Good afternoon and welcome to the TriNet First Quarter 2016 Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Alex Bauer, TriNet's Head of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to TriNet's 2016 first quarter conference call. Joining me today are Burton M. Goldfield, our President and Chief Executive Officer, and Bill Porter, our Chief Financial Officer. Burton will begin with an overview of our first 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 our Q2 and 2016 guidance and other forward-looking statements, such as predictions, expectations, estimates, strategy, or other information that may be considered forward-looking. 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 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. Burton M. Goldfield - President, Chief Executive Officer & Director: Thank you, Alex. TriNet had a solid start to the year. We delivered strong financial and operating results during the first quarter. I'm encouraged by the strength of our business and our ability to drive profitable growth. By executing our differentiated vertical strategy, we are well-positioned to pursue the large market opportunity in front of us. Looking…

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 first quarter, Net Service Revenue increased 14.7% year-over-year to $163.3 million. Total WSE count was 324,103 up 12.2% year-over-year or flat since the end of the fourth quarter. Professional service revenue for the first quarter increased 15.9% year-over-year to $112.4 million. Net Insurance Service Revenue for the first quarter increased 12.1% year-over-year to $50.8 million. Total adjusted EBITDA for the first quarter decreased 15.8% year-over-year to $42.2 million, compared to $50.1 million for the prior-year period due to $7.4 million an additional SOX and audit expenses in 2015. We had to invest significant additional time and resources to complete our first audit of our internal controls as required by Sarbanes-Oxley. We have turned to remediating our material weaknesses and we will continue to focus on improving our processes and systems until remediation is complete. Returning to our results, adjusted net income for the first quarter decreased 23% year-over-year to $19.5 million, or $0.27 per share, compared to $25.4 million, or $0.35 per share in the same quarter last year. Adjusted net income and earnings per share in the first quarter were negatively impacted by the higher than expected SOX – 2015 SOX and audit expenses. Our GAAP effective tax rate was 44.4% for the first quarter, and our Q1 pro forma tax rate was 42.5%. Our ability to generate operating cash flow is supported by our strong margin profile and asset-light model. During the first quarter, we generated $40.9 million in operating cash flow and spent $6.8 million on CapEx, representing 4.2% of Net Service Revenue during Q1. We closed the first quarter with total debt of $494.5 million representing a debt-to-EBITDA ratio of 3.4 times…

Thank you. And our first question will come from Tien-tsin Huang of JPMorgan.

Thank you. Yeah the plan was pretty clean here. I just want to ask on the WSE growth. It looks like that moderated a little bit. How did that come in versus plan, and any call outs or change in retention, new sales additions, things like that? Burton M. Goldfield - President, Chief Executive Officer & Director: So. Hey, Tien-tsin, how are you?

Good. Burton M. Goldfield - President, Chief Executive Officer & Director: Good. So, we grew WSEs 12% year-over-year, and we grew the revenue as you know by 15%. It was slightly moderated early renewals from the brokers in December to remain on the non-ACA compliant plan seem to have an impact on switching in January. So, January is a little slower. February and March were back right on track and change in existing or same-store sales was a little muted in Q1 I think reflective of the broader economic environment. But ultimately, my focus is to grow the net revenue in the key verticals year-over-year and as you heard from some of the vertical – early vertical results not as much to focus on the WSE count.

Yeah, you call that – go ahead.

Yeah, this is Bill. I'll just add one thing. The attrition was marginally up in Q1 versus our historic experience and I think some of that can be attributed to just the increased pricing that we announced in the fourth quarter.

Okay moderately up, but nothing – sounds like nothing unusual. You did mention the 16% revenue per head productivity on the vertical products. I think you also talked about accelerating bundled products in 2016. How quickly can this come to market and we actually can see this in the top line? Burton M. Goldfield - President, Chief Executive Officer & Director: So, Tien-tsin, I'm expecting at least two more products out before the end of the year and part of it is contingent on getting my new platform out, which I talked a little bit about earlier.

Right. Burton M. Goldfield - President, Chief Executive Officer & Director: So there is a completely new front-end to the product, which will allow me to much quicker customize the functionality on the front end obviously come in the back end, and as I talked about now we have Ambrose on the TriNet platform. We already have the Passport on the TriNet platform and we have the TriNet Life Sciences product on the TriNet platform. So we've been able to start refining our capabilities around changing the front end to meet the industry standards that we're going after.

