Trinet Group, Inc 10-K, filed Feb 14, 2022

Trinet Group, Inc. (TNET)

10-K 2022-02-14 For: 2021-12-31

Added on April 09, 2026

About this 10-K

Trinet Group, Inc filed this 10-K on February 14, 2022, covering the fiscal year ended December 31, 2021.

Headline figures

Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.54B; up 12.5% from $4.03B a year earlier
Net income: $338M; up 24.3% from net income of $272M a year earlier
Diluted EPS: $5.07; up 27.1% from $3.99 a year earlier

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Delaware		95-3359658
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
One Park Place,	Suite 600
Dublin,	CA	94568
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock par value $0.000025 per share	TNET	New York Stock Exchange


	Form 10-K Cross Reference	Page
Glossary		1
Business	Part I, Item 1.	5
Risk Factors	Part I, Item 1A.	16
Unresolved Staff Comments	Part I, Item 1B.	31
Properties	Part I, Item 2.	31
Legal Proceedings	Part I, Item 3.	31
Mine Safety Disclosures	Part I, Item 4.	31
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	Part II, Item 5.	32

Management’s Discussion and Analysis of Financial Condition and Results of Operations	Part II, Item 7.	35
Quantitative and Qualitative Disclosures About Market Risk	Part II, Item 7A.	55
Financial Statements and Supplementary Data	Part II, Item 8.	56
Consolidated Statements of Income and Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	Part II, Item 9.	90
Controls and Procedures	Part II, Item 9A.	90
Other Information	Part II, Item 9B.	90
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	Part II, Item 9C.	90
Directors, Executive Officers and Corporate Governance	Part III, Item 10.	91
Executive Compensation	Part III, Item 11.	91
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	Part III, Item 12.	91
Certain Relationships and Related Transactions, and Director Independence	Part III, Item 13.	91
Principal Accountant Fees and Services	Part III, Item 14.	91
Exhibits, Financial Statement Schedules	Part IV, Item 15.	92
Form 10-K Summary	Part IV, Item 16.	92
Signatures		96


2018 Term Loan			Our $425 million term loan A executed in June 2018 and repaid in 2021
2021 Credit Program			Our 2021 program to provide eligible clients with credits, subject to predefined conditions and based on certain pandemic related excess health care cost savings achieved.
2021 Credit Agreement			Our credit agreement dated February 26, 2021, including our $500 million revolving line of credit.
2029 Notes			Our $500 million senior unsecured notes maturing in March 2029
AB5			Assembly Bill 5
ACA			The Patient Protection and Affordable Care Act
ACH			Automated Clearinghouse Transaction
AFS			Available-for-sale
ARPA			American Rescue Plan Act
ASC			Accounting standards codification
ASO			Administrative Services Organization
ASU			Accounting standards update
CARES Act			Coronavirus Aid Relief and Economic Security Act
CCPA			California Consumer Privacy Act
CEO			Chief Executive Officer
CFO			Chief Financial Officer
COBRA			Consolidated Omnibus Budget Reconciliation Act
COPS			Cost of providing services

COVID-19			Novel coronavirus
CPRA			California Privacy Rights Act
D&A			Depreciation and amortization expenses
DOL			U.S. Department of Labor
EBITDA			Earnings before interest expense, taxes, depreciation and amortization of intangible assets
EPLI			Employment Practices Liability Insurance
EPS			Earnings Per Share
ERISA			Employee Retirement Income Security Act

ESPP			Employee stock purchase plan
ETR			Effective tax rate
FASB			Financial Accounting Standards Board
FFCRA			Families First Coronavirus Response Act
FLSA			Fair Labor Standards Act
G&A			General and administrative
GAAP			Generally Accepted Accounting Principles in the United States
HIPAA			Health Insurance Portability and Accountability Act
HITECH Act			Health Information Technology for Economic and Clinical Health Act
HR			Human Resources
IBNP			Incurred but not yet paid
IBNR			Incurred but not yet reported
ICR			Insurance cost ratio
IGP			Indemnity Guarantee Payment
IOM			Integrated Open Market
IRS			Internal Revenue Service


