• Total Revenue Growth: 1% year-over-year in Q4 and for the full year.
• Worksite Employees (WSEs): Approximately 361,000 total WSEs, up 4%; 330,000 co-employed WSEs, down 2%.
• Professional Services Revenue: Declined 4% in Q4; increased 1% for the year.
• PEO Revenue Growth: 3% for the year.
• Insurance Revenue Growth: 2% in Q4; 1% for the year.
• Insurance Costs: Grew 12% in Q4; 8% for the year.
• Insurance Cost Ratio (ICR): 95% in Q4; approximately 90% for the year.
• Restructuring Charge: $49 million related to exiting HRIS business.
• Operating Expenses: Down 1% in Q4; down 2% for the full year, excluding restructuring charge.
• GAAP Net Loss Per Share: $0.46 in Q4.
• Full Year GAAP Earnings Per Diluted Share: $3.43.
• Adjusted Earnings Per Diluted Share: $0.44 in Q4; $5.32 for the year.
• Net Cash Provided by Operating Activities: $279 million for the year.
• Free Cash Flow: $201 million for the year.
• Adjusted EBITDA: $60 million in Q4; $485 million for the year.
• Share Repurchases: $219 million deployed to shareholders.
• Debt to Adjusted EBITDA Ratio: 2 times at year-end.
• 2025 Revenue Guidance: $4.9 billion to $5.1 billion.
• 2025 Adjusted EBITDA Margin Guidance: 7% to 9%.
• 2025 GAAP Earnings Per Diluted Share Guidance: $1.90 to $3.40.
• 2025 Adjusted Earnings Per Diluted Share Guidance: $3.25 to $4.75.

• Warning! GuruFocus has detected 4 Warning Signs with HOUS.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Trinet Group Inc (NYSE:TNET) achieved a 1% year-over-year revenue growth in Q4 and for the full year, aligning with their guidance.
• The company reported record retention rates for 2024, even amidst higher renewal rates.
• Trinet Group Inc (NYSE:TNET) is exiting the HRIS-only business to focus on its core PEO services, which is expected to streamline operations and improve margins.
• The company has a strong cash generation capability, with $279 million in net cash provided by operating activities and $201 million in free cash flow for 2024.
• Trinet Group Inc (NYSE:TNET) plans to continue investing in growth initiatives, funding dividends, and share repurchases, maintaining a strong capital return strategy.

Negative Points

• Trinet Group Inc (NYSE:TNET) faces challenges with low customer hiring and elevated healthcare costs, impacting new sales and attrition rates.
• The company anticipates a modest increase in attrition due to healthcare price increases, which could dampen new sales.
• Trinet Group Inc (NYSE:TNET) reported a GAAP net loss per share of $0.46 in Q4, impacted by restructuring charges.
• The company expects a contraction in adjusted EBITDA margin in 2025 due to elevated insurance cost ratios and HRIS business wind-down expenses.
• Trinet Group Inc (NYSE:TNET) anticipates a slight volume decrease in 2025, driven by prudent pricing approaches and increased attrition.

Q & A Highlights

Q: What is the duration for the medium-term financial targets, and can you discuss the components of the 4% to 6% revenue growth? A: Michael Simonds, President and CEO, explained that while the exact duration of the medium-term targets is not specified, the company expects to learn more as they progress through 2025. The revenue growth is expected to come from repricing insurance back into the targeted range and modest volume increases, particularly after 2025.

Q: Can you provide an update on the insurance cost ratio (ICR) trends and any changes in the FY '25 view? A: Michael Simonds stated that there hasn't been a significant change since the last earnings call. The ICR guidance for 2025 is around 91%, slightly higher than the previous estimate. The company has improved its insurance capabilities, with better leadership and actuarial talent, and is confident in managing the ICR back to the targeted range.

Q: Are there any potential strategic changes planned over the near or medium term? A: Michael Simonds mentioned that 2025 is a transition year, and the company is focused on exiting the HRIS business and upselling to ASO. They believe they are in a good position with the right plan and channels to drive long-term growth.

Q: How should we think about the seasonality of the business, particularly in the first quarter? A: Kelly Tuminelli, CFO, explained that the first quarter tends to be about two points better than the full-year average, while the fourth quarter is about two points worse. Professional services revenue is more front-loaded in the first quarter due to unemployment fees and varying state wage bases.

Q: What is the impact of the HRIS to ASO conversion and the broker channel on new sales growth? A: Michael Simonds highlighted that the broker channel is already contributing significantly to new business, and there is potential for growth. The company is investing in technology to treat brokers as trusted advisors, which will help optimize this channel over time. The ASO model offers flexibility and could be an exciting part of their offerings.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.