Q1 2025 TriNet Group Inc Earnings Call
Good day and welcome to the TriNet Group Inc. 1st quarter 2025 earnings conference call.
Before we begin I would like to preview. This mornings call I will first pass the call to Mike where he will comment on our first quarter performance and discuss our progress on our strategy and medium term outlook.
Kelly will then review our Q1 financial performance in greater detail.
Please note that today's discussion will include our 2025 full year financial outlook, our medium term outlook.
Other statements that are not historical in nature are predictive in nature or depend upon or refer to future events or conditions.
Such as our expectations estimates predictions strategies beliefs or other statements that might be considered forward looking.
These forward looking statements are based on management's current expectations and assumptions and are inherently subject to risks uncertainties and changes in circumstances that are difficult to predict and that may cause actual results to differ materially from statements being made today or in the future.
Except as may be required by law do not undertake to update any of these statements in light of new information future events or otherwise.
We encourage you to review our most recent public filings with the SEC, including our 10-K 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 for stock.
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.
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.
There are or will be available on our website or through the SEC website.
Speaker Change: With that I will turn the call over to Mike Mike.
Mike Mike: Thank you Alex.
Mike Mike: Our first quarter financial and operating performance once again highlighted the strength and durability of Tri net business model.
Mike Mike: We delivered financial results that were in line with our expectations and that put us on a path to achieving our annual guidance.
Mike Mike: And that was in spite of an increasingly uncertain economic environment as the quarter progressed we.
Mike Mike: We saw a decline in SMB business confidence.
Mike Mike: This weaker business sentiment flowed through to try it out in the form of low net customer hiring and as a contributing factor to lower new sales conversion rates.
Mike Mike: Despite the external challenges I'm encouraged by the resilience of our business model evidenced by our strong customer retention and I'm pleased with the accelerating pace of execution of Tri net work that is positioning us for future success.
Mike Mike: For this call I'll use our strategy, which we covered last quarter to frame the discussion of our financial and operating performance.
Mike Mike: As a reminder, through the medium term, we intend to accelerate total revenues growth.
Mike Mike: Cheating, a compounded annual growth rate of 4% to 6%.
Mike Mike: Expand our adjusted EBITDA margins to 10% to 11%.
Mike Mike: And ultimately drive total annualized value creation of 13% to 15% through EPS growth supplemented by share repurchases and dividends.
Mike Mike: Starting with revenues for the first quarter growth was 1% and in line with our plan. We continue to expect revenue for full year 'twenty 'twenty five to be in the range of 4.9 to $5 1 billion with the key drivers being health care price increases and strong customer retention with new sales growth expected to emerge.
Mike Mike: Later in the year.
Mike Mike: Net customer hiring is expected to remain low throughout 2025, and assumption that seems increasingly likely given the economic environment.
Mike Mike: I'm encouraged by the progress, we're making with our benefit price increases our results to date suggest we are effectively balancing repricing and cost ratio improvement with a prudent focus on retention all while supporting our customers in a challenging environment.
Mike Mike: Between our October <unk> 24 in Jan one twenty-five renewals, we've renewed nearly two thirds of our books since resetting our cost trend assumptions.
Mike Mike: Looking forward our April 1st cohort has been successfully renewed and we're currently working with customers that renew on July 1st.
Mike Mike: At this point all our indicators suggest we are on track to achieve the planned rate increases while maintaining retention above our historical average.
Mike Mike: We are seeing the benefits of our strong service delivery and our investments in insurance talent at a more disciplined pricing process are paying off.
Mike Mike: Regarding new sales in the quarter, we're pleased with the customers. We've added this is a high quality cohort of customers with contracts priced appropriately to their risk and his stand to benefit from our strong offering, including our technology and service model.
Mike Mike: Pricing to our view of current insurance cost trends create a sales headwind versus a year ago, which when paired with a more uncertain macro environment led to lower sales conversion rates and new sales declining year over year.
