TriNet Group, Inc. (TNET) Q3 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to the TriNet Group Inc. third quarter 2026 earnings conference call. Today, all participants will be in a listen-only mode. Should you need any assistance during today's call, please signal for a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question at that time, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note that today's event is being recorded. I would now like to turn the conference over to Alex Bauer, Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning. My name is Alex Bauer, TriNet's Head of Investor Relations. Thank you for joining us, and welcome to TriNet's third quarter conference call and webcast. I am joined today by our President and CEO, Mike Simonds, and our CFO, Mala Murthy. Please note that today's discussion includes our 2026 full-year financial outlook and statements that are not historical or predictive or depend upon or refer to future events or conditions, such as our expectations, estimates, predictions, strategies, or beliefs. Forward-looking statements, which are based on management's current expectations and assumptions, are inherently subject to risks, uncertainties, and changes in circumstances. We caution you not to place undue reliance on these statements. Actual results may differ materially from those expressed or implied. 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. Our discussion today will also include non-GAAP financial measures, including our forward-looking guidance for adjusted EBITDA margin and adjusted net income per diluted share. We encourage you to review our most recent public filings with the SEC, including our 10-K and 10-Q filings, as well as our earnings release, each of which is available on our website or through the SEC website for both reconciliations of our non-GAAP financial measures to our GAAP financial results and 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. With that, I will turn the call over to Mike. Mike?

