TriNet Group Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Polkowitz - JP Morgan - Analyst : I wanted to ask a question. Mike, you made a comment on the call about commitment to achieving the 87% to 90% long-term ICR range, and you're committed to that even if you have to trade off some WSD growth. I just wanted to start by asking, can you speak to like how materially you see that being? Or like how much of the book potentially would have to be cleaned up to achieve that?

Question: Andrew Polkowitz - JP Morgan - Analyst : Okay. That's super helpful. Appreciate those comments. I just had one quick follow-up. I know that you guys are growing over pretty significant sales growth from last year, so the 40% on top of (Inaudible) seems really strong. Just I'm curious as you look into next year, I know you talked about making investments in distribution last quarter. I was curious if you could give any more color just on those investments in multichannel distribution.

Question: Andrew Polkowitz - JP Morgan - Analyst : All right, thank you very much. Appreciate the color.

Question: Kyle Peterson - Needham & Company Inc - Analyst : Great. Good morning guys and, and thanks for taking the questions. Wanted to start off on the Q4 guide for professional services revenue, I guess, that's calling for a pretty decent-size step-down both year-on-year sequentially. So if you guys could provide any more color on how much of that is maybe due to some of these workforce reductions and some that clients had in September versus any like, whether it's just macro or other drags? Or just any more color on some of those headwinds in the Services segment would be very helpful.

Question: Kyle Peterson - Needham & Company Inc - Analyst : Okay. That is helpful. And then just on timing with in your insurance repricing, you guys said that you guys have more than two-third of the book repriced now. Could you just, I guess, remind us of what time frame we should think about the kind of the roughly last [third], is that over the next one to two quarters? Like how should we think about when the rest of the book is expected to get repriced based on renewal cycles?

Question: Kyle Peterson - Needham & Company Inc - Analyst : Okay. Sounds good. So I guess you guys didn't reprice -- so July would still need to reprice it that even though it's small, it hasn't -- it didn't reprice this past year, is that correct?

Question: Kyle Peterson - Needham & Company Inc - Analyst : Okay. Thank you very much for taking my questions.

Question: Kevin McVeigh - UBS Equities - Analyst : Thank you so much and good morning. Any sense -- I mean, it seems like particularly the kind of CIE seems somewhat abrupt just given the fact that kind of where we are in the -- just given, I guess, the percentages, is that right? Or is there anything -- I mean, I know certain verticals have been kind of weak, but they've been weak for, I think, a while. Just any thoughts, Mike, as to what kind of -- was it the cost that really drove it? Just any thoughts because it's obviously a pretty deceleration.

Question: Kevin McVeigh - UBS Equities - Analyst : Got it. So it wasn't any client loss or anything like that, right? I mean that wouldn't be factored in. This was just kind of purely employee-driven?

Question: Kevin McVeigh - UBS Equities - Analyst : It's helpful. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 25, 2024 / 12:30PM, TNET.N - Q3 2024 TriNet Group Inc Earnings Call

Question: Andrew Nicholas - William Blair & Company - Analyst : Hi, good morning. Thank you for taking my questions. I wanted to circle back to the commentary regarding kind of balancing WSE growth and ICR and pair that with the preliminary 2025 outlook on ICR. I guess I'm trying to understand, given renewals seem to have gone quite well in terms of getting your targeted price increases, retention is good. Why is it then that you wouldn't see an uptick in the ICR sooner? Is it a function of the fact that one-third of the book will not have been repriced to start the year? Is it -- maybe you didn't -- you weren't as aggressive with price increases of late to keep retention high? I'm just trying to understand what the different dynamics are because I would think if you're able to raise price and maintain clients on the book that maybe you see a bit better outlook next year compared to the 90% that you're looking at in 2024.

Question: Andrew Nicholas - William Blair & Company - Analyst : That's very helpful. And maybe as a follow-up to that discussion, understanding that the macro is incredibly difficult to predict. And health care utilization over any short-term time frame can be lumpy. I mean how do you feel about kind of the conservatism of your outlook for the fourth quarter? What are you assuming or what do we need to have happen or change from kind of year-to-date levels on the claims front to be outside or above that range? Just any thoughts on the conservatism of the outlook you provided. Thank you.

Question: Andrew Nicholas - William Blair & Company - Analyst : Thank You.

Question: Jared Levine - TD Cowen - Analyst : Thank you. I just wanted to double click in terms of the sales headcount growth. Previously, you were targeting about 20% growth for this fall selling season. Just can you just discuss kind of what resulted in you not getting to that 20% growth target? And update thoughts on sales headcount growth here over the near term?

Question: Jared Levine - TD Cowen - Analyst : Got it. And then in terms of the PEO bookings, you did call out some impact in terms of the pipeline conversion there. What would you primarily attribute to that? Is that macro uncertainty? Is it the elevate health cost pricing that we're seeing there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 25, 2024 / 12:30PM, TNET.N - Q3 2024 TriNet Group Inc Earnings Call

Question: Jared Levine - TD Cowen - Analyst : Got it. And then just lastly here real quickly. In terms of the Q1 discussions around health enrollment in terms of those pricing discussions, is it -- do you feel like it's setting up pretty similar here to how it's going in Q4 where you're maintaining still really healthy retention? Or any kind of differences that you're seeing in terms of these Q1 health enrollment discussions?

Question: Jared Levine - TD Cowen - Analyst : Got it. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 25, 2024 / 12:30PM, TNET.N - Q3 2024 TriNet Group Inc Earnings Call

Question: David Grossman - Stifel Europe - Analyst : Thank you, all. Good morning. I'm wondering if you could maybe help us understand what the competitive dynamic looks like in an environment like this, particularly given how an at-risk PEO kind of can perform relative to the PEOs who don't take risk? Is it an environment that would typically put you at a disadvantage? Would it put you an advantage? Or do you think it really doesn't have much impact given that a couple of your larger competitors are largely passing through health care.

Question: David Grossman - Stifel Europe - Analyst : Right. And Kelly, I thought you said, if I heard you right that you released your pricing 90 days in advance. If I heard that correctly, does that imply that the pricing for the October 1, renewals would have gone out prior to the uptick in utilization. I just want to make sure that I understood that comment and the impact that may have.

Question: David Grossman - Stifel Europe - Analyst : And so does that imply that you would have a similar increase on the January 1, cohort then as well? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 25, 2024 / 12:30PM, TNET.N - Q3 2024 TriNet Group Inc Earnings Call

Question: David Grossman - Stifel Europe - Analyst : Right. And I'm sorry, I missed some of your commentary about the fourth quarter professional services revenue. I thought you said limited CIE

Question: David Grossman - Stifel Europe - Analyst : Okay. I'm sorry. I thought that was in the third quarter. Got it. And just lastly, I know workers' count is the tailwind is diminishing throughout the industry. Can you give us a rough sense of how much of a margin headwind that workers' comp will be in 2025?

Question: David Grossman - Stifel Europe - Analyst : Got it. Okay, guys. Good luck. Thanks very much.