Mike Mike: Absent a significant economic slowdown I expect sales results to improve as we move through 'twenty twenty-five and continue executing on our strategic initiatives.
Mike Mike: We have a motivated sales team and important deliverables lined up for our fall selling season.
Mike Mike: First we expect to launch our first set of benefit plan bundles as a reminder, our benefit plan bundles use our broad set of carrier partnerships.
Mike Mike: Paired with our proprietary data to create new plan bundles that meet customer needs for actuarial value and price, while simplifying the offering and sales process.
Mike Mike: This product innovation is made possible by our differentiated operating model.
Mike Mike: Our combined scale and risk taking provides us with a seat at the table with carriers and it allows us to innovate in ways are increasingly tenured and productive sales force can leverage.
Mike Mike: Turning to our go to market approach, we're making progress towards scaling our benefits brokerage channel.
Mike Mike: This new channel approach is a comprehensive undertaking.
Mike Mike: Tri net is using our proprietary technology and redesigning a number of our processes in order to reduce friction and improve both the broker and the customer experience.
Mike Mike: We're pleased to have engaged several national insurance brokerages in a co development effort.
Mike Mike: We believe tri net innovative benefit bundles will prove to be compelling for health and welfare brokers as they aim to provide their SMB customers with the best possible solutions deliver.
Mike Mike: Delivered in a more simplified and streamlined way.
Mike Mike: Our progress in putting tri net on a path to sustainable customer and revenue growth through new sales and retention goes beyond product and broker investments.
Mike Mike: We will continue to provide details in coming quarters on the meaningful milestones ahead, driving up rep tenure and productivity as well as improving our customer experience.
Mike Mike: The final element of revenue growth you see I E net hiring within our installed base at our first quarter result was largely in line with our muted expectations.
Mike Mike: In sum total revenues were up 1% in the quarter and absent severe economic disruption I believe a strong second half will set us up for accelerating revenue growth in 2026.
Mike Mike: We will have completed the most aggressive portion of our repricing and begun to reap the benefit of our distribution and product investments with growth accelerating towards our medium term expectation of 4% to 6%.
Mike Mike: A second component of our strategy is margin expansion and we're making progress on this dimension as well.
Mike Mike: Expenses in the quarter declined year over year. This is a meaningful achievement given we are concurrently investing in our strategic initiatives.
Mike Mike: So we've got plenty of work ahead, I'm encouraged with our progress in constructing a scalable high quality operating platform.
Mike Mike: Margin expansion over the medium term will also be supported by improvements in our insurance cost ratio.
Mike Mike: On that front, our first quarter performance was in line with our expectations.
Mike Mike: As I mentioned price increases are taking hold and medical claims trends, though was still elevated has stabilized for several months now.
Mike Mike: As claim trends stabilize we are increasingly confident with the adequacy of our pricing as we exit 'twenty 'twenty five we expect to have positive momentum returning to our long term I see our range of 87% to 90%.
Mike Mike: Our margin performance in Q1 drove strong cash generation.
Mike Mike: And consistent with our strategy, we deployed capital for the benefit of our shareholders. We recently announced a 10% increase in our dividend and repurchase stock taking advantage of the recent pullback and supported by our confidence in the momentum we're building as a company.
Mike Mike: I am pleased by the accelerating pace of execution and early successes across our portfolio of initiatives.
Mike Mike: We are positioning ourselves to launch new commercial initiatives in time for the fall selling season.
Mike Mike: We are controlling expenses, while reinvesting in our business and we're delivering exceptional service to our customers in a challenging business environment.
Mike Mike: Our decisions to narrow our focus to our core high value add HR solutions is bringing clarity and helping speed our decision making.
Mike Mike: At the same time, we recognize we are operating in a dynamic environment and may need to adapt and adjust staying focused on our customers and our medium term commitments.
Mike Mike: There is growing momentum had tried that and I expect as the year progresses shareholders wish the our initiatives translate into positive commercial operating and financial outcomes.
Kelly: With that let me pass the call to Kelly for her financial review.
Mike Mike: Kelly.
