Q4 2024 TriNet Group Inc Earnings Call

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Unknown Attendee: Hello, everyone, and welcome to TriNet's fourth quarter 2024 financial results medium term outlook.

Speaker Change: Hello, everyone and welcome to try next fourth quarter 2020, full financial result medium term outlook.

Lydia: My name is Lydia and I'll be your operator today. After the prepared remarks, there'll be an opportunity for you to ask If you'd like to participate in the Q&A, you can do so by pressing star followed by one on your telephone keypad.

Lydia: My name is Lydia there'll be you're quite.

Lydia: After the prepared remarks, there'll be an up J P. P to ask question if.

Lydia: If you'd like to participate in the Q&A you can do cite a question still followed by one on your telephone keypad.

Alex Bauer: I'll now hand you over to Alex Bauer to begin. Please go ahead.

Alex: I'll now hand, you over to Alex I'd like to begin. Please go ahead.

Lydia: Yes.

Alex Bauer: Thank you, operator. Good morning. My name is Alex Bauer, TriNet's Head of Investor Relations.

Alex Bauer: Thank you operator, good morning, My name is Alex Bauer Tri Ed's head of Investor Relations. Thank you for joining us and welcome to <unk> fourth quarter conference call and webcast.

Alex Bauer: Thank you for joining us and welcome to TriNet's fourth quarter conference call and web We're joined today by our President and CEO, Mike Simonds, and our CFO, Kelly Tuminelli. Before we begin, I would like to preview this morning's call, which will be a bit longer than usual, as we will provide a strategy update along with our earnings-related content and outline.

Mike Simonds: I'm joined today by our President and CEO, Mike Simonds, and our CFO Kelly criminality.

Mike Simonds: Before we begin I would like to preview this morning's call, which will be a bit longer than usual as we will provide a strategy update along with our earnings related content and outlook.

Alex Bauer: I will first pass the call to Mike for a few introductory comments regarding our strategy and medium-term outlook, as well as our fourth quarter and full-year plan. Kelly will then review our Q4 and full-year financial performance in greater detail and provide our 2025 financial guidance and outline.

Speaker Change: I will first pass the call to Mike for a few introductory comments regarding our strategy and medium term outlook as well as our fourth quarter and full year performance.

Speaker Change: Kelly will then review, our Q4 and full year financial performance in greater detail and provide our 2025 financial guidance and outlook.

Alex Bauer: Mike will then return to review in greater detail our strategy and medium-term outlook, including our value creation targets, leaving plenty of time for Q&A. Please note that today's discussion will include our 2025 Full Year Financial Outlook. Medium-Term Outlook, and other statements that are not historical in nature, are predictive in nature, or depend upon or refer to future events or conditions.

Speaker Change: Mike will then returned to review in greater detail, our strategy and medium term outlook, including our value creation targets, leaving plenty of time for Q&A.

Speaker Change: <unk> note that today's discussion will include our 2025 full year financial outlook, our medium term 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 are.

Unknown Attendee: Unknown Attendee, Alex Bauer, TriNet Group Inc, Unknown Attendee, Alex Bauer, TriNet These forward-looking statements are based on management's current expectations and assumptions and are inherently subject to risks, uncertainties, and changes in circumstances. that are difficult to predict and that may cause actual results to differ materially from statements being made today or in the future.

Speaker Change: Other statements that might be considered forward looking.

Speaker Change: 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 could differ materially from statements being made today or in the future.

Alex Bauer: except as may be required by law, we do not undertake to update any of these statements in light of new information, future events, or other. I 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. In addition, our discussion today will include non-GAAP financial measures, including our forward-looking guidance for adjusted EBITDA margin and adjusted net income per diluted share.

Speaker Change: Except as may be required by law.

Speaker Change: Not undertake to update any of these statements in light of new information future events or otherwise.

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

Speaker Change: In addition, our discussion today will include non-GAAP financial measures, including our forward looking guidance for adjusted EBITDA margin and adjusted net income per diluted share.

Alex Bauer: 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 are or will be available on our website or through the SEC website.

Speaker Change: For reconciliations of our non-GAAP financial measures to our GAAP financial results. Please see our earnings release 10-Q filings of our 10-K filing which are or will be available on our website or through the SEC website.

Mike Simonds: With that, I will turn the call over to Mike. Thank you, Alex. And thank you all for joining us today. It's a privilege for me to speak with you at this important time for TriNet, our customers, and for our shareholders. I'll be celebrating my first anniversary with TriNet shortly. It's been an eventful year and I've learned a great deal. While we've had to navigate a challenging environment with low customer hiring and elevated health care costs, It's given me the chance to see the strength of our business model first. It starts with my thousands of colleagues, united around a strong sense of purpose, helping small businesses attract and retain great talent, gain efficiency, stay compliant, and focus on their core business.

Speaker Change: With that I will turn the call over to Mike Mike.

Speaker Change: Thank you Alex and thank you all for joining us today.

Speaker Change: It's a privilege for me to speak with you at this important time for China, our customers and for our shareholders.

Speaker Change: I'll be celebrating my first anniversary with Tri net shortly it's been an eventful year and have learned a great deal.

Speaker Change: While we've had to navigate a challenging environment with low customer hiring and elevated health care costs is giving me the chance to see the strength of our business model firsthand.

Speaker Change: It starts with my thousands of colleagues United around a strong sense of purpose.

Speaker Change: Helping small businesses attract and retain great talent gain efficiency stay compliant and focus on their core businesses.

Mike Simonds: This team, enabled by a proprietary technology platform, provides the most comprehensive set of benefits and HR outsourcing services available in the market to SMBs. Having spent much of my career before TriNet working on just one part of this puzzle, employee benefits. I can tell you it is a beautiful thing to see it all come together in a seamless fashion. to see our scale put to work for the benefit of the small and mid-sized business. Our customers value our integrated approach to such a degree that even when we need to raise prices, as we have given healthcare cost trends, we still enjoy very strong retention and a high net promoter score.

Speaker Change: This team enabled by our proprietary technology platform provides the most comprehensive set of benefits and HR outsourcing services available in the market Smbs.

Speaker Change: We spent much of my career before tried at working on just one part of this puzzle employee benefits.

Speaker Change: I can tell you it is a beautiful thing to see it all come together in a seamless fashion to see our scale put to work for the benefit of the small and mid sized business.

Speaker Change: Our customers value our integrated approach to such a degree that even when we need to raise prices as we have given health care cost trends, we still enjoy very strong retention and a high net promoter score.

Mike Simonds: We have a strong, durable. The current environment also helped highlight opportunities for us to improve as well. Some of these we addressed in 2024, including strengthening our insurance and revenue leadership, centralizing and improving our data and analytics capabilities, and removing lower value spend from our expense Some opportunities are bigger and they require disciplined choices on where to invest. As you know, we spent time last year on a rigorous strategic review. I'm excited to share the outcome of that review with you later in the call. and outline how we're becoming a more focused company.

Speaker Change: We have a strong durable business.

Speaker Change: The current environment also help highlight opportunities for us to improve as well.

Speaker Change: Some of these we addressed in 2024, including strengthening our insurance and revenue leadership, centralizing and improving our data and analytics capabilities.

Speaker Change: And removing lower value spend from our expense base.

Speaker Change: Some opportunities are bigger and they require disciplined choices on where to invest.

Speaker Change: As you know we spent time last year on a rigorous strategic review.

Speaker Change: I am excited to share the outcome of that review with you later in the call.

Speaker Change: And outlined how we're becoming a more focused company.

Mike Simonds: How We Will Grow Revenues. Unknown Attendee, Alex Bauer, TriNet Group Inc. 2025 will be a year of transition. We will work in a measured way to reprice our insurance cost ratio back into our targeted range and exit 2025 in a much improved position. while we expect strong retention. The size of healthcare price increases will modestly increase attrition and dampen new sales compared to the first half of 2024. We will also exit our SAS only HRAS business in 2025. While the technology acquired through Zenefits remains strategically important. HRIS is a market where we don't have a clear path to winning, and it has become a distraction from our core.

Speaker Change: How we will grow revenues.

Speaker Change: Span margins and ultimately create value for our shareholders on a 13% to 15% sustained rate.

Speaker Change: 2025 will be a year of transition.

Speaker Change: We will work in a measured way to reprice, our insurance cost ratio back into our targeted range and exit 2025, and a much improved position.

Speaker Change: While we expect strong retention.

Speaker Change: The size of health care price increases will modestly increase attrition and dampen new sales compared to the first half of 2024.

We will also exit our SaaS only <unk> business in 2025.

Speaker Change: While the technology acquired through Zenna fits remains strategically important.

Speaker Change: <unk> is a market, where we don't have a clear path to winning and it has become a distraction from our core.

Mike Simonds: Our guidance for 2025 reflects the transition TriNet is going. And our goal this morning is to convey both the importance of this transition and what we believe is an achievable outlook for substantial shareholder value creation over the coming few years.

Speaker Change: Our guidance for 2025 reflects the transition Tri net is going through.

Speaker Change: And our goal. This morning is to convey both the importance of this transition and what we believe is an achievable outlook for substantial shareholder value creation over the coming few years.

Kelly Tuminelli: With that, I'm going to pass the call to Kelly to review our fourth quarter and full year performance, as well as 2025 guidance. Kelly? Thank you, Mike. Our fourth quarter performance reflected a continuation of many trends we experienced during 2024. While we saw some encouraging signs, business hiring remained slow as SMBs continued to navigate high interest rates and funding costs along with muted demand. While new customers value our services, these sales were down year over year as they were priced to reflect the elevated insurance cost environment. We also drove record retention for 2024, even as we renewed business at higher rates.

Speaker Change: With that I'm going to pass the call to Kelly to review, our fourth quarter and full year performance as well as 2025 guidance Kelly.

Kelly: Thank you, Mike our first quarter performance reflected a continuation of many trends we experienced during 2024.

Kelly: While we saw some encouraging signs business hiring remains slow as smbs continue to navigate high interest rates and funding cost along with muted demand.

Kelly: While new customers value our services. These sales were down year over year as they were priced to reflect the elevated insurance cost environment.

Kelly: We also drove record retention for 2024, even as we renewed business at higher rates.

Kelly Tuminelli: Mike will spend more time going through our strategy refresh in detail, but a key reaffirmation from it was that our customers benefit from differentiated service coupled with purpose-built technology.

Kelly: We'll spend more time going through our strategy refresh in detail, but a key reaffirmation from it was that our customers benefit from differentiated service coupled with purpose built technology.

Kelly Tuminelli: Given this, we are narrowing and intensifying our focus on PEO and will exit the HRAS software-only business. The underlying Zenefits technology will remain the core of our digital transformation and the backbone of our nascent ASO product called HR+. This offering pairs our strong service model with our HRS technology. We have scrutinized operating expenses, including staffing and our office footprint. This review led to a restructuring charge of $49 million related to exiting our HRAS business and capturing those future savings.