ISR			Insurance service revenues

LDF			Loss development factor
LIBOR			London Inter-bank Offered Rate
MCT			Medical cost trend
MD&A			Management's Discussion and Analysis of Financial Condition and Results of Operations
OE			Operating expenses
PCAOB			Public Company Accounting Oversight Board
PEO			Professional Employer Organization
PFC			Payroll funds collected
PHI			Protected Health Information
PPP			Paycheck Protection Program, a loan program administered by the U.S. Small Business Administration
PPPFA			Paycheck Protection Program Flexibility Act
PSR			Professional service revenues
Recovery Credit			2020 Program to provide eligible clients with one-time reductions against fees for future services
Reg FD			Regulation Fair Disclosure
ROU			Right-of-use
RSA			Restricted Stock Award
RSU			Restricted Stock Unit
SBA			U.S. Small Business Administration
SBC			Stock Based Compensation
S&M			Sales and marketing
S&P			Standard & Poor's
SD&P			Systems development and programming
SEC			U.S. Securities and Exchange Commission
SMB			Small and medium-size business

TCJA			Tax Cuts and Jobs Act
U.S.			United States

WSE			Worksite employee
YTD			Year to date


PROPERTIES, LEGAL PROCEEDINGS AND MINE SAFETY DISCLOSURES						Table of Contents


Corporate Headquarters:			Significant Client Service Centers:
• Dublin, California			• Bradenton, Florida
			• Reno, Nevada
			• Indian Land, South Carolina
			• Austin, Texas


Automatic Data Processing, Inc.	Insperity, Inc.	Paychex, Inc.
Barrett Business Services, Inc.	Intuit, Inc.


Period	Total Number of Shares Purchased (1)	Weighted Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans (2)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans (in millions) (3)
October 1 - October 31, 2021	5,116	$	98.36	—	$	264
November 1 - November 30, 2021	45,279	$	108.44	—	$	264
December 1 - December 31, 2021	75,814	$	95.15	6,202	$	263
Total	126,209			6,202


$4.5B			$455M			86%
Total revenues			Operating income			Insurance cost ratio
13	%	increase	24	%	increase	1	%	increase

$338M			$5.07			$376M
Net income			Diluted EPS			Adjusted Net income *
24	%	increase	27	%	increase	24	%	increase


	340,067			364,940
	Average WSE			Total WSE
	5	%	increase	10	%	increase
*	Non-GAAP measure. See definitions below under the heading "Non-GAAP Financial Measures".


	Year Ended December 31,									% Change
(in millions, except operating metrics data)	2021			2020			2019			2021 vs. 2020		2020 vs. 2019
Income Statement Data:
Professional service revenues	$	639		$	544		$	530		17	%	3	%
Insurance service revenues	3,901			3,490			3,326			12		5
Total revenues	4,540			4,034			3,856			13		5
Insurance costs	3,339			2,979			2,927			12		2
Operating expenses	746			687			661			9		4
Total costs and operating expenses	4,085			3,666			3,588			11		2
Operating income	455			368			268			24		37
Other income (expense):
Interest expense, bank fees and other	(20)			(21)			(21)			(5)		—
Interest income	6			10			23			(40)		(57)


Income before provision for income taxes	441			357			270			24		32
Income taxes	103			85			58			21		47
Net income	$	338		$	272		$	212		24	%	28	%


Cash Flow Data:
Net cash provided by operating activities	218			546			471			(60)	%	16	%
Net cash used in investing activities	(135)			(151)			(188)			(11)		(20)
Net cash provided by (used in) financing activities	12			(208)			(176)			(106)		18

Non-GAAP measures (1):



Adjusted EBITDA	565			468			378			21		24	%
Adjusted Net income	376			303			236			24		28
Corporate Operating Cash Flow	415			338			233			23		45

Operating Metrics:
Insurance Cost Ratio	86		%	85		%	88		%	1		(3)	%
Average WSEs	340,067			323,672			324,927			5		—
Total WSEs	364,940			331,908			340,017			10		(2)


	Year Ended December 31,						% Change
(in millions)	2021		2020		2019		2021 vs. 2020		2020 vs. 2019
Balance Sheet Data:
Cash and cash equivalents	$	612	$	301	$	213	103	%	41	%
Working capital	700		290		228		141	%	27	%
Total assets	3,309		3,043		$	2,748	9	%	11	%
Debt	495		369		391		34	%	(6)	%
Total stockholders’ equity	881		607		475		45	%	28	%


