SAN LEANDRO, Calif., May 2, 2017 /PRNewswire/ -- TriNet Group, Inc. (NYSE: TNET), a leading provider of comprehensive human resources solutions for small to midsize businesses, today announced financial results for the first quarter ended March 31, 2017.
First quarter highlights include:
- Total revenues increased 10% to $807.6 million, while Net Service Revenues increased 22% to $199.0 million, each as compared to the same period last year.
- Total WSEs at March 31, 2017 increased 2% from March 31, 2016, to approximately 331,000.
- Average WSEs increased 3% to approximately 328,000 as compared to the same period last year.
- Net income was $28.7 million, or $0.41 per diluted share, compared to net income of $11.6 million, or $0.16 per diluted share, in the same period last year.
- Adjusted Net Income was $31.6 million, or $0.45 per diluted share, compared to Adjusted Net Income of $19.5 million, or $0.27 per diluted share, in the same period last year.
- Adjusted EBITDA was $63.3 million, a 50% increase from the same period last year.
"We began the year with strong financial performance, and we are well positioned to achieve our 2017 financial goals," said Burton M. Goldfield, TriNet's President and CEO. "The steps we've taken during the past year to strengthen our management team, improve our operational discipline and further expand on the differentiated vertical products, are beginning to pay off. Going forward, we are committed to executing our strategic plan, including completing our platform consolidation, laying the groundwork to launch additional vertical products and profitably expanding our business."
TriNet's total revenues for the first quarter of 2017 increased 10% from the first quarter of 2016 to $807.6 million, while Net Service Revenues increased 22% from the first quarter of 2016 to $199.0 million. Net Service Revenues consisted of professional service revenues of $120.1 million and Net Insurance Service Revenues of $78.8 million. Net Insurance Service Revenues consisted of insurance service revenues of $687.5 million, less insurance costs of $608.6 million. Professional service revenues for the first quarter of 2017 increased 7%, and Net Insurance Service Revenues increased 55%, compared to the first quarter of 2016.
At March 31, 2017, TriNet had cash and cash equivalents of $216.1 million and total debt of $449.8 million.
Quarterly Report on Form 10-Q
We anticipate filing our Quarterly Report on Form 10-Q ("Form 10-Q") for the three months ended March 31, 2017 today, May 2, 2017, and it will be available at www.trinet.com. This press release should be read in conjunction with the Form 10-Q and the related Notes to Condensed 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 quarterly results and the outlook for the 2017 second quarter. 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: http://dpregister.com/10105196. 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 http://investor.trinet.com. A replay of the webcast will be available on this site for approximately one year. A telephonic replay will be available for one week following the conference call at +1 (412) 317-0088 conference ID: 10105196.
About TriNet
TriNet is a leading provider of a comprehensive human resources solution for small to midsize businesses, or SMBs. We enhance business productivity by enabling our clients to outsource their human resources, or HR, function to one strategic partner and allowing them to focus on operating and growing their core businesses. Our HR solution includes services such as payroll processing, human capital consulting, employment law compliance and employee benefits, including health insurance, retirement plans and workers' compensation insurance. Our services are delivered by our expert team of HR professionals and enabled by our technology platform, with online and mobile tools, which allow our clients and their employees to efficiently conduct their HR transactions anytime and anywhere. For more information, please visit http://www.trinet.com.
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 of the tables 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 including, among other things, TriNet's expectations regarding: its ability to execute its strategic plan, its ability to make enhancements to its technology platform and complete its platform consolidation, its ability to launch additional vertical products and its ability to profitably expand its business. 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.
Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include: risks associated with the market acceptance of outsourcing the HR function, and the anticipated benefits associated with the use of a bundled HR solution; changes to and our ability to comply with laws and regulations, including both those applicable to the co-employment relationship as well as those applicable to our clients' businesses and their employees; the amendment, repeal, replacement or continuing implementation of the Affordable Care Act and other health care reform, which may be more challenging in a changing political environment; our ability to maintain the security of our information technology (IT) infrastructure against cyber-attacks and security breaches; our ability to manage unexpected changes in workers' compensation and health insurance claims by worksite employees; the unpredictable nature of our costs and operating expenses, in particular our workers' compensation and health insurance costs; our ability to remediate the material weaknesses in our internal controls over financial reporting; our ability to effectively acquire and integrate new businesses; our ability to gain new clients, and our clients' ability to grow and gain more employees; our ability to effectively acquire and integrate new businesses; volatility in the financial and economic environment to small and mid-sized businesses; our ability to effectively manage our growth; the effects of increased competition and our ability to compete effectively; and our ability to comply with the restrictions of our credit facility and meet our debt obligations.
Further information on risks that could affect TriNet's results is included in our filings with the Securities and Exchange Commission (SEC), including our most recently filed Annual Report on Form 10-K filed with the SEC on February 28, 2017, which are available on our investor relations website at http://investor.trinet.com and on the SEC website at www.sec.gov. 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.
TriNet, Ambitions Realized and the TriNet logo are registered trademarks of TriNet.
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 March 31,
|
|
Percent
|
|
(in thousands, except per share and operating metrics data)
|
2017
|
|
2016
|
|
Change
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
Total revenues
|
$
|
807,610
|
|
$
|
732,939
|
|
10
|
%
|
|
Operating income
|
49,487
|
|
25,902
|
|
91
|
|
|
Net income
|
28,737
|
|
11,577
|
|
148
|
|
|
Diluted net income per share of common stock
|
0.41
|
|
0.16
|
|
156
|
|
|
Non-GAAP measures (1):
|
|
|
|
|
|
|
|
Net Service Revenues (1)
|
198,968
|
|
163,250
|
|
22
|
|
|
Net Insurance Service Revenues (1)
|
78,847
|
|
50,847
|
|
55
|
|
|
Adjusted EBITDA (1)
|
63,343
|
|
42,153
|
|
50
|
|
|
Adjusted Net income (1)
|
31,577
|
|
19,533
|
|
62
|
|
|
|
|
|
|
|
|
|
Operating Metrics:
|
|
|
|
|
|
|
|
Total WSEs payroll and payroll taxes processed (in millions)
|
$
|
9,816
|
|
$
|
9,402
|
|
4
|
%
|
|
Total WSEs at period end
|
330,731
|
|
324,103
|
|
2
|
|
|
Average WSEs
|
327,803
|
|
319,424
|
|
3
|
|
|
|
|
|
|
|
|
|
Cash Flow Data:
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
$
|
75,904
|
|
$
|
40,431
|
|
88
|
%
|
|
Net cash used in investing activities
|
(6,848)
|
|
(5,607)
|
|
22
|
|
|
Net cash used in financing activities
|
(37,052)
|
|
(5,224)
|
|
609
|
|
|
|
|
(1)
|
Refer to Non-GAAP Financial Measures section below for definitions and reconciliations from GAAP measures.
|
|
(in thousands)
|
March 31,
2017
|
|
December 31,
2016
|
|
Percent
Change
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
216,054
|
|
$
|
184,004
|
|
17
|
%
|
|
Working capital
|
159,869
|
|
156,771
|
|
2
|
|
|
Total assets
|
1,872,672
|
|
2,095,143
|
|
(11)
|
|
|
Notes and capital leases payable
|
449,934
|
|
459,054
|
|
(2)
|
|
|
Total liabilities
|
1,830,125
|
|
2,060,553
|
|
(11)
|
|
|
Total stockholders' equity
|
42,547
|
|
34,590
|
|
23
|
|
|
TRINET GROUP, INC.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|
|
(Unaudited)
|
|
|
Three Months Ended March 31,
|
|
(in thousands, except share and per share data)
|
2017
|
2016
|
|
Professional service revenues
|
$
|
120,121
|
$
|
112,403
|
|
Insurance service revenues
|
687,489
|
620,536
|
|
Total revenues
|
807,610
|
732,939
|
|
Insurance costs
|
608,642
|
569,689
|
|
Cost of providing services (exclusive of depreciation and amortization of intangible assets)
|
56,450
|
45,705
|
|
Sales and marketing
|
49,191
|
48,708
|
|
General and administrative
|
25,302
|
27,650
|
|
Systems development and programming
|
11,040
|
6,389
|
|
Amortization of intangible assets
|
1,350
|
4,980
|
|
Depreciation
|
6,148
|
3,916
|
|
Total costs and operating expenses
|
758,123
|
707,037
|
|
Operating income
|
49,487
|
25,902
|
|
Other income (expense):
|
|
|
|
Interest expense and bank fees
|
(4,748)
|
(5,042)
|
|
Other, net
|
151
|
(42)
|
|
Income before provision for income taxes
|
44,890
|
20,818
|
|
Income tax expense
|
16,153
|
9,241
|
|
Net income
|
$
|
28,737
|
$
|
11,577
|
|
Other comprehensive income, net of tax
|
12
|
351
|
|
Comprehensive income
|
$
|
28,749
|
$
|
11,928
|
|
|
|
|
Net income per share:
|
|
|
|
Basic
|
$
|
0.42
|
$
|
0.16
|
|
Diluted
|
$
|
0.41
|
$
|
0.16
|
|
Weighted average shares:
|
|
|
|
Basic
|
68,509,328
|
70,521,066
|
|
Diluted
|
70,913,970
|
71,745,753
|
|
TRINET GROUP, INC.
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
(Unaudited)
|
|
|
(in thousands)
|
March 31,
2017
|
December 31,
2016
|
|
Assets
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
216,054
|
$
|
184,004
|
|
Restricted cash and cash equivalents
|
14,578
|
14,569
|
|
Prepaid income taxes
|
27,583
|
42,381
|
|
Prepaid expenses
|
9,051
|
10,784
|
|
Other current assets
|
2,005
|
2,145
|
|
Worksite employee related assets
|
1,039,349
|
1,281,471
|
|
Total current assets
|
1,308,620
|
1,535,354
|
|
Workers' compensation collateral receivable
|
34,755
|
31,883
|
|
Restricted cash, cash equivalents and investments
|
127,715
|
130,501
|
|
Property and equipment, net
|
63,417
|
58,622
|
|
Goodwill
|
289,207
|
289,207
|
|
Other intangible assets, net
|
29,724
|
31,074
|
|
Other assets
|
19,234
|
18,502
|
|
Total assets
|
$
|
1,872,672
|
$
|
2,095,143
|
|
Liabilities and stockholders' equity
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable
|
$
|
22,598
|
$
|
22,541
|
|
Accrued corporate wages
|
40,908
|
30,937
|
|
Notes and capital leases payable, net
|
36,606
|
36,559
|
|
Other current liabilities
|
14,546
|
12,551
|
|
Worksite employee related liabilities
|
1,034,093
|
1,275,995
|
|
Total current liabilities
|
1,148,751
|
1,378,583
|
|
Notes and capital leases payable, net, noncurrent
|
413,328
|
422,495
|
|
Workers' compensation loss reserves
|
164,671
|
159,301
|
|
Deferred income taxes
|
91,847
|
92,373
|
|
Other liabilities
|
11,528
|
7,801
|
|
Total liabilities
|
1,830,125
|
2,060,553
|
|
Commitments and contingencies
|
|
|
|
Stockholders' equity:
|
|
|
|
Preferred stock
|
—
|
—
|
|
Common stock and additional paid-in capital
|
543,600
|
535,132
|
|
Accumulated deficit
|
(500,461)
|
(499,938)
|
|
Accumulated other comprehensive loss
|
(592)
|
(604)
|
|
Total stockholders' equity
|
42,547
|
34,590
|
|
Total liabilities and stockholders' equity
|
$
|
1,872,672
|
$
|
2,095,143
|
|
TRINET GROUP, INC.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
|
Three Months Ended March 31,
|
|
(in thousands)
|
2017
|
2016
|
|
Operating activities
|
|
|
|
Net income
|
$
|
28,737
|
$
|
11,577
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
Depreciation and amortization
|
8,123
|
8,746
|
|
Stock-based compensation
|
6,207
|
7,397
|
|
Changes in operating assets and liabilities:
|
|
|
|
Restricted cash and cash equivalents
|
(877)
|
(3,202)
|
|
Prepaid income taxes
|
14,798
|
6,735
|
|
Prepaid expenses and other current assets
|
1,701
|
(1,157)
|
|
Workers' compensation collateral receivable
|
(2,872)
|
(7,688)
|
|
Other assets
|
148
|
(312)
|
|
Accounts payable
|
(413)
|
6,111
|
|
Accrued corporate wages and other current liabilities
|
11,903
|
(2,505)
|
|
Workers' compensation loss reserves and other non-current liabilities
|
8,229
|
15,205
|
|
Worksite employee related assets
|
242,122
|
346,563
|
|
Worksite employee related liabilities
|
(241,902)
|
(347,039)
|
|
Net cash provided by operating activities
|
75,904
|
40,431
|
|
Investing activities
|
|
|
|
Acquisitions of businesses
|
—
|
(300)
|
|
Proceeds from maturity of marketable securities
|
3,625
|
1,500
|
|
Acquisitions of property and equipment
|
(10,473)
|
(6,807)
|
|
Net cash used in investing activities
|
(6,848)
|
(5,607)
|
|
Financing activities
|
|
|
|
Repurchase of common stock
|
(27,595)
|
—
|
|
Proceeds from issuance of common stock on exercised options
|
2,099
|
504
|
|
Awards effectively repurchased for required employee withholding taxes
|
(1,987)
|
(656)
|
|
Repayment of notes and capital leases payable
|
(9,569)
|
(5,072)
|
|
Net cash used in financing activities
|
(37,052)
|
(5,224)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
46
|
160
|
|
Net increase in cash and cash equivalents
|
32,050
|
29,760
|
|
Cash and cash equivalents at beginning of period
|
184,004
|
166,178
|
|
Cash and cash equivalents at end of period
|
$
|
216,054
|
$
|
195,938
|
|
|
|
|
Supplemental disclosures of cash flow information
|
|
|
|
Interest paid
|
$
|
4,162
|
$
|
4,083
|
|
Income taxes paid (refunded), net
|
(564)
|
2,572
|
|
Supplemental schedule of noncash investing and financing activities
|
|
|
|
Payable for purchase of property and equipment
|
$
|
1,971
|
$
|
1,435
|
Non-GAAP Financial Measures
In addition to financial measures presented in accordance with U.S. GAAP, we monitor other non-GAAP financial measures that we use to manage our business, make planning decisions, allocate resources and 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 useful information that we use in order 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, 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
|
|
Net Service Revenues
|
• Sum of professional service revenues and
Net Insurance Service Revenues, or total
revenues less insurance costs.
|
• Provides a comparable basis of revenues
on a net basis. Professional service
revenues are represented net of client
payroll costs whereas insurance service
revenues are presented gross of insurance
costs for financial reporting purposes.
• Acts as the basis to allocate resources to
different functions and evaluates the
effectiveness of our business strategies
by each business function, and
• Provides a measure, among others, used in
the determination of incentive
compensation for management.
|
|
Net Insurance Service Revenues
|
• Insurance revenues less insurance costs.
|
• Is a component of Net Service Revenues,
and
• Provides a comparable basis of revenues
on a net basis. Professional service
revenues are represented net of client
payroll costs whereas insurance service
revenues are presented gross of insurance
costs for financial reporting purposes.
Promotes an understanding of our
insurance services business by evaluating
insurance service revenues net of our WSE
related costs which are substantially pass-
through for the benefit of our WSEs. Under
GAAP, insurance service revenues and
costs are recorded gross as we have
latitude in establishing the price, service
and supplier specifications.
|
|
Adjusted EBITDA
|
• Net income, excluding the effects of:
- income tax provision,
- interest expense,
- depreciation,
- amortization of intangible assets, and
- stock-based compensation expense.
|
• Provides period-to-period comparisons on a
consistent basis and an understanding as to
how our management evaluates the
effectiveness of our business strategies by
excluding certain non-cash charges such as
depreciation and amortization, and stock-based
compensation recognized based on the
estimated fair values. We believe these charges
are not directly resulting from our core operations
or indicative of our ongoing operations.
• Enhances comparisons to prior periods and,
accordingly, facilitates the development of
future projections and earnings growth prospects,
and
• Provides a measure, among others, used in the
determination of incentive compensation for
management.
|
|
Adjusted Net Income
|
• Net income, excluding the effects of:
- effective income tax rate(1),
- stock-based compensation,
- amortization of intangible assets,
- non-cash interest expense(2), and
- the income tax effect (at our effective tax rate(1))
of these pre-tax adjustments.
|
• Provides information to our stockholders
and board of directors to understand how
our management evaluates our business,
to monitor and evaluate our operating results,
and analyze profitability of our ongoing operations
and trends on a consistent basis by
excluding certain non-cash charges.
|
|
|
|
(1)
|
We have adjusted the non-GAAP effective tax rate to 40.5% for 2017, from 42.5% for 2016, due to a decrease in state income taxes from an increase in excludable income for state income tax purposes. These non-GAAP effective tax rates exclude the income tax impact from stock-based compensation and changes in uncertain tax positions.
|
|
(2)
|
Non-cash interest expense represents amortization and write-off of our debt issuance costs.
|
Reconciliation of GAAP to Non-GAAP Measures
The table below presents a reconciliation of Total revenues to Net Service Revenues:
|
Three Months Ended
March 31,
|
|
Change
2017 vs. 2016
|
|
(in thousands)
|
2017
|
|
2016
|
|
$
|
%
|
|
|
Total revenues
|
$
|
807,610
|
|
$
|
732,939
|
|
$
|
74,671
|
|
10
|
%
|
|
Less: Insurance costs
|
608,642
|
|
569,689
|
|
38,953
|
|
7
|
|
|
Net Service Revenues
|
$
|
198,968
|
|
$
|
163,250
|
|
$
|
35,718
|
|
22
|
%
|
The table below presents a reconciliation of Insurance service revenues to Net Insurance Service Revenues:
|
Three Months Ended
March 31,
|
|
Change
2017 vs. 2016
|
|
(in thousands)
|
2017
|
|
2016
|
|
$
|
%
|
|
|
Insurance service revenues
|
$
|
687,489
|
|
$
|
620,536
|
|
$
|
66,953
|
|
11
|
%
|
|
Less: Insurance costs
|
608,642
|
|
569,689
|
|
38,953
|
|
7
|
|
|
Net Insurance Service Revenues
|
$
|
78,847
|
|
$
|
50,847
|
|
$
|
28,000
|
|
55
|
%
|
The table below presents a reconciliation of Net income to Adjusted EBITDA:
|
Three Months Ended March 31,
|
|
(in thousands)
|
2017
|
|
2016
|
|
Net income
|
$
|
28,737
|
|
$
|
11,577
|
|
Provision for income taxes
|
16,153
|
|
9,241
|
|
Stock-based compensation
|
6,207
|
|
7,397
|
|
Interest expense and bank fees
|
4,748
|
|
5,042
|
|
Depreciation
|
6,148
|
|
3,916
|
|
Amortization of intangible assets
|
1,350
|
|
4,980
|
|
Adjusted EBITDA
|
$
|
63,343
|
|
$
|
42,153
|
The table below presents a reconciliation of Net income to Adjusted Net Income and Adjusted Net Income per share - diluted:
|
Three Months Ended March 31,
|
|
(in thousands)
|
2017
|
|
2016
|
|
Net income
|
$
|
28,737
|
|
$
|
11,577
|
|
Effective income tax rate adjustment
|
(2,027)
|
|
394
|
|
Stock-based compensation
|
6,207
|
|
7,397
|
|
Amortization of intangible assets
|
1,350
|
|
4,980
|
|
Non-cash interest expense
|
622
|
|
775
|
|
Income tax impact of pre-tax adjustments
|
(3,312)
|
|
(5,590)
|
|
Adjusted Net Income
|
$
|
31,577
|
|
$
|
19,533
|
|
GAAP Weighted average shares of common stock - diluted
|
70,914
|
|
|
71,746
|
|
Adjusted Net Income per share - diluted
|
$
|
0.45
|
|
$
|
0.27
|
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/trinet-announces-first-quarter-2017-results-300449834.html
SOURCE TriNet Group, Inc.