PR Newswire | Apr 26, 2021 04:21PM EDT

04/26 15:20 CDT

TriNet Announces First Quarter 2021 Results1% Growth in GAAP Total Revenues and 9% Growth in Net Service Revenues for the First Quarter 202111% Growth in GAAP Net Income and 14% Growth in Adjusted Net Income for the First Quarter 2021$1.51 in Net Income and $1.66 in Adjusted Net Income per Diluted Share for the First Quarter 2021 DUBLIN, Calif., April 26, 2021

DUBLIN, Calif., April 26, 2021 /PRNewswire/ --TriNet Group, Inc. (NYSE: TNET), a leading provider of comprehensive human resources solutions for small and medium-size businesses, today announced financial results for the first quarter ended March 31, 2021. The first quarter highlights below include non-GAAP financial measures which are reconciled later in this release.

First quarter highlights include:

* Total revenues increased 1% to $1.1 billion and Net Service Revenues increased 9% to $309 million, as compared to the same period last year. * Net income was $101 million, or $1.51 per diluted share, compared to net income of $91 million, or $1.31 per diluted share, in the same period last year. * Adjusted Net Income was $111 million, or $1.66 per diluted share, compared to Adjusted Net Income of $97 million, or $1.41 per diluted share, in the same period last year. * Adjusted EBITDA was $163 million, representing an Adjusted EBITDA Margin of 53%. * Total Worksite Employees (WSEs) decreased 3% compared to the same period last year, to approximately 326,000. * Average WSEs decreased 4% as compared to the same period last year, to approximately 321,000.

"Our business model continued to add significant value to our customers during these challenging times," said Burton M. Goldfield, TriNet's President and CEO. "Our customers sought help not just with traditional HR functions such as payroll, but also with strategic HR questions as they addressed the difficult economic environment. Through our vertical strategy, we have successfully aligned the right customers, with the right service model, at the right price. We once again leveraged our differentiated business model and financial performance to establish the 2021 credit program for the benefit of all of our stakeholders. We are encouraged by the economic reopening underway, and we are excited for a return to growth in 2021."

TriNet's total revenues for the first quarter of 2021 increased 1% from the first quarter of 2020 to $1.1 billion, while Net Service Revenues (total revenues less insurance costs) for the first quarter of 2021 increased 9% to $309 million compared to first quarter 2020. Net Insurance Service Revenues consisted of insurance service revenues of $907 million, less insurance costs of $751 million. Professional service revenues for the first quarter of 2021 decreased 2%, and Net Insurance Service Revenues for the first quarter of 2021 increased 23%, each as compared to the first quarter of 2020.

At March 31, 2021, TriNet had cash and cash equivalents of $500 million and total debt of $494 million.

Second Quarter and Full-Year 2021 Guidance

In addition to announcing our first quarter 2021 results, we provide our second quarter and full-year 2021 guidance. Non-GAAP financial measures are reconciled later in this release. Percentages reflect the increase or (decrease) from the prior year quarter and prior year end.

Q2 2021 Full Year 2021

Low High Low High

Total revenues 12 %14 %9 %11 %

Professional Service Revenues 10 %14 %8 %10 %

Net Insurance Margin 10 %11 %10 %11 %

Adjusted EBITDA Margin 35 %39 %38 %40 %

Diluted net income per share of common stock$0.59 $0.74 $2.86 $3.31

Adjusted Net Income per share - diluted $0.70 $0.86 $3.42 $3.90

Quarterly Report on Form 10-Q

We anticipate filing our Quarterly Report on Form 10-Q ("Form 10-Q") for the three months ended March 31, 2021 with the U.S. Securities and Exchange Commission (SEC) and making it available at http://www.trinet.com today, April 26, 2021. This press release should be read in conjunction with the Form 10-Q and the related Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Form 10-Q.

