Trinet Group, Inc. Q1 FY2024 Earnings Call

Good morning, and welcome to the TriNet First Quarter 2024 Earnings Conference Call. Please note, this event is being recorded.

Thank you, operator. Good morning. My name is Alex Bauer, and I am TriNet's Head of Investor Relations. Thank you for joining us, and welcome to TriNet's 2024 first quarter conference call. I am joined today by our President and CEO, Mike Simonds; and our CFO, Kelly Tuminelli. Before we begin, I would like to address two items. First, for the first time, we are presenting our financial results premarket on a Friday. Please note that the change this quarter was due to our internal calendar and our desire to reach the broadest audience possible. Second, I'd like to address our use of forward-looking statements and non-GAAP financial measures. Please note that today's discussion will include our 2024 second quarter and full year financial outlook, and other statements that are not historical in nature or 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, we 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 of our stock. In addition, our discussion today will include non-GAAP financial measures, including our forward-looking guidance for 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, which are available on our website or through the SEC website. With that, I'll turn the call over to Mike. Mike?

Thank you, Alex, and thank you to our shareholders, analysts, colleagues, customers, and all others joining us this morning. I am excited to lead my first earnings call as CEO of TriNet, and I will center my initial comments on two topics. First, thoughts on our first quarter performance; and second, my initial impressions after working alongside our customers and my TriNet colleagues over the past 10 weeks. Reflecting on our first quarter performance, TriNet continued to execute well in the areas most within our control, most notably, new sales, retention, and expense management. We maintained our recent strong sales momentum and grew 50% year-over-year in the first quarter, historically, our largest sales quarter of the year. Our strong first quarter sales performance reflected a broad team effort across our organization. We are delivering a differentiated offer to the market and a strong onboarding experience for our new customers. At TriNet, we work hard to understand the evolving needs of small to midsized organizations in the industry verticals we target. And we apply that insight to deliver services and access to benefits designed with their unique needs in mind. Owning our own technology allows us to operate with this unique vertical focus and do so while capturing the benefits of scale. Our investment in expanded distribution, both the growth and maturation of our sales consultants, and the growing momentum with channel partners, allowed us to capitalize on our differentiated offering. In fact, in the first quarter, we benefited from both a 28% year-over-year growth in tenured reps, and a similar percentage productivity improvement among those same mature reps. Of course, our unique offering helps us not only win new business but retain our existing customers as well. With a strong multi-year positive trend in Net Promoter Score, our retention improved by over 2 points versus the first quarter a year ago. As a result of our strong new sales and retention, we nearly achieved positive sequential core worksite employee growth in the first quarter. This is an important achievement to highlight. TriNet came very close to replacing first quarter attrition with new sales additions. And when we think about opportunities for accelerating our growth at TriNet in the coming years, offsetting attrition with new sales is a large and obvious objective to target, and one I think we should expect to consistently achieve. Once new sales is offsetting attrition, positive core improvement, which is natural growth within our existing customer base, becomes entirely upside. Furthermore, we would expect to achieve this objective while maintaining our pricing and expense discipline, just as we did this past quarter and in previous years. I do want to underscore this last point. As we embark on this effort, we will maintain our financial discipline; we will not be trading on disciplined pricing for growth, and we will remain focused on driving efficiency in all parts of our operations. While I was pleased with our operational performance and how our offering is resonating in the market, the broader economic environment still remains challenged for SMBs. We saw this economic reality impact us in two ways: to our customers' hiring and normalization of insurance costs. In the aggregate, net customer hiring was slightly negative, performing similarly to last year's first quarter and to many of the hiring trends we've experienced since 2022. Ultimately, we firmly believe that pursuing business in our chosen core verticals with disciplined pricing is the right long-term approach. And as hiring improves, particularly in the technology industry, TriNet should receive outsized benefits from our differentiated model. Secondly, the broader market continues to experience health cost increases. We, too, saw an increase in health costs in the first quarter. We experienced some claims variability within the quarter, and while Kelly will provide more details in a minute, I would stress that we have a strong model in place to manage risk, and we are uniquely advantaged in our ability to reprice as necessary for these costs, with cohorts available each quarter. Finally, before passing the call to Kelly, I want to finish my prepared remarks by sharing two initial impressions from my first couple of months at TriNet. First, TriNet operates in a very attractive market. Since joining the company, I've spent considerable time with customers and channel partners. Without exception, these visits confirm that the challenges facing small- to medium-sized businesses are very real. Whether they're working to attract great talent, deal with cost inflation, or stay in compliance with an ever-more complex regulatory landscape, the need for what we do is significant and it's growing. With this as a backdrop, it's not surprising that PEO industry awareness has never been higher. And I'm pleased to report that recent third-party survey work confirms that TriNet's brand in our target market is now among the most recognizable in the HCM space. Our product is resonating as evidenced by our sales and retention performance and, ultimately, in this attractive market, we can and will do more to grow and capture share. My second impression relates to what I found within TriNet. Thus far, I've had the opportunity to meet with literally thousands of my colleagues across the country. This has been an energizing experience to say the least. TriNetters have not been shy with their recommendations and feedback, and I was so pleased to hear a great many ideas on how we can improve our processes, better leverage technology, and expand our offering for the benefit of our customers. Ultimately, the overwhelming theme that emerged was a genuine passion for serving our customers. The customer is truly at the center of everything we do, and it shows, which is one of the great legacies of my predecessor. I share these two impressions with you, the growth opportunity for PEO and the engagement of my colleagues, because over the next few quarters TriNet will embark on a review of our strategy with the intent of further aligning our considerable resources with the biggest opportunities for profitable growth. To successfully embark on this review and ultimately to execute, you need colleagues ready, willing, and able to deliver on the underlying drivers of the plan. I believe we have that team here at TriNet, and I'm excited about what we will accomplish together. Now I'll pass the call to Kelly for the financial review. Kelly?

