commitment to manage our business at a leverage ratio of one and a half to two times adjusted EBITDA and return up to 75% of free cash flow to investors for the year, we generated 539 million in corporate opera.

Kelly Minnelli: <unk> cash flow and 8% year over year increase and we generated 697 million in adjusted EBITDA, representing 1% year over year growth in summary, we exit 2023 and a strong financial position now.

Kelly Tuminelli: In summary, we exit 2023 in a strong financial position. Now, let's turn to our 2024 first quarter and full year outlook, where I will provide both GAAP and non-GAAP guidance. In the first quarter of 2024, we expect total revenues to grow in a range of 0 to 3 percent year over year and professional service revenues to grow in a range of 2 to 8 percent year over year. Our first quarter revenue growth guidance includes contributions from new sales growth and strong retention, offset by the limited contribution from CIE as weak customer hiring trends persist. In Q1, we are planning for healthcare utilization to increase over recent experience. This will result in an insurance cost ratio between 82.5% and 86.5%, reflecting our seasonally lower ratios at the beginning of each year. This brings our estimate of first quarter gap net income per diluted share to be in the range of $1.81 to $2.55 per share and first quarter adjusted net income per diluted share to be in the range of $2.10 to $2.85 per share.

Speaker Change: Now, let's turn to our 'twenty 'twenty, four first quarter and full year outlook, where I will provide both GAAP and non-GAAP guidance in the first quarter of 'twenty 'twenty four we expect total revenues to grow in a range of zero to 3% year over year and professional service revenues to grow in a range of two to eight per.

Speaker Change: Year over year, our first quarter revenue growth guidance includes contributions from new sales growth and strong retention offset by the limited contribution from C. I E as weak customer hiring trends persist in Q1, we are planning for health care utilization to increase over recent experience. This will result.

Speaker Change: Salt and in insurance cost ratio between 82.5% to 86, 5%, reflecting a seasonally lower ratios at the beginning of each year. This brings our estimate our first quarter GAAP net income per diluted share to be in the range of one dollar and 81 cents to $2.55 per share.

Speaker Change: Sure and first quarter adjusted net income per diluted share to be in the range of $2.10 to $2.85 per share regarding our full year 'twenty 'twenty four guidance, we are forecasting our year over year total revenues to be in the range of down 1% to up 4% with our professional service revenues.

Kelly Tuminelli: Regarding our full year 2024 guidance, we are forecasting our year-over-year total revenues to be in the range of down 1% to up 4%, with our professional service revenues to grow in the range of 1% to 5% year-over-year. We expect our insurance cost ratios to follow seasonal patterns and reflect favorable cost ratios in the first and second quarters as participants work through deductibles. We then foresee a return to higher insurance cost ratios in the third and fourth quarters as deductibles are exhausted and when pooling limits reset in October.

To grow in the range of 1% to 5% year over year, we expect our insurance cost ratios to follow seasonal patterns and reflect favorable cost ratios in the first and second quarters as participants worked through deductibles. We then foresee a return to higher insurance cost ratios in the third and fourth quarters as deductibles are.

Speaker Change: Exhausted and when pooling limits reset in October we should continue to benefit from strong workers' compensation performance. These trends bring our full year insurance cost ratio forecast to be in the range of 86, 5% to 88, 5%. This I see our projection is about.

Kelly Tuminelli: We should continue to benefit from strong workers' compensation performance. These trends bring our full-year insurance cost ratio forecast to be in the range of 86.5% to 88.5%. This ICR projection is about 2 to 4 points higher than our 2023 result, reflecting increased healthcare utilization, higher provider costs, particularly for outpatient services, and higher pharmaceutical pricing as we see continued adoption of GLP-1s as an example. We will watch this closely throughout 2024 and assess any refinements needed as we determine quarterly pricing changes. Regarding our expectation for operating expenses, we will continue to manage our expenses prudently. As such, we expect a modest low single-digit increase in operating expenses for the year. Given these anticipated trends, we expect full-year gap net income per diluted share to be in the range of $4.57 to $6.08 per share and adjusted net income per diluted share to be in the range of $5.80 to $7.35 per share.

Speaker Change: Two to four points higher than our 20 twenty-three result, reflecting increased health care utilization higher provider cost, particularly for outpatient services and higher pharmaceutical pricing as we see continued adoption of G. L. P ones as an example.

Speaker Change: We will watch this closely throughout 'twenty 'twenty, four and assess any refinements needed as we determine quarterly pricing changes regarding our expectation for operating expenses. We will continue to manage our expenses prudently as such we expect a modest low single digit increase in operating expenses for the year.

Speaker Change: Year, given these anticipated trends, we expect full year GAAP net income per diluted share to be in the range of $4.57 to $6.08 per share and adjusted net income per diluted share to be in the range of $5.80 to $7.35 per share.

Kelly Tuminelli: Our guidance for adjusted net income per diluted share includes a net benefit of between $0.25 and $0.30 per share at the midpoint versus a benefit of $0.13 per share last year as a result of our 2023 share repurchase. For 2024, we're assuming in our guidance a level of share repurchases that will continue to offset normal dilution arising from stock compensation. Before I pass the call back to Burton for his concluding remarks, I would like to take a moment and thank him for the leadership he has provided TriNet over the years and for the successful partnership we have forged over the last three and a half years. We have accomplished a lot in such a short period of time.

Speaker Change: Our guidance for adjusted net income per diluted share includes a net benefit of between 25 and 30 cents per share at the midpoint versus a benefit of 13 cents per share last year. As a result of our 20 twenty-three share repurchases for 'twenty 'twenty four we're assuming in our guidance a level of share repurchases that will continue to.

Speaker Change: Offset normal dilution arising from stock compensation.