Earnings Conference Call and Audio Webcast

TriNet will host a conference call at 2:00 p.m. PT (5:00 p.m. ET) today to discuss its first quarter results for 2021 and provide second quarter and full-year financial guidance for 2021. TriNet encourages participants to pre-register for the conference call. Callers who pre-register will be given a unique PIN to gain immediate access to the call and bypass the live operator. To pre-register, go to: https://dpregister.com/sreg/10154653/e69f504b4b. For those who would like to join the call but have not pre-registered, they can do so by dialing +1 (412) 317-5426 and requesting the "TriNet Conference Call." The live webcast of the conference call can be accessed on the Investor Relations section of TriNet's website at http://investor.trinet.com. A replay of the webcast will be available on this website for approximately one year. A telephonic replay will be available for one week following the conference call at +1 (412) 317-0088 conference ID: 10154656.

About TriNet

TriNet is a leading provider of a comprehensive human resources solution for small to medium-size businesses, or SMBs. We enhance business productivity by enabling our clients to outsource their human resources, or HR, function to us, allowing them to focus on operating and growing their core businesses. Our HR solutions include services such as payroll processing, human capital consulting, employment law compliance and employee benefits, including health insurance, retirement plans and workers compensation insurance. Our services are delivered by our expert team of HR professionals and enabled by our technology platform, with online and mobile tools, which allow our clients and their employees to efficiently conduct their HR transactions anytime and anywhere. For more information, please visit http://www.trinet.com.

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to TriNet's financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section titled "Non-GAAP Financial Measures."

Forward-Looking Statements

This press release contains, and statements made during the above referenced conference call will contain, statements that are not historical in nature, are predictive in nature, or that depend upon or refer to future events or conditions or otherwise contain forward-looking statements within the meaning of Section 21 of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including, among other things, TriNet's expectations and assumptions regarding: TriNet's financial guidance for the second quarter and full-year 2021 and the underlying assumptions, and the extent, length and growth impact of economic reopening efforts. Forward-looking statements are often identified by the use of words such as, but not limited to, "ability," "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "guidance," "impact," "intend," "may," "plan," "predict," "project," "seek," "should," "strategy," "target," "value," "will," "would" and similar expressions or variations. These statements are not guarantees of future performance, but are based on management's expectations as of the date hereof and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from our current expectations and any past or future results, performance or achievements. Investors are cautioned not to place undue reliance upon any forward-looking statements.

Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include: the economic, health and business disruption caused by the COVID-19 pandemic; the impact of the COVID-19 pandemic on our clients and prospects, insurance costs and operations; the impact of the COVID-19 pandemic on the laws and regulations that impact our industry and clients; our ability to mitigate the business risks we face as a co-employer; our ability to manage unexpected changes in workers' compensation and health insurance claims and costs by worksite employees; the effects of volatility in the financial and economic environment on the businesses that make up our client base, and the concentration of our clients in certain geographies and industries; the impact of failures or limitations in the business systems we rely upon; the impact of our Recovery Credit program; adverse changes in our insurance coverage or our relationships with key insurance carriers; our ability to improve our technology to satisfy regulatory requirements and meet the expectations of our clients and manage client attrition; our ability to effectively integrate businesses we have acquired or may acquire in the future; our ability to effectively manage and improve our operational processes; our ability to attract and retain qualified personnel; the effects of increased competition and our ability to compete effectively; the impact on our business of cyber-attacks and security breaches; our ability to secure our information technology infrastructure and our confidential, sensitive and personal information; our ability to comply with constantly evolving data privacy and security laws; our ability to manage changes in, uncertainty regarding, or adverse application of the complex laws and regulations that govern our business; changing laws and regulations governing health insurance and employee benefits; our ability to be recognized as an employer of worksite employees under federal and state regulations; changes in the laws and regulations that govern what it means to be an employer, employee or independent contractor; our ability to comply with the laws and regulations that govern PEOs and other similar industries; the outcome of existing and future legal and tax proceedings; fluctuation in our results of operation and stock price due to factors outside of our control, such as the volume and severity of our workers' compensation and health insurance claims and the amount and timing of our insurance costs, operating expenses and capital expenditure requirements; our ability to comply with the restrictions of our credit facility and meet our debt obligations; and the impact of concentrated ownership in our stock. Any of these factors could cause our actual results to differ materially from our anticipated results.

