DUBLIN, Calif., Feb. 16, 2021 /PRNewswire/ -- TriNet
Group, Inc. (NYSE: TNET), a leading provider of
comprehensive human resources solutions for small and medium-size
businesses, today announced financial results for the
fourth quarter and fiscal year ended December 31,
2020. The fourth quarter and fiscal year highlights below include
non-GAAP financial measures which are reconciled later in this
release.
Fourth quarter highlights include:
- Total revenues increased 4% to $1.1
billion and Net Service Revenues decreased 2% to
$221 million, as compared to the same
period last year.
- Net income was $22 million, or
$0.32 per diluted share, compared to
net income of $48 million, or
$0.68 per diluted share, in the same
period last year.
- Adjusted Net Income was $30
million, or $0.44 per diluted
share, compared to Adjusted Net Income of $59 million, or $0.84 per diluted share, in the same period last
year.
- Adjusted EBITDA was $56 million,
representing an Adjusted EBITDA Margin of 25%.
- Average Worksite Employees (WSEs) decreased 3% as compared to
the same period last year, to approximately 327,000.
- Total WSEs decreased 2% compared to the same period last year,
to approximately 332,000.
Full year highlights include:
- Total revenues increased 5% to $4.0
billion and Net Service Revenues increased 14% to
$1.1 billion, as compared to
2019.
- Net income was $272 million, or
$3.99 per diluted share, compared to
net income of $212 million, or
$2.99 per diluted share, in
2019.
- Adjusted Net Income was $303
million, or $4.44 per diluted
share, compared to Adjusted Net Income of $236 million, or $3.33 per diluted share, in 2019.
- Adjusted EBITDA was $468 million,
representing an Adjusted EBITDA Margin of 44%.
- Average WSEs were no change compared to 2019, at approximately
324,000.
"I was pleased with the strength of our Fourth Quarter financial
and operating performance," said Burton M.
Goldfield, TriNet's President and CEO. "Our Fourth Quarter
performance demonstrated the strength of our business model as well
as the durability and vitality of our customers. Throughout 2020,
the TriNet team and our customers worked together to navigate the
unprecedented challenges presented by the COVID-19 pandemic. We
provided support for our customers through the dedication of our
service team and through innovative offerings such as our Recovery
Credit Program. As we look to 2021 and as vaccines become widely
disseminated, we are hopeful for a safe resolution to the COVID-19
pandemic, and we are prepared for a normalization of the business
environment. TriNet is ready to grow with our customers."
TriNet's total revenues for the fourth quarter of 2020 increased
4% from the fourth quarter of 2019 to $1.1
billion, while Net Service Revenues (total revenues less
insurance costs) for the fourth quarter of 2020 decreased 2% to
$221 million compared to fourth
quarter 2019. Net Insurance Service Revenues consisted of insurance
service revenues of $922 million,
less insurance costs of $842 million.
Professional service revenues for the fourth quarter of 2020
increased 3%, and Net Insurance Service Revenues for the fourth
quarter of 2020 decreased 10%, each as compared to the fourth
quarter of 2019.
TriNet's total revenues for the full year of 2020 increased 5%
from the full year of 2019 to $4.0
billion, while Net Service Revenues (total revenues less
insurance costs) for the full year of 2020 increased 14% from the
full year of 2019 to $1.1 billion.
Net Insurance Service Revenues consisted of insurance service
revenues of $3.5 billion, less
insurance costs of $3.0 billion.
Professional service revenues for the full year of 2020 increased
3%, and Net Insurance Service Revenues for the full year of 2020
increased 28%, each as compared to the full year of 2019.
At December 31, 2020, TriNet had cash and cash equivalents
of $301 million and total debt of
$370 million.
