TriNet Group, Inc.

Good day, everyone, and welcome to the TriNet Second Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one. Please note that this event is being recorded. I'd now like to turn the conference over to Alex Bauer of Investor Relations. Please go ahead, sir.

Thank you, Operator. Good afternoon and welcome to TRINIT's 2021 second quarter conference call. Joining me today are Burton M. Goldfield, our President and CEO, and Kelly Tuminelli, our Chief Financial Officer. Our prepared remarks were pre-recorded. Burton will begin with an overview of our second quarter operating performance. Kelly will then review our financial results. We will then open up the call for the Q&A session. Before we begin, please note that today's discussion will include our 2021 third 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, future events, or otherwise. we encourage you to review our most recent public filings with the SEC, including our 10-K and 10-Q filings, for a more detailed discussion of the risks, uncertainties, and changes in circumstances that may affect our future results for the market price of our stock. In addition, our discussion today will include non-GAAP financial measures, including our forward-looking guidance for adjusted EBITDA margin and adjusted net income per diluted share. For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see our earnings release, our 10-Q filing, or our 10-K filing for our second quarter and full year of 2020 reconciliations, respectively, both of which are available on our website or through the SEC website. With that, I will turn the call over to Burton for his opening remarks. Burton?

Thank you, Alex. Simply put, TriNet's second quarter operating and financial performance was exceptionally strong, setting us up for a solid back half of 2021. These results reflect the resilience of our business and the continued execution by our team throughout the COVID-19 pandemic. Solid financial growth, robust operating performance, and strong customer retention were highlights of the second quarter of 2021. Specifically, we delivered strong financial results highlighted by our professional service revenues growth. Our WSE volume grew 9% year over year based on our approach to customer selection. We achieved historically strong retention, and our client base continued strong hiring throughout Q2. New sales grew 9% year over year as measured by annual contract value, positioning us well for a second half rebound. And we launched our new Trinet Financial Services preferred product. By the end of the quarter, we saw health services utilization trend towards a more normalized pre-pandemic rate. During the second quarter, we grew total revenues 16% year over year to $1.1 billion. The year over year revenue performance was measured against the first full pandemic quarter, which included an accrual for the recovery credit program. Additionally, when we compare the total revenues in the recent quarter to that of the second quarter of 2019, total revenues grew 18%. This reflects the strong underlying performance of our business throughout the COVID-19 pandemic. Our revenue growth highlights that our value proposition continues to resonate with our target customer base and was further supported by a 29% year-over-year growth in professional service revenues. The growth in professional service revenues was attributable to our strong volume growth, especially in our core white-collar verticals. We are now supporting the largest number of worksite employees in Trinet company history for our technology, financial services, and life science verticals. During the quarter, the growth in professional service revenues saw a large contribution from rate. Kelly will go into greater detail describing this quarter's unique drivers of rate. The year-over-year compare also benefited from the recovery credit program accrual taken in Q2 of 2020. Overall, I am very pleased with the performance of our professional service revenues as it positively reflects our customer selection process, strong value proposition, customer retention, and customer growth. Additionally, this professional service revenues creates a flywheel that will drive revenues for the second half of 2021. Our health plan enrollment also played an important role in these results. We now have the most WSCs enrolled in our health plans in our history. This exceeds our previous pre-pandemic peak. Trinet is focused on price, choice, and user experience to drive this historically high number of WSCs enrolled in our medical plans. Our clients have responded to this focus by adopting these advantageous medical plans to attract and retain exceptional employees. Ultimately, our year-over-year revenue growth as well as our revenue growth compared to the same quarter of pre-pandemic 2019 reflects the durability and vitality of our customers, the fit of our products and services to this customer base and our steadfast commitment to evolving our offering and standing with our customers in this rapidly changing business and regulatory climate. Importantly, we expect to continue to grow our revenue at strong rates through the second half of 2021. which is reflected in our revised guidance, which Kelly will address. GAAP earnings per share declined 27% year over year to $1.37 per share. As a reminder, during the second quarter of 2020, our earnings per share was positively impacted by the precipitous decline in health services utilization. That decline led to significant health cost savings, which benefited our Q2 2020 earnings. I am very pleased with this past quarter's earnings performance, not only because of the results, but because of how the earnings were generated. We outperformed the top end of our GAAP earnings per share guidance by 63 cents per share. This beat was driven by strong volume performance supported by continued health cost savings, even though the health cost savings moderated as the quarter progressed. Additionally, when