Trinet Group, Inc 10-Q for FY2024 Q2

Trinet Group, Inc. (TNET)

10-Q 2024-07-26 For: 2024-06-30

Added on April 09, 2026

About this 10-Q

Trinet Group, Inc filed this 10-Q on July 26, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).

Headline figures

Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.23B; up 1.4% from $1.21B a year earlier
Net income: $60M; down 27.7% from net income of $83M a year earlier
Diluted EPS: $1.20; down 13.0% from $1.38 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


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


Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	☐

		Emerging growth company	☐


	Form 10-Q Cross Reference	Page
Glossary		3
Cautionary Note Regarding Forward-Looking Statements		5
Unaudited Condensed Consolidated Financial Statements	Part I, Item 1.	31
Condensed Consolidated Statements of Income and Comprehensive Income		31

Condensed Consolidated Balance Sheets		32
Condensed Consolidated Statements of Stockholders' Equity		33
Condensed Consolidated Statements of Cash Flows		34
Notes to Condensed Consolidated Financial Statements		35
Note 1. Description of Business and Significant Accounting Policies		35
Note 2. Cash, Cash Equivalents and Investments - Unrestricted and Restricted		39
Note 3. Financial Instruments and Fair Value Measurements		39

Note 4. Accrued Workers' Compensation Costs		42

Note 5. Commitments and Contingencies		42
Note 6. Stock Based Compensation		43
Note 7. Stockholders' Equity		43
Note 8. Income Taxes		44
Note 9. Earnings Per Share		44


Management’s Discussion and Analysis of Financial Condition and Results of Operations	Part I, Item 2.	7
Quantitative and Qualitative Disclosures About Market Risk	Part I, Item 3.	29
Controls and Procedures	Part I, Item 4.	30
Legal Proceedings	Part II, Item 1.	45
Risk Factors	Part II, Item 1A.	45
Unregistered Sales of Equity Securities and Use of Proceeds	Part II, Item 2.	45
Defaults Upon Senior Securities	Part II, Item 3.	45
Mine Safety Disclosures	Part II, Item 4.	45
Other Information	Part II, Item 5.	45
Exhibits	Part II, Item 6.	46







2021 Credit Agreement			Our credit agreement dated February 26, 2021, as amended, supplemented or modified from time to time, most recently August 16, 2023.

2021 Revolver			Our $700 million revolving line of credit included in our 2021 Credit Agreement
2029 Notes			Our $500 million senior unsecured notes maturing in March 2029

2031 Notes			Our $400 million senior unsecured notes maturing in August 2031
AFS			Available-for-sale




CEO			Chief Executive Officer
CFO			Chief Financial Officer

COBRA			Consolidated Omnibus Budget Reconciliation Act
Colleague			TriNet’s internal employees (as distinguished from WSEs and HRIS Users)
COPS			Cost of providing services




D&A			Depreciation and amortization expenses
EBITDA			Earnings before interest expense, taxes, depreciation and amortization of intangible assets

EPS			Earnings Per Share
ERISA			Employee Retirement Income Security Act
ERP			Enterprise resource planning
ESAC			Employer Services Assurance Corporation
ESPP			Employee stock purchase plan
ETR			Effective tax rate
FASB			Financial Accounting Standards Board
FFCRA			Families First Coronavirus Response Act
G&A			General and administrative
GAAP			Generally Accepted Accounting Principles in the United States


HCM			Human capital management
HR			Human Resources
HRIS			Human resources information system
HRIS User			A client employee who is a user of our HR Platform (for example, employees of an HRIS client)



IRS			Internal Revenue Service
ICR			Insurance cost ratio
ISR			Insurance service revenues


LIBOR			London Inter-bank Offered Rate


MD&A			Management's Discussion and Analysis of Financial Condition and Results of Operations



OE			Operating expenses

PEO			Professional Employer Organization
PEO Platform Users			Individuals authorized by our clients to access and use the PEO platform
PFC			Payroll funds collected


PSR			Professional service revenues
R&D			Research and Development
Reg FD			Regulation Fair Disclosure
ROU			Right-of-use
RSU			Restricted Stock Unit


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


TriNet Clarus R+D			Clarus R+D Solutions, LLC
TriNet Trust			Trust which was created for the purpose of holding funds provided by HRIS clients for the remittance to HRIS Users, tax authorities and other recipients
U.S.			United States

WSE			A worksite employee who is co-employed by, or otherwise receiving services from a TriNet PEO
YTD			Year to date
Zenefits			YourPeople, Inc. and its subsidiaries


FORWARD LOOKING STATEMENTS AND OTHER FINANCIAL INFORMATION			Table of Contents


	$1.2B			$80M			88%
	Total revenues			Operating income			Insurance cost ratio
	1	%	increase	(18)	%	decrease	4	%	increase

