TriNet(TNET) - 2025 Q2 - Quarterly Results

Executive Summary & Business Outlook TriNet's Q2 2025 financial results, full-year guidance reaffirmation, and CEO commentary are presented Second Quarter 2025 Highlights TriNet's Q2 2025 financial results were in line with forecasts, showing declines in net income and adjusted EBITDA, flat total revenues, and a decrease in average WSEs Key Financial Metrics (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | % Change YoY | | :-------------------------------- | :------------------- | :------------------- | :----------- | | Total revenues | $1,200 | $1,200 | 0% | | Professional service revenues | $172 | $187 | -8% | | Net income | $37 | $60 | -38% | | Adjusted Net Income | $55 | $78 | -29% | | Adjusted EBITDA | $105 | $136 | -23% | | Adjusted EBITDA Margin | 8.5% | 10.9% | -2.4 pp | | Diluted net income per share | $0.77 | $1.20 | -36% | | Adjusted Net Income per share - diluted | $1.15 | $1.53 | -25% | - Average WSEs decreased 4% year-over-year to approximately 336,000[5] - Returned $117 million to shareholders through share repurchases and dividends during the first half of 2025[5] Full-Year 2025 Guidance Reaffirmation TriNet reaffirmed its full-year 2025 financial guidance, maintaining its outlook for total revenues, professional service revenues, insurance cost ratio, adjusted EBITDA margin, and diluted and adjusted net income per share Full-Year 2025 Guidance | Metric | Full Year 2025 Low | Full Year 2025 High | | :-------------------------------- | :----------------- | :------------------ | | Total Revenues | $4,950 million | $5,140 million | | Professional Service Revenues | $700 million | $730 million | | Insurance Cost Ratio | 92% | 90% | | Adjusted EBITDA Margin | 7% | 9% | | Diluted net income per share | $1.90 | $3.40 | | Adjusted Net Income per share - diluted | $3.25 | $4.75 | CEO Commentary CEO Mike Simonds stated that Q2 financial performance aligned with forecasts, keeping the company on track for full-year guidance. He highlighted strategic execution, prudent repricing of benefits, maintaining customer retention above historical averages, and upcoming growth initiatives for the fall - Second quarter financial performance was in-line with forecast, on track for full-year guidance[2] - Continued execution of strategy while supporting SMB customers through a volatile business environment[2] - Prudently repriced benefits offering while maintaining customer retention above historical average[2] - Several growth initiatives are on track for the fall, aiming to drive new sales with an expanded go-to-market approach and improved offerings[2] Company Overview & Investor Information This section provides an overview of TriNet's business, regulatory filing details, forward-looking statements, and investor contacts About TriNet TriNet Group, Inc. is a leading provider of HR solutions for SMBs, offering technology-enabled services like benefits, payroll, and compliance, aiming to be the premier HR services provider - TriNet is a leading provider of Human Resources solutions for small and medium-size businesses (SMBs)[8] - Services include human capital expertise, employee benefits (health insurance, retirement plans), payroll and payroll tax administration, risk mitigation, and compliance consulting[8] - Long-term objective is to be the premier provider of HR services for SMBs through industry-leading benefits, sales distribution excellence, and a world-class service delivery model[8] Regulatory Filings and Conference Call Details TriNet anticipates filing its Quarterly Report on Form 10-Q for the first half of 2025 on July 25, 2025. The company also hosted an earnings conference call and webcast to discuss Q2 results and reaffirm full-year guidance, with replay options available - Anticipates filing Quarterly Report on Form 10-Q for the first half of 2025 with the SEC on July 25, 2025[6] - Hosted a conference call and webcast on July 25, 2025, to discuss Q2 2025 results and reaffirm full-year guidance[7] - Webcast replay available on the Investor Relations section of TriNet's website for approximately one year; telephonic replay available for two weeks[7] Forward-Looking Statements and Risk Factors The press release contains forward-looking statements regarding future performance, growth initiatives, and financial guidance, which are subject to inherent uncertainties and risks. These risks include managing insurance claims and costs, economic volatility, client retention, operational failures, competition, cyber-attacks, and compliance with complex regulations - Statements in the press release and conference call that are not historical are considered forward-looking, identified by words like 'expect,' 'guidance,' 'plan,' and 'will'[9] - Forward-looking statements are based on management's expectations and assumptions, subject to uncertainties, risks, and changes in circumstances that could cause actual results to differ materially[9] - Important risk factors include managing workers' compensation and health insurance claims, effects of economic volatility, client loss, impact of business