Okay, one more and I'll jump off. Go ahead. Burton M. Goldfield - President, Chief Executive Officer & Director: Yeah, so two more – two incremental products, which have not been announced I'll commit to for this year.

Okay. Got it. So just one more and I'll jump off the phone. Burton M. Goldfield - President, Chief Executive Officer & Director: Sure.

Just the sales rep additions, sales rep additions were higher than we expected, up 24%. I think last quarter you said you're going to rein that in a little bit. Has that view changed? Burton M. Goldfield - President, Chief Executive Officer & Director: No, it's – so, I think last quarter was 481, now at 507. It's going to ebb and flow. It just depends opportunistically, as we bulk out these verticals; I need a critical mass of reps to go after a vertical. So we're looking at the verticals, Tien-tsin, on a national basis and there is a minimum amount of reps I'm going to place in each of the verticals in order to capture and measure the market penetration by national vertical. So, I will commit to you, it will be more than 481 by the end of the year, but I'm not sure exactly how many more.

Understood. Thanks for the update. Burton M. Goldfield - President, Chief Executive Officer & Director: Yeah thank you.

And the next question will come from Tim McHugh of William Blair. Tim J. McHugh - William Blair & Co. LLC: Hi. I guess, I just want to ask first on, I guess, can you elaborate on that kind of retention comments that was up a little bit just in the response to the re-pricing. I guess, what anecdotally did you see and can you be any more precise with, I guess, the exact metrics? Thanks.

Yeah, Tim. This is Bill. So, we generally don't give a specific attrition number, but we've generally guided to be right around the 20% level on an annual basis, and we've historically run a little better than 20%. Say this quarter, we were right at the 20% level, so slightly worse than what we've seen historically, but I think we're fine. Tim J. McHugh - William Blair & Co. LLC: Okay, thanks. And then just a few questions on the guidance, I guess. One, the reinsurance, is that still incorporated into the guidance and is there any change in I guess your thought on doing that?

Yeah, we're still continuing to look at that Tim. It's not something that we're walking away from, but we're continuing to evaluate it. And that's something that Ed and his team are looking at. So, we're still providing information to the markets and we're still looking to see does that make sense for us. If we find the right product, we could implement it at any quarter, but at this stage we're still evaluating it. Tim J. McHugh - William Blair & Co. LLC: Okay, thanks. And maybe one more just, the insurance – the Net Insurance revenue was, I guess, naturally better than what I had. You made the comment that the revenue was in line with what you thought. Can you talk about claims trends in those businesses? Were those lower than you expected or consistent? How do they kind of trend?

Sure. So, on the medical side, I think, we saw the components' premiums pretty much came in line with what we were expecting, and in terms of the claims, as you know, we look at it in the three components – run rate, large and pharmacy – and each of those were pretty close to what we were expecting. So I think all in all both on the premium and the claim side we were fairly close. We did see and probably just a touch better on the comp side and I think that's just average. Wage was up a bit and I think some of that's probably in line with the vertical approach where we're getting slightly higher revenue for WSE. So, all-in-all, I think all we're targeting are coming in within our target range; a little bit extra on the average wage probably gave us slightly more maybe than what you're estimating. Tim J. McHugh - William Blair & Co. LLC: Okay, thanks.

The next question comes from George Tong of Piper Jaffray. George K. F. Tong - Piper Jaffray & Co. (Broker): Hi, thanks. Good afternoon. Your insurance costs as a percentage of insurance service revenue dropped about 140 basis points sequentially, can you talk about the drivers of the improvement and how sustainable these levels of insurance costs are?

Yeah, George, I think it's still a little early to try to call too much out of one quarter, but I do think that we are seeing really the revenue starting to come into play in the installed base based on the pricing that we rolled out in the fourth quarter. And, yeah, that will take a full year to fully work its way through the system. So, you'll see, I think really the revenue pretty much catching up. And I think, the cost is something that we monitor. As I mentioned, we look at the three different components. Nothing stood out at us either in large run rate or pharmacy. So I think, at this stage, they're pretty much tracking to the trends we've been expecting, but I think it's little bit too early to call out anything as a major driver of change. George K. F. Tong - Piper Jaffray & Co. (Broker): Got it. Can you elaborate a bit on your recent performance in terms of the severity and frequency of medical claims and what trends you see that may cause either improvement or deterioration in those metrics?

