Total Revenues of $1.2
billion
Sequential growth in Ending WSEs of 1%
Net Income per Diluted Share of $1.63 and Adjusted Net Income per Diluted Share
of $1.91
DUBLIN,
Calif., Oct. 25, 2023 /PRNewswire/ -- TriNet
Group, Inc. (NYSE: TNET), a leading provider of
comprehensive and flexible human capital management (HCM) solutions
for small and medium-size businesses
(SMBs), today announced financial results for the
third quarter ended September 30, 2023. The third
quarter highlights below include non-GAAP financial measures which
are reconciled later in this release.
Third quarter highlights include:
- Total revenues decreased 2% to $1.2
billion compared to the same period last year.
- Professional service revenues decreased 2% to $185 million compared to the same period last
year.
- Net income was $94 million, or
$1.63 per diluted share, compared to
net income of $77 million, or
$1.22 per diluted share, in the same
period last year.
- Adjusted Net Income was $109
million, or $1.91 per diluted
share, compared to Adjusted Net Income of $104 million, or $1.64 per diluted share, in the same period last
year.
- Adjusted EBITDA was $172 million,
representing an Adjusted EBITDA Margin of 14.1%, compared to
Adjusted EBITDA of $173 million,
representing an Adjusted EBITDA Margin of 14.0% in the same period
last year.
- Ending Worksite Employees (WSEs) decreased 5% as compared
to the same period last year and increased 1% as compared to the
previous quarter, to approximately 336,000.
- Average WSEs decreased 5% as compared to the same period
last year and increased 2% as compared to the previous quarter, to
approximately 333,000.
- Sales rep count grew by approximately 5% sequentially,
resulting in year-to-date total sales rep growth of 19%.
- HRIS Cloud Services Revenues increased 42% to $17 million compared to the same period last
year
- Average HRIS Users decreased 15% as compared to the same
period last year, to approximately 211,000.
"TriNet achieved significant successes across our business,"
said Burton M. Goldfield, TriNet's
President and CEO. "We accelerated our new sales, bought back
$1 billion in stock in part through a
tender offer, executed a $400 million
bond offering in a volatile market, managed our expenses prudently,
and delivered strong earnings performance for our
shareholders."
Mr. Goldfield continued, "As we look to build on our momentum
into next year, we will always keep our customers at the center of
everything we do. We are innovating our product and technology to
reach more potential customers and effectively service them
throughout their business lifecycles. With our customer retention
and NPS scores nearing all-time highs, we are committed more than
ever to delivering our product and services how our customers
want."
Fourth Quarter and Full-Year 2023 Guidance
In addition to announcing our third quarter 2023 results, we
provide our fourth quarter and full-year 2023 guidance. Non-GAAP
financial measures are reconciled later in this release.
Percentages reflect the increase or (decrease) from the prior year
quarter and prior year end.
|
|
Q4
2023
|
|
Full Year
2023
|
|
|
Low
|
|
High
|
|
Low
|
|
High
|
Total
Revenues
|
|
— %
|
|
4 %
|
|
— %
|
|
1 %
|
Professional Service
Revenues
|
|
(2) %
|
|
1 %
|
|
— %
|
|
1 %
|
Insurance Cost
Ratio
|
|
92 %
|
|
88 %
|
|
85.5 %
|
|
84.5 %
|
Diluted net income per
share of common stock
|
|
$
0.26
|
|
$
1.00
|
|
$
5.43
|
|
$
6.27
|
Adjusted Net Income per
share - diluted
|
|
$
0.59
|
|
$
1.33
|
|
$
6.90
|
|
$
7.55
|
Quarterly Report on Form 10-Q
We anticipate filing our Quarterly Report on Form 10-Q ("Form
10-Q") for the nine months ended September
30, 2023 with the U.S. Securities and Exchange Commission
(SEC) and making it available at http://www.trinet.com today,
October 25, 2023. This press release should be read in
conjunction with the Form 10-Q and the related Notes to
Consolidated Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations contained
in the Form 10-Q.
Earnings Conference Call and Audio Webcast
TriNet will host a conference call at 2:00 p.m. PT (5:00 p.m.
ET) today to discuss its second quarter results for 2023 and
provide third quarter and full-year financial guidance for 2023.
TriNet encourages participants to pre-register for the conference
call. Callers who pre-register will be given a unique PIN to gain
immediate access to the call and bypass the live operator. To
pre-register, go to:
https://dpregister.com/sreg/10183393/fab2294e46. For those who
would like to join the call but have not pre-registered, they can
do so by dialing +1 (412) 317-5426 and requesting the "TriNet
Conference Call." The live webcast of the conference call can
be accessed on the Investor Relations section of TriNet's website
at https://investor.trinet.com. Participants can pre-register for
the webcast by going to:
https://events.q4inc.com/attendee/696724822. A replay of the
webcast will be available on this website for approximately one
year. A telephonic replay will be available for one week following
the conference call at +1 (412) 317-0088 conference ID:
1718914.
About TriNet
TriNet provides small and medium-size businesses (SMBs) with
full-service industry-specific HR solutions, providing both
professional employer organization (PEO) and human resources
information system (HRIS) services. TriNet offers access to human
capital expertise, benefits, risk mitigation, compliance, payroll,
and R&D tax credit services, all enabled by industry-leading
technology. TriNet's suite of products also includes services and
software-based solutions to help streamline workflows by connecting
HR, benefits, employee engagement, payroll and time &
attendance. Rooted in more than 30 years of supporting
entrepreneurs and adapting to the ever-changing modern workplace,
TriNet empowers SMBs to focus on what matters most - growing their
business and enabling their people For more information, please
visit TriNet.com or follow us on X, formerly Twitter, Facebook,
LinkedIn and Instagram.
Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to TriNet's
financial results as determined in accordance with GAAP are
included at the end of this press release following the
accompanying financial data. For a description of these non-GAAP
financial measures, including the reasons management uses each
measure, please see the section titled "Non-GAAP Financial
Measures."
Forward-Looking Statements
This press release contains, and statements made during the
above referenced conference call will contain, statements that are
not historical in nature, are predictive in nature, or that depend
upon or refer to future events or conditions or otherwise contain
forward-looking statements within the meaning of Section 21 of the
Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995, including, among other
things, TriNet's expectations and assumptions regarding: TriNet's
financial guidance for the fourth quarter and full-year 2023 and
the underlying assumptions; TriNet's future financial performance
and long-term growth; the continued value to customers and
stockholders of TriNet's product offerings; our ability to continue
to grow new client sales, client tenure and improve retention,
including through product and technological innovation; and the
ability of our solutions to meet all client needs throughout their
business cycle. Forward-looking statements are often identified by
the use of words such as, but not limited to, "ability,"
"anticipate," "believe," "can," "continue," "could," "estimate,"
"expect," "guidance," "impact," "intend," "may," "plan," "predict,"
"project," "seek," "should," "strategy," "target," "value," "will,"
"would" and similar expressions or variations intended to identify
forward-looking statements. These statements are not guarantees of
future performance but are based on management's expectations as of
the date hereof and assumptions that are inherently subject to
uncertainties, risks and changes in circumstances that are
difficult to predict. Forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause
actual results, performance or achievements to be materially
different from our current expectations and any past or future
results, performance or achievements expressed or implied by the
forward-looking statements. Investors are cautioned not to place
undue reliance upon any forward-looking statements.