Thanks, Alex, and good morning, everyone. I am pleased with our progress in the third quarter and encouraged by the momentum we are building across the business. At the beginning of the year, we laid out a straightforward path for returning TriNet to profitable growth. First, we needed to progress our health fee repricing and return to a sustainable insurance cost ratio. Next, we needed to improve retention, strengthening the value we deliver to our clients. Finally, we needed to increase new sales, supported by a larger, more productive sales force and strong broker channel. During the third quarter, we made progress across each of these priorities. After completing our repricing efforts, insurance performance has improved, and once again in Q3, it was better than forecast and within our target ICR range. Professional services revenue was in line with expectations, and we maintained discipline around both pricing and investment. As a result, we are very confident in our full-year outlook, which Mala will discuss in greater detail. Importantly, our improved financial performance is occurring as we invest meaningfully in capabilities supporting our other two priorities, retention and new sales. Let me start with customer retention, where we are encouraged by our progress. Improving retention is one of the most important building blocks in returning our WSE base to growth. We started 2026 planning for full-year WSE retention that was in line with our long-term historical average. As a result of our health plan repricing, retention in Q1 was lower than we expected. With Q2 and Q3 renewals complete, and Q4 renewals largely behind us as well, our full-year forecast for retention has fully recovered from the difficult start, and we now believe we will finish with a modest improvement in retention for the full year. TriNet's value proposition, a powerful combination of technology and proactive service, has now become the driver of customer retention. Our philosophy here is simple. We have built an exceptional foundation around HR expertise, benefits, payroll, compliance, and service. Increasingly, we can complement that foundation by bringing customers additional capabilities, either by building them ourselves, partnering with companies that we believe offer differentiated solutions, or through acquisition. You are beginning to see that strategy take shape. Over the past year, we have made meaningful progress improving our customer experience through AI, including our homegrown tool, TriNet Assistant. We started with a focus on WSEs, and at the end of the third quarter, nearly 60% of WSE-initiated chats are being resolved using AI, freeing our colleagues to solve more complex requests with greater speed. Two areas where we have seen quick wins are our backlog of older cases, which declined by over 60%, and leave of absence turnaround times, which have dropped by 75%. During the third quarter, we expanded TriNet Assistant support to customer administrators. As we roll out additional use cases, we expect to further improve customer satisfaction and service productivity. Where we find companies with unique solutions that integrate with the people processes we administer, we are creating partnerships. One example is TriNet Global. Many of our customers are sourcing talent globally and often identify candidates outside the United States before having the infrastructure necessary to employ them. TriNet Global addresses that need, extending the value of the TriNet relationship. A second example is TriNet IT. Managing a distributed workforce means managing remote employee technology. TriNet IT expands the solutions available to customers and addresses this adjacent business need. While early, we are seeing adoption of both offerings, which are now integrated into our broader sales efforts. Just two weeks ago, we expanded this strategy with the launch of TriNet Recruit and TriNet Spend, addressing new hire applicant tracking and expense management, respectively. We are excited about the potential these deep integration partnerships have for supporting our clients and strengthening our overall value proposition. Where owning a capability provides meaningful strategic value, we will invest directly. Cocoon is a great example. Leave of absence has historically been complex for employers. We acquired Cocoon because we believed its best-in-class solution can meaningfully strengthen our customer experience. The integration remains on track, with our first cohort already migrated, including our heaviest users of leave. Strategically, Cocoon strengthens an important HR workflow, differentiates our offering, and demonstrates how targeted acquisitions can deepen the value we deliver across the customer life cycle. Together, TriNet Assistant, Cocoon, TriNet Global, IT, Recruit, and Spend illustrate the ecosystem we're building around our core. Each addresses a real problem our SMB customers face, and each provides TriNet with another opportunity to strengthen the customer relationship. To give a client example, Diana Sacchi, Chief Human Resources Officer at Grameen America, is expanding her relationship with TriNet through Cocoon and TriNet Recruit. She's adopting these capabilities with the goal of strengthening Grameen's HR processes and improving her team's efficiency. Over time, we believe this broader set of capabilities can support both sales and retention by making the TriNet relationship increasingly valuable to clients. The final major factor for us to return to volume growth is new sales, and we made encouraging progress during the third quarter. New sales ACV for Q3 grew mid-single digits year over year, representing further improvement in our sales trajectory. In fact, that trajectory is continuing as we are currently forecasting high single-digit new sales ACV growth in the fourth quarter. This growth is an important step as we've spent much of the last two years building the foundation for sustainable, repeatable sales growth. Our experienced sales consultants remain an extraordinarily important part of our distribution model, and we continue to retain that group. At the same time, our Ascend program provides us with a repeatable process for developing the next generation of productive TriNet sales consultants. The objective isn't simply to increase headcount, but to build a sales organization with the right combination of capacity, tenure, productivity, and expertise. Our broker channel represents another increasingly important growth factor, and we are beginning to realize a return on this investment. In Q3, broker new sales ACV was a strong contributor to our third quarter sales growth. Importantly, we believe there remains a significant opportunity ahead. We want TriNet to become an increasingly valuable long-term partner to the broker community. That requires us to consistently deliver for both the broker and their client. We're investing in better technology, processes, and local talent to support our aspirations in this channel. Importantly, we also have aligned incentives to encourage both new sales and strong retention. The growing level of RFP activity and new client wins tell us our value proposition is resonating with much more runway ahead for future expansion. That brings me back to where we started. At the beginning of 2026, we were very clear about what we had to improve, and through the third quarter, we've made tangible progress. Pricing is aligned with broader market trends. Retention is improving. Our investments in technology, service, and capabilities are strengthening the overall TriNet value proposition. New sales return to growth. Our sales organization is now adding capacity, and broker activity continues to grow. As we enter the final quarter of 2026 and begin looking forward towards 2027, our focus is on translating these improvements into sustainable, predictable growth. With that, I'll turn it over to Mala. Mala?