Given this we are narrowing and intensifying our focus on PEO and will exit the HRS software only business.

Kelly: The underlying benefits technology will remain the core of our digital transformation and the backbone of our nascent ASO product called HR plus.

Kelly: This offering pairs, our strong service model with our HRS technology.

Kelly: We have scrutinized operating expenses, including staffing in our office footprint.

Kelly: This review led to a restructuring charge of $49 million related to exiting our HRS business and capturing those future savings with that let's dive into our financial performance in greater detail.

Kelly Tuminelli: With that, let's dive into our financial performance in greater detail. Total revenues grew 1% year-over-year in the fourth quarter and for the full year, both in line with our guidance. Note that we have reclassified interest income as revenue, as it's an integral outcome of our core business operations, which didn't change the year-over-year revenue growth percentage. Total revenues performance for the year was largely driven by a consistent average number of co-employed WSEs, a low single-digit rate increase, partly offset by a shift in vertical mix which reduced average admin fees and benefit participation levels. Customer hiring remained low in our technology vertical, but we did see some pockets of improvements, most notably in financial services.

Kelly: Total revenues grew 1% year over year in the fourth quarter and for the full year both in line with our guidance.

Kelly: Note that we've reclassified interest income as revenue as it is an integral outcome of our core business operations, which didn't change the year over year revenue growth percentage.

Kelly: Revenue performance for the year was largely driven by our consistent average number of co employee Ws sees.

Kelly: A low single digit rate increase partly offset by a shift in vertical mix, which reduced average admin fees and benefit participation levels.

Kelly: Customer hiring remained low in our technology vertical, but we did see some pockets of improvements most notably in financial services.

Kelly Tuminelli: We finished the year with approximately 361,000 total WSEs up 4%. As a reminder, total WSEs include platform users who are accessing our platform as well as co-employed WSEs receiving the full benefit of our PEO services. We ended the year at 330,000 co-employed WSEs, down 2%. The decline in co-employed WSEs was largely the result of hiring within the installed base remaining just over 1% for the year and new sales just below total attrition. As I said at the outset, fourth quarter new sales performance came in line with our forecast while pricing new business appropriately for the current and expected health cost environment.

Kelly: We finished the year with approximately 361000 total WSI is up 4%.

Kelly: As a reminder, total wf fees include platform users, who are accessing our platform as well as co employed WSI is receiving the full benefit of our PEO services.

Kelly: We ended the year at 330000 contemplate WSI is down 2%.

Kelly: The decline in co employed Wsu's was largely the result of hiring within the install base remaining just over 1% for the year and new sales just below total attrition.

Kelly: As I said at the outset fourth quarter, New sales performance came in line with our forecast while pricing new business appropriately for the current unexpected help cost environment.

Kelly Tuminelli: Professional Services revenue in the fourth quarter declined 4% largely due to lapping the 2023 rollout of an annual client-based technology fee. We are suspending this fee and do not expect to be charging it going forward. For the year, professional services revenue increased 1%. Our PEO revenue in the year grew 3%. This included a modest pricing uplift and the in-year benefit from the client technology fee, as well as a 19% decline in our combined HRAS and ASO revenue. As we exit the HRISS-only portion of the business, these revenues will decline meaningfully in 2025, partly offset by increased revenue from customers who buy ASO services.

Kelly: Professional services revenue in the fourth quarter declined 4% largely due to lapping the 2023 rollout of an annual client base technology fee.

Kelly: We are suspending this fee and do not expect to be charging it going forward.

Kelly: For the year professional services revenue increased 1% our PEO revenue in the year grew 3%. This included a modest pricing uplift and the in your benefit from the client technology fee as well as a 19% decline in our combined HRS and <unk> ASO revenue.

Yeah.

Kelly: As we exit the HRS has only portion of the business. These revenues will decline meaningfully in 2025, partly offset by increased revenue from customers, who buy a ASO services.

Kelly Tuminelli: The cessation of the technology fee and the exit of the HRAS business are both included in our 2025 guidance. Insurance revenues grew 2% in the fourth quarter, consistent with the year healthcare participation rates within our co-employed base were slightly lower, partly offset by rate increases. insurance revenue for 2024 grew one person We expect to see the benefit of our renewals on insurance revenues build throughout the course of 2025. Insurance costs in the fourth quarter grew 12 percent, reflecting the trend this year of higher health cost inflation and utilization. Our normal seasonal pattern was slightly amplified as our pooling limits reset in October with more high-cost play.

Kelly: The cessation of the technology fee and the exited the HRS business are both included in our 2025 guidance.

Kelly: Insurance revenues grew 2% in the fourth quarter consistent with the year health care participation rates within our co employed base were slightly lower partly offset by rate increases.

Kelly: Insurance revenue for 2024 grew 1% we.

Kelly: We expect to see the benefit of our renewals on insurance revenues build throughout the course of 2025.

Kelly: Insurance costs in the fourth quarter grew 12%, reflecting the trend this year of higher health costs inflation and utilization.

Kelly: Our normal seasonal pattern with slightly amplified as our pooling limits reset in October with more high cost climates.

Kelly Tuminelli: The pattern of workers' comp claims was different this year than in prior years. For the year, workers' comp claims were generally in line with historical Rather than being distributed across the second and fourth quarters, the benefit from favorable prior period developments this year was heavily weighted to the second quarter. This contributed to the higher ICR this quarter. For the year, total insurance costs grew 8%. Our fourth quarter insurance cost ratio came in at 95% within our guidance range and we finished 2024 with an approximately 90% ICR, also in line with our updated outlook. Excluding our $49 million restructuring charge, operating expenses in the fourth quarter were down 1% year-over-year and down 2% for the full year.

Kelly: The pattern of Workers' comp claims was different this year than in prior years for the year Workers' comp claims were generally in line with historical trends.

Kelly: Rather than being distributed across the second and fourth quarters the benefit from favorable prior period development. This year was heavily weighted to the second quarter.

Kelly: This contributed to the higher ICR this quarter.

Kelly: For the year total insurance costs grew 8%.

Kelly: Our fourth quarter insurance cost ratio came in at 95% within our guidance range and we finished 2024 with an approximately 90% ICR also in line with our updated outlook.

Kelly: Excluding our $49 million restructuring charge operating expenses in the fourth quarter were down 1% year over year and down 2% for the full year.

Kelly Tuminelli: Totally intangible impairments were $25 million. The largest portion of that was $23 million from our decision to exit the HRAS software-only business. The other components of the charge include $14 million linked to rightsizing of our onshore team to reflect efficiencies, as well as the opportunity to leverage highly skilled global talent. $7 million related to site rationalization efforts, and $3 million mainly for outside support and other items related to these efforts. of the $49 million charge, $17 million of it is capped. These actions collectively will allow us to sharpen the focus of our organization on our value-creating initiatives, unlock capital to reinvest in growth, and better position the company to deliver enhanced financial performance over the medium term.

Kelly: Total intangible impairments were $25 million the largest portion of that was $23 million from our decision to exit the HRS software only business.

Kelly: The other components of the charge include $14 million linked to right sizing of our onshore team to reflect efficiencies as well as the opportunity to leverage highly skilled global talent set.

$7 million related to site rationalization efforts and $3 million, mainly for outside support and other items related to these efforts.

Kelly: Of the $49 million charge 17 million of it is cash.

Kelly: These actions collectively will allow us to sharpen the focus of our organization on our value, creating initiatives unlock capital to reinvest in growth and better position the company to deliver enhanced financial performance over the medium term.

Kelly Tuminelli: We will continue to manage expenses tightly, and we expect our 2025 expenses to be lower than 2024, excluding the restructuring charge. We do anticipate some trailing restructuring costs in 2025, albeit much smaller than in 2024. Fourth quarter gap net loss per share was $0.46, and full year gap earnings per diluted share was $3.43. gap earnings per diluted share were reduced by the restructuring charge. Our adjusted earnings per diluted share, which excludes restructuring, was $0.44 in the quarter and $5.32 for the year. TriNet remained a strong cash-generative business in 2024 despite operating headwinds. For the year, we generated $279 million in net cash provided by operating activities and $201 million in free cash flow.

Kelly: We will continue to manage expenses tightly and we expect our 2025 expenses to be lower than 2024, excluding the restructuring charge.

Kelly: We do anticipate some trailing restructuring costs in 2025, albeit much smaller than in 2024.

Kelly: Fourth quarter GAAP net loss per share was 46 and full year GAAP earnings per diluted share was $3 and 43 GAAP earnings per diluted share were reduced by the restructuring charge.

Kelly: Our adjusted earnings per diluted share, which excludes restructuring was <unk> 44 cents in the quarter and $5.32 for the year.

Kelly: China remained a strong cash generative business in 2024, despite operating headwinds for the year, we generated $279 million and net cash provided by operating activities and $201 million in free cash flow.

Kelly Tuminelli: In accordance with emerging accounting practices, we modified the presentation of our Statement of Cash Flows by moving cash flows related to WSC activities from operating cash flows to financing cash flows. Net cash provided by Operating Activities now reflects what we previously provided within our MD&A as net cash provided by Operating Activities Corporate. We generated $60 million in adjusted EBITDA in the fourth quarter and $485 million in adjusted EBITDA for the year. Over the course of the year, we leveraged that cash generation to fund dividends and repurchase approximately 1.8 million shares, deploying $219 million to shareholders.

Kelly: In accordance with emerging accounting practices, we modified the presentation of our statement of cash flows by moving cash flows related to WMC activities from operating cash flows to financing cash flows.

Kelly: Net cash provided by operating activities now reflects what we previously provided with inner MD&A as net cash provided by operating activities corporate.

Kelly: We generated $60 million and adjusted EBITDA in the fourth quarter and $485 million and adjusted EBITDA for the year.

Kelly: Over the course of the year, we leveraged that cash generation to fund dividends and repurchase approximately one 8 million shares deploying $219 million to shareholders.

Kelly Tuminelli: We also paid down $109 million of our revolving credit facility and exited 2024 with a debt-to-adjusted EBITDA ratio of 2 times at the upper end of our targeted 1.5 to 2 times range.

Kelly: We also paid down $109 million of our revolving credit facility and exited 2024 with a debt to adjusted EBITDA ratio of two times at the upper end of our targeted one five to two times range.

Kelly Tuminelli: In 2025, our capital return priorities remain in We will continue to deliver value to shareholders by investing in our value creation initiatives, funding dividends and share rate purchases, and maintaining an appropriate liquidity buffer. Now let's turn to our 2025 outlook, where we've made a few changes compared to last year. First, we're moving from quarterly to annual guidance to better align guidance with how we forecast and manage our business. There's seasonality in both how our customers buy and how our business performs. And we spend a disproportionate amount of time discussing the seasonality of our business, distracting from long term focus of profitable growth.