you compare our most recent quarter's gap EPS versus that of the second quarter of 2019, a pre-pandemic quarter, we more than doubled our earnings per share. We finished the second quarter with approximately 340,000 WSCs up 9% year over year and up 4% sequentially versus the first quarter of 2021. Our strong volume performance is attributable to the themes we saw emerge in the first quarter. We continue to have strong retention in the second quarter. In the last two years, we created two unique to our industry credit programs in which we used our healthcare cost savings to help drive longer-term relationships with our customers. These programs highlighted our commitment to our customers, and our customers are rewarding us by staying longer. Our customer selection process has resulted in a customer base comprised of dynamic and durable companies. Our strategic decision years ago to pursue a certain set of customer attributes in specific verticals is paying dividends. Continuing a trend that began last year, this customer base hired new employees in the second quarter at historically high rates. We believe these hiring trends can continue into the second half, although not likely at the same historically high rates. Finally, under new sales leadership, Sales contributed positively with 9% year-over-year growth in annual contract value. This growth occurred in our core verticals, adding to our already strong customer base. I am optimistic that the post-pandemic bottom is in, and we will see a recovery in new sales growth throughout the second half. Additionally, during the second quarter, we announced the arrival of our new Chief Product Officer. Under her leadership, I expect to further extend our customer commitment to an evolving, value-added customer experience. An example of this evolution is that we launched our Trinet Financial Services Preferred product in the second quarter. we have always provided our financial services customers with excellent service, top-tier benefits, and support for partnerships and other entities. This enhanced offering seeks to extend these capabilities. After having served nearly 5,000 different financial services customers, we applied our deep financial industry knowledge and unique customer insight to launch this new exciting product. This product is designed to enable financial services firms to deliver a premier employee experience, efficiently manage HR administration, and comply with a complex set of employment-related risks and regulations. Financial services firms, however, have not escaped the pandemic's impact. Many are now faced for the first time with the added complexity of distributed or remote workforces as employees choose to work from different locations. Trinet Financial Services Preferred is well positioned to address this emerging complexity on behalf of our customers. This value will be delivered by both new technology and an evolved service model. Having nearly tripled our financial services customer base since 2014, and currently at our all-time high in financial services WSEs, we look forward to driving continued strong growth through adoption of our financial services preferred product. Sales and marketing are more critical than ever to our organization's growth. As we look to the second half, we expect to see a continued recovery in new sales buttressed by the powerful collaboration between our sales and marketing teams. During the pandemic, new business generation pivoted to channels where engagement and viewership increased. Our marketing team anticipated this new reality with enhanced web capabilities. Through the first half of 2021, new ACV originated by marketing is up 18% year over year. The vast majority of this business was driven through our omnichannel marketing efforts. As economic and face-to-face activity accelerates, we expect marketing to augment our efforts with increased program activity. Historically, Trinet has benefited most from face-to-face selling with prospects referred to us. Our sales team is highly effective at cultivating strong referral networks by bringing together customers, prospects, and salespeople and closing this business at faster and higher rates. In June, the successful rollout of the COVID-19 vaccines in California and New York empowered political leadership to reopen the states, which represent two of our core markets. In response, Jonathan LeCompte, our new sales leader, has spearheaded a staged return to face-to-face selling. We are excited for sales and marketing to reestablish our in-person program activity in support of our referral business. In the second quarter, we announced our largest and most prominent company program. Trinet PeopleForce, a four-day virtual and in-person conference focused on business transformation, agility, and innovation for small and medium-sized businesses, is scheduled to begin on September 13th. PeopleForce has become our showcase event where our people, products, and services are on full display for prospects and customers. When we say we put our customers at the center of everything we do, there is no better event than PeopleForce for a prospect to see Trinet in action. This year's event will be a hybrid in-person from New York City and virtual from anywhere. We are excited about the potential sales impact from PeopleForce, and we expect our sales and marketing teams to leverage this event to drive new business throughout our fall selling season. As I reflect on our second quarter performance and look to the second half of 2021, I am proud of our entire team and what they've accomplished. We are delivering strong financial results and outstanding operating performance. Our execution has resulted in revenue, earnings, and volume growth in the quarter. Looking ahead, we continue to take necessary steps to thoughtfully accelerate these efforts, and I look forward to updating you on our progress. I will now turn the call over to Kelly for a more detailed financial update. Kelly?