Thank you, Mike. The third quarter saw a continuation of several first-half themes. We benefited from disciplined pricing, better than expected insurance results, improved new sales, and strong retention. The broader economy remains mixed. The move higher in interest rates and other macroeconomic challenges was a headwind to SMB growth. Like the broader economy, our professional services verticals saw no net hiring in the quarter. Even so, we exit the third quarter well-positioned for a strong finish to 2026. With that, let's dive into our third quarter financial performance. Total revenues in the third quarter were $1.2 billion, declining 5% year-over-year in the third quarter, impacted by lower WSE volumes when compared to last year, offset in part by insurance and professional service revenue pricing. The impact of our first quarter repricing efforts on our WSE count and total revenues persisted throughout the third quarter. We finished the quarter with approximately 295,000 total ending WSEs, down 11% year-over-year. As a reminder, total WSEs include platform users or those users who are accessing our platform, as well as co-employed WSEs, or those users receiving the full benefit of our PEO services. We ended the third quarter with approximately 269,000 total ending co-employed WSEs, down 11% year-over-year. Our expectations for full year retention forecast have modestly improved. Healthcare pricing cited as a reason for attrition declined in both share and absolute terms, driving that improvement. On co-WSEs, third quarter is often weak due to seasonal workers departing, and we saw that again this year. Professional services revenue in the third quarter was $157 million, down 7% year-over-year, in line with our forecast. We once again saw favorability in our reporting methodology for state tax related revenue and benefited from Cocoon results. ASO remains in line with expectations, with professional service revenue impacted by lower co-employed WSEs. Interest revenue in the third quarter was $13 million, a decline of 24% versus the prior year. Like the first half, the expected reduction of cash balances for certain tax credits drove the bulk of the year-over-year decline. Higher than forecasted interest rates contributed to a modest outperformance in interest revenue relative to our expectation. Turning to Q3 insurance services performance. Insurance service revenue declined 4% year-over-year, primarily driven by lower overall WSEs, offset by pricing, while insurance costs declined by 5%. As a result, our third quarter insurance cost ratio came in at 89%, a one point year-over-year improvement and within our target ICR range. We continue to see health cost trends in the high single digits and in line with broader market trends. Q3 pharma cost trends remained below forecast but were higher than the first half, indicating some normalization of cost trends. Medical costs benefited from inpatient procedures remaining below forecast. It's important to reiterate that while our pharma cost inflation this year has been lower than forecast, we do not view this as a change in long-term trend given the probable future introduction of high cost drugs. In the third quarter, operating expenses, which exclude insurance costs and interest expense, increased by 2% year-over-year, largely reflecting additional Cocoon costs as well as strategic investments. As a reminder, based on our first half performance, we accelerated investments into our distribution efforts, benefits offerings, and service model. These investments will incorporate AI throughout and are slated for the current fiscal year. Our effective tax rate in the quarter declined 13 points year over year to 19% as we had success capturing additional non-recurring R&D tax credits related to our platform development. Turning to earnings, third quarter GAAP earnings per diluted share were $0.65, and adjusted net income per diluted share was $0.94. Our business remains a strong, cash generative business which supports our investment priorities and business execution. During the third quarter, we generated $89 million in adjusted EBITDA, representing an adjusted EBITDA margin of 7.6%. We grew net cash provided by operating activities by 11% to $80 million and generated free cash flow of $53 million. Our balance sheet remains strong. Given the recovery in our adjusted EBITDA, our gross debt to adjusted EBITDA ratio over the trailing 12 months now rounds up to 2 times, returning us to our targeted range. Given our outstanding debt is fixed rate, our interest expense has not been impacted by higher interest rates. Our capital priorities remain reinvesting in our business for growth, M&A, and returning capital to shareholders via share repurchases and dividends. In the third quarter, we leveraged our cash generation to return $33 million to shareholders across share repurchases and dividends. We repurchased approximately 281,000 shares for $19 million, and we paid a $0.29 dividend in the quarter. Turning to our full year guidance, we are leaving our guidance unchanged, and I will share where we believe we are trending within our provided ranges. For total revenues, our range is $4.75 to 4.9 billion. We believe total revenues are trending towards the bottom end of our full year guidance range, reflecting the WSE headwind incurred in the first quarter as we repriced a segment of our customers. On professional services revenues, our range is $647 to 663 million. We are trending towards the high end of that range. Our ICR range remains 89.5% to 88.5%. With the one-time benefit of approximately 50 basis points in Q2, as well as improved performance this year, we believe we are now tracking to the low end of the range or 88.5%. I should also note that we continue to price new and renewal business by targeting the higher end of our 87% to 90% range. Our adjusted EBITDA margin range remains 8.5% to 9%, with us currently trending towards the high end of the range. GAAP earnings per diluted share are in the range of $2.85 to $3.35, with adjusted earnings per diluted share in the range of $4.50 to $5.10. Based on our performance year-to-date and our Q4 forecast, we believe our adjusted earnings per share are tracking at the high end of our guidance range. As we look forward to the fourth quarter and 2027, we have positioned TriNet well to build on our growing momentum. We remain disciplined with our pricing, which properly reflects current inflationary cost trends, and we are making progress on our key strategic priorities. We continue to prudently and opportunistically invest in our business, and we are well-positioned to finish the year strong. With that, I will pass the call to the operator for Q&A. Operator?