Non-GAAP Measure	Definition	How We Use The Measure



Adjusted EBITDA	• Net income, excluding the effects of: - income tax provision, - interest expense, bank fees and other, - depreciation, - amortization of intangible assets, and - stock based compensation expense.	• 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 depreciation and amortization, and stock-based compensation recognized based on the estimated fair values. We believe these charges are either not directly resulting from our core operations or not indicative of our ongoing operations. • Enhances comparisons to prior periods and, accordingly, facilitates the development of future projections and 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.
Adjusted Net Income	• Net income, excluding the effects of: - effective income tax rate (1), - stock based compensation, - amortization of other intangible assets, net, - non-cash interest expense (2), and - the income tax effect (at our effective tax rate (1) of these pre-tax adjustments.	• Provides information to our stockholders and board of directors to understand how our management evaluates our business, to monitor and evaluate our operating results, and analyze profitability of our ongoing operations and trends on a consistent basis by excluding certain non-cash charges.
Corporate Operating Cash Flows	• Net cash provided by (used in) operating activities, excluding the effects of: - Assets associated with WSEs (accounts receivable, unbilled revenue, prepaid expenses and other current assets) and - Liabilities associated with WSEs (client deposits and other client liabilities, accrued wages, payroll tax liabilities and other payroll withholdings, accrued health benefit costs, accrued workers' compensation costs, insurance premiums and other payables, and other current liabilities).	• Provides information that our stockholders and management can use to evaluate our cash flows from operations independent of the current assets and liabilities associated with our WSEs. • Enhances comparisons to prior periods and, accordingly, used as a liquidity measure to manage liquidity between corporate and WSE related activities, and to help determine and plan our cash flow and capital strategies.


(in millions)
$368		2020 Operating Income
	+506	Higher total revenues primarily driven by higher Average WSEs, rate increases and a $111 million decrease in the Recovery Credit recognized. This was partially offset by the $25 million reduction in revenue recognized for the 2021 Credit Program in 2021.
	-360	Higher insurance costs primarily as a result of higher medical services utilization in 2021 compared to 2020 when we saw a significantly lower than typical medical services utilization due to stay-at-home orders and social distancing practices due to the COVID-19 pandemic.
	-59	Higher OE primarily as a result of increased sales and marketing expense, higher payroll tax and assessments and D&A, together with higher compensation and consulting expenses to support initiatives to improve client experience, enhance service offerings, and improve processes.
$455		2021 Operating Income


TABLE OF CONTENTS



TRINET	1	2021 FORM 10-K



TRINET	2	2021 FORM 10-K



TRINET	3	2021 FORM 10-K


(in millions)
$687		2020 Operating Expense
	+2	COPS was consistent with the prior year.
	+16	S&M increased, driven primarily by increased compensation and costs related to our 2nd annual TriNet PeopleForce conference.
	+24	G&A increased, driven primarily by increased payroll tax and related payroll tax assessments, compensation and technology services expenses to improve our systems and processes, and to enhance our efficiency.
	+10	SD&P increased, driven primarily by increased consulting and technology services expenses as we continue to work to improve our client experience and our systems and processes.
	+7	D&A increased, driven primarily by the impairment of customer relationship intangibles.
$746		2021 Operating Expenses


	December 31,
	2021						2020
(in millions)	Corporate		WSE		Total		Corporate		WSE		Total
Current assets:
Cash and cash equivalents	$	612	$	—	$	612	$	301	$	—	$	301
Investments	135		—		135		57		—		57
Restricted cash, cash equivalents and investments	19		1,176		1,195		15		1,373		1,388
Other current assets	91		406		497		59		355		414
Total current assets	$	857	$	1,582	$	2,439	$	432	$	1,728	$	2,160




Total current liabilities	157		1,582		$	1,739	$	142	$	1,728	$	1,870


Working capital	$	700	$	—	$	700	$	290	$	—	$	290


	Payments Due by Period
(in millions)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Workers' compensation obligations (1)	$	198	$	57	$	62	$	26	$	53


Change in loss development factor			Change in insurance costs
-5.0%			($33)
-2.5%			($19)
+2.5%			$20
+5.0%			$40


Change in medical cost trend			Change in insurance costs
+3.0%			$21
+2.0%			$14
+1.0%			$7
-1.0%			$(7)
-2.0%			$(14)
-3.0%			$(21)


