TriNet Group, Inc. (TNET) Q1 2022 Earnings Report, Transcript and Summary

00:05 Good afternoon, and welcome to the TriNet First Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. 00:27 I would now like to turn the conference over to Alex Bauer, Head of Investor Relations. Please go ahead, sir.

00:31 Thank you, operator. Good afternoon. This is Alex Bauer, Head of Investor Relations. Thank you for joining us and welcome to TriNet's 2022 first quarter conference call. I'm joined today by our CEO, Burton M. Goldfield; and our CFO, Kelly Tuminelli. 00:48 Before we begin, I would like to address our use of forward-looking statements and non-GAAP financial measures. Please note that today's discussion will include our 2022 second quarter and full-year financial outlook, and other statements that are not historical in nature or predictive in nature, or depend upon or refer to future events or conditions, such as our expectations, estimates, predictions, strategies, beliefs or other statements that may be considered forward-looking. 01:18 These forward-looking statements are based on management's current expectations and assumptions and are inherently subject to risks, uncertainties, and changes in circumstances that are difficult to predict and that may cause actual results to differ materially from statements being made today or in the future, except as may be required by law, we do not undertake to update any of these statements in light of new information, future events, or otherwise. 01:43 We encourage you to review our most recent public filings with the SEC, including our 10-K and 10-Q filings for a more detailed discussion of the risks, uncertainties, and changes in circumstances that may affect our future results or the market price of our stock. In addition, our discussion today will include non-GAAP financial measures, including our forward-looking guidance for adjusted net income per diluted share. 02:08 For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see our earnings release, 10-Q filings or 10-K filing, which are available on our website or through the SEC website. 02:18 With that, I will turn the call over to Burton. Burton?