Kelly: In 2025, our capital return priorities remain unchanged, we will continue to deliver value to shareholders by investing in our value creation initiatives funding dividends and share repurchases and maintaining an appropriate liquidity buffer.

Kelly: Now, let's turn to our 2025 outlook, where we've made a few changes compared to last year.

Kelly: First we are moving from quarterly to annual guidance to better align guidance with how we forecast and manage our business.

Kelly: There is seasonality in both how our customers buy and how our business performs and we spend a disproportionate amount of time discussing the seasonality of our business distracting from long term focus of profitable growth.

Kelly Tuminelli: Next, we're adding adjusted EBITDA margin as a guidance metric to help investors better understand how we are forecasting operating expense growth. For 2025, we expect total revenues to be in the range of $4.9 billion to $5.1 billion. Given the current economic backdrop, we are expecting slight volume decreases in 2025, resulting from three factors. One, our new sales assumption is down over 2024 with most of the decline occurring in Q1 due to our more prudent pricing approach reflecting elevated health cost trends. 2. We anticipate attrition moving up one to two points, but still below our previous historical norms as we place appropriate price increases with our existing customers.

Kelly: Next we're adding adjusted EBITA margin as a guidance metric to help investors better understand how we are forecasting operating expense growth.

Kelly: For 2025, we expect total revenues to be in the range of $4 9 billion to $5 1 billion.

Kelly: Given the current economic backdrop, we are expecting slight volume decreases in 2025, resulting from three factors.

Kelly: One our new sales assumption is down over 2024 with most of that decline occurring in Q1 due to a more prudent pricing approach, reflecting elevated health cost trends.

Kelly: Two we anticipate attrition moving up one to two points, but still below our previous historical norms as we place appropriate price increases with our existing customers.

Kelly Tuminelli: And 3. We assume CIE growth to remain at low single-digit growth rates, similar to 2024 levels. As the year progresses, we expect total revenues to grow as pricing firms. With the volume backdrop, we expect professional services revenues to range from $700 million to $730 million. The drivers of this range are, first, the overall volume decline, which has an approximately $35 to $40 million impact on our 2025 revenues compared to 2024. Second, the discontinuation of an annual per client technology fee, which contributed $22 million in revenue in 2024. This fee was introduced in late 2023, and charged again during 2024.

Kelly: And three we assume Cie growth to remain at low single digit growth rates similar to 2024 levels.

Kelly: As the year progresses, we expect total revenues to grow as pricing firms.

Kelly: With the volume backdrop, we expect professional services revenues to range from 700 million to $730 million. The drivers to this range are first the overall volume decline, which has an approximately $35 million to $40 million impact on our 2025 revenues compared.

Kelly: 2024.

Kelly: Second the discontinuation of an annual per client technology fee, which contributed $22 million in revenue in 2024.

Kelly: This fee was introduced in late 2023 and charged again during 2024, we have discontinued it after assessing customer feedback.

Kelly Tuminelli: We have discontinued it after assessing customer feedback. Third, our exit from the HRAS business, where we expect SAS-only revenues to decline as customers convert to ASO or transition to another partner. We expect this choice to reduce revenues between $15 and $20 million as we start building our base of ASO. Finally, we assume a modest single-digit price increase, contributing $25 to $30 million, partly offsetting the revenue declines I just mentioned. We expect our insurance cost ratio to be in the range of 92% to 90%. As the year progresses, we expect revenue to build and position us to exit 2025 with an improving seasonally adjusted ICR.

Kelly: Third our exit from the HRS business, where we expect SAS only revenues to decline as customers convert to a ASO or transition to another partner.

Kelly: We expect this choice to reduce revenues between 15 and $20 million as we start building our base of ASO.

Kelly: Finally, we assume a modest single digit price increase contributing $25 million to $30 million, partly offsetting the revenue declines I just mentioned.

Kelly: We expect our insurance cost ratio to be in the range of 92% to 90% as the year progresses, we expect revenue to build and position us to exit 2025, with an improving seasonally adjusted ICR.

Kelly Tuminelli: In 2025, we expect our adjusted EBITDA margin to be approximately 7 to 9%. Prudent expense management remains a key objective, particularly as we reinvest in value creation initiatives. We expect lasting efficiency improvements to come from the expense actions we are taking. The 2025 contraction in our adjusted EBITDA margin includes two short-term factors. First, the midpoint of our Guided Insurance Cost Ratio is above our targeted range of 87 to 90%. And second, we expect to carry our HRIS expense base through the wind down of that business before right sizing those expenses. For those SaaS-only customers who elect not to move to HR+, we will continue to support them through 2025.

Kelly: In 2025, we expect our adjusted EBITDA margin to be approximately 7% to 9%.

Kelly: Prudent expense management remains a key objective, particularly as we reinvest in value creation initiatives.

Kelly: We expect lasting efficiency improvements to come from the expense actions we are taking.

Kelly: The 2025 contraction in our adjusted EBITA margin includes two short term factors.

Kelly: First the midpoint of our guided insurance cost ratio is above our targeted range of 87% to 90% and second we expect to carry our H I S expense base through the wind down of that business before right sizing those expenses.

Kelly: For those SaaS only customers, who elect not to move to HR, plus we will continue to support them through 2025.

Kelly Tuminelli: Lastly, given the strong capital deployment for the last two years, our cash and investment balances are lower. We've also experienced an overall decline in rates from recent highs. Both those factors together have lowered the interest income we are expecting in 2025 versus 2024 by $25 to $30 million.

Kelly: Lastly, given our strong capital deployment for the last two years, our cash and investment balances are lower.

Kelly: We've also experienced an overall decline in rates from recent highs.

Kelly: Both those factors together have lowered the interest income we are expecting in 2025 versus 2024 by $25 million to $30 million.

Kelly Tuminelli: As Mike said, 2025 will be a transition year for TriNet as we become more focused on our core value proposition with more efficient operations. This brings our expected GAAP earnings per diluted share to be in the range of $1.90 to $3.40 and adjusted earnings per diluted share to be $3.25 to $4.75.

Kelly: As Mike said 2025 will be a transition year for China as we become more focused on our core value proposition with more efficient operations.

Mike: This brings our expected GAAP earnings per diluted share to be in the range of $1.90 to $3 40, and adjusted earnings per diluted share to be $3 25 to $4.75.

Mike Simonds: With that, I will pass the call to Mike to discuss our value creation initiatives.

Speaker Change: With that I will pass the call to Mike to discuss our value creation initiatives Mike.

Mike Simonds: Mike. Thank you, Kelly. And thank you all for accommodating a longer call this I'm excited to share our strategy and medium term outlook. And I should also thank many of you for sharing your thoughts and questions with me over my first. Many of you share my enthusiasm for our large market opportunity and TriNet's value proposition. You've also asked some very good questions about our lack of consistent growth, sustainability of margins, and the pros and cons of taking insurance risk. We undertook a thorough review of our strategy beginning last June to answer these and other important questions about our business.

Mike: Thank you Kelly and thank you all for accommodating a longer call. This quarter I'm excited to share our strategy and medium term outlook.

Mike: Should also thank many of you for sharing your thoughts and questions with me over my first year.

Mike: Many of you share my enthusiasm for our large market opportunity and Tri net value proposition.

Mike: You've also asked some very good questions about our lack of consistent growth sustainability of margins and the pros and cons of taking insurance risk.

Mike: We undertook a thorough review of our strategy beginning last June to answer these and other important questions about our business.

Mike Simonds: I'm going to walk you through the choices we've made, the data that underpins them, and the positive outcomes we're targeting for shareholders, customers, and colleagues.

Mike: I'm going to walk you through the choices, we've made the data that underpins them and the positive outcomes, we're targeting for shareholders customers and colleagues.

Mike Simonds: Our plan targets three straightforward financial objectives. Grow Revenues. to expand margins and deliver on our capital management priorities. With disciplined execution, these actions support a value creation opportunity of 13 to 15% per year for our shareholders using 2024 as a baseline.

Mike: Our planned targets three straightforward financial objectives grow revenues expand margins and deliver on our capital management priorities.

Mike: With disciplined execution these actions support our value creation opportunity of 13% to 15% per year for our shareholders using 'twenty 'twenty four as a baseline.

Mike Simonds: I won't spend a lot of time on it now, but it is important to start with the strong position TriNet enjoys today. We serve over 15,000 PEO customers and 360,000 worksite employees. and we are the premium brand in the space, delivering the leading technology experience with a high touch service model. Our market opportunity is large and our industry is growing. 59 million people in the U.S. are employed by companies with 500 or fewer employees. PEOs serve just 7% of that market. and the industry is growing seven and a half percent per year on a sustained basis.

Mike: I won't spend a lot of time on it now, but it is important to start with the strong position Tri net enjoys today.

Mike: We serve over 15000 PEO customers in 360000, Worksite employees and we are the premium brand in this space delivering the leading technology experience with a high touch service model.

Mike: Our market opportunity is large and our industry is growing 59 million people in the U S are employed by companies with 500 or fewer employees.

Mike: P O serve just 7% of that market and the industry is growing seven 5% per year on a sustained basis and we believe this growth can accelerate as there are three major secular tailwind for our business model.

Mike Simonds: And we believe this growth can accelerate as there are three major secular tailwinds for our business model. Rising health care costs are a big issue that is not going away. And we believe the scale and risk taking in our model creates real value for SMBs. More on this in a moment. Next, over 40% of the SMB workforce is now full-time remote, which only makes it more complicated to onboard, benefit, and administer HR. layer in the regulatory burden for the SMB with employees across multiple states, and our value proposition becomes even more compelling. against that backdrop of a growing industry and increasing SMB demand.

Mike: First.

Mike: Rising health care costs are a big issue that is not going away and we believe the scale and risk taking in our model creates real value for smbs more on this in a moment.

Mike: Next over 40% of the F&B workforce is now full time remote which only makes it more complicated to onboard benefit at administer HR.

Mike: Layer in the regulatory burden for the SNB with employees across multiple states and our value proposition becomes even more compelling.

Mike: Against that backdrop of a growing industry and increasing SMB demand.

Mike Simonds: TriNet's lack of consistent growth stands out, and for us, It underscores the need for us to change. Our plan is to grow revenues at 4 to 6% per year over the medium term. We've identified concrete ways to further differentiate ourselves from competitors on product, direct sales, and in the brokerage channel. Note that our 4% to 6% revenue growth assumes customer hiring remains somewhat muted, and I'll touch on that more in a moment.

Mike: <unk> lack of consistent growth stands out and for us.

Mike: It underscores the need for us to change.

Mike: Our plan is to grow revenues at 4% to 6% per year over the medium term.

Mike: We have identified concrete ways to further differentiate ourselves from competitors on product direct sales and in the brokerage channel.

Mike: Note that our 4% to 6% revenue growth assumes customer hiring remains somewhat muted and I'll touch on that more in a moment.