Kelly: Thank you Mike.
Speaker Change: We performed in line with our overall expectations during the first quarter, putting us on track to meet our full year financial guidance.
Speaker Change: The strength of our business model provided the stability to navigate the environment being prudent with expenses and still investing in our business.
Speaker Change: Continuing to bring solutions to Smbs at times, when they need them. The most one of the priorities. We laid out in February was repricing, our installed customer base to better reflect the inflationary environment and health care costs.
Speaker Change: As we shared at that time, there were select cohorts that needed to be substantially repriced, we feel confident in our progress there and our first quarter I see our performance was in line with expectations.
Speaker Change: Net sales in the first quarter were down year over year as these repricing efforts created a temporary new business headwind along with the repricing dynamic we had a difficult prior year comparison to a period in which pricing ultimately proved kilo for the cost trends that emerged.
Speaker Change: Although retention came in at a point below expectations due to higher healthy increases in a challenging external environment, our strong service model and differentiated customer experience kept us on track to achieve annual retention above our historical 80% benchmark.
Speaker Change: Now, let's dive into our financial performance in greater detail.
Speaker Change: Total revenue grew 1% year over year in the first quarter.
Speaker Change: Total revenue performance in the quarter, largely driven by insurance repricing and stronger than expected interest income.
Speaker Change: Customer hiring was slightly below our forecast and came in worse than the first quarter of 'twenty 'twenty four driven by the main street and professional services verticals.
Speaker Change: We finished the quarter with approximately 340000 total ws six down 3% over the same quarter last year and 311000 co employed ws seems down 6%.
Speaker Change: As a reminder, total ws six include platform users, who are accessing our platform as well as Colin plagued at the lessees receiving the full benefit of our P. S services.
Speaker Change: The decline in colon play Debbie lessees was driven by reduced sales when compared to the prior year.
Speaker Change: We faced a difficult Q1 sales comparison as we were operating in a much different health plan pricing environment last year, and we've sharpened our pricing discipline to reflect current trends.
Speaker Change: Retention ticked lower this quarter by approximately one point at the beginning contemplate Debbie lessees when compared to the prior year.
Speaker Change: Given our repricing efforts, we're pleased with our overall retention rate.
Speaker Change: First in aggregate those clients that left in Q1 had an insurance cost ratio that was notably higher than the companies that stayed.
Speaker Change: Second we're on track to exceed our historical retention benchmark and our full year EPS forecast remains intact.
Speaker Change: Professional services revenue in the first quarter declined 2% largely due to the decline in volume as well as the discontinuation of a specific client level technology fee.
Speaker Change: Professional services revenue was supported by the timing of receipt of payment and a low single digit improvement in admin pricing.
H I S fees and a S. A revenues, which included conversion from HRS were modestly down year over year.
Speaker Change: Continued to transition away from our SaaS only solution and we're pleased with the pick up in a ASO conversion.
Speaker Change: Insurance revenue grew 1% in the first quarter.
Speaker Change: We expect to see the benefit of renewal pricing per ws see build through the course of 'twenty 'twenty five.
Insurance costs in the first quarter grew 4%, reflecting a continuation in trends experienced last year.
Speaker Change: As a result, our first quarter insurance cost ratio came in at 88.4% within our forecast and on track to be within our full year range.
Speaker Change: Operating expenses in the quarter were down 6% year over year.
Speaker Change: While we continue to reinvest a portion of our savings back into our value creation initiatives, we manage expenses tightly and benefited from continued automation efforts and the lower overall compensation expense as our workforce strategy took hold.
Speaker Change: First quarter GAAP earnings per diluted share was $1.71 and our adjusted earnings per diluted share was $1.99. China continued its strong cash generation in the first quarter, we generated $162 million and adjusted EBITDA represent.
Speaker Change: King and adjusted EBITA margin of 12, 6%.
Speaker Change: Operating activities generated $95 million and net cash and 79 million in free cash flow or approximately half of our adjusted EBIDTA.