02:22 Thank you, Alex. I am very pleased with both our continued strong operating performance and the outcomes of our key strategic initiatives during the first quarter. We outperformed our financial plan. We closed our acquisition of Zenefits and we successfully executed a significant return of capital to our shareholders. Taken together, these achievements reflect our commitment to create long-term value for all of our stakeholders. 02:58 Turning to our first quarter financial performance. Total revenues grew 15% year-over-year outperforming our guidance. Our outperformance in revenue was attributable to our strong and growing customer base, who operate in our core verticals. They consist of technology, financial services, life sciences, professional services, non-profit, and Main Street. Additionally, we remain disciplined in managing our cost structure while systematically pricing our customers to risk. This approach has yielded both strong revenue and earnings growth at TriNet. 03:46 In the first quarter, our GAAP EPS grew 46% year-over-year to $2.21, and our adjusted net income per share grew 54% to $2.55. Our Q1 financial results were accompanied by strong cash generation and a healthy balance sheet. We leverage these strengths in the first quarter to both acquire Zenefits and complete a $316 million tender offer. Each of these actions were taken to create long-term value for the benefit of all of our stakeholders. 04:34 Our acquisition of Zenefits elevates our product offering while providing the future foundation to serve the SMB community. We are now able to address a larger portion of these cohorts throughout their business lifecycle. There is no doubt in my mind that this is the most impactful strategic acquisition during my 14-year tenure as CEO of TriNet. Additionally, the tender offer demonstrates our effective capital allocation while benefiting our shareholders. 05:14 I am pleased that TriNet finished the quarter with over 601,000 users across our PEO and HCM products. TriNet's passion and commitment to serve fast-growing dynamic industries such as technology and life sciences makes us a party to various cyclical industry trends. But as I introduced on our Q4 call, during the first quarter, we once again saw a strong hiring as well as higher WSE attrition. The incremental higher attrition was concentrated in large companies leaving due to our attractive customer base being acquired, as well as transitioning from our platform to in-house HR Solutions. We believe that a portion of this cohort was deferred from earlier quarters as the pandemic delayed back-office changes. 06:19 Importantly, our business remains healthy and strong due to the complexity created by remote work and increasing regulatory challenges. These dynamics continue unabated. Customer attrition or the number of businesses who left us in the first quarter was in line with our historical experience. Notably, we continue to add new customers from our core industry verticals and our current customers are hiring at historically strong rates. These healthy developments have become an ongoing trend for our business. 07:04 For example, over the last three years, we have grown WSEs in our technology vertical by 22% and our life sciences vertical by 59%. Innovation, supported by capital investments are driving new company formation and the growth of existing companies within our core verticals. Our vertical focus is unique and continues to pay dividends for our company. One such company is FTX, a U.S.-based cryptocurrency exchange who came to TriNet in Q1. FTX represents the type of dynamic technology-focused SMB that we are proud to call a TriNet customer. 07:58 Let me describe the value FTX sees in the TriNet offering. FTX believes in the importance of their employee experience. They wanted to improve their employee benefit plan offering and TriNet's industry-leading PEO benefits offering prove compelling for their valued employees. In addition to supporting remote work, FTX is experiencing rapid growth while expanding to additional states. These factors drew FTX to TriNet because of our multi-state compliance capability. 08:38 Finally, as a leading technology company, FTX wanted a single sign-on user experience for its administrators and employees. With TriNet's mobile app, we could offer a compelling integrated technology solution satisfying this important requirement. By adding customers like FTX, TriNet has positioned itself to again benefit from the next wave of innovation and investment, which drives our customer growth. Attracting and retaining customers like FTX requires continuous product innovation. I am particularly proud that our mobile app has a 4.8 rating with over 20,000 reviews in the Apple App Store. 09:35 Additionally, during the first quarter, we launched an enhanced PEO user experience and the early feedback has been very positive. Let me provide you with an example of the feedback that we are getting. Monica Zsamboky of N2G Worldwide Insurance Services stated, TriNet's enhanced platform does an amazing job helping us to manage the increasing volume of HR tasks. It is very easy to navigate and the new dashboard acts as a short-cut to get to all the relevant information we need quickly. The overall design and experience has been extremely positive. Thank you, Monica, and the N2G Worldwide team for the positive feedback. TriNet will continue to innovate around usability and user experience to continuously delight our clients. 10:41 As we look forward to the next three quarters of 2022, we feel very good about the expected performance of our PEO business. We will continue to add new customers in our core verticals. We anticipate that our customers will continue to add employees throughout the year and we have weathered the worst of the cyclical attrition dynamics. I believe our guidance reflects this positive outlook. During the first quarter, we closed our acquisition of Zenefits. Although, it's early, I am very pleased with the integration thus far. The teams are collaborating and we share a common vision of putting the SMB customer at the center of everything we do. 11:37 Our first quarter TriNet-Zenefits customer win exemplifies the mutual passion and respect we have for all SMBs. Jaipur Living is a family-owned rug company, that sources its product from artisans living in over 700 villages across India. Jaipur Living wants to create beautiful eye for their customers, their artisans who create their products, and the Jaipur employees. Jaipur Living selected TriNet-Zenefits for all its U.S.-based employees to streamline and centralize all their people operations data. The Jaipur team is using HR, payroll, advisory services, performance and engagement management, and sourcing benefits through TriNet-Zenefits. A great example of the capabilities delivered through the TriNet-Zenefits product. Partnering with TriNet-Zenefits, Jaipur Living can create an HR experience that positions the company for success while reinforcing alignment with their unique corporate culture. 13:00 It is important to reiterate that whether this solution is PEO or HCM software, it is impossible to separate the human from human resources. I am so proud of the 3,300 TriNet colleagues that help make the TriNet vision a reality every day. We wish Jaipur Living great success as a company and TriNet-Zenefits will do everything possible to help facilitate their growth. I'm extremely excited about the future of TriNet and the integration of TriNet-Zenefits. This integration can be viewed along 3 time horizons. 13:50 In the near term, we are combining go-to-market efforts and leveraging both teams' strengths to drive new business. Thus far, our day one marketing campaign has resulted in a 17% increase in daily visitors to the TriNet-Zenefits site. We are seeing lead sharing across the organization. Finally, the pipeline for both products is building. In future quarters, I will be discussing how these efforts have translated to net new business. 14:26 In the medium term, we are focused on integration between our two products. TriNet's current product offering can be visualized as a barbell. At one end, we have the TriNet PEO, an intensive service experience where TriNet's co-employment model mitigates risk for our customers. We are intimately involved in our customers' HR experience. We rely heavily on our team and technology to deliver the pre-eminent PEO experience for our customers. 15:05 On the other side of the barbell, we have TriNet-Zenefits, a cloud-native, low touch, API-first, HCM software experience where customer self-service is the norm. Customers are able to determine the depth of their experience by selecting from a menu of product offerings. We believe significant opportunities exist to expand additional appropriately priced services to the TriNet-Zenefits product, ultimately filling the space between our two product offerings. I look forward to updating you on these efforts as the year progresses. 15:50 The long-term goal is the digital transformation of TriNet to a single-cloud native platform, characterized by a common technology user experience across HCM and PEO. Ultimately, we believe that we will be unique among all SMB service providers by offering an integrated solution at scale, better positioning us to serve SMBs throughout their business lifecycles. 16:24 With that, I would like to pass the call to Kelly for her review of our financial performance. Kelly?

