PR Newswire | Oct 25, 2021 04:16PM EDT

10/25 15:15 CDT

TriNet Announces Third Quarter 2021 Results18% Growth in Total Revenues to $1.1 Billion24% Growth in Professional Service Revenues to $156 MillionNet Income per Diluted Share of $1.16 and Adjusted Net Income per Diluted Share $1.31 DUBLIN, Calif., Oct. 25, 2021

DUBLIN, Calif., Oct. 25, 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 third quarter ended September 30, 2021. The third quarter highlights below include non-GAAP financial measures which are reconciled later in this release.

Third quarter highlights include:

* Total revenues increased 18% to $1.1 billion as compared to the same period last year. * Professional service revenues increased 24% to $156 million as compared to the same period last year. * Net income was $77 million, or $1.16 per diluted share, compared to net income of $33 million, or $0.48 per diluted share, in the same period last year. * Adjusted Net Income was $87 million, or $1.31 per diluted share, compared to Adjusted Net Income of $39 million, or $0.56 per diluted share, in the same period last year. * Adjusted EBITDA was $132 million, compared to Adjusted EBITDA of $69 million, in the same period last year. * Total Worksite Employees (WSEs) increased 10% compared to the same period last year, to approximately 351,000. * Average WSEs increased 9% as compared to the same period last year, to approximately 348,000. * At September 30, 2021, TriNet had cash and cash equivalents of $525 million and total debt of $495 million. * Published TriNet's inaugural Environment, Social, and Governance Report.

"Our third quarter operational and financial performance reflected our strong customer base and our commitment to provide them with the best possible HR experience," said Burton M. Goldfield, TriNet's President and CEO. "Our strategy of attracting vibrant and durable customers across our core verticals has consistently led to growth in our installed base. During the third quarter, we saw this trend continue, with our customers hiring new employees at rates well in excess of both our projections and the broader economy's hiring rates."

Mr. Goldfield added, "Even as we further invest in our business and strengthen our ability to help our customers navigate the many HR complexities they are facing, TriNet has continued to deliver profitable growth, leveraging our scale and demonstrating operating leverage. We remain well positioned to build on our momentum in the fourth quarter."

Fourth Quarter and Full-Year 2021 Guidance

In addition to announcing our third quarter 2021 results, we provide our fourth 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.

Q4 2021 Full Year 2021

Low High Low High

Total Revenues 12 %14 %11 %12 %

Professional Service Revenues 16 %20 %15 %16 %

Insurance Cost Ratio 94 %92 %87.0 %86.5 %

Diluted net income per share of common stock$0.17 $0.40 $4.20 $4.43

Adjusted Net Income per share - diluted $0.36 $0.60 $4.88 $5.12

Quarterly Report on Form 10-Q

We anticipate filing our Quarterly Report on Form 10-Q ("Form 10-Q") for the nine months ended September 30, 2021 with the U.S. Securities and Exchange Commission (SEC) and making it available at http://www.trinet.com today, October 25, 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 third quarter results for 2021 and provide fourth 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/10161182/eeadf93694. 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: 10161182.

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. Examples of forward-looking statements include, among others, TriNet's guidance and expectations regarding future financial performance, and TriNet's expectations regarding client hiring rates, and the impact of our customer selection process and vertical strategy on future growth in TriNet's installed base. 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 2020 Recovery Credit program and 2021 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.com and 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 (925) 965-8441

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 September 30, Nine Months Ended September 30,

(in millions, except per share and Operating Metrics data)2021 2020 % Change2021 2020 % Change

Income Statement Data:

Total revenues $1,148 $ 975 18 % $3,308 $2,971 11 %

Operating income 105 45 133 364 338 8

Net income 77 33 133 269 250 8

Diluted net income per share of common stock 1.16 0.48 142 4.03 3.66 10

Non-GAAP measures^ (1):

Adjusted EBITDA 132 69 91 449 413 9

Adjusted Net income 87 39 123 302 274 10

Operating Metrics:

Insurance Cost Ratio 86 % 89 % 84 %83 %

Average WSEs 347,502 317,737 9 % 333,839 322,595 3 %

Total WSEs at period end 351,267 320,604 10 351,267 320,604 10

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

(in millions) September 30,December 31,% Change 2021 2020

Balance Sheet Data:

Working capital $ 645 290 122 %

Total assets 3,069 3,043 1

Debt 495 370 34

Total stockholders' equity809 607 33



Nine Months Ended September 30,

(in millions) 2021 2020 % Change

Cash Flow Data:

