TriNet Announces First Quarter 2024 Results
1%
Growth in Total Revenues to
4% Growth in Professional Service Revenues to $214 million
Net Income per Diluted Share of
First quarter highlights include:
- Total revenues increased 1% to
$1.3 billion as compared to the same period last year. - Professional service revenues increased 4% to
$214 million as compared to the same period last year. - Net income was
$91 million , or$1.78 per diluted share, compared to net income of$131 million , or$2.17 per diluted share, in the same period last year. - Adjusted Net Income was
$111 million , or$2.16 per diluted share, compared to Adjusted Net Income of$150 million , or$2.49 per diluted share, in the same period last year. - Adjusted EBITDA was
$180 million , compared to Adjusted EBITDA of$223 million , in the same period last year. - Average WSEs increased 6% as compared to the same period last year, to approximately 348,000 and includes 17,600 PEO Platform Users.
- Average HRIS Users for the period was approximately 195,000.
- At
March 31, 2024 , TriNet had cash and cash equivalents of$298 million and total debt of$1.1 billion .
"I'm excited to have begun my tenure as CEO of
Second Quarter and Full-Year 2024 Guidance
In addition to announcing our first quarter 2024 results, we provide our second quarter and full-year 2024 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.
|
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Q2 2024 |
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Full Year 2024 |
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|
Low |
|
High |
|
Low |
|
High |
Total Revenues |
|
(1) % |
|
1 % |
|
(1) % |
|
4 % |
Professional Service Revenues |
|
(2) % |
|
4 % |
|
1 % |
|
5 % |
Insurance Cost Ratio |
|
90.0 % |
|
87.0 % |
|
89.5 % |
|
87.5 % |
Diluted net income per share of common stock |
|
$ 0.68 |
|
$ 1.17 |
|
$ 3.94 |
|
$ 5.46 |
Adjusted Net Income per share - diluted |
|
$ 1.00 |
|
$ 1.50 |
|
$ 5.25 |
|
$ 6.80 |
Quarterly Report on Form 10-Q
We anticipate filing our Quarterly Report on Form 10-Q ("Form 10-Q") for the three months ended
Earnings Conference Call and Audio Webcast
About
Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to
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,
Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include: our ability to manage unexpected changes in workers' compensation and health insurance claims and costs by WSEs; our ability to mitigate the unique business risks we face as a co-employer; the effects of volatility in the financial and economic environment on the businesses that make up our client base; loss of clients for reasons beyond our control and the short-term contracts we typically use with our clients; the impact of regional or industry-specific economic and health factors on our operations; the impact of failures or limitations in the business systems and centers we rely upon; the impact of discontinuing our discretionary credits on our business and client loyalty and retention; changes in our insurance coverage or our relationships with key insurance carriers; our ability to improve our services and technology to satisfy client and regulatory expectations; our ability to effectively integrate businesses we have acquired or may acquire in the future; our ability to effectively manage and improve our operational effectiveness and resiliency; 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, breaches, disclosures and other data-related incidents; our ability to protect against and remediate cyber-attacks, breaches, disclosures and other data-related incidents, whether intentional or inadvertent and whether attributable to us or our service providers; our ability to comply with 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 and for our benefits plans to satisfy all requirements under federal and state regulations; changes in the laws and regulations that govern what it means to be an employer, employee or independent contractor; the impact of new and changing laws regarding remote work; our ability to comply with the licensing requirements that govern our solutions; the outcome of existing and future legal and tax proceedings; fluctuation in our results of operations and stock price due to factors outside of our control; 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 by Atairos and other large stockholders. Any of these factors could cause our actual results to differ materially from our anticipated results.