Sure. So, we again haven't seen anything that's really dramatically different than what our trend estimates are, both on frequency and severity. Going to last year, we did see obviously a large increase in both frequency and severity of large claims, and we have not seen that again. So we're watching it carefully; other than that, as you know we've been following carefully pharmacy, but that's been tracking pretty much to what we're expecting and we're tracking that of course because there've been a number of announced higher priced drugs that have come into the market, but that seems to be in line with what we're expecting. George K. F. Tong - Piper Jaffray & Co. (Broker): Got it. And then, last from me, you've indicated this quarter you've increased prices in your insurance business. Can you talk about how your pricing strategy will be playing out this year and whether the pricing increases from this quarter are sustainable in the quarters ahead?

Sure. So, based on our experience last year, we did see that our costs on the claim side went up a couple hundred basis points higher than what we traditionally were seeing. So, we adjusted our pricing so that we could get back in line and that is going to take, as I mentioned about a year to completely roll through our installed base. That being said, what we were targeting pretty much was realized when we looked at the premium increase that we actually realized based on our experience in Q1 versus what we were targeting. So, that tells us that it is coming in and holding as we had thought. Now clearly it does have slight impact on attrition just because there may be some who are getting a higher increase than that they would like and that's really the way we try to price the risk. So, I think, all-in-all, we'll have to watch trend, because we always of course we want to be pricing the trend, but right now I think trend looks like it's reasonable compared to our expectations, and so I think future pricing should also be in that what I consider to be a reasonable range based on trend. Burton M. Goldfield - President, Chief Executive Officer & Director: And, George, just to add to that. This is Burton. I see a real opportunity. We've gone through the toughest period because of the early renewals in December by many companies with non-ACA compliant plans for the last time. There is no opportunity to do that anymore. Additionally, in certain key states in the 50 to 99 range, many of those clients must now go to small group, which has very limited banding and even more limited choice, so there is an opportunity for our fully-ACA compliant plans, a 105 of them in 50 states, and a chance for our folks to avail themselves of that opportunity particularly in the key states like New York and California. George K. F. Tong - Piper Jaffray & Co. (Broker): Got it. Thank you.

And the next question will come from Danyal Hussain of Morgan Stanley. Danyal Hussain - Morgan Stanley & Co. LLC: Hi. You're raising top line guidance maintaining bottom line. Is that a function of the higher Sarbanes-Oxley cost? And could you call out, I guess the incremental cost in the quarter and the incremental cost throughout the year that weren't factored into your guidance last quarter? Thanks.

Sure, Danyal. This is Bill. So the additional cost in the quarter was approximately $7 million and that was higher than what we are forecasting. So, it is a significant item and that was not something that at that level we expected when we looked at and gave our guidance for Q1 and for the year. So we do – we have recalibrated and we'll be spending a lot of our focus on getting those controls improved throughout the year and we built in those costs into our expense estimates for the remainder of 2016. So, I think we're well covered there, but we don't give out a specific number where those incremental costs will be. Danyal Hussain - Morgan Stanley & Co. LLC: Got it. And you gave the example of the verticalized product delivering a 16% more revenue per head. Is that what we can expect going forward for most of these new products where it falls somewhere between Passport and Ambrose? Or are you also going to launch products somewhere between Passport and SOI where you might have lower revenue per head as well with the offset being higher growth in worksite employees? Burton M. Goldfield - President, Chief Executive Officer & Director: So. Great question. Over time, as I've talked about in the past they'll be somewhere between eight products and 14 products. We're starting with some of the derivative Passport products first. But, they'll clearly be products at a lower price to address the right price point and service model for other industries and you may see one of those as a third product in this fiscal year. But, you're exactly right in the end, it's about getting the fit product for use at the right price point and some of those products will be higher, some will be lower, but it should at the advantage of higher retention as well as an easier sale. Danyal Hussain - Morgan Stanley & Co. LLC: Got it. And then...

I'm sorry. Go ahead. This is Bill. I'll just add a little color. I think as a trend I would expect revenue for WSE to generally move up slightly and volume probably to come down slightly, and I think that's just the pattern that I would expect, as we continue to verticalize and really target our key markets. Danyal Hussain - Morgan Stanley & Co. LLC: Okay and then just one last quick question. The seasonal items for the quarter, you called that $7 million this quarter and I think $3 million in 2015. Is there a normal number we would expect? Is the 2015 number more of a normalized number, we should project going forward?

