Delaware | 001-36373 | 95-3359658 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
One Park Place, Suite 600, Dublin, CA | 94568 | |
(Address of Principal Executive Offices) | (Zip Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit Number | Description |
99.1 | Press release, dated April 30, 2018, entitled "TriNet Announces First Quarter 2018 Results." |
TriNet Group, Inc. | |||
Date: | April 30, 2018 | By: | /s/ Brady Mickelsen |
Brady Mickelsen | |||
Senior Vice President, Chief Legal Officer and Secretary |
Exhibit Number | Description |
99.1 |
• | Total revenues increased 7% to $861 million, while Net Service Revenues increased 11% to $220 million, each as compared to the same period last year. |
• | Net income was $54 million, or $0.75 per diluted share, compared to net income of $29 million, or $0.41 per diluted share, in the same period last year. |
• | Adjusted Net Income was $58 million, or $0.80 per diluted share, compared to Adjusted Net Income of $32 million, or $0.45 per diluted share, in the same period last year. |
• | Adjusted EBITDA was $91 million, a 45% increase from the same period last year. |
• | Average WSEs decreased 4% as compared to the same period last year, to approximately 315,000. |
Contacts: | |
Investors: | Media: |
Alex Bauer | Fatima Afzal |
TriNet | TriNet |
Investorrelations@TriNet.com | Fatima.Afzal@TriNet.com |
(510) 875-7201 | (510) 875-7265 |
FINANCIAL HIGHLIGHTS |
Three Months Ended March 31, | Percent Change | ||||||||||
(in millions, except per share and operating metrics data) | 2018 | 2017 | Q1 2018 vs 2017 | ||||||||
Income Statement Data: | |||||||||||
Total revenues | $ | 861 | $ | 808 | 7 | % | |||||
Operating income | 71 | 50 | 43 | ||||||||
Net income | 54 | 29 | 88 | ||||||||
Diluted net income per share of common stock | 0.75 | 0.41 | 83 | ||||||||
Non-GAAP measures (1): | |||||||||||
Net Service Revenues (1) | 220 | 199 | 11 | ||||||||
Net Insurance Service Revenues (1) | 91 | 79 | 16 | ||||||||
Adjusted EBITDA (1) | 91 | 63 | 45 | ||||||||
Adjusted Net Income (1) | 58 | 32 | 84 | ||||||||
Operating Metrics: | |||||||||||
Total WSEs payroll and payroll taxes processed (in millions) | $ | 10,319 | $ | 9,816 | 5 | % | |||||
Total WSEs at period end | 316,715 | 330,731 | (4 | ) | |||||||
Average WSEs | 314,561 | 327,803 | (4 | ) |
(1) | Refer to Non-GAAP Financial Measures section in the following pages for definitions and reconciliations from GAAP measures. |
(in millions) | March 31, 2018 | December 31, 2017 | Percent Change | ||||||||
Balance Sheet Data: | |||||||||||
Cash and cash equivalents | $ | 330 | $ | 336 | (2 | ) | % | ||||
Working capital | 247 | 234 | 5 | ||||||||
Total assets | 2,047 | 2,593 | (21 | ) | |||||||
Notes payable | 413 | 423 | (2 | ) | |||||||
Total liabilities | 1,785 | 2,387 | (25 | ) | |||||||
Total stockholders’ equity | 262 | 206 | 28 |
Three Months Ended March 31, | Percent | ||||||||||
(in millions, except operating metrics data) | 2018 | 2017 | Change | ||||||||
Cash Flow Data: | |||||||||||
Net cash used in operating activities (1) | $ | (536 | ) | $ | (161 | ) | 231 | % | |||
Net cash provided by (used in) investing activities | 2 | (7 | ) | 127 | |||||||
Net cash used in financing activities | (19 | ) | (37 | ) | (48 | ) |
(1) | Prior year balance has been retrospectively adjusted for Accounting Standards Update (ASU) 2016-18. Refer to Note 1 in the condensed consolidated financial statements and related notes included in our Quarterly Report on Form 10-Q for details. |
FINANCIAL STATEMENTS |
Three Months Ended March 31, | ||||||
(in millions, except share and per share data) | 2018 | 2017 | ||||
Professional service revenues | $ | 129 | $ | 120 | ||
Insurance service revenues | 732 | 688 | ||||
Total revenues | 861 | 808 | ||||
Insurance costs | 641 | 609 | ||||
Cost of providing services (exclusive of depreciation and amortization of intangible assets) | 57 | 57 | ||||
Sales and marketing | 39 | 49 | ||||
General and administrative | 31 | 25 | ||||
Systems development and programming | 13 | 11 | ||||
Depreciation | 8 | 6 | ||||
Amortization of intangible assets | 1 | 1 | ||||
Total costs and operating expenses | 790 | 758 | ||||
Operating income | 71 | 50 | ||||
Other income (expense): | ||||||
Interest expense, bank fees and other, net | (4 | ) | (5 | ) | ||
Income before provision for income taxes | 67 | 45 | ||||
Income tax expense | 13 | 16 | ||||
Net income | $ | 54 | $ | 29 | ||
Comprehensive income | $ | 54 | $ | 29 | ||
Net income per share: | ||||||
Basic | $ | 0.77 | $ | 0.42 | ||
Diluted | $ | 0.75 | $ | 0.41 | ||
Weighted average shares: | ||||||
Basic | 70,047,752 | 68,509,328 | ||||
Diluted | 72,274,821 | 70,913,970 |
FINANCIAL STATEMENTS |
(in millions, except share and per share data) | March 31, 2018 | December 31, 2017 | |||||||||||
Assets | |||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 330 | $ | 336 | |||||||||
Restricted cash, cash equivalents and investments | 699 | 1,280 | |||||||||||
Worksite employee related assets: | |||||||||||||
Unbilled revenue | $ | 286 | $ | 297 | |||||||||
Accounts receivable | 8 | 20 | |||||||||||
Prepaid insurance premiums and other insurance related receivables | 33 | 26 | |||||||||||
Other payroll assets | 41 | 17 | |||||||||||
Worksite employee related assets | 368 | 360 | |||||||||||
Prepaid expenses and other current assets | 22 | 15 | |||||||||||
Total current assets | 1,419 | 1,991 | |||||||||||
Restricted cash, cash equivalents and investments, noncurrent | 182 | 162 | |||||||||||
Workers' compensation collateral receivable | 40 | 39 | |||||||||||
Property and equipment, net | 74 | 70 | |||||||||||
Goodwill and other intangible assets, net | 314 | 315 | |||||||||||
Other assets | 18 | 16 | |||||||||||
Total assets | $ | 2,047 | $ | 2,593 | |||||||||
Liabilities and stockholders’ equity | |||||||||||||
Current liabilities: | |||||||||||||
Accounts payable and other current liabilities | $ | 46 | $ | 59 | |||||||||
Accrued corporate wages | 31 | 40 | |||||||||||
Notes payable | 43 | 40 | |||||||||||
Worksite employee related liabilities: | |||||||||||||
Accrued wages | $ | 284 | $ | 289 | |||||||||
Client deposits | 26 | 52 | |||||||||||
Payroll tax liabilities and other payroll withholdings | 500 | 1,034 | |||||||||||
Health benefits loss reserves | 150 | 151 | |||||||||||
Workers' compensation loss reserves | 67 | 67 | |||||||||||
Insurance premiums and other payables | 25 | 25 | |||||||||||
Worksite employee related liabilities | 1,052 | 1,618 | |||||||||||
Total current liabilities | 1,172 | 1,757 | |||||||||||
Notes payable, noncurrent | 370 | 383 | |||||||||||
Workers' compensation loss reserves | 162 | 165 | |||||||||||
Deferred income taxes | 71 | 68 | |||||||||||
Other liabilities | 10 | 14 | |||||||||||
Total liabilities | 1,785 | 2,387 | |||||||||||
Commitments and contingencies | |||||||||||||
Stockholders’ equity: | |||||||||||||
Preferred stock | — | — | |||||||||||
Common stock and additional paid-in capital | 595 | 583 | |||||||||||
Accumulated deficit | (332 | ) | (377 | ) | |||||||||
Accumulated other comprehensive loss | (1 | ) | — | ||||||||||
Total stockholders’ equity | 262 | 206 | |||||||||||
Total liabilities and stockholders’ equity | $ | 2,047 | $ | 2,593 |
FINANCIAL STATEMENTS |
Three Months Ended March 31, | ||||||
(in millions) | 2018 | 2017 | ||||
Operating activities | ||||||
Net income | $ | 54 | $ | 29 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 10 | 8 | ||||
Stock-based compensation | 9 | 6 | ||||
Changes in operating assets and liabilities: | ||||||
Prepaid income taxes | 13 | 15 | ||||
Prepaid expenses and other current assets | (9 | ) | 2 | |||
Workers' compensation collateral receivable | (1 | ) | (3 | ) | ||
Other assets | (2 | ) | — | |||
Accounts payable and other current liabilities | (15 | ) | 2 | |||
Accrued corporate wages | (9 | ) | 10 | |||
Workers' compensation loss reserves and other non-current liabilities | (6 | ) | 8 | |||
Worksite employee related assets | (14 | ) | 4 | |||
Worksite employee related liabilities | (566 | ) | (242 | ) | ||
Net cash used in operating activities | (536 | ) | (161 | ) | ||
Investing activities | ||||||
Proceeds from maturity of marketable securities | 14 | 4 | ||||
Acquisitions of property and equipment | (12 | ) | (11 | ) | ||
Net cash provided by (used in) investing activities | 2 | (7 | ) | |||
Financing activities | ||||||
Repurchase of common stock | (8 | ) | (28 | ) | ||
Proceeds from issuance of common stock on exercised options | 3 | 2 | ||||
Awards effectively repurchased for required employee withholding taxes | (4 | ) | (2 | ) | ||
Repayment of notes payable | (10 | ) | (9 | ) | ||
Net cash used in financing activities | (19 | ) | (37 | ) | ||
Net increase (decrease) in cash and cash equivalents, unrestricted and restricted | (553 | ) | (205 | ) | ||
Cash and cash equivalents, unrestricted and restricted: | ||||||
Beginning of period | 1,738 | 1,233 | ||||
End of period | $ | 1,185 | $ | 1,028 | ||
Supplemental disclosures of cash flow information | ||||||
Interest paid | $ | 4 | $ | 4 | ||
Income taxes paid (refunded), net | — | (1 | ) | |||
Supplemental schedule of noncash investing and financing activities | ||||||
Payable for purchase of property and equipment | $ | 2 | $ | 2 | ||
Supplemental schedule of cash and cash equivalents | ||||||
Net increase (decrease) in unrestricted cash and cash equivalents | $ | (6 | ) | $ | 32 | |
Net increase (decrease) in restricted cash and cash equivalents | (547 | ) | (237 | ) |
NON-GAAP FINANCIAL MEASURES |
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. • Provides a measure, among others, used in the determination of incentive compensation for management. |
Net Insurance Service Revenues | • Insurance service revenues less insurance costs. | • Is a component of Net Service Revenues. • 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 WSE related costs which are substantially pass-through for the benefit of WSEs. Under GAAP, insurance service revenues and costs are recorded gross as we have latitude in establishing the price, service and supplier specifications. • We also sometimes refer to Net Insurance Service Margin, which is the ratio of Net Insurance Revenue to Insurance Service Revenues. |
NON-GAAP FINANCIAL MEASURES |
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. • 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 Net Service Revenues. |
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 as described above, debt payment premiums and our secondary offering costs as these are not directly resulting from our core operations or indicative of our ongoing operations. |
(1) | We have adjusted the non-GAAP effective tax rate to 26% for 2018 from 41% for 2017, due primarily to a decrease in the statutory rate from 35% to 21%. These non-GAAP effective tax rates exclude the income tax impact from stock-based compensation, changes in uncertain tax positions, and nonrecurring benefits or expenses from federal legislative changes. |
(2) | Non-cash interest expense represents amortization and write-off of our debt issuance costs. |
Three Months Ended | Change | ||||||||||||
March 31, | Q1 2018 vs 2017 | ||||||||||||
(in millions) | 2018 | 2017 | $ | % | |||||||||
Total revenues | $ | 861 | $ | 808 | $ | 53 | 7 | % | |||||
Less: Insurance costs | 641 | 609 | 32 | 5 | |||||||||
Net Service Revenues | $ | 220 | $ | 199 | $ | 21 | 11 | % |
NON-GAAP FINANCIAL MEASURES |
Three Months Ended | Change | ||||||||||||
March 31, | Q1 2018 vs 2017 | ||||||||||||
(in millions) | 2018 | 2017 | $ | % | |||||||||
Insurance service revenues | $ | 732 | $ | 688 | $ | 44 | 6 | % | |||||
Less: Insurance costs | 641 | 609 | 32 | 5 | |||||||||
Net Insurance Service Revenues | $ | 91 | $ | 79 | $ | 12 | 16 | % | |||||
Net Insurance Service Revenues Margin (1) | 12 | % | 11 | % | $ | — | 9 |
(1) | Net Insurance Service Revenue Margin is calculated as the ratio of Net Insurance Service Revenues (a non-GAAP measure) to Insurance Service Revenues (a GAAP measure). |
Three Months Ended March 31, | |||||||
(in thousands) | 2018 | 2017 | |||||
Net income | $ | 54 | $ | 29 | |||
Provision for income taxes | 13 | 16 | |||||
Stock-based compensation | 9 | 6 | |||||
Interest expense and bank fees | 6 | 5 | |||||
Depreciation | 8 | 6 | |||||
Amortization of intangible assets | 1 | 1 | |||||
Adjusted EBITDA | $ | 91 | $ | 63 | |||
Adjusted EBITDA Margin (1) | 41 | % | 32 | % |
(1) | Adjusted EBITDA Margin is calculated as the ratio of Adjusted EBITDA (a non-GAAP measure) to Net Service Revenues (a non-GAAP measure). |
Three Months Ended March 31, | |||||||
(in millions, except share and per share data) | 2018 | 2017 | |||||
Net income | $ | 54 | $ | 29 | |||
Effective income tax rate adjustment | (4 | ) | (2 | ) | |||
Stock-based compensation | 9 | 6 | |||||
Amortization of intangible assets | 1 | 1 | |||||
Non-cash interest expense | 1 | 1 | |||||
Income tax impact of pre-tax adjustments | (3 | ) | (3 | ) | |||
Adjusted Net Income | $ | 58 | $ | 32 | |||
GAAP Weighted average shares of common stock - diluted | 72,274,821 | 70,913,970 | |||||
Adjusted Net Income per share - diluted | $ | 0.80 | $ | 0.45 |
EXHIBIT 1 |
Three Months Ended March 31, | ||||||||||||||||||
(in millions) | 2018 | 2017 | ||||||||||||||||
Corporate | WSE | Total | Corporate | WSE | Total | |||||||||||||
Net cash provided by (used in): | ||||||||||||||||||
Operating activities (1) | $ | 45 | $ | (581 | ) | $ | (536 | ) | $ | 76 | $ | (237 | ) | $ | (161 | ) | ||
Investing activities | 2 | — | 2 | (7 | ) | — | (7 | ) | ||||||||||
Financing activities | (19 | ) | — | (19 | ) | (37 | ) | — | (37 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents, unrestricted and restricted | $ | 28 | $ | (581 | ) | $ | (553 | ) | $ | 32 | $ | (237 | ) | $ | (205 | ) | ||
Cash and cash equivalents, unrestricted and restricted: | ||||||||||||||||||
Beginning of period | 476 | 1,262 | 1,738 | 278 | 955 | 1,233 | ||||||||||||
End of period | $ | 504 | $ | 681 | $ | 1,185 | $ | 310 | $ | 718 | $ | 1,028 | ||||||
Net increase (decrease) in cash and cash equivalents: | ||||||||||||||||||
Unrestricted | $ | (6 | ) | $ | — | $ | (6 | ) | $ | 32 | $ | — | $ | 32 | ||||
Restricted | $ | 34 | $ | (581 | ) | (547 | ) | $ | — | $ | (237 | ) | (237 | ) |
(1) | Prior year balances have been retrospectively adjusted for Accounting Standards Update (ASU) 2016-18. Refer to Note 1 in the condensed consolidated financial statements and related notes included in our Quarterly Reports on Form 10-Q for details. |
Three Months Ended March 31, | ||||||||||||||||||
(in millions) | 2018 | 2017 | ||||||||||||||||
Corporate | WSE | Total | Corporate | WSE | Total | |||||||||||||
Net income | $ | 54 | $ | — | $ | 54 | $ | 29 | $ | — | $ | 29 | ||||||
Depreciation and amortization | 10 | — | 10 | 8 | — | 8 | ||||||||||||
Stock-based compensation expense | 9 | — | 9 | 6 | — | 6 | ||||||||||||
Payment of interest | (4 | ) | — | (4 | ) | (4 | ) | — | (4 | ) | ||||||||
Income tax (payments) refunds, net | — | — | — | 1 | — | 1 | ||||||||||||
Changes in other operating assets | (2 | ) | (15 | ) | (17 | ) | 14 | 5 | 19 | |||||||||
Changes in other operating liabilities | (22 | ) | (566 | ) | (588 | ) | 22 | (242 | ) | (220 | ) | |||||||
Net cash provided by (used in) operating activities (1) | $ | 45 | $ | (581 | ) | $ | (536 | ) | $ | 76 | $ | (237 | ) | $ | (161 | ) |
(1) | Prior year balances have been retrospectively adjusted for Accounting Standards Update (ASU) 2016-18. Refer to Note 1 in the condensed consolidated financial statements and related notes included in our Quarterly Report on Form 10-Q for details. |