Thank you, Mike. In the first quarter, TriNet once again excelled in the areas within our control. New sales, as measured by annual contract value, or ACV, grew 50% year-over-year, which resulted in a significant number of new worksite employees joining TriNet. Our customer relationship and customer success teams worked diligently to provide customers with incredible service, and the result was strong retention. When you combine our net new worksite employees in Q1 with our attrition, we nearly offset our Q1 attrition with new worksite employees, representing significant progress on this front. As Mike said, when we think about accelerating growth at TriNet, offsetting attrition with new sales is an obvious objective to target. We again demonstrated financial discipline and managed our expenses prudently with only modest inflationary increases. We made choices and reinvested our cost savings into our business for growth. During the quarter, we encountered two headwinds: One, the continuation of recent trends, and the other, an emerging trend. First, continuing the multi-year trend, customer hiring came in slightly negative, again, pulled down by our technology vertical, specifically in January. While we continue to have success selling into the technology vertical, customer hiring within tech remains constrained. The second headwind we faced was an increase in insurance cost trends in Q1, which drove our insurance cost ratio to the low end of our first quarter guidance range. In the quarter, we saw a broad increase in utilization and cost inflation, reflecting trends seen across the healthcare industry. Within the quarter, paid claims in January and February skewed much higher than in March. It's unclear to us whether March represents the ongoing trend. During March, a significant ransomware attack impacted one of the largest claim processors in the U.S. It's possible that the reduced paid claims in March were partially the result of this incident. Because of this incident, we did not reflect the March favorability in our ending reserves. We will learn more in the coming months, and with several upcoming investor conferences, we will have opportunities to share more as experience develops. Now let's turn to our first quarter financial performance. In the quarter, total revenues grew 1%, in line with our guidance, and was muted from overall customer hiring headwinds. We finished the first quarter with approximately 352,000 worksite employees and approximately 332,000 co-employed worksite employees, up 1% year-over-year. Average co-employed worksite employees followed the same trend. Change in existing employees was an additional headwind as it came in negative in the quarter. Negative change in existing employees was elevated in January, while we saw the improvement in modest customer net hiring in February and March. Our overall worksite employee growth affirmed our investment into our go-to-market capabilities, driving new sales and in service areas driving retention. As we continue to build sales capacity, we believe we can achieve consistent new sales volume growth in excess of our attrition in the intermediate term. Professional services revenue grew 4%, in line with our guidance. Professional services revenue growth was driven by volume, normal rate increases, and was offset slightly by a mix given the reduction in hiring in certain verticals who pay for higher levels of services. Insurance revenue grew 1% year-over-year as healthcare participation rates were slightly lower than Q1 2023. Annual inflationary rate increases offset our slightly lower participation rates. Insurance costs grew 6% year-over-year, reflecting higher healthcare and pharmacy utilization. It's safe to say that worksite employees are no longer delaying care as they had during the pandemic. And we have returned to a more normal healthcare utilization and higher cost environment. Related to our workers' compensation, results were in line with our forecast and remained strong overall. This brought our insurance cost ratio to 86.4%, at the low end of our first quarter guidance. Now let's turn to operating expenses. We continue to demonstrate financial discipline. Our operating expenses grew a modest 2% year-over-year as we reinvested cost savings back into our business to support our sales and marketing functions and drive new sales and customer retention. The 2% growth does exclude the nonrecurring GAAP accounting remeasurement and acceleration of stock compensation related to our former CEO's retirement, which was approximately $5 million. During the quarter, we benefited from the sustained higher rate environment in interest income on investments and our operating cash. The income generated was slightly more than our interest expense during the quarter. Summing it up, we are reporting $1.78 in GAAP net income per diluted share and $2.16 of adjusted net income per diluted share for the quarter. We had $201 million of corporate operating cash flow during the quarter and ended the first quarter with $298 million in unrestricted cash on our balance sheet. Now let's turn to our financial guidance. In the second quarter, we're forecasting total revenues to be in the range of down 1% to up 1%. We expect continued strength in new sales and modest change in existing employees growth. In the second quarter, we expect to see modest change in existing employees growth as companies typically hire for full-time recent graduates and summer internships, yet we do expect it to be muted from historical averages. Given this expected employment dynamic, we forecast professional services revenue in the range of down 2% to up 4%. Turning to our insurance cost ratio, we're forecasting our insurance cost ratio in the range of 90% to 87%. The 90% would imply a continuation of first quarter trends, while the 87% implies modest improvements. Finally, we're forecasting GAAP net income per diluted share to be in the range of $0.68 to $1.17, and adjusted net income per diluted share to be in the range of $1 to $1.50. Given our expectations for Q2 financial performance and first quarter results, we are leaving our full year revenue guidance unchanged. Total revenues are expected to be in the range of down 1% to up 4%. Professional services revenue is expected to grow between 1% and 5%. Our insurance cost ratio is now expected to be in the range of 89.5% to 87.5%, reflecting our first quarter experience. Given the resetting of our insurance cost ratio guidance, we now expect GAAP net income per diluted share to be in the range of $3.94 to $5.46, and adjusted net income per diluted share to be in the range of $5.25 to $6.80. In summary, we are pleased with our first quarter performance. We are operating well, building on our new sales success and our strong continued customer retention, while exercising expense discipline and investing for growth. We are experiencing a different insurance cost environment over the past few years, and we are prudently managing through this changing environment. We remain very positive in our ability to generate great outcomes for our customers, employees, and shareholders. With that, I'll turn the call over to the operator to open up the call for questions.