First Quarter and Full-Year 2021 Guidance
In addition
to announcing our fourth quarter and fiscal year 2020 results, we
provide our first quarter and full-year 2021 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.
|
|
Q1
2021
|
|
Full Year
2021
|
|
|
Low
|
|
High
|
|
Low
|
|
High
|
Total
revenues
|
|
2
|
%
|
|
4
|
%
|
|
8
|
%
|
|
11
|
%
|
Professional Service
Revenues
|
|
(4)
|
%
|
|
(3)
|
%
|
|
6
|
%
|
|
8
|
%
|
Net Insurance
Margin
|
|
12.5
|
%
|
|
14.5
|
%
|
|
10
|
%
|
|
11
|
%
|
Adjusted EBITDA
Margin
|
|
44
|
%
|
|
48
|
%
|
|
37
|
%
|
|
40
|
%
|
Diluted net income
per share of common stock
|
|
$
|
1.10
|
|
|
$
|
1.34
|
|
|
$
|
2.79
|
|
|
$
|
3.31
|
|
Adjusted Net Income
per share - diluted
|
|
$
|
1.16
|
|
|
$
|
1.39
|
|
|
$
|
3.35
|
|
|
$
|
3.90
|
|
Annual Report on Form 10-K
We anticipate filing our
Annual Report on Form 10-K ("Form 10-K") for the year ended
December 31, 2020 with the U.S.
Securities and Exchange Commission (SEC) and making it available at
http://www.trinet.com today, February 16, 2021. This press
release should be read in conjunction with the Form 10-K 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-K.
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 fourth quarter and fiscal year results for 2020 and
provide first quarter and full-year financial guidance for 2021.
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/10151772/e16a7c98e0. 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 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: 10151772
About TriNet
TriNet is a leading provider of a
comprehensive human resources solution for small to medium-size
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 solutions include 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 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 first quarter and full-year 2021 and the
underlying assumptions. 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. 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: the economic, health and business disruption
caused by the COVID-19 pandemic; the impact of the COVID-19
pandemic on our clients and prospects, insurance costs and
operations; the impact of the COVID-19 pandemic on the laws and
regulations that impact our industry and clients; our ability to
mitigate the business risks we face as a co-employer; our ability
to manage unexpected changes in workers' compensation and health
insurance claims and costs by worksite employees; the effects of
volatility in the financial and economic environment on the
businesses that make up our client base, and the concentration of
our clients in certain geographies and industries; the impact of
failures or limitations in the business systems we rely upon; the
impact of our Recovery Credit program; adverse changes in our
insurance coverage or our relationships with key insurance
carriers; our ability to improve our technology to satisfy
regulatory requirements and meet the expectations of our clients
and manage client attrition; our ability to effectively integrate
businesses we have acquired or may acquire in the future; our
ability to effectively manage and improve our operational
processes; 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 and
security breaches; our ability to secure our information technology
infrastructure and our confidential, sensitive and personal
information; 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 under
federal and state regulations; changes in the laws and regulations
that govern what it means to be an employer, employee or
independent contractor; our ability to comply with the laws and
regulations that govern PEOs and other similar industries; the
outcome of existing and future legal and tax proceedings;
fluctuation in our results of operation and stock price due to
factors 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; 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. 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
|
TriNet
|
TriNet
|
Investorrelations@TriNet.com
|
Renee.Brotherton@TriNet.com
|
(510)
875-7201
|
(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
December 31,
|
|
Year Ended
December 31,
|
(in millions, except
per share and WSE data)
|
2020
|
|
2019
|
|
%
Change
|
|
2020
|
|
2019
|
|
%
Change
|
Income Statement
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
1,063
|
|
|
$
|
1,018
|
|
|
4
|
|
%
|
|
$
|
4,034
|
|
|
$
|
3,856
|
|
|
5
|
|
%
|
Operating
income
|
30
|
|
|
63
|
|
|
(52)
|
|
|
|
368
|
|
|
268
|
|
|
37
|
|
|
Net income
|
22
|
|
|
48
|
|
|
(54)
|
|
|
|
272
|
|
|
212
|
|
|
28
|
|
|
Diluted net income per
share of common stock
|
0.32
|
|
|
0.68
|
|
|
(53)
|
|
|
|
3.99
|
|
|
2.99
|
|
|
33
|
|
|
Non-GAAP measures
(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Service
Revenues
|
221
|
|
|
226
|
|
|
(2)
|
|
|
|
1,055
|
|
|
929
|
|
|
14
|
|
|
Net Insurance Service
Revenues
|
80
|
|
|
89
|
|
|
(10)
|
|
|
|
511
|
|
|
399
|
|
|
28
|
|
|
Adjusted
EBITDA
|
56
|
|
|
92
|
|
|
(39)
|
|
|
|
468
|
|
|
378
|
|
|
24
|
|
|
Adjusted Net
income
|
30
|
|
|
59
|
|
|
(49)
|
|
|
|
303
|
|
|
236
|
|
|
28
|
|
|
Operating
Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
WSEs
|
326,901
|
|
|
337,103
|
|
|
(3)
|
|
%
|
|
323,672
|
|
|
324,927
|
|
|
—
|
|
%
|
Total WSEs at period
end
|
331,908
|
|
|
340,017
|
|
|
(2)
|
|
|
|
331,908
|
|
|
340,017
|
|
|
(2)
|
|
|
(1)
|
Refer to Non-GAAP
Financial Measures section below for definitions and
reconciliations from GAAP measures.