	$60M			$1.20			$78M
	Net income			Diluted EPS			Adjusted Net income *
	(28)	%	decrease	(13)	%	decrease	(26)	%	decrease

	351,455			354,028			191,220
	Average WSEs **			Total WSEs **			Average HRIS Users
	7	%	increase	6	%	increase	(13)	%	decrease

*	Non-GAAP measure. See definitions below under the heading "Non-GAAP Financial Measures".
**	Total WSEs and Average WSEs include incremental WSEs that were charged a platform user access fee and incremental additional service recipients. These were identified as a result of our ongoing effort to ensure that our billing practices best match the expectations of our customers. For details, refer to the heading "Operating Metrics – Worksite Employees (WSEs).”


	$2.5B			$202M			87%
	Total revenues			Operating income			Insurance cost ratio
	1	%	increase	(24)	%	decrease	4	%	increase

	$152M			$2.98			$189M
	Net income			Diluted EPS			Adjusted Net income *
	(29)	%	decrease	(16)	%	decrease	(26)	%	decrease

	349,810			354,028			193,188
	Average WSEs **			Total WSEs **			Average HRIS Users
	7	%	increase	6%		increase	(13)	%	decrease

*	Non-GAAP measure. See definitions below under the heading "Non-GAAP Financial Measures".
**	Total WSEs and Average WSEs include incremental WSEs that were charged a platform user access fee and incremental additional service recipients. These were identified as a result of our ongoing effort to ensure that our billing practices best match the expectations of our customers. For details, refer to the heading "Operating Metrics – Worksite Employees (WSEs).”


	Three Months Ended June 30,								Six Months Ended June 30,
(in millions, except operating metrics data)	2024			2023			% Change		2024			2023			% Change
Income Statement Data:
Professional service revenues	$	186		$	177		5	%	$	400		$	382		5	%
Insurance service revenues	1,040			1,032			1		2,090			2,073			1
Total revenues	1,226			1,209			1		2,490			2,455			1
Insurance costs	916			868			6		1,823			1,720			6
Operating expenses	230			244			(6)		465			468			(1)
Total costs and operating expenses	1,146			1,112			3		2,288			2,188			5
Operating income	80			97			(18)		202			267			(24)
Other income (expense):
Interest expense, bank fees and other	(16)			(6)			167		(32)			(13)			146
Interest income	17			20			(15)		35			38			(8)


Income before provision for income taxes	81			111			(27)		205			292			(30)
Income taxes	21			28			(25)		53			78			(32)
Net income	$	60		$	83		(28)	%	$	152		$	214		(29)	%


Cash Flow Data:
Net cash provided by (used in) operating activities									(245)			67			(466)
Net cash used in investing activities									(49)			(31)			58
Net cash used in financing activities									(178)			(100)			78	%

Non-GAAP measures (1):



Adjusted EBITDA	136			161			(16)		316			385			(18)
Adjusted Net income	78			105			(26)		189			256			(26)
Corporate Operating Cash Flows									130			255			(49)	%

Operating Metrics:
Insurance Cost Ratio	88		%	84		%	4		87		%	83		%	4
Average WSEs (2)	351,455			327,376			7		349,810			327,242			7
Total WSEs (2)	354,028			334,046			6		354,028			334,046			6
Average HRIS Users	191,220			219,026			(13)	%	193,188			223,155			(13)	%


(in millions)	June 30, 2024		December 31, 2023		% Change
Balance Sheet Data:

Working capital	$	103	$	115	(10)	%
Total assets	3,703		3,693		—
Debt	1,068		1,093		(2)
Total stockholders’ equity	100		78		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, - stock based compensation expense, - amortization of cloud computing arrangements, and - transaction and integration costs.	• 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-recurring costs, which include transaction and integration costs, as well as certain non-cash charges such as depreciation and amortization, and stock-based compensation and certain impairment charges 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 the prior period 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 intangible assets, net, - non-cash interest expense, - transaction and integration costs, 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 and TriNet Trust (accounts receivable, unbilled revenue, prepaid expenses, other payroll assets and other current assets) and - Liabilities associated with WSEs and TriNet Trust (client deposits and other client liabilities, accrued wages, payroll tax liabilities and other payroll withholdings, accrued health insurance 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 and TriNet Trust. • Enhances comparisons to prior periods and, accordingly, used as a liquidity measure to manage liquidity between corporate and WSE and TriNet Trust related activities, and to help determine and plan our cash flow and capital strategies.