Mike Simonds: Let's start with our benefits offering and address one of the important questions many of you have asked. Why take insurance risks? Our benefits offering is enabled by our business model. We take insurance risk. This comes with puts and takes. particularly evident in the current cost environment. In our view, the positives went out over the long term, both for our customers and for our shareholders. Taking risk affords us greater access to claims data and puts us at the table with our carrier partners in designing and pricing our offers. However, leveraging data and carrier partnerships also requires an investment in the right expertise and the right technology.

Mike: Let's start with our benefits offering and address one of the important questions. Many of you have asked.

Mike: Why take insurance risk.

Mike: Our benefits offering is enabled by our business model, we take insurance risk. This comes with puts and takes.

Mike: Particularly evident in the current cost environment.

Mike: In our view the positives win out over the long term both for our customers and for our shareholders.

Mike: Taking risk affords us greater access to claims data and puts us at the table with our carrier partners in designing and pricing our offerings.

Mike: However, leveraging data and carrier partnerships also requires an investment in the right expertise and the right technology.

Mike Simonds: On the people side, in mid 2024, we carved out our insurance services group, reporting directly to me, we brought in a new head of insurance services and added outstanding actuarial talent as well.

Speaker Change: On the people side in mid 'twenty 'twenty four we carved out our insurance services group reporting directly to me.

Speaker Change: We brought in a new head of insurance services and added outstanding actuarial talent as well.

Mike Simonds: On the technology side, we are working to solve a longstanding problem at TriNet. Our benefits platform is efficient, but rigid, with limited flexibility to tailor solutions to a customer's needs. For example, to hit a lower price point for a cost-sensitive customer, a primary lever has been discounted. Going forward, using the Zenefits technology and dedicated change team. we're building the capability to efficiently tailor. While most of our competitors do not take risk and pass through standard health care products and pricing, we are partnering with carriers to provide options that meet customers' specific benefit objectives. We are driving towards having our first wave of these new offerings in the market by our fall selling.

Speaker Change: On the technology side, we are working to solve a long standing problem at Tri Ed our benefits platform is efficient, but rigid with limited flexibility to tailor solutions to our customers need.

Speaker Change: For example, they had a lower price point for a cost sensitive customer a primary lever has been discounting.

Speaker Change: Going forward.

Speaker Change: Using the benefits technology and dedicated change teams, we're building the capability to efficiently tailor offerings.

Speaker Change: Most of our competitors do not take risk and pass through standard health care products and pricing, we are partnering with carriers to provide options that meet customers' specific benefit objectives were.

Speaker Change: We are driving towards having our first wave of these new offerings in the market by our fall selling season.

Mike Simonds: These options, paired with the strong enrollment, decision support, and administration capabilities of our platform, will further differentiate us in the market. are increasingly tenured salespeople and growing employee benefit brokerage channel will use that differentiation to drive new business.

Speaker Change: These auctions.

Speaker Change: Paired with the strong enrollment decision support and administration capabilities of our platform will further differentiate us in the market.

Speaker Change: Our increasingly tenured salespeople and growing employee benefit brokerage channel, we'll use that differentiation to drive new business.

Mike Simonds: which is a good segue to changes we're making in our go-to-market approach. We grew our sales force by 14% in 2024 and plan to grow it modestly again here in 2025, targeting underpenetrated geographies and experienced rep hire. We're also making changes to increase average tenure in our sales. Given our expansion and some self-inflicted struggles we've had in recent years, our median tenure is just over 21 months. lower than that of our peers. A rep with four years of experience produces more than four reps in their first year at TriNet. Our strategy for keeping reps longer starts with leadership, and we were pleased to bring in a new leader with a proven track record in building strong, career-oriented direct and channel teams in the SMB market.

Speaker Change: Which is a good segue to changes, we're making in our go to market approach.

Speaker Change: We grew our sales force by 14% in 2024 and plan to grow it modestly again here in 2025 targeting underpenetrated geographies and experienced rep hires.

Speaker Change: We're also making changes to increase average tenure in our sales force.

Speaker Change: Given our expansion and some self inflicted struggles we've had in recent years. Our median tenure is just over 21 months.

Speaker Change: Lower than that of our peers.

Speaker Change: Our rep with four years of experience produces more than four reps in their first year of try that.

Speaker Change: Our strategy for keeping reps longer starts with leadership and we were pleased to bring in a new leader with a proven track record in building strong career oriented direct and channel teams in the SMB market.

Mike Simonds: We are redesigning our sales compensation and rewards programs to align incentives with longevity, investing in professional development, and building out physical offices to help strengthen our field culture and enhance collaboration. As we develop outstanding expertise in our sales team, our direct sales will benefit. In addition, benefit brokers will be more likely to do business with TriNet, preferring to refer their clients to tenured and experienced sales teams. and The Opportunity in the Benefit Broker channel is big.

Speaker Change: We are redesigning our sales compensation and rewards programs to align incentives with longevity investing in professional development and building out physical offices to help strengthen our field culture at enhanced collaboration.

Speaker Change: As we develop outstanding expertise in our sales team our direct sales will benefit. In addition benefit brokers will be more likely to do business with tri net preferring to refer their clients to tenured and experienced salespeople.

Speaker Change: And the opportunity in the benefit broker channel is big as I shared earlier P. O's only serve 7% of the SMB market.

Mike Simonds: As I shared earlier, PEOs only serve 7% of the SMB market. In contrast, employee benefit brokers bring health care to nearly 70 percent. or 41 million WSEs in the S&P market. The industry, including TriNet, have gone back and forth between partnering and competing with brokers. Many of our peers own their own brokerages today. Moving forward, our priority will be to collaborate versus We're adding functionality to our platform to allow brokers access and insight on the clients they bring to TriNet. we are aligning incentives and establishing joint go-to-market approach. While building trust in this channel doesn't happen overnight, I'm excited about the momentum we've already established.

Speaker Change: In contrast employee benefit brokers bring health care to nearly 70% or 41 million Ws. He is in the SMB market.

Speaker Change: The industry, including try that have gone back and forth between partnering and competing with brokers.

Speaker Change: Many of our peers own their own brokerages today.

Speaker Change: Moving forward, our priority will be to collaborate versus compete.

Speaker Change: We're adding functionality to our platform to allow brokers access and insight on the clients they bring to trying out.

Speaker Change: We are aligning incentives and establishing joint go to market approaches.

Speaker Change: While building trust in this channel doesn't happen overnight I'm excited about the momentum we've already established.

Mike Simonds: As I noted earlier, our medium term revenue forecast of four to six percent does not assume customer hiring returns all the way to historical Our base case assumes a gradual ramp in CIE back from low single digit to mid single digit over the next few years. Should we see CIE above that, we would see upside in our overall revenue. and Margin Improvement as well, given the low cost of acquisition and incremental servicing cost for CIE.

Speaker Change: As I noted earlier, our medium term revenue forecast of 4% to 6% does not assume customer hiring returns all the way to historical norms.

Speaker Change: Our base case assumes a gradual ramp in Cie back from low single digit to mid single digit over the next few years.

Speaker Change: Should we see I E above that we would see upside in our overall revenue and margin improvement as well given the low cost of acquisition and incremental servicing cost for C. I E.

Mike Simonds: Of course, we have levers much more in our immediate control to improve margins, and next I'd like to highlight the two most important ones. The first is risk management and improving our insurance cost ratio. We are confident we can return our ICR to our target range over the medium. On this page, we provide our health cost ratio, which excludes workers' compensation. As you can see, the health care issue is largely confined to business written in 2023 and the first half of 2024, representing 15% of our book. The remaining 85% of the customer base. sits in the middle of our targeted.

Speaker Change: Of course, we have levers much more in our immediate control to improve margins and next I'd like to highlight the two most important ones.

Speaker Change: The first is risk management and improving our insurance cost ratio. We are confident we can return our ICR to our target range over the medium term.

Speaker Change: On this page, we provide our health cost ratio, which excludes workers' compensation.

Speaker Change: As you can see the health care issue is largely confined to business written in 2023, and the first half of 'twenty 'twenty four representing 15% of our book.

Speaker Change: The remaining 85% of the customer base.

Speaker Change: Sits in the middle of our targeted range.

Mike Simonds: Because our health cost ratio issue is confined and we do not have a systemic mispricing of risk, I'm very confident we can manage our way back to our target. We took meaningful steps with our October 1st and January 1st effective renewals, and we'll continue to work through our customer base in a balanced way over the course of 2025. I fully expect to exit the year in a much better place relative to our target.

Speaker Change: Because our health cost ratio issue is can find and we do not have a systemic mispricing of risk I'm very confident we can manage our way back to our target range.

Speaker Change: Meaningful steps with our October one and January one effective renewals and we'll continue to work through our customer base in a balanced way over the course of 2025.

Speaker Change: I fully expect to exit the year in a much better place relative to our target.

Mike Simonds: In addition to ICR, the other significant lever to drive margin improvement is operating A few big elements will move the needle. First, technology, especially investments in AI and digital will lower cost while improving the customer experience. When I arrived at TriNet, we had already begun to reduce our significant tech debt, and we've accelerated those efforts. For example, we process over 2.5 million customer service cases per year. And over the medium term, we believe we can automate more than 20% of these interactions.

Speaker Change: In addition to ICR the other significant lever to drive margin improvement as operating expense.

Speaker Change: A few big elements will move the needle.

Speaker Change: First technology, especially investments in AI and digital will lower cost, while improving the customer experience when I arrived at Tri Ed We had already begun to reduce our significant tech debt and we've accelerated those efforts.

Speaker Change: For example, we process over 2.5 million customer service cases per year and over the medium term. We believe we can automate more than 20% of these interactions.

Mike Simonds: Talent strategy is another big area. This is about having the right people in the right places for where our business is going. and giving them the support and the tools to do their job. We expect the net effect of these efforts will help keep operating expense growth within a 1 to 3% range per year on average. Importantly, there will be a flywheel effect as we create efficiencies. We will not only keep overall expense growth in check, we will also grow the share of OPEX that goes into new capabilities. from 12% last year to between 20% and 25% in the medium.

Speaker Change: Talent strategy is another big area.

Speaker Change: This is about having the right people in the right places for where our business is going and giving them the support and the tools to do their job efficiently.

Speaker Change: We expect the net effect of these efforts will help keep operating expense growth within a 1% to 3% range per year on average.

Speaker Change: Importantly, there will be a flywheel effect as we create efficiencies we will not only keep overall expense growth in check we will also grow the share of opex that goes into new capabilities.

Speaker Change: From 12% last year to between 20 and 25% in the medium term this.

Mike Simonds: This gives us the room to innovate and improve the value we bring to customers.

Speaker Change: This gives us the room to innovate and improve the value we bring to customers.

