TriNet Group, Inc. (NYSE:TNET) Q1 2023 Earnings Call Transcript

TriNet Group, Inc. (NYSE:TNET) Q1 2023 Earnings Call Transcript April 26, 2023

TriNet Group, Inc. beats earnings expectations. Reported EPS is $2.49, expectations were $2.

Operator: Good afternoon, and welcome to the TriNet First Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. 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: 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 first quarter conference call. I’m joined today by our CEO, Burton M. Goldfield, and our CFO, Kelly Tuminelli. Before we begin, I would like to address our use of forward-looking statements and non-GAAP financial measures. Please note that today’s discussion will include our 2023 second quarter and full year financial outlook and other statements that are not historical in nature, are 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 10-K and 10-Q 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 net income per diluted share.

For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see our earnings release, 10-Q filings or our 10-K filing, which are available on our website or through the SEC website. With that, I will turn the call over to Burton. Burton?

Burton M. Goldfield: Thank you, Alex. I am particularly pleased with our first quarter financial results, which exceeded the top end of our guidance. Importantly, we delivered strong operating performance by making progress on several of the key TriNet initiatives. Customer retention increased by three points year-over-year. New sales improved 20% year-over-year. Disciplined expense management coupled with our revenue performance translated to outperformance in earnings. Additionally, I am proud of the TriNet team for their execution with respect to the regional bank crisis and Silicon Valley Bank receivership. TriNet processes over $70 billion in payroll annually. We use our scale including our long-term banking relationships in service of our impacted customers.

We did not miss a single payroll deadline. The TriNet team of over 3,000 colleagues is prepared for the unexpected, which benefits our customers and highlights the impact of our partnerships. During the first quarter, revenue remained healthy. Professional service revenues grew 6% year-over-year and total revenues grew 2% year-over-year both at the top end of our guidance. In the first quarter, GAAP earnings per share declined 2% year-over-year, outperforming guidance by $0.35, while adjusted net income per share also declined 2%, outperforming guidance by $0.29. Finally, we finished the first quarter with 328,000 ending WSEs. As outlined on our last call, our WSE volume is driven by three factors: retention, new sales and hiring in our installed base.

Beginning with retention, we saw a 3-point year-over-year improvement in our retention rate in the first quarter. This was driven by a few factors. The large company attrition trend we experienced last year has abated. NPS scores continue to improve in part driven by the rollout of our tiered customer service offering which contributes to the reduced attrition. Finally, the scale of TriNet including our incremental product offerings offers value in ways that ultimately improve retention. These products including Clarus R+D our in-house tax credit service are gaining traction. A good example of this value is embodied in a tax study done for our PEO customer Voyant Photonics. Voyant Photonics is a company that creates chip-scale LiDAR 3D sensing technology used for a variety of applications including autonomous vehicles, drones, robotics and factory automation.

This company has allocated significant capital towards R&D while building its innovative and industry-leading products. Voyant leveraged TriNet Clarus R+D to complete a study which yielded a tax credit greater than $300,000 in Q1. Since adding the Clarus R+D product to the TriNet product offering, the average size of the tax credit captured on behalf of our customers has increased by 92%. We are expanding the Clarus R+D market reach to include our dynamic verticals such as technology and life sciences. In summary, we are very pleased with our customer retention in Q1 and expect this improved retention to continue throughout 2023. Turning to new sales. We grew net new ACV by 20% year-over-year in the quarter. This is particularly exciting due to the fact that Q1 historically represents approximately 40% of our overall net new business for the year.

As previously discussed, we have prioritized spend to drive new sales growth in our core verticals for 2023 and beyond. This includes investing today to expand our sales organization to drive growth in future years. This decision to invest now is based on increased rep productivity success and scalability of the lead generation and lead scoring processes as well as an increased win rate on quotes delivered to prospects. Returning to new sales in the quarter. Our improved overall sales performance was driven by two key factors: our maturing and stable sales force and our overperformance in marketing sourced closed opportunities. I am confident that the investment in our sales organization as well as our vertical strategy will continue to deliver strong results.

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I look forward to updating you on the progress with respect to sales on the Q2 call. The third element of our WSE volume algorithm is CIE, or change in existing, sometimes referred to as customer net hiring. In the first quarter this metric was slightly down quarter-over-quarter and down significantly year-over-year. The difficult economic environment, particularly in the technology vertical, continued in the first quarter dampening our overall net customer hiring. I want to make two important points about the customer hiring, or CIE. First, we chose to pursue customers in very specific verticals across a broad range of key industries. We do this with the knowledge that these customers generate the highest customer lifetime value, which include higher-than-average CIE over the long term.

We believe that when the business cycle recovers, we will benefit from strong customer net hiring. The second point is that, while net hiring is down in the quarter, we do not see uniform pressure across all companies in any specific vertical. An example specifically related to our technology sector is that, when you unpack the net CIE performance, about half of our technology customers are still hiring while the other half have reduced staff. Tech companies between 10 and 50 employees are on average growing, while larger companies are not. I believe what we are seeing is VCs and management teams rationalizing their investments with respect to employees in the face of a challenging economic environment. This will ultimately lead to stronger, faster-growing companies in the future.

Additionally, as we reviewed CIE performance in the month of March, we saw stronger net hiring across our installed base. In fact, hiring in March was the strongest month we have experienced since July of 2022. One month’s performance does not make a trend and we will continue to watch closely as the CIE picture becomes clearer throughout the year. We believe that now, more than ever, SMBs need help from TriNet based on the economic legal and regulatory environment. In support of our growth aspirations TriNet recently launched our new brand identity in conjunction with our People Matters marketing campaign. Our new brand identity underscores our commitment to the growth and innovation of SMBs and the people behind them. This omnichannel marketing campaign will include TV, radio, digital and out-of-home, primarily focused in New York, Los Angeles, San Francisco, Washington D.C. and Boston markets.

We are aggressively marketing the full impact of TriNet’s value, including our broad suite of products. This is not the time to slow down. A year ago we acquired Zenefits and have now completed the full integration which includes this new brand identity. As we reflect on the acquisition after one year, we are pleased with the progress being made. We added a talented team who share our passion for the SMB market. The legacy Zenefits team is playing important roles in our digital transformation and we are excited for our future product releases. On January 1, we went live on boarding new customers to our TriNet integrated open-market product. This product pairs the PEO model with open-market benefits and leverages the legacy Zenefits benefit administration and digital brokerage tools.

This is an example of a product release combining the best of HRIS and PEO to create a new and better product. Finally, we now offer a barbell of products and services with HRIS on one end and PEO on the other which we will continue to expand over time. We continue to work on our go-to-market strategy with respect to our HRIS product but in general we feel optimistic about its future in the context of our suite of products. Over the last three years, the velocity of changes in the workplace has accelerated. This fast pace is difficult to navigate for small and medium-sized businesses who are focused on their own important mission. Before passing the call to Kelly for a review of our financials, I would like to talk to you about the McCarton Foundation.

Their growth and change over the past three years is nothing short of phenomenal and their story will show you how TriNet uses its scale for the benefit of our customers. The McCarton Foundation is a New York-based non-profit organization on a mission to change the course of lives. They bring exceptional early treatment and therapy to children with autism living in underserved communities. With TriNet, the foundation has grown from three employees to 200-plus employees. Their growth over the last three years has been anything but linear. During the pandemic, we helped the McCarton Foundation furlough workers ensuring their employees maintain their benefits, while they navigated this very difficult time. TriNet helped secure a PPP loan providing the foundation with critical liquidity when it was needed the most.

We then went to work to ensure that their loan would be forgiven. Additionally, our unique Recovery Credit program allowed them access to additional cash during a period when the savings were truly critical. As Whitney Loy CEO of McCarton Foundation said, without TriNet we would not be in business. The fact is TriNet would not be in business without incredible customers like the McCarton Foundation. TriNet is different. We are prepared for the unexpected and provide unparalleled value. Our positive impact on our customers like the McCarton Foundation is energizing and motivating for every single TriNet colleague. We will continue to focus on our passion, invest in the future, and deliver profitable growth for our shareholders. Kelly?

Kelly Tuminelli: Thank you, Burton. The first quarter allowed TriNet to prove our ability to execute well across our business and continue to support our customers during this changing macroeconomic environment. In the areas we controlled, we did very well. During the quarter, TriNet prioritized its spend on our growth agenda and our customers driving both outperformance in new sales and improved overall customer retention. This discipline ultimately resulted in strong earnings performance and cash flow generation. I was very pleased that we delivered on the strong first quarter financial performance in the face of two distinct challenges. Number one, the regional banking crisis; and number two, the overall macro headwinds. I’ve been with TriNet now just over 2.5 years and in my time here, I’ve been impressed with our customers and how the TriNet team puts our customers at the center of everything we do.

