TriNet Reports Fourth Quarter & Fiscal Year 2017 Results

SAN LEANDRO, Calif., Feb. 27, 2018 /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 fourth quarter and year ended December 31, 2017. The fourth quarter and full year highlights below include non-GAAP financial measures which are reconciled later in this release.

Fourth quarter highlights include:

• Total revenues increased 5% to $848 million and Net Service Revenues increased 18% to $204 million, each as compared to the same period last year.
           
• Net income was $66 million, or $0.92 per diluted share, compared to net income of $23 million, or $0.32 per diluted share, in the same period last year.
      
• Net income benefited by $0.56 per diluted share due to the Tax Cuts and Jobs Act.
             
• Adjusted Net Income was $33 million, or $0.46 per diluted share, compared to Adjusted Net Income of $27 million, or $0.38 per diluted share, in the same period last year.
              
• Adjusted EBITDA was $69 million, a 22% increase from the same period last year.
             
• Total WSEs at December 31, 2017 decreased 4% as compared to the same period last year to approximately 325,000.
          
• Average WSEs decreased 3% as compared to the same period last year, to approximately 323,000.

Full year highlights include:

• Total revenues increased 7% to $3.3 billion and Net Service Revenues increased 25% to $809 million, each as compared to 2016.
        
• Net income was $178 million, or $2.49 per diluted share, compared to net income of $61 million, or $0.85 per diluted share, in 2016.
           
• Adjusted Net Income was $142 million, or $1.99 per diluted share, compared to Adjusted Net Income of $87 million, or $1.20 per diluted share, in 2016.
               
• Adjusted EBITDA was $285 million, a 53% increase over 2016.

"We generated strong profitable growth in the fourth quarter and full year 2017, while making significant progress on foundational changes to support the next phase of our growth," said Burton M. Goldfield, TriNet's President and CEO.  "In 2018, we will continue to invest to both improve our client experience and utilize the scale in our business model, while growing profitably."

TriNet's total revenues for the fourth quarter of 2017 increased 5% from the fourth quarter of 2016 to $848 million, while Net Service Revenues (Total revenues less insurance costs) for the fourth quarter of 2017 increased 18% from the fourth quarter of 2016 to $204 million. Net Insurance Service Revenues consisted of insurance service revenues of $731 million, less insurance costs of $644 million. Professional service revenues for the fourth quarter of 2017 increased 2%, and Net Insurance Service Revenues for the fourth quarter of 2017 increased 48%, each as compared to the fourth quarter of 2016.

TriNet's total revenues for the full year 2017 increased 7% to $3.3 billion, while Net Service Revenues for the full year 2017 increased 25% to $809 million. Net Service Revenues consisted of professional service revenues of $458 million and Net Insurance Service Revenues of $351 million. Net Insurance Service Revenues consisted of insurance service revenues of $2.8 billion, less insurance costs of $2.5 billion. Professional service revenues for the full year 2017 increased 3%, and Net Insurance Service Revenues for the full year 2017 increased 76%, over the full year of 2016.

At December 31, 2017, TriNet had cash and cash equivalents of $336 million and total debt of $425 million.

Other Announcements

In December 2017, our Board of Directors authorized a $120 million incremental increase to TriNet's ongoing stock repurchase program. As of December 31, 2017, $136 million remained available for repurchases of TriNet stock under this program. Under this program, TriNet may repurchase stock in open-market purchases or through privately negotiated transactions, as permitted under Rule 10b-18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or through a trading plan that complies with Rule 10b5-1(c) of the Exchange Act. The extent to which TriNet repurchases its stock and the timing of such repurchases will depend upon market conditions and other corporate considerations, as determined by TriNet's management team.

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 and annual results for 2017 and provide quarterly and annual financial guidance for 2017. 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/10116106. 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: 10116106.

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 us, 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 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: its ability to execute its strategic operational plan, its ability to successfully leverage its scale, and its ability to deliver profitable growth. Forward-looking statements are often identified by the use of words such as, but not limited to, "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "intend," "may," "plan," "project," "seek," "should," "strategy," "target," "will," "would" and similar expressions or variations. 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. 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: risks associated with changes in, uncertainty regarding, or adverse application of complex laws and regulations that govern our business; our ability to be recognized as an employer of worksite employees under federal and state regulations; our ability to mitigate business risks associated with our co-employment relationship with our worksite employees; our ability to secure private and confidential client and worksite employee data and 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; fluctuation in our results of operation as a result of numerous factors, many of which are outside of our control, such as  the volume and severity of our workers' compensation and health insurance claims and the amount and timing of our insurance costs, operating expenses and capital expenditure requirements; failures or limitations in our business systems; our ability to remediate the material weakness in our internal controls over financial reporting; our ability to effectively integrate businesses we have acquired and new businesses we may acquire in the future; the effects of volatility in the financial and economic environment on the businesses that make up our client base; our ability to market our sales force effectively; the concentration of our clients in certain geographies and industries; our ability to effectively manage our growth; market acceptance of our vertical strategy; the outcome of existing and future legal proceedings; changes in our income tax positions or adverse outcomes from on-going and future audits; adverse changes in our insurance coverage or our relationships with key insurance carriers; our ability to manage client attrition; our ability to comply with the restrictions of our credit facility and meet our debt obligations; and the effects of increased competition and our ability to compete effectively.

Further information on risks that could affect TriNet's results is included in our filings with the U.S. Securities and Exchange Commission (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.

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:

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 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 regarding how cash is generated and utilized in order to maintain and grow our business.

These financial measures also provide useful information by eliminating the effect of certain non-cash items that can fluctuate significantly from period to period, as well as certain significant items that are not representative of our business operations such as our initial public offering (IPO) transaction costs. They enhance investors' ability to review our business from the same perspective as the management and facilitate consistent period to period comparisons by excluding items that we do not believe are indicative of our operating performance.

The presentation of the non-GAAP financial measures is 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.

Reconciliation of GAAP to Non-GAAP Measures

The table below presents a reconciliation of total revenues to Net Service Revenues:

The table below presents a reconciliation of insurance service revenues to Net Insurance Service Revenues:

The table below presents a reconciliation of net income to Adjusted EBITDA:

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

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SOURCE TriNet Group, Inc.