system failures, changes in insurance coverage, ability to improve services and technology, increased competition, cyber-attacks, and compliance with evolving laws and regulations[10] Investor and Media Contacts Contact information for investor relations and media inquiries is provided for TriNet Group, Inc. - Investor Contact: Alex Bauer, (510) 875-7201, Alex.Bauer@TriNet.com[12] - Media Contact: Renee Brotherton, (925) 965-8441, Renee.Brotherton@TriNet.com[12] Detailed Financial Statements This section provides detailed financial statements, including key metrics, consolidated statements of income, balance sheets, and cash flows Key Financial and Operating Metrics TriNet's Q2 2025 metrics show flat total revenues but declining net income and Adjusted EBITDA, while H1 2025 saw increased Free Cash Flow and cash equivalents Key Financial and Operating Metrics (Q2 & H1 2025 vs. 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change (QoQ) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (YoY) | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------- | :----------------------------- | :----------------------------- | :------------- | | Total revenues | $1,238 | $1,243 | — % | $2,530 | $2,525 | — % | | Net income | $37 | $60 | (38)% | $122 | $152 | (20)% | | Diluted net income per share | $0.77 | $1.20 | (36)% | $2.48 | $2.98 | (17)% | | Adjusted EBITDA | $105 | $136 | (23)% | $268 | $316 | (15)% | | Adjusted Net income | $55 | $78 | (29)% | $154 | $189 | (19)% | | Free Cash Flow | N/A | N/A | N/A | $136 | $95 | 43% | | Insurance Cost Ratio | 90% | 88% | 2 pp | 89% | 87% | 2 pp | | Average WSEs | 336,010 | 351,455 | (4)% | 338,377 | 349,810 | (3)% | Balance Sheet Data (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | % Change | | :------------------------ | :----------------------- | :--------------------------- | :------- | | Cash and cash equivalents | $407 | $360 | 13% | | Working capital | $254 | $199 | 28% | | Total assets | $3,688 | $4,119 | (10)% | | Total stockholders' equity | $107 | $69 | 55% | Cash Flow Data (Six Months Ended June 30, 2025 vs. 2024) | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | % Change | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | :------- | | Net cash provided by operating activities | $170 | $130 | 31% | | Net cash used in investing activities | $(7) | $(47) | (85)% | | Net cash used in financing activities | $(428) | $(555) | (23)% | Consolidated Statements of Income and Comprehensive Income TriNet's Q2 2025 income statement shows flat total revenues but decreased net income and diluted EPS, driven by declining professional service revenues and increased operating expenses Consolidated Statements of Income (Three Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :-------------------------------- | :-------------- | :-------------- | | Professional service revenues | $172 | $186 | | Insurance service revenues | $1,048 | $1,040 | | Total revenues | $1,238 | $1,243 | | Total costs and operating expenses | $1,187 | $1,162 | | Income before tax | $51 | $81 | | Net income | $37 | $60 | | Diluted net income per share | $0.77 | $1.20 | Consolidated Statements of Income (Six Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :-------------------------------- | :-------------- | :-------------- | | Professional service revenues | $381 | $400 | | Insurance service revenues | $2,113 | $2,090 | | Total revenues | $2,530 | $2,525 | | Total costs and operating expenses | $2,364 | $2,320 | | Income before tax | $166 | $205 | | Net income | $122 | $152 | | Diluted net income per share | $2.48 | $2.98 | Consolidated Balance Sheets As of June 30, 2025, TriNet's total assets decreased by 10% compared to December 31, 2024, primarily due to a reduction in restricted cash, cash equivalents, and investments. Total liabilities also decreased, while total stockholders' equity increased significantly by 55% Consolidated Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :---------------------------------------- | :----------------------- | :--------------------------- | | Cash and cash equivalents | $407 | $360 | | Restricted cash, cash equivalents and investments | $1,101 | $1,413 | | Total current assets | $2,762 | $3,180 | | Total assets | $3,688 | $4,119 | | Total current liabilities | $2,508 | $2,981 | | Total liabilities | $3,581 | $4,050 | | Total stockholders' equity | $107 | $69 | - Total assets decreased by 10% from $4,119 million at December 31, 2024, to $3,688 million at June 30, 2025[16] - Total stockholders' equity increased by 55% from $69 million at December 31, 2024, to $107 million at June 30, 2025[16] Consolidated Statements of Cash Flows H1 2025 cash flow shows a 31% increase in operating activities, a significant decrease in investing activities, and reduced financing activities due to lower WSE-related changes and share repurchases Consolidated Statements of Cash Flows (Six Months Ended June 30) | Activity | 2025 (Millions) | 2024 (Millions) | | :---------------------------------------- | :-------------- | :-------------- | | Net cash provided by operating activities | $170 | $130 | | Net cash used in investing activities | $(7) | $(47) | | Net cash used in financing activities | $(428) | $(560) | | Net change in cash and cash equivalents, unrestricted and restricted | $(265) | $(477) | | End of period cash and cash equivalents, unrestricted and restricted | $1,426 | $989 | - Net cash provided by operating activities increased by $40 million, or 31%, to $170 million in the first half of 2025[17] - Net cash used in investing activities decreased by 85% to $(7) million, driven by lower purchases of marketable securities[17] - Net cash used in financing activities decreased by 23% to $(428) million, primarily due to a smaller change in WSE and TriNet Trust related assets and liabilities and reduced share repurchases[17] Non-GAAP Financial Measures and Reconciliations This section defines TriNet's non-GAAP financial measures and provides detailed reconciliations to their most directly comparable GAAP measures Definition and Use of Non-GAAP Measures TriNet utilizes non-GAAP measures like Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow for business management, planning, resource allocation, and performance evaluation, excluding non-recurring or non-cash charges - Non-GAAP measures are used to manage the business, make planning decisions, allocate resources, and as performance measures in executive compensation[18] - Adjusted EBITDA excludes income tax, interest expense, depreciation, amortization, stock-based compensation, cloud computing arrangements, and restructuring costs to provide a consistent view of core operations[20] - Adjusted Net Income excludes effective income tax rate adjustments, stock-based compensation, amortization of intangible assets, non-cash interest expense, and restructuring costs to analyze ongoing profitability[20] - Free Cash Flow, defined as net cash provided by operating activities reduced by capital expenditures, indicates liquidity strength and aids in planning and resource allocation[20] Reconciliation of GAAP to Non-GAAP Measures (Q2 & H1 2025) TriNet provides reconciliations of GAAP net income to Adjusted EBITDA and Adjusted Net Income, and net cash provided by operating activities to Free Cash Flow for the three and six months ended June 30, 2025 and 2024. These reconciliations show the adjustments made for non-cash and non-recurring items Reconciliation of Net Income to Adjusted EBITDA | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net income | $37 | $60 | $122 | $152 | | Provision for income taxes | $14 | $21 | $44 | $53 | | Stock based compensation | $18 | $18 | $31 | $38 | | Interest expense, bank fees and other | $15 | $16 | $29 | $32 | | Depreciation and amortization of intangible assets | $17 | $19 | $34 | $37 | | Amortization of cloud computing arrangements | $2 | $2 | $5 | $4 | | Restructuring costs | $2 | — | $3 | — | | Adjusted EBITDA | $105 | $136 | $268 | $316 | | Adjusted EBITDA Margin | 8.5% | 10.9% | 10.6% | 12.5% | Reconciliation of Net Income to Adjusted Net Income | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net income | $37 | $60 | $122 | $152 | | Effective income tax rate adjustment | $1 | — | $2 | $1 | | Stock based compensation | $18 | $18 | $31 | $38 | | Amortization of intangible assets | $3 | $5 | $5 | $10 | | Non-cash interest expense | — | $1 | $1 | $1 | | Restructuring costs | $2 | — | $3 | — | | Income tax impact of pre-tax adjustments | $(6) | $(6) | $(10) | $(13) | | Adjusted Net Income | $55 | $78 | $154 | $189 | | GAAP weighted average shares of common stock - diluted | 49 | 51 | 49 | 51 | | Adjusted Net Income per share - diluted | $1.15 | $1.53 | $3.15 | $3.70 | Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net cash provided by operating activities | $170 | $130 | | Acquisitions of property and equipment and projects in process | $(34) | $(35) | | Free Cash Flow | $136 | $95 | | Adjusted EBITDA | $268 | $316 | | Free Cash Flow Conversion Ratio | 51% | 30% | Reconciliation of GAAP to Non-GAAP Measures (Full-Year 2025 Guidance) TriNet provided a reconciliation of GAAP net income to Adjusted Net Income and Adjusted Net Income per share - diluted for its full-year 2025 guidance, showing the impact of various adjustments on the projected non-GAAP profitability Reconciliation of Net Income to Adjusted Net Income (Full-Year 2025 Guidance) | Metric | FY 2024 Actual (Millions) | FY 2025 Guidance Low (Millions) | FY 2025 Guidance High (Millions) | | :---------------------------------------- | :------------------------ | :------------------------------ | :------------------------------- | | Net income | $173 | (46)% | (3)% | | Effective income tax rate adjustment | $(5) | (83) | (105) | | Stock based compensation | $65 | 11 | 11 | | Amortization of intangible assets | $19 | (49) | (49) | | Non-cash interest expense | $3 | (100) | (100) | | Restructuring costs | $49 | (80) | (80) | | Income tax impact of pre-tax adjustments | $(35) | (32) | (32) | | Adjusted Net Income | $269 | (40)% | (12)% | | GAAP weighted average shares of common stock - diluted | 50 | N/A | N/A | | Adjusted Net Income per share - diluted | $5.32 | $3.25 | $4.75 |