Change in completion factors			Change in insurance costs
-0.75%			$16
-0.50%			$11
-0.25%			$5
+0.25%			$(5)
+0.50%			$(11)
+0.75%			$(16)


Reports of Independent Registered Public Accounting Firm (PCAOB ID No.34)						57
Consolidated Statements of Income and Comprehensive Income						60
Consolidated Balance Sheets						61
Consolidated Statements of Stockholders’ Equity						62
Consolidated Statements of Cash Flows						63
Notes to Consolidated Financial Statements						64
Note 1. Description of Business and Significant Accounting Policies						64
Note 2. Cash, Cash Equivalents and Investments						73
Note 3. Investments						73
Note 4. Financial Instruments and Fair Value Measurements						74
Note 5. Property, Equipment and Software, Net						76
Note 6. Goodwill and Other Intangible Assets						77
Note 7. Accrued Workers' Compensation Costs						78
Note 8. Leases						78
Note 9. Long-term Debt						79
Note 10. Commitments and Contingencies						80
Note 11. Stock Based Compensation						80
Note 12. Stockholders' Equity						83
Note 13. Income Taxes						85
Note 14. Earnings Per Share						88
Note 15. 401(k) Plan						88
Note 16. Related Party Transactions						88
Note 17. Subsequent Event						89


	Year Ended December 31,
(in millions except per share data)	2021		2020		2019
Professional service revenues	$	639	$	544	$	530
Insurance service revenues	3,901		3,490		3,326
Total revenues	4,540		4,034		3,856
Insurance costs	3,339		2,979		2,927
Cost of providing services	264		262		245
Sales and marketing	202		186		190
General and administrative	176		152		137
Systems development and programming	50		40		43
Depreciation and amortization of intangible assets	54		47		46
Total costs and operating expenses	4,085		3,666		3,588
Operating income	455		368		268
Other income (expense):
Interest expense, bank fees and other	(20)		(21)		(21)
Interest income	6		10		23
Income before provision for income taxes	441		357		270
Income taxes	103		85		58
Net income	$	338	$	272	$	212
Other comprehensive (loss) income, net of income taxes	(5)		4		—
Comprehensive income	$	333	$	276	$	212

Net income per share:
Basic	$	5.13	$	4.03	$	3.04
Diluted	$	5.07	$	3.99	$	2.99
Weighted average shares:
Basic	66		67		70
Diluted	67		68		71


	December 31,		December 31,
(in millions, except share and per share data)	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	612	$	301
Investments	135		57
Restricted cash, cash equivalents and investments	1,195		1,388
Accounts receivable, net	15		18
Unbilled revenue, net	324		246
Prepaid expenses, net	67		63
Other current assets	91		87
Total current assets	2,439		2,160
Restricted cash, cash equivalents and investments, noncurrent	166		210
Investments, noncurrent	168		138
Property, equipment and software, net	79		79
Operating lease right-of-use asset	42		51
Goodwill	294		294
Other intangible assets, net	6		18
Other assets	115		93
Total assets	$	3,309	$	3,043
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and other current liabilities	$	86	$	50

Long-term debt	—		22
Client deposits and other client liabilities	97		134
Accrued wages	369		309
Accrued health insurance costs, net	174		172
Accrued workers' compensation costs, net	55		59
Payroll tax liabilities and other payroll withholdings	929		1,095
Operating lease liabilities	11		11
Insurance premiums and other payables	18		18
Total current liabilities	1,739		1,870
Long-term debt, noncurrent	495		348
Accrued workers' compensation costs, noncurrent, net	135		138
Deferred taxes	11		22
Operating lease liabilities, noncurrent	41		49
Other non-current liabilities	7		9
Total liabilities	2,428		2,436
Commitments and contingencies (see Note 10)
Stockholders' equity:
Preferred stock	—		—
($0.000025 par value per share; 20,000,000 shares authorized; no shares issued or outstanding at December 31, 2021 and 2020)
Common stock and additional paid-in capital	808		747
($0.000025 par value per share; 750,000,000 shares authorized; 65,968,224 and 66,456,663 shares issued and outstanding at December 31, 2021 and 2020, respectively)
Retained earnings (Accumulated deficit)	74		(144)
Accumulated other comprehensive (loss) income	(1)		4
Total stockholders' equity	881		607
Total liabilities & stockholders' equity	$	3,309	$	3,043