Further information on risks that could affect TriNet's results is included in our filings with the SEC, including under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are available on our investor relations website at http://investor.trinet.comand on the SEC website at www.sec.gov. Copies of these filings are also available by contacting TriNet Corporation's Investor Relations Department at (510) 875-7201. Except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements in this press release, and any forward-looking statements in this press release speak only as of the date of this press release. In addition, we do not assume any obligation, and do not intend, to update any of our forward-looking statements, except as required by law.

Contacts:

Investors: Media:

Alex Bauer Renee Brotherton

TriNet TriNet

Investorrelations@TriNet.comRenee.Brotherton@TriNet.com

(510) 875-7201 (408) 646-5103

Key Financial and Operating Metrics

We regularly review certain key financial and operating metrics to evaluate growth trends, measure our performance and make strategic decisions. These key financial and operating metrics may change over time. Our key financial and operating metrics for the periods presented were as follows:

Three Months Ended March 31,

(in millions, except per share and WSE data)2021 2020 % Change

Income Statement Data:

Total revenues $ 1,060 $ 1,048 1 %

Operating income 138 120 15

Net income 101 91 11

Diluted net income per share of common stock1.51 1.31 15

Non-GAAP measures^ (1):

Net Service Revenues 309 283 9

Net Insurance Service Revenues 156 127 23

Adjusted EBITDA 163 145 12

Adjusted Net income 111 97 14

Operating Metrics:

Average WSEs 321,295 336,348 (4) %

Total WSEs at period end 326,216 336,846 (3)



(1) Refer to Non-GAAP measures definitions and reconciliations from GAAP measures under the heading "Non-GAAP Financial Measures".





(in millions) March 31,December 31,% Change 2021 2020

Balance Sheet Data:

Working capital $ 520 290 79 %

Total assets 3,005 3,043 (1)

Debt 494 370 34

Total stockholders' equity 653 607 8





Three Months Ended March 31,

(in millions) 2021 2020 % Change

Cash Flow Data:

Net cash used in operating activities $ (175) $ (282) (38) %

Net cash used in investing activities (3) (94) (97)

Net cash provided by financing activities 56 185 (70)

Non-GAAP measure ^(1):

Corporate Operating Cash Flows 131 119 10

(1) Refer to Non-GAAP measures definitions and reconciliations from GAAPmeasures under the heading "Non-GAAP Financial Measures".

TRINET GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)



Three Months Ended March 31,

(in millions except per share data) 2021 2020

Professional service revenues $ 153 $ 156

Insurance service revenues 907 892

Total revenues 1,060 1,048

Insurance costs 751 765

Cost of providing services 64 64

Sales and marketing 46 46

General and administrative 36 33

Systems development and programming 13 9

Depreciation and amortization of intangible assets 12 11

Total costs and operating expenses 922 928

Operating income 138 120

Other income (expense):

Interest expense, bank fees and other (5) (4)

Interest income 2 5

Income before provision for income taxes 135 121

Income taxes 34 30

Net income $ 101 $ 91

Other comprehensive (loss) income, net of income taxes(1) 2

Comprehensive income $ 100 $ 93

Net income per share:

Basic $ 1.53 $ 1.32

Diluted $ 1.51 $ 1.31

Weighted average shares:

Basic 66 68

Diluted 67 69

TRINET GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)



(In millions) March 31, 2021December 31, 2020

Assets

Current assets:

Cash and cash equivalents $500 $301

Investments 71 57

Restricted cash, cash equivalents and investments 1,081 1,388

Accounts receivable, net 5 18

Unbilled revenue, net 340 246

Prepaid expenses, net 58 63

Other current assets 105 87

Total current assets 2,160 2,160

Restricted cash, cash equivalents and investments, noncurrent184 210

Investments, noncurrent 130 138

Property, equipment and software, net 75 79

Operating lease right-of-use asset 51 51

Goodwill 294 294

Other intangible assets, net 17 18

Other assets 94 93

Total assets $3,005 $3,043

Liabilities and stockholders' equity

Current liabilities:

Accounts payable and other current liabilities $84 $50

Long-term debt - 22

Client deposits and other client liabilities 151 134

Accrued wages 488 309

Accrued health insurance costs, net 165 172

Accrued workers' compensation costs, net 59 59

Payroll tax liabilities and other payroll withholdings 668 1,095

Operating lease liabilities 12 11

Insurance premiums and other payables 13 18

Total current liabilities 1,640 1,870

Long-term debt, noncurrent 494 348

Accrued workers' compensation costs, noncurrent, net 138 138

Deferred taxes 21 22

Operating lease liabilities, noncurrent 49 49

Other non-current liabilities 10 9

Total liabilities 2,352 2,436

Stockholders' equity:

Preferred stock - -

Common stock and additional paid-in capital 758 747

Accumulated deficit (108) (144)

Accumulated other comprehensive income 3 4

Total stockholders' equity 653 607

Total liabilities and stockholders' equity $3,005 $3,043

TRINET GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



Three Months Ended March 31,

(in millions) 2021 2020

Operating activities

Net income $101 $ 91

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 19 15

Amortization of ROU asset 3 4

Accretion of discount rate on lease liabilities 1 -

Amortization of premium of investments 1 -

Stock based compensation 11 9

Changes in operating assets and liabilities:

Accounts receivable, net 13 -

Unbilled revenue, net (94) (95)

Prepaid expenses, net 5 (3)

Accounts payable and other current liabilities 33 29

Client deposits and other client liabilities 17 (6)

Accrued wages 179 38

Accrued health insurance costs, net (7) (2)

Accrued workers' compensation costs, net - 3

Payroll taxes payable and other payroll withholdings (426) (334)

Operating lease liabilities (3) (5)

Other assets (24) (28)

Other liabilities (4) 2

Net cash used in operating activities (175) (282)

Investing activities

Purchases of marketable securities (82) (155)

Proceeds from sale and maturity of marketable securities 84 67

Acquisitions of property and equipment (5) (6)

Net cash used in investing activities (3) (94)

Financing activities

Repurchase of common stock (60) (40)

Awards effectively repurchased for required employee withholding taxes (5) (3)

Proceeds from revolving credit agreement borrowings - 234

Payment of long-term financing fees (2) -

Payment of debt issuance costs (7) -

Proceeds from issuance of 2029 Notes 500 -

Repayment of debt (370) (6)

Net cash provided by financing activities 56 185

Net decrease in cash and cash equivalents, unrestricted and restricted (122) (191)

Cash and cash equivalents, unrestricted and restricted:

Beginning of period 1,643 1,456

End of period $1,521 $ 1,265



Supplemental disclosures of cash flow information

Interest paid $2 $ 3

Income taxes paid, net 2 1

Supplemental schedule of noncash investing and financing activities

Payable for purchase of property and equipment $3 $ 1





Non-GAAP Financial Measures

In addition to the selected financial measures presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), we monitor other non-GAAP financial measures that we use to manage our business, to make planning decisions, to allocate resources and to use as performance measures in our executive compensation plan. These key financial measures provide an additional view of our operational performance over the long term and provide information that we use to maintain and grow our business.

The presentation of these non-GAAP financial measures is used to enhance the understanding of certain aspects of our financial performance. It is not meant to be considered in isolation from, superior to, or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.

Non-GAAP Measure Definition How We Use The Measure

? Provides a comparable basis of revenues on a net basis. Professional service revenues are presented net of client payroll costs whereas insurance service revenues are presented gross of insurance costs for financial reporting ? Sum of purposes. professional service revenues and Net ? Acts as the basis to Net Service Revenues Insurance Service allocate resources to Revenues, or total different functions and revenues less evaluates the insurance costs. effectiveness of our business strategies by each business function. ? Provides a measure, among others, used in the determination of incentive compensation for management.

? Is a component of Net Service Revenues. ? Provides a comparable basis of revenues on a net basis. Professional service revenues are presented net of client payroll costs whereas insurance service revenues are presented gross of insurance costs for financial reporting purposes. Promotes an ? Insurance service understanding of our Net Insurance Service Revenuesrevenues less insurance services insurance costs. business by evaluating insurance service revenues net of our WSE related costs which are substantially pass-through for the benefit of our WSEs. Under GAAP, insurance service revenues and costs are recorded gross as we have latitude in establishing the price, service and supplier specifications.

? Net Insurance ? Provides a comparable Margin (NIM) is the basis of Net Insurance ratio of Net Service Revenues relativeNet Insurance Margin Insurance Services to insurance service Revenues to revenues. Promotes an insurance service understanding of our revenues. pricing to risk performance.

? Provides period-to-period comparisons on a consistent basis and an understanding as to how our management evaluates the effectiveness of our business strategies by excluding certain non-cash charges such as ? Net income, depreciation and excluding the amortization, and effects of: stock-based compensation recognized based on the - income tax estimated fair values. We provision, believe these charges are either not directly - interest expense, resulting from our core bank fees and other,operations or not indicative of our ongoingAdjusted EBITDA - depreciation, operations. - amortization of ? Enhances comparisons to intangible assets, prior periods and, and accordingly, facilitates the development of future - stock based projections and earnings compensation growth prospects. expense. ? Provides a measure, among others, used in the determination of incentive compensation for management. ? We also sometimes refer to Adjusted EBITDA margin, which is the ratio of Adjusted EBITDA to Net Service Revenue.

? Net income, excluding the ? Provides information to effects of: our stockholders and board of directors to - effective income understand how our tax rate (1), management evaluates our business, to monitor and - stock based evaluate our operating compensation, results, and analyze profitability of our Adjusted Net Income - amortization of ongoing operations and intangible assets, trends on a consistent basis by excluding - non-cash interest certain non-cash charges. expense (2), and - the income tax effect (at our effective tax rate (1) of these pre-tax adjustments.

? Net cash provided by (used in) operating activities, excluding the effects of: ? Provides information that our stockholders and - Assets associated management can use to with WSEs (accounts evaluate our cash flows receivable, unbilledfrom operations revenue, prepaid independent of the expenses and other current assets and current assets) and liabilities associated with our WSEs. - Liabilities Corporate Operating Cash Flowsassociated with WSEs? Enhances comparisons to (client deposits andprior periods and, other client accordingly, used as a liabilities, accruedliquidity measure to wages, payroll tax manage liquidity between liabilities and corporate and WSE related other payroll activities, and to help withholdings, determine and plan our accrued health cash flow and capital benefit costs, strategies. accrued workers' compensation costs, insurance premiums and other payables, and other current liabilities).

Non-GAAP effective tax rate is 25.5% for the first quarters of 2021 and(1) 2020, which excludes the income tax impact from stock-based compensation, changes in uncertain tax positions, and nonrecurring benefits or expenses from federal legislative changes.

(2) Non-cash interest expense represents amortization and write-off of our debt issuance costs and loss on derivative.