Thank you. We will now begin the question and answer session. As a reminder, to ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If your question has been addressed and you would like to withdraw it, please press star then two. At this time, we will pause momentarily to assemble our roster. Today's first questioning comes from Jared Levine with TD Cowen. Please proceed.

Thanks. I want to start in terms of sales. It is good to hear the acceleration in Q3 and expecting further acceleration in Q4. I guess based on the current pipeline demand environment, how are you feeling about Q1 sales, particularly as you add more sales headcount here in the next few months?

Good morning, Jared. It is Mike. Thanks for the question. Appreciate it. Yeah. No, encouraging momentum building. As you recall, second quarter sales were roughly flat, good mid-single digit growth here in Q3. I think we are in a spot we can feel pretty confident about high single digits in Q4. To your specific question, as we look at the pipeline for January, there is a lot of work to do over the coming six, seven weeks, but certainly we are in a spot to build on that momentum that we have seen emerge in the second half of the year. I think what is nice is not just to see the sales growth coming, but to see it coming as a result of the investments we have made over the last 18 months that give us some confidence that it is here and it is sustainable. It is things like the Ascend program, which now the first two cohorts have rolled out, so that is contributing to 10%+ growth in our sales consultants in the market here through the selling season. It is also having more than 110 of those Ascend participants currently in-house. So we have got a good line of sight to cohorts that will roll out and help us continue to grow the sales force in 2027 as well. Then, of course, we have talked a lot about the broker channel, and we talked about the pipeline that was building early in the year, and now that has materialized into being a really strong contributor to our sales growth here in the quarter. And encouragingly, as we look at the brokers across the MSAs across the country, we know we're just kind of getting started, and there's a lot of runway to build really good, strong relationships based on quality business that drives new sales, but also retention over time.

Got it. I wanted to dig into the updated ICR guidance here. So it does imply for Q4 here, even to get to the low end of that range there, the 88.5, an increase in ICR for Q4. Anything to call out in terms of one-time impacts or maybe some conservatism in terms of why that implied, I guess, degradation in ICR implied in that Q4 guidance here and any other kind of considerations to be mindful of as we think about Q4 ICR would be helpful.

Yeah. Jared, this is Mala. Thank you for the question. Good morning. As we think about ICR, first of all, we are really pleased with the outperformance year-to-date in ICR. Q3 was yet another good quarter of ICR outperformance. It's, as Mike outlined in his prepared remarks, one of the three key priorities that we were focusing on for the year, so good to see that coming online. From a Q4 perspective, you all know that it is our seasonally highest ICR quarter every year. It's really largely that high ICR in Q4 is largely driven by the resetting of our pooling limit deductibles and the fact that WSEs by now have largely burned through their deductibles. So that trend is definitely continuing. So that is certainly a reason for the high ICR in Q4. Two other things I would say. The fact is, year-to-date, we have had a lower ICR driven by the trends that we are seeing. Our trends have been lower than forecast. So it's not that ICR in Q4 is particularly weak, it is just in relation to the year-to-date outperformance you've seen. We should look at it in juxtaposition. The last thing I would say is we have always, in Q4, thought about volatility. So we have seen volatility in claims performance in the later part of the year. So certainly, as we thought about our forecast and guidance, Jared, we have accounted for some amount of volatility. Now, look, volatility can be positive or negative, and if it works to our favor, then you could see some modest outperformance in our ICR.

That makes sense. Thank you.

The next question comes from Andrew Nicholas with William Blair. Please go ahead.

Hi, Mala and Mike. Good morning. This is Dan on for Andrew this morning. Going back a little bit on the sales front, if you can expand a little more on how you're feeling specifically about renewals this fall selling season, given the industry cost dynamics, and what that means for the starting point for WSE growth in 2027. I know you mentioned some modest improvement year-over-year, but is there continued room for that retention to improve going into 2027?

Good morning, Dan. Thanks for the question. If I took a step back to think about the beginning of the year, pretty simple set of objectives, get ICR back in the targeted range, and it was good to see that happen in the first quarter of the year, and as Mala said, sustained here through the 3Q year-to-date numbers. To your point about sales, it's really key to see that growth start to emerge after a flat 2Q, and it's starting to come through nicely here in 3Q, and accelerate a bit as we look at 4Q and the January pipeline. To your specific question on retention, we did have a difficult start to the year as we were doing the last of our catch-up repricing on health fees. We really saw retention bounce back in 2Q. Now we're in that spot where, again, with 3Q and 4Q renewals largely placed, that we feel like we can actually, despite the repricing, do a bit better than our historical average here for retention overall. I think, again, a lot of work to do on placing January renewals. But where we sit right now would suggest, again, a continued build on that momentum that we've seen through the year. A lot of that is one, having done the work to catch up to renewals. We have made some pretty substantial investments in the actuarial talent, the processes that we've improved and put in place, and how we go about pricing and renewing business. We have a new rating system that allows us to be more granular in assessing the risk out there. It sort of helps us build some confidence that we're balancing the retention with the right level of forward-looking cost increases. When does WSE growth emerge exactly? Not going to try to pinpoint it on this call, but it's very clear that we're on the right path when it comes to managing that ICR, delivering sales growth, and getting retention up to a higher level.

Okay, great. That's helpful. Then one more back to maybe a little bigger picture on ICR, but if you can kind of estimate the balance in this year's improvement in the metric, the balance between sort of more favorable market conditions versus the actions that have been taken internally over the past couple of years, just to kind of get a read on the sustainability of these levels going into next year, and obviously progressing toward the medium-term targets, and whether that's a reasonable expectation next year and beyond.

Sure. Yeah. Thanks, Dan. We've talked about a long-term target for the insurance cost ratio overall being in that 87%-90% range. The way that we think about it is, when we're in a period like we are in right now, I think folks on this call can really appreciate the fact that high single digit, low double digit type healthcare cost inflation for going on three-plus years now, it's been a long time since we've seen that level of increase across the industry for this level of kind of sustained period. It compounds, right? So it's a real pressure item to be managed and to stay on top of. We feel like within that 87%-90%, in a period like this with this level of inflation across the market, we're really targeting towards the top end of that range. If future cycles prove to hold, which I suspect that they will over time, as some of that healthcare cost inflation moderates a bit, that will give us an opportunity to price down towards maybe more the middle part of that range. But as we are making decisions around new business and renewal pricing in this kind of an environment, we think the right balance to strike with our clients is towards the top end of that range.

I would also add, we will not go into providing a 2027 outlook for ICR, but just a couple of additional comments to Mike. Look, trends are still in the high single-digit range, and as we said in our prepared remarks, we have seen lower than that in terms of pharma. But as we look out to pharma trends in particular and think about the use of specialty drugs as well as GLP-1s, we do expect that pharma trends will reassert to what we had originally been expecting. And then the other thing is, in Q2, we did have a one-time non-recurring benefit from the settlement that we discussed. So let us just keep that in mind as we think about 2027 and go forward ICR. In addition to the fact that, as Mike said, we are pricing to the higher end of our 87 to 90 target range.

Our next question comes from Kyle Peterson with Needham & Company. Please go ahead.

Hi, this is Ross Cole on for Kyle Peterson. Good morning. So I was wondering if you could maybe go into some of the drivers behind it. It appears there is a bit of a step down in EPS for Q4. Maybe you could explain a bit of what is driving that. Thank you.