Speaker Change: Before I pass the call back to Burton for his concluding remarks, I would like to take a moment and thank him for the leadership. He has provided trend out over the years and for the successful partnership we forged over the last three and a half of that is.

Burton: We accomplished a lot in such a short period of time your vision for building train at into an enduring company redefined what a P O could be and created over $6 billion at enterprise value. During your tenure I know I speak for all train at colleagues when I wish you nothing but happiness.

Burton M. Goldfield: Your vision for building TriNet into an enduring company redefined what a PEO could be and created over $6 billion of enterprise value during your tenure. I know I speak for all TriNet colleagues when I wish you nothing but happiness in your well-deserved retirement. Burton

Burton: In your well deserved retirement Burton thank.

Burton: Thank you Kelly Triad is a unique company made up of incredible passionate people throw out my over 15 years, leading tri net.

Burton M. Goldfield: Thank you, Kelly. TriNet is a unique company made up of incredible, passionate people. Throughout my over 15 years leading TriNet, our colleagues have been dedicated to solving problems for small businesses across the country, providing unparalleled service to our customers, building value for our shareholders, and, most of all, supporting each other as we build this enduring company. I could not be prouder of the work that our team does every day, helping entrepreneurs to fulfill their dreams and ensuring that our country continues to be the center of innovation for the world. I am grateful to every one of our colleagues who've allowed me to lead them by channeling our combined passion for the service of our customers. In today's world, a diverse team of almost 4,000 committed people can do miraculous things.

Burton: Cross the country, providing unparalleled service to our customers building value for our shareholders and most of all supporting each other as we build this enduring company I could not be prouder of the work that our team does every day.

Burton: <unk>, helping entrepreneurs to fulfill their dreams and ensuring that our country continues to be the center of innovation for the World I am grateful to every one of our colleagues who've allowed me to lead them by channeling our combined passion in service of our customers in today's world Eh.

Burton: Diverse team of almost 4000 committed people can do miraculous things.

Operator: As I end my last earnings call, I would like to thank my colleagues at TriNet. Thank you for what you do for our small business customers across the country every single day. I know you will continue to do this and will thrive in the future. I am excited for my own future with my wife, Carol, and my family, including my first grandchild. I am particularly excited to work with TriNet over the next year and watch all of you continue to grow in the process. I am happy to take your questions now. Operator?

Speaker Change: As I end my last earnings call I would like to thank my colleagues at Tri net thank you for what you do for our small business customers across the country. Every single day I know you will continue to do this and we will thrive in the future I am excited for my own future with my wife, Carol and <unk>.

Speaker Change: My family, including my first grandchild, I am, particularly excited to work with Tri net over the next year and watch all of you continued to grow and prosper I am happy to take your questions now operator.

Speaker Change: Thank you.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star then 1 on your telephone. If you are using a speakerphone, we ask that you please pick up your handset before proceeding.

I will begin the question and answer session.

I'd like to ask a question. Please press Star then one on your telephone keypad.

Speaker Change: We're using a speaker phone we ask that you. Please pickup your handset before pressing the keys.

Speaker Change: If at any time your question has been addressed and they'd like to withdraw your question. Please press Star then two.

Operator: If at any time your question has been addressed and you'd like to withdraw your question... Today's first question comes from Kevin McVeigh with UBN. Hey, Kevin, let me in. The Bulletproof Executive 2013, terrific, terrific job, and you know rarely do CEOs go out on their own terms, and it's just a terrific outcome. Congratulations! Thank you. Burton, this might be a little unfair, but... What do you think has been your greatest sense of upside since you set out 15 years ago? I mean, and you can't say the stock because that's obviously been terrific, but just, you know, you've been so early in the sector. Any thoughts on that for a broader audience than me? You know, there's just going to be a real knowledge void. Well, thank you, Kevin. And look, I can retire because of this amazing team. I can retire because the culture is focused on the customer. I can retire because we weren't following anyone.

Speaker Change: Today's first question comes from Kevin Mcveigh with UBS. Please go ahead.

Kevin Mcveigh: Great. Thanks, Hey, Kevin.

Kevin Mcveigh: Hey, Burton, let me add my congratulations I mean, you've been at.

Kevin Mcveigh: Steward across trying it for a long time create a lot of value and congratulations on your retirement here.

Kevin Mcveigh: First grandchild, and you know just a terrific terrific job and rarely do Ceos go out on their own terms and it is just a terrific outcome for you. So congratulations on that.

Speaker Change: Thank you.

Speaker Change: Hey, Burton just might be a little unfair but.

Burton: What do you think has been your greatest sense of upside from when you set out 15 years ago I mean, it can't say the stock because that's obviously been terrific, but just.

Speaker Change: You know you've been so early in this sector just any thoughts on that more for the broader audience than me because I think it just.

Speaker Change: Theres, just going to be a real knowledge before you transition into retirement.

Well, thank you, Kevin and look I can retire because of this amazing team I can retire because the culture is focused on the customer I can retire because we weren't following any one we were trying to lead the industry with unique technology.

Burton M. Goldfield: We were trying to lead the industry with unique technology, the vertical strategy, and the service model. And I am just saying, it's not about me. It's about a culture that's been created where this company is going to do great. And I would never do this if I didn't think it would continue to grow and prosper. So I think, like any CEO, what have I done well? I haven't changed the mission or the vision every year. I haven't said to go after this shiny object or that shiny object.

Speaker Change: The vertical strategy the service model and I am just it's it's not about me it's about a culture. That's been created where this company is going to do great and I would never do this if I didn't think it would continue to grow and prosper.

Speaker Change: So I.

Speaker Change: I think like any CEO, what have I done well I havent changed the mission of the vision every year I haven't said go after this shiny objects that shiny object for a while I was a little bit of a lone ranger in the technology needs to be this substrate of scale and service to the customer so we've been investing.