Mike Simonds: Naturally, delivering on our growth and margin objectives will translate into strong, free cash flow growth. Cash generation is one of the reasons we love our business model. And over the next few years, we expect to convert approximately 60 to 65% of adjusted EBITDA to free cash. That's cash we can reinvest in the business or return to shareholders as we've done in recent years, returning over $2 billion since 2020 through repurchase.

Speaker Change: Naturally delivering on our growth and margin objectives will translate into strong free cash flow growth.

Speaker Change: Cash generation is one of the reasons, we love our business model and over the next few years, we expect to convert approximately 60% to 65% of adjusted EBITDA to free cash flow.

Speaker Change: That's cash we can reinvest in the business or returned to shareholders as we've done in recent years, returning over $2 billion since 2020 through repurchases.

Mike Simonds: Our capital allocation strategy remains largely unchanged. We will continue the dividend we initiated in 2024 and we expect it to grow with earnings over time. we expect to continue to repurchase shares. And while we will remain opportunistic with respect to M&A, we do not anticipate significant transactions in the medium term and believe our policy of returning 75% of free cash flow on average to shareholders remains a good target.

Speaker Change: Our capital allocation strategy remains largely unchanged.

Speaker Change: We will continue the dividend we initiated in 2024, and we expect it to grow with earnings over time.

Speaker Change: We expect to continue to repurchase shares.

Speaker Change: And while we will remain opportunistic with respect to M&A, we do not anticipate significant transactions in the medium term and believe our policy of returning 75% of free cash flow on average to shareholders remains a good target.

Mike Simonds: Overall, we expect this plan will create compelling value for investors in the range of 13 to 15% per year on average. Our investments in offering and go to market will drive 4 to 6% revenue growth. We will achieve 10 to 11% margins through strong insurance risk management and expense efficiencies.

Speaker Change: Overall, we expect this plan will create compelling value for investors in the range of 13% to 15% per year on average.

Speaker Change: Our investments in offering and go to market will drive 46% revenue growth.

Speaker Change: We will achieve 10% to 11% margins through strong insurance risk management and expense efficiencies.

Mike Simonds: We believe we can convert between 60 and 65% of our adjusted EBITDA to free cash flow in support of our capital allocation strategy, which translates into 12 to 14% EPS growth and 13 to 15% value creation when you take the dividend into Now, I'm mindful we are communicating our strategy on the same call that we're providing short-term guidance for 2025, which on most dimensions is below our medium-term outlook. I want to share a little more about the cadence of improvement to help you bridge from our 2025 guidance to our medium-term outlook. The changes we are making build momentum through the year and set us up to exit 2025 on an improved trajectory.

Speaker Change: We believe we can convert between 60 and 65% of our adjusted EBITDA to free cash flow in support of our capital allocation strategy, which translates into 12% to 14% EPS growth and 13% to 15% value creation. When you take the dividend into account.

Speaker Change: Now our mindful we are communicating our strategy on the same call that we're providing short term guidance for 2025, which are most dimensions is below our medium term outlook.

Speaker Change: I wanted to share a little more about the cadence of improvement to help you bridge from our 2000 and twenty-five guidance to our medium term outlook.

The changes, we are making build momentum through the year and set us up to exit 2025 on an improved trajectory. There are three primary factors driving this.

Mike Simonds: There are three primary factors driving. The first is repricing. We began this effort in the second half of 2024 and it takes about four quarters for the full impact of repricing the 2023 and first half 24 cohorts to be seen in the P&L. That means we'll see some benefit of repricing in the second half of 2025, but more meaningfully in 2026 and beyond.

Speaker Change: The first is repricing we began this effort in the second half of 2024 and it takes about four quarters for the full impact of repricing. The 2023 and first half 'twenty four cohorts to be seen in the P&L.

Speaker Change: That means we'll see some benefit of repricing in the second half of 2025, but more meaningfully in 2026 and beyond.

Mike Simonds: Next is Salesforce productivity. It takes time to recruit and hire sales reps that meet our standards and get them fully up. That said, we have large cohorts of salespeople entering their third and fourth years with TriNet, and we expect this experience, along with benefit offering improvements, will begin to drive sales increases during the fall selling season with significant improvements for January 2026.

Speaker Change: Next is sales force productivity it takes time to recruit and hire sales reps that meet our standards and get them fully up to speed.

Speaker Change: That said, we have large cohorts of salespeople entering their third and fourth years with try that and we expect this experience along with benefit offering improvements will begin to drive sales increases during the fall selling season with significant improvements for January 2026.

Mike Simonds: Finally, the exit of the HRAS business lowers our base of revenue by $15 to $20 million in 2025. and recall that while HRAS revenue goes away relatively quickly, it takes a bit longer to take out the expense as we will continue to service the solution through full transition of our In 2025, there's a modest EBITDA margin drag related to this dynamic that will not persist into 2026. HRIS was a low margin and shrinking on a pro-forma basis. Fully exiting this business will be accretive to margin.

Speaker Change: Finally, the exit of the HRS business lowers our base of revenue by $15 million to $20 million in 2025.

Speaker Change: And recall that while HRS revenue goes away relatively quickly it takes a bit longer to take out the expense as we will continue to service the solution through full transition of our customers.

Speaker Change: In 2025, there's a modest EBITDA margin drag related to this dynamic that will not persist into 2026.

Speaker Change: HRS was a low margin and shrinking on a pro forma basis fully exiting this business will be accretive to margins.

Mike Simonds: In conclusion, I'd like to finish back where I started this call. We are in the midst of a transition year here at TriNet, but I couldn't be more excited or confident in where we're headed.

Speaker Change: In conclusion, I'd like to finish back where I started this call.

Speaker Change: We are in the midst of a transition year here at Tri, Ed, but I couldn't be more excited or confident in where we're headed.

Mike Simonds: With our large growing market, strong customer value proposition, and a straightforward and disciplined strategy in place, we are well positioned to restart revenue growth, expand our margins, and create value for our shareholders.

Speaker Change: With our large growing market strong customer value proposition and a straightforward and disciplined strategy in place, we are well positioned to restart revenue growth expand our margins and create value for our shareholders.

Unknown Attendee: With that, we now look forward to taking your questions, operator. Thank you. Please press star followed by the number one if you'd like to ask a question and ensure your devices are muted locally when it's your turn to speak. If you change your mind, or your question's already been answered, you can withdraw your question by pressing star followed by the number.

Speaker Change: With that we now look forward to taking your questions.

Speaker Change: Operator.

Speaker Change: Thank you.

Speaker Change: <unk> followed by the number one if you'd like to ask a question and answer all your devices, Amit you'd likely limit your attempt to speak have you changed your mind with your question's already been asked Jade Hey, Julia question by question and stuff on it by the number.

Jared Levine: Our first question comes from Jared Levine with TD Cowen. Please go ahead, your line is open. Thank you.

Speaker Change: Our first question comes from Jared Levine with Gd Cowen.

Speaker Change: Please go ahead your line is open.

Speaker Change: Thank you I guess to start here, let's touch on the medium term financial targets I guess to the first part here, where do you finding in terms of duration for the medium term and then can you discuss the underlying components of that 40% fixed revenue growth between volume and pricing increases.

Jared Levine: I guess to start here, let's touch on the medium-term financial targets. I guess the first part here, where are you defining in terms of duration for the medium-term? And then can you discuss the underlying components of that four to six revenue growth between volume and pricing increases?

Mike Simonds: Unknown Speaker Good morning, Jared. Thanks for the question. It's Mike.

Speaker Change: Yes, good morning, Jared Thanks for the question it's Mike.

Mike Simonds: And, you know, if I could take a quick step back, you know, we thought it was really important to give the marketing investors a sense of not just where we're going to be in 2025, but as we look out over the coming years past that, what's the rate of improvement that we see in terms of value creation? And we did take a little bit of time to lay out the plans and the steps we're taking. There's a lot of confidence in our ability to step through that.

Speaker Change: If I just take a quick.

Speaker Change: Step back.

Speaker Change: That was really important to give the market and investors a sense of not just where we're going to be in 2025, but as we look out.

Speaker Change: Over the coming years past that what's the rate of improvement that we see in terms of value creation.

Speaker Change: You just take a little bit of time to lay out the plans and the steps, we're taking as a lot of confidence in our ability to step through that well when we thought about exactly naming the duration, we felt we feel like.

Mike Simonds: But, you know, when we thought about exactly naming the duration, we felt we feel like we're going to learn a lot as we go through 2020, 2025, you know, what's the exact rate of improvement on the controllable inside of TriNet, as well as those external as well. And so, you know, we've left it a little bit open in terms of the exact, you know, sort of that duration of the medium term.

Speaker Change: We're going to learn a lot as we go through 2020 245, what's the exact rate of improvement on those.

Speaker Change: Controllable inside of China, as well as those external as well and so we left it a little bit open in terms of the exact.

Speaker Change: The duration of the medium term, but I can tell you. If you think about the elements of the plan is kind of gets to the second part of your question our confidence is a little bit difficult to read that is that a pretty intuitive. So I took.

Mike Simonds: But I can tell you, if you think about the elements, the plans kind of get to the second part of your question, our confidence is a little bit different for reasons I think that are pretty intuitive. So if I took the insurance cost ratio, our confidence is quite high there, that we can manage that through our new business and renewal pricing over, say, the next three years back into the middle part of that targeted range. When you take, you know, a volume driver like CIE, our confidence is, you know, much less certain given that there's a lot that happens externally.

The insurance call cost ratio, our confidence is quite high there that we can manage that through our new business and renewal.

Speaker Change: Rising over say the next three years back into the <unk>.

Speaker Change: Middle part of that targeted.

Speaker Change: Okay.

Speaker Change: <unk> driver like Cie our competencies.

Speaker Change: Much less certain given that theres a lot that happens external and so we've put in there is that kind of a very modest improvement not all the way back to historical Cie.

Mike Simonds: And so we've put in there kind of a very modest improvement, not all the way back to historical CIE norms. And we also have provided more transparency to the market by giving you some sensitivity analysis around that. So, you know, I think it bodes well in terms of your question in that repricing of insurance back into that middle of the range will be a substantial part of the revenue increase. But we also see volume, particularly as we get past 2025, starting to be a meaningful contributor over the long term.

Speaker Change: And we also provided more transparency to the market by giving you some sensitivity analysis around that.

Speaker Change: I think it bodes well in terms of your question in that.

Speaker Change: The pricing of insurance back into that middle of the range will be a substantial part of the revenue increase but we also see volume, particularly as we get past 2025, starting to be a meaningful contributor over the long term.

Jared Levine: Got it. And then in terms of the ICR, can you give us an update in terms of the cost trends there in terms of how those trending?

Speaker Change: Got it and then interest the ICR can you give us an update in terms of the cost trends there in terms of how those trends did you see any further acceleration I think on the prior earnings call you kind of pointed out of preliminary view for 25 around 90% or so the current guide you just provided right now is right around 91% anything kind of defer.

