TriNet Group, Inc.

Good day, and welcome to the TRINET Second Quarter 2024 Earnings Conference Call. All participants will be in 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 on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Alex Bauer, Investor Relations. Please go ahead.

Thank you, Operator. Good morning, and thank you for joining us for Trinet's 2024 Second Quarter Earnings Conference Call. I'm Alex Bauer, and I am Trinet's Head of Investor Relations. I'm joined today by our President and CEO, Mike Simons, and our CFO, Kelly Tuminelli. Before we begin, I would like to address our use of forward-looking statements in non-GAAP financial measures. Please note that today's discussion will include our 2024 third quarter and full-year financial outlook 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 or the market price of our stock. In addition, our discussion today will include non-GAAP financial measures, including our forward-looking guidance for adjusted net income per diluted share. For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see our earnings release, 10-Q filings, or 10-K filing, which are all available on our website or through the SEC website. With that, I will turn the call over to Mike. Mike?

Thank you, Alex, and thank you, everyone, for joining us. I am pleased to share that Trinet delivered a strong second quarter with a number of positive factors contributing to our results. This morning, I'll share my thoughts on our financial and operating performance, as well as provide some additional observations regarding TriNet and the growth opportunity ahead of us now five months into my role. Starting with the market context, the environment for small and mid-sized businesses remains challenged. SMBs continue to navigate high interest rates, softening end markets, and persistent high healthcare cost inflation. They're hiring new people, but doing so cautiously. They're working very hard to retain their existing talent, avoiding the costs associated with turnover, and they're seeking to drive productivity. In short, they're signaling more clearly than ever that their people matter. And while on the topic of people, I do want to pause and recognize the thousands of my colleagues at Trinet who put our customers at the center of everything they do, helping us create exceptional value for SMBs while delivering strong performance for our shareholders. Thanks to their efforts, we made progress in the quarter against our intermediate term goal of exceeding the volume lost from attrition with the gains from new sales. Our marketing team strengthened the top of our funnel through targeted campaigns highlighting our compelling value proposition, a value proposition which includes outstanding customer service, access to high-quality benefits, and real cost savings derived from our bundled approach. Our sales team pursued those leads and delivered a good quarter with our sales roughly in line with a strong prior year and up 30% through the first half of 2024. Given our sizable market opportunity and the strength of our offering, we continue to further invest in our field teams. We finished the second quarter with 15% more reps year over year, and we expect to grow the distribution team further, approaching 20% year over year growth before heading into our fall selling season. And as we grow our sales team, we are increasingly investing in their productivity, looking to retain and develop the very best in the industry. For our services team, the ultimate performance measure is whether our customers stay with us for longer. And on this measure, our team is performing exceptionally well. Customers are benefiting from our proprietary technology access to high quality benefits priced to their risk, and our exceptional service model. During the second quarter, our full year 2024 forecasted retention rate continued to improve, nudging closer to our record 2023 performance. I'm not comfortable yet declaring that we will repeat our record 2023 retention performance. However, I am pleased that we find ourselves in this improved position. Strong retention is helping offset slower net hiring within the customer base. Customers in the quarter continue to hire, albeit at slower rates than forecasted. One encouraging CIE data point I'd note is that so far in 2024, we have now booked five consecutive months of positive yet modest customer hiring, a first since 2022. In this environment, pricing across our offering has remained aligned with the value we provide and consistent with our customers' risk. We also continue to find ways to improve our processes and operate more efficiently, resulting in a reduction in operating expenses in the quarter. So taken together, solid sales, great retention, pricing discipline, and well-managed expenses created another very good quarter and demonstrated once again that TriNet is a strong cash generative business. Through the first half, we used our cash to repurchase nearly $135 million of stock and pay out $25 million in dividends through July, returning nearly $160 million in capital to shareholders. We believe Trinet's stock at its current price represents significant long-term value, given our strong operating performance and our long-term growth prospects. And frankly, I am very optimistic about Trinet's future. While the SMB business environment is difficult at the moment, our business is demonstrating its resiliency. I'm now five months into my role, and I still have plenty to learn, but it's very clear to me that Trinet's business model is exceptional, and we have a very real growth opportunity in front of us. We've built a premium brand amongst the SMB community and the attractive verticals we target. Our service model fosters loyalty with our customer base. Our risk-taking approach to insurance allows us the platform, still somewhat nascent, to innovate and create value for customers and shareholders. And finally, we own our own technology and therefore control the customer experience and the runway to further quality and efficiency gains. We continue to do the strategy work I mentioned after one cue. identifying the best areas for us to focus on in our pursuit of profitable growth. And while there's still work to be done, certainly one of the areas will be accelerated innovation in our approach to benefits. What the market is experiencing here in 2024 with elevated healthcare inflation is reinforcing that SMBs should not try to solve for healthcare on their own. These SMBs are coming to us for help And we believe the growing cost and complexity of health care is a long-run tailwind for our business. Real opportunities exist to improve our data and analytic capabilities, innovate our benefits portfolio, and broaden our channels to capture this opportunity. On this point, we continue to round out and strengthen our leadership team. With the recent additions of Tim Nimmer, Head of Insurance Services, and Shea Treadway, our new Chief Revenue Officer. Both were attracted to Trinet in large part because of our compelling long-term growth prospects as well as the people-focused culture here. With Tim, I believe we have a leader who can both help us better manage the risk we take associated with our offering and foster a strong commercial culture to help drive growth. Tim comes to Trinet with deep knowledge and experience having led pricing, underwriting and innovation functions, for two of the largest firms globally in the health insurance space. Shea brings to Trinet extensive SMB distribution experience at significant scale across multiple channels, including direct and intermediated, with a deep knowledge of insurance products and employee benefits brokerage. With Shea, we take another step towards deepening our knowledge of multichannel distribution and digital transformation, areas which are critical for broadly and efficiently targeting the SMB market. Shea and Tim are joining a talented and motivated leadership team intently focused on strengthening our value prop, growing our business for the benefit of customers and shareholders, and fostering an inclusive and vibrant company culture necessary for us to achieve our goals. So in summary, I'm pleased with a strong quarter and the resiliency of our business. and I'm so excited about the growth opportunity ahead. For more on the quarter, I will now turn the call over to Kelly.