	December 31, 2021				December 31, 2020
(in millions)	Cash and cash equivalents		Available-for-sale marketable securities		Total		Cash and cash equivalents		Available-for-sale marketable securities		Total
Cash and cash equivalents	$	612	$	—	$	612	$	301	$	—	$	301
Investments	—		135		135		—		57		57
Restricted cash, cash equivalents and investments
Payroll funds collected	1,012		—		1,012		1,228		—		1,228
Collateral for health benefits claims	25		98		123		16		82		98
Collateral for workers' compensation claims	58		—		58		60		—		60

Other security deposits	2		—		2		2		—		2
Total restricted cash, cash equivalents and investments	1,097		98		1,195		1,306		82		1,388
Investments, noncurrent	—		168		168		—		138		138
Restricted cash, cash equivalents and investments, noncurrent
Collateral for workers' compensation claims	29		137		166		36		174		210
Total	$	1,738	$	538	$	2,276	$	1,643	$	451	$	2,094


(in millions)	December 31, 2021
One year or less	$	193
Over one year through five years	310
Over five years through ten years	10
Over ten years	25
Total fair value	$	538


(in millions)	Level 1		Level 2		Total
December 31, 2021
Cash equivalents:
Money market mutual funds	$	4	$	—	$	4
U.S. treasuries	—		21		21
Total cash equivalents	4		21		25
Investments:
Asset-backed securities	—		49		49
Corporate bonds	—		137		137
U.S. government agencies and government-sponsored agencies	—		2		2
U.S. treasuries	—		106		106
Other debt securities	—		9		9
Total investments	—		303		303
Restricted cash equivalents:
Money market mutual funds	93		—		93

Certificate of deposit	—		1		1

Total restricted cash equivalents	93		1		94
Restricted investments:
Corporate bonds	—		30		30
U.S. government agencies and government-sponsored agencies	—		15		15
U.S. treasuries	—		179		179

Certificate of deposit	—		11		11
Total restricted investments	—		235		235
Total investments and restricted cash equivalents and investments	$	97	$	560	$	657


(in millions)	Amount
Balance at December 31, 2019	$	289
Additions	5
Balance at December 31, 2020	$	294
Additions	—
Balance at December 31, 2021	$	294


Year ending December 31:	Amount (in millions)
2022	$	4
2023	2
2024 and thereafter	—



Total	$	6


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Balance at December 31, 2020	379,985	$	15.10	3.2	$	25

Exercised	(73,118)	10.20



Balance at December 31, 2021 (1)	306,867	$	16.20	2.2	$	24


	Year Ended December 31,
Additional Disclosures for Stock Options (in millions)	2021		2020		2019

Total fair value of options vested	$	—	$	—	$	1
Total intrinsic value of options exercised	6		4		9
Cash received from options exercised	1		1		2



	Total Number of RSUs	Total Number of RSAs	Total Number of Shares	Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2020	1,230,071	30,026	1,260,097	$	54.04
Granted	562,881	—	562,881	83.71
Vested	(603,674)	(24,282)	(627,956)	54.91
Forfeited	(180,351)	—	(180,351)	60.96
Nonvested at December 31, 2021	1,008,927	5,744	1,014,671	$	68.74



	Year Ended December 31,
Additional Disclosures for equity-based plans	2021		2020		2019
Total grant date fair value of shares granted (in millions)	$	47	$	50	$	38
Total grant date fair value of shares vested (in millions)	$	34	$	31	$	30
Shares withheld to settle payroll tax liabilities related to vesting of shares held by employees	207,603		230,569		315,762



	Total Number of RSUs	Total Number of RSAs	Total Number Shares	Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2020	167,127	16,052	183,179	$	52.89
Granted	246,349	—	246,349	67.70
Vested	(145,207)	(16,052)	(161,259)	52.24

Forfeited	(13,045)	—	(13,045)	61.33
Nonvested at December 31, 2021	255,224	—	255,224	$	67.16


	Amount (in millions)		Weighted-Average Period (in Years)

Nonvested time based RSUs and RSAs	$	64	2.38
Nonvested performance based RSUs and RSAs	15		1.44