Jared Levine: Did you see any further acceleration? I think on the prior earnings call, you kind of pointed out of the preliminary view for 25 around 90% or so. The current guide you just provided right now is right around 91%.

Jared Levine: Anything kind of different now versus last quarter in terms of this FY25 view?

Speaker Change: <unk> now versus last quarter in terms of this FY 'twenty five.

Mike Simonds: Yeah, it's a great question. And we did sort of give our best view about 100 days ago around where we thought, you know, 2025 was lining up and feeling like it was going to be relatively similar to how 2024 would end. It kind of finished around 90%. We put out guidance today that put this kind of maybe 100 basis points to the midpoint of the guide this year. And in general, I'd say, you know, not a lot of material change. There is just going to be a little bit of things that we learn as we go through it.

Speaker Change: Yes, it's a great question and we did sort of give our best view of about 100 days ago around where we thought.

Speaker Change: 2025 was lining up and feeling like we can be relatively similar to how 2024.

Speaker Change: And you sort of finished around 90%.

Speaker Change: Without guidance today.

Speaker Change: Maybe 100 basis points to the midpoint of the guide this year and in general I would say not a lot of material change. There is just going to be a little bit out of AWS as we go through it but I would just take a step back and say.

Mike Simonds: But I would just take a step back, Jared, and say, you know, a year into the role, our insurance capability is meaningfully better. We've carved that group out. We brought in strong leadership, actuarial talent, and just the granularity that we have on our forecast around medical costs, pharmaceutical costs, trends, and where our customers are positioned relative to their risk is just much, much better than it was a year ago. And as we went through the prepared remarks, it's really good, and hopefully investors take comfort in the fact that we don't have a broad issue to solve for in terms of that insurance cost ratio.

Speaker Change: A year into the role our insurance capability is meaningfully.

Speaker Change: Better.

Speaker Change: Carved that out we brought in strong leadership actuarial talent and just the granularity that we have on our forecast around medical cost pharmaceutical cost trend, where our customers are positioned relative to their risk is just much much better.

Speaker Change: Was a year ago.

Speaker Change: We went through the prepared remarks is really good hopefully investors take comfort in the fact that we don't have a broad issue to solve for in terms of that insurance cost ratio.

Mike Simonds: It's a confined part of the book, about 15%. And again, that builds confidence that we're just getting better and better at sort of understanding how risk is materializing and how we can manage it on a proactive basis.

Speaker Change: It's a confined part of the book about 15% and again builds confidence that we're just getting better at better sort of understanding how risk is materializing and how we can manage it on a on a proactive basis.

Mike Simonds: And if I could sneak in one more here, any other potential strategic changes planned over the near term or the potential for additional strategic changes over the medium term here? I think we're in a really good spot. And like we talked about, we're sort of fully cognizant that 2025 is a transition year, and our guidance reflects the fact that it's a transition year. But, you know, our team, and I define team broadly, as we went through this strategic review, a broad group of leaders engaged on this, we looked at a lot of different opportunities, we asked ourselves really tough questions and questions that frankly, many of you have been asking me over the last year, and came out of it with a renewed sense of optimism around that S&B market, the value that we create with a comprehensive set of HR outsourcing solution, and just the tailwinds that we have for this business.

Speaker Change: Got it and if I could sneak in one more here any other potential strategic changes planned over the near term or the potential for additional strategic changes over the medium term here.

Speaker Change: I think we're in a really good spot and like we've talked about.

Speaker Change: Fully cognizant that 2025 is a transition year and our guidance reflects the fact that it's a transition year, but.

Speaker Change: Our team.

Speaker Change: Define broadly as we went through the strategic review a broad group of leaders engaged on this we looked at a lot of different opportunities.

Speaker Change: Asked ourselves really tough questions and questions that frankly, many of you have been asking me over the last year and came out of it with.

Speaker Change: A renewed sense of optimism around that SMB market.

Speaker Change: Value that we create with a comprehensive set of HR outsourcing.

Speaker Change: Outsourcing solution and just the tailwind that we have for this business. So I think as we work our way through 2025 treat our customers extremely fairly in the HRS business as we exited an upsell to ASO I.

Mike Simonds: So I think as we work our way through 2025, treat our customers extremely fairly in the HRIS business as we exit and upsell to ASO. I think we're in a really good spot with the right plan, the right set of businesses. And the right channels opening up to drive growth over the long term.

Speaker Change: I think really really good spot with the right plan the right set of businesses in the right channels opening up to drive growth over the long term.

Unknown Attendee: Great, thank you. Thank you.

Speaker Change: Great. Thank you.

Jim: Thanks, Jim.

Kyle Peterson: Our next question comes from Kyle Peterson with Needham & Company.

Speaker Change: Our next question comes from Kyle Peterson with Needham <unk> Company.

Kyle Peterson: Please go ahead. Great, thanks. Good morning, guys. I know you guys are shifting from quarterly to the annual guide here, but I just wanted to see if you guys could give us a little bit of help here to think about the seasonality, particularly in the first quarter of this year. I know typically that's a good quarter seasonally for insurance costs as some of these deductibles reset, but then I know there's some repricing puts and takes. So I guess, is there any color you guys could give us on how this year's seasonality? should unfold compared to historical levels, at least kind of how you guys see things today.

Jim: Please go ahead.

Jim: Great.

Jim: Thanks, Good morning, guys.

Jim: I know you guys are shifting.

Jim: Yes from quarterly to annual guide here, but.

Jim: Just wanted to see if you guys could give us a little bit of help here to think about the seasonality, particularly in the first quarter of this year I know.

Jim: Typically that.

Jim: Good quarter seasonally for insurance costs.

Jim: Deductibles reset.

Speaker Change: I know there is some sort of repricing puts and takes so I guess is there any color you guys can give us on how this year's seasonality.

Jim: Should unfold.

Jim: Compared to historical levels at least kind of how you guys see things today.

Kelly Tuminelli: Yes, Kyle, it's Kelly, I'd be happy to take that and good to hear from you. You know, as we think about seasonality, you know, Mike mentioned a few things around what we're doing from a repricing perspective that should put us in a great spot to end the year and jump into 2026. But we do provide some seasonal charts. You know, while it has varied a little bit from year to year, the way that we think about it is roughly, if you pick a point on a full year guide, typically, like the first quarter tends to be, you know, on average, about two points worse, and the fourth quarter, or better rather, and the fourth quarter tends to be about two points worse, you know, and so it averages out that way.

Yes, I'll, let Kelly I mean.

Jim: And good to hear from you.

As we think about seasonality Mike mentioned, a few things around what we're doing from a repricing perspective, it should put us at a great spot in.

Jim: In the year end and jumped into 2026.

Jim: We did provide some seasonal charts.

Jim: It has varied a little bit from year to year. The window, we think about it is roughly.

Pick a point on a full year guide typically like the first quarter tends to be.

Jim: On average about two points worse and the fourth quarters are better rather than the fourth quarter. It tends to be about two points worse.

Jim: And so it averages out that way the other thing now from a seasonality perspective, I'd like to remind you.

Kyle Peterson: The other thing, though, from a seasonality perspective, I'd like to remind you is because of part of our professional service revenue comes from processing, you know, unemployment fees, et cetera, the PSR tends to be a little bit more front loaded in the first quarter because of different varying state wage bases and things like that. So hopefully that helps. Okay, yeah, that's, that is very helpful here.

Jim: Is that part of our professional service revenue.

Jim: From classic, saying.

Jim: He's had a rash <unk> tends.

Jim: Tends to be a little bit more frontloaded in the first quarter.

Jim: Brent varying state wage basis and things like that.

Jim: So hopefully that's helpful.

Jim: Okay.

Jim: Yes.

Kyle Peterson: And then, as a follow up, just want to see how should we think about WSEs for the year? I know, with the tech fee going away, I know there was a tailwind to WSEs last year. I'm assuming that'll kind of reverse this year, but if you could remind us on, you know, what that impact will be and, you know, how we should think about it, at least based on the CIE assumptions in the guide, that'd be great.

Jim: That is very helpful here and then.

Jim: As a follow up just want to see how should we think about.

Jim: WCS for the year I know.

Jim: With the tech fee going away.

Jim: Tailwind.

Jim: WCS last year and assuming that will.

Jim: Kind of reverse this year, but if you could remind us on what.

Jim: What that impact will be and how do we shouldnt think about it at least based on the Cie assumptions in the guidance that'd be good.

Jim: Great.

Kelly Tuminelli: Yeah, it's a great question. And that probably is one of the bigger impacts on our overall professional service revenue guide for the year. So we are anticipating WSU to be down year over year. And it's really a combination of a couple factors. One, you know, we want to make sure we're pricing our products based on the risk that we see in the market right now. We are assuming a double-digit health cost increase and want to make sure that we're anticipating that so we can get our ICR back into the range in the future. And so that is going to have a drag in the first quarter, for sure.

Jim: Yeah.

Jim: It's a great question and probably one of the bigger impacts on our overall professional service revenue guidance for the year. So we are anticipating it to be down year over year, and it's really a combination of factors one we want to make sure we're pricing our products based on <unk>.

Jim: We see in the market right now we are assuming a double digit.

Jim: I'll ask increase and want to make sure that we're anticipating that so we can get back.

Jim: Back into the range in.

In the future and.

Jim: So that is going to have a drag in the first quarter for sure.

Kelly Tuminelli: Then if we think about it, our CIE assumption is pretty similar to 2024. So, you know, like I said, in the prepared remarks, we were up about 1%, a little over 1% in 2024. And we're not expecting much improvement over that. Then when it comes to attrition, we had a record year last year, it was great, really good retention year. But we are anticipating that to pick up about one to two points, which happens to put a little bit of pressure on volume as well. So that's going to create about a $35 to $40 million headwind on professional service revenue for the year.

Jim: Then as we think about it our Cie assumption is pretty similar to 2024.

Jim: So you know like I said in the prepared remarks, we were up about 1% a little over 1%.

Jim: In 2024, and we're not expecting much improvement over that.

Jim: Then when it comes to attrition, we had a record year last year. It was great really good retention year.

Jim: But we are anticipating that to take out about one to two points.

Jim: A little bit of pressure on volume as well.

Jim: So that's going to create about a $35 million to $40 million.

Jim: Headwind on professional service revenue for the year.

Kyle Peterson: Okay, appreciate all of the color and detail. Thank you.

Jim: Okay.

Jim: I appreciate all the color and detail. Thank you.

Michael Simonds: Michael. Thank you.

Jim: Michelle.

Speaker Change: Thank you and as a reminder, if you'd like to ask a question today. It still followed by one on your telephone keypad.

Unknown Attendee: And as a reminder, if you'd like to ask a question today, it's star followed by one on your telephone keypad.