16:33 Thank you, Burton. The actions TriNet took during the first quarter and our particularly strong operating performance demonstrated the power of our sustainable business model and resulting cash generation. We are solidly positioned for continued strong performance in 2022. We closed on our acquisition of Zenefits, expanding our product offering, and positioning us to become the most trusted adviser to SMBs by harnessing the power of scale. We successfully returned capital to shareholders as we executed a $316 million share buyback using a modified Dutch auction tender offer. And notably, our strong revenue and earnings growth generated $193 million in corporate operating cash flow during the quarter. 17:24 Our first quarter achievements clearly demonstrate our commitment to serving all of our stakeholders who are represented by our shareholders, customers, employees, and the communities in which we operate. During the first quarter, total revenues increased 15% year-over-year to $1.2 billion. This would have been 14% growth excluding Zenefits. This outperformed our expected guidance by 2 points. The outperformance in total revenues for the first quarter was driven by WSEs outperforming our forecast as we once again benefited from strong hiring within our installed base and rate growth, benefiting both professional services and insurance revenues. We finished the first quarter with approximately 348,000 worksite employees, up 7% year-over-year with an average WSE count for the quarter of over 343,000, also up 7%. 18:31 As Burton noted in his prepared remarks and as we discussed on our Q4 earnings call, we expected and experienced higher than normal WSE attrition during the first quarter. This was primarily due to large customers leaving and M&A transactions within our valuable client base. This resulted in first quarter ending WSEs declining by 5% sequentially. Importantly, customer attrition, as measured by the total number of customers who left us in the first quarter is clearly in line with our historical experience, but those customers were larger this year. 19:10 To put in perspective how unusual this attrition was, during the first quarter 12 large customers left, which accounted for the bulk of this attrition. Half of these customers left due to M&A, which by definition is uncontrollable, although, as proof of our effectiveness and the other half grew out of our PEO model bringing HR in-house. Our recent average is for one similarly-sized customer to leave in the first quarter. That being said, we feel that we performed well during the cycle. We are confident. We are well-positioned to benefit from our current customers' future growth. 19:51 Turning to Professional Service revenues. In the quarter, Professional Service revenues grew 27% year-over-year to $194 million, benefiting directly by 5% from the Zenefits acquisition. Excluding the contribution from Zenefits, Professional Service revenue growth exceeded our first quarter guidance by 5%. The Professional Service revenue growth in excess of the high end of our prior guidance excluding HCM revenues was specifically attributable to rate, making up the majority of the benefit helped by some seasonal benefits and volume driving the remainder from continued strong hiring within our installed base. 20:35 Insurance revenue grew 13% in the quarter. It was primarily driven by volume, wage and healthy growth as well as the year-over-year benefit from last year's Recovery Credit Program not recurring. For the first quarter, our insurance cost ratio was 80.4%, lower than our forecasted range for the quarter of 82% to 85%. Our insurance cost ratio outperformed in the quarter as we benefited from favorable claims development as our fourth quarter reserves were paid during the first quarter. Given the higher paid claims activity in December, we had assumed higher levels of incurred, but unpaid health costs. 21:17 In fact, COVID-19 testing and vaccination costs were slightly higher than our forecast. However, once again, these higher than forecasted COVID-related costs were more than offset by reduced overall health services utilization. This was likely driven by the Omicron variant of COVID-19 as paid claims activity early in the quarter came in under forecast. 21:43 Let me point out that as the variant abated, we did see a return closer to expected utilization levels later in the quarter. Workers comp costs were relatively flat in the quarter. This is consistent with our mix of white-collared workers and continued remote work for a significant portion of our WSE population. 22:03 Turning to operating expenses during the first quarter, expenses grew 11% year-over-year. The excess growth in expenditures was largely attributable to the Zenefits acquisition and integration-related expenses, including investment banking and legal fees. We also experienced compensation-related expense growth reflective of current inflation and labor market dynamics. In spite of the increased transaction-related expenses, let me point out that we grew first quarter GAAP net income per diluted share by 46% year-over-year to $2.21 or $0.18 higher than our original guidance. 22:47 Adjusted net income per diluted share in the first quarter was $2.55 or $0.33 higher than our original guidance. Please note that our adjusted net income in the quarter excluded approximately $10 million or $0.11 per share of Zenefits related acquisition and integration costs. As a reminder, during the first quarter, we completed our tender offer where we repurchased over 3.6 million shares at an $86.50 price per share. However, given the timing of completion of the tender in the quarter, it clearly did not significantly impact our first quarter earnings per diluted share. 23:32 Our strong first quarter financial and operating performance generated over $193 million in corporate operating cash flows and $242 million of adjusted EBITDA. We ended with approximately $235 million of corporate cash after utilizing $316 million for our tender offer and $192 million for the cash portion of the Zenefits acquisition. Our purchase price of Zenefits was adjusted down to $209 million from $220 million. This was due to the accounting treatment of some acquisition triggered time-based payments. These will be captured in our integration costs and will be recognized over time. I would also like to highlight that the Zenefits back-office integration is on track. 24:24 Now let's turn to our second quarter and revised full year outlook, which now reflects our first quarter performance, the acquisition of Zenefits and the share repurchase executed through March. We are lifting the top end of our full year adjusted EPS guidance by $0.15. This is due to our first quarter outperformance continued above average hiring by our customers, good core cost control and the benefit of the share repurchase. These benefits are partially offset by Zenefits operating losses and an expected full return of healthcare utilization in the second half of the year. 25:08 Forecasting our insurance cost ratio due to the impact of COVID-19 remains a challenge due to many factors. These include the risk of new variants, a continuing period of deferred routine and elective care and potentially new government initiatives. Despite the strong first quarter insurance cost ratio or ICR results, we fully expect our second quarter ICR to return to within our historical seasonal range. Our second half view of ICR is more measured, as we expect the combination of seasonally higher utilization and a full return of primary care and elective visits to drive a higher claims rate than in the first half of the year. We will continue to watch this closely as we move throughout the year. 25:57 Now that our acquisition of Zenefits has completed, we are enthusiastic about the growth opportunities for this part of our business and are projecting an associated gross revenue lift of between $40 million and $45 million this year. We still anticipate retention and integration costs of approximately $40 million to $50 million, plus an additional $10 million to $15 million in amortization of purchased intangibles, both of which will impact our GAAP results but will be excluded from adjusted earnings per share. Finally, as a result of our successful tender offer, we expect to receive an $0.18 earnings per share benefit for the full year of 2022 over our previous guidance. 26:42 Turning to specific second-quarter 2022 guidance, including TriNet-Zenefits we expect total revenue growth to be in a range of 8% to 9% year-over-year and Professional Service revenue growth to be in a range of 14% to 15% year-over-year. Our robust second quarter Professional Service revenue growth outlook includes approximately $12 million of TriNet-Zenefits HCM cloud revenue. It also reflects our continued expectation of above average PEO customer hiring, double-digit year-over-year growth in our PEO new sales, and price increases at or above our service costs. 27:25 In the second quarter, we foresee healthcare utilization to return to pre-pandemic seasonal averages. As a result, we expect an insurance cost ratio of between 87.5% to 88.5% in the second quarter. Our second quarter estimate of GAAP net income per diluted share is in the range of $0.69 to $0.80 per share, reflecting the cost impact from the Zenefits acquisition and integration activities that are underway. Controlling for the one-time impacts from that acquisition, we believe our second quarter adjusted net income per diluted share will be in the range of $1.10 to $1.21 per share. 28:10 Regarding our full year 2022 guidance, we are now forecasting our year-over-year total revenue growth to be in the range of 7% to 9% with our professional service revenue expected to grow between 16% and 18%. Total revenues growth and professional service revenues growth both include approximately $40 million to $45 million of incremental TriNet-Zenefits HCM cloud revenue. Professional service revenues growth will benefit from continued hiring from our installed base above pre-pandemic rates and annual service fee increases. 28:50 Our insurance cost ratio guidance of 88% to 89% remains unchanged as we expect higher ICR rates in the second half of the year to offset the lower rate in Q1 during the Omicron peak. As I mentioned earlier, we will continue to cautiously monitor this as the year progresses. Given the integration expenses related to the Zenefits transaction offset in part by the benefit from the tender offer, we are revising our full year GAAP net income per diluted share guidance to $3.28 to $3.91. 29:29 We are raising our full year adjusted net income per diluted share guidance by $0.15 at the midpoint to $4.70 to $5.35, reflecting the benefit from our tender and the strong first quarter financial performance. TriNet has clearly delivered. While, at some point, there could be an opportunity to improve our outlook. We remain prudent in our projections given the remaining uncertainty in full year health utilization. 29:59 With that, I will turn the call to Burton for his closing remarks. Burton?

30:04 Thank you, Kelly. After coming off an extremely strong 2021, the first quarter of 2022 was remarkable. Q1 was characterized by strong execution for the benefit of all our stakeholders. We exceeded our guidance on all key metrics. We closed our acquisition of Zenefits, diversifying our product offering and positioning TriNet to further innovate in service of SMBs. We returned capital to shareholders in the form of our $316 million tender offer. We launched a new PEO user experience, again demonstrating our commitment to our customers. We will always put the best possible product into the market and we continue to add new dynamic customers in our verticals, positioning us for future growth. While I'm extremely confident about our strategic direction and our financial performance, I will never be complacent. I look forward to updating you on our progress as the year progresses. Operator?

31:27 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.

31:54 Hey, Tien-Tsin.

31:55 Hey. Good afternoon. Thanks so much for all those detail. I know there's a lot of moving pieces, but I was hoping to maybe just -- would you mind just going through the EPS guidance change a little bit? I saw the rate of $0.15 and some of it is the tender impact, and then you've got -- you're absorbing more than the -- more all the Zenefits layering in. So I'm just trying to understand what's changed in the outlook if we control for those two items.

32:20 Sure, Tien-Tsin. It's Kelly. I'll be happy to take that. When I think about guidance and the rest of the year, as we were looking at first quarter outperformance, honestly, it comes down to a volume story. So when we take into account increased volume and better hiring in the first quarter while we're being cautious for the rest of the year on hiring, that's the net difference other than the difference between Zenefits and the share repurchase. So Zenefits reduced EPS by approximately -- well, a little bit higher than the $0.25 we had anticipated last quarter given the timing of the closing. The share repurchase benefited by $0.18 to adjusted EPS, and the rest of the benefit really was related to volume.

33:16 Got it. Thank you for that. And just my quick follow-up and just on the WSE growth, the plus 4% is a little bit -- plus 4% is better than what we had forecasted, but just trying to -- I heard the attrition was in line with seasonal patterns, so how did it come in versus your expectations? And have your thinking on -- has your thinking on WSE count growth changed for the full year in general?

33:42 Yeah, Tien-Tsin, I'll be happy to take that. Related to the first part of your question on attrition, while client attrition was in line, those clients were larger. And we obviously had foreshadowed that on our call and it was really in line with our guidance and probably the real difference from our guidance from a volume perspective was first quarter hiring. We're muting that for the rest of the year, but we do expect it to contribute to a level of volume growth that we hadn't originally anticipated when we gave guidance in the fourth -- at the end of the fourth quarter.

34:20 Got it. Thank you, guys.

34:23 Thank you.

34:24 Thanks, Tien-Tsin.

34:26 [Operator Instructions] Our next question will come from Andrew Nicholas with William Blair. Please go ahead.

34:36 Hi. Good afternoon. Thank you for taking my questions. Yeah. I wanted to follow up on that last question. First, just on WSE growth. It sounds like hiring within the installed base was really strong in the first quarter. You're taking a bit more conservative approach through the rest of the year, but are there any indications that hiring is slowing through the second quarter or as the year progressed? I'm just kind of curious if given your visibility into the SMB market broadly, if you could speak to kind of the health of the market, how hiring trends have progressed more recently, and just to make sure that it's not something that you're seeing as much as it is being conservative on the hiring front given some really strong recent activity.

35:19 Yeah. So great question, Andrew. I'll give you my honest opinion. I was surprised that the continued strong hiring in Q1, it continues to this day. So it is above the models that we've built for the company. We have an amazing customer base, as you know and we're selective about those customers and they continue to grow. So the straight answer to your question, the first part is, no, we don't have an indication, but it seems improbable that this will continue all the year, yet we're rooting for these amazing clients that we're trying to support in every way possible. So that's sort of the CIE story. 36:06 I'm also seeing increased productivity in our reps, which was Q1 and it's coming into Q2. So I'm optimistic about the future of the net new sales side of the equation. And as I'm sure you realize, this is just a great market for PEOs. The complexity, both on the regulatory side and the persistence of the work-from-home has really brought in net new customers to the PEO model and we've gotten our share. And then, finally, what we're trying to do is through the acquisition of Zenefits, we're trying to demonstrate that you can have an exceptional technology solution and exceptional customer service. So at TriNet, these two things go hand-in-hand. So yeah, I'm optimistic.

37:05 Great. That's helpful. Thank you. And then for my follow-up, I know last quarter, Zenefits hadn't closed yet so you were a little bit hesitant to speak to some of the operational plans there. Having now headed under your belt for a couple of months, just wondering if you could spend a bit more time on kind of how you expect to run that inside of TriNet now that it's in the fold, what the branding might look like, plans for the sales force. I think you mentioned combining go-to-market efforts in your prepared remarks, but any other kind of logistical things that you could speak to or branding items? Just trying to figure out what the medium-term vision is for the combined organization?

37:46 Great. And I can talk on that for a long time. But I continue to be very excited about Zenefits 10 weeks into the integration. I've gotten to know the Zenefits team, I had a chance to meet all the top sales producers at the Zenefits President's Club, and I'm inspired by the energy, the focus, and the execution of the organization. Today, there is a senior leader at Zenefits who reports directly to me and we are deep diving in the technology for both the short term, which is additional capabilities for Zenefits, meaning over the next six months, as well as the build-out of the long-term unified platform. 38:35 But in the medium term, for me, it's about accelerating new sales for both set of products. It's about adding new capabilities to the Zenefits product for the existing customers as well as new customers. And it's about getting the best ideas from both of these teams, but having said that, have them focus maniacally on their delivered results for each of these products.

39:04 Makes sense. If I could just squeeze one more in if it's okay.

39:08 Absolutely.

39:10 Just on Zenefits, could you speak a bit more, I think you said $40 million to $45 million of revenue. Is there any detail you could provide on kind of an EBITDA contribution for '22? I think last time we spoke, you talked to it being breakeven over a certain time frame. But just wondering if there's any more detail you can provide in terms of near-term contributions. Thank you.

39:35 Yeah, Andrew. When we rolled forward our guidance -- I'll be happy to take it. It's Kelly. But when we rolled forward our guidance, we definitely took our best view into account based on trying to grow the business and investing in the go-to-market there. We expect -- I'm not going to give you an EBITDA view specifically but related to the impact on earnings per share. The negative was slightly higher than the $0.20 to $0.25. I had guided to last quarter. So it's a little bit more than that given some investments we want to do in the go-to-market side. Hopefully, that helps.

40:14 Got it. Appreciate it.

40:20 [Operator Instructions] And our next question will come from David Grossman with Stifel. Please go ahead.

40:40 Hi.

40:43 Hey, David.

40:44 Thank you. Hi, Burton. Thank you. I'm just -- Sorry. I'm juggling a few things here. I just want to make sure I got a couple of things down, right. So on the EPS walk from where the guidance was previously to where we are today, I think you talked about an $0.18 benefit from the share repurchase, and then I missed what the offsets were to that. So I want -- could you just repeat that? And I'm sorry, I just didn't catch everything.

41:18 Sure, David. No problem. And it kind of ties to Andrew's, again, it was a recent question as well. So the share repurchase, given the timing of when it happened will be about $0.18 benefit to adjusted net income per share. That's offset by the expected loss from Zenefits, which I said was slightly higher than the $0.25 I guided to for last quarter's call. And then, we're anticipating insurance cost ratio to really go back to a more normal full year level, which means it would accelerate somewhat, but we're being cautious because we don't know what's going to happen given potential new variants, new governmental programs, et cetera. 42:04 And then, the real benefit frankly, on the quarter was volume and continuing to get our pricing that we're pricing for in the market. So it is really -- when you cut through all of it, it's really a volume story.

