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Edited Transcript of TNET earnings conference call or presentation 25-Jul-19 9:00pm GMT

Q2 2019 TriNet Group Inc Earnings Call

SAN LEANDRO Jul 29, 2019 (Thomson StreetEvents) -- Edited Transcript of TriNet Group Inc earnings conference call or presentation Thursday, July 25, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alex Bauer

TriNet Group, Inc. - Executive Director of IR

* Burton M. Goldfield

TriNet Group, Inc. - President, CEO & Director

* Richard J. Beckert

TriNet Group, Inc. - CFO & Senior VP

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Conference Call Participants

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* David Michael Grossman

Stifel, Nicolaus & Company, Incorporated, Research Division - MD

* Palmer Miles Pawlusiak

Crédit Suisse AG, Research Division - Analyst

* Tien-Tsin Huang

JP Morgan Chase & Co, Research Division - Senior Analyst

* Timothy John McHugh

William Blair & Company L.L.C., Research Division - Partner & Global Services Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the TriNet Second Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note that this event is being recorded. I would now like to turn the conference over to Alex Bauer, Investor Relations. Please go ahead.

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Alex Bauer, TriNet Group, Inc. - Executive Director of IR [2]

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Thank you, operator. Good afternoon, everyone, and welcome to TriNet's 2019 Second Quarter Conference Call. Joining me today are Burton M. Goldfield, our President and CEO; and Richard Beckert, our Chief Financial Officer. Our prepared remarks were prerecorded. Burton will begin with an overview of our second quarter operating and financial performance. Richard will then review our financial results in more detail. We will then open up the call for the Q&A session.

Before we begin, please note that today's discussion will include our 2019 third quarter and full year guidance, 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 non-GAAP Net Service Revenues, adjusted EBITDA, adjusted EBITDA margin and adjusted net income. For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see our earnings release or our 10-Q filing for our second quarter of 2019, which are available on our website or through the SEC website.

Reconciliation of our non-GAAP forward-looking guidance to the most directly comparable GAAP measures is also available on our website.

With that, I will turn the call over to Burton for his opening remarks.

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Burton M. Goldfield, TriNet Group, Inc. - President, CEO & Director [3]

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Thank you, Alex. I'm pleased with our second quarter results, which puts us on track for delivering our 2019 plan. Capitalizing on our first quarter momentum, the second quarter saw the TriNet sales and services organizations successfully deliver value in the verticals we serve. In the second quarter, we grew GAAP total revenues 10% year-over-year to $935 million, and we grew our Net Service Revenues by 5% year-over-year to $231 million. Professional service revenues grew 11% year-over-year to $127 million. The strength in professional service revenues in the quarter was the result of our focus on keeping our customers at the center of everything we do. Professional service revenues benefited from improved retention and strength in our new sales.

During the second quarter, we grew insurance service revenues by 10% year-over-year to $808 million, while Net Insurance Service Revenues declined 2% year-over-year to $104 million for the quarter. Net Insurance Service Revenues were in line with our forecast. Please recall, Net Insurance Service Revenues in the second quarter of 2018 saw significant outperformance due to prior period adjustments. In the second quarter, our Q2 GAAP earnings per share declined 20% year-over-year to $0.64 per share, while our Q2 adjusted net income per share declined 19% to $0.70 per share. Please note that both our GAAP and non-GAAP EPS came in near the top of our guidance range.

Finally, we finished the quarter with approximately 324,000 work site employees, up 2% year-over-year due to improved customer retention as a result of our customer service teams' proactive customer engagement, improved new sales as we built on our first quarter momentum by successfully selling our value proposition and continued strong hiring from our installed base.

I am encouraged that the improvement in customer retention that we saw at the end of the first quarter has continued throughout the second quarter. We benefited from our improved customer engagement process, which involves leveraging our customer analytics to anticipate and respond to our customer concerns. Our ability to monitor thousands of customers for events such as renewal pricings or management changes has become increasingly beneficial. For example, during the quarter, we engaged a 300-plus WSE design company, which was at risk of leaving. Anticipating sensitivity to their renewal pricing, we proactively engaged the customer on their upcoming renewal. We leveraged our insurance services team to propose cost-containment strategies for the upcoming year. Our customer implemented the proposed strategies and based on these actions, remains a customer today.