	Six Months Ended June 30,
(in millions)	2024		2023
Net cash provided by (used in) operating activities	$	(245)	$	67
Less: Change in WSE & TriNet Trust related other current assets	(439)		89
Less: Change in WSE & TriNet Trust related current liabilities	64		(277)
Net cash used in operating activities - WSE & TriNet Trust	$	(375)	$	(188)
Net cash provided by operating activities - Corporate	$	130	$	255


(in millions)
$97		Second Quarter 2023 Operating Income
	+17	Higher total revenues primarily driven by higher Average WSEs and rate increases from our PEO services, partially offset by lower health plan enrollment.
	-48	Higher insurance costs primarily driven by higher health insurance utilization and cost inflation.
	+14	OE decreased due to lower transaction and integration costs and discretionary spending, partially offset by higher compensation expenses.
$80		Second Quarter 2024 Operating Income


(in millions)
$267		YTD 2023 Operating Income
	+35	Higher total revenues primarily driven by higher Average WSEs and rate increases from our PEO services, partially offset by lower health plan enrollment.
	-103	Higher insurance costs primarily driven by higher health insurance utilization and cost inflation.
	+3	OE decreased due to lower transaction and integration costs and discretionary spending, partially offset by higher compensation expenses.
$202		YTD 2024 Operating Income


TABLE OF CONTENTS



TRINET	2	2024 Q2 FORM 10-Q



TRINET	3	2024 Q2 FORM 10-Q



TRINET	4	2024 Q2 FORM 10-Q


(in millions)
$244		Q2 2023 Operating Expenses
	-4	COPS decreased due to lower compensation expense.
	+2	S&M increased slightly, driven primarily by higher compensation to support our sales force, partially offset by lower advertising costs.
	-13	G&A decreased due to lower consulting and transaction and integration costs.
	—	SD&P was consistent with the prior period.
	+1	D&A was consistent with the prior period.
	$230	Q2 2024 Operating Expense


(in millions)
$468		YTD 2023 Operating Expenses
	-2	COPS decreased due to lower compensation expense.
	+5	S&M increased, driven primarily by higher compensation to support our sales force, partially offset by lower advertising costs.
	-8	G&A decreased due to lower consulting and transaction and integration costs partially offset by higher compensation expense.
	+1	SD&P was consistent with the prior period as higher compensation expense was offset by lower technology expense.
	+1	D&A was consistent with the prior period.
	$465	YTD 2024 Operating Expense


	June 30, 2024						December 31, 2023
(in millions)	Corporate		WSE & TriNet Trust		Total		Corporate		WSE & TriNet Trust		Total
Current assets:
Cash and cash equivalents	$	176	$	1	$	177	$	287	$	—	$	287
Investments	72		—		72		65		—		65
Restricted cash, cash equivalents and investments	22		871		893		22		1,247		1,269
Other current assets	101		1,323		1,424		73		884		957
Total current assets	$	371	$	2,195	$	2,566	$	447	$	2,131	$	2,578




Total current liabilities	$	268	$	2,195	$	2,463	$	332	$	2,131	$	2,463

Working capital	$	103	$	—	$	103	$	115	$	—	$	115


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions except per share data)	2024		2023		2024		2023
Professional service revenues	$	186	$	177	$	400	$	382
Insurance service revenues	1,040		1,032		2,090		2,073
Total revenues	1,226		1,209		2,490		2,455
Insurance costs	916		868		1,823		1,720
Cost of providing services	75		79		154		156
Sales and marketing	72		70		144		139
General and administrative	47		60		95		103
Systems development and programming	17		17		35		34
Depreciation and amortization of intangible assets	19		18		37		36
Total costs and operating expenses	1,146		1,112		2,288		2,188
Operating income	80		97		202		267
Other income (expense):
Interest expense, bank fees and other	(16)		(6)		(32)		(13)
Interest income	17		20		35		38
Income before provision for income taxes	81		111		205		292
Income taxes	21		28		53		78
Net income	$	60	$	83	$	152	$	214
Other comprehensive income (loss), net of income taxes	—		(4)		(3)		(1)
Comprehensive income	$	60	$	79	$	149	$	213

Net income per share:
Basic	$	1.21	$	1.40	$	3.01	$	3.58
Diluted	$	1.20	$	1.38	$	2.98	$	3.56
Weighted average shares:
Basic	50		60		50		60
Diluted	51		60		51		60


	June 30,		December 31,
(in millions, except share and per share data)	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	177	$	287
Investments	72		65
Restricted cash, cash equivalents and investments	893		1,269
Accounts receivable, net	15		18
Unbilled revenue, net	485		447
Prepaid expenses, net	76		67
Other payroll assets	800		381
Other current assets	48		44
Total current assets	2,566		2,578
Restricted cash, cash equivalents and investments, noncurrent	163		158
Investments, noncurrent	156		143
Property and equipment, net	14		17
Operating lease right-of-use asset	21		24
Goodwill	462		462
Software and other intangible assets, net	176		172
Other assets	145		139
Total assets	$	3,703	$	3,693
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and other current liabilities	$	85	$	87
Revolving credit agreement borrowings	84		109