Net cash used in operating activities $(16) $(40) (60) %

Net cash used in investing activities (145) (151) (4)

Net cash provided by financing activities20 77 (74)

Non-GAAP measure ^(1):

Corporate Operating Cash Flows 334 308 8

(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 EndedNine Months Ended September 30, September 30,

(in millions except per share data) 2021 2020 2021 2020

Professional service revenues $ 156 $ 126 $465 $403

Insurance service revenues 992 849 2,843 2,568

Total revenues 1,148 975 3,308 2,971

Insurance costs 851 759 2,400 2,137

Cost of providing services 61 68 191 192

Sales and marketing 56 45 147 136

General and administrative 52 38 128 106

Systems development and programming 12 9 36 27

Depreciation and amortization of intangible assets 11 11 42 35

Total costs and operating expenses 1,043 930 2,944 2,633

Operating income 105 45 364 338

Other income (expense):

Interest expense, bank fees and other (5) (8) (15) (16)

Interest income 3 2 6 9

Income before provision for income taxes 103 39 355 331

Income taxes 26 6 86 81

Net income $ 77 $ 33 $269 $250

Other comprehensive (loss) income, net of income taxes(2) - (3) 4

Comprehensive income $ 75 $ 33 $266 $254

Net income per share:

Basic $ 1.17$ 0.49 $4.08 $3.69

Diluted $ 1.16$ 0.48 $4.03 $3.66

Weighted average shares:

Basic 66 67 66 68

Diluted 67 68 67 69

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



(In millions) September 30, 2021December 31, 2020

Assets

Current assets:

Cash and cash equivalents $ 525 $301

Investments 155 57

Restricted cash, cash equivalents and investments 1,040 1,388

Accounts receivable, net 8 18

Unbilled revenue, net 305 246

Prepaid expenses, net 73 63

Other current assets 95 87

Total current assets 2,201 2,160

Restricted cash, cash equivalents and investments, noncurrent176 210

Investments, noncurrent 167 138

Property, equipment and software, net 78 79

Operating lease right-of-use asset 44 51

Goodwill 294 294

Other intangible assets, net 7 18

Other assets 102 93

Total assets $ 3,069 $3,043

Liabilities and stockholders' equity

Current liabilities:

Accounts payable and other current liabilities $ 70 $50

Long-term debt - 22

Client deposits and other client liabilities 120 134

Accrued wages 555 309

Accrued health insurance costs, net 162 172

Accrued workers' compensation costs, net 54 59

Payroll tax liabilities and other payroll withholdings 567 1,095

Operating lease liabilities 12 11

Insurance premiums and other payables 16 18

Total current liabilities 1,556 1,870

Long-term debt, noncurrent 495 348

Accrued workers' compensation costs, noncurrent, net 137 138

Deferred taxes 21 22

Operating lease liabilities, noncurrent 43 49

Other non-current liabilities 8 9

Total liabilities 2,260 2,436

Stockholders' equity:

Preferred stock - -

Common stock and additional paid-in capital 790 747

Retained earnings (Accumulated deficit) 18 (144)

Accumulated other comprehensive income 1 4

Total stockholders' equity 809 607

Total liabilities and stockholders' equity $ 3,069 $3,043

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



Nine Months Ended September 30,

(in millions) 2021 2020

Operating activities

Net income $269 $250

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

Depreciation and amortization 63 49

Amortization of ROU asset 8 12

Lease modification and impairment 2 -

Accretion of discount rate on lease liabilities 2 2

Amortization of premium of investments 2 -

Stock based compensation 37 31

Changes in operating assets and liabilities:

Accounts receivable, net 10 5

Unbilled revenue, net (59) (90)

Prepaid expenses, net (10) (1)

Accounts payable and other current liabilities 19 10

Client deposits and other client liabilities (14) 163

Accrued wages 246 63

Accrued health insurance costs, net (10) (7)

Accrued workers' compensation costs, net (6) (2)

Payroll taxes payable and other payroll withholdings (528) (467)

Operating lease liabilities (10) (15)

Other assets (34) (46)

Other liabilities (3) 3

Net cash used in operating activities (16) (40)

Investing activities

Purchases of marketable securities (348) (278)

Proceeds from sale and maturity of marketable securities 232 166

Acquisitions of property and equipment (29) (27)

Other - (12)

Net cash used in investing activities (145) (151)

Financing activities

Repurchase of common stock (94) (135)