Part of this ethos is managing the unexpected on behalf of our customers and the regional bank crisis and Silicon Valley Bank receivership represented just that opportunity. The immediate risk for impacted PEO and HRIS customers was access to their corporate funds and making their payrolls. The TriNet team leveraged our banking partners assisted with alternative funding methods and helped our customers navigate the situation. The end result was none of our impacted customers missed a payroll or were asked to double-fund the payroll across our PEO and HRIS platforms. I’m extremely proud of the team. The second distinct challenge we faced in the quarter was our customer net hiring was modestly negative overall. This represents the second consecutive quarter where existing employment shrunk versus grew.

The impact in the first quarter from the lack of hiring exacerbated the normal Q1 volume dip. As we described when we laid out our full year guidance, we did expect first half customer hiring performance to be subdued before picking up in the second half of 2023, but we had not anticipated the negative CIE in the quarter when we initially set that guidance. At the highest level customer net hiring was bifurcated between those companies with fewer than 50 and those with greater than 50 worksite employees. Consistent with the survey data we received last fall, the smaller businesses were more optimistic then and in aggregate they did continue to hire. Digging into our verticals. Technology experienced a net hiring decline of approximately 1% of our starting base as did our Main Street vertical.

Financial services also experienced a small net decline in the quarter. Life sciences, nonprofits and professional services saw positive net hiring, but down when compared to Q1 2022. To underscore, Burton’s comments across our business greater than 50% of our customers with more than five worksite employees hired employees in Q1. On average, the classic PEO target-sized customer hired workers. In technology, it was slightly less than half of those clients greater than five worksite employees that continued to hire. We are seeing a rationalization by investors and management teams. Investors are being more discerning supporting those companies that have stronger prospects. Larger SMBs are behaving more conservatively managing their labor force cautiously given the broader economic environment.

While these market dynamics are out of our control in the short term what we do control is pursuing business in our core verticals. Given our extensive work on customer lifetime value we believe staying in our core verticals will yield strong financial performance over time Now let’s turn to our first quarter financial performance. Total revenues grew 2% in line with the top end of our guidance. Total revenue growth was supported by pricing and higher health participation rates. We finished the first quarter with approximately 328,000 worksite employees down 6% year-over-year with an average WSE count for the quarter of over 327,000, down 5%. WSE volumes were lower in the first quarter, largely due to the seasonal attrition we experienced in January, and a significant decline year-over-year in customer net hiring.

As Burton noted, we did see a three-point improvement in retention year-over-year and we do expect to continue with strong retention over the course of 2023. Professional services revenue grew 6% in line with the top end of our guidance. Professional services revenue offset the WSE volume decline through strong contributions from rate mix and HRIS revenues year-over-year. Insurance revenue grew 2% year-over-year due to an uptick in participation and annual inflationary rate increases offsetting our overall volume declines. Insurance costs grew 4% year-over-year reflecting increased and more normalized health utilization. The growth in health costs was partly offset by continued strong workers’ compensation performance. Taken together, our insurance cost ratio was 82%, one point lower than the high end of our guidance all driven by the outperformance on workers’ compensation.

Turning to operating expenses. We were very deliberate in the quarter to focus our incremental spend on supporting new sales and customer service. We did so by managing all other expenses. As a result, we were very pleased with the efficiency with which we managed our business. Overall, operating expenses grew 18% in the quarter, representing a decline from recent run rates but reflecting the fact that we acquired TriNet Zenefits mid-quarter 2022. As we look to the balance of the year, our comparisons will begin to normalize. We also benefited from the current higher rate environment in interest income on investments and our operating cash. The strong workers’ comp, expense management and higher interest income translated to solid earnings performance.

In the quarter, we earned $2.17 in GAAP net income per share exceeding the top end of our guidance by $0.35 and we earned $2.49 in adjusted net income per share exceeding the top end of our guidance by $0.29. We had $169 million of corporate operating cash flow during the quarter and ended the first quarter with $707 million in cash on our balance sheet. The sequential growth in our cash was driven by our corporate operating cash flow and drawdowns on our credit facility. At the outset of the regional bank crisis, we drew down our credit facility in full to ensure access to liquidity in the event the crisis proved to be far worse. We returned $200 million on the facility in March, leaving $295 million of borrowings still outstanding which was fully repaid during April, but after we closed the quarter.