|
(in
millions)
|
December 31,
2020
|
|
December 31,
2019
|
|
%
Change
|
|
Balance Sheet
Data:
|
|
|
|
|
|
|
Working
capital
|
290
|
|
|
228
|
|
|
27
|
|
%
|
Total
assets
|
3,043
|
|
|
2,748
|
|
|
11
|
|
|
Debt
|
370
|
|
|
391
|
|
|
(5)
|
|
|
Total stockholders'
equity
|
607
|
|
|
475
|
|
|
28
|
|
|
|
Year Ended
December 31,
|
(in
millions)
|
2020
|
|
2019
|
|
%
Change
|
Cash Flow
Data:
|
|
|
|
|
|
|
Net cash used in
operating activities
|
$
|
546
|
|
|
$
|
471
|
|
|
16
|
|
%
|
Net cash used in
investing activities
|
(151)
|
|
|
(188)
|
|
|
(20)
|
|
|
Net cash provided by
(used in) financing activities
|
(208)
|
|
|
(176)
|
|
|
18
|
|
|
Non-GAAP
measure(1):
|
|
|
|
|
|
|
Corporate operating
cash flows
|
338
|
|
|
233
|
|
|
45
|
|
|
(1)
|
Refer to Non-GAAP
Financial Measures section below for definitions and
reconciliations from GAAP measures.
|
TRINET GROUP,
INC.
CONSOLIDATED
STATEMENTS OF INCOME (Unaudited)
|
|
Three Months Ended
December 31,
|
Year Ended
December 31,
|
(in millions except
per share data)
|
2020
|
2019
|
2020
|
2019
|
Professional service
revenues
|
$
|
141
|
|
$
|
137
|
|
$
|
544
|
|
$
|
530
|
|
Insurance service
revenues
|
922
|
|
881
|
|
3,490
|
|
3,326
|
|
Total
revenues
|
1,063
|
|
1,018
|
|
4,034
|
|
3,856
|
|
Insurance
costs
|
842
|
|
792
|
|
2,979
|
|
2,927
|
|
Cost of providing
services
|
70
|
|
59
|
|
262
|
|
245
|
|
Sales and
marketing
|
50
|
|
45
|
|
186
|
|
190
|
|
General and
administrative
|
46
|
|
38
|
|
152
|
|
137
|
|
Systems development
and programming
|
13
|
|
9
|
|
40
|
|
43
|
|
Depreciation and
amortization of intangible assets
|
12
|
|
12
|
|
47
|
|
46
|
|
Total costs and
operating expenses
|
1,033
|
|
955
|
|
3,666
|
|
3,588
|
|
Operating
income
|
30
|
|
63
|
|
368
|
|
268
|
|
Other income
(expense):
|
|
|
|
|
Interest expense, bank
fees and other
|
(6)
|
|
(4)
|
|
(21)
|
|
(21)
|
|
Interest
income
|
2
|
|
5
|
|
10
|
|
23
|
|
Income before
provision for income taxes
|
26
|
|
64
|
|
357
|
|
270
|
|
Income
taxes
|
4
|
|
16
|
|
85
|
|
58
|
|
Net
income
|
$
|
22
|
|
$
|
48
|
|
$
|
272
|
|
$
|
212
|
|
Other comprehensive
income, net of income taxes
|
4
|
|
(1)
|
|
4
|
|
—
|
|
Comprehensive
income
|
$
|
26
|
|
$
|
47
|
|
$
|
276
|
|
$
|
212
|
|
Net income per
share:
|
|
|
|
|
Basic
|
$
|
0.33
|
|
$
|
0.69
|
|
$
|
4.03
|
|
$
|
3.04
|
|
Diluted
|
$
|
0.32
|
|
$
|
0.68
|
|
$
|
3.99
|
|
$
|
2.99
|
|
Weighted average
shares:
|
|
|
|
|
Basic
|
66
|
|
69
|
|
67
|
|
70
|
|
Diluted
|
67
|
|
70
|
|
68
|
|
71
|
|
TRINET GROUP,
INC.