The first question comes from Tien-Tsin Huang with JPMorgan.

Maybe I just want to ask you a big picture question, Mike, and thanks for your review. Were there any surprises during your 10-week listening tour with clients and employees that are worth sharing, aside from what you mentioned initially? I'm also curious about the strategy review you mentioned. Can you elaborate on what that entails? Is this a comprehensive review or focused on specific areas like technology or expenses? It seems like sales are doing well, but please provide more insight.

Yes. Thanks, Tien-Tsin. Great question. And no real surprises thematically. I would just say sort of the things that jumped out at me, and I hit a couple of them in the prepared remarks, but certainly, the degree to which this focus on small business and supporting our customers really permeates the culture here at TriNet. And it's just encouraging to see, I expected to see that coming in. The degree to which that it comes through, I think, is really important. One, because it helps us deliver the kinds of emerging growth momentum results that you're seeing. And two is just, as we lean into the second part of your question about the strategic review, we've got an organization that's hungry to grow and serve more of those SMB customers over time. And I guess in terms of the review, I would stress right up front, we have a lot of good things happening. And from my vantage point, I don't see big issues or the need for significant reset. I think it's just with me coming in, as you would expect, it's a fresh set of eyes to examine where we're focused today and make some choices around where we can really put our considerable resources behind the biggest opportunities for profitable growth. And I think, and you'd know, that a lot of companies, the challenge is where to find growth. And for us, I think it's really about picking among the very best of where we can put those resources. And I do very much have a growing sense of confidence that we can accelerate our growth by making a few disciplined, strategic choices. And I think importantly, as we grow, I think we can leverage that scale to drive both quality and cost efficiency as part of this. So I'm 10 weeks in, you'll learn more over the coming quarters as I get to work with the team. But again, I'm very bullish on the prospects here.

That's helpful. Just on my quick follow-up regarding the new sales, the ACV is up 50%. I believe TriNet has been experiencing a series of positive new sales results. Kelly, could you comment on the quality of the new sales and the ACV? Is there anything to mention about the PEO front or even on the HR side?

Great question. I'll touch on a few points upfront, and then Kelly can address the specific quality aspect. First, I appreciate you highlighting the 50% ACV growth this quarter. This points to two key related factors. Our offering is resonating well in the market, as we uniquely target specific verticals and understand their unique needs. By building a service model on top of proprietary technology tailored to those verticals, we see our offering gaining traction. Coupled with our investments in expanded distribution and capacity, such as the 28% growth in our tenured sales team, not only do we have more salespeople, but they are also more productive. Additionally, we are developing our channel organization, which means channels like insurance brokers, although initially small, are becoming increasingly important in driving our sales growth. This combination of a compelling offering and expanded capacity sets us up positively, not just for the quality of sales this quarter but also for our outlook as we move into 2024. Regarding quality, which I mentioned in my prepared comments, it is crucial that we maintain our discipline as we grow. We will avoid chasing growth through short-term pricing decisions and will keep a balanced approach. Kelly, do you have anything to add?

I mean the only thing I would really add, Tien-Tsin, is when I look across all the verticals, all the verticals are up. And that's really just a testament to the increased tenured sales reps, et cetera, and channel expansion. Customer size, slightly larger, but not significant. So definitely still hitting the chord.

The next question is from Kyle Peterson with Needham.

Great. I wanted to start off on insurance costs and kind of repricing. Just if you could remind us on kind of the seasonality of when some of the existing book reprices on the insurance side and just some of the initiatives and ways you guys are kind of responding to the normalization of insurance costs, that would be helpful.

Yes, Kyle, I appreciate the question. Thanks for asking. Your first question was about repricing. We have a unique model where we reprice a portion of our book every quarter. The largest quarters for us are October 1 and January 1, each accounting for about one-third, with July 1 being the smallest and April being the third largest. This allows us to reflect our current experience, although we only have two months of slightly elevated experience to consider. In March, our claims were lower, but we didn't give it much weight due to the disruption caused by the Change Healthcare Cyberattack. We're monitoring the situation closely, and we have a couple of upcoming conferences where we can provide market updates if there are significant changes. Overall, I'm confident in our risk selection and assessment, and we expect renewal levels to be in the high single-digit to low double-digit range.

Got it. That's really helpful. And then just a follow-up, Mike, maybe if you could share some of your thoughts on capital allocation. I know you guys have given some pretty detailed thoughts kind of in the past year. Business still continues to spend off quite a bit of cash. But maybe if you could kind of share some priorities between whether it's buybacks, dividends or M&A, that would be helpful.

Thanks for pointing that out. We provide significant value to our customers, and the W-2s are crucial for them in achieving that value. Our cash generative model is quite robust. As has been the case consistently, our primary focus in capital allocation is on business growth and ensuring we implement strategies that will allow us to serve our customers better and expand over time. I hope that message is clear. We are still generating more than what is required for growth, along with good cash flow and meeting our financial targets, including returning 75% of free cash flow to shareholders, and we now have a new approach to do that. This week, we initiated our first dividend, which is a positive step forward, along with our share repurchase strategy. A key aspect of our model is starting with the customer, delivering exceptional value to them consistently, and simultaneously ensuring that we are also providing significant value to our shareholders.

The next question is from Andrew Nicholas with William Blair.

I wanted to revisit healthcare utilization and the guidance range. Kelly, I believe you mentioned that the second quarter margin assumption at the low end reflects a continuation of current trends. It appears to be at 13%, suggesting modest improvement. How does March's experience fit into that? I'm trying to understand if March aligns with your expectations, considering it might not be reliable due to the breach, and how that relates to the trends for January and February in terms of both second quarter guidance and the full year.

Yes. January and February, we definitely saw a little bit of elevation in paid claims and continued to watch the expense as we went into March. March was significantly favorable. And we just couldn't give it much credibility because we didn't know what the backup in claims was with a changed Healthcare. So we really did just use a projection method and booked our incurred but not reported, not taking into account the favorability that we saw in March. And we're just going to watch it come through. So when I look at second quarter, we do have a level of seasonality. Usually, first quarter is our most favorable, and then we see it kind of trail down throughout the year. So the second quarter just reflects kind of the level of healthcare plans we would expect to see at that time of the year. But we're always going to take kind of a conservative view.