Burton M. Goldfield: For a while, I was a little bit of a Lone Ranger in that technology needs to be the substrate of scale and service to the customer. So we've been investing in technology during my entire tenure. I don't have to catch up right now.

Speaker Change: In technology during my entire tenure I don't have to catch up right now, but I really appreciate your your comments I believe that our tech first approach with great service and scale and the leadership around this executive leadership table combined with <unk>.

Burton M. Goldfield: But I really appreciate your comments. I believe that our tech-first approach with great service and scale and the leadership around this executive leadership table combined with Mike coming in the door is a great combination. I'm really proud of that.

Speaker Change: Mike coming in the door is a great combination and I'm really proud of that I'm proud of the team more than my individual contribution.

Burton M. Goldfield: I'm proud of the team more than my individual contributions. I'm going to leave it there, because the rest... Wow. Thank you. You're awesome, Kevin. No, thank you.

Speaker Change: That's terrific.

Speaker Change: But there too the rest are just numbers and just.

Speaker Change: Both lines.

Speaker Change: Thank you.

Speaker Change: Awesome Kevin.

Speaker Change: Thank you.

Operator: Thank you. And our next question today comes from Kyle Peterson with NETO. Hey, Carl.

Speaker Change: Yeah.

Speaker Change: Thank you and our next question today comes from Karl Peterson with Needham. Please go ahead.

Karl Peterson: Okay. Thanks.

Operator: Thanks. Hey guys, good afternoon.

Karl Peterson: Hey, guys.

Karl Peterson: Good afternoon, I guess I'll pick up with with the with the numbers.

Kelly Tuminelli: I guess I'll pick up with the numbers, but I wanted to touch on the guide a little bit and see kind of what you guys had assumed for CIE for the current year. I guess it sounds like you guys are being fairly conservative based on client conversations, but I just wanted to see if you guys had kind of modeled any improvement in the back half or kind of what your expectations are as we sit here today. Hi Kyle, it's Kelly. Good to hear from you. Great question, because it's something we watch every single day.

Karl Peterson: But you want to.

Karl Peterson: Touch on the guide a little bit and see kind of what you guys had assumed for CAE for the current year I guess it sounds like you guys are being.

Karl Peterson: Fairly conservative based on you know client conversations, but you know just wanted to see if you guys had kind of modeled in any improvement in the back half or kind of what your expectations are as we sit here today.

Karl Peterson: I pilots Kelly good to hear from you.

Kelly Minnelli: Great question, because it's something we watch every single day as we're thinking about Cie. Overall 2023 was the lowest Cie year, China has never had and I think it's just you know proof of our resilient model frankly that we were able to still grow revenue and profit.

Kelly Tuminelli: As we're thinking about CIE overall, 2023 was the lowest CIE year TriNet has ever had, and I think it's just proof of our resilient model, frankly, that we were able to still grow revenue and profits and get there. As we're looking into 2024, what we're really forecasting on the low end of guidance is really low single-digit CIE. At the high end of guidance, we're at middle single-digit CIE and think that it is skewed towards the back half of the year. That's really helpful.

Kelly Minnelli: And get there as we're looking into 'twenty 'twenty four and what we're really forecasting on the low end of guidance is really low single digit C. I E. At the high end of guidance, where it middle single digit Cie and you know think that it is skewed towards the back half of the year.

Kelly Minnelli: Great.

Kelly Tuminelli: And then just to follow up, great to see the dividend announcement today. I just want to kind of pick your brain on capital return priorities for the coming year. I guess last year was a big year, obviously, for the buyback.

Speaker Change: Very helpful and then.

Speaker Change: Just a follow up and great to see the dividend announcement.

Today I just wanted to kind of rein on.

Speaker Change: Capital return priorities for the coming year, I guess last year was a big year of seafood.

Speaker Change: Buyback I guess is the dividends.

Kelly Tuminelli: I guess is the dividend going to be the big or the prominent priority today outside of offsetting with dilution? Or how are you guys kind of thinking about returning capital to shareholders for the current year? Yeah, Kyle, right now, our guide assumes, related to capital return, just, just the offset of dilution because due to the timing, stock price, a variety of other factors, we don't actually bake that in, but we just laid out our financial policy in the middle of the year.

Speaker Change: Going to be the big or the prominent priority today outside of offsetting with dilution or how are you guys kind of thinking about returning.

Speaker Change: Returning capital to shareholders for the current year.

Speaker Change: Yeah, Kyle right now our guide assumes assumes related to capital returns is just the offset of dilution due to the timing stock price a variety of other factors, we don't actually bake that in but we just laid out our financial policy in the middle of the year. So our priorities really have not.

Kelly Tuminelli: So, our priorities really have not changed. We're going to first invest in the business to drive growth. We'll look at accretive M&A, but as it relates to returning capital to shareholders, we will look at both share repurchase opportunistically, as well as the newly instituted dividends that we're doing. So, our target is, on average, 75% return of free cash flow to shareholders, and we'll look at the tools we've got to see what the best approach is. Great! That's really helpful. Leave it there.

Speaker Change: Changed we're going to first.

Speaker Change: And that's in the business to drive growth well, we will look at accretive M&A, but as it.

Speaker Change: Hits to returning capital to shareholders, we will look at both share repurchase opportunistically as well as the newly instituted dividend that we're doing so.

Speaker Change: Our target is on average 75% return of free cash flow to shareholders, then and we'll look at the tools, we've got to see what what the best approach is.

Speaker Change: Great that's.

Speaker Change: That's really helpful. I'll leave it there thanks, guys in and Burton congratulations and enjoy the retirement.

Operator: Thanks, guys, and Burton, congratulations, and enjoy your retirement. Thank you so much. Thank you. And our next question comes from Jared Levine with TD Cowen. Please go ahead.

Speaker Change: Thank you so much.