Speaker Change: Our strong cash generation afforded us the ability to take advantage of the volatility in our stock after our fourth quarter earnings report and repurchased approximately 1.2 million shares.
Speaker Change: In addition to share repurchase we paid a 25 cent dividend and announced a 10% increase to our next dividend.
Speaker Change: In total we deployed a little over $100 million to shareholders in the first quarter.
Speaker Change: In 2025, our capital return priorities remain unchanged.
We will continue to create value for our shareholders by investing in our value creation initiatives funding dividends and share repurchases, while maintaining an appropriate liquidity buffer.
Speaker Change: Now, let's turn to our 2025 outlook for the year given first quarter performance. We are tracking within our previously disclosed range and are affirming our full year guidance.
Speaker Change: As a reminder for 2025, we expect total revenue to be in the range of $4 95 billion to five point linked for Valeant.
Speaker Change: We expect professional services revenue to range from $700 million to $730 million.
Speaker Change: Our insurance cost ratio to be in the range of 92% to 90% and our adjusted EBITA margin to be from just under 7% to approximately eight 5%.
Speaker Change: Finally, we expect GAAP earnings per diluted share to be in the range of $1 90 to $3 47, and adjusted earnings per diluted share to be $3.25 to foreign English and 75 cents.
Speaker Change: With our laser focus on those items critical for training success, we delivered a strong first quarter and strong start to the year.
Speaker Change: Despite the uncertainty introduced by the difficult economic environment, we are on track to achieve our annual guidance and we will keep our focus on serving our customers and executing our strategy.
Speaker Change: With that I will pass the call to the operator for Q&A.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question. Please press Star then one on your telephone keypad.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Yeah.
Speaker Change: Our first question comes from Jared Levine from Cowen. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Started in terms of double click on the demand environment. So you did mentioned.
Speaker Change: Kind of increasing macro uncertainty did impact sales conversions over the quarter here. So I guess, what drives the confidence on that improving sales performance from here.
Speaker Change: This increasing uncertainty is that more sort of dynamic of easing comps in the maturation of the sales force or anything else to kind of note there.
Speaker Change: Yes, good morning, Jeremy It's Mike I appreciate the question I think actually.
Speaker Change: Hit it there the tail end.
Speaker Change: Combination to here when we look at the comp year over year and Kelly you've made the point earlier the.
Speaker Change: The way, we're thinking about health care pricing in this period versus a year ago is pretty markedly different.
Speaker Change: Different so that's going to have a bit of an impact on the sales conversion rate on a year over year basis, and then you pair that with.
Speaker Change: The uncertainty in the environment, which we saw pick up towards the end of the quarter.
Speaker Change: Our confidence though is based on a few things one is just the pipeline itself and so the demand environment is still there and it is kind of environments like these were small.
Speaker Change: All businesses are looking for.
Speaker Change: Really scalable solutions, and sometimes that scaling up and sometimes that scaling down we bring that sort of a variable cost model to play.
Speaker Change: It too is we can.
Speaker Change: You need to invest in the productivity.
Speaker Change: And we're picking up some tenure in the sales force and then some of the initiatives that we're bringing into the market for the fall selling season. So all that comes together and you don't want to get too predictive given it's a little bit of a volatile macro but all the things that we can control. There is definitely a building sense of momentum on the new business front for us.
Speaker Change: Great and then.
Speaker Change: HRS wind down here can you give an update on your efforts to retain those clients with D. A ASO offering and then any change in expectations of about 15 to 20 million year on year headwind for FY 'twenty five.
Speaker Change: Yeah, absolutely. So as you know Jared we made the decision to exit the SaaS only business, but wanted to do that in a very customer first way so were.
Speaker Change: Gradually moving customers off of that platform in either up into.
Speaker Change: The ASO service category or.
Partners that are better suited to deliver just kind of particularly the smaller end of that customer base and a lower.