CONSOLIDATED
BALANCE SHEETS (Unaudited)
|
(In
millions)
|
December 31,
2020
|
|
December 31,
2019
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
301
|
|
|
$
|
213
|
|
Investments
|
57
|
|
|
68
|
|
Restricted cash, cash
equivalents and investments
|
1,388
|
|
|
1,180
|
|
Accounts receivable,
net
|
18
|
|
|
9
|
|
Unbilled revenue,
net
|
246
|
|
|
285
|
|
Prepaid expenses,
net
|
63
|
|
|
52
|
|
Other current
assets
|
87
|
|
|
64
|
|
Total current
assets
|
2,160
|
|
|
1,871
|
|
Restricted cash, cash
equivalents and investments, noncurrent
|
210
|
|
|
212
|
|
Investments,
noncurrent
|
138
|
|
|
125
|
|
Property, equipment
and software, net
|
79
|
|
|
85
|
|
Operating lease
right-of-use asset
|
51
|
|
|
55
|
|
Goodwill
|
294
|
|
|
289
|
|
Other intangible
assets, net
|
18
|
|
|
15
|
|
Other
assets
|
93
|
|
|
96
|
|
Total
assets
|
$
|
3,043
|
|
|
$
|
2,748
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
other current liabilities
|
$
|
50
|
|
|
$
|
31
|
|
Long-term
debt
|
22
|
|
|
22
|
|
Client deposits and
other client liabilities
|
134
|
|
|
44
|
|
Accrued
wages
|
309
|
|
|
391
|
|
Accrued health
insurance costs, net
|
172
|
|
|
167
|
|
Accrued workers'
compensation costs, net
|
59
|
|
|
61
|
|
Payroll tax
liabilities and other payroll withholdings
|
1,095
|
|
|
901
|
|
Operating lease
liabilities
|
11
|
|
|
17
|
|
Insurance premiums and
other payables
|
18
|
|
|
9
|
|
Total current
liabilities
|
1,870
|
|
|
1,643
|
|
Long-term debt,
noncurrent
|
348
|
|
|
369
|
|
Accrued workers'
compensation costs, noncurrent, net
|
138
|
|
|
144
|
|
Deferred
taxes
|
22
|
|
|
61
|
|
Operating lease
liabilities, noncurrent
|
49
|
|
|
48
|
|
Other non-current
liabilities
|
9
|
|
|
8
|
|
Total
liabilities
|
2,436
|
|
|
2,273
|
|
Stockholders'
equity:
|
|
|
|
Preferred
stock
|
—
|
|
|
—
|
|
Common stock and
additional paid-in capital
|
747
|
|
|
694
|
|
Accumulated
deficit
|
(144)
|
|
|
(219)
|
|
Accumulated other
comprehensive income
|
4
|
|
|
—
|
|
Total stockholders'
equity
|
607
|
|
|
475
|
|
Total liabilities
and stockholders' equity
|
$
|
3,043
|
|
|
$
|
2,748
|
|
TRINET GROUP,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Year Ended
December 31,
|
(in
millions)
|
2020
|
2019
|
Operating
activities
|
|
|
Net income
|
$
|
272
|
|
$
|
212
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
67
|
|
57
|
|
Lease modification and
impairment
|
1
|
|
—
|
|
Amortization of ROU
asset
|
14
|
|
16
|
|
Accretion of discount
rate on lease liabilities
|
2
|
|
—
|
|
Stock based
compensation
|
43
|
|
41
|
|
Deferred income
taxes
|
(42)
|
|
(7)
|
|
Amortization of
(premium) discount of investments
|
1
|
|
(1)
|
|
Changes in operating
assets and liabilities:
|
|
|
Accounts receivable,
net
|
(7)
|
|
5
|
|
Unbilled revenue,
net
|
39
|
|
19
|
|
Prepaid expenses,
net
|
(12)
|
|
(5)
|
|
Accounts payable and
other current liabilities
|
19
|
|
(15)
|
|
Client deposits and
other client liabilities
|
87
|
|
(12)
|
|
Accrued
wages
|
(82)
|
|
40
|
|
Accrued health
insurance costs, net