Thank you and our next question comes from Jared Levine with TD Cowen. Please go ahead.

Kelly Tuminelli: Yeah, I just would like to dig in a little bit to start. But first, I wanted to say congrats, Bert, on the retirement. But in terms of the FY 24 guide, can you give us a little more color in terms of what you're assuming in terms of average WSC growth and kind of how to think about the cadence of WSC levels for 24? Yeah, well, as you know, we don't forecast WSCs or give a future guide on WSCs, Jared, but the way that we're thinking about the pieces of it is, you know, And CIE definitely helps bring that up as well with the assumption that we've got right now.

Jared Levine: Yes, I just would like to hear a little bit to start your first I wanted to take her regrets burden the retirement, but in terms of the FY 'twenty. Four guide can you give us a little more color in terms of what youre, assuming in terms of average ws fee growth and kind of how to think about the cadence of WSB levels for 'twenty four.

Speaker Change: Yeah, well you know as you know we are we don't forecast Ws Cesar or get future guide on Ws. These jared, but the way that we're thinking about the pieces of it is you know given the sales momentum that we've got in our strong January debt.

Speaker Change: Burton talked about we've really narrowed the gap between new sales and customer.

Speaker Change: Customer attrition.

Speaker Change: And Cie definitely helps bring that up as well with the assumption that we've got right. Now. So you know, we're not really forecasting ws ease, but you can tell probably from our both our professional service revenue growth forecast as well as our assumption around total GAAP revenue.

Kelly Tuminelli: So, you know, we're not really forecasting WSCs, but you can probably tell from both our professional service revenue growth forecast, as well as our assumption around total gap revenue, how that comes in with a real low, low single digit on the bottom end for CIE. Got it. And then, in terms of the FY24 ICR guide, does that assume a health insurance margin that's aligned with what was contemplated in your long-term ICR target of 88 to 90%? Yeah, when we, you know, related to 2024, really, probably the difference in terms of us versus the, you know, 88 to 90% is the expected continued favorability from workers compensation. Now, we are definitely looking at health care prices increasing. We're looking at increased sales in pharma, pharma prices, etc. So, that is contributing significantly to the year over year drop because we're not anticipating, you know, 15.7% NIM or 84.3% insurance cost ratio going forward. So, the increase in health prices, etc. are really driving that piece.

Speaker Change: Roughly assuming how that comes in with a real low low single digit on the bottom end for Cie.

Got it and then in terms of the FY 'twenty for ICR Guide does that assume a health insurance margin that the line with what was contemplated in your long term ICR target of 88% to 90%.

Speaker Change: Yeah. When we you know related to 'twenty 'twenty, four really probably the difference in terms of the us versus the 88% to 90% is the expected continued favorability from from Workers' compensation and now we are looking at definitely health care price.

Speaker Change: Increasing we're looking at increased environment pharma prices et cetera, so that is contributing significantly to the year over year drop because were not anticipating.

Speaker Change: 10.7%, NIM or 84, 3% our insurance cost ratio going forward. So that the increase in health prices et cetera are really driving that piece.

Burton M. Goldfield: And if I could sneak in one more here in terms of one of your competitors last week announcing a partnership with Workday, just thoughts on that announcement in terms of that competitive advantage of new client sales for organizations with, you know, 100 plus WSCs. So I'll take that. There is plenty of opportunity for all the competitors in the space, but we are still less than 50% of quotes against the direct competitor. And the opportunity to address that space from a TriNet standpoint is completely in our hands with our software and our vision of Denali and where it's going. Other competitors are taking a very different approach to that.

And then if I could sneak in one more here in terms of one of your competitors last week announced the partnership with Workday just thoughts on that announcement in terms of that competitive advantage, but on new client sales for organizations with 100 plus wsb's.

Speaker Change: So I'll take that.

Speaker Change: There is plenty of opportunity for all the competitors in this space.

Speaker Change: We're still less than 50% of quotes are against a direct competitor.

And the opportunity to address that space from a tri net standpoint is completely in our hands with our software and our vision of Denali and where it's going.

Speaker Change: Their competitors are taking a very different approach to that and I believe that our expertise our service and our core technology will lead us to a very very competitive plays as you go up market over the next couple of years, but there's there's plenty of room for everyone and I welcome.

Burton M. Goldfield: And I believe that our expertise, our service, and our core technology will lead us to a very, very competitive place as you go up market over the next couple of years. But there's plenty of room for everyone, and I welcome others to address that segment of the market as well. Thank you. Thank you.

Speaker Change: Others to address that segment of the market as well.

Speaker Change: Great. Thank you.

Speaker Change: Thank you and our next question comes from Andrew Nicholas with William Blair. Please go ahead.

Burton M. Goldfield: Bye, good afternoon. I wanted to extend my congratulations as well, Burton. It's been a pleasure working with you. I do want to ask a question about the quarter in the guide, though, on the sales force in particular. Sounds like new ACV growth is very good, and January momentum continued. How much of that are you baking into?

Andrew Owen Nicholas: Hi, good afternoon.

Andrew Owen Nicholas: Hey, I wanted to extend my congratulations as well Burton.

Andrew Owen Nicholas: And it's been a pleasure working with you.

Andrew Owen Nicholas: I do want to ask a question on the <unk>.

Andrew Owen Nicholas: And the guide.

Andrew Owen Nicholas: On the sales force in particular.

Andrew Owen Nicholas: Like new ATV growth is very good January momentum continued.

Andrew Owen Nicholas: How much of that are you baking into the.

Burton M. Goldfield: The guidance at this point, and if there's any way to translate some of those ACP growth numbers into the professional services growth guide, that would be helpful for us to make the transition. Why don't you start? Yeah, so it's a great question, and there are a couple of pieces to that. First, the strategy around the sales force and sales leadership is working. We are up 19 percent in net new sales capacity. That's a pure capacity number.

Andrew Owen Nicholas: The guidance at this point.

Andrew Owen Nicholas: And if theres any way to kind of translate some of those ATP growth numbers into the professional services growth guide that would be helpful for us to make that linkage.

Speaker Change: When Easter Yeah. So it's a great question and there's a couple of pieces to that first the strategy around the sales force and sales leadership is working we were up 19% in net new sales capacity, that's a pure capacity number of patients. He is all.

Burton M. Goldfield: Efficiency is also up, so you're seeing dramatic increases year over year. January was way up, as we talked about, and that's against a really strong January last year, so there's a lot of momentum in the net new ACV and the onboarding of our new clients. Additionally, attrition is way down, and retention is incredibly strong right now, so we're entering the year from a very strong position. It is really nice to be ahead of the curve at the beginning of the year, which is continued momentum from Q4. So I see this continuing to accelerate, and where we feel that we need to be really conservative is in the CIE or the hiring in our installed base. It's an area that is less under our control.

Easter: So up so youre seeing dramatic increases year over year January was way up as we talked about and that's against a really strong January last year. So there's a lot of momentum in the net new ACB in the Onboarding of our new clients. Additionally.

Speaker Change: <unk>.

Speaker Change: Attrition is way down and retention is incredibly strong right now so we're entering the year from a very strong position. It is really nice to be ahead of the curve at the beginning of the year, which is a continued momentum from Q4 so.

Speaker Change: I see this continuing to accelerate and where we feel that we need to be really conservative is in the C. I E or the hiring in our installed base. It's an area that is less under our control. It's an area that will come back there was strong sales in tech in January.

Burton M. Goldfield: It's an area that will come back. There were strong sales in tech in January. It will take a matter of time, but controlling the cost and being realistic about the unwinding of the net new ACV into profitability is built into the guidance. And I'll turn it over to Kelly.

Speaker Change: It will take a matter of time, but controlling the costs.

Speaker Change: And being realistic about the unwinding of the net new ways CV into profitability is built into the guidance and I will turn it over to Kelly, Yeah. I mean, I think the critical point Andrew is that at the level of AC D that we're seeing in January we're really narrowing the gap.

Kelly Tuminelli: Yeah. I mean, I think the critical point, Andrew, is that at the level of ACV that we're seeing in January, we're really narrowing the gap that we've talked about between new sales and attrition of our customers. So, you know, to Burton's point, when hiring comes back, it's going to be terrific. But we're not planning on that right now.

Kelly Minnelli: We've talked about between new sales and attrition of our customers.

Kelly Minnelli: So Tim Burton's point when hiring comes back.

It's gonna be terrific, but we're not planning on that right now and in terms of what's baked in to our forecast.

Kelly Tuminelli: And in terms of what's baked into our forecast, you know, we were well aware of our January results when we created the guidance that we came through. So that is fully baked into our professional service revenue forecast right now. But you're seeing growth year over year. And if you dig into the underlying assumptions, we're assuming low single-digit price increases.

Kelly Minnelli: We're well aware of our January results. When we created the guidance that we came through so that is fully baked in to our professional service revenue forecast right now, but you're seeing the growth year over year. If you dig into the underlying assumptions, we're assuming low single digit price increases we're assuming expand.

Kelly Tuminelli: We're assuming expansion of products and wallet share as we're offering new things to the market. We're looking at our broker channel as another source of value there. So all of those things add up together to make our professional service revenue growth rate. That's really helpful, and maybe as a follow-up to that, Kelly, specifically.

Kelly Minnelli: Churn of products and wallet share.

Kelly Minnelli: We're offering new things to the Mark at we're looking at.

Kelly Minnelli: Our broker channel as another source of value there. So all of those things add up together.

Kelly Minnelli: To make our professional service revenue growth rate.

Speaker Change: That's really helpful. And then maybe as a follow up to that Kelly, specifically it sounds like you've narrowed the gap.

Kelly Tuminelli: It sounds like you've narrowed the gap in terms of new sales relative to attrition. Is the expectation, maybe not this year, but in 2025 and 2026, that that gap can be positive, and then you can layer on kind of a normal CIE on top of that? I guess it goes to Burton's kind of medium-term ambitions for a high single, low double.

Kelly Minnelli: In terms of new sales relative to attrition is the expectation maybe not this year, but 25% and 26 that that gap can be positive and then you can layer on kind of a normal cie on top of that I guess it goes to burton's kind of medium term.

Kelly Minnelli: Go low double.

Kelly Tuminelli: Yeah, you get it exactly. That's really our goal is to, as we've been investing, you know, cutting back our back office to be able to invest in the front office of our sales force. We are trying to narrow that gap so that new sales will actually more than cover attrition, and CIE will be upside. All right, great. And if I could just squeeze in one more on the worksite employee trend, So, I know there's some noise there with the... reclassification and the platform user access fee. But just under the hood, like anything that you would say at the vertical level in terms of strength or stabilization relative to prior quarters, as we think about maybe the things that are outside of your control. You know, in terms of some favorability from seasonal hiring in certain verticals, you know, as we're looking forward to January as well, we're seeing a little bit of choppiness across them. No real clear signal at this point in time.

Yeah, It's you get it exactly that's really our goal is to as we've been investing.

Kelly Minnelli: Cutting back our back office to be able to invest in the front office and our sales force. We are trying to but narrow that gap. So that new sales will actually more than cover attrition and C. I E will all be upside.

Speaker Change: Alright, great and if I could just squeeze in one more.

Speaker Change: Worksite employee trend.

Speaker Change: So I know, there's some noise there with the.

Speaker Change: Reclassification in the platform user access fee.

Speaker Change: But just under the Hood like anything that you would say at the vertical level in terms of of strength or stabilization relative to prior quarters. As we think about maybe the things that are outside of your control.

Speaker Change: You know in terms of we saw some favorability from seasonal hiring in certain verticals.

Speaker Change: You know as we're looking forward to January as well.

Speaker Change: We are seeing a little bit of choppiness across them.

Speaker Change: No.

Speaker Change: Clear signal at this point in time, and that's why we wanted to be conservative on our RCA forecast and really trended towards the back half of the year.

Burton M. Goldfield: And that's why we wanted to be conservative on our CIE forecast and really trended towards the back half of the year. Thank you. And, Andrew, just to add one more point to that, we will continue to invest significantly in the sales engine and the growth of sales reps. So, the way you phrased it is exactly where we're headed. We need additional capacity. The additional capacity is coming on board, not only at the same efficiency but at higher efficiency.

Speaker Change: Understood. Thank you.

Speaker Change: And Andrew just just to add one more point to that we will continue to invest significantly in the sales engine and growth of sales reps. So the way you phrased. It is exactly where we're headed we need additional capacity additional capacity has come.

Andrew Owen Nicholas: Ming onboard not only at the same efficiency, but at a higher efficiency and as long as that's the case.

Burton M. Goldfield: And as long as that's the case, we will invest in the sales organization. And we're doing that, at the same time, keeping overall costs relatively flat. Kelly and the team have done an amazing job of reallocating dollars, keeping the service levels up, and keeping referrals up, but we will continue to invest significantly in the sales channel throughout 2024 as long as the results continue the way they did in January. Thank you and congrats again, Burton. Thank you, and as a reminder, if you'd like to ask a question... OK. So can we go back so far?

Andrew Owen Nicholas: We will invest in the sales organization, we're doing that.

Andrew Owen Nicholas: At the same time, keeping overall costs relatively flat so.

Andrew Owen Nicholas: Kelly and the team have done an amazing job of reallocating dollars, keeping the service levels up keeping referrals, but we will continue to invest significantly into the sales channel throughout 2020 for as long as the results continue the way they did in January.

Speaker Change: Great. Thank you and congrats again thanks.

Speaker Change: Yeah.

Speaker Change: Thank you and as a reminder, if you'd like to ask a question. Please press Star then one.

Operator: Our next question comes from Andrew Polkowicz with J.P. Morgan. Hey, good evening guys. First, Burton, I wanted to say congratulations to myself, but Tingen has always admired the long run you've had, so I wanted to share his congratulations as well. Thank you so much.

Speaker Change: Our next question comes from Andrew Nicholas.

Andrew Owen Nicholas: With J P. Morgan. Please go ahead.

Andrew Owen Nicholas: Hey, good evening, guys first Burton element they congrats for myself, but also Tianjin has always admired the long run you've had but I wanted to share his congratulations as well and.

Andrew Owen Nicholas: I can speak to.

Kelly Tuminelli: I wanted to start with a question about the enrollment season, so obviously, we're through that, and I was just curious about what you guys saw as far as benefits attached rates go. Were there any differences or improvements versus last year? Yeah, it's a really good question. We're seeing slightly lower benefit attached rates. I think it really is a signal of what's going on in the economy right now. We're seeing a little bit of a buy-down on plans as well, Andrew, but you are still seeing sort of the vertical differences that we normally see. Financial Services has the highest benefits attached rate.

Speaker Change: No problem.

Andrew Owen Nicholas: I wanted to start with a question on the enrollment season, and so obviously, we're through that and I was just curious on what you guys saw as far as benefits attach rates were there any differences or improvements versus the last year or two.

Speaker Change: Yeah. It's a really good question, we're seeing slightly lower benefit attach rates I think it really is a signal of what's going on in the economy right now, we're seeing a little bit of buy down on plans as well Andrew.

Speaker Change: But you are still seeing sort of the vertical.

Speaker Change: <unk> that we normally see in financial services has the highest benefits attach rate tax probably second when we think about it from a vertical perspective, but they're all down maybe a point or two.

Burton M. Goldfield: Tech's probably second when we think about it from a vertical perspective, but they're all down, maybe a point or two. Okay. It makes sense. Thanks for that, Kelly. And then just one follow-up from me. I wanted to ask you about, obviously, really strong ACV growth, and I just wanted to see what you attribute it most to. So obviously, Salesforce 10-year has been improving for a while now, and you called out better client onboarding. But, is there anything in the demand environment maybe to call out just basically the attribution analysis and that strong ACV? So, great question, as you pointed out. First, it's just pure sales capacity. We have more sales reps. Second, as we've talked about on earlier calls, the uncertainty in the business environment is driving people to the PEO solution. So complexity and uncertainty are driving people to go to this type of model.

Speaker Change: Okay makes sense. Thanks, and then just one follow up for me.

Speaker Change: I wanted to ask you know, obviously really strong <unk> growth.

Speaker Change: Wanted to see what you attributed most who's obviously sales force tenure, it's been improving for a while now and you called out better client Onboarding.

Was there anything in the demand environment, maybe to call out. So you just basically at the attribution analysis and that strong <unk> growth would be great.

Speaker Change: So great question as you pointed out first is just pure sales capacity, we have more sales reps second is that as we've talked about on earlier calls the uncertainty in the business environment is driving people to the PEO solution. So complexity.

Speaker Change: And uncertainty is driving people to go to this.

Speaker Change: <unk> model and then finally, the vertical focus is resonating in the market.

Burton M. Goldfield: And then finally, the vertical focus is responding in the market, and the technology backbone is providing the best service we have ever delivered in my tenure at TriNet. So referrals are up, the broker channel is up, direct sales are up, and the market, I believe, will continue to give us this opportunity. And as you know, that represents about 40% of the revenue or the ACV generated in Q1. So we're pretty excited about where we are today to start ahead of the curve. And that's one of the reasons I'm particularly excited about how the year pans out.