Speaker Change: SaaS only offer if you had to make a series of assumptions as we went through our plans for this year and I would tell you a quarter into it we're driving actually right in line, maybe a tick or two higher in terms of the up sell rate into that ASO products. So early days plenty of work to do between now and the end of the year, but I would say.
Speaker Change: Assistant with kind of the plans and the set of assumptions that went into our forecast I think that's where we're tracking yeah and Sharon I'd, just add one quarter and we really haven't changed our assumption there, but we are pleased with conversion rates.
Speaker Change: Great. Thank you.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Kyle Peterson from Needham. Please go ahead.
Kyle Peterson: Great. Good morning, guys, Hey, I appreciate you taking the question.
Speaker Change: One day.
Speaker Change: If we could dive into some of the moving pieces in the guidance I know in in aggregate.
Speaker Change: It should be.
Speaker Change: About in line, but is there anything like.
Speaker Change: He was.
Speaker Change: In the ballpark, but maybe a little more conservative are tracking towards the low end I guess anything at a more micro level, that's progressing a little better or worse.
Speaker Change: Than expected in the guide.
Speaker Change: Good day performance.
Speaker Change: Yeah sure.
Speaker Change: Happy to take the question Kyle.
Speaker Change: No in general in guidance.
Speaker Change: A few things in this slightly but really we feel like we're on track for the full year overall insurance was roughly in line with our expectation expenses, where maybe a tick better Cie and nutrition was it take worse.
Speaker Change: So it really just puts us in line those are probably the major drivers.
Speaker Change: Okay. Okay that is very helpful and then I.
Speaker Change: I guess on some of the commentary with.
Speaker Change: Net new sales.
Speaker Change: The confidence.
Speaker Change: It kind of fading a bit.
Speaker Change: Quarter progressed.
Speaker Change: I guess any color as to what you guys have seen.
Speaker Change: Or how you guys feel for.
Speaker Change: You weeks of April as Don I know theres been a lot more volatility and uncertainty given the tariffs and all that so any.
David: Yes, David as to how this is looked.
Speaker Change: Quarter to date.
Speaker Change: Really helpful.
Speaker Change: Yes, sure Kyle it's Mike.
Kyle Peterson: It's certainly been up and down and I think we've all experienced that I think a couple of things and you know this but our mix of business is one that doesn't have a great deal of exposure directly into things like tariff. So.
Speaker Change: Outside of some manufacturing in.
Kyle Peterson: In main street, and some tax actually in life science manufacturing.
Speaker Change: All in something.
Speaker Change: Well I'll start with 20% of our business kind of has that exposure. So it's really more about the second.
Speaker Change: Secondary impacts and sort of the broader business sentiment for us.
Speaker Change: And in general like we just got a big market opportunity in front of us and a lot of times in fact, the majority of the times, our biggest competitors, just inertia and getting a small business owner to make the decision today to move forward with our <unk> solution.
Speaker Change: And so really that you're just kind of look out as long as we don't see something deteriorate materially beyond where we are today again looking looking at our pipeline looking at some of the momentum and things that we're bringing to market Theres reasons, I think for us to be optimistic as we come into the.
Sort of middle in latter parts of the year and as you know the important fall selling season, we're going to be at a much better position.
Speaker Change: And even actually it's worth commenting in the first quarter, while sales are down from a volume point of view the revenue associated with new sales in the quarter was a little bit of an upside for US again. These are customers that are coming in their price to risk. There are really a good fit in terms of our vertical mix and so yeah again some uncertain.
Speaker Change: For sure, but I think reasons for optimism.
Speaker Change: Got it.
Speaker Change: That's very helpful. Thanks for taking my questions and nice results.
Mike Mike: Alright, Thank you Kal.
Speaker Change: Thank you.
Speaker Change: The next question comes from Andrew Nicholas from William Blair. Please go ahead.
Andrew Nicholas: Hi, good morning, Thanks for taking my questions.
Andrew Nicholas: Wanted to first touch on health care utilization trends.
Andrew Nicholas: Just generally what you're seeing under the Hood it seems like.