Andrew Nicholas: Our next question comes from Andrew Nicholas with William Blair. Please go ahead. Your line is open. Hi, good morning. Thanks for taking my question.

Speaker Change: Our next question comes from Andrew Nicholas with William Blair.

Speaker Change: Please go ahead your line is open.

Andrew Nicholas: Hey, good morning, Thanks for taking my question.

Andrew Nicholas: I guess to start, I just wanted to confirm on the medium-term plan, should we be looking at that in those kind of growth rates relative to 2024 or 2025? I just want to make sure, I think you said 2024 is the baseline, but obviously makes a decent bit of difference on the earnings growth figure if we're using 2024. It is 2024. And good morning, Andrew. I agree.

Andrew Nicholas: I guess to start I just wanted to confirm on the medium term plan should.

Andrew Nicholas: Should we be looking at that and those kind of growth rates relative to 'twenty four.

Andrew Nicholas: For 2025, just want to make sure I think you said 2024 as the baseline, but obviously it makes a D.

Andrew Nicholas: Many different John on the earnings growth CAGR, if we're using 24 versus 25.

Andrew Nicholas: It is 2024 and good morning, Andrew.

Andrew Nicholas: Alright, great. Thank you and then.

Andrew Nicholas: Thank you. And then maybe a question on the health of the customer.

Speaker Change: Maybe a question on <unk> and the health of the customer.

Mike Simonds: Unknown Speaker How have customer conversations kind of trended over the past couple months? You know, I think, depending on where you look, there are some signs of overall SMB optimism out there. Just curious if you have any commentary on what you're hearing from clients. And if there's any color you can provide at the vertical level too, besides think Kelly, you mentioned a little bit better financial services growth in your prepared remarks. Any more insight there would be great. Yeah, sure. So I'd say the tone of conversation, as I'm spending time with our customers and with our channel partners is markedly improved.

Speaker Change: How have customer conversations kind of trended over the past couple of months.

Speaker Change: I think depending on where you look there are some signs of overall SMB optimism out there just curious if you have any commentary on what you're hearing from clients and if theres any color you can provide at the vertical level two besides HLA.

Speaker Change: Kelly, you mentioned, a little bit better financial services, Greg in your prepared remarks.

Speaker Change: Any more insight there would be great.

Speaker Change: Yes, sure. So I'd say the tone of conversation as I'm spending time with our customers and with our channel partners has markedly improved and certainly post election, we saw that.

Mike Simonds: And certainly post election, we saw that Unknown Attendee, Alex Bauer, TriNet Group Inc. You know, our plan is Kelly laid out really doesn't bet on an increase in net customer hiring. We're serious. And there's, I think, a good chart in the materials, but we're still sitting at is what is a very historical low to what is pretty usually a really important part of our business model, that net customer hiring. I think we continue to watch, you know, all the verticals and, and we do see actually, you know, reasons for optimism in a few spots. But actually, when I take a step back and look at it, it really across like sciences, technology, financial services, nowhere near what we would expect from a net hiring point of view, which sort of speaks less to anything that's vertical in nature and more just a broad base pressures around and a little bit of caution around finance costs, new business starts and the relative balance.

Speaker Change: The sense of at least understanding or belief that things would settle in.

Speaker Change: We'd be in a more business friendly climate I think is.

Speaker Change: Pretty broadband pretty consistently and that's been the sentiment and thats materially different I'd say than where we were sitting a year ago. So I think there is reasons for some optimism.

Speaker Change: I think.

Speaker Change: Our plan is Kelly laid out really doesn't bet on an increase in net customer hiring with shares and theirs. So I think a good chart in the materials, but we're still.

Speaker Change: Sitting at is what is a very historical low to what is usually a really important part of our business model that net customer hiring.

Speaker Change: I think we continue to watch all the verticals and we do see actually.

Speaker Change: Reasons for optimism in a few spots, but actually when I take a step up it really across life Sciences technology financial services.

Speaker Change: Nowhere near what we would expect from a net hiring point of view, which sort of speaks lest anything thats vertical in nature and more just a broad base.

Speaker Change: Yours around it a little bit of caution around.

Speaker Change: Finance costs, new business starts and the relative balance.

Kelly Tuminelli: from Venture Capital and Private Equity around conserving cash versus investing in growth. So a little bit more optimistic, but not seeing it in the numbers just yet.

Speaker Change: From venture capital and private equity around conserving cash versus investing in growth. So.

Speaker Change: A little bit more optimistic, but not seeing it in the numbers just yet.

Kelly Tuminelli: Yeah, and the only thing I'd add to that, Andrew, is we look at the verticals overall, and I look at it kind of on a four-year basis. You know, I mentioned the bright spot in financial services. It's probably in the mid-single-digit level CIE year over year, even though the total was, you know, just over 1%. The other, you know, in tech, we saw significant declines last year, whereas it really seems to be leveling off and slightly positive this for 23 and 4.

Andrew Nicholas: And the only thing I'd add to that Andrew is as we look at the verticals overall when I look at it kind of on a full year basis.

Andrew Nicholas: I mentioned, the bright spot in financial services, it's probably in the mid single digit level Cie year over year, even though the total was.

Andrew Nicholas: Just over 1%.

Andrew Nicholas: The other.

We saw significant declines last year, whereas it really seems to be leveling off.

Andrew Nicholas: After this year.

Andrew Nicholas: For transplant alright, great.

Andrew Nicholas: All right. Thank you.

Andrew Nicholas: Thank you and if I could squeeze one more in just on the guidance.

Andrew Nicholas: And if I could squeeze one more in just on on the guidance. specifically related to ICR guidance.

Andrew Nicholas: Specifically related to ICR guidance can you kind of walk us through.

Mike Simonds: Can you kind of walk us through? how you're thinking about kind of top and bottom and what what drives you to each end and maybe conservatism broadly, because it sounds like versus a couple months ago, you know, utilization trends haven't changed meaningfully. So I just want to make sure I understand kind of what the risk is to performance below, you know, the lower end of that guy.

Andrew Nicholas: How youre thinking about kind of the top and bottom and what drives you to each and and maybe conservatism broadly because it sounds like versus a couple of months ago utilization trends haven't changed meaningfully so.

Andrew Nicholas: So I just want to make sure I understand kind of what the risk is.

Andrew Nicholas: Performance below.

Andrew Nicholas: The lower end of that guys. Thank you.

Mike Simonds: Thank you.

Mike Simonds: Sure, and maybe I'll start with it. But I think it really just is important to say, we are better than we were a year ago. And so the data that we're using the discipline in the process, the people that are that are running and applying that process is still confidence continues to grow. And I am sure a year from now, we will have improved materially from there. The 90-90 period is our best point of view, I would tell you, as we looked at incurred claims data over the last several months, it's encouraging to us. It's materializing in ways that are quite consistent with the assumptions that we put into the guide and put into our pricing plan.

Andrew Nicholas: Sure maybe I'll start with it.

Andrew Nicholas: Yes.

Andrew Nicholas: I think it really just as important to say.

Andrew Nicholas: Our better than we were a year ago.

Andrew Nicholas: Data that we're using the disciplined in the process. The people that are that are running in applying that processes start confidence continues to grow and I am sure a year from now we will have improved materially from there. The 90 95 is our best point of view I would tell you as we looked at incurred claims data over the last.

Andrew Nicholas: Several months, it's encouraging to us it's materializing in ways that are.

Andrew Nicholas: But consistent with the assumptions that we put into the guide and put into our pricing plans and things that would take us towards the top end to the specific question is it above that top end potentially we'll see that.

Mike Simonds: I mean, I think things that would take us towards the top end to this specific question and above that top end potentially would be to see a continued acceleration in the healthcare cost inflation trend. And that's not what we're seeing over the last several months. So that is, that is encouraging. We need to see the curve begin to bend in terms of rate increase, a rate of increase. And it's too early to say that, but that kind of move would put us towards the favorable end of that guide.

Andrew Nicholas: Continued acceleration in health care cost inflation trend.

Andrew Nicholas: What we're seeing over the last several months.

Andrew Nicholas: That is encouraging you would need to see.

Andrew Nicholas: The curves you can spend in terms of rate increase or rate of increase.

Andrew Nicholas: It's too early to say that but that kind of moving towards a favorable well into that guide.

Unknown Attendee: Great. Thanks so much.

Andrew Nicholas: Great. Thanks, so much.

Andrew Nicholas: Kevin.

Andrew Nicholas: Yes.

David Grossman: Next we have a question from David Grossman with Stiefel. Please go ahead. Thank you. Good morning.

Andrew Nicholas: Next we have a question from David Grossman with Stifel.

Speaker Change: Please go ahead.

David Grossman: Thank you good morning.

David Grossman: I'm wondering if I could just go, you know, higher level as we we think about CIE, you know, beyond 2025. Is it still, you know, realistic and reasonable to assume that given your business model relative to two of your peers and two of the bigger peers in the market, that it's probably unrealistic to think that your, you know, WC growth would really parallel theirs given the mechanics of how they grow their businesses, you know, despite all the great improvements that you've made and some of those that are still coming. I just wanted to check on that to make sure that, you know, our expectations are in line with, you know, the business model itself.

David Grossman: I'm wondering if I could just go higher level as we think about CRD b beyond 2025.

David Grossman: Is it still.

David Grossman: Realistic and reasonable to assume that given your business model relative to two of your peers towards the bigger peers in the market.

David Grossman: It's probably unrealistic to think that your WC growth would really parallel there's given the mechanics of how they grow their businesses.

Speaker Change: Despite all the great improvements that you've made in some of those that are still coming I just wanted to check on that to make sure that at all.

David Grossman: Patients are in line with you.

Speaker Change: The business model itself.

Mike Simonds: Yeah, good morning, David. Thanks for the question. at peace. If you look at the CIE, the data that we lay out sort of gives you a good sense for, you know, what we've experienced over a 10-year period, and certainly there's volatility to that, but it's, I think, a very reasonable assumption to say, you know, CIE, that's somewhere in the, you know, high single, it's a very low double-digit, is a reasonable long-term assumption. What we've chosen to do in terms of building into our medium-term outlook is just sort of a gradual reversion towards that into sort of the mid-single-digit range and provide some sensitivities if it gets better or if it gets worse to that.

David Grossman: Yes, good morning, David Thanks for the question.

Speaker Change: I see.

Speaker Change: If you look at the Cie the data that we lay out gives you a good sense for what we've experienced over a 10 year period, and certainly there's volatility to that but it's I think a very reasonable assumption to say Cie, that's somewhere in the high singles to very low double digit is a reasonable long term.

Speaker Change: <unk>.

Speaker Change: We've chosen to do in terms of building into our medium term outlook is just sort of a gradual.

Speaker Change: We're aversion towards that into sort of the.

Speaker Change: Mid single digit range and provided some sensitivities if it gets better or it gets worse to that.