Speaker Change: And the technology backbone is providing the best service we have ever delivered in my tenure Tri net so referrals are up.

Speaker Change: Broker channel was up direct sales is up and the market I believe will continue to give us this opportunity and as you know there's about 40% of the revenue or the C. V generated in Q1. So we're pretty excited about where we are today to start ahead of the curve and that's one of the.

Speaker Change: Reasons, I'm, particularly excited about how the year pans out. Additionally, you have the retention levels at record highs because people are appreciating the solution where delivery.

Burton M. Goldfield: Additionally, you have retention levels at record highs because people are appreciating the solution we're delivering. Thank you for answering my questions, and again, congratulations, Burton. Thank you. I appreciate it. And our next question comes from David Grossman with Stiefel. Please go ahead.

Speaker Change: That's great. Thank you for answering my questions and again congratulations burden. Thank you appreciate you.

Speaker Change: And our next question comes from David Grossman with Stifel. Please go ahead.

David Grossman: Hey, Burton, congratulations. Well, it's been a fun run. It has. It has.

Speaker Change: Okay.

David Grossman: And congratulations it's been a home run.

David Grossman: It has it has thank you.

David Grossman: Thank you. You're my oldest friend in the industry, and you'll be missed. Uh, hey. Mike's a lot nicer than I am, and he's smarter. Yeah, he couldn't be nearly as enthusiastic, so.

David Grossman: Yeah, My oldest friend in the industry you'll be missed.

David Grossman: Hey, Mike a lot nicer than I am any smarter.

David Grossman: Yeah, he couldnt be nearly as enthusiastic so well.

David Grossman: Well, that's probably true, www.trinet.com. Well, what a chance to catch up. Mike, welcome as well. Just I know it's getting late here, so thanks for squeezing me in.

David Grossman: True.

David Grossman: [laughter].

David Grossman: Alright.

David Grossman: Well well have a chance to catch up Mike welcome as well so just I know, it's getting late here.

Mike Simonds: Sure. So thanks for squeezing me in.

David Grossman: You know, I guess I have two questions. One is, there was a question asked earlier, I think, about the partnership with Workday by one of your competitors. And obviously, you went about buying, you know, the Zenefits platform and integrating that into your own business. And I'm just curious.

Mike Simonds: I guess I have two questions. One is there was a question asked earlier I think about.

Mike Simonds: The partnership with Workday by one of your competitors and obviously you went by buying.

Mike Simonds: The benefits platform in <unk>.

Mike Simonds: Integrating that.

Mike Simonds: And to your own business and I'm just curious.

Burton M. Goldfield: You know, whether you saw this a couple years ago when you initiated that transaction or whether you're seeing things differently today. What's changed in the marketplace that may compel somebody, as they scale and achieve adequate scale to self-insure, they may decide to stay with the PEO longer today than they may have thought two years ago. So it's a really good question.

Mike Simonds: Whether you saw this you know a couple of years ago, when you initiated that transaction or whether youre seeing things different today.

Mike Simonds: What what's changed in the marketplace that may compel.

Mike Simonds: Somebody that as they scale.

Mike Simonds: Achieve adequate scale to self insure that they may decide to stay with the PEO model longer today than they may have thought two years ago.

Speaker Change: So it's a really good question the way I see it is the complexity of the environment. If you can continue to scale the larger customers offer them services as well as an alternative insurance construct other than just the single employer plan, which is.

Burton M. Goldfield: The way I see it is the complexity of the environment; if you can continue to scale the larger customers, offer them services, as well as an alternative insurance construct other than just the single employer plan, which is awesome when you're smaller, I believe you can keep the customers longer. I think the challenge that people are finding right now is that if you're primarily people-driven, it's really hard to scale. And if you combine the people-driven approach with inflation, it's hard to maintain profits.

Speaker Change: Awesome when you're smaller I believe you can keep the customers longer.

Speaker Change: The challenge that people are finding right now is that if you're primarily people driven it's really hard to scale and if you combine the people driven approach with inflation, it's hard to maintain profits. So what we've been able to do is build the platform.

Burton M. Goldfield: So what we've been able to do is build a platform, use the scale of the platform in service of the customers, but not have to add one new employee for every 10 new customers. So you're seeing us break out of a model where our costs are climbing as the service complexity goes up because we're tweaking the platform every single day, and we have a vision for the future of the platform. And it's not only about running payroll. It's about the knowledge base and the knowledge engine that's behind it.

<unk> used the scale of the platform in service of the customers, but not have to add one new employee for every 10, new customers. So youre seeing us break out of a model where our costs are climbing as a service complexity goes up because we're tweaking the platform every single.

Speaker Change: Good day, and we have a vision for the future of the platform.

Speaker Change: And it's not only about running payroll, it's about the knowledge base and the knowledge engine that's behind it it's about the ability to pivot based on the complexity of each customer. So that you can grow with them and you and I have talked about it the complexity around <unk>.

Burton M. Goldfield: It's about the ability to pivot based on the complexity of each customer so that you can grow with them. And you and I have talked about that. The complexity around access controls, the complexity around union payroll, the complexity around all types of other requests by the customers is really important. What I'm particularly excited about with Denali is the API-first strategy allows us to connect with many partners out there, not tied to a single closed platform. And would you consider taking on somebody without offering health and worker's comp?

Speaker Change: Access controls the complexity around union payroll the complexity around all types of other asked by the customers is really important what I'm, particularly excited about with Denali is the API first strategy allows us to connect with many partners out there.

Speaker Change: Not tied to a single closed platform.

Speaker Change: And would you consider taking on somebody without offering health and workers' comp.

Speaker Change: Well.

