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|
|
|
|
Delaware
|
|
95-3359658
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|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
One Park Place, Suite 600
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|
|
|
Dublin,
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CA
|
|
94568
|
(Address of principal executive offices)
|
|
(Zip Code)
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|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common stock par value $0.000025 per share
|
TNET
|
New York Stock Exchange
|
Large accelerated filer
|
x
|
Accelerated filer
|
o
|
|
|
|
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
☐
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|
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|
|
|
Emerging growth company
|
☐
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|
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Form 10-Q
Cross Reference
|
Page
|
|
||
Part I, Item 1.
|
||
|
||
|
||
|
||
|
||
|
||
Part I, Item 2.
|
||
Part I, Item 3.
|
||
Part I, Item 4.
|
||
Part II, Item 1.
|
||
Part II, Item 1A.
|
||
Part II, Item 2.
|
||
Part II, Item 3.
|
||
Part II, Item 4.
|
||
Part II, Item 5.
|
||
Part II, Item 6.
|
GLOSSARY
|
|
AFS
|
Available-for-sale
|
ASC
|
Accounting standards codification
|
ASU
|
Accounting standards update
|
CEO
|
Chief Executive Officer
|
CFO
|
Chief Financial Officer
|
COPS
|
Cost of providing services
|
D&A
|
Depreciation and Amortization
|
EBITDA
|
Earnings before interest expense, taxes, depreciation and amortization of intangible assets
|
EPS
|
Earnings Per Share
|
ERISA
|
Employee Retirement Income Security Act of 1974
|
FASB
|
Financial Accounting Standards Board
|
G&A
|
General and administrative
|
GAAP
|
Generally Accepted Accounting Principles in the United States
|
HR
|
Human Resources
|
IRS
|
Internal Revenue Service
|
ISR
|
Insurance service revenues
|
MD&A
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
NISR
|
Net Insurance Service Revenues
|
NSR
|
Net service revenues
|
OE
|
Operating expenses
|
PFC
|
Payroll funds collected
|
PSR
|
Professional service revenues
|
ROU
|
Right-of-use
|
RSA
|
Restricted Stock Award
|
RSU
|
Restricted Stock Unit
|
SBC
|
Stock Based Compensation
|
S&M
|
Sales and marketing
|
SD&P
|
Systems development and programming
|
SEC
|
Securities and Exchange Commission
|
SMB
|
Small to midsize business
|
U.S.
|
United States
|
WSE
|
Worksite employee
|
|
|
|
FORWARD LOOKING STATEMENTS AND OTHER FINANCIAL INFORMATION
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
•
|
experienced an improvement in retention as a result of our customer service initiatives,
|
•
|
benefited from our clients growing their WSEs,
|
•
|
saw an increase in new sales which delivered additional revenue growth,
|
•
|
continued to experience a change in our client mix with customers increasing their participation, or enrollment, in our insurance services offerings, and
|
•
|
delivered profitable growth.
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
$935M
|
|
$55M
|
|
$231M
|
||||||
|
Total revenues
|
|
Operating income
|
|
Net Service Revenue *
|
||||||
|
10
|
%
|
increase
|
|
(28
|
)%
|
decrease
|
|
5
|
%
|
increase
|
|
|
|
|
|
|
|
|
|
|||
|
$46M
|
|
$0.64
|
|
$50M
|
||||||
|
Net income
|
|
Diluted EPS
|
|
Adjusted Net income *
|
||||||
|
(22
|
)%
|
decrease
|
|
(20
|
)%
|
decrease
|
|
(21
|
)%
|
decrease
|
|
|
|
|
|
|
|
|
|
|||
*
|
Non-GAAP measure as defined in the section below.
|
|
|
|
|
|
323,957
|
|
318,874
|
|
$9.1B
|
||||||
|
Total WSEs
|
|
Average WSEs
|
|
Payroll and payroll tax payments
|
||||||
|
2
|
%
|
increase
|
|
2
|
%
|
increase
|
|
9
|
%
|
increase
|
|
|
|
|
|
|
|
|
|
|
$1.9B
|
|
$137M
|
|
$482M
|
||||||
|
Total revenues
|
|
Operating income
|
|
Net Service Revenue *
|
||||||
|
9
|
%
|
increase
|
|
(7
|
)%
|
decrease
|
|
9
|
%
|
increase
|
|
|
|
|
|
|
|
|
|
|||
|
$109M
|
|
$1.53
|
|
$120M
|
||||||
|
Net income
|
|
Diluted EPS
|
|
Adjusted Net income *
|
||||||
|
(3
|
)%
|
decrease
|
|
(1
|
)%
|
decrease
|
|
(2
|
)%
|
decrease
|
|
|
|
|
|
|
|
|
|
|||
*
|
Non-GAAP measure as defined in the section below.
|
|
|
|
|
|
315,817
|
|
$20.7B
|
||||
|
Average WSEs
|
|
Payroll and payroll tax payments
|
||||
|
1
|
%
|
increase
|
|
11
|
%
|
increase
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||
(in millions, except per share and WSE data)
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
||||||||||||
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenues
|
$
|
935
|
|
|
$
|
850
|
|
|
10
|
|
%
|
|
$
|
1,869
|
|
|
$
|
1,711
|
|
|
9
|
|
%
|
Operating income
|
55
|
|
|
76
|
|
|
(28
|
)
|
|
|
137
|
|
|
147
|
|
|
(7
|
)
|
|
||||
Net income
|
46
|
|
|
58
|
|
|
(22
|
)
|
|
|
109
|
|
|
112
|
|
|
(3
|
)
|
|
||||
Diluted net income per share of common stock
|
0.64
|
|
|
0.80
|
|
|
(20
|
)
|
|
|
1.53
|
|
|
1.55
|
|
|
(1
|
)
|
|
||||
Non-GAAP measures (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net Service Revenues
|
231
|
|
|
220
|
|
|
5
|
|
|
|
482
|
|
|
440
|
|
|
9
|
|
|
||||
Net Insurance Service Revenues
|
104
|
|
|
105
|
|
|
(2
|
)
|
|
|
219
|
|
|
196
|
|
|
11
|
|
|
||||
Adjusted EBITDA
|
85
|
|
|
99
|
|
|
(16
|
)
|
|
|
193
|
|
|
190
|
|
|
1
|
|
|
||||
Adjusted Net Income
|
50
|
|
|
63
|
|
|
(21
|
)
|
|
|
120
|
|
|
121
|
|
|
(2
|
)
|
|
||||
Operating Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total WSEs payroll and payroll taxes processed
|
$
|
9,110
|
|
|
$
|
8,371
|
|
|
9
|
|
%
|
|
$
|
20,732
|
|
|
$
|
18,690
|
|
|
11
|
|
%
|
Average WSEs
|
318,874
|
|
|
313,845
|
|
|
2
|
|
|
|
315,817
|
|
|
314,203
|
|
|
1
|
|
|
||||
Total WSEs at period end
|
323,957
|
|
|
318,921
|
|
|
2
|
|
|
|
323,957
|
|
|
318,921
|
|
|
2
|
|
|
(in millions)
|
June 30,
2019 |
|
December 31,
2018 |
|
% Change
|
|
|||||
Balance Sheet Data:
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
$
|
219
|
|
|
$
|
228
|
|
|
(4
|
)
|
%
|
Working capital
|
236
|
|
|
221
|
|
|
7
|
|
|
||
Total assets
|
2,318
|
|
|
2,435
|
|
|
(5
|
)
|
|
||
Long-term debt
|
402
|
|
|
413
|
|
|
(3
|
)
|
|
||
Total liabilities
|
1,879
|
|
|
2,060
|
|
|
(9
|
)
|
|
||
Total stockholders’ equity
|
439
|
|
|
375
|
|
|
17
|
|
|
|
Six Months Ended June 30,
|
|||||||||||
(in millions)
|
2019
|
|
2018
|
|
% Change
|
|||||||
Cash Flow Data:
|
|
|
|
|
|
|
||||||
Net cash used in operating activities
|
$
|
(162
|
)
|
|
$
|
(543
|
)
|
|
(70
|
)
|
%
|
|
Net cash used in investing activities
|
(25
|
)
|
|
(166
|
)
|
|
(86
|
)
|
|
|||
Net cash used in financing activities
|
(77
|
)
|
|
(36
|
)
|
|
113
|
|
|
|||
Non-GAAP measure(1):
|
|
|
|
|
|
|
||||||
Corporate operating cash flows
|
107
|
|
|
108
|
|
169
|
|
—
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
Non-GAAP Measure
|
Definition
|
How We Use The Measure
|
Net Service Revenues
|
• Sum of professional service revenues and Net Insurance Service Revenues,
or total revenues less insurance costs. |
• Provides a comparable basis of revenues on a net basis. Professional service revenues are presented net of client payroll costs whereas insurance service revenues are presented gross of insurance costs for financial reporting purposes.
• Acts as the basis to allocate resources to different functions and evaluates the effectiveness of our business strategies by each business function. • Provides a measure, among others, used in the determination of incentive compensation for management. |
Net Insurance Service Revenues
|
• Insurance revenues less insurance costs.
|
• Is a component of Net Service Revenues.
• Provides a comparable basis of revenues on a net basis. Professional service revenues are presented net of client payroll costs whereas insurance service revenues are presented gross of insurance costs for financial reporting purposes. Promotes an understanding of our insurance services business by evaluating insurance service revenues net of our WSE related costs which are substantially pass-through for the benefit of our WSEs. Under GAAP, insurance service revenues and costs are recorded gross as we have latitude in establishing the price, service and supplier specifications.
• We also sometimes refer to Net Insurance Service Margin, which is the ratio of Net Insurance Revenue to Insurance Service Revenue.
|
Adjusted EBITDA
|
• Net income, excluding the effects of:
- income tax provision,
- interest expense,
- depreciation,
- amortization of intangible assets, and
- stock-based compensation expense.
|
• Provides period-to-period comparisons on a consistent basis and an understanding as to how our management evaluates the effectiveness of our business strategies by excluding certain non-cash charges such as depreciation and amortization, and stock-based compensation recognized based on the estimated fair values. We believe these charges are either not directly resulting from our core operations or not indicative of our ongoing operations.
• Enhances comparisons to prior periods and, accordingly, facilitates the development of future projections and earnings growth prospects.
• Provides a measure, among others, used in the determination of incentive compensation for management.
• We also sometimes refer to Adjusted EBITDA margin, which is the ratio of Adjusted EBITDA to Net Service Revenue.
|
Adjusted Net Income
|
• Net income, excluding the effects of:
- effective income tax rate (1),
- stock-based compensation,
- amortization of intangible assets,
- non-cash interest expense (2), and
- the income tax effect (at our effective tax rate (1)) of these pre-tax adjustments.
|
• Provides information to our stockholders and board of directors to understand how our management evaluates our business, to monitor and evaluate our operating results, and analyze profitability of our ongoing operations and trends on a consistent basis by excluding certain non-cash charges.
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
Corporate Operating Cash Flows
|
• Net cash (used in) provided by operating activities, excluding the effects of:
- Assets associated with WSEs (accounts receivable, unbilled revenue, prepaid expenses and other current assets) and
- Liabilities associated with WSEs (client deposits, accrued wages, payroll tax liabilities and other payroll withholdings, accrued health benefit costs, accrued workers' compensation costs, insurance premiums and other payables, and other current liabilities).
|
• Provides information that our stockholders and management can use to evaluate our cash flows from operations independent of the current assets and liabilities associated with our WSEs.
• Enhances comparisons to prior periods and, accordingly, used as a liquidity measure to manage liquidity between corporate and WSE related activities, and to help determine and plan our cash flow and capital strategies.
|
(1)
|
Non-GAAP effective tax rate is 26% for 2019 and 2018, which excludes the income tax impact from stock-based compensation, changes in uncertain tax positions, and nonrecurring benefits or expenses from federal legislative changes.
|
(2)
|
Non-cash interest expense represents amortization and write-off of our debt issuance costs.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
(in millions)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Total revenues
|
$
|
935
|
|
$
|
850
|
|
|
$
|
1,869
|
|
$
|
1,711
|
|
Less: Insurance costs
|
704
|
|
630
|
|
|
1,387
|
|
1,271
|
|
||||
Net Service Revenues
|
$
|
231
|
|
$
|
220
|
|
|
$
|
482
|
|
$
|
440
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
(in millions)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Insurance service revenues
|
$
|
808
|
|
$
|
735
|
|
|
$
|
1,606
|
|
$
|
1,467
|
|
Less: Insurance costs
|
704
|
|
630
|
|
|
1,387
|
|
1,271
|
|
||||
Net Insurance Service Revenues
|
$
|
104
|
|
$
|
105
|
|
|
$
|
219
|
|
$
|
196
|
|
Net Insurance Service Revenue Margin
|
13
|
%
|
14
|
%
|
|
14
|
%
|
13
|
%
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended
June 30, |
||||||||||
(in millions)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Net income
|
$
|
46
|
|
$
|
58
|
|
|
$
|
109
|
|
$
|
112
|
|
Provision for income taxes
|
10
|
|
14
|
|
|
30
|
|
27
|
|
||||
Stock-based compensation
|
11
|
|
10
|
|
|
20
|
|
19
|
|
||||
Interest expense and bank fees
|
6
|
|
7
|
|
|
11
|
|
13
|
|
||||
Depreciation and amortization of intangible assets
|
12
|
|
10
|
|
|
23
|
|
19
|
|
||||
Adjusted EBITDA
|
$
|
85
|
|
$
|
99
|
|
|
$
|
193
|
|
$
|
190
|
|
Adjusted EBITDA Margin
|
36
|
%
|
45
|
%
|
|
40
|
%
|
43
|
%
|
|
Three Months Ended June 30,
|
|
Six Months Ended
June 30, |
||||||||||
(in millions)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Net income
|
$
|
46
|
|
$
|
58
|
|
|
$
|
109
|
|
$
|
112
|
|
Effective income tax rate adjustment
|
(5
|
)
|
(6
|
)
|
|
(6
|
)
|
(10
|
)
|
||||
Stock-based compensation
|
11
|
|
10
|
|
|
20
|
|
19
|
|
||||
Amortization of intangible assets
|
2
|
|
2
|
|
|
3
|
|
3
|
|
||||
Non-cash interest expense
|
—
|
|
3
|
|
|
—
|
|
4
|
|
||||
Income tax impact of pre-tax adjustments
|
(4
|
)
|
(4
|
)
|
|
(6
|
)
|
(7
|
)
|
||||
Adjusted Net Income
|
$
|
50
|
|
$
|
63
|
|
|
$
|
120
|
|
$
|
121
|
|
|
Six Months Ended
June 30, |
|||||
(in millions)
|
2019
|
2018
|
||||
Net cash used in operating activities
|
$
|
(162
|
)
|
$
|
(543
|
)
|
Change in WSE related other current assets
|
52
|
|
(1
|
)
|
||
Change in WSE related liabilities
|
217
|
|
652
|
|
||
Corporate Operating Cash Flows
|
$
|
107
|
|
$
|
108
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
•
|
Volume - the percentage change in period over period Average WSEs,
|
•
|
Rate - the combined percentage change in service fees for each vertical product and change in service fees associated with each insurance service offerings, and
|
•
|
Mix - the change in composition of Average WSEs within our verticals combined with the composition of our enrolled WSEs within our insurance service offerings.
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
(in millions)
|
|
|
$147
|
YTD 2018 Operating Income
|
|
|
+158
|
Higher total revenues primarily as a result of an increase in ISR fees and health plan enrollment.
|
|
-116
|
Higher insurance costs primarily as a result of an increase in medical cost trend and health plan participation, or enrollment.
|
|
-52
|
Higher OE primarily as a result of growth in the number of our corporate employees and costs associated with initiatives to improve customer experience and our growth initiatives.
|
$137
|
YTD 2019 Operating Income
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
•
|
Mix - the change in composition of Average WSEs across our verticals,
|
•
|
Rate - the percentage change in fees for each vertical, and
|
•
|
Volume - the percentage change in period over period Average WSEs.
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
•
|
Volume - the percentage change in period over period Average WSEs,
|
•
|
Rate - the percentage change in fees associated with each of our insurance service offerings, and
|
•
|
Mix - all other changes including the composition of our enrolled WSEs within our insurance service offerings (health plan enrollment).
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
•
|
Volume - the percentage change in period over period Average WSEs,
|
•
|
Rate - the percentage change in cost trend associated with each of our insurance service offerings, and
|
•
|
Mix - all other changes including the composition of our enrolled WSEs within our insurance service offerings (health plan enrollment).
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
June 30, 2019
|
December 31, 2018
|
||||||||||||||||
(in millions)
|
Corporate
|
WSE
|
Total
|
Corporate
|
WSE
|
Total
|
||||||||||||
Current assets:
|
|
|
|
|
|
|
||||||||||||
Cash and cash equivalents
|
$
|
219
|
|
$
|
—
|
|
$
|
219
|
|
$
|
228
|
|
$
|
—
|
|
$
|
228
|
|
Investments
|
76
|
|
—
|
|
76
|
|
54
|
|
—
|
|
54
|
|
||||||
Restricted cash, cash equivalents and investments
|
14
|
|
658
|
|
672
|
|
15
|
|
927
|
|
942
|
|
||||||
Other current assets
|
50
|
|
438
|
|
488
|
|
36
|
|
386
|
|
422
|
|
||||||
Total current assets
|
$
|
359
|
|
$
|
1,096
|
|
$
|
1,455
|
|
$
|
333
|
|
$
|
1,313
|
|
$
|
1,646
|
|
|
|
|
|
|
|
|
||||||||||||
Total current liabilities
|
$
|
123
|
|
$
|
1,096
|
|
$
|
1,219
|
|
$
|
112
|
|
$
|
1,313
|
|
$
|
1,425
|
|
|
|
|
|
|
|
|
||||||||||||
Working Capital
|
$
|
236
|
|
$
|
—
|
|
$
|
236
|
|
$
|
221
|
|
$
|
—
|
|
$
|
221
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
Six Months Ended June 30,
|
|||||||||||||||||
(in millions)
|
2019
|
2018
|
||||||||||||||||
|
Corporate
|
WSE
|
Total
|
Corporate
|
WSE
|
Total
|
||||||||||||
Net cash provided by (used in):
|
|
|
|
|
|
|
||||||||||||
Operating activities
|
$
|
107
|
|
$
|
(269
|
)
|
$
|
(162
|
)
|
$
|
108
|
|
$
|
(651
|
)
|
$
|
(543
|
)
|
Investing activities
|
(27
|
)
|
2
|
|
(25
|
)
|
(166
|
)
|
—
|
|
(166
|
)
|
||||||
Financing activities
|
(77
|
)
|
—
|
|
(77
|
)
|
(36
|
)
|
—
|
|
(36
|
)
|
||||||
Net increase (decrease) in cash and cash equivalents, unrestricted and restricted
|
$
|
3
|
|
$
|
(267
|
)
|
$
|
(264
|
)
|
$
|
(94
|
)
|
$
|
(651
|
)
|
$
|
(745
|
)
|
Cash and cash equivalents, unrestricted and restricted:
|
|
|
|
|
|
|
||||||||||||
Beginning of period
|
425
|
|
924
|
|
1,349
|
|
476
|
|
1,262
|
|
1,738
|
|
||||||
End of period
|
$
|
428
|
|
$
|
657
|
|
$
|
1,085
|
|
$
|
382
|
|
$
|
611
|
|
$
|
993
|
|
|
|
|
|
|
|
|
||||||||||||
Net increase (decrease) in cash and cash equivalents:
|
|
|
|
|
|
|
||||||||||||
Unrestricted
|
$
|
(9
|
)
|
$
|
—
|
|
$
|
(9
|
)
|
$
|
(134
|
)
|
$
|
—
|
|
$
|
(134
|
)
|
Restricted
|
12
|
|
(267
|
)
|
(255
|
)
|
40
|
|
(651
|
)
|
(611
|
)
|
|
Six Months Ended June 30,
|
|||||||||||||||||
(in millions)
|
2019
|
2018
|
||||||||||||||||
|
Corporate
|
WSE
|
Total
|
Corporate
|
WSE
|
Total
|
||||||||||||
Net income
|
$
|
109
|
|
$
|
—
|
|
$
|
109
|
|
$
|
112
|
|
$
|
—
|
|
$
|
112
|
|
Depreciation and amortization
|
27
|
|
—
|
|
27
|
|
24
|
|
—
|
|
24
|
|
||||||
Noncash lease expense
|
10
|
|
—
|
|
10
|
|
—
|
|
—
|
|
—
|
|
||||||
Stock-based compensation expense
|
20
|
|
—
|
|
20
|
|
19
|
|
—
|
|
19
|
|
||||||
Interest paid
|
(9
|
)
|
—
|
|
(9
|
)
|
(8
|
)
|
—
|
|
(8
|
)
|
||||||
Income tax payments, net
|
(33
|
)
|
—
|
|
(33
|
)
|
(24
|
)
|
—
|
|
(24
|
)
|
||||||
Changes in other operating assets
|
(29
|
)
|
(52
|
)
|
(81
|
)
|
(13
|
)
|
1
|
|
(12
|
)
|
||||||
Changes in other operating liabilities
|
12
|
|
(217
|
)
|
(205
|
)
|
(2
|
)
|
(652
|
)
|
(654
|
)
|
||||||
Net cash provided by (used in) operating activities
|
$
|
107
|
|
$
|
(269
|
)
|
$
|
(162
|
)
|
$
|
108
|
|
$
|
(651
|
)
|
$
|
(543
|
)
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
Six Months Ended June 30,
|
|||||
(in millions)
|
2019
|
2018
|
||||
Investments:
|
|
|
||||
Purchases of investments
|
65
|
|
203
|
|
||
Proceeds from sale and maturity of investments
|
(65
|
)
|
(63
|
)
|
||
Cash used in investments
|
$
|
—
|
|
$
|
140
|
|
|
|
|
||||
Capital expenditures:
|
|
|
||||
Software and hardware
|
$
|
18
|
|
$
|
13
|
|
Office furniture, equipment and leasehold improvements
|
7
|
|
13
|
|
||
Cash used in capital expenditures
|
$
|
25
|
|
$
|
26
|
|
|
Six Months Ended June 30,
|
|||||
(in millions)
|
2019
|
2018
|
||||
Financing activities
|
|
|
||||
Repurchase of common stock, net of issuance
|
$
|
66
|
|
$
|
32
|
|
Repayment of borrowings
|
11
|
|
4
|
|
||
Cash used in financing activities
|
$
|
77
|
|
$
|
36
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
AND CONTROLS AND PROCEDURES
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
|
June 30,
|
|
December 31,
|
||||
(in millions, except share and per share data)
|
|
2019
|
|
2018
|
||||
ASSETS
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
219
|
|
|
$
|
228
|
|
Investments
|
|
76
|
|
|
54
|
|
||
Restricted cash, cash equivalents and investments
|
|
672
|
|
|
942
|
|
||
Accounts receivable, net
|
|
10
|
|
|
11
|
|
||
Unbilled revenue, net
|
|
341
|
|
|
304
|
|
||
Prepaid expenses, net
|
|
64
|
|
|
48
|
|
||
Other current assets
|
|
73
|
|
|
59
|
|
||
Total current assets
|
|
1,455
|
|
|
1,646
|
|
||
Restricted cash, cash equivalents and investments, noncurrent
|
|
200
|
|
|
187
|
|
||
Investments, noncurrent
|
|
117
|
|
|
135
|
|
||
Property & equipment, net
|
|
89
|
|
|
79
|
|
||
Operating lease right-of-use asset
|
|
60
|
|
|
—
|
|
||
Goodwill
|
|
289
|
|
|
289
|
|
||
Other intangible assets, net
|
|
18
|
|
|
21
|
|
||
Other assets
|
|
90
|
|
|
78
|
|
||
Total assets
|
|
$
|
2,318
|
|
|
$
|
2,435
|
|
Liabilities and stockholders' equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable and other current liabilities
|
|
$
|
40
|
|
|
$
|
45
|
|
Long-term debt
|
|
22
|
|
|
22
|
|
||
Client deposits
|
|
67
|
|
|
56
|
|
||
Accrued wages
|
|
377
|
|
|
352
|
|
||
Accrued health insurance costs, net
|
|
143
|
|
|
135
|
|
||
Accrued workers' compensation costs, net
|
|
64
|
|
|
67
|
|
||
Payroll tax liabilities and other payroll withholdings
|
|
473
|
|
|
729
|
|
||
Operating lease liabilities
|
|
17
|
|
|
—
|
|
||
Insurance premiums and other payables
|
|
16
|
|
|
19
|
|
||
Total current liabilities
|
|
1,219
|
|
|
1,425
|
|
||
Long-term debt, noncurrent
|
|
380
|
|
|
391
|
|
||
Accrued workers' compensation costs, noncurrent, net
|
|
148
|
|
|
158
|
|
||
Deferred taxes
|
|
67
|
|
|
68
|
|
||
Operating lease liabilities, noncurrent
|
|
55
|
|
|
—
|
|
||
Other non-current liabilities
|
|
10
|
|
|
18
|
|
||
Total liabilities
|
|
1,879
|
|
|
2,060
|
|
||
Commitments and contingencies (see Note 6)
|
|
|
|
|
||||
Stockholders' equity:
|
|
|
|
|
||||
Preferred stock
|
|
—
|
|
|
—
|
|
||
($0.000025 par value per share; 20,000,000 shares authorized; no shares issued or outstanding at June 30, 2019 and December 31, 2018)
|
|
|
|
|
||||
Common stock and additional paid-in capital
|
|
667
|
|
|
641
|
|
||
($0.000025 par value per share; 750,000,000 shares authorized; 69,991,145 and 70,596,559 shares issued and outstanding at June 30, 2019 and December 31, 2018)
|
|
|
|
|
||||
Accumulated deficit
|
|
(229
|
)
|
|
(266
|
)
|
||
Accumulated other comprehensive income
|
|
1
|
|
|
—
|
|
||
Total stockholders' equity
|
|
439
|
|
|
375
|
|
||
Total liabilities & stockholders' equity
|
|
$
|
2,318
|
|
|
$
|
2,435
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||
(in millions, except share and per share data)
|
2019
|
2018
|
2019
|
2018
|
||||||||
Professional service revenues
|
$
|
127
|
|
$
|
115
|
|
$
|
263
|
|
$
|
244
|
|
Insurance service revenues
|
808
|
|
735
|
|
1,606
|
|
1,467
|
|
||||
Total revenues
|
935
|
|
850
|
|
1,869
|
|
1,711
|
|
||||
Insurance costs
|
704
|
|
630
|
|
1,387
|
|
1,271
|
|
||||
Cost of providing services
|
63
|
|
51
|
|
127
|
|
108
|
|
||||
Sales and marketing
|
52
|
|
41
|
|
98
|
|
80
|
|
||||
General and administrative
|
36
|
|
31
|
|
72
|
|
62
|
|
||||
Systems development and programming
|
13
|
|
11
|
|
25
|
|
24
|
|
||||
Depreciation and amortization of intangible assets
|
12
|
|
10
|
|
23
|
|
19
|
|
||||
Total costs and operating expenses
|
880
|
|
774
|
|
1,732
|
|
1,564
|
|
||||
Operating income
|
55
|
|
76
|
|
137
|
|
147
|
|
||||
Other income (expense):
|
|
|
|
|
||||||||
Interest expense, bank fees and other
|
(6
|
)
|
(7
|
)
|
(11
|
)
|
(13
|
)
|
||||
Interest income
|
7
|
|
3
|
|
13
|
|
5
|
|
||||
Income before provision for income taxes
|
56
|
|
72
|
|
139
|
|
139
|
|
||||
Income tax expense
|
10
|
|
14
|
|
30
|
|
27
|
|
||||
Net income
|
$
|
46
|
|
$
|
58
|
|
$
|
109
|
|
$
|
112
|
|
Other comprehensive income, net of tax
|
1
|
|
1
|
|
1
|
|
—
|
|
||||
Comprehensive income
|
$
|
47
|
|
$
|
59
|
|
$
|
110
|
|
$
|
112
|
|
|
|
|
|
|
||||||||
Net income per share:
|
|
|
|
|
||||||||
Basic
|
$
|
0.65
|
|
$
|
0.82
|
|
$
|
1.56
|
|
$
|
1.59
|
|
Diluted
|
$
|
0.64
|
|
$
|
0.80
|
|
$
|
1.53
|
|
$
|
1.55
|
|
Weighted average shares:
|
|
|
|
|
||||||||
Basic
|
69,703,792
|
|
70,448,809
|
|
69,806,319
|
|
70,250,273
|
|
||||
Diluted
|
71,074,751
|
|
72,561,891
|
|
71,151,219
|
|
72,404,539
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2019
|
2018
|
2019
|
2018
|
|||||||||
Total Stockholders' Equity, beginning balance
|
$
|
406
|
|
$
|
262
|
|
|
$
|
375
|
|
$
|
206
|
|
Common Stock and Additional Paid-In Capital
|
|
|
|
|
|
||||||||
Beginning balance
|
651
|
|
595
|
|
|
641
|
|
583
|
|
||||
Issuance of common stock from exercise of stock options
|
1
|
|
3
|
|
|
2
|
|
6
|
|
||||
Issuance of common stock for employee stock purchase plan
|
4
|
|
3
|
|
|
4
|
|
3
|
|
||||
Stock-based compensation expense
|
11
|
|
10
|
|
|
20
|
|
19
|
|
||||
Ending balance
|
667
|
|
611
|
|
|
667
|
|
611
|
|
||||
|
|
|
|
|
|
||||||||
Accumulated Deficit
|
|
|
|
|
|
||||||||
Beginning balance
|
(245
|
)
|
(332
|
)
|
|
(266
|
)
|
(377
|
)
|
||||
Net income
|
46
|
|
58
|
|
|
109
|
|
112
|
|
||||
Cumulative effect of accounting change
|
—
|
|
—
|
|
|
—
|
|
3
|
|
||||
Repurchase of common stock
|
(24
|
)
|
(22
|
)
|
|
(62
|
)
|
(30
|
)
|
||||
Awards effectively repurchased for required employee withholding taxes
|
(6
|
)
|
(6
|
)
|
|
(10
|
)
|
(10
|
)
|
||||
Ending balance
|
(229
|
)
|
(302
|
)
|
|
(229
|
)
|
(302
|
)
|
||||
|
|
|
|
|
|
||||||||
Accumulated Other Comprehensive Loss
|
|
|
|
|
|
||||||||
Beginning balance
|
—
|
|
(1
|
)
|
|
—
|
|
—
|
|
||||
Other comprehensive income
|
1
|
|
1
|
|
|
1
|
|
—
|
|
||||
Ending balance
|
1
|
|
—
|
|
|
1
|
|
—
|
|
||||
Total Stockholders' Equity, ending balance
|
$
|
439
|
|
$
|
309
|
|
|
$
|
439
|
|
$
|
309
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Six Months Ended June 30,
|
|||
(in millions)
|
2019
|
2018
|
||
Operating activities
|
|
|
||
Net income
|
109
|
|
112
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
||
Depreciation and amortization
|
27
|
|
24
|
|
Noncash lease expense
|
10
|
|
—
|
|
Stock-based compensation
|
20
|
|
19
|
|
Changes in operating assets and liabilities:
|
|
|
||
Accounts receivable
|
3
|
|
11
|
|
Unbilled revenue
|
(36
|
)
|
35
|
|
Prepaid expenses
|
(18
|
)
|
(9
|
)
|
Other assets
|
(30
|
)
|
(45
|
)
|
Accounts payable and other current liabilities
|
(11
|
)
|
(28
|
)
|
Client deposits
|
10
|
|
(24
|
)
|
Accrued wages
|
25
|
|
(28
|
)
|
Accrued health insurance costs
|
9
|
|
(13
|
)
|
Accrued workers' compensation costs
|
(13
|
)
|
(8
|
)
|
Payroll taxes payable and other payroll withholdings
|
(256
|
)
|
(588
|
)
|
Operating lease liabilities
|
(9
|
)
|
—
|
|
Other liabilities
|
(2
|
)
|
(1
|
)
|
Net cash used in operating activities
|
(162
|
)
|
(543
|
)
|
Investing activities
|
|
|
||
Purchases of marketable securities
|
(65
|
)
|
(203
|
)
|
Proceeds from sale and maturity of marketable securities
|
65
|
|
63
|
|
Acquisitions of property and equipment
|
(25
|
)
|
(26
|
)
|
Net cash used in investing activities
|
(25
|
)
|
(166
|
)
|
Financing activities
|
|
|
||
Repurchase of common stock
|
(62
|
)
|
(30
|
)
|
Proceeds from issuance of common stock from employee stock purchase plan
|
4
|
|
3
|
|
Proceeds from issuance of common stock from exercised options
|
2
|
|
5
|
|
Awards effectively repurchased for required employee withholding taxes
|
(10
|
)
|
(10
|
)
|
Proceeds from issuance of notes payable, net
|
—
|
|
210
|
|
Payments for extinguishment of debt
|
—
|
|
(204
|
)
|
Repayment of debt
|
(11
|
)
|
(10
|
)
|
Net cash used in financing activities
|
(77
|
)
|
(36
|
)
|
Net decrease in unrestricted and restricted cash and cash equivalents
|
(264
|
)
|
(745
|
)
|
Cash and cash equivalents, unrestricted and restricted:
|
|
|
||
Beginning of period
|
1,349
|
|
1,738
|
|
End of period
|
1,085
|
|
993
|
|
|
|
|
||
Supplemental disclosures of cash flow information
|
|
|
||
Interest paid
|
9
|
|
8
|
|
Income taxes paid, net
|
33
|
|
24
|
|
Supplemental schedule of noncash investing and financing activities
|
|
|
||
Payable for purchase of property and equipment
|
8
|
|
2
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
•
|
compensation through wages and salaries,
|
•
|
employer payroll-related tax payments,
|
•
|
employee payroll-related tax withholdings and payments,
|
•
|
employee benefit programs, including health and life insurance, and others, and
|
•
|
workers' compensation coverage.
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Six Months Ended June 30, 2018
|
||||||||
(in millions)
|
As previously reported
|
Reclassified amounts
|
As revised
|
||||||
Operating activities
|
|
|
|
||||||
Accounts receivable
|
$
|
—
|
|
$
|
11
|
|
$
|
11
|
|
Unbilled revenue
|
—
|
|
35
|
|
35
|
|
|||
Prepaid income taxes
|
2
|
|
(2
|
)
|
—
|
|
|||
Prepaid expenses and other current assets
|
(23
|
)
|
23
|
|
—
|
|
|||
Prepaid expenses
|
—
|
|
(9
|
)
|
(9
|
)
|
|||
Workers' compensation collateral receivable
|
(6
|
)
|
6
|
|
—
|
|
|||
Accounts payable and other current liabilities
|
(14
|
)
|
(14
|
)
|
(28
|
)
|
|||
Client deposits
|
—
|
|
(24
|
)
|
(24
|
)
|
|||
Accrued wages
|
—
|
|
(28
|
)
|
(28
|
)
|
|||
Accrued corporate wages
|
(5
|
)
|
5
|
|
—
|
|
|||
Accrued health insurance costs
|
—
|
|
(13
|
)
|
(13
|
)
|
|||
Accrued workers' compensation costs
|
—
|
|
(8
|
)
|
(8
|
)
|
|||
Workers' compensation loss reserves and other non-current liabilities
|
(4
|
)
|
4
|
|
—
|
|
|||
Payroll taxes payable and other payroll withholdings
|
—
|
|
(588
|
)
|
(588
|
)
|
|||
Worksite employee related assets
|
4
|
|
(4
|
)
|
—
|
|
|||
Worksite employee related liabilities
|
(652
|
)
|
652
|
|
—
|
|
|||
Other assets
|
—
|
|
(45
|
)
|
(45
|
)
|
|||
Other liabilities
|
—
|
|
(1
|
)
|
(1
|
)
|
|
Three Months Ended
|
Six months ended
|
||||||||||||||||
|
June 30, 2018
|
June 30, 2018
|
||||||||||||||||
(in millions)
|
As previously reported
|
Reclassified amounts
|
As revised
|
As previously reported
|
Reclassified amounts
|
As revised
|
||||||||||||
Depreciation
|
$
|
8
|
|
$
|
(8
|
)
|
$
|
—
|
|
$
|
16
|
|
$
|
(16
|
)
|
$
|
—
|
|
Amortization of intangible assets
|
2
|
|
(2
|
)
|
—
|
|
3
|
|
(3
|
)
|
—
|
|
||||||
Depreciation and amortization of intangible assets
|
—
|
|
10
|
|
10
|
|
—
|
|
19
|
|
19
|
|
||||||
Interest expense, bank fees and other, net
|
(4
|
)
|
4
|
|
—
|
|
(8
|
)
|
8
|
|
—
|
|
||||||
Interest expense, bank fees and other
|
—
|
|
(7
|
)
|
(7
|
)
|
—
|
|
(13
|
)
|
(13
|
)
|
||||||
Interest income
|
—
|
|
3
|
|
3
|
|
—
|
|
5
|
|
5
|
|
||||||
Other comprehensive income, net of tax
|
—
|
|
1
|
|
1
|
|
—
|
|
—
|
|
—
|
|
||||||
Comprehensive income
|
58
|
|
1
|
|
59
|
|
112
|
|
—
|
|
112
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
•
|
liability for unpaid losses and loss adjustment expenses (accrued workers' compensation costs) related to workers' compensation and workers' compensation collateral receivable,
|
•
|
accrued health insurance costs,
|
•
|
liability for insurance premiums payable,
|
•
|
valuation of the investment portfolio,
|
•
|
impairments of goodwill and other intangible assets,
|
•
|
income tax assets and liabilities, and
|
•
|
liability for legal contingencies.
|
•
|
not to reassess 1) whether any contracts that existed prior to adoption have or contain leases, 2) the classification of our existing leases or 3) initial direct costs for existing leases,
|
|
|
|
FINANCIAL STATEMENTS
|
|
•
|
to use the practical expedient of using hindsight to determine the lease terms and evaluate any impairments in right-of-use assets upon transition, and
|
•
|
not separately record non-lease and lease components for all leases in which we act as a lessee.
|
|
|
June 30, 2019
|
||||||||||
(in millions)
|
|
As reported
|
|
Balance Using Previous Standard
|
|
Increase (Decrease)
|
||||||
Balance sheet
|
|
|
|
|
|
|
||||||
Assets
|
|
|
|
|
|
|
||||||
Operating lease right-of-use assets
|
|
$
|
60
|
|
|
$
|
—
|
|
|
$
|
60
|
|
Liabilities
|
|
|
|
|
|
|
||||||
Operating lease liabilities
|
|
17
|
|
|
—
|
|
|
17
|
|
|||
Operating lease liabilities, noncurrent
|
|
55
|
|
|
11
|
|
|
44
|
|
|||
Equity
|
|
|
|
|
|
|
||||||
Accumulated deficit
|
|
(229
|
)
|
|
—
|
|
|
(229
|
)
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
June 30, 2019
|
December 31, 2018
|
|||||||||||||||||||
(in millions)
|
Cash and cash equivalents
|
Available-for-sale marketable securities
|
Total
|
Cash and cash equivalents
|
Available-for-sale marketable securities
|
Certificate
of
deposits
|
Total
|
||||||||||||||
Cash and cash equivalents
|
$
|
219
|
|
$
|
—
|
|
$
|
219
|
|
$
|
228
|
|
$
|
—
|
|
$
|
—
|
|
$
|
228
|
|
Investments
|
—
|
|
76
|
|
76
|
|
—
|
|
54
|
|
—
|
|
54
|
|
|||||||
Restricted cash, cash equivalents and investments
|
|
|
|
|
|
|
|
|
|
||||||||||||
Insurance carriers' security deposits
|
14
|
|
—
|
|
14
|
|
15
|
|
—
|
|
—
|
|
15
|
|
|||||||
Payroll funds collected
|
519
|
|
—
|
|
519
|
|
783
|
|
—
|
|
—
|
|
783
|
|
|||||||
Collateral for health benefits claims
|
75
|
|
—
|
|
75
|
|
75
|
|
—
|
|
—
|
|
75
|
|
|||||||
Collateral for workers' compensation claims
|
63
|
|
1
|
|
64
|
|
66
|
|
1
|
|
—
|
|
67
|
|
|||||||
Collateral to secure standby letter of credit
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
2
|
|
|||||||
Total restricted cash, cash equivalents and investments
|
671
|
|
1
|
|
672
|
|
939
|
|
1
|
|
2
|
|
942
|
|
|||||||
Investments, noncurrent
|
—
|
|
117
|
|
117
|
|
—
|
|
135
|
|
—
|
|
135
|
|
|||||||
Restricted cash, cash equivalents and investments, noncurrent
|
|
|
|
|
|
|
|
|
|
||||||||||||
Collateral for workers' compensation claims
|
195
|
|
5
|
|
200
|
|
182
|
|
5
|
|
—
|
|
187
|
|
|||||||
Total
|
$
|
1,085
|
|
$
|
199
|
|
$
|
1,284
|
|
$
|
1,349
|
|
$
|
195
|
|
$
|
2
|
|
$
|
1,546
|
|
|
June 30, 2019
|
December 31, 2018
|
||||||||||||||||||||||
(in millions)
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Fair Value
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Fair Value
|
||||||||||||||||
Asset-backed securities
|
$
|
35
|
|
$
|
—
|
|
$
|
—
|
|
$
|
35
|
|
$
|
33
|
|
$
|
—
|
|
$
|
—
|
|
$
|
33
|
|
Corporate bonds
|
94
|
|
1
|
|
—
|
|
95
|
|
99
|
|
—
|
|
—
|
|
99
|
|
||||||||
U.S. government agencies and government-
sponsored agencies
|
5
|
|
—
|
|
—
|
|
5
|
|
7
|
|
—
|
|
—
|
|
7
|
|
||||||||
U.S. treasuries
|
58
|
|
1
|
|
—
|
|
59
|
|
46
|
|
—
|
|
—
|
|
46
|
|
||||||||
Exchange traded fund
|
1
|
|
—
|
|
—
|
|
1
|
|
1
|
|
—
|
|
—
|
|
1
|
|
||||||||
Other debt securities
|
4
|
|
—
|
|
—
|
|
4
|
|
9
|
|
—
|
|
—
|
|
9
|
|
||||||||
Total
|
$
|
197
|
|
$
|
2
|
|
$
|
—
|
|
$
|
199
|
|
$
|
195
|
|
$
|
—
|
|
$
|
—
|
|
$
|
195
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
(in millions)
|
|
June 30, 2019
|
|
||
One year or less
|
|
$
|
81
|
|
|
Over one year through five years
|
|
103
|
|
|
|
Over five years through ten years
|
|
7
|
|
|
|
Over ten years
|
|
7
|
|
|
|
Total fair value
|
|
$
|
198
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||
(in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||
Gross proceeds from sales
|
$
|
14
|
|
$
|
—
|
|
$
|
28
|
|
$
|
39
|
|
Gross proceeds from maturities
|
19
|
|
10
|
|
36
|
|
24
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
(2)
|
Presented in accordance with ASC 842, which excludes base payments of $4 million for leases that do not yet have a commencement date.
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||
(in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||
Total accrued costs, beginning of period
|
$
|
236
|
|
$
|
250
|
|
$
|
238
|
|
$
|
255
|
|
Incurred
|
|
|
|
|
||||||||
Current year
|
16
|
|
19
|
|
35
|
|
39
|
|
||||
Prior years
|
(11
|
)
|
(6
|
)
|
(16
|
)
|
(13
|
)
|
||||
Total incurred
|
5
|
|
13
|
|
19
|
|
26
|
|
||||
Paid
|
|
|
|
|
||||||||
Current year
|
(2
|
)
|
(2
|
)
|
(3
|
)
|
(2
|
)
|
||||
Prior years
|
(15
|
)
|
(17
|
)
|
(30
|
)
|
(35
|
)
|
||||
Total paid
|
(17
|
)
|
(19
|
)
|
(33
|
)
|
(37
|
)
|
||||
Total accrued costs, end of period
|
$
|
224
|
|
$
|
244
|
|
$
|
224
|
|
$
|
244
|
|
(in millions)
|
June 30, 2019
|
December 31, 2018
|
||||
Total accrued costs, end of period
|
$
|
224
|
|
$
|
238
|
|
Collateral paid to carriers and offset against accrued costs
|
(12
|
)
|
(13
|
)
|
||
Total accrued costs, net of carrier collateral offset
|
$
|
212
|
|
$
|
225
|
|
|
|
|
||||
Payable in less than 1 year
(net of collateral paid to carriers of $3 at June 30, 2019 and December 31, 2018) |
$
|
64
|
|
$
|
67
|
|
Payable in more than 1 year
(net of collateral paid to carriers of $9 and $10 at June 30, 2019 and December 31, 2018, respectively) |
148
|
|
158
|
|
||
Total accrued costs, net of carrier collateral offset
|
$
|
212
|
|
$
|
225
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||
|
2019
|
2018
|
2019
|
2018
|
|||||
Shares issued and outstanding, beginning balance
|
70,079,747
|
|
70,363,251
|
|
|
70,596,559
|
|
69,818,392
|
|
Issuance of common stock from vested restricted stock units
|
213,991
|
|
389,875
|
|
|
500,710
|
|
1,000,141
|
|
Issuance of common stock from exercise of stock options
|
58,491
|
|
263,464
|
|
|
139,773
|
|
469,894
|
|
Issuance of common stock for employee stock purchase plan
|
112,623
|
|
84,525
|
|
|
112,623
|
|
84,525
|
|
Repurchase of common stock
|
(392,700
|
)
|
(434,766
|
)
|
|
(1,175,609
|
)
|
(594,799
|
)
|
Awards effectively repurchased for required employee withholding taxes
|
(81,007
|
)
|
(92,462
|
)
|
|
(182,911
|
)
|
(204,266
|
)
|
Shares issued and outstanding, ending balance
|
69,991,145
|
|
70,573,887
|
|
|
69,991,145
|
|
70,573,887
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
RSUs
|
RSAs
|
||||||||
|
Number of Units
|
Weighted-Average
Grant Date
Fair Value
|
Number of Units
|
Weighted-Average
Grant Date
Fair Value
|
||||||
Nonvested at December 31, 2018
|
1,737,554
|
|
$
|
32.83
|
|
346,792
|
|
$
|
49.13
|
|
Granted
|
724,172
|
|
60.58
|
|
—
|
|
—
|
|
||
Vested
|
(511,813
|
)
|
30.34
|
|
(31,248
|
)
|
50.61
|
|
||
Forfeited
|
(106,737
|
)
|
36.52
|
|
(11,103
|
)
|
49.35
|
|
||
Nonvested at June 30, 2019
|
1,843,176
|
|
$
|
44.18
|
|
304,441
|
|
$
|
49.11
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
(in millions)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Cost of providing services
|
$
|
2
|
|
$
|
2
|
|
|
$
|
4
|
|
$
|
4
|
|
Sales and marketing
|
1
|
|
2
|
|
|
1
|
|
4
|
|
||||
General and administrative
|
7
|
|
5
|
|
|
13
|
|
9
|
|
||||
Systems development and programming costs
|
1
|
|
1
|
|
|
2
|
|
2
|
|
||||
Total stock-based compensation expense
|
$
|
11
|
|
$
|
10
|
|
|
$
|
20
|
|
$
|
19
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||
(in millions, except per share data)
|
2019
|
2018
|
2019
|
2018
|
||||||||
Net income
|
$
|
46
|
|
$
|
58
|
|
$
|
109
|
|
$
|
112
|
|
Weighted average shares of common stock outstanding
|
70
|
|
70
|
|
70
|
|
70
|
|
||||
Basic EPS
|
$
|
0.65
|
|
$
|
0.82
|
|
$
|
1.56
|
|
$
|
1.59
|
|
Net income
|
$
|
46
|
|
$
|
58
|
|
$
|
109
|
|
$
|
112
|
|
Weighted average shares of common stock outstanding
|
70
|
|
70
|
|
70
|
|
70
|
|
||||
Dilutive effect of stock options and restricted stock units
|
1
|
|
3
|
|
1
|
|
2
|
|
||||
Weighted average shares of common stock outstanding
|
71
|
|
73
|
|
71
|
|
72
|
|
||||
Diluted EPS
|
$
|
0.64
|
|
$
|
0.80
|
|
$
|
1.53
|
|
$
|
1.55
|
|
|
|
|
|
|
||||||||
Common stock equivalents excluded from income per diluted share because of their anti-dilutive effect
|
—
|
|
—
|
|
1
|
|
1
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
(in millions)
|
Level 1
|
Level 2
|
Total
|
||||||
June 30, 2019
|
|
|
|
||||||
Cash equivalents:
|
|
|
|
||||||
Money market mutual funds
|
$
|
89
|
|
$
|
—
|
|
89
|
|
|
Total cash equivalents
|
89
|
|
—
|
|
89
|
|
|||
Investments:
|
|
|
|
||||||
Asset-backed securities
|
—
|
|
35
|
|
35
|
|
|||
Corporate bonds
|
—
|
|
95
|
|
95
|
|
|||
U.S. government agencies and government-sponsored agencies
|
—
|
|
5
|
|
5
|
|
|||
U.S. treasuries
|
—
|
|
54
|
|
54
|
|
|||
Other debt securities
|
—
|
|
4
|
|
4
|
|
|||
Total investments
|
—
|
|
193
|
|
193
|
|
|||
Restricted cash equivalents:
|
|
|
|
||||||
Money market mutual funds
|
43
|
|
—
|
|
43
|
|
|||
Commercial paper
|
18
|
|
—
|
|
18
|
|
|||
Total restricted cash equivalents
|
61
|
|
—
|
|
61
|
|
|||
Restricted investments:
|
|
|
|
||||||
U.S. treasuries
|
—
|
|
5
|
|
5
|
|
|||
Exchange traded fund
|
1
|
|
—
|
|
1
|
|
|||
Certificate of deposit
|
—
|
|
—
|
|
—
|
|
|||
Total restricted investments
|
1
|
|
5
|
|
6
|
|
|||
Total unrestricted and restricted cash equivalents and investments
|
$
|
151
|
|
$
|
198
|
|
$
|
349
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
(in millions)
|
Level 1
|
Level 2
|
Total
|
||||||
December 31, 2018
|
|
|
|
||||||
Cash equivalents
|
|
|
|
||||||
Money market mutual funds
|
$
|
4
|
|
$
|
—
|
|
$
|
4
|
|
U.S. treasuries
|
—
|
|
1
|
|
1
|
|
|||
Total cash equivalents
|
4
|
|
1
|
|
5
|
|
|||
Investments
|
|
|
|
||||||
Asset-backed securities
|
—
|
|
33
|
|
33
|
|
|||
Corporate bonds
|
—
|
|
99
|
|
99
|
|
|||
U.S. government agencies and government-sponsored agencies
|
—
|
|
7
|
|
7
|
|
|||
U.S. treasuries
|
—
|
|
41
|
|
41
|
|
|||
Other debt securities
|
—
|
|
9
|
|
9
|
|
|||
Total investments
|
—
|
|
189
|
|
189
|
|
|||
Restricted cash equivalents:
|
|
|
|
||||||
Money market mutual funds
|
48
|
|
—
|
|
48
|
|
|||
Commercial paper
|
20
|
|
—
|
|
20
|
|
|||
Total restricted cash equivalents
|
68
|
|
—
|
|
68
|
|
|||
Restricted investments:
|
|
|
|
||||||
U.S. treasuries
|
—
|
|
5
|
|
5
|
|
|||
Exchange traded fund
|
1
|
|
—
|
|
1
|
|
|||
Certificate of deposit
|
—
|
|
2
|
|
2
|
|
|||
Total restricted investments
|
1
|
|
7
|
|
8
|
|
|||
Total unrestricted and restricted cash equivalents and investments
|
$
|
73
|
|
$
|
197
|
|
$
|
270
|
|
|
June 30, 2019
|
||||||||||
|
|
|
|
Fair Market Value
|
|||||||
(in millions)
|
Hedge type
|
Final settlement date
|
Notional amount
|
Other current assets
|
Accounts payable and other current liabilities
|
||||||
Derivatives designated as hedging instruments
|
|
|
|
|
|
||||||
Collar - LIBOR
|
Cash flow
|
May 2022
|
$
|
213
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
|
|
OTHER INFORMATION
|
|
Period
|
Total Number of
Shares
Purchased (1)
|
|
Weighted Average Price
Paid Per Share |
|
Total Number of
Shares Purchased as Part of Publicly Announced Plans (2) |
|
Approximate Dollar Value ($ millions)
of Shares that May Yet be Purchased Under the Plans (2) |
||||||
April 1- April 30, 2019
|
146,761
|
|
|
$
|
60.91
|
|
|
144,500
|
|
|
$
|
329
|
|
May 1 - May 31, 2019
|
238,763
|
|
|
$
|
62.08
|
|
|
161,200
|
|
|
$
|
319
|
|
June 1 - June 30, 2019
|
88,183
|
|
|
$
|
65.91
|
|
|
87,000
|
|
|
$
|
313
|
|
Total
|
473,707
|
|
|
|
|
|
392,700
|
|
|
|
|
|
|
OTHER INFORMATION
|
|
|
|
|
|
Incorporated by Reference
|
|
|
||||||
Exhibit No.
|
|
Exhibit
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Filed Herewith
|
10.1
|
|
|
|
|
|
|
|
|
|
|
X
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
X
|
|
31.1
|
|
|
|
|
|
|
|
|
|
|
X
|
|
31.2
|
|
|
|
|
|
|
|
|
|
|
X
|
|
32.1*
|
|
|
|
|
|
|
|
|
|
|
X
|
|
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
|
|
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Document has been furnished, is deemed not filed and is not to be incorporated by reference into any of TriNet Group, Inc.’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.
|
|
|
|
SIGNATURES
|
|
|
TRINET GROUP, INC.
|
||
|
|
||
Date: July 25, 2019
|
|
By:
|
/s/ Burton M. Goldfield
|
|
|
|
Burton M. Goldfield
|
|
|
|
Chief Executive Officer
|
|
|
|
|
Date: July 25, 2019
|
|
By:
|
/s/ Richard Beckert
|
|
|
|
Richard Beckert
|
|
|
|
Chief Financial Officer
|
|
|
|
|
Date: July 25, 2019
|
|
By:
|
/s/ Michael P. Murphy
|
|
|
|
Michael P. Murphy
|
|
|
|
Chief Accounting Officer
|
|
|
|
Participant:
|
|
Award Number:
|
|
Date of Grant:
|
|
Number of Shares Subject to Award:
|
|
•
|
acknowledges receipt of, and represents that Participant understands, this Notice, the RSU Agreement, the Restrictive Covenants Agreement and the Plan;
|
•
|
acknowledges and agrees that this Notice, the RSU Agreement (including any exhibits attached thereto), the Restrictive Covenants Agreement and the Plan set forth the entire understanding between the Participant and the Company regarding this Award and supersede all prior oral or written agreements, promises and/or representations on that subject with the exception of (i) equity awards previously granted and delivered to the Participant, (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law or listing standards applicable to the Company, and (iii) any written employment or severance arrangement that would provide for vesting acceleration;
|
•
|
acknowledges and confirms the Participant’s consent to receive electronically the Award Agreement, the Plan and any other Plan documents or other related communications that the Company wishes or is required to deliver;
|
•
|
acknowledges that a copy of the Plan and the related Plan documents were made available to the Participant; and
|
•
|
agrees that the electronic acceptance of the Award Agreement constitutes a legally binding acceptance of the Award Agreement, and that the electronic acceptance of the Award Agreement shall have the same force and effect as if the Award Agreement was physically signed.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of TriNet Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: July 25, 2019
|
|
|
/s/ Burton M. Goldfield
|
Burton M. Goldfield
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of TriNet Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: July 25, 2019
|
|
|
/s/ Richard Beckert
|
Richard Beckert
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: July 25, 2019
|
/s/ Burton M. Goldfield
|
|
Burton M. Goldfield
|
|
Chief Executive Officer
|
|
|
|
|
Date: July 25, 2019
|
/s/ Richard Beckert
|
|
Richard Beckert
|
|
Chief Financial Officer
|