Trinet Group adjusts 2025 guidance upwards, citing improved financial performance and strategic initiatives despite ongoing market challenges.

OPERATOR - (00:02:45)

Good morning and welcome to the TriNet third quarter 2025 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Alex Bauer, Head of Investor Relations. Please go ahead.

Alex Bauer - Head of Investor Relations - (00:03:26)

Thank you Operator. Good morning, My name is Alex Bauer, TriNet's head of Investor Relations. Thank you for joining us and welcome to TriNet's third quarter conference call and webcast. I'm joined today by our President and CEO Mike Simons and our CFO Kelly Tuminelli. Before we begin, I would like to preview this morning's call. I will first pass the call to Mike where he will comment on our third quarter performance and discuss our progress on our strategy and medium term outlook. Kelly will then review our Q3 financial performance and in greater detail. Please note that today's discussion will include references to our 2025 full year financial outlook, our medium term 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. We encourage you to review our most recent public filings with the SEC, including our 10K and 10Q filings for a more detailed discussion of the risks, uncertainties and changes in circumstances that may affect our future results or the market price of our stock. In addition, our discussion today will include non GAAP financial measures including our forward looking guidance for adjusted EBITDA and adjusted Net Income per diluted share. For reconciliations of our non GAAP financial measures to our GAAP financial results, please see our earnings release, 10Q filings or 10K filing which are or will be available on our website or through the SEC website. With that, I will turn the call over to Mike Mike thank you Alex.

Mike Simons - President and CEO - (00:05:39)

And good morning everyone. We appreciate you joining us for the early start before Discussing our third quarter results, I want to formally welcome Mala Murthy who, as announced this morning, will become TriNet's chief financial officer effective November 28 and I am sure is listening to the call this morning. Mala previously served as CFO of Teladoc Health and has more than 25 years of leadership experience including Business Unit CFO for the Global commercial segment at Amex, an FPA corporate strategy and treasury experience at PepsiCo. I'm excited to have her join at a pivotal time for TriNet as our results increasingly reflect a strengthened foundation and our focus is on generating sustainable growth. I know Mala looks forward to getting out and meeting you all over the coming months. I would also like to sincerely thank Kelly Tuminelli, our outgoing CFO, for her outstanding service and contributions to TriNet over the past five years. Kelly has played a vital role at TriNet during her tenure. She's been a consistent and reliable voice to shareholders and has been a great partner to me as I transitioned into the company. I'm grateful for all her efforts and for her willingness to stay on as an advisor to me through the middle of March next year, supporting a seamless transition. Thank you Kelly. Now let's turn to the third quarter which was a good one for TriNet. I'm pleased with our financial and operating performance allowing us to adjust our full year earnings outlook upwards and towards the high end of our 2025 guidance range. In the quarter we made progress on several dimensions of our strategy. While overall market conditions remain difficult with persistently low SMB hiring and elevated health care costs in the areas we control, our execution is strong, our outlook is improving and our confidence is growing as we work to reposition TriNet for long term profitable growth. As a reminder, our medium term strategy objectives include total revenues achieving a compounded annual growth rate of 4 to 6% with our adjusted EBITDA margins expanding to 10 to 11%, which taken together will ultimately drive total annualized value creation of 13 to 15% through earnings growth supplemented by share repurchase and dividends. During the third quarter, revenues were in line with our plan and with just a quarter left in the year, we expect full year 2025 total revenues to be approximately $5 billion near the midpoint of our full year guide. Our disciplined pricing and better than expected ASO sales have contributed to revenues in line with Plan despite a decline in WSE volumes. I recognize that while revenues being in line with plan is encouraging, investors will also have questions on underlying WSE volumes and when to expect a return to growth on this metric before talking through the components of volume growth, I'd like to make two points as context. First, we look at both the absolute number and the quality of WSEs in our client base. While volumes are down, we are quite pleased with the strong and increasing quality and profitability of our customers. Looking forward, we feel confident we have the high quality client base alongside other levers at our disposal to achieve value creation in line with our medium term strategy. Second, our health plan pricing relative to the market is important context. Partly because we had our own issues to fix, we moved earlier to address the escalating cost trend, taking a view that might initially have been thought to be conservative, that is that the escalated trend would not abate in the short term. We now believe this assumption of persistent escalated trend is playing out as the prudent view, moving more quickly and aggressively with health fee increases which proved to be in line with the general healthcare market we believe put us ahead of some other PEO competitors. While this has clearly impacted our WSE volumes, we believe we are largely through the steepest part of the repricing and set up well for 2026. Based on what we are seeing in our new business pipeline and hearing from brokers, the pricing gap appears to be tightening. With those two points as context, let's look a little deeper into our 3Q volume performance through the 3 customer hiring or CIE retention and new sales. Kelly will go into more detail on CIE later, but specific to the third quarter we saw the normal exodus of summer seasonal workers in September. Even still, we are on track to see some overall improvement in CIE when compared with last year, albeit still at much lower levels than historical norms on retention. While we remain on track to retain clients at or above our historical norm of 80%, we have seen a decline from prior year. It's worth noting that margins for terminated clients are considerably lower than for the overall client base. Further, in looking at our client exit research, it's clear that health plan pricing is the driver as it was cited as the number one reason for termination, up from being the fourth largest reason cited a year ago. Controlling for the impact of health plan pricing, attrition was down year over year and indeed we feel very good about our improving service delivery. More than a dozen years ago we established the Net Promoter Score as our primary measure of success from our clients perspective and I'm happy to report that here in 2025 we've reached an all time high in NPS. We believe there is a strong correlation between our investments and our service model and our strong NPS scores. On that front, we recently announced the launch of our AI powered suite of capabilities which harnesses our extensive HR knowledge and delivers tailored output for our customers. The evolution of our service model continues to and AI will play a central role in this evolution. Turning to New Sales Sales were down in the quarter, though we are encouraged by the quality of new clients added. Looking ahead to the fourth quarter, we expect improvement in our year over year performance and we're excited about the January pipeline as well. With strong contributions from the growth investments we've made, we continue to improve the retention of our senior most productive reps and the median tenure of our team continues to improve. At the same time, we've revamped our recruiting and training programs and have restarted our hiring. With more confidence these new reps will reach productive status. Our Preferred Broker Program, which is comprised of four national partners, is currently in market. As a reminder, a feature of this program is the alignment of targets for new sales and retention as well as building out dedicated quoting sales and service teams. This program is already generating a growing share of our RFPs, increasing our optimism for Q4 and 2026. We're also in market with our first set of benefit bundles which seek to simplify the offering, streamline the sales process and better align cost and plan design needs for our clients. It's increasingly clear that simplified benefit offerings will be an important part of our growth across equation. So on revenue overall, we believe we are building the foundation for predictable and sustainable growth. On margins, we're making progress towards our 10 to 11% target. The two key levers for improving margins are getting back into our long term insurance cost ratio range and managing operating expense growth. The third quarter saw us again realize health plan increases per enrolled member of approximately 10.5%. This is the cumulative increase after plan design buy downs which clients use to manage fee increases and also has the effect of reducing risk to TriNet. Looking forward, we're increasingly confident in our ability to return the insurance cost ratio back below the top end of our long term range of 87 to 90% in 2026, while also allowing for more moderate and predictable pricing for our client base on operating expenses for the third straight quarter. We saw a year over year reduction down 2% in 3Q. The drivers of this performance remain the same the application of technology to our business processes and continued talent optimization with our expenses and pricing levels well managed free cash flow is improving which enables us to return capital to shareholders consistent with our history. In the third quarter we repurchased stock and paid dividends totaling $45 million. In conclusion, we have a high quality client base that is increasingly advocating for TriNet. We have a talented and engaged colleague base and an increasingly broad set of marketplace partners. We're making progress on our growth and margin expansion initiatives and delivering against our financial objectives. Momentum is clearly building here at TriNet. With that, let me pass the call to Kelly for her review of our financial performance.

Kelly Tuminelli - Chief Financial Officer - (00:15:29)

Kelly thank you Mike. Before I jump into discussing the quarterly results, I do want to mention a few things about our leadership transition. My five plus year tenure at TriNet, working with our dedicated group of colleagues who always put our customers first has certainly been a highlight of my career. The entrepreneurial spirit of TriNet is unmatched and it has been an honor to help move the company forward on many fronts including a focus on capital management. I have confidence in the management team to finish 2025 strong and make significant progress towards the medium term strategy to and shareholder value creation announced last February. I will remain on board as an advisor to help support the team as they work through the year end process. Now let's jump into the third quarter results. During the third quarter we demonstrated continuing progress on benefit repricing and a focus on effiCIEncy and cost discipline resulting in a quarter that puts us at the top end of our annual EPS guidance. Total revenue in the quarter was down 2% on a year over year basis. Total revenue performance in the quarter reflected our decline in WSE volume, but was supported by prudent benefit repricing putting us back in line with the general cost trends in the healthcare market. Interest income and pricing strength in professional service revenue also supported total revenue performance. Similar to our second quarter, interest income was higher than originally forecasted driven by increased balances attributable to the timing of certain tax refunds. The timing of these refunds remains intermittent and difficult to predict, particularly given the processing delays at the irs. As we've continued our repricing focus, volume remained a headwind for revenue. We finished the quarter with approximately 332,000 total WSEs down 7% year over year and 302,000 co employed WSEs down 9%. During Q3 we saw a continuation of many of the trends we've experienced. In 2025, attrition was elevated when compared to the last year due to our repricing efforts and new sales were down as our pricing reflected higher healthcare observed trends. CIE was flat to last year and a NET negative in Q3 due to the off boarding of seasonal workers. Note that Even with this, CIE is slightly higher than last year on a year to date basis by approximately half of a point. Our year to date improvement has been driven mainly by the tech vertical, but we've also seen strength in hiring in financial services. This modest year over year improvement in CIE is in line with the guidance we laid out at the beginning of the year. As Mike indicated, we expect to see an improved year over year comparison for sales execution in the fourth quarter and our January pipeline is benefiting from our growth initiatives. We've also been quite pleased with the high quality customers we have added. Furthermore, our January cohort represents our last outsized renewal and it's our view that our pricing is increasingly aligned with claim trends and competition. Professional services revenue in the third quarter declined 8% year over year largely due to two main reasons, lower WSE volumes and the discontinuation of a specific client level technology fee of which we recognized $5 million in Q3 of last year. As the technology fee was largely fully recognized in revenue through Q3 of 2024 beginning in the fourth quarter, it will no longer be a significant negative prior year comparison. Professional services revenue was supported by low to mid single digit pricing strength and stronger than originally forecasted HRAs and ASO revenue. On an absolute basis. HRIS fees and ASO revenues, including those resulting from his conversions, decreased slightly year over year as the company transitions away from a SaaS only solution. However, our ASO conversion rates continued to exceed initial forecasts indicating ongoing demand for our services and because of our ASO pricing framework at 50 to $75 pepm. This strong demand partially mitigated the impact of reduced PEO volume. Insurance revenue and costs in the quarter each declined by 1%, resulting in an insurance cost ratio just a touch over 90%, which was about flat to last year and slightly better than our embedded guidance. We attribute our improved performance to two items, our continued pricing discipline and stabilization in health cost growth rates, albeit at elevated levels when compared with historical trends. While we're pleased with our pricing discipline, we do acknowledge the adverse impact it has had on both retention and new sales in 2025. On retention after the successful implementation of our January 2026 renewals, we believe that the catch up will be behind us and our pricing will be aligned with health insurance pricing trends moving forward on new sales, we believe that our pricing in the fourth quarter and fall selling season are already aligned with the market's perception of current healthcare pricing levels. Each bodes well for continued improvements in 2026. Turning to expenses expenses in the quarter declined by 2% year over year. Our continued disciplined expense management is driven by further automation and our workforce strategy. I would like to reiterate that with the portion of the savings we realized, we funded our medium term strategic initiatives which are intended to drive growth, improve our customer experience and implement process effiCIEnCIEs. I continue to be impressed by the improvements our colleagues are making on the items that will truly matter to our customers. Third quarter GAAP Earnings Per Share was $0.70 and our adjusted earnings per diluted share was $1.11. Our earnings were supported by continued improvement in our cash flow. In the quarter we generated $100 million in adjusted EBITDA representing an adjusted EBITDA margin of 8.2%. Through three quarters, operating activities generated $242 million in net cash and $191 million in free cash flow. Our free cash flow conversion now stands at 52% and is in line with our 2025 plan. Our capital return priorities for 2025 remain consistent. We aim to deliver shareholder value through continued investment in our value creation initiatives, funding dividends and share buybacks and maintaining a suitable operating liquidity buffer. In the quarter, we paid a 27.5 cent dividend per share, representing a 10% increase year over year and repurchased approximately $31 million in stock, bringing total capital deployment to $45 million. For the year, we've deployed $162 million to shareholders or approximately 85% of our free cash flow ahead of our annual target of 75%. With the improvement in our financial performance, we continue to move closer to within the top end of our targeted leverage ratio of 1.5 to 2 times EBITDA. Now let's turn to our 2025 outlook. With just one quarter remaining and the benefit of three quarters of performance, we wanted to provide a little more color as to where we're falling within our annual guidance range laid out in February. Given some of the volume impacts offset by other favorability in 2025, we expect total revenue and professional service revenue to both come in near the midpoint of our originally stated range. Our insurance cost ratio is trending slightly better than the midpoint altogether. This is bringing our adjusted EBITDA margin to the top half as well as our adjusted EPS closer to the top end of our originally disclosed range. In conclusion, we performed well in the third quarter, executing our medium term initiatives, remaining disciplined in our pricing and prudently managing our expenses. While the operating environment remains challenging, especially for our customers and prospects, we are optimistic that our efforts to enhance our offerings are being received well in the marketplace. We believe that efforts to drive profitable growth effiCIEnCIEs and to return us to our targeted insurance cost ratio by 2026 are all on track. I'm proud of the continued execution by our dedicated colleagues and I know our team is going to finish the year strong. With that, I'll pass the call to the operator for Q and A.

OPERATOR - (00:25:03)

We will now begin the question and answer session. To ask a question, you may press Star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press Star then two. Again, it is Star then one to ask a question at this time. We will pause momentarily to assemble our roster. The first question comes from Jared Levine with TD Cowan. Please go ahead.

Jared Levine - Equity Analyst at TD Cowan - (00:25:46)

Thank you. Just wanted to start by double clicking on the ICR. Just want to clarify, were there any one time impacts to your 3Q performance here? And then as you pointed to returning to that long term ICR guy in FY26, can you just go over some of the assumptions there? Does that assume there's any kind of deceleration in healthcare cost trends there? Thank you.

Kelly Tuminelli - Chief Financial Officer - (00:26:07)

Jared. It's Kelly. Happy to respond. Regarding the ICR.

UNKNOWN - (00:26:14)

Yeah, I mean, I think I'll take the second one, Kelly. First on the assumptions for next year, we're going to stay pretty conservative about what healthcare trend is going to do next year. I think we've talked a little bit on this call. We saw about four quarters of very stable, albeit elevated trend. We started to see some of the shorter duration analysis show a little bit of improvement. We think it's reasonable to assume, Jared, on the margin just a tick or two lower than what we sort of experienced this year, but nothing that isn't already reflected in some of those duration curves overall. And then I think the first question. Was just about one timers. Yeah, yeah, yeah. Really nothing notable in the quarter at all related to one timers, Jared.

Jared Levine - Equity Analyst at TD Cowan - (00:27:00)

Got it. And then in terms of the sales headcount there, can you just update us in terms of your expectations for ending sales headcount for FY25 and then how you're thinking about, you know, at this stage, FY26 in terms of continuing to grow that headcount?

UNKNOWN - (00:27:16)

Yeah, happy to do that. And the strength of our sales force, the productivity and tenure. As you know, Jared's a big part of the investments we're Making in growth. So in terms of tenure to actually start there, we've we continue to see the median tenure of our sales force increase. We see Turnover at the three plus years of experience in reps, particularly over 48 months. Our most productive reps be at or below historical lows and that's really, really important as we're taking that kind of quality of salespeople through the selling season and into 2026. We did slow down as you know, new rep recruiting early in this year as we really revamped that process, we retooled. We are doing experienced rep hiring but also some right out of college hiring to help sort of build a stronger culture and hopefully a longer tenure in that team. And that pause in the aggressiveness of hiring means we've got a smaller in aggregate, albeit more experienced salesforce at the moment. I do expect that as those new trainees come on in 2026, we'll start to see the absolute number grow in terms of the sales force next year.

Jared Levine - Equity Analyst at TD Cowan - (00:28:29)

Great, thank you. Thanks Jared.

OPERATOR - (00:28:35)

The next question comes from Andrew Nicholas with William Blair. Please go ahead.

Andrew Nicholas - Equity Analyst at William Blair - (00:28:42)

Thank you and good morning. I wanted to hone in on your comments around rate increases and pricing relative to competition. Is there anything that you could say either qualitatively or quantitatively on maybe just the magnitude of difference between, you know, the rate hikes that you're going out to market with or even with your existing client base with versus maybe what you suspect some of your competition is having to do this renewal season?

UNKNOWN - (00:29:16)

Yeah. Good morning Andrew. And I think we sort of tried to hit it in prepared remarks, but I think in general when you think about health carriers out there, managed care, nobody saw the acceleration in trend come, including us. We also had happened to be leaning. In for about six quarters in terms of more aggressive and lower new business and retention pricing. So the timing wasn't good. So we had some issues on our front that sort of, it compelled us to move pretty quickly and pretty conservatively when it came to to pricing. And I think at this point that that proves fortuitous for us. We're coming up on January 1st renewals being last, sort of our last kind of catch up set of renewals in terms of the magnitude of the difference. I wouldn't think it doesn't need to be sort of a massive gap to be consequential just given the absolute cost of health care today in the small case commercial market. So you know, I wouldn't quantify the number but I would say, you know, the evidence is sort of Pointing towards when we look at, you know, what we see in our pipeline, what we're hearing from our channel partners, kind of our most recent, you know, pretty good October sales month here, sort of points to what that gap being through most of the year, tightening up here as we get to the end of the year and as we head into 2026. Understood, thank you. And then maybe just a higher level question on client decision making. You know, it's been a choppy year for SMBs, broadly with liberation Day and tariffs and kind of all the uncertainty around, around that part of the market. Just curious, you know, what you're seeing in terms of business optimism or hiring plans or maybe just, you know, business owners willingness to make budget decisions or, you know, HR decisions in this environment and whether or not there's any change in that relative to the past couple quarters. Thank you. Sure. Happy to do it. And I'm sure Kelly will have a couple of thoughts on what we're seeing. You know, maybe by vertical on the CIE front, I would say high level, actually, we sort of have seen a. Little bit of settling in when I'm. Talking to clients and prospects. Like you said, there was a lot of optimism at the very beginning of the year and then there was an immense amount of uncertainty. And I think some of the uncertainty has now become a little bit the new normal and people are just sort of realizing we are where we are and they are making decisions. I'd say because healthcare costs have been so challenging for the market in total, that what we're seeing a little bit is healthcare being pretty central to the PEO buy decision and people wanting to line that up around the January 1 start. So we see some things that we normally would see in November, December getting pushed to January 1st a little bit, just healthcare specific dynamic, maybe a little bit of a slowdown in the buying process. But in general, I'd say it's a pretty resilient small business client base that we're seeing in our verticals. And CIE isn't where we would want it to be, but it does look like we're on track to see a bit of an improvement this year over the full year last year. Kelly, I don't know if you have anything to add. Yeah, the only thing I would add, Andrew, to Mike's point, about half a point better on a year to date basis related to cie, but when you kind of pull the covers apart on that, what we're really seeing is there's less layoffs. So it's not that there's more people hiring but there are less layoffs than there had been in the past. And you know, it was a bright spot for us though when we looked at most of our cie growth has really been year over year in tech and financial services. Thank you. Thanks Andrew.

OPERATOR - (00:33:28)

Once again, if you have a question, Please press star then 1. The next question comes from Kyle Peterson with Needham. Please go ahead.

Kyle Peterson - Equity Analyst at Needham - (00:33:40)

Great, thanks and good morning guys. Thanks for the early call. Made sure to get extra, extra cup of coffee here but wanted to start off, you know, particularly on some of the new logo pipeline. I know you guys mentioned that attrition has picked up a little bit. It sounds like with some of the insurance pricing, which obviously is kind of a necessary thing given the environment. Sounds like you guys are a little ahead of some of your competitors. So I just wanted to see if.

UNKNOWN - (00:34:12)

You guys had any thoughts on if you think there's an opportunity to maybe gain share or increase new logo signups when as some of these other guys catch up and push their own repricing through their books within the next, you know, whether it's, you know, six to 15 months or whatever the cycle ends up being for them. Yeah, we appreciate the early start Kyle. And the extra cup of coffee. The, you know, I think there's a, there is a little bit of an element, we've talked about it for, for a long time here at Trinet about repricing on our cohorts on a quarterly basis. And I think, you know, over the last four quarters or so for the reasons we've talked about, we were probably a little bit quicker and a little bit more conservative to move those prices on the health side up. We do look at our pricing on new business and a cohort of our. Renewals every 90 days or so. So I think it's both the aggregate level, the pace at which we put that pricing through tends to be a little bit quicker than maybe the average market participant. And I think it's a reasonable assumption to say that while we certainly aren't forecasting a big fall off in healthcare claim cost trends, we are seeing that tailed down just a little bit. And I think we can be responsive to that over the next 12 to 18 months, maybe a little bit quicker than the average market participant. But I think really what that does is that gap to the market narrows and we get in a position there where the broader value proposition can just shine through a little bit brighter. And for me, and I think for the team here, the fact that we've got a greater Percentage of our clients advocating for us. You saw the kind of record high on the NPS. The fact that double digit growth in broker driven RFPs is that channel is really starting to open up. We've got a more tenured salesforce. You know, our biggest 4Q win so far actually is a, is a benefit bundle proposition to a large employer that had a very distributed workforce and we were able to bundle up the benefits in a way that sort of met their need for simplicity and hit a price point that made sense to their budget. So I think there's a bit of. An opportunity here relative to pricing, but. I think ultimately it's just about kind of clearing the deck so the investments we're making in growth can really come through. Okay. Okay, fair enough. That's good color. And then I guess just a follow up on interest income. I know that's been a big swing factor and it's been pretty resilient this year. I know there's some timing impacts and rates maybe haven't come down as fast as originally thought. But I guess how should we think about that line item moving forward? Especially just given some timing shifts on tax returns? Seems like rates are going to drift down some, but then you guys should be building cash too. So I guess like what's a good. Run rate for that line moving forward and how should we be thinking about the impacts of the timing shifts and the outside benefit this quarter? Yeah, Kyle, it's a great question because it has been definitely a bright spot on our revenue for the year for sure. We have had some catch up interest associated with IRS tax refunds and that did occur again this quarter. It's a little uncertain due to the fact that, you know, the IRS is currently shut down. But you know, other than that, you know, we're, you know, we're just have small balances that we're still expecting to receive some level of interest on. So can't really give you the forecast for catch up interest, you know, for delayed payments there. But you know, I think as we're all watching what's going on with rates, you know, we would expect those to come down but while we're building our cash buffer back up. Okay, I guess then I guess just as kind of a house, is there like a rough amount of the catch up interest that has benefited this quarter or anything? Any color you guys can give? Sure. In terms of the catch up interest. It was roughly $3 million this quarter. So that was the amount that I would kind of consider unusual. Our balances are a little bit Higher right now as well, before we distribute some of those to our clients as well. Okay, that's perfect. Thank you. The next question, the next question comes from. Excuse me, I'll go to the next. Next one is Andrew Polkowitz from JP Morgan. Please go ahead.

Andrew Polkowitz - Equity Analyst at JP Morgan - (00:39:12)

Good morning. And before I ask my question, Kelly, just wanted to congratulate you on a great tenure. First question. Of course.

UNKNOWN - (00:39:24)

First question for me, I wanted to ask if you could provide an update on what you're seeing on the ASO offering. It sounds like interest is tracking a little bit better than expected there, so I figured I'd start there. And maybe as a quick follow up to that question, is there a different competitive set that you're kind of competing against at this stage for aso or is it really just kind of converting the existing HRIs at this point? Yeah. Good morning, Great question. And we are. So I think we made the decision to exit the SaaS only business because we really do feel like competitively our advantage is the combination of really strong technology and outstanding colleague support. And so we sort of made a set of assumptions around the rate at which the ideal profile of customers that were currently sitting on the SaaS only product would buy up. And we've done pretty considerably better than we would have thought, which was really encouraging. And then the second piece, Andrew, is of late here, in the last quarter or so we've seen organic new sales coming in and our forecast coming up on that front as well. So this is sort of a long term bet for us and I think will be a meaningful contributor to our longer term growth. And I think partly it's because to your, you know, kind of what's inferred in your question, we've got clients that need, you know, on the PEO side and their needs change over time and so they may want to unbundle certain parts of that offering and ASO can make a lot of sense for them. I think the competitive set is probably. Is a little bit of a Venn diagram. It overlaps in certain respects with some of the traditional competitors we have on the PEO side. I think we're also seeing a lot of success in a much more fragmented ASO and much more sort of locally delivered ASO market where kind of having the depth of expertise and then sort of the strength technology platform on a national scale, I think sets us up well against that sort of local, fragmented customer or competitor base. Got it. That's helpful. And maybe for my follow up question, I'll just ask around the guidance so you're very clear that revenue kind of pointing to the midpoint eps, ICR a little bit to the stronger end of the range. I just wanted to ask the question, is there anything we should consider, like what the unknowns are that would point to the higher, lower end of the range? Understanding there's only about two months left in the quarter, but still January 1 selling season is sort of in flight right now. So just wanted to ask kind of the range of outcomes embedded there. Yeah, good question, Andrew. And you know, we have tried to pivot to annual guidance just to make sure that we're really focusing on the core direction of the business, et cetera. You know, we're not expecting anything unusual at this point in the fourth quarter. We pointed towards the top end of the EPS range overall. You know, that was also helped by capital management throughout the year too, and partly through share repurchase. But you know, ICR obviously will have some minor level of fluctuation that will impact EPS in a little bit more disproportional way. But that would be the largest winger. I think we've got a pretty good eye on both new sales and retention, you know, from a volume perspective, you know, so I really wouldn't point anything out of date normal seasonal impacts. Thanks very much and again, congrats, Kelly. Great, thanks, Andrew. The next question comes from David Grossman and Sievel. Please go ahead.

David Grossman - Equity Analyst at Sievel - (00:43:24)

Good morning. Thank you. I just had two really quick questions. One is on the CIE commentary. Is growth, when you say it's improving year over year, is that less negative versus growth? I just wanted to clarify and make sure I'm understanding that correctly. And then secondly, as I look into 2026, if we remain in a stable environment and we know that we have lower attrition, the gap in pricing is improving. And. Is there any reason to think that in a stable environment WCS won't grow next year?

UNKNOWN - (00:44:08)

Yeah, Dave, let me take the CIE question and then I'll pass it over to Mike to take overall growth questions about next year regarding cie. I did make the comment earlier on on Jared's question around less layoffs cie, we expect to be really low single digit positive for the year on a net basis. Just when you peel apart or you know, pull up, pull up the covers, you do see that, you know, while hiring has been pretty stable, you know, at a low level, we are seeing just less layoffs. So net net, when those two net out, it's a small single digit positive, but about a half point better than last year. Yeah. And then on the second question around. Getting to growth in 2026, I'd take one step back, Dave, and say we laid out a series of objectives with the medium term strategy, the two component parts of that. Let's get revenue growth going. Certainly volume growth would be a sort of component part on that side and then get the EBITDA margin improved in aggregate. We're very much on track, maybe tracking. A little bit favorable. I'd say within that we're probably a. Tick or two stronger, quicker to the margin improvement and maybe a tick or two slower to sort of the outlook on revenue growth. I think that affords us the ability to do a little bit of rebalancing here in the short term as we kind of head into 2026. So I would stop short of predicting kind of volume growth or WSE growth, but I would say just because CIE is going to be a little bit of a wild card. But I do feel like getting past January 1st, our last catch up renewal, as we work through 2026, being on track for total revenue growth to reemerge. You know, we certainly are feeling bullish on that prospect. That's helpful. Right? And then, you know, I'm sorry if I missed this, if you mentioned this earlier. However, are you seeing, you know, if the pricing discrepancy between you and the market is compressing? If you look sequentially throughout calendar 25, has the attrition been diminishing on a relative basis each quarter by virtue of that price differential Diminishing? Yeah, I think the way I would sort of actually think about that is we brought on, as we talked about and sort of laid out at the beginning of the year, a cohort of business over about six quarters that tended to be skewed pretty heavily to January 1st. So that sort of throws out, sort of throws off the retention pattern. So it doesn't have that kind of sort of natural, what you might expect, improving. So I do think kind of we'll look to this, getting through this January 1st renewal. I, I do think we're going to remain above our historical average of 80% retention. I am looking forward to this sort of last catch up, being in the rearview mirror and getting out into 2026, you know, back into that long term insurance cost ratio range of 87 to 90. So I think the team's done a. Very good job of sort of balancing retention, taking, you know, a couple of cycles for, for a cohort or two to kind of get back to where we need to be. I think that was the, the fair and balanced things to do for these small businesses. But yeah, in general, I'd say you can think the end is in sight from what we can tell in terms of catching back up to where we needed to be. Right. And then just lastly, you gave a metric on the broker channel, I think about the percentage of our piece that are coming in. Is there anything that you can, I. Think with double digit growth in RPs in that channel, is there anything you can tell us about the character of the business that's coming through the channel versus, you know, your existing both? Yeah, it matches up very well from. A vertical point of view and I. Think as we're sort of building out, we're learning a lot about these relationships and I think really good partners in the channel, they want to understand, you know, what kind of client is going to be the best fit for Trinet. And, and their job is to, is to match make obviously. So I think that's coming through really well. I think our, our, our proposition comes through really well. I'd say on average, maybe the one difference we could point to is the average size of prospect tends to be a little bit bigger, not, not dramatically so, but a little. Great. All right, guys, good luck. Thank you. Thanks, David. This concludes our question and answer session. I would like to turn the conference back over to Michael Simons for any closing remarks.

Michael Simons - (00:49:08)

Thanks, Drew. And thank all for the early start this morning. Hopefully you're leaving with a better understanding of both our strengthening results and a really positive outlook here at Trinet. And I do want to thank Kelly. One more time as we are wrapping up her last Trinet earnings call. I, Kelly, appreciate everything you've done to help make Trinet the strong company that it is and all the support you provided for me in coming in and that you will provide in making this a really seamless and successful transition. I know you've already got a couple of board seats and you're looking to add to that portfolio over time and I can't imagine a better person to help guide a company. So thank you, Kelly. Much appreciated. And with that operator, that includes. That concludes our call.

UNKNOWN - (00:49:59)

Thank you.

OPERATOR - (00:50:01)

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.