Our focus on improving our customer experience is a critical component in our strategy for returning to sustainable WSE growth. The early returns on our efforts are positive and are gaining momentum.

During the second quarter, new sales, another key component of our strategy for returning to sustainable WSE growth, improved. Our sales force successfully sold our products and services into the verticals we serve. We package HR expertise, benefit options, payroll services, risk mitigation and our technology platform together so that our customers have more time to focus on their business and are in a stronger position to attract and retain top talent. Our value proposition was on full display this quarter when we won the business of a New York-based architecture firm. The process began when a new CFO joined the firm and quickly sought out a PEO partner.

TriNet's comprehensive products and services proved compelling. First, the new CFO was impressed with our platform and cloud-based products. The TriNet user interface was critical for winning over the firm's executives. Second, based in New York with a diverse employee group, the new customer valued TriNet's benefits offering. We could accommodate their employees' various benefit needs, including access to rich plans as well as high deductible HSA-eligible plans, an important advantage when competing for talent in a tight labor market.

Finally, with several employees on work visas in-country, the customer valued our visa service capabilities. Having TriNet streamline the visa workflow was very attractive to the customer in making the decision to purchase TriNet. This process is not atypical of the way we engage with prospects in the selling cycle. We continue to be attractive and add value in our core customer segments, as this example demonstrates.

Given our reported WSE performance during the second quarter and the trend of our retention and new sales results, we now expect to grow our volume for the remainder of 2019. The evolution of our products continues with the July 16 release of TriNet workforce analytics, our fully integrated HR reporting and analytics tool.

Workforce analytics provides our SMB customers with rich data, enabling in-depth analysis needed for accurate reporting and forecasting. We assist our customers through our services team of industry-specific consultants to interpret this data and empower informed business decisions.

Key features of the workforce analytics product includes: access to important workforce data such as annualized compensation, average employee tenure and benefit selections; integration with third-party vendors such as QuickBooks, NetSuite, Xero and Intacct to sync accounting data for more accurate reporting; and the ability to create, save and quickly access customized favorite or recently viewed reports, as well as many other features.

Additionally, during the second quarter, we launched our brand and marketing campaign, People Matter. Our campaign places at its center TriNet customers who represent a diverse cross-section of American entrepreneurialism and celebrates their many contributions to the U.S. economy and our commitment to small and medium-sized businesses. Following our brand campaign launch featuring New York customers in April, we expanded the campaign to feature additional customers from the San Francisco Bay area and Los Angeles. As we approach our critical selling season, these customers will play a role in our demand-focused omnichannel marketing campaign. We remain committed to developing a world-class brand aligned with our powerful value proposition and in support of our sales efforts.

Now let me turn the call over to Richard for a review of our financials. Richard?

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Richard J. Beckert, TriNet Group, Inc. - CFO & Senior VP [4]

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Thank you, Burton. As I review the financials, I will focus on the GAAP and non-GAAP numbers where appropriate. During the second quarter, GAAP total revenue increased 10% year-over-year to $935 million, and we grew our Net Service Revenues by 5% year-over-year to $231 million. We finished the second quarter with approximately 324,000 work site employees, showing 2% year-over-year growth. Average WSE count for the second quarter was approximately 319,000, also a 2% year-over-year increase. Professional service revenue for the second quarter increased 11% year-over-year to $127 million. Professional service revenue benefited from higher-than-expected WSE count as a result of both our process improvement initiatives and new sales, as well as a mix towards our white-collar verticals. Insurance Service Revenues for the second quarter increased 10% year-over-year to $808 million, and Net Insurance Service Revenues decreased 2% year-over-year to $104 million. Net Insurance Service Revenues in the quarter benefited from strong revenue due to our higher WSE count and lower workers' comp costs, driven by $11 million worth of favorable prior period development, which were offset by increased health costs. As a reminder, Net Insurance Service Revenues in the second quarter of 2018 benefited from $6 million in workers' comp favorable prior period development, the reversal of our Q1 flu reserve and the realized favorable workers' comp and health experience. Our second quarter GAAP effective tax rate was 17%. Our tax rate in the quarter benefited from the tax treatment of employee equity compensation and a discrete benefit from tax changes. For the quarter, our non-GAAP tax rate was 26%. GAAP net income decreased 22% year-over-year to $46 million or $0.64 per share compared to $58 million or $0.80 per share in the same quarter last year.

Adjusted net income decreased 21% year-over-year to $50 million or $0.70 per share compared to $63 million or $0.87 per share in the same quarter last year. Adjusted EBITDA for the second quarter decreased 16% year-over-year to $85 million compared to $99 million during the prior year period for an adjusted EBITDA margin of 36%. Adjusted EBITDA was impacted by increased OpEx, as we invest in our marketing campaign and process improvements initiatives. We closed the second quarter with total cash of $219 million and working capital of $236 million versus $251 million and $226 million, respectively, in the first quarter of 2019.

Through the first half, we generated $108 million of positive corporate cash flow from operating activities and used $270 million primarily comprised of WSE-related payroll tax obligations. As a result, total cash outflow from operations were $162 million. We spent approximately $25 million to repurchase approximately 393,000 shares of stock in the second quarter.

Turning to our 2019 full year and third quarter outlook. I will provide GAAP and non-GAAP guidance. For the full year, we are raising guidance, reflecting both our first half performance and our second half expectations. First, for the second half, we expect OpEx growth to moderate even as we continue to invest in both our process improvement initiatives and our 2019 marketing campaign.

Second, our revised guidance reflects our expectation that health cost at one carrier will remain elevated. For FY '19, we are forecasting GAAP revenue in the range of $3.8 billion to $3.85 billion, up from $3.7 billion to $3.8 billion, and now representing year-over-year growth of 8% to 10%.

We expect Net Service Revenues in the range of $938 million to $951 million, an increase from $906 million to $933 million, which now represents year-over-year growth of 5% to 7%. Adjusted EBITDA is now expected to be in the range of $385 million to $400 million, up from $380 million to $390 million. This now represents a 41% to 42% adjusted EBITDA margin range for FY '19 versus a 42% previously. The low end of our adjusted EBITDA guidance reflects potential elevated costs with one of our carriers. We now expect GAAP earnings per share in the range of $2.99 to $3.16, up from $2.94 to $3.07, and adjusted net income per share in the range of $3.34 to $3.50, up from $3.34 to $3.47.

Before providing our third quarter guidance, please note that during the third quarter of 2018, we had a very strong net insurance margin of 14%, which is unlikely to be repeated during our third quarter of 2019. As a reminder, the 3Q 2018 margin benefited from the change in economic arrangement with one of our carriers and the realized favorable workers' comp and health experience. For Q3 2019, we expect GAAP revenue in the range of $954 million to $964 million, representing year-over-year growth of 9% to 10%, and Net Service Revenues in the range of $213 million to $228 million, which represents a year-over-year decline of minus 7% to flat growth. Adjusted EBITDA is expected to be in the range of $84 million to $97 million for the quarter, representing an adjusted EBITDA margin range of 39% to 42%. We expect GAAP earnings per share in the range of $0.62 to $0.77 per share and adjusted net income per share in the range of $0.71 to $0.85 per share.

With that, I will return the call to Burton for his closing comments. Burton?

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Burton M. Goldfield, TriNet Group, Inc. - President, CEO & Director [5]

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Thank you, Richard. This has been a particularly satisfying beginning to our fiscal year. The marketing campaign, People Matter, has allowed me the opportunity to get even closer to our customers who are doing incredible things. This energizes me and inspires the team to do even better. With respect to our growth, as I have said in the past, WSEs are an element of our growth model but do not represent the only metric. Having said that, I am pleased that we returned to volume growth and expect to continue to grow WSEs. We are reflecting this growth by raising our full year top line and Net Service Revenue guidance. Our goal continues to be profitable growth by servicing our core verticals. I'd like to end by again thanking the team for the incredible work you are doing. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from Timothy McHugh with William Blair.