|
5
|
|
32
|
|
Accrued workers'
compensation costs, net
|
(9)
|
|
(20)
|
|
Payroll taxes payable
and other payroll withholdings
|
194
|
|
172
|
|
Operating lease
liabilities
|
(19)
|
|
(17)
|
|
Other
assets
|
(38)
|
|
(34)
|
|
Other
liabilities
|
11
|
|
(12)
|
|
Net cash (used in)
provided by operating activities
|
546
|
|
471
|
|
Investing
activities
|
|
|
Purchases of
marketable securities
|
(327)
|
|
(302)
|
|
Proceeds from sale and
maturity of marketable securities
|
224
|
|
159
|
|
Acquisitions of
property and equipment
|
(36)
|
|
(45)
|
|
Other
|
(12)
|
|
—
|
|
Net cash used in
investing activities
|
(151)
|
|
(188)
|
|
Financing
activities
|
|
|
Repurchase of common
stock
|
(178)
|
|
(140)
|
|
Proceeds from issuance
of common stock
|
10
|
|
11
|
|
Awards effectively
repurchased for required employee withholding taxes
|
(18)
|
|
(25)
|
|
Proceeds from
revolving credit agreement borrowings
|
234
|
|
—
|
|
Repayment of revolving
credit agreement
|
(234)
|
|
—
|
|
Repayment of
debt
|
(22)
|
|
(22)
|
|
Net cash used in
financing activities
|
(208)
|
|
(176)
|
|
Net (decrease)
increase in cash and cash equivalents, unrestricted and
restricted
|
187
|
|
107
|
|
Cash and cash
equivalents, unrestricted and restricted:
|
|
|
Beginning of
period
|
1,456
|
|
1,349
|
|
End of
period
|
$
|
1,643
|
|
$
|
1,456
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
Interest
paid
|
$
|
16
|
|
$
|
19
|
|
Income taxes paid,
net
|
123
|
|
62
|
|
Supplemental
schedule of noncash investing and financing
activities
|
|
|
Payable for purchase
of property and equipment
|
$
|
2
|
|
$
|
2
|
|
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,
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.
- 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.
- Provides a
comparable basis of revenues
on a net basis. Professional service revenues
are presented 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.
|
Net Insurance
Margin
|
- Net Insurance
Margin (NIM) is the ratio of Net
Insurance Services Revenues to insurance
service revenues.
|
- Provides a
comparable basis of Net
Insurance Service Revenues relative to
insurance service revenues. Promotes an
understanding of our pricing to risk
performance.
|
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 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 Net Service Revenue.
|
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.
|
Corporate
Operating Cash Flows
|
- Net cash (used in)
provided by operating
activities, excluding the effects of:
- Assets associated with WSEs
(accounts
receivable, unbilled revenue, prepaid
expenses and other current assets) and
- Liabilities associated with WSEs (client
deposits, accrued wages, payroll tax
liabilities and other payroll withholdings,
accrued health benefit 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 25.5% and 26% for the fourth quarter and full year of
2020 and 2019, respectively, which excludes
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.