Andrew Nicholas: Largely in line with your expectations in the first quarter, but you've.
Andrew Nicholas: You know you've seen some of the managed care providers site.
Andrew Nicholas: Weakness in certain pockets of the market. So just any any additional granularity you could provide there and then may be on price trends broadly.
Andrew Nicholas: I think Mike last time, we spoke you spoke to like low double digit increases stabilizing just making sure that's still your viewpoint.
Mike Mike: Yes sure. Thanks, Good morning, Andrew and Youre right I will let Kelly speak to some of the underpinnings on the health care side, two things I'd highlight so.
Andrew Nicholas: First.
Andrew Nicholas: Keep in mind that our insured is yeah.
Andrew Nicholas: Average working age insured and so some of the things that you've seen in the external market are really more older age and government program specific.
Andrew Nicholas: And that sort of leads to the second point, which is.
Andrew Nicholas: Low double digit sort of year over year health care cost trends.
Andrew Nicholas: Have really sort of stabilized so we're a little over two quarters here of.
Andrew Nicholas: Kind of tabletop flat year over year inflation in terms of what we're experiencing and while that settled in at a higher rate.
Andrew Nicholas: And it's sticking it's really important to us because that's the underlying assumption thats going into our renewal and new business pricing and it really helps build confidence that that ICR trajectory.
Andrew Nicholas: We sort of laid out in our plans and forecast that we can achieve that with some confidence and should we see and eventually we will see that trend come down from the low double digits.
Andrew Nicholas: If it comes down a little bit faster than that is a little bit of a tailwind for us.
Andrew Nicholas: But in terms of what's happening and what sort of is persisting in the cost trend. Okay. Let's you've got anything you want to add to that.
Andrew Nicholas: Andrew happy to add a little bit of color when we think about differences between medical and prescription.
Andrew Nicholas: Both both are in the double digit range, when we look kind of year over year, but very low double digit for medical but a little bit higher on prescription. The thing that we're seeing now is on the prescription side, we are seeing it tailed down a little bit to the rate of acceleration of cost is coming due.
Andrew Nicholas: We're watching it.
Andrew Nicholas: That's what it is in terms of what's underneath that.
Andrew Nicholas: More people are taking more as scripts and.
Andrew Nicholas: But on average the cost per script is coming down a little debt.
Speaker Change: Great. Thank you for for the response that was thorough and helpful for.
Speaker Change: For my follow up I, just wanted to ask about the cost of providing services line and your Cogs line.
Speaker Change: You know pretty sizable decrease in absolute dollars year over year, and it sounds like youre gaining efficiencies drought.
Speaker Change: Organization, but I'm, just wanting to kind of better understand.
Speaker Change: That line in particular, how much of that is benefits related versus some of the efficiency program do you have in place and maybe how sustainable that kind of level load.
Speaker Change: Cogs line is for.
Speaker Change: For this year. Thank you.
Speaker Change: Yeah, no happy to take Atlanta, Andrew.
Speaker Change: When we laid out the strategy, we talked about over the medium term you know expenses growing modestly but couple of points lower than we would expect from a revenue perspective, I'm really proud of the team for really focusing on making sure that we're providing the right level of service.
As you know that's going to drive the right NPS score.
Speaker Change: We're really focused on those areas that matter the most.
Speaker Change: Have been working on an automation.
Speaker Change: We went into the year expecting kind of low single digit Cie and knew we were gonna have to really manage expenses tightly so that so that we could still work on on margins and make sure we have acceptable margins.
Speaker Change: So we're on track and actually a little bit better than I had planned for the first quarter.
Speaker Change: But the one thing I did want to hit on that though is we are still investing so we've got dedicated teams that are working on a set of strategic priorities, including scaled service delivery.
Speaker Change: Which will help us continue.
Speaker Change: Not only just get efficiencies that make sure we're really delivering the value to our clients.
Speaker Change: Yeah.
Speaker Change: Very helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Kevin Mcveigh from UBS. Please go ahead.
