Trinet Group (NYSE:TNET) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.
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Access the full call at https://events.q4inc.com/attendee/214291011
Summary
Trinet Group reported a strong Q1 2026 with a 25% increase in adjusted EPS due to disciplined health fee repricing and expense management.
The company completed its health fee repricing, expecting improved retention and sales growth, supported by new initiatives like the Cocoon acquisition and partnerships for global and IT services.
TriNet sees AI as a significant opportunity, with AI tools like TriNet Assistant improving operational efficiency and customer engagement.
Despite a 5% decline in total revenue to $1.2 billion, the insurance cost ratio improved to 84% due to effective pricing and lower health costs.
The company maintains its 2026 revenue guidance of $4.75 to $4.9 billion, with adjusted EBITDA margin and EPS targets aligning with the favorable end of their guidance.
Full Transcript
OPERATOR
Good day and welcome to the TriNet Group, Inc. First Quarter 2026 Earnings Conference Call. All participants will be in listen only mode. Should you need assistance, please do a conference specialist by pressing the star key. Follow a zero after today’s presentation there will be an opportunity to ask questions. To ask a question, you press star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Alex Bauer, Head of Investor Relations. Please go ahead. Thank you and good afternoon everyone. Joining me today are Irving Tan, WD’s chief executive officer and Chris Senecal, WD’s chief financial officer. Before we begin, please note that today’s discussion will contain forward looking statements based on management’s current assumptions and expectations which are subject to various risks and uncertainties. Thank you. Please stand by. The conference will resume. The speakers are live. I have connected speakers. Good morning everybody. Sorry for the technical snafu. My name is Alex Bauer. I’m head of TriNet’s investor relations. Thank you for joining us and welcome to TriNet’s first quarter conference call and webcast. I am 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 first quarter performance. Mala will then review our Q1 financial performance in greater detail and comment on our 2026 financial guidance and outlook. Please note that today’s discussion will include our 2026 full year financial Outlook and other statements that are not historical in nature or 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, 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 10K and 10Q 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, 10Q filings or 10K filing, which are available on our website or through the SEC website. Please also note that going forward, these filings may be released up to 48 hours after our earnings release. With that, I will turn the call over to Mike thank you Alex and good morning everyone. I’m pleased with our start to 2026. In the first quarter, the TriNet team kept our clients as our first priority, navigating a volatile business and geopolitical environment. For today’s call, I’ll start with our first quarter performance, then highlight the actions we’re taking to drive growth, and finally discuss the potential impacts of AI, a widely discussed subject during the quarter. Our strong first quarter adjusted earnings per share, up 25% over prior year, reflect our disciplined approach to both repricing health fees and managing our expenses. Health fee repricing over the last year created a headwind for new sales and retention, including our January 2026 renewal where attrition was about 2 points worse than prior year. Our pricing addressed both heightened medical cost trend and a cohort of underpriced business. With our January renewals complete, all cohorts within our customer base are now priced in line with more historical practices and despite the impact of our January repricing, we expect overall 2026 retention to be better than than full year 2025. We’re already seeing a tangible improvement here in the second quarter where attrition due to health pricing has already declined by 30%, a trend we expect to continue throughout 2026. New sales grew modestly year over year in the first quarter. The increasingly volatile business environment pressured March close rates for sales opportunities. In the post proposal stage, we saw the time to close extend by about 15%. However, given pipeline visibility, our pricing position relative to the market, and several sales initiatives that are coming online, which I’ll talk about in just a minute, we expect a solid full year sales growth for 2026 on insurance performance improved as we benefited from stable health cost trends and disciplined pricing, resulting in an 84% insurance cost ratio. A feature of our model is our ability to quickly respond to changes in insurance outcomes. We responded quickly to rising cost trends and will do so again if and when trends moderate. We remain disciplined on expenses, aligning the business to its current scale, automating processes, and advancing our talent optimization strategy. As a result, we delivered strong earnings and profitability in Q1 and we believe earnings are now tracking to the top half of our annual guidance. Our strong operating performance enables us to invest further in our products and services. Through acquisition partnerships and internal build efforts. We’re extending our value prop on issues our clients care about. These new capabilities in combination with our investment in sales capacity represent important steps in our return to sustainable growth. During the quarter we completed the acquisition of Cocoon, an industry leading employee leave management application. Aligned with our Compliance first approach, Cocoon should integrate seamlessly into our platform and address a significant customer pain point with an automated leave of absence solution. We expect improved NPS scoring and increased retention along with further competitive differentiation in our PEO and ASO offerings. Next, we announced partnerships powering Trinet Global and TriNet IT. TriNet Global, powered through our partnership with Multiplier, delivers global workforce visibility, compliance built workflows and localized support enabling our clients to expand internationally with confidence. TriNet IT, powered through our partnership with Electric AI, embeds device and asset management into HR workflows, reducing IT effort, lowering costs and improving security. We remain on track to deliver our new benefit bundles, simplifying the buying process and aligning the right set of plans with client needs. As benefit bundles are released during the second quarter, we expect to benefit from their impact during the fall selling season. Alongside these investments in our offering, we continue to invest in our go to market capacity. Our broker strategy is increasingly driving deal flow and sales opportunities. Broker RFPs grew by nearly 12% year over year in Q1 and we’re seeing Q2 broker RFPs accelerate off that number. We improved our broker experience with automated Trusted Advisor status and enhanced renewal access. In addition, we grew our most senior and productive sales reps by 10% year over year in Q1. Our Ascend program graduates its first class, which will represent over 10% of our sales focus this fall, and with more than 100 trainees in the pipeline by year end, we believe we can sustainably grow our sales force in 2027 both in terms of number and in terms of quality. In summary, we’re improving our product services and go to market capabilities. We’ve brought health fees in line with risk and increased the accuracy of our pricing processes going forward. As a result, we expect improved conversion rates on new business and higher retention rates in the client base. We’re moving quickly on numerous fronts, which is a testament to my colleagues across the company. Increasingly, their efforts are being enabled by investments in AI, which brings me to the last topic I wanted to touch on before turning things over to Mala. We certainly understand that AI is an important topic for all of our stakeholders and we see AI’s impact across two dimensions. First, its impact on Trinet’s operations sales service model and second, the external impacts on our client base and industry. Starting internally this March, we launched Trinet Assistant, an AI tool giving our customers and colleagues access to our HR expertise whenever and wherever needed. Already, Trinet Assistant is proving its impact. We just navigated tax season historically, a period that sees a significant spike in inbound volume. Between March 31 and April 16, inbound volumes typically increase on average by 12%. TriNet Assistant successfully handled much of that demand, driving a 6% reduction in inbound contacts through the busy period, delivering timely, accurate responses and improving overall service productivity. Trinet Assistant will continue to evolve, broaden and become more effective with increased utilization. Similar examples of AI have emerged in our product development processes where 30% of code and 50% of our test cases are now AI generated and moving directly into peer review for production deployment. Sales agents are supporting our prospecting, quoting and closing processes. AI is supporting our colleagues on client engagements, capturing notes, suggesting answers and automating correspondence. As we have talked about on this call for the past few years, Trinet has operated with excellent client facing technology but many manual processes behind the scenes. The Runway for AI to drive real improvement in client outcomes and efficiency is substantial and we’re excited about the capacity it creates for our colleagues to focus on what matters most, working directly with our clients. The ability to apply judgment, build relationships, manage risk is where my colleagues stand out and where I believe the resilience of our business model lies. During the first quarter, there’s been robust discussion about the long term threats of AI. TriNet sits at the intersection of employers, employees and government, where AI supports rather than replaces the human responsibilities we take on behalf of our customers. Things like handling payroll, human resources, insurance, taxes, compliance and more. Our customers aren’t just buying software or knowledge, they’re transferring risk and liability to Trinet. Further, they’re buying real and human expertise to step in at high stakes moments, ensuring employees get paid when problems occur, that health care coverage is there when needed, and having someone in their corner when regulators inquire. As for AI’s impact on SMBs, it’s early and still very uncertain. We believe SMBs will be impacted differently across the various industry verticals. In verticals where AI adoption is highest, such as technology, client hiring has not changed materially over the past two years, suggesting AI is creating as much opportunity as it’s replacing. There also seems to be a growing correlation between AI adoption and faster new business formation. As small businesses do what they always do, move quickly to innovate and take advantage of new opportunities, rest assured that Trinet will be there to capture our share of this market. So in summary, AI is undoubtedly driving changes, but given our business model, we see AI as a positive opportunity to serve more SMBs and serve them better overall. We are off to a strong start successfully navigating a difficult operating and business environment. Pricing is normalizing, expenses are managed and we’re trending toward the favorable end of our 2026 financial guidance. We see significant AI opportunities across our operations and product and we are pursuing them. There’s more work ahead, but momentum is building and we look forward to updating you as the year progresses. With that, I’ll pass the call to
Mala Murthy (Chief Financial Officer)
Mala Mala thank you, Mike While the macro environment in the first quarter was uneven, Trinet’s solid financial results were driven by disciplined pricing, better than expected insurance performance, and strong execution over multiple cycles. We repriced our health fees in a disciplined and measured way. The impact on new sales and retention was considerable. I’m pleased to say that our trend plus price increases concluded with our January 1st renewal and our retention outlook is improving. Furthermore, in the first quarter we saw health costs materialize lower than forecast, which when combined with our disciplined pricing drove improved ICR performance. Our discipline extended to expense management. We made difficult decisions in the quarter which resulted in meaningful run rate cost savings. Expenses are increasingly aligned with the scale …
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