Trinet Group, Inc 10-K for FY2023

Trinet Group, Inc. (TNET)

10-K 2024-02-15 For: 2023-12-31

Added on April 09, 2026

About this 10-K

Trinet Group, Inc filed this 10-K on February 15, 2024, covering the fiscal year ended December 31, 2023 (FY2023).

Headline figures

Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.92B; up 0.8% from $4.89B a year earlier
Net income: $375M; up 5.6% from net income of $355M a year earlier
Diluted EPS: $6.56; up 16.9% from $5.61 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.	17
Unresolved Staff Comments	Part I, Item 1B.	31
Cybersecurity	Part I, Item 1C	31
Properties	Part I, Item 2.	32
Legal Proceedings	Part I, Item 3.	32
Mine Safety Disclosures	Part I, Item 4.	32
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	Part II, Item 5.	33

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.	57
Financial Statements and Supplementary Data	Part II, Item 8.	58
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.	93
Controls and Procedures	Part II, Item 9A.	93
Other Information	Part II, Item 9B.	93
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	Part II, Item 9C.	94
Directors, Executive Officers and Corporate Governance	Part III, Item 10.	95
Executive Compensation	Part III, Item 11.	95
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	Part III, Item 12.	95
Certain Relationships and Related Transactions, and Director Independence	Part III, Item 13.	95
Principal Accountant Fees and Services	Part III, Item 14.	95
Exhibits, Financial Statement Schedules	Part IV, Item 15.	96
Form 10-K Summary	Part IV, Item 16.	96
Signatures		100


2018 Term Loan			Our $425 million term loan A executed in June 2018 and repaid in 2021
2021 Credits			Our announced 2021 credits, which provided eligible clients with discretionary credits, subject to certain predefined conditions.
2022 Credits			Includes both of our announced 2022 credits, each of which provides eligible clients with discretionary credits, subject to certain predefined conditions.
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

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
CIRT			Cybersecurity Incident Response Team
CFO			Chief Financial Officer

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

COVID-19			Novel coronavirus
CPRA			California Privacy Rights Act
CSO			Chief Security Officer
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
ERM			Enterprise Risk Management
ERP			Enterprise Resource Planning

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
HCM			Human capital management
HIPAA			Health Insurance Portability and Accountability Act


HITECH Act			Health Information Technology for Economic and Clinical Health Act
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 a TriNet Zenefits client)
IBNP			Incurred but not yet paid
IBNR			Incurred but not yet reported
ICR			Insurance cost ratio
IGP			Indemnity Guarantee Payment
IRC			Incident Review Committee
IRCF			Integrated Risk and Control Framework
IRM			Information Risk Management
IRS			Internal Revenue Service
ICR			Insurance cost ratio
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
MEWA			Multiple Employer Welfare Arrangement
OE			Operating expenses
OMS			Open Market Solutions offering that includes Broker Select and Broker Flex offerings
PCAOB			Public Company Accounting Oversight Board
PEO			Professional Employer Organization
PFC			Payroll funds collected
PHI			Protected Health Information


PSR			Professional service revenues
R&D			Research and Development
Recovery Credit			Our 2020 Recovery Credit to provide eligible clients with one-time reductions against fees for future services
Recovery Credits			Collectively, our Recovery Credit, 2021 Credits, and 2022 Credits
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
TriNet Clarus R+D			Clarus R+D Solutions, LLC
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


PROPERTIES, LEGAL PROCEEDINGS AND MINE SAFETY DISCLOSURES						Table of Contents


Corporate Headquarters:			Significant Client Service Centers:
• Dublin, California			• Bradenton, Florida
			• Austin, Texas


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


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 of Shares that May Yet Be Purchased Under the Plans (in millions) (3)
October 1 - October 31, 2023	98,722	$	109.78	98,390	$	435
November 1 - November 30, 2023	77,037	$	109.28	24,717	$	433
December 1 - December 31, 2023	75,899	$	118.96	—	$	433
Total	251,658			123,107


$4.9B			$469M			84%
Total revenues			Operating income			Insurance cost ratio
1	%	increase	(6)	%	decrease	0	%	flat

$375M			$6.56			$446M
Net income			Diluted EPS			Adjusted Net income *
6	%	increase	17	%	increase	0	%	flat


	331,423			347,542			215,295
	Average WSE **			Total WSE **			Average HRIS Users
	(5)	%	decrease	0	%	flat	(13)	%	decrease
*	Non-GAAP measure. See definitions below under the heading "Non-GAAP Financial Measures".
**	Total WSEs includes approximately 12,000 incremental WSEs for December 31, 2023 and Average WSEs includes approximately 4,000 incremental WSEs for the fourth quarter of 2023 (1,000 for the full year 2023) that were charged a platform user access fee. Additionally, Total WSEs includes approximately 4,500 incremental WSEs for December 31, 2023 and Average WSEs includes approximately 4,800 for the fourth quarter of 2023 (1,500 for the full year 2023) 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).”


	Year Ended December 31,									% Change
(in millions, except operating metrics data)	2023			2022			2021			2023 vs. 2022		2022 vs. 2021
Income Statement Data:
Professional service revenues	$	756		$	754		$	639		—	%	18	%
Insurance service revenues	4,166			4,131			3,901			1		6
Total revenues	4,922			4,885			4,540			1		8
Insurance costs	3,513			3,463			3,339			1		4
Operating expenses	940			923			746			2		24
Total costs and operating expenses	4,453			4,386			4,085			2		7
Operating income	469			499			455			(6)		10
Other income (expense):
Interest expense, bank fees and other	(40)			(39)			(20)			3		95
Interest income	72			22			6			227		267


Income before provision for income taxes	501			482			441			4		9
Income taxes	126			127			103			(1)		23
Net income	$	375		$	355		$	338		6	%	5	%


Cash Flow Data:
Net cash provided by operating activities	545			562			218			(3)	%	158	%
Net cash used in investing activities	(70)			(226)			(135)			(69)		67
Net cash provided by (used in) financing activities	(546)			(536)			12			2		(4,567)

Non-GAAP measures (1):



Adjusted EBITDA	697			688			565			1	%	22	%
Adjusted Net income	446			448			376			—		19
Corporate Operating Cash Flow	539			497			415			8		20

Operating Metrics:
Insurance Cost Ratio	84		%	84		%	86		%	—	%	(2)	%
Average WSEs (2)	331,423			348,543			340,067			(5)		2
Total WSEs (2)	347,542			348,652			364,940			—		(4)
Average HRIS Users (3)	215,295			248,496			N/A			(13)		N/A


	Year Ended December 31,						% Change
(in millions)	2023		2022		2021		2023 vs. 2022		2022 vs. 2021
Balance Sheet Data:
Cash and cash equivalents	$	287	$	354	$	612	(19)	%	(42)	%
Working capital	115		338		700		(66)	%	(52)	%
Total assets	3,693		3,443		3,309		7	%	4	%
Debt	1,093		496		495		120	%	—	%
Total stockholders’ equity	78		775		881		(90)	%	(12)	%


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 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 intangible assets, net, - non-cash interest expense (2), - 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 (accounts receivable, unbilled revenue, prepaid expenses, other payroll assets 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 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. • 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)
$499		2022 Operating Income
	+37	Higher total revenues primarily driven by rate increases and due to no reduction in revenue being recognized in 2023 related to our 2022 Credits, partially offset by lower health plan enrollment and lower Average WSEs.
	-50	Higher insurance costs primarily as a result of higher rates, partially offset by lower health plan enrollment and lower volume due to lower Average WSEs.
	-17	Higher OE primarily as a result of higher compensation, S&M and technology spend to improve client experience, enhance service offerings, and improve processes, including a full year of supporting the HRIS product, together with higher sales and marketing expenses to support sales efforts. This was partially offset by lower spend in facilities and transaction and integration costs.
$469		2023 Operating Income


TABLE OF CONTENTS



TRINET	1	2023 FORM 10-K



TRINET	2	2023 FORM 10-K



TRINET	3	2023 FORM 10-K


(in millions)
$923		2022 Operating Expense
	+4	COPS increased, driven primarily by higher compensation expense to support WSEs and incremental costs related to our HRIS cloud services.
	+43	S&M increased, driven primarily by higher compensation from the growth in our sales force, together with higher advertising, conference and events expenses, technology spend and broker commissions.
	-30	G&A decreased, driven primarily by lower transaction and integration expenses as well as lower costs in consulting and facilities expenses.
	-8	SD&P decreased, driven primarily by lower net compensation and consulting expenses due to higher capitalization of internally developed software.
	+8	D&A increased, due to the amortization of intangible assets recognized for the Zenefits and Clarus R+D acquisitions as well as higher amortization related to recently deployed software.
$940		2023 Operating Expenses