Okay. And then kind of sticking with guidance, on the full year, my math, it looks like really the only change to guidance is on the insurance cost ratio. So just if you could confirm that. And then also kind of within that, it sounds like the attrition to new sales gap has narrowed, maybe even a little bit earlier than expected. So under the hood, is that maybe being offset by a little bit worse change in existing employees? Or if you could just kind of unpack the full year guidance reduction or at the midpoint a little bit further between those two parts, that would be helpful.

Yes, I'm happy to help, Andrew. Regarding our guidance, I believe you are correct. We have accounted for our performance in the first quarter concerning insurance, but our overall outlook remains largely unchanged. Sales are robust, and we are confident in our retention rates. We are anticipating changes in existing employees to be in the low single-digit range moving forward, which is reflected in our guidance. We have also factored in some positive expense variances. Adjustments have been made around the margins, but generally, the insurance cost ratio from the first quarter will be consistent throughout the year. Additionally, from a retention standpoint, this first quarter marked our best performance in the past decade. The team's efforts to ensure our products resonate with customers have truly paid off. However, there was a negative shift in existing employees, which was more pronounced than we expected. Meanwhile, new sales met our expectations and showed strong growth at 50%.

All right. Great. And then maybe if I could squeeze one more in for Mike. I think you mentioned it in response to one question, you noted a little bit in your prepared remarks. But on the broker channel in particular, if you could just kind of speak to that opportunity momentum there. And maybe more holistically what the strategy is and how it compares to the way that TriNet has tackled the market historically.

Yes, sure. Thanks, I appreciate that, Andrew. And I'll build off of the point Kelly was making because it actually links to the brokerage question. When we think about the healthcare and the insurance cost ratio, we look at it and spend a lot of time with our carrier partners and in broad industry studies, and we're certainly not seeing anything different than what the broad market has seen, and albeit maybe we're seeing it at a little bit of a less degree, I would say, than what the small case commercial market has shown over the last several quarters. And while that represents a little bit of a headwind here in the quarter, I think it's worth noting that long-term healthcare cost inflation is actually a demand creator for us here at TriNet. A big part of what we do is help our small business customers compete, both in terms of attracting, retaining talent with great benefits and managing cost, and we can do that with scale and scale that they don't have available to them on their own. And I think increasingly, as healthcare becomes a bigger part of the total cost of ownership of a service like TriNet, then experts in that space like insurance brokers on the health side, I think we have the opportunity to be increasingly relevant to them and to create economics that are favorable to the customer, to that channel, and to TriNet as well. And there's work to do to maximize that channel. There's choices that we'll have to make. But I am encouraged about the momentum that the team has created on that front. And to your broader question, like I said, and I would just stress again, it's just good practice to come in when you have a fresh set of eyes and look at the choices that we've made and say, are there some things that we can do better? There's a lot that's going really well. And I don't see the need for huge changes in the short term. It really is about choosing amongst some really good options and marshaling what we already have for considerable resources to drive that growth. So I hope that's helpful, Andrew.

The next question is from Jared Levine with TD Cowen.

In terms of that 2-point improvement year-on-year on worksite employee retention, can you go into how much of that was controllable versus uncontrollable in terms of that improvement?

Yes, Jared, thank you for the question. As Kelly mentioned, the retention results in the first quarter were quite strong. I want to take a moment to acknowledge our exceptional team and service organization for their achievements, especially in January, which is our busiest month for service transactions and onboarding new customers. The service levels we maintained are a true reflection of their efforts. This has contributed to our strong retention, not just in this quarter but over the past several quarters. Looking at the mix, honestly, there’s not much to report regarding controllable versus uncontrollable factors. Overall, we observed consistent performance across the board, indicating a general upward trend.

Yes. Jared, the only thing I would add to that is we're not seeing a huge uptick in like business insolvencies, and given the sort of the tepid M&A market, it really hasn't picked up that much over last year. So those are the two things I would probably put in the uncontrollable bucket, and we're really not seeing notable trends there.

Got it. And then in terms of the demand environment, has there been any change in the pace of prospective client decision-making? And how would you characterize that new PEO deal pipeline currently relative to prior quarters?

Yes. Thanks, favorable in terms of the pipeline. And really from the top of the funnel through, we're really encouraged. I do think the relevancy in demand for the PEO model and, in particular for TriNet's unique approach, is in a really, really good spot. And in general, the sort of secular pieces of demand, I think, are representing tailwinds. As more and more regulations come online, you have more activism at state and municipal levels. That's more that these small businesses have to comply with as they have been increasingly distributed and remote workforces. So there's a lot that sort of plays into our strength. When we think about sales results in the coming quarter, it's a tougher comp year-over-year in 2Q, but feel really good about the pipeline that the team has got in place.