Important factors that could cause actual results to differ
materially from those expressed or implied by these forward-looking
statements include: our ability to manage unexpected changes in
workers' compensation and health insurance claims and costs by
worksite employees; our ability to mitigate the unique business
risks we face as a co-employer; the effects of volatility in the
financial and economic environment on the businesses that make up
our client base; loss of clients for reasons beyond our control and
the short-term contracts we typically use with our clients; the
impact of regional or industry-specific economic and health factors
on our operations; the impact of failures or limitations in the
business systems and service centers we rely upon; the impact
of recovery credits on our business and client loyalty and
retention; changes in our insurance coverage or our relationships
with key insurance carriers; our ability to improve our services
and technology to satisfy client and regulatory expectations; our
ability to effectively integrate businesses we have acquired or may
acquire in the future; our ability to effectively manage and
improve our operational effectiveness and resiliency; our ability
to attract and retain qualified personnel; the effects of increased
competition and our ability to compete effectively; the impact on
our business of cyber-attacks, breaches, disclosures and other
data-related incidents; our ability to protect against and
remediate cyber-attacks, breaches, disclosures and other
data-related incidents, whether intentional or inadvertent and
whether attributable to us or our service providers; our ability to
comply with constantly evolving data privacy and security laws; our
ability to manage changes in, uncertainty regarding, or adverse
application of the complex laws and regulations that govern our
business; changing laws and regulations governing health insurance
and employee benefits; our ability to be recognized as an employer
of worksite employees and for our benefits plans to satisfy all
requirements under federal and state regulations; changes in the
laws and regulations that govern what it means to be an employer,
employee or independent contractor; the impact of new and changing
laws regarding remote work; our ability to comply with the
licensing requirements that govern our HCM solutions; the outcome
of existing and future legal and tax proceedings; fluctuation in
our results of operations and stock price due to factors outside of
our control; our ability to comply with the restrictions of our
credit facility and meet our debt obligations; and the impact of
concentrated ownership in our stock by Atairos and other large
stockholders. Any of these factors could cause our actual results
to differ materially from our anticipated results.
Further information on risks that could affect TriNet's results
is included in our filings with the SEC, including under the
headings "Risk Factors" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and elsewhere in
our most recent Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q, which are available on our investor relations website at
http://investor.trinet.com and on the SEC website at www.sec.gov.
Copies of these filings are also available by
contacting TriNet Corporation's Investor Relations Department
at (510) 875-7201. Except as required by law, neither we nor any
other person assumes responsibility for the accuracy and
completeness of the forward-looking statements in this press
release, and any forward-looking statements in this press release
speak only as of the date of this press release. In addition, we do
not assume any obligation, and do not intend, to update any of our
forward-looking statements, except as required by law.
Contacts:
|
|
Investors:
|
Media:
|
Alex Bauer
|
Renee Brotherton / Josh
Gross
|
TriNet
|
TriNet
|
Investorrelations@TriNet.com
|
Renee.Brotherton@TriNet.com
|
(510)
875-7201
|
Josh.Gross@TriNet.com
|
|
(408)
646-5103
|
Key Financial and Operating Metrics
We regularly review certain key financial and operating metrics
to evaluate growth trends, measure our performance and make
strategic decisions. These key financial and operating metrics may
change over time. Our key financial and operating metrics for the
periods presented were as follows:
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
(in millions, except
per share and Operating Metrics data)
|
2023
|
|
2022
|
|
%
Change
|
|
2023
|
|
2022
|
|
%
Change
|
Income Statement
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
1,222
|
|
$
1,241
|
|
(2)
|
%
|
|
$
3,677
|
|
$
3,659
|
|
—
|
%
|
Operating
income
|
116
|
|
120
|
|
(3)
|
|
|
382
|
|
443
|
|
(14)
|
|
Net income
|
94
|
|
77
|
|
22
|
|
|
308
|
|
307
|
|
—
|
|
Diluted net income per
share of common stock
|
1.63
|
|
1.22
|
|
34
|
|
|
5.20
|
|
4.81
|
|
8
|
|
Non-GAAP measures
(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
172
|
|
173
|
|
(1)
|
|
|
557
|
|
577
|
|
(3)
|
|
Adjusted Net
income
|
109
|
|
104
|
|
5
|
|
|
365
|
|
378
|
|
(3)
|
|
Operating
Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance Cost
Ratio
|
84 %
|
|
83 %
|
|
1
|
%
|
|
83 %
|
|
82 %
|
|
1
|
%
|
Average WSEs
(2)
|
333,286
|
|
351,888
|
|
(5)
|
|
|
329,257
|
|
348,833
|
|
(6)
|
|
Total WSEs at period
end (2)
|
335,741
|
|
351,839
|
|
(5)
|
|
|
335,741
|
|
351,839
|
|
(5)
|
|
Average HRIS Users
(3)
|
210,863
|
|
247,375
|
|
(15)
|
|
|
219,058
|
|
251,707
|
|
(13)
|
|
(1)
|
Refer to Non-GAAP
measures definitions and reconciliations from GAAP measures under
the heading "Non-GAAP Financial Measures".
|
(2)
|
Total WSEs
includes approximately 4,600 additional service recipients and
Average WSEs includes approximately 1,500 additional service
recipients for the third quarter of 2023, in each case 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)" in our Quarterly Report on Form 10-Q for the
period ended September 30, 2023.
|
(3)
|
For the nine
months ended September 30, 2022, reflects HRIS Users from February
15, 2022, the date on which we acquired Zenefits, to the end of the
period.
|
(in
millions)
|
September 30,
2023
|
|
December 31,
2022
|
|
%
Change
|
|
Balance Sheet
Data:
|
|
|
|
|
|
|
Working
capital
|
150
|
|
338
|
|
(56)
|
%
|
Total
assets
|
2,966
|
|
3,443
|
|
(14)
|
|
Debt
|
1,091
|
|
496
|
|
120
|
|
Total stockholders'
equity
|
10
|
|
775
|
|
(99)
|
|
|
Nine Months Ended
September 30,
|
(in
millions)
|
2023
|
|
2022
|
|
% Change
|
Cash Flow
Data:
|
|
|
|
|
|
|
Net cash provided by
(used in) operating activities
|
$
(43)
|
|
$
76
|
|
(157)
|
%
|
Net cash used in
investing activities
|
(57)
|
|
(205)
|
|
(72)
|
|
Net cash used in
financing activities
|
(523)
|
|
(392)
|
|
33
|
|
Non-GAAP measure
(1):
|
|
|
|
|
|
|
Corporate Operating
Cash Flows
|
$
386
|
|
$
436
|
|
(11)
|
|
(1)
|
Refer to Non-GAAP
measures definitions and reconciliations from GAAP measures under
the heading "Non-GAAP Financial Measures".
|
TRINET GROUP,
INC.
CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(in millions except per
share data)
|
2023
|
2022
|
|
2023
|
2022
|
Professional service
revenues
|
$
185
|
$
189
|
|
$
567
|
$
565
|
Insurance service
revenues
|
1,037
|
1,052
|
|
3,110
|
3,094
|
Total
revenues
|
1,222
|
1,241
|
|
3,677
|
3,659
|
Insurance
costs
|
874
|
872
|
|
2,594
|
2,547
|
Cost of providing
services
|
74
|
79
|
|
231
|
225
|
Sales and
marketing
|
75
|
72
|
|
214
|
179
|
General and
administrative
|
51
|
63
|
|
154
|
165
|
Systems development and
programming
|
15
|
18
|
|
49
|
54
|
Depreciation and
amortization of intangible assets
|
17
|
17
|
|
53
|
46
|
Total costs and
operating expenses
|
1,106
|
1,121
|
|
3,295
|
3,216
|
Operating
income
|
116
|
120
|
|
382
|
443
|
Other income
(expense):
|
|
|
|
|
|
Interest expense, bank
fees and other
|
(10)
|
(22)
|
|
(23)
|
(33)
|
Interest
income
|
18
|
5
|
|
57
|
8
|
Income before
provision for income taxes
|
124
|
103
|
|
416
|
418
|
Income taxes
|
30
|
26
|
|
108
|
111
|
Net
income
|
$
94
|
$
77
|
|
$
308
|
$
307
|
Other comprehensive
income (loss), net of income
taxes
|
(2)
|
7
|
|
(3)
|
(4)
|
Comprehensive
income
|
$
92
|
$
84
|
|
$
305
|
$
303
|
Net income per
share:
|
|
|
|
|
|
Basic
|
$
1.65
|
$
1.23
|
|
$
5.23
|
$
4.85
|
Diluted
|
$
1.63
|
$
1.22
|
|
$
5.20
|
$
4.81
|
Weighted average
shares:
|
|
|
|
|
|
Basic
|
57
|
62
|
|
59
|
63
|
Diluted
|
58
|
63
|
|
59
|
64
|
TRINET GROUP,
INC.
CONSOLIDATED BALANCE
SHEETS (Unaudited)
|
|
|
|
September
30,
|
|
December
31,
|
(in millions, except
share and per share data)
|
|
2023
|
|
2022
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
170
|
|
$
354
|
Investments
|
|
75
|
|
76
|
Restricted cash, cash
equivalents and investments
|
|
833
|
|
1,263
|
Accounts receivable,
net
|
|
21
|
|
19
|
Unbilled revenue,
net
|
|
404
|
|
375
|
Prepaid expenses,
net
|
|
75
|
|
71
|
Other payroll
assets
|
|
226
|
|
122
|
Other current
assets
|
|
49
|
|
46
|
Total current
assets
|
|
1,853
|
|
2,326
|
Restricted cash, cash
equivalents and investments, noncurrent
|
|
154
|
|
153
|
Investments,
noncurrent
|
|
143
|
|
151
|
Property and equipment,
net
|
|
16
|
|
24
|
Operating lease
right-of-use asset
|
|
24
|
|
31
|
Goodwill
|
|
462
|
|
462
|
Software and other
intangible assets, net
|
|
169
|
|
163
|
Other assets
|
|
145
|
|
133
|
Total
assets
|
|
$
2,966
|
|
$
3,443
|
Liabilities and
stockholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable and
other current liabilities
|
|
$
109
|
|
$
98
|
Client deposits and
other client liabilities
|
|
73
|
|
106
|
Accrued
wages
|
|
458
|
|
437
|
Accrued health
insurance costs, net
|
|
183
|
|
174
|
Accrued workers'
compensation costs, net
|
|
51
|
|
54
|
Payroll tax
liabilities and other payroll withholdings
|
|
804
|
|
1,087
|
Operating lease
liabilities
|
|
15
|
|
15
|
Insurance premiums and
other payables
|
|
10
|
|
17
|
Total current
liabilities
|
|
1,703
|
|
1,988
|
Long-term debt,
noncurrent
|
|
1,091
|
|
496
|
Accrued workers'
compensation costs, noncurrent, net
|
|
122
|
|
128
|
Deferred
taxes
|
|
5
|
|
8
|
Operating lease
liabilities, noncurrent
|
|
30
|
|
41
|
Other non-current
liabilities
|
|
5
|
|
7
|
Total
liabilities
|
|
2,956
|
|
2,668
|
Stockholders'
equity:
|
|
|
|
|
Preferred
stock
|
|
—
|
|
—
|
Common stock and
additional paid-in capital
|
|
953
|
|
899
|
Accumulated
deficit
|
|
(935)
|
|
(119)
|
Accumulated other
comprehensive loss
|
|
(8)
|
|
(5)
|
Total stockholders'
equity
|
|
10
|
|
775
|
Total liabilities
& stockholders' equity
|
|
$
2,966
|
|
$
3,443
|
TRINET GROUP,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
|
|
|
Nine Months Ended
September 30,
|
(in
millions)
|
2023
|
2022
|
Operating
activities
|
|
|
Net income
|
$
308
|
$
307
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization of intangible assets
|
53
|
48
|
Amortization of
deferred costs
|
31
|
26
|
Amortization of ROU
asset, lease modification, impairment, and abandonment
|
5
|
15
|
Stock based
compensation
|
43
|
46
|
Deferred income
taxes
|
(2)
|
1
|
Provision for doubtful
accounts
|
2
|
1
|
Losses and impairment
on investments
|
—
|
18
|
Losses from
disposition of assets
|
—
|
3
|
Other
|
1
|
—
|
Changes in operating
assets and liabilities:
|
|
|
Accounts receivable,
net
|
(4)
|
10
|
Unbilled revenue,
net
|
(29)
|
(38)
|
Prepaid expenses,
net
|
(4)
|
3
|
Other
assets
|
(44)
|
(30)
|
Other payroll
assets
|
(104)
|
(56)
|
Accounts payable and
other liabilities
|
9
|
5
|
Client deposits and
other client liabilities
|
(33)
|
(43)
|
Accrued
wages
|
21
|
40
|
Accrued health
insurance costs, net
|
9
|
(10)
|
Accrued workers'
compensation costs, net
|
(9)
|
(5)
|
Payroll taxes payable
and other payroll withholdings
|
(283)
|
(252)
|
Operating lease
liabilities
|
(13)
|
(13)
|
Net cash provided
by (used in) operating activities
|
(43)
|
76
|
Investing
activities
|
|
|
Purchases of
marketable securities
|
(226)
|
(337)
|
Proceeds from sale and
maturity of marketable securities
|
223
|
390
|
Acquisitions of
property and equipment
|
(54)
|
(39)
|
Acquisition of
subsidiary, net of cash acquired
|
—
|
(219)
|
Net cash used in
investing activities
|
(57)
|
(205)
|
Financing
activities
|
|
|
Repurchase of common
stock
|
(1,109)
|
(383)
|
Proceeds from issuance
of common stock
|
9
|
6
|
Proceeds from issuance
of 2031 Notes
|
400
|
—
|
Awards effectively
repurchased for required employee withholding taxes
|
(14)
|
(15)
|
Proceeds from
revolving credit agreement borrowings
|
695
|
—
|
Payment of long-term
financing fees and debt issuance costs
|
(9)
|
—
|
Repayment of
borrowings under revolving credit facility
|
(495)
|
—
|
Net cash used in
financing activities
|
(523)
|
(392)
|
Net decrease in
cash and cash equivalents, unrestricted and
restricted
|
(623)
|
(521)
|
Cash and cash
equivalents, unrestricted and restricted:
|
|
|
Beginning of
period
|
1,537
|
1,738
|
End of
period
|
$
914
|
$
1,217
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
Interest
paid
|
$
21
|
$
18
|
Income taxes paid,
net
|
$
89
|
$
60
|
Supplemental
schedule of noncash investing and financing
activities
|
|
|
Payable for purchase
of property and equipment
|
$
2
|
$
7
|
Acquisitions of
subsidiaries paid in stock
|
$
—
|
$
4
|
Non-GAAP Financial Measures
In addition to the selected financial measures presented in
accordance with U.S. Generally Accepted Accounting Principles
(GAAP), we monitor other non-GAAP financial measures that we use to
manage our business, to make planning decisions, to allocate
resources and to use as performance measures in our executive
compensation plan. These key financial measures provide an
additional view of our operational performance over the long term
and provide information that we use to maintain and grow our
business.
The presentation of these non-GAAP financial measures is used to
enhance the understanding of certain aspects of our financial
performance. It is not meant to be considered in isolation from,
superior to, or as a substitute for the directly comparable
financial measures prepared in accordance with GAAP.
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,
- 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.
|
(1)
|
Non-GAAP effective tax
rate is 25.6% for the third quarter and full year of 2023 and 25.5%
for the third quarter and full year of 2022, which excludes the
income tax impact from stock-based compensation, changes in
uncertain tax positions, and nonrecurring benefits or expenses from
federal legislative changes.
|
Reconciliation of GAAP to Non-GAAP Measures
The table below presents a reconciliation of net income to
Adjusted EBITDA:
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September
30,
|
(in
millions)
|
2023
|
2022
|
|
2023
|
2022
|
Net income
|
$
94
|
$
77
|
|
$
308
|
$
307
|
Provision for income
taxes
|
30
|
26
|
|
108
|
111
|
Stock based
compensation
|
15
|
16
|
|
43
|
46
|
Interest expense, bank
fees and other (1)
|
10
|
22
|
|
23
|
33
|
Depreciation and
amortization of intangible assets
|
17
|
17
|
|
53
|
46
|
Amortization of cloud
computing arrangements
|
3
|
1
|
|
7
|
3
|
Transaction and
integration costs
|
3
|
14
|
|
15
|
31
|
Adjusted
EBITDA
|
$
172
|
$
173
|
|
$
557
|
$
577
|
Adjusted EBITDA
Margin
|
14.1 %
|
14.0 %
|
|
15.1 %
|
15.7 %
|
(1)
|
2022 Interest expense,
bank fees and other includes $17M of realized investments losses on
sales and impairments related to AFS securities.
|
The table below presents a reconciliation of net income to
Adjusted Net Income and Adjusted Net Income per share -
diluted:
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September
30,
|
(in millions, except
per share data)
|
2023
|
2022
|
|
2023
|
2022
|
Net income
|
$
94
|
$
77
|
|
$
308
|
$
307
|
Effective income tax
rate adjustment
|
(2)
|
—
|
|
1
|
4
|
Stock based
compensation
|
15
|
16
|
|
43
|
46
|
Amortization of
intangible assets
|
5
|
5
|
|
16
|
13
|
Non-cash interest
expense
|
—
|
1
|
|
1
|
1
|
Transaction and
integration costs
|
3
|
14
|
|
15
|
31
|
Income tax impact of
pre-tax adjustments
|
(6)
|
(9)
|
|
(19)
|
(24)
|
Adjusted Net
Income
|
$
109
|
$
104
|
|
$
365
|
$
378
|
GAAP weighted
average shares of common stock - diluted
|
58
|
63
|
|
59
|
64
|
Adjusted Net Income
per share - diluted
|
$
1.91
|
$
1.64
|
|
$
6.16
|
$
5.94
|
The table below presents a reconciliation of net cash provided
by (used in) operating activities to Corporate Operating Cash
flows:
|
Nine Months
Ended
September
30,
|
(in
millions)
|
2023
|
2022
|
Net cash provided by
operating activities
|
$
(43)
|
$
76
|
Less: Change in
WSE related other current assets
|
(134)
|
(101)
|
Less: Change in
WSE related liabilities
|
(295)
|
(259)
|
Net cash used in
operating activities - WSE
|
$
(429)
|
$
(360)
|
Net cash provided by
operating activities - Corporate
|
$
386
|
$
436
|
Reconciliation of GAAP to Non-GAAP Measures for the fourth
quarter and full-year 2023 guidance.
Low and high percentages represent increases (decreases) from
the same periods in the previous year.
The table below presents a reconciliation of net income to
Adjusted Net Income and Adjusted Net Income per share -
diluted:
|
Q4
2022
|
|
Q4 2023
Guidance
|
|
FY
2022
|
|
Year 2023
Guidance
|
(in millions, except
per share data)
|
Actual
|
|
Low
|
High
|
|
Actual
|
|
Low
|
High
|
Net income
|
$
49
|
|
(73) %
|
6 %
|
|
$
355
|
|
(10) %
|
1 %
|
Effective income tax
rate adjustment
|
—
|
|
17
|
50
|
|
5
|
|
(87)
|
(93)
|
Stock based
compensation
|
16
|
|
12
|
12
|
|
62
|
|
(2)
|
(4)
|
Amortization of
intangible assets
|
5
|
|
5
|
5
|
|
18
|
|
18
|
18
|
Non-cash interest
expense
|
—
|
|
(100)
|
(100)
|
|
1
|
|
(16)
|
(16)
|
Transaction and
integration costs
|
6
|
|
(84)
|
(84)
|
|
37
|
|
(58)
|
(58)
|
Income tax impact of
pre-tax adjustments
|
(6)
|
|
(16)
|
(16)
|
|
(30)
|
|
(16)
|
(17)
|
Adjusted Net
Income
|
$
70
|
|
(57) %
|
(3) %
|
|
$
448
|
|
(12) %
|
(4) %
|
GAAP weighted
average shares of
common stock - diluted
|
62
|
|
|
|
|
64
|
|
|
|
Adjusted Net Income
per share - diluted
|
$
1.11
|
|
$
0.59
|
$
1.33
|
|
$
7.07
|
|
$ 6.90
|
$ 7.55
|
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SOURCE TriNet Group, Inc.