Speaker Change: Your next question comes from Kevin Mcveigh from UBS. Please go ahead.
Speaker Change: Yes.
Speaker Change: Kevin Your line isn't muted. Please proceed with your question.
Speaker Change: Okay.
Speaker Change: As there is no response from the line of the current participant we will move on to the next question.
Speaker Change: And before we move onto the next question a reminder to everyone to register for a question you May Press Star then one on your Touchtone phone.
Speaker Change: Yeah.
Speaker Change: The next question comes from Andrew political which from J P. Morgan. Please go ahead.
Speaker Change: Hey, good morning, everyone I'm really nice results.
Speaker Change: I wanted to start by asking just about the <unk> cutover I understand that <unk> is typically the seasonally lower watermark for Wsb's, but I was wondering if you could contextualize how much of this quarter was sort of that normal course, sharron versus maybe excess from the pricing environment that you guys had.
Speaker Change: Talked about.
Speaker Change: Yes, Thanks, and good morning, Yeah I think.
Speaker Change: A little bit I think Kelly alluded to it.
Speaker Change: <unk>.
Speaker Change: Came into the year and we've.
Speaker Change: Cheap record retention last year, we felt confident that sort of given where we are given the positioning given the investments we've made in the technology and the service delivery that we can maintain.
Speaker Change: Maintain quite favorable and have done so, but I think there was about a point to kellys earlier conversation.
Speaker Change: Health care related.
Speaker Change: Attrition attrition, yes, exactly and I think in general.
Speaker Change: As we sort of look out over the year.
Speaker Change: You sort of seen the bulk of the attrition that we're going to see happens in the first quarter and the team has done a really good job of being close to customers and understanding.
Speaker Change: Yes, a little bit higher shopping activity in the market, but what they are finding I think pretty consistently is that the health care price increases those sizable that replacing theyre in line.
Speaker Change: The other options out there in the market, it's an industry wide phenomenon.
Mike Mike: Okay, Great that's super helpful color Mike.
Speaker Change: For my one follow up I wanted to ask something about the go to market plans in the back half of the year I know you alluded just scaling the broker channel and some co development efforts there.
Mike Mike: Just wanted to ask as far as well.
Mike Mike: What's baked into the outlook how important is the scaling of the broker channel versus the maturing of your sales force that you've spoken about in the past.
Mike Mike: Yeah.
Mike Mike: Yeah, absolutely Ed and they're actually both quite important and think about the good news is we're not sort of at a standing stop when it comes to the brokerage channel, it's about 10% to 15% when we think about health care brokers contributing to new business and so we would see that becoming incrementally more important but also we did.
Mike Mike: See the median tenure of our sales force tick higher here.
Mike Mike: Good retention amongst our senior perhaps that's a really important metric for us is because of the productivity curve is so steep with each year of experience. So both I think are going to contribute to it we are pretty excited.
Mike Mike: Some of the quick wins that were developing with some of our national brokerage relationships I think that those will be additive as we go into the second half of the year and I think it's also really exciting because theres more material things on the roadmap from a technology.
Mike Mike: Process point of view that that will represent upside even past the second half of this year. So we're pretty excited about it.
Mike Mike: Great. Thank you very much for taking my questions and congrats again on the quarter.
Andrew Nicholas: Thanks, Andrew.
Mike Mike: Thank you.
Andrew Nicholas: Your next question comes from David Grossman from Stifel. Please go ahead.
David Grossman: Thank you.
David Grossman: Morning, Mike.
David Grossman: I think you talked about.
David Grossman: It was 90 days ago.
David Grossman: Taking that underperforming segments.
David Grossman: Many of the health care book and repricing it over multiple years.
David Grossman: The rationale being to retain those clients that you wanted to retain because you thought there was solid cohort of customers and in.
David Grossman: In that book.
David Grossman: Is your thinking pretty much the same where do you think it's still going to be a multiple multiyear period.
David Grossman: Just based on the experience in the first 90 days do you think maybe you come in a little bit below that.