Mike Simonds: I really don't see a systemic reason to expect that the long run for our targeted part of the SMB market is going to sort of materially changed or shifted beyond what we've seen historically. We just didn't want to make a bet on a full reversion at this point. I think the other piece, and you and others have asked great questions here in my first year about what about new sales and bringing in volume growth by growing the customer base. And I am very excited about the work that's underway with our revenue team. driving the maturity when we went externally as part of the strategy work.

Speaker Change: I really don't see a systemic reason to expect that the long run for our targeted part of the SMB market is going.

Speaker Change: Sort of materially changed or shifted.

Speaker Change: Beyond what we've seen historically.

Speaker Change: It just didn't want to make a bet on a full reversion at this point.

Speaker Change: I think the other piece and you and others have asked great questions here I'm in my first year about what about new sales and bringing in volume growth.

Speaker Change: By growing the customer base.

Speaker Change: I am very excited about the work that's underway with our revenue team.

Speaker Change: Driving the maturity when we went externally as part of the strategy work.

Mike Simonds: We've grown our sales force materially. But we've gone up and down in terms of account, and we've added a lot of new people. And so our average tenure benchmarks low relative to the industry. And that may be part of, you know, when you look at us relative to peers, some of those results. So the combination of I think, really investing and maturing our sales team on the direct front and growing that employee benefits brokerage channel, I think has the real opportunity for us to tap into what I think is a really exciting and underpenetrated market.

Speaker Change: We've grown our salesforce materially.

Speaker Change: We've gone up and down in terms of account and we've added a lot of new people and so our average tenure of benchmarks low relative to the industry and that may be part of when you look at us relative to some of those results.

Speaker Change: So the combination of I think really investing and maturing our sales team on the direct front and growing that employee benefits brokerage and I think as the real opportunity for us to tap into what I think is a really exciting and underpenetrated market and it's going to take a little bit on that doesn't happen overnight.

Mike Simonds: And it's going to take a little bit of time that doesn't happen overnight. But yeah, no, I would not concede the point that TriNet's growth in WSEs would lag the industry in the long Okay, so structurally, you don't think there's a limitation there, when you look at the differences in the models. No, I really don't. And when you think about back to the medium term guide, this is a fantastic business model, and it's durable. And so there's real growth just as we reprice this business in a measured, thoughtful way back into the targeted range. I think there's upside to our retention over time as we invest in our delivery model with technology.

Speaker Change: But yes, no I would not concede the point that trying to its growth in wsu's with lagged the industry in the long term.

Speaker Change: Okay. So structurally you're able to take there is a limitation there.

Speaker Change: When you look at the differences in the models.

Speaker Change: No I really don't.

Speaker Change: About just back to the medium term guide this is a fantastic business model and it's durable and so there is a real growth just as we reprice. This business in a measured thoughtful way back into the targeted range I think there is upside to our retention over time as we invest in our delivery model.

Speaker Change: Technology.

Mike Simonds: you know, and then you start to layer in volume growth, again, things we can control on the new sales front. And for me, the less dependent we are on CIE in terms of delivering sustained, consistent, predictable growth, the better job we're doing that run. Right.

Speaker Change: And then you start to layer in volume growth again things, we can control on the new sales front and for me the less dependent we are on Cie in terms of delivering sustained consistent predictable for growth the better job, we're doing better on that.

Speaker Change: Right. So just to that point about their new sales growth.

Mike Simonds: So just to that, that point about new sales growth, I guess you raised two points in your prepared remarks. One was version of HRIS to the ASO model and as well as channel partners, which is something you've talked quite a bit about, you know, since you've been there. So, you know, maybe you could talk about first on the channel partners. you know, what is a realistic timeline? Do you think it is to really engage with that segment of the market to really start driving incremental volume? And what is it going to take really for you to penetrate that, you know, that channel to really the broker channel that is to really become an advocate for trying to Yeah, you know, I think it's, it's encouraging that we've already got some momentum in the employee benefits brokerage channel.

Speaker Change: I guess you raised two points in your prepared remarks Martin was.

Speaker Change: Version of HRS too.

Speaker Change: The ASO model as well as.

Speaker Change: Channel partners, which is something you've talked quite a bit about since you've been there. So yes.

Speaker Change: Maybe you could talk about first on the channel partners.

Speaker Change: What is a realistic timeline do you think it has to really engage with that.

Segmented the market to really start driving incremental volume and what is it going to take really for you to penetrate that.

Speaker Change: That channel to really the broker channel that is to really become an advocate for China.

Speaker Change: Yeah, I think it's encouraging that we've already got some momentum in employee benefits brokerage channel. So it's contributing a meaningful part of our new business already today, although we do see a lot of upside in <unk>.

Mike Simonds: So it's contributing a meaningful part of our new business already today. But we do see a lot of upside. And, and, again, as we went through the strategic review and looked at how much of the SMB market is fully benefited and fully benefited via trusted advisor on the employee benefit broker side, it became very increasingly clear to us that one, that that's a very efficient, effective channel for us. Two, there's secular trends on the brokerage side that are very supportive of partnership with the PEO model. So the average employee benefit broker is seeing the cost to serve a small business move up dramatically.

Speaker Change: Again, as we went through the strategic review and looked at how much of the SMB market is fully benefited actually benefited the trusted advisor on the employee benefit broker side that became very increasingly clear to us that.

Speaker Change: That's a very efficient effective channel for us.

Speaker Change: Two there are secular trends on the brokerage side that are very supportive of partnership with the PEO model. So.

Speaker Change: The average employee benefit broker is seeing but Austin to serve a small business move up dramatically. They are expected to bring benefit administration technology as part of their offerings are expected to bring compliance support they are expected to do all that in in a complicated commission environment very often.

Mike Simonds: They are expected to bring benefit administration technology as part of their offering. They're expected to bring compliance support. They're expected to do all that in a capitated commission environment very often. So they're looking for answers on how to profitably serve those small businesses. I think that the PEO model and what TriNet brings with a really strong service brand is a perfect fit. We do. It's going to take us some time, I think, to fully optimize this channel because, you know, one, you need to invest in the technology that starts treating employee benefit brokers not as referral partners, but as trusted advisors that have access and insight to the clients that they refer into TriNet over time.

Speaker Change: So theyre looking for answers on how to profitably serve the small businesses I think the PEO model and what try that brings really strong service brand is a perfect fit we do it's going to take us. Some time I think this fully optimize this channel because one you need to invest in the technology.

Speaker Change: That starts treating employee benefits brokers not as referral partners, but as trusted advisers that have access and insight to the clients that they referred into China.

Mike Simonds: And so, again, that benefits technology brings us a fantastic opportunity. It's really the backbone of the investments we're making to open that channel up fully and embrace them. Benefit brokers, high quality benefit broker system. through the process.

Speaker Change: So again that <unk> technology brings us.

Speaker Change: Fantastic opportunity, it's really the backbone of the investments, we're making to open that channel up fully and Embracement benefit brokers high quality benefit brokers as partners through the process.

Mike Simonds: So I'm excited about how that's going to materialize already momentum building over the next few years. How much does the broker channel contribute to your your new sales right now just as a percentage round numbers? Yeah, it varies a bit quarter to quarter, but in general, it's well into the double digits for us.

Speaker Change: So I'm excited about how that's going to materialize already momentum building over the next few years.

Speaker Change: How much is the broker channel contributed to your new sales right now just as a percent of that is round numbers.

Speaker Change: Yes, it varies a bit quarter to quarter, but in general well into the double digits for us and we see that growing although I will say that the direct.

Mike Simonds: And we see that growing, although I will say that the direct channel is and will remain over the medium term period, our most important go to market motion.

Speaker Change: Channel is and will remain over the medium term period, our most important go to market motion.

Mike Simonds: Yeah, and just one last question, like, if I could just on the ASL. You know, maybe you could just walk us through very quickly, you know, what impact that could have on your business overall, given, you know, it's different than the PEO model and how that flows through to the financials if that business really gains momentum. Yeah, we're excited about the possibility there. And I'll be honest with you, David, it's sometimes I think we do ourselves a little bit of a disservice by putting too, too strong a name to the PEO product. And the reality is the business that we're in, is high value add, comprehensive HR outreach.

Got it and just one last question if I could just on the ASO, yes.

Speaker Change: Maybe you could just walk us through very quickly.

Speaker Change: The impact that could have on your business overall.

Speaker Change: Different than the PEO model and how that flows through.

Speaker Change: To the financials, if that business really gains momentum.

Speaker Change: And we're excited about the possibility there and I'll be honest with you David is that sometimes I think we do ourselves a little bit of a disservice by putting too.

Speaker Change: Sure Shaun named to the PEO product and the reality is the business that we're in is high value add comprehensive HR outsourcing and so what does that all the way through to what a traditional <unk>.

Mike Simonds: And so whether that's all the way through to what a traditional PBO product looks like, where we start potentially, you know, where the risk doesn't match, unbundling some of the insured products and helping customers through their brokers, source those in open market, all the way to a strong, you know, $50, $60 Peplum ASO offering, we really see it as sort of a continuum in that part of the market, that high value-add comprehensive service. So yeah, no, we're pretty excited about building a bit more flexibility into our processes and technology. I think ASO could be potentially a really exciting part of that.

Speaker Change: <unk> product looks like when we start potentially where the risk doesn't match unbundling some of the insured products and helping customers through their brokers sourced those in open market all the way to a strong $50 $60 platform ASO offering we really see it as sort of a continuum in that.

Speaker Change: That part of the market at high value add comprehensive service. So yes, we're pretty excited about building a bit more flexibility into our processes and technology I think ISO could be potentially a really exciting part of that.

Speaker Change: Yeah.

David Grossman: Got it. All right. Great.

Speaker Change: Got it alright, great. Thanks, very much for that insight and good luck.

David Grossman: Thanks very much for that insight and good luck. Thanks, David.

Speaker Change: Yeah.

David Grossman: Thanks, David.

Unknown Attendee: Thank you.

David Grossman: Thank you we have no further questions.

Mike Simonds: We have no further questions, so I'll pass you back to Mike Simonds for closing comments. All right. Let me thank you all once again for taking the time to join us this morning. And I know Kelly and I and Alex will be spending time with many of you over the coming weeks to continue the dialogue. And thank you, Lydia, for your help this morning.

David Grossman: You bought Chi Mike Simon for closing comment.

Mike Simonds: Alright, let me. Thank you all once again for taking the time to join US. This morning, and I know Kelly and I will be spending time with many of you over the coming weeks to continue.

Mike Simonds: The dialogue and thank you Lydia for your help this morning and with that we'll conclude the call.

Unknown Attendee: With that, we'll complete the call. Thank you.

Mike Simonds: Thank you. This concludes our call today, thank you for joining.

Unknown Attendee: This concludes our call today. Thank you for joining. You may now disconnect your line.

Mike Simonds: You may now disconnect your lines.