TriNet Group, Inc.

Good day and welcome to the TRINET fourth quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please tell 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 can press star then one on your telephone keypad. To try your question, please press star then two. Please note, this event is being recorded. And now let's turn to the conference over to Alex Bauer, head of investor relations. Please go ahead.

Thank you, operator. Good morning. My name is Alex Bauer, Trinet's head of investor relations. Thank you for joining us and welcome to Trinet's fourth quarter conference call and webcast. I'm joined today by our president and CEO, Mike Simons, and our CFO, Mala Murthy. Before we begin, I would like to preview this morning's call. First, I will pass the call to Mike for his comments regarding our fourth quarter and full-year performance. Mala will then review our Q4 and full-year financial performance in greater detail and conclude with our 2026 financial guidance and outlook. Please note that today's discussion will include our 2026 full-year financial outlook, our midterm 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 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, 10-Q filings, or 10-K filing, which are 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 all for joining us this morning. 2025 was a challenging year across the SMB landscape marked by elevated medical cost inflation and muted hiring activity. Against that backdrop, I'm proud of how the TriNet team stayed focused on our clients and executed with discipline against our strategy. As a result of that execution, we delivered solid financial performance. We finished the year at the top end of our earnings guidance and generated 16% growth in free cash flow. We significantly improved the quality of our pricing processes, successfully completing a comprehensive health fee renewal across our customer base, strengthening our risk position heading into 2026. And we made meaningful progress against our most important initiatives, improving client service, strengthening our go-to-market execution, and driving greater operational efficiency. We're making progress on what we control, repositioning Trinet for durable long-term growth and staying focused on our clients. And in an environment like this, healthcare inflation at levels not seen in more than two decades and the slowest hiring market since 2020, our clients need us more than ever. Yes, Trinet typically delivers a mid to high teens ROI to SMBs by leveraging our scale and technology to lower HR and benefits expense. However, beyond cost, we help our clients manage risk while acting as a trusted advisor in a time of change, something an increasingly big number of our clients are dealing with today. For example, we worked with one technology client, a sector dealing with significant disruption, to help restructure their 160-person organization. We helped them reduce costs by more than 20%, flatten the management structure, prioritize critical skills, and implement a compensation framework aligned with their long-term objectives. This is the positive impact Trinet can have on an SMB. And while we can't control external headwinds, we are gaining momentum, adding new capabilities designed to bring in more clients and serve them longer. The growth-focused investments we made in 2025 are beginning to take hold. Sales were up nicely in January, and we expect momentum to continue through 2026. Our broker channel is a long-term build, but off to a strong start. We entered 2026 with four national partners and expect to add more over time. We've improved our quoting, service, technology, and incentive alignment with our key partners. Health brokers contributed disproportionately to both our January sales growth and to our pipeline for the coming months. Second, we invested meaningfully in our sales organization in 2025 with a focus on maturing and retaining senior sales talent. We're coming into 2026 with double-digit growth in tenured reps, those with greater than four years of experience. One senior rep is more productive than four first-year reps, and as a group, they are critical for effective collaboration with successful brokers in each local market. To build a sustainable rep pipeline, we launched the Ascend program in 2025, bringing recent graduates into an immersive training experience in Atlanta. We are pleased with the results and excited about the first cohort entering the market aligned with the fall selling season. These new reps, combined with the growth in tenured reps, will result in nearly a 20% expansion in selling capacity later this year. Looking even further out, last week we announced the expansion of Ascend to six regional hubs. This program is helping us attract motivated talent, embed our culture early, and build long-term sales capacity. We're also seeing how this influx of AI native talent is accelerating adoption of AI across our sales processes. While it doesn't happen overnight, we are excited about the sustainable way our sales force is being built. Third, we are simplifying our PEO health plan offering through benefit bundles. We're increasingly presented prospects with streamlined geographic and risk adjusted bundles. Early feedback has been positive and we expect momentum to build as the year progresses. Finally, ASO is now a core growth driver in 2026. After discontinuing our SAS only HRIS platform at the start of 2025, Conversion rates to ASO exceeded expectations. We ended the year with more than 39,000 ASO users, average PEPMs of approximately $50, roughly three times our SaaS-only offering, and stronger-than-expected new sales. Having a successful ASO offering in our portfolio gives our reps and brokers more opportunities to grow their businesses when PEO may not be a fit. Of course, other major lever for client growth is driving improved retention. For us to return to our targeted insurance cost ratio in the current medical cost inflationary environment required a significant repricing effort. For 2025, our ICR was 90.8, slightly better than the midpoint of our guidance with year-over-year improvement in the fourth quarter. we addressed a cohort that had been significantly underpriced in 2023 and early 2024. And while the repricing resulted in an increase to client attrition, I'm pleased to report that January renewals represented the final major true-up for this cohort. Remaining clients have now cycled through two renewals and are trending toward expected ICR levels in 2026. Looking ahead, Barring a significant uptick in healthcare trend beyond the already elevated level, health fee pricing pressure will moderate. To give you some sense for this, in looking at our April 1st renewals, the percentage of clients receiving health fee increases above 30% declined by more than half versus Jan 1 renewals. This is a significant move closer to a normalized distribution. With these catch-up renewals behind us, Retention will increasingly be driven by strong capabilities and service quality, and here we're making great progress. In 2025, TriNet achieved an all-time high Net Promoter Score. While encouraged by this progress, our ambition is higher. In the coming weeks, we will launch TriNet Assistant, an AI-powered HR tool that enables customers to receive accurate, immediate answers across a broad range of HR topics. Built on more than 30 years of curated expertise, this represents a meaningful advancement in how we deliver value. Importantly, the Assistant will be expanding and improving rapidly post-launch. The foundational work has been laid with the right security and compliance layers in place. Over the coming quarters, we believe Trinet Assistant will become an indispensable tool for customers. Beyond AI, we are enhancing the client experience through strategic integrations. We plan to announce new capabilities in international employment, contractor management, IT provisioning and security, and leave of absence, significantly expanding the value provided via the Trinet platform. In summary, we have built real momentum with our people, partnerships, and our platform investments. It's important to note that we're making these investments while remaining disciplined on expenses. We're exiting 2025 with expenses down 7% year over year and expect further improvement in 2026. We laid out our medium-term strategy a year ago with a base case that called for modest improvement in the macro environment over time. We have not seen any improvement to date, resulting in pressure to our revenue expectations, even as we've progressed the plan on margin improvement. Our guidance for 2026, based on our own data and benchmarked externally, doesn't assume any improvement on healthcare cost trend or hiring. Instead, we will just stay focused on getting better, doing the things we can control, go to market execution, improved value to clients, discipline pricing, and prudent expense management. We've made difficult decisions in response to a challenging macro environment, choices that are making us a stronger, more disciplined, more client-focused company, a company that will generate good outcomes in 2026 with building momentum. And with that, I'd like to ask our new Chief Financial Officer, Mala Murthy, to share more details on the quarter and the outlook for 2026. Mala is a little over two months on the job and has already made a positive impact while coming rapidly up to speed. Welcome, Mala.