Further information on risks that could affect
Contacts: |
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Investors: |
Media: |
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(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 |
|||||
(in millions, except per share and Operating Metrics data) |
2024 |
|
2023 |
|
% Change |
|
Income Statement Data: |
|
|
|
|
|
|
Total revenues |
$ 1,264 |
|
$ 1,246 |
|
1 |
% |
Operating income |
122 |
|
169 |
|
(28) |
|
Net income |
91 |
|
131 |
|
(31) |
|
Diluted net income per share of common stock |
1.78 |
|
2.17 |
|
(18) |
|
Non-GAAP measures (1): |
|
|
|
|
|
|
Adjusted EBITDA |
180 |
|
223 |
|
(19) |
|
Adjusted Net income |
111 |
|
150 |
|
(26) |
|
Operating Metrics: |
|
|
|
|
|
|
Insurance Cost Ratio |
86 % |
|
82 % |
|
4 |
|
Average WSEs (2) |
348,164 |
|
327,107 |
|
6 |
% |
Total WSEs at period end (2) |
351,919 |
|
328,299 |
|
7 |
|
Average HRIS Users (3) |
195,157 |
|
231,347 |
|
(16) |
|
(1) |
Refer to Non-GAAP measures definitions and reconciliations from GAAP measures under the heading "Non-GAAP Financial Measures". |
(2) |
Total WSEs and Average WSEs include approximately 19,600 and 17,600, respectively, for incremental WSEs that were charged a platform user access fee for the first quarter ended |
(in millions) |
|
|
|
|
% Change |
|
Balance Sheet Data: |
|
|
|
|
|
|
Working capital |
171 |
|
115 |
|
49 |
% |
Total assets |
3,968 |
|
3,693 |
|
7 |
|
Debt |
1,093 |
|
1,093 |
|
— |
|
Total stockholders' equity |
143 |
|
78 |
|
83 |
|
|
|
|||||
|
Three Months Ended |
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(in millions) |
2024 |
|
2023 |
|
% Change |
|
Cash Flow Data: |
|
|
|
|
|
|
Net cash used in operating activities |
$ (122) |
|
$ (77) |
|
58 |
% |
Net cash used in investing activities |
(47) |
|
(23) |
|
104 |
|
Net cash provided by (used in) financing activities |
(30) |
|
200 |
|
(115) |
|
Non-GAAP measure (1): |
|
|
|
|
|
|
Corporate Operating Cash Flows |
$ 201 |
|
$ 169 |
|
19 |
|
(1) |
Refer to Non-GAAP measures definitions and reconciliations from GAAP measures under the heading "Non-GAAP Financial Measures". |
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) |
||
|
Three Months Ended |
|
(in millions except per share data) |
2024 |
2023 |
Professional service revenues |
$ 214 |
$ 205 |
Insurance service revenues |
1,050 |
1,041 |
Total revenues |
1,264 |
1,246 |
Insurance costs |
907 |
852 |
Cost of providing services |
79 |
78 |
Sales and marketing |
72 |
69 |
General and administrative |
48 |
43 |
Systems development and programming |
18 |
17 |
Depreciation and amortization of intangible assets |
18 |
18 |
Total costs and operating expenses |
1,142 |
1,077 |
Operating income |
122 |
169 |
Other income (expense): |
|
|
Interest expense, bank fees and other |
(16) |
(7) |
Interest income |
18 |
18 |
Income before provision for income taxes |
124 |
180 |
Income taxes |
33 |
49 |
Net income |
$ 91 |
$ 131 |
Other comprehensive income (loss), net of income taxes |
(3) |
3 |
Comprehensive income |
$ 88 |
$ 134 |
Net income per share: |
|
|
Basic |
$ 1.80 |
$ 2.18 |
Diluted |
$ 1.78 |
$ 2.17 |
Weighted average shares: |
|
|
Basic |
51 |
60 |
Diluted |
51 |
60 |
CONSOLIDATED BALANCE SHEETS (Unaudited) |
||||
|
|
|
|
|
(in millions, except share and per share data) |
|
2024 |
|
2023 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ 298 |
|
$ 287 |
Investments |
|
85 |
|
65 |
Restricted cash, cash equivalents and investments |
|
1,059 |
|
1,269 |
Accounts receivable, net |
|
11 |
|
18 |
Unbilled revenue, net |
|
467 |
|
447 |
Prepaid expenses, net |
|
79 |
|
67 |
Other payroll assets |
|
791 |
|
381 |
Other current assets |
|
50 |
|
44 |
Total current assets |
|