	December 31,
	2023						2022
(in millions)	Corporate		WSE		Total		Corporate		WSE		Total
Current assets:
Cash and cash equivalents	$	287	$	—	$	287	$	354	$	—	$	354
Investments	65		—		65		76		—		76
Restricted cash, cash equivalents and investments	22		1,247		1,269		22		1,241		1,263
Other current assets	73		884		957		78		555		633
Total current assets	$	447	$	2,131	$	2,578	$	530	$	1,796	$	2,326




Total current liabilities	332		2,131		$	2,463	$	192	$	1,796	$	1,988


Working capital	$	115	$	—	$	115	$	338	$	—	$	338


	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)	$	175	$	51	$	54	$	23	$	47


Change in loss development factor			Change in insurance costs
-5.0%			($31)
-2.5%			($18)
+2.5%			$19
+5.0%			$38


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%			$19
-0.50%			$13
-0.25%			$6
+0.25%			$(6)
+0.50%			$(13)
+0.75%			$(19)


Reports of Independent Registered Public Accounting Firm (PCAOB ID No.34)						59
Consolidated Statements of Income and Comprehensive Income						62
Consolidated Balance Sheets						63
Consolidated Statements of Stockholders’ Equity						64
Consolidated Statements of Cash Flows						65
Notes to Consolidated Financial Statements						66
Note 1. Description of Business and Significant Accounting Policies						66
Note 2. Cash, Cash Equivalents and Investments						74
Note 3. Investments						75
Note 4. Property, Equipment and Software, Net						77
Note 5. Goodwill and Other Intangible Assets						77
Note 6. Accrued Workers' Compensation Costs						78
Note 7. Leases						79
Note 8. Long-term Debt						80
Note 9. Commitments and Contingencies						81
Note 10. Stock Based Compensation						81
Note 11. Stockholders' Equity						84
Note 12. Income Taxes						86
Note 13. Earnings Per Share						89
Note 14. 401(k) Plan						89
Note 15. Related Party Transactions						89
Note 16. Acquisition						88


	Year Ended December 31,
(in millions except per share data)	2023		2022		2021
Professional service revenues	$	756	$	754	$	639
Insurance service revenues	4,166		4,131		3,901
Total revenues	4,922		4,885		4,540
Insurance costs	3,513		3,463		3,339
Cost of providing services	307		303		264
Sales and marketing	285		242		202
General and administrative	211		241		176
Systems development and programming	65		73		50
Depreciation and amortization of intangible assets	72		64		54
Total costs and operating expenses	4,453		4,386		4,085
Operating income	469		499		455
Other income (expense):
Interest expense, bank fees and other	(40)		(39)		(20)
Interest income	72		22		6

Income before provision for income taxes	501		482		441
Income taxes	126		127		103
Net income	$	375	$	355	$	338
Other comprehensive (loss) income, net of income taxes	3		(4)		(5)
Comprehensive income	$	378	$	351	$	333

Net income per share:
Basic	$	6.61	$	5.66	$	5.13
Diluted	$	6.56	$	5.61	$	5.07
Weighted average shares:
Basic	57		63		66
Diluted	57		64		67


	December 31,		December 31,
(in millions, except share and per share data)	2023		2022
ASSETS
Current assets:
Cash and cash equivalents	$	287	$	354
Investments	65		76
Restricted cash, cash equivalents and investments	1,269		1,263
Accounts receivable, net	18		19
Unbilled revenue, net	447		375
Prepaid expenses, net	67		71
Other payroll assets	381		122
Other current assets	44		46
Total current assets	2,578		2,326
Restricted cash, cash equivalents and investments, noncurrent	158		153
Investments, noncurrent	143		151
Property and equipment, net	17		24
Operating lease right-of-use asset	24		31
Goodwill	462		462
Software and other intangible assets, net	172		163
Other assets	139		133
Total assets	$	3,693	$	3,443
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and other current liabilities	$	87	$	98
Revolving credit agreement borrowings	109		—

Client deposits and other client liabilities	65		106
Accrued wages	515		437
Accrued health insurance costs, net	175		174
Accrued workers' compensation costs, net	50		54
Payroll tax liabilities and other payroll withholdings	1,438		1,087
Operating lease liabilities	14		15
Insurance premiums and other payables	10		17
Total current liabilities	2,463		1,988
Long-term debt, noncurrent	984		496
Accrued workers' compensation costs, noncurrent, net	120		128
Deferred taxes	13		8
Operating lease liabilities, noncurrent	30		41
Other non current liabilities	5		7
Total liabilities	3,615		2,668
Commitments and contingencies (see Note 9)
Stockholders' equity:
Preferred stock	—		—
($0.000025 par value per share; 20,000,000 shares authorized; no shares issued or outstanding at December 31, 2023 and 2022)
Common stock and additional paid-in capital	976		899
($0.000025 par value per share; 750,000,000 shares authorized; 50,664,471 and 60,555,661 shares issued and outstanding at December 31, 2023 and 2022, respectively)
Retained earnings (Accumulated deficit)	(896)		(119)
Accumulated other comprehensive loss	(2)		(5)
Total stockholders' equity	78		775
Total liabilities & stockholders' equity	$	3,693	$	3,443


	December 31, 2023				December 31, 2022
(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	$	287	$	—	$	287	$	354	$	—	$	354
Investments	—		65		65		—		76		76
Restricted cash, cash equivalents and investments
Payroll funds collected	1,067		—		1,067		1,062		—		1,062
Collateral for health benefits claims	31		113		144		29		110		139
Collateral for workers' compensation claims	54		2		56		58		—		58

Other security deposits	2		—		2		4		—		4
Total restricted cash, cash equivalents and investments	1,154		115		1,269		1,153		110		1,263
Investments, noncurrent	—		143		143		—		151		151
Restricted cash, cash equivalents and investments, noncurrent
Collateral for workers' compensation claims	25		133		158		27		123		150
Other security deposits	—		—		—		3		—		3
Total	$	1,466	$	456	$	1,922	$	1,537	$	460	$	1,997


(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
December 31, 2023
Cash equivalents:
Money market mutual funds	Level 1	$	183	$	—	$	—	$	183	$	96	$	—	$	87
U.S. treasuries	Level 2	7		—		—		7		5		—		2
Total cash equivalents		190		—		—		190		101		—		89
AFS Investments:
Asset-backed securities	Level 2	41		—		(1)		40		—		40		—
Corporate bonds	Level 2	135		1		—		136		—		103		33
Agency securities	Level 2	40		—		(1)		39		—		10		29
U.S. treasuries	Level 2	231		1		(1)		231		—		47		184
Certificate of deposit	Level 2	2		—		—		2		—		—		2
Other debt securities	Level 2	8		—		—		8		—		8		—
Total AFS Investments		$	457	$	2	$	(3)	$	456	$	—	$	208	$	248


(in millions)	December 31, 2023
One year or less	$	93
Over one year through five years	332
Over five years through ten years	11
Over ten years	20
Total fair value	$	456


(in millions)	Amount
Balance at December 31, 2021	$	294
Additions	168
Balance at December 31, 2022	$	462
Additions	—
Balance at December 31, 2023	$	462


Year ending December 31:	Amount (in millions)
2024	$	59
2025	46
2026	31
2027	23
2028	7
2029 and thereafter	3
Total	$	169


(Dollars in millions)	Annual contractual interest rate		Effective interest rate		Principal amount		Deferred issuance costs		Less: current portion		Long-term debt, noncurrent
(Dollars in millions)	Annual contractual interest rate		Effective interest rate		Principal amount		Deferred issuance costs		Less: current portion		December 31, 2023		December 31, 2022

2021 Revolver	6.58	%	7.07	%	$	200	$	—	$	(109)	$	91	$	—
2029 Notes	3.50	%	3.67	%	$	500	$	(3)	$	—	$	497	$	496
2031 Notes	7.13	%	7.30	%	$	400	$	(4)	$	—	$	396	$	—


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Balance at December 31, 2022	190,275	$	20.50	1.5	$	9

Exercised	(182,067)	20.50			14



Balance at December 31, 2023 (1)	8,208	$	19.50	0.45	$	1


	Year Ended December 31,
Additional Disclosures for Stock Options (in millions)	2023	2022	2021


Total intrinsic value of options exercised	14	8	6
Cash received from options exercised	4	1	1



	Total Number of RSUs	Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2022	1,198,561	$	80.75
Granted	769,286	78.27
Vested	(617,937)	76.25
Forfeited	(120,708)	82.58
Nonvested at December 31, 2023	1,229,202	$	80.88



	Year Ended December 31,
Additional Disclosures for equity-based plans	2023		2022		2021
Total grant date fair value of shares granted (in millions)	$	60	$	85	$	47
Total grant date fair value of shares vested (in millions)	$	47	$	42	$	34
Shares withheld to settle payroll tax liabilities related to vesting of shares held by employees	213,569		204,191		207,603



	Total Number Shares	Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2022	202,586	$	86.82
Granted	177,067	79.05
Vested	(156,642)	86.22


Nonvested at December 31, 2023	223,011	$	81.08