Yeah. I don't know what that would be, but it's probably somewhere in that range, probably a little bit higher in Q1 of this year than what we were expecting and a lot of those are tax related. But, it's probably somewhere in that the $4 million to the $7 million range would be the right place that I would assume it is going forward. It's always hard to predict some of those rates. Danyal Hussain - Morgan Stanley & Co. LLC: Understood. Thank you.

Thank you.

And then the next question is from Ato Garrett of Deutsche Bank Of Deutsche Bank.

Hi. Good afternoon. Bill, looking back at last quarter, I know you made some comments specifically about your financial services vertical. I'm wondering if you can give us any more details on specific vertical performances in the quarter?

Hey, Ato. This is Bill. I don't think at this stage, we've quite the ability to call those out, although and that would be something if we get down in the future we should be able to provide more color. It's still a little early to be able to provide that level of detail. We did see coming into January just on the backdrop, we thought it was a little weaker in both financial services and technology, but I think throughout the quarter, I don't think that's a trend that we saw really taking hold, so I think there is a little bit of early caution.

Okay. Great and then just following up on some of the – again a little more detail on some of the changes that have come in since the hiring of your Chief Risk Officer in re-pricing of insurance. Has that really – have those been the primary changes of your go-to-market strategy as you address like the healthcare side of the offering or has it been anything else there?

So, having the Chief Risk Officer looking at the fitness of the product use in a particular vertical – he is reviewing all constructs associated with the insurance product. The question is how much does ACA impact a particular vertical? Almost none at all in financial services. They were already giving high-end medical plans, very significant in the hospitality industry. The question is what are the right set of products? What is the right amount of plans to be offering to any particular client, so there can be too many, too few and how do we get the right concentration? So, I think the big difference since we've hired the new team, the two actuaries and the Senior Vice President is to look at each of these verticals and see where the real opportunity is to enhance the offering to a particular vertical. It's not about a general offering anymore, it's about what vertical resonates with each part of the plan. And I think that as these products become more and more different from each other, the medical plans associated with these products will become more and more different from each other.

Great, thank you.

And the next question comes from Jason Kupferberg of Jefferies.

Hey, Jason.

Thanks, guys. Hey how you're doing? Burton M. Goldfield - President, Chief Executive Officer & Director: Good.

Good, good. Nice set of results. I guess just stepping back kind of a big picture question. I wanted to just kind of test the overall confidence level that you guys have as far as the ability to forecast the business. I mean especially the medical and the workers' comp claims. It seems like that has improved. But just wanted to kind of take your temperature on that and get a sense of how sustainable you feel that improvement is. Obviously, you've got Ed and his team in place and that seems to be making a difference. So, are you pretty comfortable that we're out of the woods, so to speak?

Hey, Jason. This is Bill. I think we're trying to operationalize a number of the things that we looked at, as we looked at our experience in 2015 to improve the information we received and to improve the ability to forecast using all that information. So with that, it is an area that has some volatility to it particularly on the claim side, but I think we're focusing on operational improvements throughout that information change to help us better forecast that business. So we think we've tried to build that in addition to getting better data faster, to just do a better job in terms of how we construct the forecast and maybe a little bit more in terms of our ability to absorb any bumps that we can't see getting down the line. So, we try to do all that. That being said, yeah, you never can be completely sure on how that component will come in just because you can't have higher frequency of a number of items that will bounce around. That being said, I think, we're comfortable with our forecast. We think we've built-in some prudent cushions to be able to cover that kind of volatility, but you never know what can happen down the line.

Okay, that's fair. And maybe just kind of a related question, on the full year guidance. So you beat the Q1 revenue guide I think by about $13 million-ish at the midpoint, if I'm not mistaken. I know that the full year guidance is going up $5 million. So, are we just expressing some of that apparent conservatism that you think is prudent at this relatively early stage of the year or has anything fundamentally changed in terms of your outlook for the remainder of the year from a revenue standpoint?

Yeah. That's a good question. So, now, I think we got off to a good start in Q1, but it's still early. So, I do think we want to maintain some level of conservatism just because we could see, based on last year, that you can have some volatility. So I think, we need to get a little further into the year before we can, let's just say, let things move through.

