TriNet Group Q3 2023 Earnings Call Transcript

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October 25, 2023

Key Takeaways

  • During Q3, TriNet delivered GAAP EPS growth of 34% YoY, outperforming its guidance on cost control and earnings.
  • New sales ACV accelerated 42% YoY and sales headcount rose 19% YoY, with a record pipeline expected to sustain momentum into Q4.
  • TriNet completed a $1 billion share repurchase at $107 per share funded by a $400 million bond and expanded credit facility, and targets returning 75% of free cash flow including potential dividends.
  • For Q4, TriNet cut revenue guidance to flat to +4% and sees full-year revenue of flat to +1%, while worksite employees were down 5% YoY at quarter-end.
  • Key digital transformation milestones included 100% application cloud migration, a Healthe partnership and an enhanced benefits administration platform to support a new broker channel.
AI Generated. May Contain Errors.
Earnings Conference Call
TriNet Group Q3 2023
00:00 / 00:00

There are 8 speakers on the call.

Operator

Good afternoon, and welcome to the TriNet Third Quarter 2023 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please also note that this event is being recorded today. I would now like to hand the conference over to Alex Bauer, Head of Investor Relations.

Operator

Please go ahead, sir.

Speaker 1

Thank you, operator. Good afternoon. My name is Alex Bauer, and I am TriNet's Head of Investor Relations. Thank you for joining us, and welcome to TriNet's 2023 Third Quarter Conference Call. I am joined today by our CEO, Burton M.

Speaker 1

Goldfield and our CFO, Kelly Tuminelli. Before we begin, I would like to address our use Forward looking statements and non GAAP financial measures. Please note that today's discussion will include our 20 23 Q4 and 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 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.

Speaker 1

We encourage you to review our most recent public filings with the SEC, Our 10 ks and 10 Q filings for a more detailed discussion of the risks, uncertainties and changes in circumstances that may affect our future results In addition, our discussion today will include non GAAP financial measures, including our forward looking guidance For reconciliations of our non GAAP financial measures to our GAAP financial results, please see our earnings release, 10 Q filings or 10 ks filing, which are available on our website or through the SEC website. With that, I will turn the call over to Burton. Burton?

Speaker 2

Thank you, Alex. During the Q3, I am pleased that our first half positive trends accelerated Into the back half of twenty twenty three, we successfully executed against a key set of corporate priorities. We delivered financial results largely in line with our guidance, outperforming in both cost control and earnings growth. GAAP earnings per share grew 34% year over year. To align with business trends, we leveraged our investment in technology and increased our service levels, while reducing our overall spend.

Speaker 2

Notably in the 3rd quarter, We realized outsized year over year growth in new sales. This represents a further acceleration of our sales results over Q2. Based on the existing pipeline, I expect this trend In year over year growth in new sales to continue into the Q4, our differentiated Service model has paid off with improved retention in 2023. We are now forecasting our retention rate to be in line with our all time best retention rate. Additionally, it should therefore come as no surprise WSE growth in Q3 and we are forecasting additional sequential growth In Q4, despite continued headwinds in customer hiring.

Speaker 2

Importantly, delivering on our key Digital transformation milestones has enhanced our core capabilities. This positive impact a $1,000,000,000 buyback transaction, including a tender offer, which is already proven to be accretive to EPS, And we believe this trend will continue. Despite the uncertain economic and geopolitical environment, TriNet continues to focus on execution and delivering results. This is what our investors have come to expect from TriNet. Whether we are discussing operating expenses or insurance costs, TriNet manages its cost prudently.

Speaker 2

We have sufficient flexibility in our operations to adjust our expenses consistent with the Current demands from our business and each quarter we reprice insurance for a cohort of our customers, which enables us to react to insurance cost trend changes if and when they occur. Finally, we finished the 3rd quarter with 300 And 36,000 WSEs representing sequential growth quarter over quarter. I am particularly pleased with the continued strength in our new sales. Historically, the Q3 has been a slower Sales quarter for TriNet, not this year as TriNet's value proposition has resonated with the market. 3rd quarter new sales ACV accelerated 42% year over year.

Speaker 2

This continued the momentum from our strong second quarter results. Our new sales growth was driven by excellent execution And the tight partnership between sales and marketing, referrals from dedicated customers Have provided significant increased leads and marketing is incubating the leads, which delivers prospects Ready to engage with TriNet. Our sales team is executing and we are seeing improved close rates as a result. Last quarter, I discussed our overall growth in mature sales reps, while still highlighting the need to grow capacity. That need persists, but we are making progress.

Speaker 2

During the Q3, we grew overall rep count by approximately 5% sequentially, Resulting in year to date total sales force growth of approximately 19%. It is important to note that our current sales pipeline is the strongest in our company history. The visibility into both our Q4 and January 2024 new sales pipelines, for Q4 and the Q1 of 2024. Turning to the topic of retention, We now expect to realize a 6 point year over year improvement in our retention rate, which is better than our previous expectations. We believe TriNet offers great value for SMBs in our core verticals And our Net Promoter Score supports this belief.

Speaker 2

With our first half NPS scores in hand, We saw a significant improvement when compared with the prior period. This continues a multiyear trend of NPS improvement, which reflects our delivery of the best possible service to our customers. Finally, To close out our volume discussion, customer hiring in the Q3 continued to be inconsistent amongst our verticals. This trend is similar to the last 5 quarters and validates the value of our deliberate And diversified targeted customer strategy. This diversification enables us to grow During challenging times, notably, we saw hiring in Life Sciences, ThinServe and Main Street Within technology, the hiring trend on a net basis Was modestly weaker than last quarter.

Speaker 2

We saw small reductions in workforces across all customer sizes with the bulk of the weakness captured in the software industry. While near term challenges to tech growth remain in place, My long term view of this key vertical remains optimistic and constructive. In September, in an effort to garner greater insight into the overall health of the SMB market, We analyze the proprietary results of our commissioned Harris Poll of SMBs. In general, we saw a shift to optimism in the SMB space. 82% of leaders Are more confident in their ability to weather the macroeconomic environment over the next year, a 23 point improvement from last year.

Speaker 2

SMBs in the first half of the year took the necessary actions to weather the current economic climate and are investing in future initiatives. Specific to technology, over 85% of the leaders indicated They were planning investments in products, market expansion and or technology. However, for the same period, only 36 Percent of TechSMB Leaders indicated that they plan to hire new workers. Irrespective of that sentiment, we expect to grow our installed base by adding new customers and keeping them longer To our differentiated customer service, the economy will ultimately rebound, Customers will hire and we will benefit from this growth. I would like to pivot and discuss TriNet's Technology strategy.

Speaker 2

I have always believed that owning your own technology is imperative And we are now clearly benefiting from our long term technology investment. Our acquisition of Zenefits was the most Prominent example of this evolution. I have discussed how owning an HRIS platform enables TriNet to offer the full barbell of HCM Services to SMBs. At one end of the barbell is the low touch, low cost HRIS And at the other end, the PEO construct. TriNet has pursued a strategy of filling in the barbell With additional products and services to provide further value for our customers.

Speaker 2

Our ultimate goal is to serve our customers throughout their business lifecycle. During the Q3, we accomplished 3 important objectives on the path to realizing this vision. First, for PEO customers, TriNet has long offered the most robust health plan offerings in the SMB market. We are acutely aware of how challenging the selection of benefits can be for WSEs. Earlier this month, we announced that TriNet entered into a strategic partnership with Healthe.

Speaker 2

Healthe is an AI based solution that helps transform the employee benefits experience by optimizing benefits selection for the unique needs of each WSE. 2nd, through the acquisition of Zenefits, we gained access to an 3 leading benefits administration tool purpose built for SMBs. Last year, we paired the BenAdman tool With our PEO to launch TriNet IOM. This quarter, we leveraged our learnings And enhanced our IOM solution. As we refined our broker strategy, we renegotiated certain relationships, which benefited TriNet Benefits revenue this quarter.

Speaker 2

But more importantly, this strategy sets us up Said another way, by leveraging our advanced Ben admin capabilities, we are launching a new broker channel, which will greatly expand our sales capacity and market opportunity. Lastly, TriNet's entire product and service offering is linked to our digital transformation. During the Q3, TriNet successfully completed the migration of 100% of our applications to the cloud. This is another example for our customers of our steadfast dedication To delivering top tier service and unwavering reliability, the investment and focus On technological evolution, including AI, security, interoperability and usability Will result in the following benefits to our customers. Industry defining usability, Not only for administrators and employees, but for their families.

Speaker 2

Continuous availability, including 7x24 support, enhanced business continuity and further Strengthening of our data security. This is particularly exciting to me because I am seeing the many years of architectural work now resulting in concrete results. These include the next generation of exciting capabilities along with longer term cost containment. With this in mind, we believe our stock represents significant long term value. During the Q3, TriNet successfully executed $1,000,000,000 of share repurchase, including A public tender offer at $107 per share.

Speaker 2

I am extremely proud of the TriNet team for delivering this Successful transaction, including the issuance of a bond and the share buyback. This has been a transformational quarter for TriNet and I would be remiss not to thank every single TriNet colleague for their focus on our amazing customers. With that, I will pass the call over to Kelly for a review of our financials. Kelly?

Speaker 3

Thank you, Burton. In a quarter that saw rising long term interest rates and an overall challenging business environment, TriNet successfully executed a series of capital actions, grew our sales and nimbly managed our operations. As we've discussed throughout the year, we believe that TriNet's stock offered significant value when measured against alternative capital actions, Given our long term view of our growth and opportunity, during the Q3, we took action. We repurchased $1,000,000,000 in stock at $107 a share through a $640,000,000 tender offer and a $360,000,000 share While TriNet is a strong cash generator, a transaction this size necessitated additional funding. We successfully issued a $400,000,000 bond into a volatile interest rate market and we expanded our bank lending group, Upsizing our credit facility by $200,000,000 to total $700,000,000 This rebalancing of our capital structure Brings us within our targeted leverage ratios, while maintaining a prudent cash buffer and access to additional liquidity.

Speaker 3

We know our products and services are resonating in the market. During the Q3, we grew new sales ACV by 42% year over year. As I've talked about throughout the year, we are managing our expenses prudently and allocating capital to drive growth. Even as we drove strong new sales, our operating expenses in the quarter declined year over year. Taken altogether, TriNet successfully executed several important initiatives, positioning the company for future growth.

Speaker 3

Now let's turn to our financial review of Q3 and our 4th quarter outlook. In the 3rd quarter, total revenues declined 2%, slightly below our guidance. Total revenue in the quarter was impacted by the workforce reductions in our tech vertical, which impacted our overall health participation rates by approximately 1%. This reduced our insurance services revenue. Regarding volume, we finished the 3rd Quarter with approximately 336,000 worksite employees, down 5% year over year and up 1% sequentially.

Speaker 3

Average WSE count for the quarter was over 333,000, also down 5% year over year, but up 2% sequentially. Consistent with previous quarters, our Q3 WSE volumes were lower year over year largely due to the cumulative impact of lower customer hiring and workforce reductions in the last half of twenty twenty two and through the Q3 of 2023. Customer hiring in the 3rd quarter remained mixed with many of our verticals seeing growth. Technology, our largest vertical, along with Nonprofit and Professional Services saw workforce reductions slightly skewed towards larger clients. Professional Service revenue declined 2%, in line with the lower end of our guidance.

Speaker 3

The decline in professional services revenue was largely driven by subdued net customer hiring In a slight mix shift away from our technology vertical, our HRIS cloud services did provide a revenue benefit in the quarter as we optimize certain broker agreements on our path for expanding our PEO brokered benefits product. Insurance service revenues declined 1% year over year, largely due to lower than forecast participation rates And lower volume, which were partially offset by annual inflationary rate increases. The decline in our technology vertical is the primary reason for our decline in participation rates. While utilization increased year over year, Paid claims in the month of September were lower than what we had laid out in our Q3 guidance, driving a 2 point benefit to our insurance cost ratio versus prior expectations. While our ICR remains strong, we continue to observe Underlying health cost inflation driven by growth in provider prices and higher pharmaceutical costs.

Speaker 3

With respect to workers' comp, We continue to see strong overall performance, driving an approximately one point benefit to our ICR with a much smaller contribution this quarter from prior period development. As a result, our insurance cost ratio was 84%, about 3 points lower than the high end of our guidance. Turning to operating expenses. In the Q3, we demonstrated our commitment We also saw the minimization of certain Zenefits acquisition and integration related expenses, which taken together Spence reduction builds on our trajectory to achieve breakeven profitability for our HRIS product in 2024. Interest earned from our investments and operating cash continue to benefit from the current interest rate environment.

Speaker 3

During the quarter, We generated $18,000,000 in interest income, which after netting with interest expense resulted in $8,000,000 of other income. I should note that given the issuance of our $400,000,000 note and the $200,000,000 drawdown from our credit facility, In future quarters, we've reduced our expectations of significant net interest income. Our strong expense management, Lower health utilization and strong net contribution from interest income translated to solid earnings performance. In the quarter, we earned $1.63 in GAAP net income per share and we earned $1.91 in adjusted net income per share. Please note that our EPS result does include an approximately $0.02 net benefit in the quarter from our successfully executed tender offer.

Speaker 3

During the quarter, we generated $131,000,000 of corporate operating cash flow and ended the 3rd quarter with 2 $245,000,000 in unrestricted cash and investments on our balance sheet. The sequential decline in our Cash was driven by the funding for our tender offer and share repurchase. Now let's turn to our financial guidance. For the Q4, we are forecasting year over year total revenues to be in the range of flat to up 4%. Given 3 quarters of performance and our 4th quarter guidance, we are forecasting our full year 2023 revenues To be in the range of flat to up 1%.

Speaker 3

This represents a 1 point reduction to our previous full year guidance. We expect professional services revenue in the quarter to be in the range of down 2% to up 1%. For the full year, we expect professional services revenue to be in the range of flat to up 1%. This revised full year guidance reflects the Q3 achievement tightening up our previous range. For the Q4, We expect our insurance cost ratio in the range of 92% to 88%, reflecting both the seasonality of our insurance performance and expected health cost inflation.

Speaker 3

Given our Q4 guidance and our strong cumulative performance through the Q3, We now forecast our full year ICR to be in the range of 85.5% to 84.5%, representing a one point improvement to the high end of our previous guidance. Our 4th quarter estimate of GAAP net income per diluted share Is in the range of $0.26 to 1 dollars while our 4th quarter estimate for adjusted earnings per diluted share Is in the range of $0.59 to $1.33 Our 4th quarter earnings guidance includes the full impact from our share repurchase Transactions on our diluted share count. For full year 2023, our estimate of GAAP net income per diluted share is in the range $5.43 to $6.27 which represents a $0.53 increase from our previous guidance at the midpoint. Our full year 2023 estimate for adjusted earnings per diluted share is in a range of $6.90 To $7.55 this represents a $0.58 increase from our previous guidance at the midpoint. Our revised full year earnings per share guidance benefited from 3 items, around $0.19 net EPS contribution from our tender offer on the high end, An improved outlook on both health and workers' compensation and an outperformance in operating expenses As we manage our cost structure to reflect the current operating environment, we are encouraged by our execution, our strong financial and operating performance Is ultimately the outcome we want, keeping our focus on servicing our customers, bringing in new customers and keeping our customers longer.

Speaker 3

Now, I'll return the call to Burton for his final remarks. Burton?

Speaker 2

Thank you, Kelly. We delivered a strong third quarter Where the areas within our control, new sales, retention and expenses all performed well. Our customer base appears to be addressing their challenges and are prepared to navigate the volatile operating environment. This volatility is the outcome of increased global conflict, a polarized domestic political environment And higher interest rates causing continued uncertainty. As a company with over 3,600 employees, We have colleagues and their families impacted and traumatized by these unfolding events.

Speaker 2

We are focused on the well-being of our colleagues, customers and investors. The importance of what we do for our customers Remains top of mind and we will continue to put them at the center of everything we do. Operator?

Operator

We will now begin the question and answer session. At this time, we will take our first question, which will come from Tien Tsin Huang from JPMorgan. Please go ahead.

Speaker 2

Hi, Tien Tsin.

Speaker 4

Hey, Burton. Great to talk to you and Kelly as well. Just on the ACV, it's really strong, Burton up 47%. Can you help us with how does that translate here to revenue or volume As we look ahead and maybe just underline again for us, is it balance between sales productivity getting better versus Change in demand environment in your mind, maybe a little bit more color. Thank you.

Speaker 2

Yes. So great question, Tien Tsin. And We're actually up in ACV 42% in Q3 year over year. We've talked about this acceleration over the past Couple of quarters, we have grown the sales force under excellent leadership and we're up about 5% sequentially, But 19% year over year. So if you take the 42% ACV growth, you recognize there is a Capacity increased to 19%.

Speaker 2

We're getting higher close rates, better quality leads from marketing And a very strong pipeline. So across the board, I'm pretty excited or I wouldn't have had the strong conviction around Q4 continuing. As you realize with the complexity of executing a small business today, What we are offering has tremendous value, whether it's around cost control, fixed versus variable costs, Whether it's around reducing complexity or whether it's around assisting with remote workers And driving productivity within the small businesses, which they sorely need, TriNet is there to help.

Speaker 4

Good. Thank you for that. And I know I see more advertising as well. Maybe I think on the follow-up questions, maybe for Kelly, the 4th quarter revenue is flat to up or Maybe decompose for us a little bit there the mix between volume, rate and mix. How might that look versus what we saw in the Q3?

Speaker 3

Yes. I appreciate the question, Tien Tsin. And as we're looking in the Q4 And really what we've seen all year is kind of a low single digit contribution from rate. And so the majority of what we expect to see in the 4th quarter is predominantly volume related. Hopefully that helps.

Speaker 4

Good. Glad to hear it. Thank you.

Operator

Our next question will come from Kyle Peterson with Needham. Please go ahead.

Speaker 5

Hey, good afternoon. Thanks for taking the questions guys. I wanted to start off on CIE. I guess it sounds like The trends you guys saw in the Q3 were a little mixed, some verticals better than others. And does the guide Factor in any improvement or deterioration or are you guys kind of expecting things to stay Fairly consistent based on what you've seen so far in October.

Speaker 3

Yes, Kyle, why don't I take it and then I'll let Burton add anything that he wants To add from a color perspective, in terms of customer hiring in the quarter, we did see weakness and it was really predominantly in tech. I think 3 of our verticals Growth 3 of our verticals shrunk from a hiring pure hiring perspective, but it was really predominantly in tech. As we're looking out and thinking about guidance for the rest of the year, we did lower our CIE assumption And are assuming kind of call it on an annualized basis very low single digit.

Speaker 5

All right. That's really helpful. And then just a follow-up on the capital return rates, the tender Get executed and it seems like that's a successful transaction, but I guess maybe if you guys can provide more color. I know last You guys kind of mentioned considering maybe doing a dividend at some point, but how should we think about capital return moving forward And kind of how you guys are thinking about dividends versus buybacks?

Speaker 3

Great, Kyle. I appreciate the question. We're really pleased with what we were able to do in the quarter around capital actions. Obviously, it occurred a little bit later in the quarter, so the impact on the current quarter was Relatively small, about $0.02 We expect it to contribute about $0.19 on the full year 2023 EPS. As we're looking forward, I do want to reiterate for all of our investors the tenants So one, we agreed that it's appropriate for us to target returning approximately 75% of our free cash flow to Our investors on an annualized basis, as we think about what the form of that is, we do believe a recurring dividend is a useful addition our capital return strategy.

Speaker 3

We'll evaluate that as we move into 2024 and provide guidance there. We have been using the time since our last earnings call to really get feedback from our investors and we'll definitely consider that as we think about our But it really would be premature to talk about a level or anything like that, because we have not made a formal decision.

Speaker 5

Got it. That makes sense and helpful color. Thanks guys. Nice quarter.

Speaker 2

Thank you so much.

Operator

And our next question will come from Andrew Nicholas with William Blair. Please go ahead.

Speaker 6

Hi, Andrew. Good afternoon. Hey, Burton. A couple of questions on the close rates and sales force productivity that I want to ask. Maybe first, is there any sense that you have from talking to your sales force where like the primary drivers of those Increased close rates, are you seeing is that primarily going up against kind of greenfield opportunities or win rates Elevated, competitively, just kind of interested in unpacking that a little bit further.

Speaker 2

So that's a great question. First and foremost, we have a tremendous amount of referrals. And from a driver standpoint, I would say complexity, which is the multistate issue, Cost control and that varies depending on customer, but that's a big driver and then it's risk reduction. As you get into these challenging environments, you get into some more challenging situations from an employment standpoint. On your second question, overall close rates are up.

Speaker 2

The sales force is maturing and they're growing. But I would be remiss if I really didn't dig into the fact that our investments in technology To deliver an exceptional product are paying off. And what I mean by this is, in the HR world, there's been a lot of Change over the last couple of years. A few examples of the PPP loans came out of nowhere. You have the ERTC tax credit issue, Which is another complexity and I believe that it requires you to own your own technology and invest in the future And that has paid off from us.

Speaker 2

Now, I do not believe that a commoditized PEO platform shared by hundreds of other PEOs is an enduring strategy and I don't Into these platforms and then relying on somebody else to make investments. So I believe that the platform is distinguishing itself. You asked about the close rates. They're up across the board, but notably our close rates are up 50% If we do a technology demo, so we're distinguishing ourselves with technology and the service goes right along with the technology. So there's a momentum and as you realize, position is one thing, but momentum is entirely different thing.

Speaker 6

Interesting. That's all helpful. And then maybe I could kind of take a step back and ask a bigger question around Kind of pricing and aggressiveness and how you think about risk, it seems like in looking at ICR, You've been awfully profitable in the insurance services revenue line here for several years in a row. When you think about that Line, I don't want to ask about margins on a go forward basis as much as I want to ask if you could potentially use that profitability to Be more aggressive on price and potentially use that as a lever to grow worksite employees faster or if the Inclination from your perspective Burton is to kind of try to stay around levels that you've been at the last 4 years And if that comes with a little bit slower worksite employee growth, so be it.

Speaker 2

So we will always price to risk. We have exceeded the net insurance margin and I'm targeting that margin and then continue to try to get to that margin. We are using more sophisticated tools and obviously as you approach that margin, which is less Then today, it gives you some incremental price advantage. So there's no effort to drive a higher NIM. It is just having the sophistication in the book of business, having visibility into the claims to drive Towards the targeted NIM that we had.

Speaker 2

So I think the answer to your question is, as the technology advances and we get more It is much as that price drives incremental growth, so be it, Because the goal has always been to price to our targeted NIM.

Speaker 6

That's very helpful. And then if I could just ask one more, if you don't mind. Sure. I think within Zenefits and HRIS, you have a little bit of a structural Change going on in terms of the technology that you can offer to support that channel. What could that mean in terms of the opportunity set And how different is it from what you've historically done in that channel?

Speaker 6

I generally think of TriNet as being more oriented towards Selling direct, but just kind of curious about that kind of strategic shift and how it sets you up going forward? Thank you.

Speaker 2

Great question. So we've talked for a couple of quarters about how impressed We are with the benefits administration capabilities, which came with benefits. It opened our eyes to the fact that by Binding that VennAdmin tool directly with the PEO model, we have seen some interesting results. We have started to open that up to a broker community. So this would be an additional channel, Not an and or it would be an and not an or.

Speaker 2

And as we've talked about, we believe there is a deep and vast market For TriNet, we're still less than 50% of our quotes are against another PEO. So we have a plentiful mentality. We believe a select set of brokers could really help get this product to a completely different set of customers And we're in the early stages. So that isn't built into the model today. We are starting to leverage that Ben admin tool On a more fulsome basis, right now it's a small amount of our business.

Speaker 2

But what I think you'll see over the next Couple of quarters as we implement the full solution, the idea of bringing your own benefits and also enjoying The full breadth and depth of the PEO solution will become a reality.

Speaker 6

Thanks Burton. Appreciate

Speaker 2

it. No, I appreciate the questions.

Operator

And our next question will come from Jared Levine with TD Cowen. Please go ahead.

Speaker 6

Thank you. Bern, with the

Speaker 7

4Q 'twenty two earnings, you expressed confidence on growing WSCs at a high single digit rate starting FY 'twenty four. Being mindful of the fact you have lowered CI expectations for FY2023 a few points since then, is mid single digits WXT growth for FY 'twenty four reasonable at this point, assuming fairly stable retention rates, PIE consistent with what you're witnessing in FY 'twenty three What you're anticipating for January bookings?

Speaker 2

So look, I don't control the CIE. I Still will not back off from trying to drive that through sales force capacity, Exceptional retention and we're at a level of retention as high as I've seen in my 15 years at TriNet based on great service And great technology. And as we give guidance for 2024, I'll give you a better answer to that. But if you're asking me today, if I'm dissuaded from that, the answer is no. With a flat To a couple percent CIE that becomes a significant challenge, but I also believe our diversified customer base And by the way, some of the external studies that we've done where new business formation is way up, I'm still optimistic about the future.

Speaker 2

I am a pretty optimistic guy to begin with, but I do believe we're taking the right steps To drive towards that goal, whether it's Q1 or not, I can't tell you. But I do believe that The economy will rebound, a bit of help from CIE, and yes, that target is very doable.

Speaker 7

Got it. And then Kelly, in terms of actual or what you're anticipating for FY 'twenty three on the health insurance margin, how does that compare to your long term target of 88% to 90%. And then are there any reasons why you can now perform better or worse, versus what was embedded in that long term insurance margin over the medium term here?

Speaker 3

Yes. Well, one of the things I would highlight on that, Jared, and within that margin or insurance cost ratio It's truly both workers' comp and health. So, on the workers' comp side, we are evaluating this, but we have had The benefit this year of appropriate development and particularly in the second quarter that was a significant benefit to our Insurance cost ratio, it was less of a benefit this last quarter. It only added about 1 point to our margin overall. That was part of the benefit.

Speaker 3

We don't really expect or forecast prior period development. And so that's one unusual thing I'd pull to the side. As we look at the trends that we're seeing in Healthcare, we are always trying to anticipate those and we're adjusting Our renewal pricing every single quarter to reflect the trends that we're seeing, both upwards and downwards. To give a little bit of color on it, we have seen pharma prices increase pretty significantly and pharma usage increase significantly. But on the flip side, we've seen benefits with people using lower cost settings, like rather than in hospital outpatient Has been a change in terms of situs of care.

Speaker 3

So we're just going to continue to watch it, target our Long term overall average, and we'll give you more guidance as we get into 2024.

Speaker 2

And Jared, just to Give you a little bit more color, what we are going to do is control our costs, We are going to grow our sales and we are going to retain our customers. And we are at the early innings

Operator

This concludes our question and answer session and also concludes today's conference call. Thank you very much for attending today's presentation. You may now disconnect your lines.

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