Yeah. To be crystal clear, when we gave guidance in July, where we talked about our adjusted EPS in the range of $4.50 to $5.10, we have reiterated that guidance this morning. We have also signaled that we expect to come in at the top end of the range at $5.10. What I would say is the drivers of that signaling we will be at the top end of the guidance range is really twofold. One is relative to our own expectations, we did have a beat in Q3, driven really by a combination of factors such as our performance and interest income, as we talked about from an ICR perspective. We did reinvest some of that beat into incremental strategic investments. But essentially, we did have a beat relative to our own expectations. The second thing is, from an ICR perspective, we have also signaled that we are expecting to come in at the low favorable end of the range. Our signaling of full-year EPS being at the high end of the range really reflects the combination of those two. So I would say to you, keep those two factors in mind as you look at our expectations for the fourth quarter.

Great. Thank you. I was also wondering if you could maybe talk a little bit more about WSE in terms of retention and new sales growth. What are you seeing this look like in 2027, if you can give any additional color there? I know you've already touched on it a little bit.

Yeah. Probably a little too early to share much detail on 2027. Part of the reason is we're right in the thick of it right now in terms of placing renewals for January 1 and a very large pipeline to work through in terms of the new business. But hopefully you picked up in some of the prepared remarks. On both fronts as we've worked our way through 2026, we've seen building favorable momentum. On the case of retention, think about a long-term historical average around 80% retention at TriNet. Despite a challenged start with our January 2026 renewals, we've kind of come all the way back to actually feeling like we're going to be a bit ahead of our expectations for the year, which were more in line with that historical norm. Frankly, our expectations are that as we continue to invest in our service model, in the capabilities that we talked about in the call today, we're sort of operating at a record high Net Promoter Score for TriNet right now, and frankly feel like we've got room to improve there. So our expectations around retention, again, not trying to pinpoint January 2027, but over the midterm are certainly higher than that historical average. Similarly with new sales, it isn't just about getting new sales growth in the very short term, it's about getting growth that's sustainable over time. The investments in the local talent, the investments in the capabilities that help differentiate us. Just being a bit smarter about how we assess healthcare risks on the back of the investments we've made in insurance services. All of those things kind of give us a growing sense of confidence that our renewals or our retention continue to improve over that medium term. Again, not to try to peg 2027 or a WSE growth inflection point, but as you would know on this call, certainly, the next big milestone as now ICR is back in the range, retention's improved, sales is improving, is to see the gross revenue really start to come through as well, and we would expect that as a kind of next mile marker that we're on track for.

Great. Thank you. That's really helpful.

Thanks, Ross.

The next question is from David Grossman with Stifel. Please go ahead.

Good morning. Thank you. Mike, this has been an unusual year in some respects just because of all the repricing going on in your book, combined with another year of outsized healthcare trends. Just wondering, is there anything that we should think about going forward in the context of now that you've reset pricing in the vast majority of the book? If healthcare pricing stays elevated, is there anything we should be thinking about in terms of your competitive positioning now that the entire book has been repriced, or is there really nothing different, if you will, going forward now that the book has been repriced and cost trend remains elevated?

Yeah. Good morning, David. Appreciate that question. I would say, it does feel like we've got another year across the market of a pretty challenging set of healthcare cost trend increases. It feels good to have made a series of investments to improve how we sort of predict, assess, and price for that risk at acquisition and reacquisition. That's a constant process, right? So new rating system this year, improved processes, but there's clearly things we can do to improve our model. So we're going to continue to just be smart and strike that right long-term balance with our clients that makes their budget more predictable and puts TriNet in a place to be competitive in the market. From a competitive set, I really wouldn't point to any dramatic change. Maybe one thing I would say is we have seen some larger private players that have been growing pretty rapidly. As we're looking at our pipeline, we're seeing some pretty outsized renewals that are coming in. I don't think that that's necessarily unusual or unexpected. But at some point, you do have to catch up to where the trend is. So we're going to be very thoughtful and disciplined as we go through that. But, yeah, on the margins, there's probably a little bit of opportunity for us to add some good clients and remain disciplined through that.

Is there anything, just again, just based on historical dynamics when trends stays elevated, the impact it has on the customer and their employees in terms of participation rates, types of plans that they buy, and anything that we should keep in mind given that you expect another high single digit year of cost trend next year?

Yeah. No, it's a great point. Actually, just looking at 3Q results, there is going to be a little bit of downward pressure on participation in the health programs across the client base, just as the per member costs continue to climb. Again, it's not dramatic. It doesn't drop off a cliff or anything like that, but there is a little bit of downward pressure on that piece. Some of our larger clients, another thing that we pay attention to is like, as they get larger, they don't outgrow the full PEO model, but they may want to seek a self-insured plan or a level-funded plan. Being able to maintain the majority of the service value proposition, but allowing them to find the right answer in the open market, we see a bit of a growth in the number of renewals and new clients coming on in that kind of an open market situation as well. We'll watch the buy-downs of plan design as well. At this point, we really haven't seen a dramatic shift outside the norm in terms of going into higher deductibles or things like that. A part of our reworking of our health plan library into bundle sets was to enable clients to hit price points and do it in a sustainable way. Over time, we could probably expect to see a little bit of buy-down activity as well.

Right. Just one other kind of bigger picture question. Obviously, there's some meaningful differences between you and a couple of your other very large competitors in terms of the risk that you take on your health plans. As we get past this kind of period where you're reformulating the model, should we think big picture about your growth in WSEs versus those competitors that really aren't taking risk? Do you have any thoughts on that?

Well, I think because we take risk, then another dynamic, David, I know you're familiar with is we're repricing a cohort of our business every quarter. Other PEOs, I'd say the vast majority that are on a pass-through and not taking risk are getting one annual plan and renewal. It enables us to move a little bit quicker. So we sort of see that in the repricing of our book and working through that. Then over time, and we don't see this in the short term, but over time, as that healthcare cost inflation moderates, that actually enables a little bit of a window for us to move a little bit more quickly to reflect some of those moderated trends in our new business and our renewal pricing as well. So there could be that opportunity. When that shows up, I won't try to predict, but that's another opportunity for us as well.

Right. But structurally, you don't see that difference as really manifesting itself in a different secular growth rate relative to those models. Is that what I'm hearing?

No, I don't think so. No. In general, I think as long as you're at scale, over the midterm, those things are going to balance out.

Right. Great. All right. Thanks very much.

Absolutely.

The next question comes from Tobey Sommer with Truist. Please go ahead.

Good morning. This is Tyler Barishaw for Toby. You mentioned retention modestly improving. Can you maybe just walk through some of the drivers of that?

Yeah, sure. We got off to a little bit of a weaker start with retention. We had our last sort of most significant catch-up repricing on our health fees, and so that was on January renewals in the first quarter of this year. Earlier in the year, as we were talking through those results, the health fee increases, when we looked at reasons for attrition, that was far and away our biggest driver. As we've now got our health fees priced much more to sort of current trend, as we sort of work through the year, we've seen our retention improve quite a bit. We're sort of in a spot now with having communicated fourth quarter renewals to feel confident that we're actually going to come all the way back and finish a bit ahead of our original expectation. I think what's important is it's certainly the first step is getting the health fees repriced and hitting that key milestone. I think importantly, when you get to that point where you're much more in line with market trend, then your overall service proposition really starts to come through. As I mentioned, operating at a TriNet sort of record level of NPS, the investments we're continuing to make to sort of grow the relationship into things like managing a global workforce, managing IT and spend categories, those things add real value to the client. They're deeply integrated into the HR workflow that we own, and it provides greater stickiness. Our goal is, over the midterm, to continue to increase our expectations around client retention beyond even what we've been able to accomplish this year.

Thank you.

Thanks, Tyler.

This concludes today's question and answer session. I would now like to turn the conference back over to Mike Simonds for any closing remarks.

Thank you, I appreciate everybody dialing in this morning and for the good questions. Just maybe to finish where we started the call, a pretty straightforward path for getting TriNet back to profitable growth, I am pleased with the progress that we have made. Our repricing is behind us. Retention is improving. Sales have returned to growth. Hopefully that sense of momentum came through in the report and in our discussion today, we certainly look forward to meeting with many of you over the coming weeks. With that, let us conclude the call. Thanks, Chris.

Thank you. The conference is now concluded. Thank you all for attending today's presentation, you may now disconnect.