Trinet Group, Inc 10-K for FY2022

Trinet Group, Inc. (TNET)

10-K 2023-02-15 For: 2022-12-31

Added on April 09, 2026

About this 10-K

Trinet Group, Inc filed this 10-K on February 15, 2023, covering the fiscal year ended December 31, 2022 (FY2022).

Headline figures

Fiscal year ended December 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.89B; up 7.6% from $4.54B a year earlier
Net income: $355M; up 5.0% from net income of $338M a year earlier
Diluted EPS: $5.61; up 10.7% from $5.07 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.	32
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.	36
Quantitative and Qualitative Disclosures About Market Risk	Part II, Item 7A.	56
Financial Statements and Supplementary Data	Part II, Item 8.	57
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.	92
Controls and Procedures	Part II, Item 9A.	92
Other Information	Part II, Item 9B.	93
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	Part II, Item 9C.	93
Directors, Executive Officers and Corporate Governance	Part III, Item 10.	94
Executive Compensation	Part III, Item 11.	94
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	Part III, Item 12.	94
Certain Relationships and Related Transactions, and Director Independence	Part III, Item 13.	94
Principal Accountant Fees and Services	Part III, Item 14.	94
Exhibits, Financial Statement Schedules	Part IV, Item 15.	95
Form 10-K Summary	Part IV, Item 16.	95
Signatures		99


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, including our $500 million revolving line of credit.
2029 Notes			Our $500 million senior unsecured notes maturing in March 2029
AB5			California 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
Clarus R+D			Clarus R+D Solutions, LLC
COBRA			Consolidated Omnibus Budget Reconciliation Act
colleague			TriNet's internal employees (as distinguished from WSEs and HRIS Users)
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
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 not co-employed by a TriNet PEO (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
IOM			Integrated Open Market brokered benefit offering
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
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
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
U.S.			United States


WSE			A worksite employee who is co-employed by a TriNet PEO
YTD			Year to date
Zenefits			YourPeople, Inc. (dba Zenefits) 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 (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, 2022	170,280	$	65.34	169,971	$	173
November 1 - November 30, 2022	179,654	$	65.09	133,141	$	165
December 1 - December 31, 2022	1,776,500	$	71.19	1,675,744	$	245
Total	2,126,434			1,978,856


$4.9B			$499M			84%
Total revenues			Operating income			Insurance cost ratio
8	%	increase	10	%	increase	(2)	%	decrease

$355M			$5.61			$448M
Net income			Diluted EPS			Adjusted Net income *
5	%	increase	11	%	increase	19	%	increase


	348,543			348,652			248,496
	Average WSE			Total WSE			Average HRIS Users
	2	%	increase	(4)	%	decrease
*	Non-GAAP measure. See definitions below under the heading "Non-GAAP Financial Measures".


	Year Ended December 31,									% Change
(in millions, except operating metrics data)	2022			2021			2020			2022 vs. 2021		2021 vs. 2020
Income Statement Data:
Professional service revenues	$	754		$	639		$	544		18	%	17	%
Insurance service revenues	4,131			3,901			3,490			6		12
Total revenues	4,885			4,540			4,034			8		13
Insurance costs	3,463			3,339			2,979			4		12
Operating expenses	923			746			687			24		9
Total costs and operating expenses	4,386			4,085			3,666			7		11
Operating income	499			455			368			10		24
Other income (expense):
Interest expense, bank fees and other	(39)			(20)			(21)			95		(5)
Interest income	22			6			10			267		(40)


Income before provision for income taxes	482			441			357			9		24
Income taxes	127			103			85			23		21
Net income	$	355		$	338		$	272		5	%	24	%


Cash Flow Data:
Net cash provided by operating activities	562			218			546			158	%	(60)	%
Net cash used in investing activities	(226)			(135)			(151)			67		(11)
Net cash provided by (used in) financing activities	(536)			12			(208)			(4,567)		(106)

Non-GAAP measures (1):



Adjusted EBITDA	688			565			468			22		21	%
Adjusted Net income	448			376			303			19		24
Corporate Operating Cash Flow	497			415			338			20		23

Operating Metrics:
Insurance Cost Ratio	84		%	86		%	85		%	(2)		1	%
Average WSEs	348,543			340,067			323,672			2		5
Total WSEs	348,652			364,940			331,908			(4)		10
Average HRIS Users (2)	248,496			N/A			N/A			N/A		N/A


	Year Ended December 31,						% Change
(in millions)	2022		2021		2020		2022 vs. 2021		2021 vs. 2020
Balance Sheet Data:
Cash and cash equivalents	$	354	$	612	$	301	(42)	%	103	%
Working capital	338		700		290		(52)	%	141	%
Total assets	3,443		3,309		3,043		4	%	9	%
Debt	496		495		369		—	%	34	%
Total stockholders’ equity	775		881		607		(12)	%	45	%


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 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)
$455		2021 Operating Income
	+345	Higher total revenues primarily driven by the addition of HRIS cloud services revenue, rate increases and higher Average WSEs, partially offset by higher reductions in revenue from our 2022 Credits.
	-124	Higher insurance costs primarily as a result of higher Average WSEs and higher medical services utilization.
	-177	Higher OE primarily as a result of increased G&A driven by the Zenefits and Clarus R+D acquisitions, together with higher compensation to support initiatives to improve client experience, enhance service offerings, upgrade our software and technology platforms, and improve our internal processes.
$499		2022 Operating Income


TABLE OF CONTENTS



TRINET	1	2022 FORM 10-K



TRINET	2	2022 FORM 10-K



TRINET	3	2022 FORM 10-K


(in millions)
$746		2021 Operating Expense
	+39	COPS increased, driven primarily by additional hiring to support more WSEs and incremental costs related to our HRIS Cloud Services.
	+40	S&M increased, driven primarily by increased compensation, technology spend, travel and entertainment and partially offset by a reduction in broker referral commissions.
	+65	G&A increased, driven primarily by the $42 million of transaction and integration costs related to the Zenefits and Clarus R+D acquisitions, higher compensation, technology services expenses to improve our systems and processes, and to enhance our service offerings, and impairments related to underutilized office space, partially offset by lower payroll tax and related assessments.
	+23	SD&P increased, driven primarily by increased compensation and technology service expenses as we continue to work to improve our client experience and our systems and processes.
	+10	D&A increased, due to the amortization of intangible assets recognized for the Zenefits and Clarus R+D acquisitions.
$923		2022 Operating Expenses


	December 31,
	2022						2021
(in millions)	Corporate		WSE		Total		Corporate		WSE		Total
Current assets:
Cash and cash equivalents	$	354	$	—	$	354	$	612	$	—	$	612
Investments	76		—		76		135		—		135
Restricted cash, cash equivalents and investments	22		1,241		1,263		19		1,176		1,195
Other current assets	78		555		633		91		406		497
Total current assets	$	530	$	1,796	$	2,326	$	857	$	1,582	$	2,439




Total current liabilities	192		1,796		$	1,988	$	157	$	1,582	$	1,739


Working capital	$	338	$	—	$	338	$	700	$	—	$	700


	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)	$	189	$	56	$	57	$	25	$	51


Change in loss development factor			Change in insurance costs
-5.0%			($32)
-2.5%			($18)
+2.5%			$20
+5.0%			$39


Change in medical cost trend			Change in insurance costs
+3.0%			$20
+2.0%			$14
+1.0%			$7
-1.0%			$(7)
-2.0%			$(14)
-3.0%			$(20)


Change in completion factors			Change in insurance costs
-0.75%			$18
-0.50%			$12
-0.25%			$6
+0.25%			$(6)
+0.50%			$(12)
+0.75%			$(18)


Reports of Independent Registered Public Accounting Firm (PCAOB ID No.34)						58
Consolidated Statements of Income and Comprehensive Income						61
Consolidated Balance Sheets						62
Consolidated Statements of Stockholders’ Equity						63
Consolidated Statements of Cash Flows						64
Notes to Consolidated Financial Statements						65
Note 1. Description of Business and Significant Accounting Policies						65
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						79
Note 9. Commitments and Contingencies						80
Note 10. Stock Based Compensation						81
Note 1 1 . Stockholders' Equity						83
Note 1 2 . Income Taxes						85
Note 1 3 . Earnings Per Share						88
Note 1 4 . 401(k) Plan						88
Note 1 5 . Related Party Transactions						88
Note 16. Acquisition						88


	Year Ended December 31,
(in millions except per share data)	2022		2021		2020
Professional service revenues	$	754	$	639	$	544
Insurance service revenues	4,131		3,901		3,490
Total revenues	4,885		4,540		4,034
Insurance costs	3,463		3,339		2,979
Cost of providing services	303		264		262
Sales and marketing	242		202		186
General and administrative	241		176		152
Systems development and programming	73		50		40
Depreciation and amortization of intangible assets	64		54		47
Total costs and operating expenses	4,386		4,085		3,666
Operating income	499		455		368
Other income (expense):
Interest expense, bank fees and other	(39)		(20)		(21)
Interest income	22		6		10

Income before provision for income taxes	482		441		357
Income taxes	127		103		85
Net income	$	355	$	338	$	272
Other comprehensive (loss) income, net of income taxes	(4)		(5)		4
Comprehensive income	$	351	$	333	$	276

Net income per share:
Basic	$	5.66	$	5.13	$	4.03
Diluted	$	5.61	$	5.07	$	3.99
Weighted average shares:
Basic	63		66		67
Diluted	64		67		68


	December 31,		December 31,
(in millions, except share and per share data)	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	354	$	612
Investments	76		135
Restricted cash, cash equivalents and investments	1,263		1,195
Accounts receivable, net	19		15
Unbilled revenue, net	375		324
Prepaid expenses, net	71		67
Other payroll assets	122		50
Other current assets	46		41
Total current assets	2,326		2,439
Restricted cash, cash equivalents and investments, noncurrent	153		166
Investments, noncurrent	151		168
Property and equipment, net	24		24
Operating lease right-of-use asset	31		42
Goodwill	462		294
Software and other intangible assets, net	163		61
Other assets	133		115
Total assets	$	3,443	$	3,309
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and other current liabilities	$	98	$	86


Client deposits and other client liabilities	106		97
Accrued wages	437		369
Accrued health insurance costs, net	174		174
Accrued workers' compensation costs, net	54		55
Payroll tax liabilities and other payroll withholdings	1,087		929
Operating lease liabilities	15		11
Insurance premiums and other payables	17		18
Total current liabilities	1,988		1,739
Long-term debt, noncurrent	496		495
Accrued workers' compensation costs, noncurrent, net	128		135
Deferred taxes	8		11
Operating lease liabilities, noncurrent	41		41
Other non-current liabilities	7		7
Total liabilities	2,668		2,428
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, 2022 and 2021)
Common stock and additional paid-in capital	899		808
($0.000025 par value per share; 750,000,000 shares authorized; 60,555,661 and 65,968,224 shares issued and outstanding at December 31, 2022 and 2021, respectively)
Retained earnings (Accumulated deficit)	(119)		74
Accumulated other comprehensive loss	(5)		(1)
Total stockholders' equity	775		881
Total liabilities & stockholders' equity	$	3,443	$	3,309


	December 31, 2022				December 31, 2021
(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	$	354	$	—	$	354	$	612	$	—	$	612
Investments	—		76		76		—		135		135
Restricted cash, cash equivalents and investments
Payroll funds collected	1,062		—		1,062		1,012		—		1,012
Collateral for health benefits claims	29		110		139		25		98		123
Collateral for workers' compensation claims	58		—		58		58		—		58

Other security deposits	4		—		4		2		—		2
Total restricted cash, cash equivalents and investments	1,153		110		1,263		1,097		98		1,195
Investments, noncurrent	—		151		151		—		168		168
Restricted cash, cash equivalents and investments, noncurrent
Collateral for workers' compensation claims	27		123		150		29		137		166
Other security deposits	3		—		3		—		—		—
Total	$	1,537	$	460	$	1,997	$	1,738	$	538	$	2,276


(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, 2022
Cash equivalents:
Money market mutual funds	Level 1	$	314	$	—	$	—	$	314	$	225	$	—	$	89
U.S. treasuries	Level 2	18		—		—		18		18		—		—
Total cash equivalents		332		—		—		332		243		—		89
AFS Investments:
Asset-backed securities	Level 2	42		—		(2)		40		—		40		—
Corporate bonds	Level 2	140		—		(1)		139		—		112		27
Agency securities	Level 2	33		—		(1)		32		—		5		27
U.S. treasuries	Level 2	229		—		—		229		—		62		167
Certificate of deposit	Level 2	12		—		—		12		—		—		12
Other debt securities	Level 2	8		—		—		8		—		7		1
Total AFS Investments		$	464	$	—	$	(4)	$	460	$	—	$	226	$	234


(in millions)	December 31, 2022
One year or less	$	130
Over one year through five years	293
Over five years through ten years	12
Over ten years	25
Total fair value	$	460


(in millions)	Amount
Balance at December 31, 2020	$	294
Additions	—
Balance at December 31, 2021	$	294
Additions	168
Balance at December 31, 2022	$	462


Year ending December 31:	Amount (in millions)
2023	$	53
2024	40
2025	28
2026	18
2027	17
2028 and thereafter	7
Total	$	163


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Balance at December 31, 2021	306,867	$	16.22	2.2	$	24

Exercised	(116,592)	9.30			8



Balance at December 31, 2022 (1)	190,275	$	20.50	1.5	$	9


	Year Ended December 31,
Additional Disclosures for Stock Options (in millions)	2022		2021		2020

Total fair value of options vested	$	—	$	—	$	—
Total intrinsic value of options exercised	8		6		4
Cash received from options exercised	1		1		1



	Total Number of RSUs	Total Number of RSAs	Total Number of Shares	Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2021	1,008,927	5,744	1,014,671	$	68.74
Granted	979,102	—	979,102	86.41
Vested	(589,625)	(5,744)	(595,369)	70.71
Forfeited	(199,843)	—	(199,843)	77.03
Nonvested at December 31, 2022	1,198,561	—	1,198,561	$	80.75



	Year Ended December 31,
Additional Disclosures for equity-based plans	2022		2021		2020
Total grant date fair value of shares granted (in millions)	$	85	$	47	$	50
Total grant date fair value of shares vested (in millions)	$	42	$	34	$	31
Shares withheld to settle payroll tax liabilities related to vesting of shares held by employees	204,191		207,603		230,569



	Total Number of RSUs	Total Number Shares	Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2021	255,224	255,224	$	67.16
Granted	245,808	245,808	84.88
Vested	(252,236)	(252,236)	65.78

Forfeited	(46,210)	(46,210)	82.78
Nonvested at December 31, 2022	202,586	202,586	$	86.82


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

Nonvested time based RSUs and RSAs	$	89	2.62
Nonvested performance based RSUs and RSAs	17		1.60