And if I could just sneak in one more here. In terms of the change in existing employees assumptions for the fiscal year '24 guide, was there any change between your prior view of very low single digit to mid-single-digit growth? Just want to confirm that.

Only reflecting our first quarter performance, Jared. So our outlook for the future remains pretty much unchanged, less than half of historical experience. But we are reflecting the first quarter negative change in existing employees in that outlook as well.

The next question is from David Grossman with Stifel.

Mike, I know it's still early, and as you think about the company's growth strategy, I'm sure it's multidimensional. However, when you think about the next, let's just say, 2-year time horizon, where do you see the greatest opportunity for growth? Is it sales head count and productivity? Is it channels? Do you entertain geographic expansion as a potential opportunity? Maybe you could just provide a little more insight into how you're thinking about where you're going to see the most opportunity here in the next 24 months?

Yes. Thanks, Dave. It's good to hear from you. I appreciate the question. And can I answer with all of the above, in that we really are taking a thorough look at all those dimensions. And I suspect, as you said, that we're going to focus primarily on what we are doing well today that we can really push and be exceptional. So when I think about things that are distinctive for TriNet, I think likely it's going to be how do we make those things even more distinctive. So the core PEO business and the increasing importance of benefits as a component of that, and really doubling down and understanding how do we really help more SMBs solve for some of those problems, I think there's potential there to continue to leverage that piece of our offering in the market, continue, I think, a really good expansion in our distribution, both the direct sales team and how do we continue to drive retention. We saw a 4 points better retention of our sales consultants. I think my experience is that really good salespeople love to win, and we're winning in the market. And so that creates a nice virtuous cycle for us with a differentiated offer. I think we are skewed towards certain parts of the U.S. I think there is opportunity for us to look at some geographies, where we can construct favorable benefits packages and build our brands in those markets and put the right sales and sales channels in place. So again, give you a little bit of time. We're 10 weeks in. We have a really strong team focused on executing for our customers and looking out to say, how do we do this on a bigger scale? And I would just conclude, and I mentioned it earlier, I really do see the opportunity to grow and grow profitably, and then put that to work in terms of leveraging scale to drive quality and efficiency. So I would expect that to be one of the aspects of the plan as we pull it together. TriNet's unique. We focus not on the entire market. We're not trying to be a PEO HR provider for everyone. But for the ones we do, we really do want to stand out with that focus and with our proprietary technology, and then take advantage of that to really drive quality and efficiency, and so see the scale benefits come through. So I recognize there's not as much specificity as you might like, but we'll look to keep people updated over the coming quarters.

Okay. And just one quick follow-up to those comments. I mean I think earlier you said leveraging your proprietary technology, and sorry if I'm forgetting, but where are we on the journey of integrating everybody onto the kind of the unified platform? I'm sorry if I've forgotten if you've mentioned that.

We have made significant progress, especially with the Zenefits acquisition, which has introduced impressive technology that we have already begun utilizing. Instead of performing a complete transition to a new platform, which can be challenging for our customers and us, we are effectively integrating functionalities into our core product and have seen positive results in that area. In relation to our HRS business, it's important to note that we are not only utilizing this technology but also the talent that comes along with it. We have made some adjustments in the HRS business, including raising prices and capturing cost synergies, which means that this segment is now self-funded. We are benefiting from the technology and talent in a cost-effective manner. Regarding the growth outlook for this business, it is part of our strategic review. Overall, we have a valuable set of technologies and talent within our portfolio that we plan to leverage effectively.

And we really, David, haven't seen a significant change in maybe a 1 point difference in terms of enrollment as a percentage of the base overall. So you do see some level of buy-down behavior, like people going for more high-deductible plans and things like that as healthcare becomes a little bit more expensive. But we are working with our carrier partners to make sure that we've got the best offerings that hit their needs, and we're working with our clients to make sure that the funding strategies that they have also align with what they're trying to deliver to their employees.

This concludes our question-and-answer session. I would like to turn the conference back over to Mike for any closing remarks.

Thanks, Debbie, and thank you all for attending. I'll just close out our call with a big thank you to our incredible colleagues at TriNet. We continue to outperform in the areas that we control, and I'm really grateful to the team that worked so hard over the past quarter to produce these really strong results for our customers and for our company. I'm excited to continue good work over the remainder of the year as we continue to generate increasing value for our shareholders. Thank you very much. And with that, we'll conclude the call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.