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Timothy John McHugh, William Blair & Company L.L.C., Research Division - Partner & Global Services Analyst [2]

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Just following up, I guess, on the kind of the commentary around retention. Can you quantify that at all, I guess? And I guess, give us some context relative to where it was early this year, as well as I guess a year ago? I'm just trying to understand how much better it has gotten for you guys?

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Richard J. Beckert, TriNet Group, Inc. - CFO & Senior VP [3]

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Hi, Tim, it's Rich. As we've talked about on the call, the investing that we did in the fourth quarter of last year and through the first half of this year is starting to pay dividends, so that's why you see that elevated OpEx. What we saw, as we finished up the last migration of the OSI platform, what we really start to see now is that's coming in very strong. A lot of the things you heard Burton talk about being preemptive, I think are really starting to pay dividends. We are not going to declare that it is over, but we feel pretty good about what we have been able to accomplish in the last 6 months on retention.

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Burton M. Goldfield, TriNet Group, Inc. - President, CEO & Director [4]

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Yes, Tim, and there's not much I can add there other than to say that this was expected. It's better than I thought. Having SOI behind us, focused on our core verticals and allowing our teams to service these great customers is starting to pay off in terms of on track to return to growth in the WSE count.

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Timothy John McHugh, William Blair & Company L.L.C., Research Division - Partner & Global Services Analyst [5]

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I guess, may be let me follow up. Is retention operating near a peakish type of level, if you will, or higher than you have seen in the past? Or is there room for further improvement over the next medium-term here?

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Richard J. Beckert, TriNet Group, Inc. - CFO & Senior VP [6]

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Well, remember, we were elevated in Q1, right? So we should be able to improve on that moving on into next year. A lot of the effort that we're doing we believe will continue to have a pay-off as you move out into next year and beyond. So we can see things like our Net Promoter Score increasing and things like that. These are all indicators that we are touching the right parts of the customer.

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Timothy John McHugh, William Blair & Company L.L.C., Research Division - Partner & Global Services Analyst [7]

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Okay, and then just on the health care claim side. I guess you have, I think, one carrier, which you talked about last quarter as well. What's -- I guess, how do you look at the risk that that's a trend line that could start to -- you could start to see more broadly across the business? I guess, just talk about, well, how you have looked at that?

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Richard J. Beckert, TriNet Group, Inc. - CFO & Senior VP [8]

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No, it's contained in the 1 carrier. It's in the low end of guidance for both Q3 and full year if they do perform. Now remember the wrap around effect, because we started see it in Q4 last year. So it will naturally start to get muted. But we think that -- we know it's contained to that one carrier. We know the geographic region and we are continuing to work with them. And then of course, we will reprice the entire book of business during Q1 of next year.

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Operator [9]

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Our next question will come from Tien-Tsin Huang with JPMorgan.

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Tien-Tsin Huang, JP Morgan Chase & Co, Research Division - Senior Analyst [10]

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So yes, good to see the WSE count go positive here. So I know it's hard to give specifics, but could you may be rank the factors that drove the -- drove you back to positive and the outlook for volume? And I heard new sales was a contributor, retention from the tools you put in was a contributor. It sounds like same-store growth at your installed base was positive as well. So can you maybe just help us rank the factors that contributed to the positive outcome?

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Burton M. Goldfield, TriNet Group, Inc. - President, CEO & Director [11]

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Sure. So as you've heard me say in the past, the WSE growth is an element of our growth but not the only metric and the fact is all 3 of the areas that you just talked about, I'm really pleased with and are up. I am pleased with new sales. I'm pleased with the productivity of new sales. The demand in the market remains strong and the competitive landscape it is -- hasn't changed much. So that's the new sales side. Attrition, or on the other side of the coin, retention, was strong. For me, a lot of it is the work that we did at the end of last year, the beginning of the year, and be completely away from the attrition factor associated with the migration of the SOI book of business. So it's better than I thought, but I fully expect it to get back to this growth stance. And then finally, new hiring was great within our installed base. The customers are hiring people. The market is limited in the number of great people out there and I'm finding that the TriNet customers are out there, getting more than their fair share of great employees to put on their companies.

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Tien-Tsin Huang, JP Morgan Chase & Co, Research Division - Senior Analyst [12]

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Got it. So just as a quick second question, maybe just on the trend on commercial service revenue per WSE is still trending up. The net insurance margin on the other hand, I think, is coming -- is still a bit better than what you expected but a little bit back to normal versus last year. So have you changed -- should we change our thinking on trend line on both of those items here as we cross into the second half of the year, again, professional service revenue per work site employee and then the net insurance margin outlook for the second half versus first half.

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Richard J. Beckert, TriNet Group, Inc. - CFO & Senior VP [13]

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No, I think, we've captured it, as you can tell, on the low end of guidance that would be, if that trend from that one carrier continues. And at the top end we are still in line with what we had said, the 12% to 13%. That's not -- it's all within that guidance range. From professional services revenue, I think Burton highlighted it in his opening remarks. We're going after the right verticals with the right product at the right price. We are able to get that. We are seeing the attach rate of our -- people who are taking our insurance, increase, so that says that's priced correctly, and we are very selective. So we're making sure that the price to risk inside of insurance is correct and the customers that we're going after see the value of what we have inside the total company.

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Operator [14]

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Our next question will come from David Grossman with Stifel.

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David Michael Grossman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [15]

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So the last couple of questions, I think, were trying to get some better perspective on the different elements of growth. And it sounds like you are reticent to get too specific about each of those elements, but what can you tell us about where we are in this cycle that gets you back to more of an equilibrium level of growth? I mean I think it's fair that -- it's a fair question given that we're coming off a period where a lot of those metrics were going down or sideways. So now that they're pointing in the right direction, what color can you give us that can better give us a sense of how we should think about where the model can -- what kind of growth we can generate in equilibrium once those metrics are in place for a couple of quarters and they continue to improve.

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Burton M. Goldfield, TriNet Group, Inc. - President, CEO & Director [16]

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Yes, David, this is Burton. Look, it's a huge addressable market, and we are very excited about the future. I believe we're on track to return to mid to single -- or to high single-digit growth, and I believe that the retention will continue to get better and the new sales productivity, as the rest mature, will get better. So ultimately, there is a strong opportunity for us to build market share with net new logos and companies that grow to continue to increase on the volume metric which you are focused on, which is the WSE count. But equal to me -- equal for me is the PEPM growth and selecting the right customers that see the full value proposition of TriNet at that right price that stay with us for a long period of time.

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David Michael Grossman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [17]

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So can you give us...

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Richard J. Beckert, TriNet Group, Inc. - CFO & Senior VP [18]

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Let me just add to that. Remember, we had talked about the flywheel effect for the company. So we have been saying that new sales have been growing with the industry and that it was just going to take a while for the flywheel effect to take in. And you are just starting to see that now as we continue to retain the right customers. As Burton had said, our WSE count is a piece of it, but we're pretty happy with the 11% growth rate that you see and 10% overall in GAAP.

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David Michael Grossman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [19]

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Right. So just to the point, Burton, you made about revenue per client. So what can you tell us about what the change has been now that you are focusing on a different client in terms of what kind of revenue you're getting? Because we just see the blended average of course. But just curious, as you think about the new business you're bringing in, what is the difference that we're talking about, a 5% difference, a 10% difference? Can give us any granularity at all?

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Burton M. Goldfield, TriNet Group, Inc. - President, CEO & Director [20]

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Well, what the granularity I will give you is that I am focused on ACV, the annual contract value and it continues to improve on a per rep basis in the second quarter. Additional granularity is, I'm very pleased with the first half results from my sales team. And then when you couple that with the increased retention and the changing in the -- change in existing, I find that we are headed in the right direction, which is the reason I say we're on track to return to mid- to high single-digit growth in that WSE metric.

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David Michael Grossman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [21]

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Got it, okay, fair enough. And then just maybe a longer-term question about margin, since our longer-term margin target for net interest margin is more in that 11% to 12% range. If we head back to that level from where we are now, do you still feel you have got enough leverage embedded in the business that you can still show overall margin expansion even if the net insurance margins come back down to that target level, which is probably a little over a 100 basis points from where we are right now.

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Richard J. Beckert, TriNet Group, Inc. - CFO & Senior VP [22]

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Right. So as you know, part of that is due to the prior period development predominantly in workers' comp and that should abate over time. At the same time, it also says the job we're doing on selecting the right customers and pricing to risk, we think, is paying off. As far as the -- a lot of the effort that we're doing right now for getting our internal operations to work much better, so a lot of process improvements, and the work we're doing right now on marketing to have a entire quarter longer in marketing are all things that we think will stimulate both the top line and the bottom line. To the degree we choose to increase or decrease in the future will be whether or not the right mix for revenue growth versus profit but we plan on -- the selection of clients has always going to be profitable, smart client selection.

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David Michael Grossman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [23]

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Right. So I guess just to rephrase it directly is that even if we return to that more natural spot for insurance margin, does that necessarily impede your ability to expand margin overall going forward?

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Richard J. Beckert, TriNet Group, Inc. - CFO & Senior VP [24]

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Again, it will be a choice that we have. We have levers inside the company that we can -- we know we can be more efficient and effective with the use of our dollars internally to support our customers, sell to our customers. So there's a lot we can still do. But again, I want to quantify that with we will decide whether or not the right choices are to drive incremental revenue or go after incremental profit, but we're confident that we can do either which makes sense -- the best sense for our investors.

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David Michael Grossman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [25]

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Got it. And then just one last one. Is the range -- or the wide range in third quarter EPS just reflect the variability around this one carrier and the claims? Is that why the range is so large?

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Burton M. Goldfield, TriNet Group, Inc. - President, CEO & Director [26]

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Correct. Remember last year, you have to remember about the prior year-over-year compare. But when you're talking about the actual width of it is that we see that one carrier and the low end of that range is saying that they will not return to the norm with the other carriers, that they will stay elevated.

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David Michael Grossman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [27]

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Right. And I'm sorry, just one last one, as you may have seen some of the MCOs that reported within the last week and their MLRs went up. Are you seeing any of that? Or is this kind of what we're talking about kind of unrelated to what may be happening in those carriers?

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Richard J. Beckert, TriNet Group, Inc. - CFO & Senior VP [28]

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I can't say that we have seen anything in particular.

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Operator [29]

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And our next question will come from Kevin McVeigh with Crédit Suisse.

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Palmer Miles Pawlusiak, Crédit Suisse AG, Research Division - Analyst [30]

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This is Palmer on for Kevin. Just looking at the WSE volumes again, nice to see those tick up in the quarter. Was the WSE growth attributable to any one geographic region or any particular industry vertical?

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Burton M. Goldfield, TriNet Group, Inc. - President, CEO & Director [31]

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Not particularly, and it's a good question, but it was felt across our core markets and across the verticals. So there's no standout that I can tell you about one vertical dramatically or overemphasizing the change in existing or CIE.

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Palmer Miles Pawlusiak, Crédit Suisse AG, Research Division - Analyst [32]

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Got it. That's helpful. And then can you guys talk about your sales force hiring expectations? Are you going to hire sales force -- going to hire in your sales force in the expected growth in WSEs? Or are you focused on the existing sales force that you have and just increasing productivity?

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Burton M. Goldfield, TriNet Group, Inc. - President, CEO & Director [33]

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So both, I'm increasing productivity, which is critically important for our sales force. We have our sales kick-off in 2 weeks called Triumph, and my expectation is we'll be up in quota-carrying reps at Triumph in the mid-single digits.

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Palmer Miles Pawlusiak, Crédit Suisse AG, Research Division - Analyst [34]

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Got it. Okay. That's helpful. And then last one for me. You guys have a fair amount of cash on the balance sheet, light leverage. You've passed the SOI migration. How should we think about capital allocation from here? How are you guys thinking about M&A from here relative to flexing to the buyback?

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Richard J. Beckert, TriNet Group, Inc. - CFO & Senior VP [35]

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Hi, Palmer. So I would say 3 things. We will always, first, invest in the company. We're always looking for M&A that makes sense to us. That could either be bringing on another carrier and geographic region or adding to a vertical, either existing or new. And then, clearly, we will always want to offset dilution.

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Operator [36]

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This concludes our question-and-answer session as well as the conference. Thank you for attending today's presentation, and you may now disconnect.