2,840 |
|
2,578 |
Restricted cash, cash equivalents and investments, noncurrent |
|
152 |
|
158 |
Investments, noncurrent |
|
161 |
|
143 |
Property and equipment, net |
|
15 |
|
17 |
Operating lease right-of-use asset |
|
22 |
|
24 |
|
|
462 |
|
462 |
Software and other intangible assets, net |
|
174 |
|
172 |
Other assets |
|
142 |
|
139 |
Total assets |
|
$ 3,968 |
|
$ 3,693 |
Liabilities and stockholders' equity |
|
|
|
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Current liabilities: |
|
|
|
|
Accounts payable and other current liabilities |
|
$ 122 |
|
$ 87 |
Revolving credit agreement borrowings |
|
109 |
|
109 |
Client deposits and other client liabilities |
|
51 |
|
65 |
Accrued wages |
|
537 |
|
515 |
Accrued health insurance costs, net |
|
167 |
|
175 |
Accrued workers' compensation costs, net |
|
51 |
|
50 |
Payroll tax liabilities and other payroll withholdings |
|
1,611 |
|
1,438 |
Operating lease liabilities |
|
14 |
|
14 |
Insurance premiums and other payables |
|
7 |
|
10 |
Total current liabilities |
|
2,669 |
|
2,463 |
Long-term debt, noncurrent |
|
984 |
|
984 |
Accrued workers' compensation costs, noncurrent, net |
|
120 |
|
120 |
Deferred taxes |
|
13 |
|
13 |
Operating lease liabilities, noncurrent |
|
27 |
|
30 |
Other non current liabilities |
|
12 |
|
5 |
Total liabilities |
|
3,825 |
|
3,615 |
Stockholders' equity: |
|
|
|
|
Preferred stock |
|
— |
|
— |
Common stock and additional paid-in capital |
|
996 |
|
976 |
Accumulated deficit |
|
(848) |
|
(896) |
Accumulated other comprehensive loss |
|
(5) |
|
(2) |
Total stockholders' equity |
|
143 |
|
78 |
Total liabilities & stockholders' equity |
|
$ 3,968 |
|
$ 3,693 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
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|
Three Months Ended |
|
(in millions) |
2024 |
2023 |
Operating activities |
|
|
Net income |
$ 91 |
$ 131 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
Depreciation and amortization of intangible assets |
18 |
18 |
Amortization of deferred costs |
11 |
12 |
Amortization of ROU asset, lease modification, impairment, and abandonment |
2 |
2 |
Stock based compensation |
20 |
11 |
Provision for doubtful accounts |
1 |
1 |
Changes in operating assets and liabilities: |
|
|
Accounts receivable, net |
6 |
3 |
Unbilled revenue, net |
(20) |
5 |
Prepaid expenses, net |
(12) |
(14) |
Other assets |
(21) |
(10) |
Other payroll assets |
(410) |
(180) |
Accounts payable and other liabilities |
20 |
30 |
Client deposits and other client liabilities |
(14) |
25 |
Accrued wages |
23 |
(21) |
Accrued health insurance costs, net |
(7) |
(5) |
Accrued workers' compensation costs, net |
1 |
(1) |
Payroll taxes payable and other payroll withholdings |
173 |
(80) |
Operating lease liabilities |
(4) |
(4) |
Net cash used in operating activities |
(122) |
(77) |
Investing activities |
|
|
Purchases of marketable securities |
(95) |
(82) |
Proceeds from sale and maturity of marketable securities |
66 |
76 |
Acquisitions of property and equipment and projects in process |
(18) |
(17) |
Net cash used in investing activities |
(47) |
(23) |
Financing activities |
|
|
Repurchase of common stock |
(23) |
(91) |
Awards effectively repurchased for required employee withholding taxes |
(7) |
(4) |
Proceeds from revolving credit agreement borrowings |
— |
495 |
Repayment of revolving credit agreement borrowings |
— |
(200) |
Net cash provided by (used in) financing activities |
(30) |
200 |
Net change in cash and cash equivalents, unrestricted and restricted |
(199) |
100 |
Cash and cash equivalents, unrestricted and restricted: |
|
|
Beginning of period |
1,466 |
1,537 |
End of period |
$ 1,267 |
$ 1,637 |
|
|
|
Supplemental disclosures of cash flow information |
|
|
Interest paid |
$ 26 |
$ 11 |
Income taxes paid, net |
$ 7 |
$ 4 |
Supplemental schedule of noncash investing and financing activities |
|
|
Cash dividend declared, but not yet paid |
$ 13 |
$ — |
Payable for purchase of property and equipment |
$ 3 |
$ 5 |
Non-GAAP Financial Measures
In addition to the selected financial measures presented in accordance with
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 |
Adjusted EBITDA |
|
|
Adjusted Net Income |
|
|
Corporate Operating Cash |
|
|
(1) |
Non-GAAP effective tax rate is 25.6% for the first quarters of 2024 and 2023, 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 a terminated derivative. |
Reconciliation of GAAP to Non-GAAP Measures
The table below presents a reconciliation of net income to Adjusted EBITDA:
|
Three Months Ended
|
|
(in millions) |
2024 |
2023 |
Net income |
$ 91 |
$ 131 |
Provision for income taxes |
33 |
49 |
Stock based compensation |
20 |
11 |
Interest expense, bank fees and other |
16 |
7 |
Depreciation and amortization of intangible assets |
18 |
18 |
Amortization of cloud computing arrangements |
2 |
2 |
Transaction and integration costs |
— |
5 |
Adjusted EBITDA |
$ 180 |
$ 223 |
Adjusted EBITDA Margin |
14.2 % |
17.9 % |
The table below presents a reconciliation of net income to Adjusted Net Income and Adjusted Net Income per share - diluted:
|
Three Months Ended
|
|
(in millions, except per share data) |
2024 |
2023 |
Net income |
$ 91 |
$ 131 |
Effective income tax rate adjustment |
1 |
3 |
Stock based compensation |
20 |
11 |
Amortization of intangible assets |
5 |
6 |
Transaction and integration costs |
— |
5 |
Income tax impact of pre-tax adjustments |
(6) |
(6) |
Adjusted Net Income |
$ 111 |
$ 150 |
GAAP weighted average shares of common stock - diluted |
51 |
60 |
Adjusted Net Income per share - diluted |
$ 2.16 |
$ 2.49 |
The table below presents a reconciliation of net cash provided by operating activities to Corporate Operating Cash flows:
|
Three Months Ended
|
|
(in millions) |
2024 |
2023 |
Net cash used in operating activities |
$ (122) |
$ (77) |
Less: Change in WSE related other current assets |
(420) |
(178) |
Less: Change in WSE related liabilities |
97 |
(68) |
Net cash used in operating activities - WSE |
$ (323) |
$ (246) |
Net cash provided by operating activities - Corporate |
$ 201 |
$ 169 |
Reconciliation of GAAP to Non-GAAP Measures for the second quarter and full-year 2024 guidance.
Low and high percentages represent increases (decreases) from the same periods in the previous year.
The table below presents a reconciliation of net income to Adjusted Net Income and Adjusted Net Income per share - diluted:
|
Q2 2023 |
|
Q2 2024 Guidance |
|
FY 2023 |
|
Year 2024 Guidance |
||
(in millions, except per share data) |
Actual |
|
Low |
High |
|
Actual |
|
Low |
High |
Net income |
$ 83 |
|
(58) % |
(28) % |
|
$ 375 |
|
(46) % |
(26) % |
Effective income tax rate adjustment |
— |
|
158 |
(70) |
|
(2) |
|
46 |
2 |
Stock based compensation |
17 |
|
8 |
8 |
|
59 |
|
26 |
26 |
Amortization of intangible assets |
5 |
|
(9) |
(9) |
|
20 |
|
(5) |
(5) |
Non-cash interest expense |
1 |
|
(100) |
(100) |
|
2 |
|
(73) |
(73) |
Transaction and integration costs |
7 |
|
(100) |
(100) |
|
17 |
|
(100) |
(100) |
Income tax impact of pre-tax adjustments |
(8) |
|
(22) |
(22) |
|
(25) |
|
(4) |
(4) |
Adjusted Net Income |
$ 105 |
|
(52) % |
(27) % |
|
$ 446 |
|
(40) % |
(22) % |
GAAP weighted average shares of common stock - diluted |
60 |
|
|
|
|
57 |
|
|
|
Adjusted Net Income per share - diluted |
$ 1.74 |
|
$ 1.00 |
$ 1.50 |
|
$ 7.81 |
|
$ 5.25 |
$ 6.80 |
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