Specialist
Former C-Suite at TriNet Group Inc
Agenda
- Trends and developments impacting TriNet’s (NYSE: TNET) operating environment
- Competitive dynamics across PEO (professional employer organisation)- and SMB-focused HCM (human capital management) solutions – TriNet vs peers such as ADP (NASDAQ: ADP), Insperity (NYSE: NSP), Paychex (NASDAQ: PAYX), Rippling, Gusto and BambooHR
- Product portfolio expansion and demand outlook
- Mid-to-long-term growth outlook – M&A strategy and expectations
Questions
1.
Could you give us an overview of TriNet’s operating environment? What are 2-3 key trends or drivers you’re monitoring and that the investment community should be attuned to?
2.
You mentioned insularity for the PEO [professional employer organisation] sector, and we’ve seen slowing in new business formation. TriNet client surveys at the end of 2022 indicated headcount growth expectations by 10% on average in 2023. In 2023 so far, however, we’ve seen regular headlines of lay-offs and uncertainty around the broader economic environment. How are you thinking about the macro picture and WSE [worksite employee] growth in 2023 and beyond?
3.
You mentioned industry hesitancy and certain SMBs adopting a PEO model. TriNet CEO Burton Goldfield discussed increasing regulation and increasing complexity for SMBs operating in multi-state environments and how that benefits PEO players such as TriNet. How should we compare those two? Do you think increasing complexity will incentivise SMBs to adopt a PEO model and overcome hesitancies they might have when considering the bleak macroeconomic picture?
4.
What would you estimate the penetration rate across the SMB market for PEOs and players such as TriNet to be? The company has mentioned this being a very under-penetrated market.
5.
Using the New York or California market as a proxy here, how would you compare TriNet to ADP or Insperity? Who do you see the company competing most with in those competitive markets, and where is it winning? Where is it best-of-breed?
6.
Could you elaborate on TriNet’s vertical strategy and its approach to the total lifetime value of the customer? How much of a market differentiator is that? Does that make the company stand out in the marketplace, and do you expect more PEOs to adopt a similar approach?
7.
What was the strategy and rationale behind TriNet’s February 2022 acquisition of Zenefits? How might the acquisition expand the company’s broader market opportunity, and do you foresee any negative repercussions?
8.
How much success do you think TriNet will have in marrying that PEO HCM [human capital management] solution to be a fully integrated broker where the customer is able to have a single platform, data model, payroll and reporting engine?
9.
Do you think the hands-on ethos you just mentioned runs throughout TriNet’s organisation? It seems the company is trying to recruit and scale its sales organisations. How would you assess its efforts in scaling up go-to-market functions or sales teams?
10.
You mentioned focusing on the PEO side of the business and this trust element. Has TriNet’s portfolio of offerings positioned it well to retain larger clients who may grow outside the confines of a PEO? If not, how much more product development is needed to make sure the company can retain those clients?
11.
How are you thinking about SMB market retention dynamics for that TriNet customer base over 2023? It seems we’ve seen it holding at a healthy level thus far, but could that retreat towards historically lower levels?
12.
Professional services revenue grew 18% YoY – some of that is attributable to Zenefits, and TriNet has guided for 1-5% growth across FY23. What do you see as the biggest components or growth drivers to success for the company’s professional service businesses, and how are you thinking about professional services revenue growth in 2023?
13.
Is there anything we haven’t covered thus far that you wanted to address regarding TriNet?
14.
Regarding consolidation, you mentioned 900 PEOs pre-pandemic vs roughly 600 today. Could you elaborate on what increased consolidation in the PEO space might look like over the next 24-36 months? What might that 600 number whittle down to?
15.
It seems M&A may take a backseat here as TriNet digests and integrates its Zenefits acquisition. Do you think H1 2023 will be relatively inactive for the company before it focuses on prioritising the M&A buckets you alluded to – market reach and accelerations, product augmentation and enhancement, then technology advancements – in H2 2023?
16.
Are there any markets where you see TriNet under-represented? Do you think the company’s vertical market strategy – focusing on technology, life science and financial services, all customer verticals that have been impacted by some of those macroeconomic headwinds – exposes it to economic headwinds?
17.
How would you assess TriNet’s senior leadership team – we mentioned CEO Burton Goldfield – and its overall growth strategy and performance? Are your confident in the company’s ability to navigate potential macroeconomic headwinds and realise growth opportunities?
18.
TriNet guided for 2023 total revenue or top-line growth of plus or minus 2%. What’s your take on that range?
19.
Do you have any thoughts on TriNet’s health insurance side?
20.
What’s your broader 24-36-month outlook for the PEO sector? Who are the medium-to-long-term winners and losers? Do you have any concluding remarks?
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