TriNet Group, Inc. (TNET) Q2 2020 Earnings Report, Transcript and Summary

Good day and welcome to the TriNet Second Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Alex Bauer, Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and welcome to TriNet's 2020 Second Quarter Conference Call. Joining me today are Burton Goldfield, our President and CEO; and Mike Murphy, our Chief Financial Officer. Our prepared remarks were prerecorded. Burton will begin with an overview of our second quarter operating and financial performance. Mike will then review our financial results in more detail and provide our forward-looking guidance. We will then open up the call for the Q&A session. Before we begin, please note that today's discussion will include our 2020 third quarter and full year guidance 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 that are inherently subject to risks, uncertainties and changes in circumstances that are difficult to predict 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 non-GAAP net service revenues, adjusted EBITDA margin and adjusted net income per share. For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see our earnings release or our 10-Q filing for our second quarter, which is available on our Web site or through the SEC Web site. A reconciliation of our non-GAAP forward-looking guidance to the most directly comparable GAAP measures is also available on our Web site. With that, I will turn the call over to Burton for his opening remarks.

Thank you, Alex. As a result of COVID-19 and the subsequent economic downturn, the second quarter proved to be a complex operating environment. I am pleased with our financial results, which are attributable to our strategy, execution and the resiliency of our customers. In the second quarter, we grew GAAP total revenues 1% year-over-year to $948 million. Net service revenues grew 45% year-over-year to $335 million. Professional service revenues decreased by a percent year-over-year to $121 million. During the second quarter, insurance service revenues increased 2% year-over-year to $827 million. In the quarter insurance service revenues outperformed due to better than expected retention and a health plan participation rate exceeding 70%. This is the highest recorded health participation rate we have experienced. It is largely due to a mix shift in the TriNet customer base. Net insurance service revenues increased 106% year-over-year to $214 million. The growth in our net insurance service revenues was the result of significantly lower insurance costs. The drivers behind the coining insurance costs were one-time in nature and driven by lower health utilization as a result of the decrease in medical services partially offset by COVID cases. The cost savings in the second quarter were significant and we intend to leverage these savings for the benefit of our customers. Our press release on July 16, announcing the return of certain administrative fees to our customers in the form of a fee credit is one example of the savings. Additionally, we are creating a recovery credit program, which we expect will have an even larger impact on our customers moving forward. This program will support our incredible customers as we jointly commit to our ongoing relationship. Later in the call, Mike will share additional details regarding this innovative and impactful program that we're announcing here today. Our Q2 GAAP earnings per share grew 192% year-over-year to $1.87 per share, Q2 adjusted net income per share also grew 190% to $2.03 per share, from a cost perspective, we were able to actively manage our operating expenses during the quarter. This is a direct result of previously described investments in process improvements over the last 18 months. However, we continue to invest in these types of initiatives, including modularity and automation. Additionally, these initiatives resulted in a significant improvement in our second quarter installed base Net Promoter score polling. We realized a 33% improvement in our NPS score accelerating a multi-quarter trend. I am very proud of this improvement in customer satisfaction. And I am thankful to our colleagues for their commitment to our customers in this difficult time. We finished the quarter with approximately 313,000 worksite employees down 3% year-over-year. Our ending second quarter WSE count exceeded our forecast. In late April, when we reported our first quarter earnings, we provided an inter-quarter WSE count, which was between 300 and 305,000, WSEs. In hindsight, that volume count proved to be our inter-quarter low. In May and June with states reopening and the positive effects of the paycheck protection program being felt our installed base stabilized. The rate of customer attrition, layoffs and furloughs all declined, resulting in the TriNet customer base being comprised of nearly 80% white collar workers. Incredibly, our customers returned to positive change in existing in June, predominantly in our white collar verticals. In the quarter, despite the difficult operating and economic environment, our cash flow remained strong. We spent $60 million repurchasing 1.4 million shares in accordance with our capital management strategy. As previously mentioned, we experienced our highest level of health enrollment rates in Q2 at over 70%. We found the customers who secured their health benefits through TriNet are likely to staying longer with us. Along with health benefits, the challenges our customers face as a result of COVID-19 highlight the importance of our technology and service model. For the last several years, we have been investing in our technology and service model. A result of this investment is our omni-channel service model where we can efficiently service customers how, when and where they want to be served, whether it's a high touch interaction with experts, a call center transaction or a chat box, we are there to respond to and address our customers needs 24 hours a day. Additionally, our mobile app is highly rated and well utilized. We regularly produce content, which addresses various employment benefits and government program related issues. Much of our content is posted on our COVID TriNet business resiliency and preparedness center found on our Web site. So far we have posted 11 webinars with over 20,000 attendees. Several webinars targeted the PPP loan process. As an example, today, we produced four webinars on just PPP, garnering over 10,000 views. Presently, our PPP-related efforts have pivoted to helping our customers generate the reports necessary to achieve PPP loan forgiveness. Given the critical support provided by this program, we are hopeful that government will continue to support SMBs through the remainder of this pandemic. TriNet's customers are the small and medium sized businesses that are supporting our country through this crisis. Customers like re:3D. re:3D is a manufacturing startup, which provides affordable 3D printers for the global market. The re:3D printer gigabyte is easily transportable, can use recycled plastic and allows its users to build products where they are needed. Re:3D is currently hiring full time engineering, sales and manufacturing employees. Over the past several months in response to COVID-19, re:3D leveraged their internal R&D to design and prototype PPE and other life saving devices. The company mobilized its global customer base to produce necessary health care equipment on site, selling regional supply gaps, while eliminating shipping delays. Working with customers like re:3D is an example of the important role TriNet plays in helping these amazing customers have a positive impact on our world. We understand, however, that many of our customers are still facing significant challenges as they navigate this uncertain and difficult environment. For example, our Main Street vertical has been hit the hardest with layoffs, furloughs and customer attrition. As we look forward, uncertainty around the economic environment continues. We remain cognizant that the economic recovery may be more drawn out than originally predicted. With respect to new sales, we see continued interest in TriNet products and services, the sales paradigm has shifted significantly, with meetings being held remotely. This has elongated the decision-making process. However, average deal size in the first half has nearly doubled year-over-year as we pivoted to larger customers. We expect to continue to make new sales for the balance of 2020 although at a significantly lower rate than in previous years. That said, we do expect to leverage our improved customer satisfaction to drive growth through referrals as the economy rebounds. Finally, we continue to pursue inorganic growth where it makes sense. For us that means exploring opportunities to expand into new geographies or into attractive verticals. As you saw today, we announced the acquisition of Little Bird. Little Bird represents our ability to identify industries, where our value proposition is particularly well suited. Through this acquisition, we are expanding our footprint in an attractive area of our non-profit vertical, while adding significant industry expertise. While the financial and volume impacts from this acquisition are limited. We're excited about this deal, as it represents an expansion into one of our core verticals with a large, attractive market opportunity. The entire TriNet team welcome Little Bird to our company. With that, I will turn the call over to Mike for the financial Review. Mike?

Thanks Burton. As I review the financials, I'm going to focus on the GAAP and non-GAAP numbers where appropriate. But first, on our last earnings call, I previewed that our Q2 results in 2020 guidance would be significantly impacted by timing as a result of COVID-19. And this is what has happened and what we expect to happen. And this timing includes timing of our insurance performance. For the second quarter, we guided to a net insurance margin range of 19% to 23%. And we delivered 26% as cost savings exceeded our forecast. We expect to see a reversal of this in the second half. COVID-19 also impacted volume of WSEs as we exited the second quarter with higher WSEs in our forecast. And insurance costs due to reduced utilization of health services, partially offset by direct costs of COVID care. And finally, our revenue as we began to accrue for our client recovery credit program and while I won't separate out the COVID-19 impact on our WSE volume, I will reference how it impacted our revenue results. As Burton referenced, we finished the second quarter with approximately 313 worksite employees, a 3% decline year-over-year. Average WSE count for the second quarter was approximately 314,000, a year-over-year decrease of 2%. During the second quarter GAAP total revenues increased 1% year-over-year to $948 million. Our net service revenues grew 45% year-over-the year to $335 million. GAAP total revenues were offset by 6% or $56 million as a result of our initial accrual for our recovery credit program. Professional service revenues for the second quarter decreased by 5% year-over-year to $121 million. While our professional service revenues in the quarter outperformed our forecast, the year-over-year decline was driven by our year-over-year decrease in WSE volumes and the 5% accrual for the recovery credit. Insurance service revenues for the second quarter increased 2% year-over-year to $827 million. The growth in insurance service revenues was also offset by the 6% recovery credit accrual. Net insurance service revenues increased 106% year-over-year to $214 million with a net insurance margin of 26%. The growth in net insurance service revenues was the result of reduced health utilization of all services as a result of shelter in place orders and lower COVID-19 incidents at the shelter and place orders were effective in reducing initial positivity rates, combined with COVID-19 costs that were slightly lower per patient and less testing costs. As we have said on prior calls, our pre-COVID expectation for the net insurance margin was about 11% to 12%. So we estimate that the net favorable impact of COVID-19 on our second quarter insurance costs was approximately $160 million. When we exclude the impact of our recovery credit and our estimate of the favorable impact from COVID-19, we estimate our net service revenue was roughly flat year-over-year. Our second quarter GAAP effective tax rate was 26% for the quarter. Our non-GAAP tax rate was 25.5%. GAAP net income increased 174% year-over-year to $126 million or $1.87 per share, compared to $46 million or $0.64 per share in the same quarter last year. Adjusted net income increased 172% year-over-year to $136 million or $2.03 per share, compared to $50 million or $0.70 per share in the same quarter last year. Adjusted EBITDA for the second quarter increased 134% year-over-year to $199 million, compared to $85 million during the prior year period for an adjusted EBITDA margin of 59%. Adjusted EBITDA benefited from both timing and prudent expense management, as we carefully managed colleague related expenses. We closed the quarter with total cash of $637 million, working capital was $364 million in the second quarter versus $284 million in the first quarter of 2020. Through the six months ended June 30, 2020. We generated $350 million of positive corporate cash flow from operating activities and used $445 million, primarily in settlement of WSE-related payroll tax obligations. As a result, total cash outflow from operations was $130 million. We spent approximately $60 million to repurchase 1.4 million shares of stock in the second quarter, in accordance with our capital management approach. We will continue to repurchase stock in the second half at a similar pace to the first half subject to the price of our stock, most of the EPS accretion benefit from our second half repurchases will be realized in 2021. Turning now to our 2020 third quarter and full year outlook, I will provide both GAAP and non-GAAP guidance and in an effort to be transparent given these unprecedented times, I will provide a summary of the changes to our guidance before providing a more comprehensive review. For the year we are raising our GAAP total revenue guidance due to our higher than originally forecasted WSE count and our higher health participation rate experienced in Q2. We are also raising the top-end of our adjusted EBITDA margin range to reflect our full year OpEx expectations. As a result, the top-end of our EPS guidance ranges will also be raised. Please recognize that as we referenced previously, there are significant timing differences between the first half and the second half results for 2020. First, the health cost savings that we realized in the second quarter are expected to reverse in the second half as we continue to accrue for the recovery credit and realize incremental COVID-19 insurance related costs that are no longer offset by savings from health care utilization. Second, you will see an increase in OpEx in the second half as we invest in growth and IT initiatives. We would characterize this spend as project based and not permanent spending increases. Our top end of guidance presumes that U.S. policymakers will continue to support employment and SMBs using programs like its paychecks protection program for the balance of 2020. The low end of our guidance now assumes limited or no direct additional support of employment via liquidity funding to SMBs. Our GAAP revenue guidance is now informed by our volume growth assumptions under these two economic outlooks as well as our recovery credit accrual. When compared to our outlook last quarter, we have changed the shape of our WSE forecast from a steep decline, followed by a rapid recovery to a shallow decline, which we realized in the second quarter to be followed by a much more flat recovery and later in the year. We also believe new sales will continue to be low in the third and fourth quarters, hindered by economic uncertainty and deferred decision-making. Overall, we assume the impact from the pandemic will be much more regionalized and fragmented, with some areas returning to business growth, while others returning to various forms of business shut down. Our GAAP revenue guidance will also be impacted by our recovery credit accrual, we expect to accrue most of the remainder of our forecasted savings over the second half. Currently, we anticipate this to be about 2% to 4% of GAAP revenue. Before we go any further, let me talk through the mechanics of the recovery credit. First, the recovery credit will be accrued in financial year 2020 and payable, beginning late 2020 through financial year 2021 at the time TriNet and our clients choose to extend our relationship. Second, the accrual is classified on our balance sheet as restricted cash and the changes in cash flow through our WSE-related cash. As a result of these assumptions, we now forecast our full year 2020 net insurance margin to be in the range of 12% to 14%. And excluding the impact from the recovery credit in COVID-19 costs, we are forecasting our second half net insurance margin to be in the range of 10% to 11%. Finally, we expect to return to a more normalized net insurance margin in financial year 2021. Now, I'd like to set out our financial guidance, which includes the acquisition of Little Bird. The acquisition did not materially alter our growth expectation for 2020 revenue or EBITDA. For the third quarter of 2020, we expect GAAP revenue to be down approximately 3%. We expect net service revenue to be down in the range of down 22% to down 17% year-over-year. And as I mentioned previously, our third quarter net service revenue guidance is impacted by the timing of our recovery accrual and our expected COVID-19 insurance costs. As a result, we expect our net insurance margin to be in the range of 6% to 8%. We are forecasting an adjusted EBITDA margin in the range of 12% to 18% for the quarter. Again, our adjusted EBITDA margin in the quarter is impacted by timing related to the recovery credit accrual expected COVID-19 impacts on insurance costs and one-time OpEx investments. We expect Q3 GAAP earnings per share to be down year-over-year in the range of down 102% to down 93%. And adjusted net income per share to be down year-over-year in the range of down 90% to down 75%. Turning to our full year 2020 guidance because of the outperformance of our volume in the second quarter, the change shape of our second half volume forecast. The realized mix shift to our white collar verticals and the cumulative first half financial performance, we're taking the top-end of our guidance higher. For GAAP revenue, we now expect the year-over-year change to be in the range of flat to up 1%, up from our previous guidance of down 8% to down 3% year-over-year. We now forecast our net service revenue to be flat to up 5% year-over-year versus our previous guidance of flat to up 4% year-over-year. Our full year 2020 adjusted EBITDA margin is now expected to be approximately 38% to 41%, up two points at the top-end. GAAP earnings per share are now expected to be down 8% but growing 9% year-over-year, raised from our previous guidance of down 8% to down 1% year-over-year. Adjusted net income per share is now expected to be down 3% to up 14% raised from our previous guidance of down 3% to up 4% year-over-year. With that, I'll return the call to Burton for his closing remarks. Burton?

I am very proud of the entire TriNet team for the results delivered in the second quarter in the face of COVID-19. The positive results related to revenue, profit, cash flow, client retention, NPS surveys, cost control and marketing impact reflect a strong outcome as we help our customers navigate these difficult times. I am equally proud of the many resilient customers we serve every single day. They are the innovators and entrepreneurs who represent the backbone of our economy. These are the companies that will lead us through our nation's recovery. With the recovery credit program we've announced today, we will be pleased to standby them as they survive and thrive. The current TriNet operating model is working well and we will continue to leverage it in the face of the uncertainty that confronts us. We are passionate about helping our customers navigate and implement new constructs, like PPP loan forgiveness as they become available. Regardless if this is the new normal, or a short lived blip in our country's history, TriNet is well-positioned to provide the resources necessary to help our customers pursue their business goals and secure future success. Operator?

We will now begin the question-and answer-session. [Operator Instructions] And our first question today will come from Tien-Tsin Huang with JPMorgan. Please go ahead.

Well, I know there's a lot of moving pieces, maybe I'll ask on paper and maybe ask on retention because I understand that sales is a little bit more difficult. But retention sort of stood out to me here with the higher test scores. You talked about higher utilization helping, automation helping, so where is it now, as you're thinking on how high it can go change given what you've learned through this initial COVID period.

Hi, Tien-Tsin, this is Mike. The way I think about it is there's really two pieces that affect our WSE volume. The first is attrition, which is client attrition and what we've seen is that our pattern of attrition this year, compared to this time last year is about the same for the half year. And I think the other aspect is our clients laying off their employees. And that's really the driver of the force and the performance in the second quarter.

Got you. And then, if I heard you correctly, for the quarter, you talked to net service revenue was roughly flat if we excluded the recovery credit, as well as the COVID impact here. Is that here you're messaging on how we should consider the baseline assumption here for the second quarter what a clean baseline would be. Is that the intent?

Yes. That's right.

Understood. And then, lastly, maybe for you Burton. Just on the acquisition here, I think you mentioned it was relatively small in terms of impact. Anything else you can share in terms of size or a number of the WSEs, the risk model, what else did they bring that you lacked?

Yes. So look Tien-Tsin, this is really exciting for me. Our vertical oriented business model is working very well in this economy. And it's allowed us to focus on exactly what these verticals need and what these industries are asking for. The Little Bird acquisition represents exactly that. I'm passionate about the non-profit space, the education space as well and they have expertise that's going to come on to TriNet and help us get even better in this particular space. They're based out of New York, a stronghold for TriNet and I'm excited that they're on board. The size is very, very small, but the impact I can have over time with them helping us in this particular vertical is exciting.

And that financials, overall Tien-Tsin is immaterial to our financials. But to give you some color, it's about 1% of our volume. And we believe it will be accretive over time.

And I don't doubt that you can amplify the growth rate. Thank you for all the details.

[Operator Instructions] And our next question will come from Andrew Nicholas with William Blair. Please go ahead.

Hi, good afternoon. Thank you for taking my questions. The first one I wanted to ask about actually Burton in your prepared remarks, you made a comment about the average deal size has nearly doubled year-over-year. I was just hoping you could parse that out a little bit further. What's driving that change and what does that mean for your addressable market more broadly sales cycles, growth outlook, that sort of thing.

So the solution that we're delivering, is landing very well with our customer base. And we believe by going up market, which was a conscious decision on the part of TriNet allows us to expand that value proposition for those particular customers. So what you will see over time is that we will expand on the size of the customers that comes to TriNet and they will avail themselves of the medical, the technology and the risk transfer that our unique model offers. So we're focused on the customers that really understand the direct value proposition and we find that as the customers grow that value proposition grows with the customers.

Got it. Makes sense. And then, just in the balance sheet, you gave nearly$650 million in cash at quarter end. And obviously, what seems to be a little bit more stable of a backdrop or at least less uncertain than it was last quarter when you drew down on your credit facilities. I was just hoping you could speak to near and medium-term capital allocation priorities where repurchases fit alongside M&A outlook? Thank you.

Sure. Thank you. Also as I said in my prepared remarks, our plan is unchanged as in regards to capital allocation and our plan is to buy in the second half of the year, roughly the same amount as we purchased in the first half of the year subject to the stock price. I think with regard to M&A, our view is that nothing has changed. We're always in the market for the right kind of transaction. And as we look at multiples and the fit, we'll examine those opportunities.

And our next question will come from Kevin McVeigh with Credit Suisse. Please go ahead.

Great, thanks. Hey, Burton you talked about 70%, just finishing rate on the healthcare side, can you help us frame that a little bit in terms of where it's been historically, where do you think you go to and just I guess, any thoughts around that if we could start there?

Let me take that one for you. We have historically had about mid-60s kind of performance previously. And so it represents about a 4% or 5% mix shift to the favorable for us right now. And what you'll see is a pattern of white collar participants being much more enrolled, whereas our blue collar is much generally much lower enrollment.

And Kevin, I'll add to that is the 80% white collar mix in our book is a direct that it 70% is a direct outcome of the mix shift. But what's good about that is, that we are finding that customers who take our medical insurance generally stay longer with TriNet and that's part of the comment I was trying to make about selling the whole value proposition and finding the verticals, the industries and the right customer size, where the entire value proposition resonates best.

That makes sense. And then, is there any way to think about within that 70% not much to take workers comp as well?

So generally, Kevin, all of our customers are off of workers compensation and take it.

Got it. That's helpful. And then, Mike, could you speak about WSE over this third and fourth quarter. Just remind us that if you could?

Sure. We don't actually give out volume for -- that's in our guide. That revenue for the full year is about 0% to 5%. And that's a reasonable proxy net of rate and mix for our volume guide.

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

There's just so many moving pieces in this environment for you guys and I'm wondering if maybe just kind of help us think at a high level about just the impact of retention, which sounds like if I heard is roughly flat year-over-year, maybe I got that wrong, but it sounded like it was flat. We have some deferred decision-making on the new bookings and WSE is probably anybody's guess, but definitely trending better than we thought. So, as -- I know you don't want to comment beyond this year. But can you give us any kind of high level way to think about how each of these different factors may impact next year excluding, of course, the net insurance margin, which I think we all understand will be going down year-over-year next year.

So we don't really give out our guide for 2021. I would tell you that the way we think about exiting the year is that the recovery from where we are now is going to be flatter and longer. We see that new sales will continue at lower levels through the second quarter and through the remainder of the year. And our GAAP guide is a reasonable proxy for volume net of rate and mix.

Got it. And did I hear you right though that attrition was flat year-over-year as of the end of June?

For the six months, this year versus six months last year, it was broadly similar.

Got it. Okay. And as we think about --

David, what I would say about that is, I'm particularly pleased with the retention rates. I'm particularly pleased as you think about it with the NPS scores. We have seen a direct correlation between customer satisfaction, referrals and new business, which I believe will pay off over time. I think that the recovery credit program is particularly exciting as it relates to 2021. And the team is just performing very well, in this COVID environment. I believe that it distinguishes us from a cobbled together set of solutions, having a single provider, they can provide the technology, the service and the risk reduction is showing well in this economy.

Great. So thanks for that Burton. So let's just take that a step further and think about, the professional services revenue, which I think declines less than WSEs probably because of the mix shift, the white collar but as you think about your pipeline and you gave some good detail about that previously, should we expect that professional services revenue to start kind of distancing itself or seeing more significant increases relative to the WSE count just based on what's in your sales pipeline?

So what I would say is that we see that are great and mix continues throughout the year on professional service revenues at the same rate and pace. And that the GAAP guide really gives you the insight into how to think about volume for the rest of the year.

Right. But, I think I was talking about mix within the volumes, so white versus blue.

So I think the way we're thinking about it right now is we may see some down scenario, we may see some more increase in mix, but in our up scenario our mix would stay broadly stable.

Got it. And then, just one last thing, just on the workers comp side, is there any kind of significant adjustments year-over-year or sequentially? There's a worker's comp accrual that we should think about or through the balance of the year that you've reflected in guidance?

So in our results, we posted favorable development of about $5 million to $6 million. And we haven't seen any particular significant material impact from COVID right yet, workers compensation develops slowly. We don't see anything changing right now.

So you don't see any material risk based on what you're seeing right now, people coming back and claiming workers comp, COVID worker comp or COVID-related workers comp claim?

It's too early to tell. I think that there are various legislative pressures in different locations that could swing it one way or the other. And it remains uncertainty and that's to a certain extent, why we've widened the range of our potential of our guidance for the year to capture more potential outcomes.

Thank you so much and I am incredibly humbled by this customer base and their resilience and their focus, David. So hopefully that'll continue.

And our next question will come from Sam England with Berenberg. Please go ahead.

Hi, guys. Just top up for me, just around the new business pipeline, can you give us an idea of what you've seen in terms of postponements or cancellations in Q2? And can we expect there's been any work that maybe got postponed due to something that was going on in Q2 that will kick-in in Q3 and Q4?

Though I have seen deferred decision-making, what I would say is in its simplest form, what I'm seeing is, that prospects frankly, are most concerned about the front of the shop right now. They're concerned about staying in business. So while we can help with that, it's difficult for them to make a decision to change the back end in the current environment. So we're staying focused on servicing our customers. And I know there's a direct correlation between this customer satisfaction referrals and the new business, which should pay off over time. Additionally, the marketing efforts are paying off as well.

Okay, great. Thanks. And then, I suppose the rest of -- going ahead the rest of this year, How are you thinking about the ramp up times for new clients given what's going on with remote working? Is it taking longer to deploy with your clients now or continue things as quickly as you could?

That's an awesome question. That team is doing the onboarding remotely and they're doing a very good job. We measured the NPS results immediately after implementation, which is quite complex and moving a client over to TriNet. And I am really thrilled with the type of scores we're getting and the team's adaptability to the onboarding and these new clients. A lot of this is going to depend on how the curve ultimately forms. But I believe that the team is doing a good job on the implementation remotely.

Great. Thanks. And maybe just one more. Sorry, if I didn't catch it, you mentioned some increased OpEx investment in the back half of this year. What was that related to and what's that investment going into?

So as we said on the last quarter, we were going to be prudent with expenses through the rest of the year. And as a result, we have definitely been careful with our colleague related expenses. We have pivoted and remained focused on some long-term investments, and Burton discussed process improvement and platform modularity issues. Clearly, we got the financial levers to pull, if we have any changes to the outcome, but for now, we think it makes sense to continue to focus on the long-term

And just to add to what Mike just said is, we're planning to invest further in 2020, particularly in process improvements in automation. We believe that the Q2 performance indicates that these investments are paying off, as evidenced by our ability to work remotely, which I have 3000 people doing and servicing our customers how they want to be serviced. We're continuing these investments in the third quarter and in the second half. But to be clear, the spin that Mike's talking about are project based investments, not a ramp up in people.

Ladies and gentlemen, this will conclude our question-and-answer session, also concluding today's conference. We'd like to thank you for attending today's presentation. And at this time, you may now disconnect your lines and have a great day.