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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-36373
tnet-20220930_g1.jpg
TRINET GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
95-3359658
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
One Park Place,Suite 600
Dublin,
CA
94568
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (510352-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock par value $0.000025 per share
TNET
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
xAccelerated filero
Non-accelerated filer
o
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  Yes  o    No  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
The number of shares of Registrant’s Common Stock outstanding as of October 19, 2022 was 62,230,133.


TABLE OF CONTENTS


TRINET GROUP, INC.
Form 10-Q - Quarterly Report
For the Quarterly Period Ended September 30, 2022

TABLE OF CONTENTS
Form 10-Q
Cross Reference
Page
Part I, Item 1.
Part I, Item 2.
Part I, Item 3.
Part I, Item 4.
Part II, Item 1.
Risk Factors
Part II, Item 1A.
Part II, Item 2.
Part II, Item 3.
Part II, Item 4.
Part II, Item 5.
Part II, Item 6.

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Glossary of Acronyms and Abbreviations
Acronyms and abbreviations are used throughout this report, particularly in Part I, Item 1. Unaudited Condensed Consolidated Financial Statements and Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
2018 Term LoanOur $425 million term loan A executed in June 2018 and repaid in 2021
2021 Credit Program/
2022 Credit Program
Our 2021 and 2022 programs, respectively, to provide eligible clients with credits, subject to certain predefined conditions and based on certain pandemic related excess health care cost savings achieved.
2021 Credit AgreementOur credit agreement dated February 26, 2021, including our $500 million revolving line of credit.
2029 NotesOur $500 million senior unsecured notes maturing in March 2029
AFSAvailable-for-sale
CARES ActCoronavirus Aid Relief and Economic Security Act
CEOChief Executive Officer
CFOChief Financial Officer
Clarus R+DClarus R&D Solutions, LLC
COBRAConsolidated Omnibus Budget Reconciliation Act
COPSCost of providing services
COVID-19Novel coronavirus
D&ADepreciation and amortization expenses
EBITDAEarnings before interest expense, taxes, depreciation and amortization of intangible assets
EPSEarnings Per Share
ERISAEmployee Retirement Income Security Act
ESACEmployer Services Assurance Corporation
ETREffective tax rate
FFCRAFamilies First Coronavirus Response Act
G&AGeneral and administrative
GAAPGenerally Accepted Accounting Principles in the United States
HCMHuman capital management
HRHuman Resources
IRSInternal Revenue Service
ICRInsurance cost ratio
ISRInsurance service revenues
LIBORLondon Inter-bank Offered Rate
MD&AManagement's Discussion and Analysis of Financial Condition and Results of Operations
OEOperating expenses
PEOProfessional Employer Organization
PFCPayroll funds collected
PPPPaycheck Protection Program, a loan program administered by the U.S. Small Business Administration
PSRProfessional service revenues
R&DResearch and Development
Recovery Credit2020 program to provide clients with one-time reductions against fees for future services
Recovery Credit ProgramsCollectively, our 2020 Recovery Credit, 2021 Credit Program and 2022 Credit Program
Reg FDRegulation Fair Disclosure
ROURight-of-use
RSARestricted Stock Award
RSURestricted Stock Unit
SBCStock Based Compensation
S&MSales and marketing
S&PStandard & Poor's
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SD&PSystems development and programming
SECU.S. Securities and Exchange Commission
SMBSmall and medium-size business
U.S.United States
WSEWorksite employee
YTDYear to date
ZenefitsYourPeople, Inc. (dba Zenefits) and its subsidiaries

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FORWARD LOOKING STATEMENTS AND OTHER FINANCIAL INFORMATION
Cautionary Note Regarding Forward-Looking Statements
For purposes of this Quarterly Report on Form 10-Q (Form 10-Q), the terms “TriNet,” “the Company,” “we,” “us” and “our” refer to TriNet Group, Inc., and its subsidiaries. This Form 10-Q contains statements that are not historical in nature, are predictive in nature, or that depend upon or refer to future events or conditions or otherwise contain forward-looking statements within the meaning of Section 21 of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often identified by the use of words such as, but not limited to, "ability," “anticipate,” “believe,” “can,” “continue,” “could,” “design,” “estimate,” “expect,” “forecast,” “hope,” "impact," “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “strategy,” “target,” "value," “will,” “would” and similar expressions or variations intended to identify forward-looking statements. Examples of forward-looking statements include, among others, TriNet’s expectations regarding: our continued ability to support the economic recovery of our clients and SMBs; our ability to respond appropriately to the impact of COVID-19 on our business and our clients' businesses; the impact of the Zenefits and Clarus R+D acquisitions on our business including our ability to diversify our overall service offerings and grow the Zenefits client base; the effect that our stock repurchases, issuance of senior notes and of our 2021 Credit Agreement will have on our business; the timing and strategies we employ with respect to corporate investments and capital expenditures; expectations regarding medical utilization rates by our WSEs; the impact of our Recovery Credit program and our 2021 and 2022 Credit Programs; the impact of our PEO vertical approach; our ability to leverage our scale and industry HR experience to deliver vertical service offerings; the impact of our plans to continue to grow our client base; planned improvements to our technology platform; the implementation of our Enterprise Resource Planning system and its impact on our internal financial controls and operations; our ability to drive operating efficiencies and improve the client experience; the impact of our client service initiatives; the volume and severity of insurance claims and the continuing impact of COVID-19 on those claims; metrics that may be indicators of future financial performance; the relative value of our benefit offerings versus those SMBs can independently obtain; the principal competitive drivers in our market; our plans to retain clients and manage client attrition; our investment strategy and its impact on our ability to generate future interest income, net income, and Adjusted EBITDA; seasonal trends and their impact on our business, including due to COVID-19; fluctuations in the period-to-period timing of when we incur certain operating expenses; the estimates and assumptions we use to prepare our financial statements; and other expectations, outlooks and forecasts on our future business, operational and financial performance.
Important factors that could cause actual results, level of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements are discussed above and throughout our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 14, 2022 (our 2021 Form 10-K), including those appearing under the heading “Risk Factors” in Item 1A, and under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our 2021 Form 10-K, as well as those appearing under the heading “Risk Factors” and under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q or any other form 10-Q filed with the SEC in 2022, and those appearing in our other periodic filings with the SEC, including risk factors associated with: the economic, health and business disruption caused by the COVID-19 pandemic; the impact of the COVID-19 pandemic on our clients and prospects, insurance costs and operations; the impact of the COVID-19 pandemic on the laws and regulations that impact our industry and clients; our ability to manage unexpected changes in workers’ compensation and health insurance claims and costs by worksite employees; our ability to mitigate the business risks we face as a co-employer; the effects of volatility in the financial and economic environment on the businesses that make up our client base and the concentration of our clients in certain geographies and industries; loss of clients for reasons beyond our control; the short-term contracts we typically use with our clients; the impact of regional or industry-specific economic and health factors on our operations; the impact of failures or limitations in the business systems we rely upon; the impact of our client Recovery Credit Programs, including our 2021 and 2022 Credit Programs; adverse changes in our insurance coverage or our relationships with key insurance carriers; our ability to improve our services and technology to satisfy regulatory requirements and meet the expectations of our clients and manage client attrition; our ability to effectively integrate businesses we have acquired or may acquire in the future; our ability to effectively manage and improve our operational processes; our ability to attract and retain qualified personnel; the effects of increased competition and our ability to compete effectively; the impact on our business of cyber-attacks and security breaches; our ability to secure our information technology infrastructure and our confidential, sensitive and personal information; our ability to comply with constantly evolving data privacy and security laws; our ability to manage changes in, uncertainty regarding, or adverse application of the complex laws and regulations that govern our business; changing laws and regulations governing health insurance and employee benefits; our ability to be recognized as an employer of worksite employees under federal and state regulations; changes in the laws and regulations that govern what it
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FORWARD LOOKING STATEMENTS AND OTHER FINANCIAL INFORMATION
means to be an employer, employee or independent contractor; our ability to comply with the laws and regulations that govern PEOs and other similar industries; the outcome of existing and future legal and tax proceedings; fluctuation in our results of operations and stock price due to factors outside of our control, such as the volume and severity of our workers’ compensation and health insurance claims and the amount and timing of our insurance costs, operating expenses and capital expenditure requirements; our ability to comply with the restrictions of our credit facility and meet our debt obligations; and the impact of concentrated ownership in our stock. Any of these factors could cause our actual results to differ materially from our anticipated results.
Forward-looking statements are not guarantees of future performance but are based on management’s expectations as of the date of this Form 10-Q and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from our current expectations and any past results, performance or achievements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
The information provided in this Form 10-Q is based upon the facts and circumstances known as of the date of this Form 10-Q, and any forward-looking statements made by us in this Form 10-Q speak only as of the date of this Form 10-Q. We undertake no obligation to revise or update any of the information provided in this Form 10-Q, except as required by law.
The MD&A of this Form 10-Q includes references to our performance measures presented in conformity with GAAP and other non-GAAP financial measures that we use to manage our business, to make planning decisions, to allocate resources and to use as performance measures in our executive compensation plans. Refer to the Non-GAAP Financial Measures within our MD&A for definitions and reconciliations from GAAP measures.
Website Disclosures
We use our website (www.trinet.com) to announce material non-public information to the public and to comply with our disclosure obligations under Regulation Fair Disclosure (Reg FD). We also use our website to communicate with the public about our Company, our services, and other matters. Our SEC filings, press releases and recent public conference calls and webcasts can also be found on our website. The information we post on our website could be deemed to be material information under Reg FD. We encourage investors and others interested in our Company to review the information we post on our website. Information contained in or accessible through our website is not a part of this report.
Our Company is the sole owner of the trademark “TriNet” and other trademarks appearing in this report. Our Company does not intend to use or display trade names or trademarks owned by others to imply any form of association with any of those companies.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
Overview
TriNet is a leading provider of HR expertise, payroll services, employee benefits, employment risk mitigation services and human capital management (HCM) software for SMBs. We deliver a comprehensive suite of services that help our clients administer and manage various HR-related needs and functions, such as compensation and benefits, payroll processing, employee data, health insurance and workers' compensation programs, and transactional HR needs using our technology platform, cloud-based software and HR, benefits and compliance expertise. We empower SMBs to focus on what matters most - growing their business.
We leverage our scale and industry HR experience to deliver our PEO service offerings tailored for SMBs in specific industry verticals. We believe our PEO vertical approach is a key differentiator for us and creates additional value for our PEO clients driven by addressing their industry-specific HR needs. We offer six industry-tailored PEO vertical services: TriNet Financial Services, TriNet Life Sciences, TriNet Main Street, TriNet Nonprofit, TriNet Professional Services, and TriNet Technology. We continue to introduce new product solutions that enhance our offerings. Through our acquisition of Zenefits, we now also offer a self-directed, cloud-based HCM software product and other HR related services for all SMBs without using a co-employment model.
Acquisitions
In February 2022, we acquired Zenefits, a leading cloud HR platform which provides innovative and intuitive HR, benefits, payroll and employee engagement software purpose-built for SMBs. We believe the acquisition of Zenefits and its cloud-based HCM software allows us to diversify our product and service offerings to all SMBs without using a co-employment model, and enables us to dynamically service SMBs throughout their lifecycle and expand the SMBs we serve.
In September 2022, we acquired Clarus R+D, an industry leading, service and expertise driven fintech solutions company that simplifies the R&D tax credit process for SMBs. We believe the acquisition of Clarus R+D and its cloud-based software platform, coupled with the deep expertise of its professional services team, allows us to better serve our existing SMB clients and expand our service offerings for all SMBs.
