TriNet Announces Second Quarter Fiscal 2016 Results and Senior Secured Credit Facility Refinancing

OREANDA-NEWS. August 02, 2016. TriNet Group, Inc. (NYSE: TNET), a leading provider of a comprehensive human resources solution for small to midsize businesses, today announced financial results for the second quarter ended June 30, 2016. TriNet also announced the refinancing of its senior secured credit facilities on July 29, 2016.

Second quarter highlights include:

• Total revenues increased 17% to \\$745.8 million, while Net Service Revenues increased 22% to \\$149.2 million, each as compared to the same period last year.
• Total WSEs at June 30, 2016 increased 8% from June 30, 2015, to approximately 325,000.
• Net income was \\$12.3 million, or \\$0.17 per diluted share, compared to net loss of \\$1.3 million, or \\$0.02 loss per diluted share, in the same period last year.
• Adjusted Net Income was \\$19.5 million, or \\$0.27 per diluted share, compared to Adjusted Net Income of \\$10.5 million, or \\$0.15 per diluted share, in the same period last year.
• Adjusted EBITDA was \\$42.6 million, a 72% increase from the same period last year.

"I am pleased with our second quarter results," said

Burton M. Goldfield, TriNet's President and CEO.  "We delivered strong financial results and made further progress aligning our vertical sales channel and building bundled products tailored to select industries.  Our differentiated vertical product offerings are resonating in a market in need of innovative solutions, and we believe we are well positioned for the second half of the year."

TriNet's total revenues for the second quarter of 2016 increased 17% from the second quarter of 2015 to \\$745.8 million, while Net Service Revenues increased 22% from the second quarter of 2015 to \\$149.2 million. Net Service Revenues consisted of professional service revenues of \\$109.6 million and Net Insurance Service Revenues of \\$39.6 million. Net Insurance Service Revenues consisted of insurance service revenues of \\$636.3 million, less insurance costs of \\$596.7 million. Professional service revenues for the second quarter of 2016 increased 12%, and Net Insurance Service Revenues increased 63%, compared to the second quarter of 2015. Results for the second quarter of 2016 reflect a net increase of 23,091 WSEs since June 30, 2015 representing 8% growth. TriNet ended the second quarter with 471 Total Sales Representatives, down from 486 at the end of the second quarter of 2015, a decrease of 3%.

At June 30, 2016, TriNet had cash and equivalents of \\$166.7 million and total debt of \\$476.8 million. On July 29, 2016, TriNet refinanced its tranche B term loan in a leverage-neutral transaction: \\$135 million principal amount of tranche B term loans outstanding at June 30, 2016 and maturing July 2017 were replaced with the same amount of tranche A-2 term loans maturing July 2019 pursuant to an Incremental Amendment to TriNet's Amended and Restated Credit Agreement. The \\$342 million of tranche A term loans outstanding at June 30, 2016 and the revolving credit facility were not modified.  Additional details regarding the terms of the refinancing and a copy of the Incremental Amendment to the Amended and Restated Credit Agreement are provided in TriNet's Current Report on Form 8-K dated August 1, 2016, filed with the Securities and Exchange Commission.

Earnings Conference Call and Audio Webcast
TriNet will host a conference call at 2:00 p.m. PT ( 5:00 p.m. ET) today to discuss its quarterly results and the outlook for the 2016 second half. TriNet encourages participants to pre-register for the conference call. Callers who pre-register will be given a unique PIN to gain immediate access to the call and bypass the live operator. To pre-register, go to: http://dpregister.com/10090202. For those who would like to join the call but have not pre-registered, they can do so by dialing +1 (412) 317-5426 and requesting the "TriNet Conference Call."  The live webcast of the conference call can be accessed on the Investor Relations section of TriNet's website at http://investor.trinet.com. A replay of the webcast will be available on this site for approximately one year. A telephonic replay will be available for one week following the conference call at +1 (412) 317-0088 conference ID: 10090202.

About TriNet
TriNet is a leading provider of a comprehensive human resources solution for small to midsize businesses, or SMBs. We enhance business productivity by enabling our clients to outsource their human resources, or HR, function to one strategic partner and allowing them to focus on operating and growing their core businesses. Our HR solution includes services such as payroll processing, human capital consulting, employment law compliance and employee benefits, including health insurance, retirement plans and workers compensation insurance. Our services are delivered by our expert team of HR professionals and enabled by our proprietary, cloud-based technology platform, which allows our clients and their employees to efficiently conduct their HR transactions anytime and anywhere. For more information, please visit http://www.trinet.com.

Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to TriNet's financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled "Non-GAAP Financial Measures."

