TriNet(TNET) - 2025 Q2 - Quarterly Report

Glossary of Acronyms and Abbreviations This section defines key terms and financial metrics essential for understanding TriNet's business model and financial reporting - The glossary defines key terms such as PEO (Professional Employer Organization), ASO (Administrative Services Offering), WSE (Worksite Employee), Adjusted EBITDA, and EPS, crucial for understanding TriNet's business model and financial reporting[9][10] Cautionary Note Regarding Forward-Looking Statements This section outlines forward-looking statements and associated risks concerning TriNet's future performance and operational challenges - Forward-looking statements, identified by terms like "anticipate" and "expect," pertain to TriNet's future performance, client growth, insurance costs, and operational efficiency[11] - Key risks involve managing unexpected changes in workers' compensation and health insurance claims, mitigating co-employer business risks, navigating financial volatility, and sustaining benefits from realignment initiatives[12] Part I. Financial Information Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations TriNet's Q2/YTD 2025 results show flat revenues, decreased WSEs, and lower net income, amidst strategic restructuring Executive Summary TriNet offers HR solutions for SMBs; Q2/YTD 2025 results reflect flat revenues, decreased WSEs, and lower net income, with strategic restructuring - TriNet provides comprehensive HR solutions for SMBs via its PEO co-employment model and ASO-only services, encompassing payroll, benefits, risk mitigation, and compliance[20][21][22] | Metric | Q2 2025 | % Change | | :-------------------- | :------ | :------- | | Total revenues | $1.2B | — % flat | | Income before tax | $51M | (37)% decrease | | Insurance cost ratio | 90% | 2 % increase | | Net income | $37M | (38)% decrease | | Diluted EPS | $0.77 | (36)% decrease | | Adjusted Net income | $55M | (29)% decrease | | Average WSEs | 336,010 | (4)% decrease | | Total WSEs | 338,900 | (4)% decrease | | Metric | YTD 2025 | % Change | | :-------------------- | :------- | :------- | | Total revenues | $2.5B | — % flat | | Income before tax | $166M | (19)% decrease | | Insurance cost ratio | 89% | 2 % increase | | Net income | $122M | (20)% decrease | | Diluted EPS | $2.48 | (17)% decrease | | Adjusted Net income | $154M | (19)% decrease | | Average WSEs | 338,377 | (3)% decrease | | Total WSEs | 338,900 | (4)% decrease | - Strategic initiatives for 2025 include focusing on core value propositions, growing ASO, improving operational efficiency, selling TriNet Clarus R+D, disciplined expense management, establishing an Atlanta corporate center, and continuing common stock dividends[24] Results of Operations This section details TriNet's financial performance, including revenues, costs, net income, cash flows, and key operating metrics for Q2 and YTD 2025 versus 2024 | Metric (in millions, except operating metrics data) | Q2 2025 | Q2 2024 | % Change (Q2) | YTD 2025 | YTD 2024 | % Change (YTD) | | :-------------------------------- | :------ | :------ | :------------ | :------- | :------- | :------------- | | Professional service revenues | $172 | $186 | (8)% | $381 | $400 | (5)% | | Insurance service revenues | $1,048 | $1,040 | 1% | $2,113 | $2,090 | 1% | | Interest income | $18 | $17 | 6% | $36 | $35 | 3% | | Total revenues | $1,238 | $1,243 | —% | $2,530 | $2,525 | —% | | Insurance costs | $947 | $916 | 3% | $1,889 | $1,823 | 4% | | Operating expenses | $225 | $230 | (2)% | $446 | $465 | (4)% | | Interest expense, bank fees and other | $15 | $16 | (6)% | $29 | $32 | (9)% | | Total costs and operating expenses | $1,187 | $1,162 | 2% | $2,364 | $2,320 | 2% | | Income before tax | $51 | $81 | (37)% | $166 | $205 | (19)% | | Income taxes | $14 | $21 | (33)% | $44 | $53 | (17)% | | Net income | $37 | $60 | (38)% | $122 | $152 | (20)% | | Net cash provided by operating activities | N/A | N/A | N/A | $170 | $130 | 31% | | Net cash used in investing activities | N/A | N/A | N/A | $(7) | $(47) | (85)% | | Net cash used in financing activities | N/A | N/A | N/A | $(428) | $(555) | (23)% | | Adjusted EBITDA | $105 | $136 | (23)% | $268 | $316 | (15)% | | Adjusted Net income | $55 | $78 | (29)% | $154 | $189 | (19)% | | Insurance Cost Ratio | 90% | 88% | 2% | 89% | 87% | 2% | | Average WSEs | 336,010 | 351,455 | (4)% | 338,377 | 349,810 | (3)% | | Total WSEs | 338,900 | 354,028 | (4)% | 338,900 | 354,028 | (4)% | | Metric (in millions) | June 30, 2025 | December 31, 2024 | % Change | | :-------------------- | :------------ | :---------------- | :------- | | Cash and cash equivalents | $407 | $360 | 13% | | Working capital | $254 | $199 | 28% | | Total assets | $3,688 | $4,119 | (10)% | | Debt | $984 | $983 | —% | | Total stockholders' equity | $107 | $69 | 55% | Non-GAAP Financial Measures This section defines and reconciles TriNet's non-GAAP financial measures, Adjusted EBITDA and Adjusted Net Income, to their most comparable GAAP equivalents - Adjusted EBITDA excludes income tax provision, interest expense, depreciation, amortization of intangible assets, stock-based compensation, amortization of cloud computing arrangements, and restructuring costs[34] - Adjusted Net Income excludes effective income tax rate adjustments, stock-based compensation, amortization of intangible assets, non-cash interest expense, restructuring costs, and the income tax effect of these pre-tax adjustments[34] | (in millions) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------------- | :------ | :------ | :------- | :------- | | 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 % | | (in millions) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------------- | :------ | :------ | :------- | :------- | | Net income | $37 | $60 | $122 | $152 | | Effective income tax rate adjustment | 1 | — | 2 | 1 | | Stock based compensation | 18 | 18 | 31 | 38 | | Amortization of other intangible assets | 3 | 5 | 5 | 10 | | Non-cash interest expense