Okay. Now, that's good color and just last question from me. I don't think I heard any comments about the Teleborder acquisition. I know that was announced last – so if I'm not mistaken. So anything you can tell us there just in terms of kind of sizing the business and the strategic fit? Burton M. Goldfield - President, Chief Executive Officer & Director: So, we're excited about the team that came on board and the technology that we're able to acquire, but we're not ready to release the product yet and talk about that. There is some fantastic capabilities that they bring to the table that will be incorporated into frankly multiple products. So, stand by and we will continue to look aggressively at other M&A-type activity. So we're feeling a little better about it and a couple more back to the question that Bill answered for you. I'll feel real comfortable when we're now four in a row. So I got one, now I'm waiting for the next quarter Q2, but from an acquisition standpoint, I'm excited about the quarter, and we'll look at how these products get released into the market over the next few quarters.

Okay. Makes sense. Thanks guys. Burton M. Goldfield - President, Chief Executive Officer & Director: Thank you.

And the next question comes from David Grossman of Stifel. David M. Grossman - Stifel, Nicolaus & Co., Inc.: Thanks. I just was hoping that – I had to hop off for a minute, so if this has been answered we can take this offline, but just going back to the quarter, it looks like you guided at the high end $41 million of EBITDA, you did $42 million. And, I don't know, Bill, if I understood you correctly, but did you say that the $7 million of audit expenses were over and above what you had modeled in or kind of guided to for first quarter? And if I did get that right, what was the offset that allowed you to come in above the high end of the range on EBITDA?

No, David. You're correct. We weren't expecting that level of costs in Q1. So, I think it was a combination of doing a little better on the top-line primarily through slightly higher revenue for WSE and some ability to maintain a little bit of other expense controls, but effectively we were able to compete a little bit more on the top line and to maintain expenses to offset those additional costs, which were much higher than we had expected them to be. David M. Grossman - Stifel, Nicolaus & Co., Inc.: Right. So if a component of that is the pricing dynamic, should we think about all else being equal of course that the Net Insurance revenue as a percentage of growth should continue to improve over the next two quarters until you anniversary that increase sometime in the fourth quarter?

I think it's a little early to call out a trend on the Net Insurance revenue particularly given Q2 and Q3 are generally the quarters where we see higher seasonal claims activity. I think we need to see the year develop, David, before we can really go back to see what's happening on the claim side. Now, that being said, we think we're getting the hold on the revenue. So, we should see some improvement on the revenue for insurance of WSE. David M. Grossman - Stifel, Nicolaus & Co., Inc.: Right. Okay, fair enough on that. And then just finally maybe Burton can you talk maybe just a minute about the difference, if there is any difference in trend among the three offerings. And in particular maybe you could update us on what's going on with SOI now that you've had several months behind you in terms of the change in the sales strategy? Burton M. Goldfield - President, Chief Executive Officer & Director: So, I don't honestly, David, look at it as three offerings anymore. I have a technology offering, a life sciences offering and not-for-profit offering. I'm focused on professional services, the financial services, which is the Ambrose offering and the SOI. I don't consider SOI, a market. I consider property management a market, I consider retail, I consider manufacturing, I consider hospitality. We will laser focus and slice these verticals up and find out where we get the retention, where we can get profitable growth in revenue and where we have an opportunity to tailor the product to be fundamentally different than either the legacy SOI product or frankly any of the other products that are out there in the market. In general, if you ask me about SOI it did very well in Q1, which is kind of a legacy uptick. Last year was a challenging year, so it snapped back nicely. I think that obviously, as you look at the total addressable market, I stare at the TAM data every day. I stare at the attrition, the change in existing or same-store sales as well as new sales. And within those markets, there is trends emerging that give me a lot of excitement about our ability to target on a national basis very specific verticals within that overall let's just say SOI market. So, SOI from a quote product by the end of the year, I expect that all new clients will be going on to the TriNet platform and those TriNet products will be called property management or financial services and my feeling is that there's a big opportunity here to really focus on a segment and either succeed in it or decide if we're going to exit that vertical. David M. Grossman - Stifel, Nicolaus & Co., Inc.: Okay, very good guys. Thanks very much.

And this concludes our question-and-answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.