TriNet Group, Inc.

Good day and welcome to the TriNet third quarter 2019 conference call. TriNet has given me a script to read to the audience and it goes, TriNet's 8K and the 10Q filings will both be delayed pending the SEC's EDGAR system coming back online. However, we will proceed the call and a transcript of this call will be filed. I would now like to turn the conference over to Alex Bauer, Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and welcome to Trinet's 2019 Third Quarter Conference Call. Joining me today are Burton M. Goldfield, our President and CEO, and Richard Beckert, our Chief Financial Officer. Our prepared remarks were pre-recorded. Burton will begin with an overview of our third quarter operating and financial performance. Richard will then review our financial results in more detail. We will then open up the call for a Q&A session. Before we begin, please note that today's discussion will include our 2019 fourth quarter and full year guidance and other statements that are not historical in nature, are predictive in nature, or depend upon or refer to future events or conditions such as our expectations, estimates, predictions, strategies, beliefs, or other statements that might be considered forward-looking. These forward-looking statements are based on management's current expectations and assumptions and are inherently subject to risks, uncertainties and changes in circumstances that are difficult to predict and that may cause actual results to differ materially from statements being made today or in the future. Except as may be required by law, we do not undertake to update any of these statements in light of new information We encourage you to review our most recent public filings with the SEC, including our 10K and 10Q filings, for more detailed discussions of the risks, uncertainties, and changes in circumstances that may affect our future results or the market price of our stock. In addition, our discussion today will include non-GAAP financial measures, including our forward-looking guidance for non-GAAP net service revenues, adjusted EBITDA, adjusted EBITDA margin, and adjusted net income. For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see our earnings release or our 10-Q filing for our third quarter of 2019, which are available on our website or through the SEC website. A reconciliation of our non-GAAP forward-looking guidance to the most directly comparable GAAP measures is also available on our website. With that, I will turn the call over to Burton for his opening remarks.

Thank you, Alex. In the third quarter, we continued to accelerate our business momentum. The Trinet Sales and Services Organization successfully delivered value in the verticals we serve. The revenue and volume growth is expected to continue. Our third quarter financial results were impacted We have taken steps to mitigate these higher costs and we anticipate returning to a normalized cost trend in 2020. In the third quarter, we grew GAAP total revenues 11% year over year to $969 million, While net service revenues declined by 4% year-over-year to $221 million. Professional service revenues grew 8% year-over-year to $130 million. The strength in professional service revenues in the quarter reflected our continued focus on keeping the customers at the center of everything we do. Customer retention continued to improve in the quarter and was a key driver of this outperformance. During the third quarter, we grew insurance service revenues by 11% year over year to $839 million, while net insurance service revenues declined 17% year over year to $91 million for the quarter. Net insurance service revenues were impacted by higher health costs. Later in my prepared remarks, I will elaborate on the drivers of the increased costs. In the third quarter, our Q3 gap earnings per share grew 11% year-over-year to 78 cents per share. Our Q3 adjusted net income per share grew 8% to 81 cents per share, both within our guidance range. Finally, we finished the quarter with approximately 332,000 worksite employees, up 4% year over year, primarily due to further improvement in our customer retention, which continues a trend that began in February, and continued strong hiring from our installed base reflecting our solid business mix. Through our differentiated business model and go-to-market approach, we primarily target white and gray color customers. This has generally insulated us from some of the more cyclical verticals. One example of the benefits of this strategy was reduced impact to our volume from fewer seasonal workers leaving in Q3. Overall, I am very pleased with the performance of our client services and sales teams. Their efforts have led to improved retention and our overall WSC growth. Returning to net insurance service revenues, insurance costs were impacted by higher than expected costs at one of our carriers. This is continued a trend we cited on our first and second quarter earnings calls. This is best illustrated by two key drivers of the higher than expected costs at this carrier. First, we saw a shift in pharmaceutical utilization from brand name drugs to higher cost specialty drugs. And second, we saw significant health network cost increases in a geographic region serviced by this carrier. As we look forward to 2020, we have implemented specific changes that will mitigate these drivers of higher costs. This should result These include three key changes. First, for plan year 2020 and beyond, after proactive engagement with our carrier partner, we negotiated ongoing pharmaceutical cost relief, including rebates. As a result, we expect overall pharmaceutical costs to return to its historical trend. Second, we have been working with our carriers to obtain greater cost trend visibility. This will help us further improve our underwriting and pricing of our health benefit plans. Finally, we have repriced our insurance book to risk. Between the fourth and the first quarters, approximately 80% of our health book renews. The regional population which drove these elevated costs renews on January 1. Their recent health experience was captured in their renewal. As a result of these changes, we believe the 2020 performance of insurance costs as measured by net insurance margin should be in the 11 to 12% range. In addition to the changes we have made, we have added a new carrier available January 2020 for the benefit of our New York based customers, Empire Blue Shield Blue Cross. Empire has served New Yorkers for over 80 years and now serves more than 4 million members and more than 38,000 businesses and small employers in New York. This addition means that TriNet now offers small and medium-sized businesses in New York access to United Healthcare, Aetna, and Empire. We believe this comprehensive choice puts our customers at an advantage in this historically competitive labor market. Stepping away from insurance, overall, I am very pleased with the momentum in our business, especially when measured by our gap revenue growth, professional service revenues growth, and WSC volume growth. Our improved client retention and service levels have been key drivers of our momentum and represent one of our most significant 2019 achievements. As I stated on our last call, we have successfully combined our improved customer service with analytics. By leveraging this combination, we can identify and remediate problems sooner, resulting Thank you for joining us. identified the customer as at risk, and the client services team proceeded to deliver a multi-layered account management plan to support the customer throughout their slowdown. This plan included an enterprise pricing contract, which provided the customer greater expense certainty over a longer period. expanded human capital support, including a human capital roadmap. The customer's director of HR left, and rather than backfilling the position, the customer expanded its reliance on Trinet's human capital support. Finally, Trinet delivered increased technical support, which helped facilitate Thank you for joining us. will be supported by efforts like these. We remain pleased with our new sales efforts. During the quarter, we successfully sold our product and services in complex, value-added situations. For example, Trinet's Vertical Strategy won the business of a Florida-based private equity group through the Trinet Financial Services team. In this case, the group also saw tremendous value using TriNet for their portfolio companies. Immediately following the onboarding of this private equity group, we then onboarded one of their portfolio companies into our TriNet professional services product. We have found significant business opportunities When we leverage our vertical products and expertise for the portfolio companies of our private equity customers. Our platform continues to evolve. Just last week, we announced the launch of our new benefits enrollment site. This timely launch is critical with 2020 open enrollment quickly approaching. The new site will improve the enrollment experience by providing our WSEs with an intuitive experience for comparing and contrasting our extensive health plan offerings. We have made significant progress in 2019 with continued sales successes, increased product functionality, and improved customer experience. We are experiencing positive business momentum as a result of these efforts. We are excited for our important fall selling season and look forward to a strong 2020. Now let me turn the call over to Richard for a review of our financials. Richard?