On the capital allocation front, we repurchased $90 million or approximately 1.2 million shares during the first quarter. We still have 455 million remaining in our share repurchase authorization and repurchase will remain a capital priority for TriNet. Now let’s turn to our financial guidance. Our revised full year guidance includes our updated estimates for lower customer hiring. While March customer hiring showed signs of improvement, the continued challenging economic environment drove us to be more prudent and lower our full year CIE estimate. We continue to expect strong new sales and significantly improved retention but the changed CIE assumption has a direct impact on full year revenue guidance. In recognition of our strong workers’ compensation performance we are lowering our insurance cost ratio.

Our expense reductions, higher interest income, along with our workers’ comp outperformance all contribute to raising our earnings guidance for the year. Operationally, this was a strong quarter for TriNet one in which we can raise earnings guidance and still invest in our business to drive growth. Now let’s turn to our expectations for the second quarter. Given our first quarter volume performance and strong benefits participation, we are forecasting second quarter year-over-year total revenues to be flat to up 1%. We expect professional services revenue to be down 3% to flat as our year-over-year compare now includes our HRIS revenues and reflects our expectation for second quarter PEO volumes. We expect our insurance cost ratio in the range of 88.5% to 87% as health utilization continues to normalize.

Our second quarter estimate of GAAP net income per diluted share is in a range of $0.72 to $0.96, while our second quarter estimate for adjusted earnings per diluted share is in a range of $1.15 to $1.40. The year-over-year decline in our earnings per share estimate is primarily driven by our expectation for higher insurance cost ratios in the quarter. Now let’s turn to our full year financial guidance. Regarding total revenues after one quarter’s performance and better visibility into our volume trends, we are tightening our range. We are raising the low end of our guidance by three points while keeping the top end of our range unchanged and now expect full year total revenues to be up 1% to 2%. For professional service revenues, we are lowering the high end of our range to reflect our expectations that full year customer net hiring will be at the low end of our initial full year 2023 forecast.

As a result, we now expect full year professional service revenue growth in the range of 1% to 3%. Turning to our insurance cost ratio. We are lowering our full year ICR by 50 basis points to 88.5% to 87%. This reduction in our ICR is primarily driven by workers’ compensation outperformance, which we expect to offset the normalization and health utilization we are beginning to see. We now are forecasting an increase to interest income to approximately $50 million given the renegotiation of certain contracts and our expectation that rates persist at higher levels longer. As a result of these changes, coupled with our strong disciplined expense management, we are raising our GAAP net income per diluted share forecast by $0.74 at the midpoint to a new range of $3.96 to $4.90.

Regarding our adjusted net income per diluted share guidance, we are raising the range by $0.63 at the midpoint to $5.40 to $6.35 per share. We’ve included share repurchase to offset dilution from stock compensation, but we have not included any benefits from additional share repurchase in our expected EPS range given the variability of repurchase timing and price. We are encouraged by our first quarter performance during what has proven to be a difficult economic environment. We are driving new sales, keeping our customers longer, investing in our business for growth, and managing our expenses in a disciplined manner. As a result, our full year financial outlook has improved and we look forward to building on this momentum. Now, I’ll turn it back to Burton for his final remarks.

Burton?

Burton M. Goldfield: Thank you, Kelly. Our first quarter financial and operating performance set TriNet up for a strong year. In the face of unexpected crisis, we delivered unparalleled value to our customers. We continue to expand our products and services in ways that are different from other HCM providers. Clarus R+D is a good example of this. We are investing in sales and sales force growth and we expect to leverage our new brand identity to drive growth. As always, we manage our company for profitable growth proving that you can invest in growth without sacrificing profitability. We are well positioned to build on our first quarter momentum throughout the year. Operator?

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Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. And the first question will be from Tien-Tsin Huang from JPMorgan. Please go ahead.

Burton M. Goldfield: Hi, Tien-Tsin.

Tien-Tsin Huang: Hey, Burton, Kelly, Alex, thanks for all the detail as always. I guess Burton I’ll ask if you don’t mind on the new sales front 20% growth in ACV. Can you give us a little bit more? What’s selling well? Is there anything to share anything that was surprising there? And generally speaking how does that translate into the P&L? I know we have to assume some assumptions going ahead. So any thoughts on the pipeline on top of that? Thanks.

Burton M. Goldfield: Absolutely. And thanks for the question Tien-Tsin. So first, our decision to continue to invest in sales is due to increased rep productivity is holding which has been really good. Success and scalability of the marketing lead generation and scoring process is also very good. And we’re also seeing an increase in win rates from quote to win in terms of WSEs. And as you realize, we’ve spent a lot of years understanding this customer base. And we believe over the long-term, they’re going to deliver tremendous value. Specifically to your question about what’s going to happen in the future, I will say to you now that given my visibility into the pipeline for the second and third quarters and giving — given the fact that deals are closing at a higher rate, I believe that we’re on track to continue the growth that we are seeing in a year-over-year basis from a sales standpoint.

Tien-Tsin Huang: Great. And then just using that KPI is there a way to think about the impact on midterm revenue growth? I’m just trying — I know there’s a lot of moving pieces retention you went through that CIE. But in isolation thinking about new sales is there a rule of thumb to use on impact to revenue growth?

Burton M. Goldfield: Yeah. Look they’re all — obviously right now retention is another really great story. As Kelly said, it was up three points in the first quarter and that will have a big impact as well. From a sales standpoint, Kelly I don’t know if you have a percentage. But it’s still a smaller percentage of this year’s revenue where it’s really important is as it goes into 2024. So we will keep growing the sales force as long as productivity stays high. We’re seeing high retention of the reps, and we’re seeing a pretty good market even in the impacted areas related to the Bay Area in California despite the Silicon Valley Bank failure. So that’s a whole other discussion I’m happy to have. But Kelly, anything specifically we can give Tien-Tsin on this increased sales run rate?

Kelly Tuminelli: Not really Burton. And Tien-Tsin, I’ll think about that as we think about the KPIs that we publish and how to think about it in terms of revenue. It is fully baked into our guidance. We haven’t changed our view on sales. We do expect to have really strong sales. We have moderated our assumptions around CIE a little bit just given what we saw in the first quarter and have improved our retention assumptions. Just seeing really good results there.

Tien-Tsin Huang: Look it’s encouraging. Glad to hear the new sales coming through. I’m sure you all are happy about it.

Burton M. Goldfield: We are really proud of this quarter Tien-Tsin.

Tien-Tsin Huang: Yeah. No, I’m sure that’s the case. So my quick follow-up, if you don’t mind just on the EPS – yeah, the EPS raise the $0.63. Kelly is there a way to maybe unpack it a little bit more in terms of what the elements are? We obviously can calculate the beat the $0.29 beat. You mentioned higher interest income and then the lower ICR with the workers’ comp outperformance. I don’t know, if there’s any change in OpEx outlook either. Is there any way, just maybe unpack that or decompose it for us? Thanks.

Kelly Tuminelli: Well, you got all the elements right there Tien-Tsin. So you’re right on. We did improve our interest income forecast about $50 million. That was about a $19 million increase from where we were at before. On the OpEx side, we rationalized our G&A costs so that we can invest in sales. So we absolutely baked in cost savings and efficiencies there. And related to the ICR health is right on track. And what we’re really doing is we just built in the favorability from workers’ comp. So not much of a change there. The other thing we slightly did is we’re seeing stronger participation rates not by a lot by about 1%. But we did build in the benefit participation rates at about 1% higher, which also contributed to the benefit.

Tien-Tsin Huang: Got it. That’s good stuff, well done. Thank you, guys.

Burton M. Goldfield: Thank you. We appreciate it.

Operator: The next question is from Andrew Nicholas from William Blair. Please go ahead.

Andrew Nicholas: Hi. Good afternoon. Thanks for taking my question. Wanted to follow-up on a few of your – Burton, wanted to follow up a little bit on some of your answers there. I guess the first one just in terms of kind of SVB fallout. Obviously, operationally everything went really well. I think it sounds like you were very proud of your efforts there. Were there any changes to kind of the sales cycle within March or even what you’ve seen in April? Obviously, 20% sales growth in the quarter would indicate you had some momentum anyway. But just given some of the commentary from a competitor of yours this morning just curious, what if any impact that had on the sales cycle?

Burton M. Goldfield: So, it’s a really good question. And let me break it down a little bit for you. So clearly SVB failure had an impact on the Bay Area tech ecosystem and obviously other areas. But interesting, we’re not seeing it. We actually have a higher year-over-year win rate from quote to win in terms of WSEs as well as ACV. So we’re selling value. We’re not discounting. And in fact, our new sales in the Bay Area tech vertical have remained strong. But as I said in the prepared remarks what you have to do is look under the covers. It’s not a general tech malaise, Andrew. What we’re seeing is half of our tech customers are hiring and half of them are not. And then the other thing that is a big question mark in my mind which Kelly mentioned if you look at March CIE it is the highest-CIE month we’ve had since July of 2022.

So I feel like we’re coming back but it doesn’t — obviously one month doesn’t make a trend. I’m excited to see what April brings. So January was bad. It’s always bad but it was worse. February was better and March was darn good compared to the last nine months. I think we’re in the right verticals. And obviously as Kelly said the bigger customers were impacted further. But the growth was between five and 50 and it was pretty dramatic, which leaves me to believe that the funded companies have a mission going after the product and they were not disrupted by the SVB or any other ecosystem issue. The bigger customers 100-plus certainly were. And the question is was it lack of access to capital or was it a great time to rationalize the current employee base as we move forward.

But there’s no question in my mind over the next couple of years we’re in the right verticals and they will recover. But we did not see a significant impact from SVB. In fact the Bay Area was strong.

Andrew Nicholas: That’s helpful. Thank you. And then for my follow-up on your CIE assumption, it sounds like the professional services revenue line item is assuming a bit lighter CIE than what you had previously. Is the assumption still that you see a decent bit of growth in the second half, or just maybe unpack what that lower assumption looks like relative to the last quarter? Thank you.

Burton M. Goldfield: Yeah. Thank you. Kelly?

Kelly Tuminelli: Yeah. I’m happy to take that Burton. And Andrew thanks for the question. When we look at last quarter, CIE was negative overall. We are expecting positive hiring particularly as we look towards June and you get college grads going into the workforce and we see interns and seasonal workers coming on board. So we’re expecting positive CIE for the remainder of the year. But what we’re really expecting is significantly lower than what we saw last year, what we’ve seen historically. The low end of our range is about the lowest we’ve seen over a decade.

Andrew Nicholas: All right. Thank you very much.

Operator: The next question is from Jared Levine with TD Cowen. Please go ahead.

Jared Levine: Thank you. I wanted to dig in a little bit more on the PEO bookings. So, you previously cited January bookings growth of 35% year-over-year and now with 20% overall in 1Q. Was there a notable deceleration in March, or was it pretty even in terms of that I guess let’s call it softer back half of the quarter there?

Burton M. Goldfield: Yes, there wasn’t a notable deceleration. The fact is and this is an operational issue we changed territories and teams on February 1st. January is actually the last month of the sales year. So, as we reorganized and put the new teams in place February and March are usually relatively slower. So, there was no surprises there. But as I said to Tien-Tsin from my vantage point, we have a pipeline to continue that growth at least through Q2 as it looks right now.

Jared Levine: Okay, great. And then in terms of the sales force and your intentions to add headcount there, can you update us on the staffing levels of the sales force how that compared to also the beginning of the year? And then any change in terms of your hiring expectations over the year or even the timing of some of those headcount additions within the sales force?

Burton M. Goldfield: The goal right now is to end the year significantly higher in total rep count. That will be based on two things, which is both retention. Obviously, there’s a lot of momentum around the sales force and they won big in Q1. So, that certainly helps. And then the second is hiring of new reps. I would say by the end of the year; my expectation is roughly 20%-plus growth in sales headcount. But it is not on board yet. It will impact next year because I’d like to continue this momentum.

Jared Levine: Great. If I could sneak in one quick one here on Zenefits — revenue contribution? And are you still expecting around $50 million for the full year?

Kelly Tuminelli: For Zenefits?

Jared Levine: Yes.

Kelly Tuminelli: Yes, right around that level is our expectation.

Jared Levine: And the 1Q performance?

Kelly Tuminelli: And 1Q was right around $12 million.

Jared Levine: Great. Thank you.

Burton M. Goldfield: Thank you.

Operator: Ladies and gentlemen, this concludes our question-and-answer session and thus concludes today’s call. Thank you very much for joining TriNet’s first quarter 2023 earnings conference call. You may now disconnect. Take care.