Reconciliation of GAAP to Non-GAAP Measures The table below presents a reconciliation of total revenues to Net Service Revenues:



Three Months Ended March 31,

(in millions) 2021 2020

Total revenues $ 1,060 $ 1,048

Less: Insurance costs 751 765

Net Service Revenues $ 309 $ 283



The table below presents a reconciliation of insurance service revenues to Net Insurance Service Revenues:



Three Months Ended March 31,

(in millions) 2021 2020

Insurance service revenues $ 907 $ 892

Less: Insurance costs 751 765

Net Insurance Service Revenues $ 156 $ 127

NIM 17 % 14 %



The table below presents a reconciliation of net income to Adjusted EBITDA:



Three Months Ended March 31,

(in millions) 2021 2020

Net income $ 101 $ 91

Provision for income taxes 34 30

Stock based compensation 11 9

Interest expense, bank fees and other 5 4

Depreciation and amortization of intangible assets 12 11

Adjusted EBITDA $ 163 $ 145

Adjusted EBITDA Margin 53 % 51 %



The table below presents a reconciliation of net income to Adjusted Net Income and Adjusted Net Income per share - diluted:



Three Months Ended March 31,

(in millions, except per share data) 2021 2020

Net income $ 101 $ 91

Effective income tax rate adjustment - (1)

Stock based compensation 11 9

Amortization of intangible assets 1 1

Non-cash interest expense 2 -

Income tax impact of pre-tax adjustments (4) (3)

Adjusted Net Income $ 111 $ 97

GAAP weighted average shares of common stock - diluted 67 69

Adjusted Net Income per share - diluted $ 1.66 $ 1.41



The table below presents a reconciliation of net cash (used in) provided by operating activities to Corporate Operating Cash flows:



Three Months Ended March 31,

(in millions) 2021 2020

Net cash used in operating activities $ (175) $ (282)

Less: Change in WSE related other current assets (85) (110)

Less: Change in WSE related liabilities (221) (291)

Net cash used in operating activities - WSE $ (306) $ (401)

Net cash provided by operating activities - Corporate $ 131 $ 119

Reconciliation of GAAP to Non-GAAP Measures for the second quarter and full-year 2021 guidance. Low and high percentages represent increases (decreases) from the same period in the previous year. The table below presents a reconciliation of insurance service revenues to Net Insurance Service Revenues and NIM:



Q2 2020 Q2 2021 Guidance FY 2020 Year 2021 Guidance

(in millions) Actual Low High Actual Low High

Insurance service revenues $827 13 %14 %$3,490 9 % 11 %

Less: Insurance costs 613 38 38 2,979 15 15

Net Insurance Service Revenues $214 (59) %(53) %$511 (25) % (17) %

NIM 26 %9.5 %10.7 %15 %10 % 11 %



The table below presents a reconciliation of net income to Adjusted EBITDA:



Q2 2020 Q2 2021 Guidance FY 2020 Year 2021 Guidance

(in millions) Actual Low High Actual Low High

Net income $126 (69) %(61) %$272 (30) % (18) %

Provision for income taxes 45 (81) (73) 85 (32) (18)

Stock based compensation 11 15 20 43 18 22

Interest expense, bank fees and other 4 29 29 21 (8) (8)

Depreciation and amortization of 13 1 1 47 (4) (4) intangible assets

Adjusted EBITDA $199 (61) %(54) %$468 (22) % (13) %

Adjusted EBITDA Margin 59 %35 %39 %44 %38 % 40 %

The table below presents a reconciliation of net income to Adjusted Net Income and Adjusted Net Income per share - diluted:



Q2 2020Q2 2021 Guidance FY 2020Year 2021 Guidance

(in millions, except per share data) Actual Low High Actual Low High

Net income $126 (69) %(61) %$272 (30) %(18) %

Effective income tax rate adjustment 1 (403) (371) (6) (2) (19)

Stock based compensation 11 15 20 43 18 22

Amortization of intangible assets 1 (1) (1) 5 (1) (1)

Non-cash interest expense - 31 31 1 286 286

Income tax impact of pre-tax adjustments (3) 14 18 (12) 21 24

Adjusted Net Income $136 (66) %(58) %$303 (24) %(13) %

GAAP weighted average shares of common stock - diluted 68 68

Adjusted Net Income per share - diluted $2.03$0.70 $0.86 $4.44$3.42 $3.90



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SOURCE TriNet Group, Inc.