David Grossman: You can get that booked.
David Grossman: Book price to risk may be a little more quickly than you had thought.
David Grossman: Yes, good morning, David Thanks for the question I think we're still I'd say.
David Grossman: On a similar track at this point and so down a little bit more attrition a little bit more attrition frankly in that cohort that you're describing when we look at things like.
David Grossman: What's the insurance cost ratio for the.
David Grossman: The <unk> business versus the business that we've retained theres, a pretty big Delta between the two and we don't like to lose customers, but it's sort of can't get to a sort of economically lifetime value.
David Grossman: Of equation.
David Grossman: Usually what's going to happen. So at this point I think we're sort of staying the course again.
David Grossman: A little bit of green shoots in terms of like what Kelly was talking about where our pricing is assumes no abatement in cost trend from the current low double digit level, we're seeing a little bit of.
David Grossman: There are reasons for optimism on the script side.
David Grossman: No real movement on the on the medical side so if.
David Grossman: Some of those year over year inflation trends were to tail off a little bit and we see a recovery back into our targeted 87% to 90% range a little bit quicker, but I think right now the team is doing a really good job of just balancing.
David Grossman: Retention of customer over a couple of cycles, and it's a difficult environment for small businesses and so we want to sort of meet them halfway through the process.
David Grossman: Got it and then there was.
Speaker Change: You mentioned in your prepared remarks that I think.
Speaker Change: Youre going to start introducing your benefit bundles.
Speaker Change: It may be towards the second half of the year when the selling season becomes more important.
Speaker Change: And maybe you could just.
Speaker Change: Give us a little bit more color on what the plan is there in terms of.
Speaker Change: What the change the major changes are and how you expect that to impact.
Speaker Change: The sales process as we get into the selling season in the back half of the year.
Speaker Change: Yeah, sure and Theres a lot of really good work happening right now and just admittedly context trying that as you know takes risk over the years working with our carrier partners, we built out a really rich and diverse set of healthcare benefit plans.
Speaker Change: That's a good thing to have that set of choices, but in some instances.
Speaker Change: I would say, particularly smbs that have employees in a lot of different states for instance, as you know with remote work that's happening more often.
Speaker Change: Having that number of choices does introduce some complexity and probably a little less ability to hit specific budget targets without broad based discounting and we've really moved away from that.
Speaker Change: So what what bundles and we're gonna start in some select markets here in the fall selling season, what they do it just gives clients a simpler set of plan choices to help them manage their cost and I think it will also and I think this is actually pretty important it will make the sales and renewal process.
Speaker Change: More streamlined and simplified for our teams, which I think could help with the sales velocity in the process. So.
Speaker Change: Pretty excited about the work that's happening we're going to learn a lot here in the coming months and we will continue to build on that but I think it is an important part.
Speaker Change: And one of a set of actions that were taken to grow this business in a sustainable and profitable way.
Speaker Change: Right and if I could just squeeze one more.
Speaker Change: Could you just give us a rough sense of what mainstream is currently as a percentage of your revenue mix.
Speaker Change: David I don't have it in terms of revenue mix that is roughly 20% of our worksite employees for main street.
Speaker Change: Yeah.
Speaker Change: And so then.
Speaker Change: Logically it would be less as a percent of revenue right.
Speaker Change: I understand yeah, yeah generally drives two things one is slightly lower.
And then too.
Speaker Change: Last health care participation.
Speaker Change: Right.
Speaker Change: Great Alright, guys. Thanks very much.
Okay. Thank you David Thank you David.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session.
Speaker Change: I'd like to turn the conference back over to Mike Simons for closing remarks.
Mike Simons: Thank you cigar and thank you everyone for joining us today on the call hopefully you get a sense.
Speaker Change: For the strong start that we got to the year and the competence.
Speaker Change: And that we're building here at Tri net, albeit in an uncertain environment. So.
Speaker Change: Look forward to updating you again on our progress here in about 90 days and with that cigar begin conclude todays call.
Speaker Change: Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: