TriNet Announces Third Quarter Fiscal 2016 Results

SAN LEANDRO, Calif., Nov. 1, 2016 /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 third quarter ended September 30, 2016.

Third quarter highlights include:

  • Total revenues increased 15% to $770.5 million, while Net Service Revenues increased 21% to $161.0 million, each as compared to the same period last year.
  • Total WSEs at September 30, 2016 increased 6% from September 30, 2015, to approximately 334,000.
  • Net income was $14.6 million, or $0.20 per diluted share, compared to net income of $3.1 million, or $0.04 per diluted share, in the same period last year.
  • Adjusted Net Income was $20.8 million, or $0.29 per diluted share, compared to Adjusted Net Income of $13.3 million, or $0.19 per diluted share, in the same period last year.
  • Adjusted EBITDA was $45.4 million, a 47% increase from the same period last year.

"Our third quarter results reflect continued progress on our strategic growth initiatives," said Burton M. Goldfield, TriNet's President and CEO. "During the quarter, we launched a new vertical product, TriNet Technology, and today we announced the availability of our fourth industry specific product, TriNet Financial Services, strengthening our ability to serve our key vertical markets. We believe we are well positioned to end the year with strong momentum."

TriNet's total revenues for the third quarter of 2016 increased 15% from the third quarter of 2015 to $770.5 million, while Net Service Revenues increased 21% from the third quarter of 2015 to $161.0 million. Net Service Revenues consisted of professional service revenues of $110.5 million and Net Insurance Service Revenues of $50.5 million. Net Insurance Service Revenues consisted of insurance service revenues of $660.0 million, less insurance costs of $609.4 million. Professional service revenues for the third quarter of 2016 increased 11%, and Net Insurance Service Revenues increased 48%, compared to the third quarter of 2015. Results for the third quarter of 2016 reflect a net increase of 18,848 WSEs since September 30, 2015 representing 6% growth. TriNet ended the third quarter with 406 Total Sales Representatives, down from 479 at the end of the third quarter of 2015, a decrease of 15%.

At September 30, 2016, TriNet had cash and cash equivalents of $160.6 million and total debt of $472.5 million.

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 2016 fourth 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/10094164. 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: 10094164.

About TriNet
TriNet is a leading provider of comprehensive human resources solutions 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, allowing our clients to focus on operating and growing their core businesses. Our HR solutions include services such as multi-state payroll processing and tax administration, employee benefits programs (including health insurance and retirement plans), workers compensation insurance and claims management, federal, state and local labor, employment and benefit law compliance, risk mitigation, expense and time management, and other human capital consulting services, as well as our proprietary, cloud-based HR software systems. Our services are delivered by our expert team of HR professionals and enabled by our proprietary, cloud-based technology platform, which allows 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, forward-looking statements including, among other things, TriNet's expectations regarding: the growth of its customer base, its ability to deepen its presence across a range of industry sectors, its ability to roll out additional product offerings as and when planned, its ability to make enhancements to its technology platform, its ability to execute on its vertical market strategy and penetrate the market for HR solutions for small to midsize businesses, and other expectations, outlooks and forecasts on its future business, operational and financial performance. 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 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; our ability to continue to expand our direct sales force and the efficacy of our sales and marketing efforts; 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; the effects of seasonal trends on our results of operations; the unpredictable nature of our costs and operating expenses, in particular our insurance costs; 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 continuing implementation of the Affordable Care Act, including its application to the co-employer relationship; 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, including our most recently filed Annual Report on Form 10-K filed with the Commission on April 1, 2016, which could cause actual results to vary from expectations. Except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements, and we do not assume any obligation, and do not intend, to update any of our forward-looking statements, whether as a result of new information or otherwise.

Contacts:


Investors:

Media:

Alex Bauer

Jock Breitwieser

TriNet

TriNet

Investorrelations@TriNet.com

Jock.Breitwieser@TriNet.com

(510) 875-7201

(510) 875-7250

TriNet, Ambitions Realized and the TriNet logo are registered trademarks of TriNet.

 


TriNet Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)



Three Months Ended September 30,


Nine Months Ended September 30,


2016


2015


2016


2015

Professional service revenues

$

110,493



$

99,473



$

332,489



$

294,288


Insurance service revenues

659,964



568,535



1,916,753



1,639,305


Total revenues

770,457



668,008



2,249,242



1,933,593


Costs and operating expenses:








Insurance costs

609,422



534,481



1,775,784



1,535,678


Cost of providing services (exclusive of depreciation and amortization of intangible assets)

50,142



37,540



139,881



111,582


Sales and marketing

41,470



44,997



133,978



123,740


General and administrative

22,477



17,726



69,078



48,991


Systems development and programming costs

8,124



6,991



20,970



21,849


Amortization of intangible assets

4,662



10,459



14,647



32,284


Depreciation

5,188



4,132



13,663



10,761


Total costs and operating expenses

741,485



656,326



2,168,001



1,884,885


Operating income

28,972



11,682



81,241



48,708


Other income (expense):








Interest expense and bank fees

(5,597)



(4,685)



(15,677)



(14,653)


Other, net

313



355



434



873


Income before provision for income taxes

23,688



7,352



65,998



34,928


Provision for income taxes

9,107



4,255



27,558



17,328


Net income

$

14,581



$

3,097



$

38,440



$

17,600


Net income per share:








Basic

$

0.21



$

0.04



$

0.55



$

0.25


Diluted

$

0.20



$

0.04



$

0.53



$

0.24


Weighted average shares:








Basic

70,187,989



70,237,737



70,478,266



70,247,035


Diluted

71,964,603



72,087,917



72,126,060



72,757,277


 

 


TriNet Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 (Unaudited)



September 30,
 2016


December 31,
 2015

Assets




Current assets:




Cash and cash equivalents

$

160,558



$

166,178


Restricted cash

14,563



14,557


Prepaid income taxes

6,310



4,105


Prepaid expenses

13,018



8,579


Other current assets

2,173



1,359


Worksite employee related assets

847,545



1,373,386


  Total current assets

1,044,167



1,568,164


Workers compensation receivable

40,578



29,204


Restricted cash and available for sale investments

122,378



101,806


Property and equipment, net

53,141



37,844


Goodwill

289,207



289,207


Other intangible assets, net

32,424



46,772


Other assets

18,431



19,452


  Total assets

$

1,600,326



$

2,092,449


Liabilities and stockholders' equity




Current liabilities:




Accounts payable

$

18,461



$

12,904


Accrued corporate wages

29,039



28,963


Current portion of notes payable and borrowings under capital leases, net

36,497



32,970


Other current liabilities

11,960



11,402


Worksite employee related liabilities

842,552



1,369,497


  Total current liabilities

938,509



1,455,736


Notes payable and borrowings under capital leases, net, less current portion

431,638



460,965


Workers compensation liabilities

138,912



105,481


Deferred income taxes

54,411



54,641


Other liabilities

7,941



7,545


  Total liabilities

1,571,411



2,084,368


Commitments and contingencies




Stockholders' equity:




Preferred stock, $0.000025 per share stated value; 20,000,000 shares authorized;
no shares issued and outstanding at September 30, 2016 and December 31, 2015




Common stock, $0.000025 per share stated value; 750,000,000 shares authorized;
69,659,283 and 70,371,425 shares issued and outstanding at September 30, 2016 
and December 31, 2015, respectively

522,910



494,397


Accumulated deficit

(493,574)



(485,595)


Accumulated other comprehensive loss

(421)



(721)


   Total stockholders' equity

28,915



8,081


   Total liabilities and stockholders' equity

$

1,600,326



$

2,092,449


 

 

TriNet Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



Nine Months Ended September 30,


2016


2015

Operating activities


Net income

$

38,440



$

17,600


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

27,810



42,036


Deferred income taxes

(346)



1,835


Stock-based compensation

20,169



12,991


Excess tax credits received from equity incentive plan activity

(2,591)



(20,327)


Changes in operating assets and liabilities:




  Restricted cash and available for sale investments

(31,409)



(21,198)


  Prepaid expenses and other current assets

(5,253)



(3,201)


  Workers compensation receivables

(11,374)



3,294


  Other assets

438



(14,585)


  Accounts payable

4,538



2,522


  Prepaid income taxes

386



27,574


  Accrued corporate wages and other current liabilities

4,548



9,103


  Workers compensation and other liabilities

33,856



47,419


  Worksite employee related assets

525,841



768,010


  Worksite employee related liabilities

(526,945)



(768,552)


  Net cash provided by operating activities

78,108



104,521


Investing activities




Acquisitions of businesses

(300)



(4,750)


Purchases of restricted investments

(14,959)



(14,989)


Proceeds from maturities of restricted investments

25,790



1,275


Purchase of property and equipment

(27,942)



(14,747)


  Net cash used in investing activities

(17,411)



(33,211)


Financing activities




Proceeds from issuance of notes payable

57,978




Payments for extinguishment of debt

(57,563)




Payment of debt issuance costs

(1,376)




Repayment of notes payable and capital leases

(27,506)



(40,493)


Proceeds from issuance of common stock on exercised options

3,584



6,464


Proceeds from issuance of common stock on employee stock purchase plan

2,304



2,723


Repurchase of common stock

(43,747)



(48,364)


Awards effectively repurchased for required employee withholding taxes

(2,672)



(576)


Excess tax credits received from equity incentive plan activity

2,591



20,327


Tax credit received for deductible IPO transaction costs



822


Net cash used in financing activities

(66,407)



(59,097)


Effect of exchange rate changes on cash and cash equivalents

90



(239)


Net increase in cash and cash equivalents

(5,620)



11,974


Cash and cash equivalents at beginning of period

166,178



134,341


Cash and cash equivalents at end of period

$

160,558



$

146,315


 

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. Our key financial and operating metrics for the periods presented were as follows:

 


Three Months Ended
September 30,


Nine Months Ended
September 30,

Key Financial and Operating Metrics

2016


2015


2016


2015

Net Insurance Service Revenues (in thousands)

$

50,542



$

34,054



$

140,969



$

103,627


Net Service Revenues (in thousands)

$

161,035



$

133,527



$

473,458



$

397,915


Total WSEs

333,778



314,930






Total Sales Representatives

406



479






 

Non-GAAP Financial Measures

We use Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share – diluted to provide an additional view of our operational performance. Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted are financial measures that are not prepared in accordance with GAAP. We define Net Insurance Service Revenues as insurance service revenues less insurance costs, which include the premiums we pay to insurance carriers for the health and workers compensation insurance coverage provided to our clients and WSEs and the reimbursements we pay to the insurance carriers for claim payments within our insurance deductible layer. We define Net Service Revenues as the sum of professional service revenues and Net Insurance Service Revenues. We define Adjusted EBITDA as net income, excluding the effects of our income tax provision, interest expense, depreciation, amortization of intangible assets and stock-based compensation. We define Adjusted Net Income as net income, excluding the effects of our effective income tax rate, stock-based compensation, amortization of intangible assets, non-cash interest expense, debt prepayment premium, and the income tax effect of these pre-tax adjustments at our effective tax rate. For purposes of our non-GAAP financial presentation, as a result of a 2015 increase in New York City tax rates and an increase in blended state rates, we have adjusted the effective tax rate to 42.5% for the periods ended September 30, 2016, from 41.5% for the periods ended September 30, 2015. Each of these effective tax rates exclude income tax on non-deductible stock-based compensation and discrete items including the cumulative effect of state law changes. Non-cash interest expense represents amortization and write-off of our debt issuance costs.

We believe that Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share – diluted are useful for our stockholders and board of directors by helping them to identify trends in our business and understand how our management evaluates our business. We believe that Net Insurance Service Revenues provides a useful measure of revenues from our provision of cost effective insurance services to our clients. We believe that Net Service Revenues provides a useful measure of total revenues for the two main components of our revenues calculated on a consistent basis. We believe that the use of Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted provides useful period-to-period comparisons and analysis of trends in our business, as they exclude certain non-cash expenses. We use Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted to monitor and evaluate our operating results and trends on an ongoing basis and internally for operating, budgeting and financial planning purposes, in addition to allocating our resources to enhance the financial performance of our business and evaluating the effectiveness of our business strategies. We also use Net Service Revenues and Adjusted EBITDA in determining the incentive compensation for management.

Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted are not prepared in accordance with, and should not be considered in isolation of, or as an alternative to, measurements required by GAAP. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. As non-GAAP measures, Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. In particular:

  • Net Insurance Service Revenues and Net Service Revenues are reduced by the insurance costs that we pay to insurance carriers;
  • Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
  • Adjusted EBITDA does not reflect the amounts we paid in taxes or other components of our tax provision;
  • Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
  • Adjusted EBITDA and Adjusted Net Income do not reflect changes in, or cash requirements for, our working capital needs;
  • Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted do not reflect the non-cash component of employee compensation;
  • Although depreciation and amortization of intangible assets are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
  • Other companies in our industry may calculate these measures or similar measures differently than we do, limiting their usefulness as a comparative measure.

Because of these limitations, you should consider Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted alongside other financial performance measures, including total revenues, net income and our other financial results presented in accordance with GAAP.

The table below sets forth a reconciliation of GAAP insurance service revenues to Net Insurance Service Revenues:

 


Three Months Ended
September 30,


Change
2016 vs. 2015


Nine Months Ended
September 30,


Change
2016 vs. 2015


2016


2015


$


%


2016


2015


$


%


(in thousands, except percentages)

Insurance service revenues

$

659,964



$

568,535



$

91,429



16%


$

1,916,753



$

1,639,305



$

277,448



17

%

Less: Insurance costs

609,422



534,481



74,941



14%


1,775,784



1,535,678



240,106



16

%

Net Insurance Service Revenues

$

50,542



$

34,054



$

16,488



48%


$

140,969



$

103,627



$

37,342



36

%

 

The table below sets forth a reconciliation of GAAP total revenues to Net Service Revenues:

 


Three Months Ended
September 30,


Change
2016 vs. 2015


Nine Months Ended
September 30,


Change
2016 vs. 2015


2016


2015


$


%


2016


2015


$


%


(in thousands, except percentages)

Total revenues

$

770,457



$

668,008



$

102,449



15%


$

2,249,242



$

1,933,593



$

315,649



16

%

Less: Insurance costs

609,422



534,481



74,941



14%


1,775,784



1,535,678



240,106



16

%

Net Service Revenues               

$

161,035



$

133,527



$

27,508



21%


$

473,458



$

397,915



$

75,543



19

%

 

The table below sets forth a reconciliation of GAAP net income to Adjusted EBITDA:

 


Three Months Ended
September 30,


Nine Months Ended
September 30,


2016


2015


2016


2015


(in thousands)

Net income

$

14,581



$

3,097



$

38,440



$

17,600


Provision for income taxes

9,107



4,255



27,558



17,328


Stock-based compensation

6,264



4,188



20,169



12,991


Interest expense and bank fees

5,597



4,685



15,677



14,653


Depreciation

5,188



4,132



13,663



10,761


Amortization of intangible assets

4,662



10,459



14,647



32,284


Adjusted EBITDA

$

45,399



$

30,816



$

130,154



$

105,617


 

The table below sets forth a reconciliation of GAAP net income to Adjusted Net Income and Adjusted Net Income per share - diluted:

 


Three Months Ended
September 30,


Nine Months Ended
September 30,


2016


2015


2016


2015


(in thousands)

Net income

$

14,581



$

3,097



$

38,440



$

17,600


Effective income tax rate adjustment

(960)



1,204



(491)



2,833


Stock-based compensation

6,264



4,188



20,169



12,991


Amortization of intangible assets

4,662



10,459



14,647



32,284


Non-cash interest expense

1,559



799



3,183



2,820


Income tax impact of pre-tax adjustments

(5,306)



(6,410)



(16,150)



(19,959)


Adjusted Net Income

$

20,800



$

13,337



$

59,798



$

48,569


GAAP Weighted average shares of common stock -

diluted

71,965



72,088



72,126



72,757


Adjusted Net Income per share - diluted

$

0.29



$

0.19



$

0.83



$

0.67


 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/trinet-announces-third-quarter-fiscal-2016-results-300355364.html

SOURCE TriNet Group, Inc.

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.