Burton M. Goldfield: Well, that's the vision. Absolutely. I think that what we're focused on is the professional service revenues. And what you're seeing is, in our forecast for 2024, we are going to grow professional service revenues in excess of gross revenue, which includes insurance. And that's what the barbell is about, and that's where some of these professional service revenues will come from in 2024. But as you get into 2025 and beyond, I absolutely believe that the right answer is to provide the insurance construct that the companies choose and have multiple insurance constructs for those clients. All right, got it. And one other thing, and this is really more of a cyclical question, but, you know, your MCR has been strong for multiple years now, right? And this is the first year that I can remember that. You know, we've faced these kinds of year-over-year declines, which is industry-wide, of course. It's not unique to China.

Speaker Change: Yeah.

Speaker Change: The vision, absolutely I think that what we're focused on is the professional service revenues and what Youre seeing is in our forecast for 24, we're going to grow professional service revenues in excess of the gross revenue, which includes insurance and that's what the barbell was about it.

Speaker Change: That's where some of this professional service revenues will come from in 'twenty, four but as you get into 'twenty five and beyond I, absolutely believe that the right answer is to provide the insurance construct that the companies choose and have multiple insurance costs drugs for those clients.

Speaker Change: Alright got it.

Speaker Change: And one other thing and its really more publicly.

Speaker Change: Cyclical question, but your MCR, it's been strong for multiple years now right.

Speaker Change: This is the first year that I can remember that.

Speaker Change: Chase these kinds of year over year declines.

Speaker Change: Which is industry wide of course is that you need to.

Kelly Tuminelli: So is there anything that you want to remind us of that we should just keep in mind as we go into 24 and 25? You know, if we remain in this higher cost, you know, environment, you know, things that maybe we haven't seen for years. David, it's a great question.

Speaker Change: Hi, Matt.

Matt: So is there anything that you want to remind us that we should just keep.

Matt: Keep in mind as we go into 'twenty, four and 'twenty five.

If we remain in this higher cost.

Matt: Environment things that maybe we haven't seen for years, we should just keep in the back of our minds as we look forward.

Matt: David It's a great question you know as you know we monitor very detailed health claims.

Kelly Tuminelli: You know, as you know, we monitor very detailed health claims to make sure we're understanding trends. And that's one of the reasons we reprice a cohort of our business every single quarter so that we can see the trends and bake them into our insurance cost trends, etc. Really, as we think about, you know, things like COBRA, I think the COBRA we have today is very different from the COBRA that there was before because there are Affordable Care Act plans available to everyone out there. And so we do see less COBRA uptake than we had historically seen, like during the financial crisis, etc. But I do expect, as well, people buying down plans just due to the significant increase in health care costs. So they will be buying plans with higher deductibles and, you know, more of a co-insurance type relationship, etc.

David Grossman: To make sure we're understanding trends and that's one of the reasons, we repriced a cohort of our business every single order. So that we can see the trends in and bake it into our insurance cost trends et cetera.

David Grossman: Really as we think about things like Cobra I think the Cobra. We have today is very different than the Cobra that there was a four because there's affordable care Act plans available to everyone out there and so we do see less co browse take than had historically seemed like during the financial crisis.

David Grossman: Sarah but I do expect as well there to be people buying down plans just due to the significant increase in health care costs. So they will be buying plans with higher deductibles.

David Grossman: With more of a coinsurance type relationship et cetera, and it would be what I anticipate but it's something we're watching very closely especially with pharma costs, which obviously are getting a lot of press. These days.

Kelly Tuminelli: It would be what I anticipate, but it's something we're watching very closely, especially with pharma costs, which, you know, obviously are getting a lot of press these days. Right. And sorry, just one last thing, just on workers comp. Is there... It sounds like you expect a favorable experience in 24. Did I hear that right?

Speaker Change: Right and sorry, just one last thing just on workers' comp is there.

Speaker Change: It sounds like you expect favorable experience and 24% did I hear that right.

Kelly Tuminelli: Yeah, we are expecting, you know, continued favorable experience in 2024 related to workers' compensation. And will that be just less of a tailwind in 24 than it was in 23, or is it a tailwind year over year? No, I think it's less of a tailwind.

Speaker Change: Yeah. We we are expecting continued favorable experience in 2024 related to workers compensation.

Speaker Change: And will that be just less of a tailwind in 'twenty four than it was in 'twenty three or is it.

Speaker Change: Tailwind year over year.

Speaker Change: I think it's less of a tailwind we had some very favorable prior period development in 2022 'twenty three I do not expect it at the same level as we move into 2024, we tend to be relatively conservative reserves in general as we're looking at emerging trends in our workers comp book.

Kelly Tuminelli: We had some very favorable prior period development in 2020 and 2023, but I do not expect it at the same level as we move into 2024. We tend to be relatively conservative reservers in general as we're looking at emerging trends in our workers' comp book. But I think our workers' comp team is one of the best in the industry as well at working with our clients and making sure we're ensuring safe workplaces. And I think that gives us a competitive advantage as well.

Speaker Change: But I think our workers comp payments one of the best in the industries as well at working with our clients and making sure we're ensuring safe workplaces and I think that gives us a competitive advantage as well.

David Grossman: Bye. All right, guys. Well, thank you very much. Burton, good luck, and I'm sure we'll be in touch. So, thanks again. Yes, I look forward to seeing you.

Speaker Change: Alright.

Speaker Change: Alright, guys well. Thank you very much Bart Burton good luck I'm sure we'll be in touch. So thanks again, yes, I look forward to seeing it. Thanks Bye bye bye.

Operator: Thanks. Bye-bye. Bye-bye. Thank you. This concludes today's question and answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day. The Ultimate Parody Site! BF-WATCH TV 2021, www.trinet.com

Speaker Change: Bye bye.

Speaker Change: Thank you. This concludes today's question and answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Speaker Change: [music].

Speaker Change: Yeah.