42:20 Right. So was the net increase about $0.15? Did I do that in my head right, about the increase?

42:26 That's exactly right. Yeah, exactly right.

42:28 Okay. So you have $0.18 less the $0.25. And then the push above that, I guess is $0.22 of pricing and volume. Is that it?

42:44 And volume. Yeah. That's right.

42:47 Okay. All right. And can you just remind me, how much of your revenue, if any, is tied to wages -- to wage levels?

42:56 Yeah. Really, the few things that are tied to wage levels, workers' comp is a wage base type fee. And given our white-collar workers, our workers' revenues are lower rate because it's less risky, but that's definitely wage-based. Our unemployment insurance is definitely wage-based as well, although that tends to be very seasonal towards the first quarter given high wage base of our WSE base. So a lot of that does cap out in the first quarter given some of the statements.

43:32 All right. And I guess both you and Burton, you spoke kind of very positively about volume growth continuing into the quarter -- into the second quarter that is. And how -- just historically, and maybe Burton, this is a better question for you. I mean historically, how much visibility have you had in terms of shifting momentum of hiring within the base? Is that something that just you typically don't get much visibility into it starting to happen or is it something that you generally have some insight into at least more than a month or so of visibility into?

44:16 It would be hard for me to say I have tremendous visibility, David. Obviously, as they come on, they're onboarded to TriNet. We are involved with our clients and they are continuing to hire. But as Andrew said, look, it's hard for me to believe that this rate continues all year. So if it does, fantastic. But right now, I can say that I have not seen anything that indicates the slowing, it's more a logical outcome of what you're seeing in the overall macroeconomic conditions. Having said that, we have a very unique customer base. They are executing tremendously well and they're -- as I said in my prepared remarks, they are hiring and looking for great talent. So when it comes down to that, for me, they want the good benefits. They're competing for the talent, they love the technology, and they love the service. So if they're looking for a premier service provider, they're looking to TriNet.

45:29 Great. So can I -- maybe just a couple of quick cleanup questions here. So I'm sure you've seen kind of what your competitors [indiscernible] metrics reported today and ADP will report tomorrow. So just maybe to frame kind of what those lost clients. I think you gave some great information about how many lots this year versus in prior years. But can you give us any better sense in terms of exactly what kind of unit impact that had on your growth rate from losing kind of 12 large clients during the quarter, just so that we can frame that on a relative basis.

46:06 Yeah. David, this is Kelly. In total, when I look at it, it had about a 3% impact on the quarter in terms of overall WSEs for just those 12 clients.

46:18 And is that sequential or year-over-year?

46:21 Sequential.

46:22 Okay. Great. And just one last one is just -- and maybe I missed this on the diluted share count. With the Dutch tender and the Zenefits shares that were issued, can you just give us maybe a little clear guidance. And I'm sorry if I missed this, if you said about what the share count, we should use going forward just given that we have some pretty significant moving pieces that transpired in the quarter.

46:51 We don't guide the share count, but what I would say is it's pretty easy to back into it based on our reconciliations in the back of our press release. So I don't want to guide to share count. Because there will be variability, it's going to change. The diluted numbers will change obviously depending on the stock price, but you can absolutely back into at least what our current expectations are.

47:16 Okay. And you said that you -- the share repos -- or the $192 million was the share dollar value issued for Zenefits. Is that correct?

47:30 No, $192 million was the cash that we paid for Zenefits, excluding the shares, the shares were, I want to say, around $16 million of TriNet stock. But in general, when we look at all of that net of the repurchase activity, there's definitely going to be an ongoing benefit going forward. We repurchased a little over 3.6 million shares at $86.50.

48:02 Right. Okay, I think we can do it from there. Got it. Okay. Thanks very much. Appreciate it.

48:07 Thanks, David.

48:11 Ladies and gentlemen, this will conclude our question-and-answer session, also concluding today's call. We'd like to thank you for attending today's presentation. And at this time, you may now disconnect.