Client deposits and other client liabilities	70		65
Accrued wages	558		515
Accrued health insurance costs, net	182		175
Accrued workers' compensation costs, net	43		50
Payroll tax liabilities and other payroll withholdings	1,421		1,438
Operating lease liabilities	13		14
Insurance premiums and other payables	7		10
Total current liabilities	2,463		2,463
Long-term debt, noncurrent	984		984
Accrued workers' compensation costs, noncurrent, net	107		120
Deferred taxes	13		13
Operating lease liabilities, noncurrent	24		30
Other non-current liabilities	12		5
Total liabilities	3,603		3,615
Commitments and contingencies (see Note 5)
Stockholders' equity:
Preferred stock	—		—
($0.000025 par value per share; 20,000,000 shares authorized; no shares issued or outstanding at June 30, 2024 and December 31, 2023)
Common stock and additional paid-in capital	1,021		976
($0.000025 par value per share; 750,000,000 shares authorized; 49,710,395 and 50,664,471 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively)
Accumulated deficit	(916)		(896)
Accumulated other comprehensive loss	(5)		(2)
Total stockholders' equity	100		78
Total liabilities & stockholders' equity	$	3,703	$	3,693


(in millions)	Fair Value Level	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Investments		Restricted Cash, Cash Equivalents and Investments
June 30, 2024
Cash equivalents:
Money market mutual funds	Level 1	$	128	$	—	$	—	$	128	$	38	$	—	$	90
U.S. treasuries	Level 2	7		—		—		7		—		—		7
Total cash equivalents		135		—		—		135		38		—		97
AFS Investments:
Asset-backed securities	Level 2	43		—		—		43		—		43		—
Corporate bonds	Level 2	137		—		—		137		—		103		34
Agency securities	Level 2	34		—		(1)		33		—		7		26
U.S. treasuries	Level 2	249		—		(3)		246		—		68		178
Certificate of deposit	Level 2	1		—		—		1		—		—		1
Other debt securities	Level 2	7		—		—		7		—		7		—
Total AFS Investments		$	471	$	—	$	(4)	$	467	$	—	$	228	$	239


(in millions)	June 30, 2024
One year or less	$	91
Over one year through five years	351
Over five years through ten years	8
Over ten years	17
Total fair value	$	467


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Total accrued costs, beginning of period	$	175	$	187	$	175	$	189
Incurred
Current year	14		18		30		34
Prior years	(26)		(17)		(30)		(23)
Total incurred	(12)		1		—		11
Paid
Current year	(1)		(1)		(2)		(2)
Prior years	(8)		(9)		(19)		(20)
Total paid	(9)		(10)		(21)		(22)
Total accrued costs, end of period	$	154	$	178	$	154	$	178



	Total Number of Shares	Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2023	1,229,202	$	80.88
Granted	534,379	124.22
Vested	(324,921)	82.11
Forfeited	(30,505)	86.28
Nonvested at June 30, 2024	1,408,155	$	96.08


	Total Number of Shares	Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2023	223,011	$	81.08
Granted	129,631	125.65
Vested	(5,067)	92.53

Forfeited	(2,598)	77.00
Nonvested at June 30, 2024	344,977	$	96.08


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per share data)	2024		2023		2024		2023
Net income	$	60	$	83	$	152	$	214
Weighted average shares of common stock outstanding	50		60		50		60
Basic EPS	$	1.21	$	1.40	$	3.01	$	3.58
Net income	$	60	$	83	$	152	$	214
Weighted average shares of common stock outstanding	50		60		50		60
Dilutive effect of stock options and restricted stock units	1		—		1		—
Weighted average shares of common stock outstanding	51		60		51		60
Diluted EPS	$	1.20	$	1.38	$	2.98	$	3.56

Common stock equivalents excluded from income per diluted share because of their anti-dilutive effect	1		—		1		1


Period	Total Number of Shares Purchased (2)	Weighted Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans (1)	Approximate Dollar Value ($ millions) of Shares that May Yet be Purchased Under the Plans (3)
April 1 - April 30, 2024	163,243	$	106.65	163,191	$	392
May 1 - May 31, 2024	723,736	$	103.47	671,639	$	322
June 1 - June 30, 2024	221,616	$	104.85	221,616	$	299
Total	1,108,595			1,056,446



*			Document has been furnished, is deemed not filed and is not to be incorporated by reference into any of TriNet Group, Inc.’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.


	TRINET GROUP, INC.

Date: July 26, 2024		By:	/s/ Michael Q. Simonds
			Michael Q. Simonds
			Chief Executive Officer

Date: July 26, 2024		By:	/s/ Kelly Tuminelli
			Kelly Tuminelli
			Chief Financial Officer