Proceeds from issuance of common stock 6 5

Awards effectively repurchased for required employee withholding taxes (13) (11)

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) (16)

Net cash provided by financing activities 20 77

Net decrease in cash and cash equivalents, unrestricted and restricted (141) (114)

Cash and cash equivalents, unrestricted and restricted:

Beginning of period 1,643 1,456

End of period $1,502$1,342



Supplemental disclosures of cash flow information

Interest paid $11 $11

Income taxes paid, net 83 83

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 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 ? Net income, non-cash charges such as excluding the effectsdepreciation and of: amortization, and stock-based compensation - income tax recognized based on the provision, estimated fair values. We believe these charges - interest expense, are either not directly bank fees and other, resulting from our core Adjusted EBITDA operations or not - depreciation, indicative of our ongoing operations. - amortization of ? Enhances comparisons intangible assets, to prior periods and, and accordingly, facilitates the development of - stock based future projections and compensation expense.earnings growth prospects. ? 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 total revenues.

? Net income, excluding the effects of: ? Provides information - effective income to our stockholders and tax rate (1), board of directors to understand how our - stock based management evaluates our compensation, business, to monitor and evaluate our operating Adjusted Net Income - amortization of results, and analyze other intangible profitability of our assets, net, ongoing operations and trends on a consistent - non-cash interest basis by excluding expense (2), and certain non-cash charges. - 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 - Assets associated that our stockholders with WSEs (accounts and management can use receivable, unbilled to evaluate our cash revenue, prepaid flows from operations expenses and other independent of the current assets) and current assets and liabilities associated - Liabilities with our WSEs. Corporate Operating Cash Flowsassociated with WSEs ? Enhances comparisons (client deposits and to prior periods and, other client accordingly, used as a liabilities, accrued liquidity measure to wages, payroll tax manage liquidity between liabilities and othercorporate and WSE payroll withholdings,related activities, and accrued health to help determine and benefit costs, plan our cash flow and accrued workers' capital strategies. compensation costs, insurance premiums and other payables, and other current liabilities).

Non-GAAP effective tax rate is 25.5% for the third 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 net income to Adjusted EBITDA:



Three Months Ended Nine Months Ended September 30, September 30,

(in millions) 2021 2020 2021 2020

Net income $77 $33 $269 $250

Provision for income taxes 26 6 86 81

Stock based compensation 13 11 37 31

Interest expense, bank fees and other 5 8 15 16

Depreciation and amortization of intangible assets 11 11 42 35

Adjusted EBITDA $132 $69 $449 $413

Adjusted EBITDA Margin 11.5 %7.1 %13.6 %13.9 %



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



Three Months Ended Nine Months Ended September 30, September 30,

(in millions, except per share data) 2021 2020 2021 2020

Net income $77 $33 $269 $250

Effective income tax rate adjustment - (4) (4) (3)

Stock based compensation 13 11 37 31

Amortization of intangible assets 1 1 11 4

Non-cash interest expense - 1 3 1

Income tax impact of pre-tax adjustments (4) (3) (14) (9)

Adjusted Net Income $87 $39 $302 $274

GAAP weighted average shares of common stock - diluted 67 68 67 68

Adjusted Net Income per share - diluted $1.31 $0.56 $4.51 $3.99



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



Nine Months Ended September 30,

(in millions) 2021 2020

Net cash used in operating activities $(16) $(40)

Less: Change in WSE related other current assets (50) (103)

Less: Change in WSE related liabilities (300) (245)

Net cash used in operating activities - WSE $(350) $(348)

Net cash provided by operating activities - Corporate $334 $308

Reconciliation of GAAP to Non-GAAP Measures for the fourth 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 net income to Adjusted Net Income and Adjusted Net Income per share - diluted:



Q4 2020Q4 2021 Guidance FY 2020Year 2021 Guidance

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

Net income $22 (47) %22 %$272 3 %9 %

Effective income tax rate adjustment (3) (140) (159) (6) (38) (46)

Stock based compensation 12 19 19 43 19 19

Amortization of intangible assets 1 (3) (3) 5 132 132

Non-cash interest expense 1 39 39 1 288 288

Income tax impact of pre-tax adjustments(3) 17 17 (12) 36 36

Adjusted Net Income $30 (17) %36 %$303 8 %13 %

GAAP weighted average shares of 67 68 common stock - diluted

Adjusted Net Income per share - diluted $0.44$0.36 $0.60 $4.44$4.88 $5.12



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SOURCE TriNet Group, Inc.