Forward-Looking Statements
This press release contains, and statements made during the above referenced conference call will contain, forward-looking statements including, among other things, TriNet's expectations regarding: the growth of its customer base, its ability to deepen its presence across a range of industry sectors, its ability to roll out additional product offerings as and when planned, its ability to make enhancements to its technology platform, its ability to execute on its vertical market strategy and penetrate the market for HR solutions for small to midsize businesses. These statements are not guarantees of future performance, but are based on management's expectations as of the date hereof and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements. Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include: risks associated with the market acceptance of outsourcing the HR function, and the anticipated benefits associated with the use of a bundled HR solution; our ability to continue to expand our direct sales force and the efficacy of our sales and marketing efforts; our ability to gain new clients, and our clients' ability to grow and gain more employees; our ability to effectively acquire and integrate new businesses; the effects of seasonal trends on our results of operations; the unpredictable nature of our costs and operating expenses, in particular our insurance costs; changes to and our ability to comply with laws and regulations, including both those applicable to the co-employment relationship as well as those applicable to our clients' businesses and their employees; the continuing implementation of the Affordable Care Act, including its application to the co-employer relationship; our ability to effectively manage our growth; the effects of increased competition and our ability to compete effectively; and our ability to comply with the restrictions of our credit facility and meet our debt obligations.

Further information on risks that could affect TriNet's results is included in our filings with the Securities and Exchange Commission, including our most recently filed Annual Report on Form 10-K filed with the Commission on April 1, 2016, which could cause actual results to vary from expectations. Except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements.

TriNet, Ambitions Realized and the TriNet logo are registered trademarks of TriNet.

Key Operating Metrics
We regularly review certain key operating metrics to evaluate growth trends, measure our performance and make strategic decisions. Our key operating metrics for the periods presented were as follows:

Non-GAAP Financial Measures
We use Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share – diluted to provide an additional view of our operational performance. Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted are financial measures that are not prepared in accordance with GAAP. We define Net Insurance Service Revenues as insurance service revenues less insurance costs, which include the premiums we pay to insurance carriers for the health and workers compensation insurance coverage provided to our clients and WSEs and the reimbursements we pay to the insurance carriers for claim payments within our insurance deductible layer. We define Net Service Revenues as the sum of professional service revenues and Net Insurance Service Revenues. We define Adjusted EBITDA as net income (loss), excluding the effects of our income tax provision, interest expense, depreciation, amortization of intangible assets and stock-based compensation. We define Adjusted Net Income as net income (loss), excluding the effects of our effective income tax rate, stock-based compensation, amortization of intangible assets, non-cash interest expense, debt prepayment premium, and the income tax effect of these pre-tax adjustments at our effective tax rate. For purposes of our non-GAAP financial presentation, as a result of a 2015 increase in New York City tax rates and an increase in blended state rates, we have adjusted the effective tax rate to 42.5% for the periods ended June 30, 2016, from 40.5% for the periods ended June 30, 2015. Each of these effective tax rates exclude income tax on non-deductible stock-based compensation and discrete items including the cumulative effect of state law changes. Non-cash interest expense represents amortization and write-off of our debt issuance costs.

We believe that the use of Net Insurance Service Revenues provides useful information as it presents a measure of revenues from our provision of insurance services to our clients that eliminates the cost to us of that insurance. We believe that Net Service Revenues provides a useful measure of total revenues for the two main components of our revenues calculated on a consistent basis. We believe that the use of Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted provides additional period-to-period comparisons and analysis of trends in our business, as they exclude certain non-cash expenses. We believe that Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share – diluted are useful for our stockholders and board of directors by helping them to identify trends in our business and understand how our management evaluates our business. We use Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted to monitor and evaluate our operating results and trends on an ongoing basis and internally for operating, budgeting and financial planning purposes, in addition to allocating our resources to enhance the financial performance of our business and evaluating the effectiveness of our business strategies. We also use Net Service Revenues and Adjusted EBITDA in determining the incentive compensation for management.

Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted are not prepared in accordance with, and should not be considered in isolation of, or as an alternative to, measurements required by GAAP. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. As non-GAAP measures, Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. In particular:

• Net Insurance Service Revenues and Net Service Revenues are reduced by the insurance costs that we pay to insurance carriers;
• Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
• Adjusted EBITDA does not reflect the amounts we paid in taxes or other components of our tax provision;
• Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
• Adjusted EBITDA and Adjusted Net Income do not reflect changes in, or cash requirements for, our working capital needs;
• Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted do not reflect the non-cash component of employee compensation;
• Although depreciation and amortization of intangible assets are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
• Other companies in our industry may calculate these measures or similar measures differently than we do, limiting their usefulness as a comparative measure.

Because of these limitations, you should consider Net Insurance Service Revenues, Net Service Revenues, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share – diluted alongside other financial performance measures, including total revenues, net income (loss) and our other financial results presented in accordance with GAAP.

The table below sets forth a reconciliation of GAAP insurance service revenues to Net Insurance Service Revenues:

The table below sets forth a reconciliation of GAAP total revenues to Net Service Revenues:

The table below sets forth a reconciliation of GAAP net income (loss) to Adjusted EBITDA:

The table below sets forth a reconciliation of GAAP net income (loss) to Adjusted Net Income and Adjusted Net Income per share - diluted: