Good afternoon and welcome to the TriNet Group, Fourth Quarter and Full Year 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions [Operator Instructions]. Please also note today's event is being recorded. I would now like to turn the conference over to Alex Bauer, Executive Director, Investor Relations, please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to TriNet's 2015 fourth quarter and year end conference call. Joining me today are Burton M. Goldfield, our President and CEO, and Bill Porter, our Chief Financial Officer. Burton will begin with an overview of our fourth quarter operating and financial performance. Bill will then review our financial results in more detail. Bill, Burton and I will then open up the call for the Q&A session. Before I hand the call over to Burton, please note that today's discussion will include forward-looking statements, such as predictions, expectations, estimates or other information that might be considered forward-looking including our 2016 forecast and strategy. During today's call, we will present some important factors relating to our business, which may potentially affect these forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and assumptions that may cause actual results to differ materially from statements being made today. We do not undertake to update any of these statements in light of new information or future events. We encourage you to review our most recent public filings with the SEC for a more a detailed discussion of these risks and uncertainties that may affect our future results or the market price of our stock. In addition, our discussion today will include non-GAAP financial measures. For reconciliations of non-GAAP financial measures, please see the company's earnings release available on our website or through the SEC website. With that, I will turn the call over to Burton for his opening remarks.

Thank you Alex. We are pleased to report strong fourth quarter results as indicated by healthy double digit growth in our top line and solid profitability. The fundamentals of our business remain strong and we are successfully executing our vertical market strategy. In addition we are well on our way to making the necessary changes in our insurance business to strengthen our product and improve our forecasting ability. In turn we have entered 2016 in a strong position to continue to pursue the market opportunities in front of us while further improving sales force productivity and driving cash flows to the benefit of our shareholders. There are three items I'd like to cover on today's call. First our fourth quarter results and 2015 highlights, second the progress we’ve made on insurance services and third, our 2016 outlook. In the fourth quarter we grew total net revenue 17% to $149 million. Net insurance service revenue increased 14% year over year to $42 million. Net insurance service revenue was slightly lower than expected primarily due to reduced workers' compensation revenue as a result of our clients paying lower bonuses within the financial services vertical. In the fourth quarter professional service revenue increased 19% year over year to $107 million. During the fourth quarter we organically grew work site employees by over 9,000 to 3,24,399 up 13% year-over-year or 3% from the prior quarter and we expanded our client base to over 12,700 small and midsized businesses. We ended the year with 481 quota carrying non-duplicative sales reps exceeding our stated goal of 470 representing 25% year over year frontline sales rep growth. We achieved our pro forma adjusted net income earnings per share guidance of $0.31 per share. For 2015 professionals service revenue grew 17% year-over-year to $401 million. In our Q3…

Thanks Burton. As we review the financials I will focus on the non-GAAP numbers and go into the GAAP numbers where appropriate. During the fourth quarter net service revenue increased 17.4% to $149 million year-over-year. Total WSE count was 3,24,399 up 12.5% year-over-year or 3% since the end of the third quarter. Professional service revenue for the fourth quarter increased 18.8% to $107 million year-over-year, net insurance service revenue for the fourth quarter increased 14.1% to $42 million year-over-year. Net insurance service revenue for the fourth quarter was lower than expected primarily due to reduced workers' comp revenue as a result of our clients paying lower bonuses within the financial services vertical. Total adjusted EBITDA for the fourth quarter increased 14% year-over-year to $45.7 million, compared to $40.1 million for the prior year period. Our Q4 adjusted EBITDA margin was 30.7%. Adjusted net income for the fourth quarter increased 15% year-over-year to 22.2 million or $0.31 per share compared to $19.2 million or $0.26 per share in the same quarter last year. Our GAAP effective tax rate was 43.8% for the fourth quarter and our Q4 pro forma tax rate was 41.5%. During the fourth quarter, we generated $27.3 million in operating cash flow and spent $5.1 million on CapEx. For 2015, we grew net service revenue 7.8% to $546.9 million. Total adjusted EBITDA for 2015 decreased 8% to $151.3 million with an adjusted EBITDA margin of 27.7%. 2015 adjusted net income decreased 5% to $70.7 million or $0.99 per share compared to $74.4 million or $1.03 per share in 2014. Our ability to generate operating cash flow is supported by a strong market profile. For 2015, we generated $131 million in operating cash flow. Historically we have spent approximately 3% to 4% of our net service revenue on an…

Thanks, Bill. To summarize we close the challenging year on a strong note with healthy growth in our top line and solid profitability. Looking ahead the fundamentals of our business remains strong and we are successfully executing our vertical market strategy. In addition we are well on our way to making the necessary changes in our insurance business to strengthen our product and improve our forecasting ability. We remain well positioned to pursue the market opportunities in front of us. This concludes our formal remarks and now I'd like to turn the call back to the operator for the Q&A session.

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I guess couple of question just first on the fourth quarter just trying to look at the details here, what cause you to fall short of the revenue guidance a little bit? Is it primarily just a lower worth this comp from smaller bonuses, any other factors had it claims come in versus plan or is that the WSE unit count how did that come in versus target?

This is Bill. Yes that was the primary reason that is we did not see the same level of bonus revenue to our clients and that reduced our workers comp revenue well that's that came through on the insurance services line. Our WSE count came in line with our estimates, so that we really was the difference.

Okay. And then on the outlook the 28% to 29% margin so it sounds like did you freedom to execute on the reinsurance but if you don’t there could be some upsides that anything else to consider on the margin front?

No. I think you've summarize it well, so for the outlook we considered the 2015 higher level of medical trends in 2016, so we think we've got our 2016 claims covered and then we've got enough to cover potential for the estimated cost of reinsurance which we've been exploring in the market.

And then just one just a bigger picture question and then I'll let others, ask just on the decision to not due to fully guarantee I get the pricing comments or was the fears clients attrition and the ability to you design your own plans it sounds like that maybe played a bigger role off the taking that off to cable did I read that correctly?

Hi. Tien-tsin. This is Burton. I think you read very, very well in the end the verticals react very differently to different types of plans as you are aware with 38% of our plans are fully insured and in some markets that's appropriate in other markets after talking to clients and analyzing the opportunity we just were not willing to give up the visibility and control. As you realize if we went with the fully insured plan it reduces the quarter-to-quarter volatility, but it doesn't help the year-over-year because the increase would then be passed directly on to our clients. So from my advantage point we looked at it every way possible and it was not the right decision for us at the time having said that with Ed Griese on board his expertise in medical we continue very deep conversations with insurance companies and reinsurers I on keeping the allowances in the budget so that those conversations could bear fruit under the right economic circumstances.

Got it, thanks for taking my questions.

And our next question comes from Danyal Hussain of Morgan Stanley. Please go ahead.

Hi. Burton and Bill. I just want to follow up on the decision not to find with one of the reinsurers if I guess just walk us maybe you can walk us through the process did you not reach out to maybe a broad enough group of reinsurers or is it just bad right now the pricing you have been included is too high because as what you've seen recently and then maybe looking forward is there some potential change and how you can approach getting reinsurance either by working those potentially more reinsurers or constructing it in different way? Thanks.

I think you've answered the question. Yes, we have had a free and open dialogue and I think part of it was, we didn't get face-to-face earlier enough with the reinsurers. I think there's an opportunity if they get to know us and our constructs. To be able to create something that is frankly somewhat unique. It has to do with the volatility on a quarterly basis as opposed to an annual basis which they're much more comfortable doing. It has to do with understanding our business environment and we have the opportunity now to give them the data for the first couple months of '16 and reevaluated under the right price point and then finally Ed comes from the reinsurance market so he has already in the short time he's been here reached out and is exploring other companies that we didn't do in the first round that may be closer to what we're looking for. So absolutely still an open discussion and still an opportunity for us but frankly we feel comfortable either way.

Okay, and then can you maybe just talk about any pricing changes you rolled forward in your insurance line for the quarter and what percent of the book was re-priced this quarter.

Sure Daniel, this is Bill. So in Q1 we're setting around 35% to 40% of the book that's you've got the price increases and that starts to slowdown in Q2 and Q3 and then it will hit another approximate 40% in Q4. That how the pricing rolls out and we got pretty good acceptance in the market, everyone understands it’s competitive.

Okay. And then just a quick question on the two sort of offsetting factors for the year, you called that a second half tailwind, but then offsetting that is a macro headwind just from SMB formations and that would you expect this to still turn out to be headwind, assuming you were to keep your sales force growth consistent from year-to-year. Or is the net impact that you would expect that macro headwinds to be a little bit more powerful?

I'm pretty optimistic about the year, I think there as you say there's different forces some of them very positive, some of them not as positive. It's around things like business formation in the technology area, it's around areas of our installed base as growing as quickly January wasn't as quick, much growth within the install base what we call change in existing but ultimately I believe these small businesses are pretty resilient, so you know I think that overall it's net positive for the year, it may be back half loaded but there's still a tremendous opportunity.

And our next question comes from Jason Kupferberg of Jefferies, please go ahead.

Thanks guys, I just wanted to start with a question on the guidance, if we look at Q1 relative to the full-year, it looks like we need to a pretty healthy ramp during the last three quarters of the year to get to the numbers. Can you just talk about the factors that should drive that acceleration?

Jason, this is Bill. I think we generally would expect as you saw on '15 and again in '16 a pretty steady increase in our professional service line every quarter, and so I don't think we're going to expect anything different in '16, just good steady progression. I think which you'll also see in '16 as we do have a little bit of seasonality on the insurance services line and traditionally we have seen better performance in the first quarter, in the fourth quarter generally just because of the way the seasonality comes in with claims but I wouldn’t see really much different other than that in 2016 is laid it out.

Okay and then can you just talk about some of the more specific underlying assumptions for sales force growth and WSE growth that underpins the guidance for the year.

Yes so for sales force growth we're going to look at that I think with a little bit more cautious outlook as Burt mentioned. We got critical mass coming out of in 2015 and with our look at the macro-environment we will grow the sales force but we don't need to push it as fast given that it's a little bit harder for new sales people to get their feet on the ground given this macro-environment. So we'll take it a step at a time we will take opportunities to grow sales infrastructure and to look at sales force growth where we're seeing the right opportunities in selected verticals. But I think we're going to just be moderate going in and then we'll see what happens throughout the year on the sales force side.

And on the WSE side?

We don't try to lay out what WSE growth would be, but it's generally it's going to be somewhat in line with our topline growth. There's always going to be a volume element to it. We're continuing to focus on improving our pricing along with watching our WSE growth, so I think they'll both be contributors to the outlook that we've indicated in our guidance.

Okay, and just last one from me on the balance sheet, can you just remind us in terms of the composition of our debt what we've got in terms of upcoming maturities, average interest rates how much is fixed versus floating rate?

Yes, it's basically all LIBOR plus 275, there is no LIBOR floor, we do have a component that comes due in July the term B that comes due in July of 2017, and that's pretty much what we've got going in. So it will float with LIBOR, but the terms are pretty favorable.

And did mind the term B with the size is that payment?

Yes, it's sitting around 175 million. But I can confirm with that you, I don't have right in front of me.

And our next question comes from Timothy McHugh of William Blair. Please go ahead.

Thanks, just want to ask I guess as we think about the guidance, can be any more specific about how much you've built-in in terms of the cost of reinsurance and if didn't do it I guess is what do you expect that cost not to be there or will it show up in something else? And then I guess maybe relate question just what you're assuming about the profitability or MLR for healthcare in 2016?

Sure Tim, so I'll start with your second question first, so MLR were looking something that’s going to be close to what we saw in 2015, so somewhere in the 85 range. But we've also been able to make progress with our carriers and continuing to reduce our admin costs, so we're continuing to be able to provide a little bit more opportunity for us as we continue to push down the admin fee as we continue to grow our WSE account and provide a good risk to the carriers. We're not going to be specific on what amount of cost we've built-in for reinsurance, but I'd say that as I mentioned we've built-in enough trends into our 2016 estimates for claims, we factor in our experience in 2015 as well as having tested the markets. I think we have a pretty good sense of what a reasonable costs range will be and we've got that built-in to that EBITDA range that we've given. So that's the level of detail I am comfortable going into.

Okay and then just a related questions to earlier question, the difference Q1 kind of run rate in the full-year, I guess particularly then the margin I guess I didn’t understand your response to that, I thought you've highlighted Q1 as normally a better than average quarter for insurance kind of profitability, so I guess why the better profitability as we go later in the year?

Probably what I was referring to mostly for the year-over-year comparisons as it's a little bit of a tougher compare Q1 of 16 versus Q1 of 15 because in Q1 of 15 we had a pretty good insurance quarter, so that year-over-year growth doesn't look as strong when you're going against the strong comparisons and that being said, we got a pretty reasonable ramp throughout the year and then Q4 is generally our strongest quarter and that's just because our insurance is strongest in Q4.

And our next question comes from David Grossman of Stifel Financial. Please go ahead.

Thank you. I was if you just go back just to synthesizing the question for the finance both about the first quarter guide and some of the expense assumed in guidance, was it seemed to imply or you guys implied year-over-year increases yield in margin and that's on a flat MLR, so and that's also with factoring and I am assuming some incremental potential costs from reinsurance, so I guess I am just trying to connect all the dots I mean was the reduction in admin fees significant enough that you can not only absorb the incremental cost of reinsurance yet still shows some year-over-year improvement or there is some other pricing dynamics or something else going on the cost side that allowing you to share that increment in margin for synergy year-over-year?

It's a good question David, yes we did pick up what I would say is not insignificant increase in the admin fee coverage from the carriers and reduction in costs, so that clearly helps us with our margin there. But we've also as we talked laid out reasonable price increases that also get spread out throughout 2016 which helps in the margin, those combination of those as well as Burton indicated that we're going to continue to manage given somewhat cautious outlook for the headwind with making sure that we can manage flexibly our cost side of the business to get the margins that we're expecting throughout the year.

And can help us understand just when the price, did you start increasing price last year that you're getting some follow-through this year on a year-over-year basis or is that pricing pretty much going on each quarter?

It goes on each quarter David, as we indicated, we did not have our pricing early enough to catch us for Q4 of 2015 so it really started in Q1 of 2016 and then it will take us through Q4 of 2016 to pretty much a lap and get that price increase in place that we needed for what we saw experienced in the second quarter of 2015.

But the insurance comparison is difficult enough with the pricing benefit in the first quarter doesn’t help quite enough.

Correct. Yes the Q1of 2015 was a pretty good insurance quarter.

Okay and I guess going back to this the whole decision to say what the market is not giving us what we think is fair and reasonable to ensure some of this risks and I understand the process you’re maybe find a right fit, but were there any points or any quarters last year where the MLR exceeded 15% and just to give us some comfort -- you remain uninsured basically right this year what data points can you give us that give us some comforts that there isn’t some potential volatility that could happen that just happen in the past that could somehow the relic guidance again this year?

So I think we've learned, obviously I’ll continue to learn a bit from our experience but as we've laid out 2016 I think one we made sure, we built in an uptrend pickup Russel McLean site though we've done, that and secondly as we've looked at either the cost of reinsurance or the cost of holding that on our own books for now of either way will should be able to get enough coverage so that we, we can't completely mitigate volatility. That we think we have enough ability given the EBITDA range we've laid out to be able to mitigate a large component of it and we think we’re pretty well set for the year on a quarterly basis there can always be activities that could bunch claims.

Okay. And then if we could just could you give us the help us with modeling the non-GAAP adjustments to the GAAP through pro forma both the adjusted EBITDA and net income?

Yes I think that's probably better done off line but we can do that.

Okay and then just finally on the stock repurchases I didn’t do the math and perhaps you've given us enough information but it would appear that the stock purchases were fairly modest in the fourth quarter despite which was up pretty weak stock price so did the weakness in internal controls we restricted on buying stock in the quarter or was there another reason or maybe my math is off, in which case just mentioned that, but just curious why at least on the surface it appears that not a lot of stock was bought in the fourth quarter?

And we did not actually repurchase any stock in the fourth quarter David and it has nothing to do with our internal control. We had just decided that it was something that we would keep our powder dry on and the board now has given us the ability to raise as we've indicated $50 million of additional 40 and so will take that into 2016.

Okay, thank you.

And our next question comes from George Tong of Piper Jaffray. Please go ahead.

You've ruled out changing proven limits in our holding off on purchasing reinsurance can you elaborate on the remaining strategy that you have to better manage claims cost and improve visibility?

Sure George. We did a lot of modeling as we looked at the reinsurance contracts that and were available on the market and one of the things that was clear based on the work that we did was that individual pooling limits really did not have that significant effect on reducing volatility on a quarterly basis and so while we evaluated that as an option, we went back we price it. That was not as effective a tool as are there different constructs were, so we've model them all we think there are some that potentially could work but at this stage we just haven't seen the right pricing and as Burton mentioned there ad is continuing to look at the different opportunities out in the market with the constructs we think work better for reducing volatility and we will see if we can arrive at the right balance of risk mitigation and costs. And so it’s that right balance that were looking to explore throughout 2016.

Right. And obviously pricing is one tool that you have to manage some of the higher claims patterns how much did average insurance pricing increasing by this year and how much which you need to see to fully offset the higher claims accrual cost that are required for this year.

Well we built in to our outlook both what we've expect our total claims trend to be as well as the pricing that will role throughout the year and we've basically are trying to take a couple of points above trend because that was what we needed to get back to the equilibrium that we had looked at before which was slightly better than an 85 NOR [ph]. So we built that pricing in, trends is sitting somewhere in the 7% to 8% it really depends on the region and the plan, though it's slightly higher in certain costs states where you see higher trend and it's lower in others and on top of the trends that we see in those individuals markets are generally, we got one or two points on top of that just to guess back in line where we were prior to '15.

Okay, got it, and you brought on new talent in the insurance business with a lot of experience in health and actuarial analysis, what new findings have you discovered that you didn't previously know that caused the elevated medical claims frequency from last year.

I don't think there's anything that we've seen that is going to help us go back and understand when you get large claims activity, but what we're looking at both as part of the evaluation that we did with the consulting firm as well as with Ed and some of the new actuarial talent is we're continuing to look at ways to get access into analyzed data faster and come to insights probably a little bit sooner which helps us both identify trends earlier and that also helps us then to consider what the effects are either positive or negative on pricing earlier. So I can those are some of the things that have already come up and we’re looking at ways that we can institutionalize that both internally with the way we handle data as well as how do we get data from different sources and look at it a little faster than we do today.

And our next question comes from Paul Ginocchio of Deutsche Bank, please go ahead.

Thanks, just on the back, on that comment around maybe a tougher macro-environment, is there anything sort of the slower change existing thing year-to-date and that sort of bubble bursting protecting with evaluations here in Silicon Valley, is there anything else you're seeing that gives you that pause and then I've got a couple more questions.

So the indications that I'm seeing are particularly on the technology arena, new business formation and across the board in the January change in existing. You know when I look at January the activity levels are great in the pipeline for new business, I don't see massive change in the competitive environment and those are really the cause for pause and it t sort of goes to the earlier question about net-net how's the year I think we're going to have tailwinds as well as headwinds and it's playing out each and every month with still a big month which is March as far as Q1 goes. So I think that it's just a cautionary environment when I see some reaction in the small businesses and I want make sure we're right on top of it.

What’s your exposure to technology overall in the Silicon Valley specifically then I've got two more.

Paul, this is Bill, we don't have any significant increase or significant exposure but, in California and probably in New York there's, that's where we're seeing some new business formation slowdown so we’re just going to be watching it carefully. But we don't have any significant component of our business that's overly concentrated in technology.

Okay and if I kind of heard what you said earlier about not choosing not to go fully insured, just trying to understand what percentage of your WSEs, revenue are in those industries that are very price sensitive, do you maybe go to a fully insured or raising prices to go to fully insured insurance. Any idea can you give us a rough how many vertical that is or how many industries to what percentage of WSEs.

Sure Paul, so I think first point I just want to make a clarification all of our programs, all of our plans are fully insured. So about 40% are what we call guaranteed costs which is complete pass through for the carriers, the remaining 60% we do have the deductible risk which gives us both the flexibility on pricing and planned design. So that's -- and it's in the larger markets, in the larger verticals where you'll see that 60%. So clearly California, New York and those would be the markets that have the deductible component or the flexible component, it's usually the smaller markets and depending on the vertical where you have the guaranteed cost programs.

So the pricings going to be more in geography based than industry base.

I think it's a combination of both, we're looking at it vertically based but plans also have a strong regional component to them because carriers are different, you get some national carriers which you have throughout the country, but you also have regional players who could be very strong in particular markets like California or Florida or Texas. So you have to look at those in concert with the particular vertical that they're serving.

Great, Burt if I could ask you one more?

Sure.

Just maybe you know it looks like the guidance for WSEs is a little bit lower than we've just seen, are you assuming in that guidance maybe some tighter gates for new clients to ensure that you do have insurance revenue in volatility or is that not the right way to think about it.

Look, I've always pursued growth through profitable business. I think that the nice opportunity I have is to turn the dial towards the profitable vertical and the business where we're not bumping head-to-head into anybody and we can add significant value with the right price, so as we talked about some of these new products are higher value and higher priced and the ability to turn the dial by vertical and I mentioned earlier, I'll add to vertically specific products that least this year, gives me the ability to find the right vertical with the right value proposition and the product at right price. So these are very industry-specific, the medical plans are tied directly to those vertical, and I think your point is a good one which is that I want to grow the business on profitable new clients and ultimately what I'm interested in is top line revenue and bottom-line profitability and delivering it to you guys each and every quarter.

With a new risk -- Chief Risk Officer, so it sounds like you may be built in little be it of maybe a little tighter factor that you bring into clients, is that safe to assume or you're not there yet?

I think that what I would say is I am getting a tremendous amount of additional visibility on the new clients coming into door, so you can draw that conclusion, but having Ed at my table having Ed on the huddles that we do four days a week and having the direct line which Frankly I've had for the last couple of months into the risk constructs of our company has certainly given me an additional focus on who's coming in the door at the Company.

Yes, Paul this is Bill, it wouldn't say that it's not something that's new. I'd say that there is just there is just different insight that we're able to get with different experience and different sets of eyes looking at the same issues, so we've always looked at that we're getting a different insights as we look at the risk profiles and the pricing of clients.

And our next question is a follow on from Timothy McHugh. Please go ahead.

I guess just quick one, I wasn't clear Burton what you're saying about January, what's the change in existing, where you're saying employment trends at existing clients, or was there something about retention of clients I guess overall?

No it was -- so Tim, the installed base in January CIE which we call Change in Existing, their hiring practices for the month of January the amount of new employees hired by existing clients was off year-over-year.

Retention there was no big change?

It was about CIE I was talking about. And by the way, Tim, it was still positive, so don't want to give the impression that there is a major change is just enough to scratch my head and say, I need to see February which I'll get in the few days and go from there

Thank you, sir. This concludes the question-and-answer session and today's conference. We thank you all for attending today's presentation. You may now disconnect you lines and have a wonderful day.