|
Reconciliation of GAAP to Non-GAAP Measures
The table below presents a reconciliation of total revenues to
Net Service Revenues:
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
(in
millions)
|
2020
|
2019
|
|
2020
|
2019
|
Total
revenues
|
$
|
1,063
|
|
$
|
1,018
|
|
|
$
|
4,034
|
|
$
|
3,856
|
|
Less: Insurance
costs
|
842
|
|
792
|
|
|
2,979
|
|
2,927
|
|
Net Service
Revenues
|
$
|
221
|
|
$
|
226
|
|
|
$
|
1,055
|
|
$
|
929
|
|
The table below presents a reconciliation of insurance service
revenues to Net Insurance Service Revenues:
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
(in
millions)
|
2020
|
2019
|
|
2020
|
2019
|
Insurance service
revenues
|
$
|
922
|
|
$
|
881
|
|
|
$
|
3,490
|
|
$
|
3,326
|
|
Less: Insurance
costs
|
842
|
|
792
|
|
|
2,979
|
|
2,927
|
|
Net Insurance
Service Revenues
|
$
|
80
|
|
$
|
89
|
|
|
$
|
511
|
|
$
|
399
|
|
NIM
|
9
|
%
|
10
|
%
|
|
15
|
%
|
12
|
%
|
The table below presents a reconciliation of net income to
Adjusted EBITDA:
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
(in
millions)
|
2020
|
2019
|
|
2020
|
2019
|
Net income
|
$
|
22
|
|
$
|
48
|
|
|
$
|
272
|
|
$
|
212
|
|
Provision for income
taxes
|
4
|
|
16
|
|
|
85
|
|
58
|
|
Stock based
compensation
|
12
|
|
12
|
|
|
43
|
|
41
|
|
Interest expense and
bank fees
|
6
|
|
4
|
|
|
21
|
|
21
|
|
Depreciation and
amortization of intangible assets
|
12
|
|
12
|
|
|
47
|
|
46
|
|
Adjusted
EBITDA
|
$
|
56
|
|
$
|
92
|
|
|
$
|
468
|
|
$
|
378
|
|
Adjusted EBITDA
Margin
|
25
|
%
|
41
|
%
|
|
44
|
%
|
41
|
%
|
The table below presents a reconciliation of net income to
Adjusted Net Income and Adjusted Net Income per share -
diluted:
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
(in millions, except
per share data)
|
2020
|
2019
|
|
2020
|
2019
|
Net income
|
$
|
22
|
|
$
|
48
|
|
|
$
|
272
|
|
$
|
212
|
|
Effective income tax
rate adjustment
|
(3)
|
|
1
|
|
|
(6)
|
|
(11)
|
|
Stock based
compensation
|
12
|
|
12
|
|
|
43
|
|
41
|
|
Amortization of
intangible assets
|
1
|
|
1
|
|
|
5
|
|
5
|
|
Non-cash interest
expense
|
1
|
|
—
|
|
|
1
|
|
1
|
|
Income tax impact of
pre-tax adjustments
|
(3)
|
|
(3)
|
|
|
(12)
|
|
(12)
|
|
Adjusted Net
Income
|
$
|
30
|
|
$
|
59
|
|
|
$
|
303
|
|
$
|
236
|
|
GAAP weighted
average shares of common stock - diluted
|
67
|
|
70
|
|
|
68
|
|
71
|
|
Adjusted Net
Income per share - diluted
|
$
|
0.44
|
|
$
|
0.84
|
|
|
$
|
4.44
|
|
$
|
3.33
|
|
The table below presents a reconciliation of net cash used in
operating activities to Corporate Operating Cash flows:
|
Year Ended
December 31,
|
(in
millions)
|
2020
|
2019
|
Net cash provided by
operating activities
|
$
|
546
|
|
$
|
471
|
|
Less: Change
in WSE related other current assets
|
10
|
|
15
|
|
Less: Change
in WSE related liabilities
|
198
|
|
223
|
|
Net cash provided
by operating activities - WSE
|
$
|
208
|
|
$
|
238
|
|
Net cash provided
by operating activities - Corporate
|
$
|
338
|
|
$
|
233
|
|
Reconciliation of GAAP to Non-GAAP Measures for the first
quarter and full-year 2021 guidance.
Low and high percentages represent increases (decreases) from
the same period in the previous year.
The table below presents a reconciliation of insurance service
revenues to Net Insurance Service Revenues and NIM:
|
Q1
2020
|
|
Q1 2021
Guidance
|
|
FY
2020
|
|
Year 2021
Guidance
|
(in
millions)
|
Actual
|
|
Low
|
High
|
|
Actual
|
|
Low
|
High
|
Insurance service
revenues
|
$
|
892
|
|
|
3
|
%
|
5
|
%
|
|
$
|
3,490
|
|
|
8
|
%
|
11
|
%
|
Less: Insurance
costs
|
765
|
|
|
5
|
|
4
|
|
|
2,979
|
|
|
14
|
|
16
|
|
Net Insurance
Service Revenues
|
$
|
127
|
|
|
(9)
|
%
|
7
|
%
|
|
$
|
511
|
|
|
(25)
|
%
|
(17)
|
%
|
NIM
|
14
|
%
|
|
12.5
|
%
|
14.5
|
%
|
|
15
|
%
|
|
10
|
%
|
11
|
%
|
The table below presents a reconciliation of net income to
Adjusted EBITDA:
|
Q1
2020
|
|
Q1 2021
Guidance
|
|
FY
2020
|
|
Year 2021
Guidance
|
(in
millions)
|
Actual
|
|
Low
|
High
|
|
Actual
|
|
Low
|
High
|
Net income
|
$
|
91
|
|
|
(18)
|
%
|
(1)
|
%
|
|
$
|
272
|
|
|
(31)
|
%
|
(18)
|
%
|
Provision for income
taxes
|
30
|
|
|
(41)
|
|
(25)
|
|
|
85
|
|
|
(31)
|
|
(16)
|
|
Stock based
compensation
|
9
|
|
|
30
|
|
36
|
|
|
43
|
|
|
18
|
|
22
|
|
Interest expense and
bank fees
|
4
|
|
|
(47)
|
|
(47)
|
|
|
21
|
|
|
(61)
|
|
(61)
|
|
Depreciation and
amortization of
intangible assets
|
11
|
|
|
3
|
|
3
|
|
|
47
|
|
|
(4)
|
|
(4)
|
|
Adjusted
EBITDA
|
$
|
145
|
|
|
(19)
|
%
|
(5)
|
%
|
|
$
|
468
|
|
|
(25)
|
%
|
(15)
|
%
|
Adjusted EBITDA
Margin
|
51
|
%
|
|
44
|
%
|
48
|
%
|
|
44
|
%
|
|
37
|
%
|
40
|
%
|
The table below presents a reconciliation of net income to
Adjusted Net Income and Adjusted Net Income per share -
diluted:
|
Q1
2020
|
|
Q1 2021
Guidance
|
|
FY
2020
|
|
Year 2021
Guidance
|
(in millions, except
per share data)
|
Actual
|
|
Low
|
High
|
|
Actual
|
|
Low
|
High
|
Net income
|
$
|
91
|
|
|
(18)
|
%
|
(1)
|
%
|
|
$
|
272
|
|
|
(31)
|
%
|
(18)
|
%
|
Effective income tax
rate adjustment
|
(1)
|
|
|
1014
|
|
1063
|
|
|
(6)
|
|
|
(26)
|
|
(35)
|
|
Stock based
compensation
|
9
|
|
|
30
|
|
36
|
|
|
43
|
|
|
18
|
|
22
|
|
Amortization of
intangible assets
|
1
|
|
|
(1)
|
|
(1)
|
|
|
5
|
|
|
(1)
|
|
(1)
|
|
Non-cash interest
expense
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
|
—
|
|
—
|
|
Income tax impact of
pre-tax adjustments
|
(3)
|
|
|
26
|
|
31
|
|
|
(12)
|
|
|
16
|
|
20
|
|
Adjusted Net
Income
|
$
|
97
|
|
|
(20)
|
%
|
(4)
|
%
|
|
$
|
303
|
|
|
(25)
|
%
|
(13)
|
%
|
GAAP weighted
average shares of
common stock - diluted
|
69
|
|
|
|
|
|
68
|
|
|
|
|
Adjusted Net
Income per share -
diluted
|
$
|
1.41
|
|
|
$
|
1.16
|
|
$
|
1.39
|
|
|
$
|
4.44
|
|
|
$
|
3.35
|
|
$
|
3.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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SOURCE TriNet Group, Inc.