Operational Highlights
Our consolidated results for the nine months ended September 30, 2022 reflect our continuing efforts to serve our existing clients and attract new customers while continuing to support the economic recovery of SMBs from the COVID-19 pandemic.
During the nine months ended September 30, 2022 we:
continued to grow total revenues,
completed the acquisition of Clarus R+D, expanding our service offerings for all SMBs,
hosted the 3rd annual TriNet PeopleForce, our showcase client and prospect conference focused on business transformation, agility and innovation for small and medium-size businesses,
launched Enrich, an innovative product line that will allow clients to expand the benefits they offer to their employees,
established our 2022 Credit Program to benefit our eligible clients, resulting in a $25 million reduction in insurance service revenues recognized in the second quarter of 2022,
completed the acquisition of Zenefits, diversifying our product and service offerings, and
completed a tender offer to repurchase $316 million in shares of TriNet common stock.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
Performance Highlights
Our results for the third quarter and nine months ended 2022 when compared to the same periods of 2021 are noted below:
Q3 2022
$1.2B$120M83%
Total revenuesOperating incomeInsurance cost ratio
%increase14 %increase(3)%decrease
$77M$1.22$104M
Net incomeDiluted EPSAdjusted Net income *
— %flat%increase20 %increase
351,888351,839247,375
Average WSEsTotal WSEsAverage HCM Users
%increase— %flat
*
Non-GAAP measure. See definitions below under the heading "Non-GAAP Financial Measures".
The revenue growth as compared to the third quarter of 2021 reflects our higher Average WSEs, insurance and service fee rate increases and the addition of HCM cloud services following the acquisition of Zenefits in February 2022 and Clarus R+D in September 2022.
Our ISR growth as compared to the third quarter of 2021 was driven by higher rates and average WSEs. This growth was partially offset by higher insurance costs driven by higher medical services utilization in the third quarter of 2022, combined with increased volume due to higher average WSEs. These factors caused our insurance cost ratio to decrease as compared to the third quarter of 2021.
The growth in total revenues was offset by increases in insurance costs, operating expenses, and realized losses on investment securities, which resulted in net income being flat compared to the third quarter of 2021. Excluding the impacts of transaction and integration costs from our acquisitions of Zenefits and Clarus R+D, Adjusted Net Income increased 20%.
YTD 2022
$3.7B$443M82%
Total revenuesOperating incomeInsurance cost ratio
11 %increase22 %increase(2)%decrease
$307M$4.81$378M
Net incomeDiluted EPSAdjusted Net income *
14 %increase19 %increase25 %increase
348,833251,707
Average WSEsAverage HCM Users
%increase
*
Non-GAAP measure. See definitions below under the heading "Non-GAAP Financial Measures".
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The following table summarizes our results of operations for the third quarter and nine months ended September 30, 2022 when compared to the same periods of 2021. For details of the critical accounting judgments and estimates that could affect our Results of Operations, see the Critical Accounting Judgments and Estimates section within the MD&A in Item 7 of our 2021 Form 10-K.
 Three Months Ended September 30,Nine Months Ended September 30,
(in millions, except operating metrics data)20222021% Change20222021% Change
Income Statement Data:
Professional service revenues$189 $156 21 %$565 $465 22 %
Insurance service revenues1,052 992 3,094 2,843 
Total revenues1,241 1,148 3,659 3,308 11 
Insurance costs872 851 2,547 2,400 
Operating expenses249 192 30 669 544 23 
Total costs and operating expenses1,121 1,043 3,216 2,944 
Operating income120 105 14 443 364 22 
Other income (expense):
Interest expense, bank fees and other(22)(5)340 (33)(15)120 
Interest income5 67 8 33 
Income before provision for income taxes103 103 — 418 355 18 
Income taxes26 26 — 111 86 29 
Net income$77 $77 — %$307 $269 14 %
Cash Flow Data:
Net cash provided by (used in) operating activities$76 $(16)(575)%
Net cash used in investing activities(205)(145)41 
Net cash provided by (used in) financing activities(392)20 (2,060)
Non-GAAP measures (1):
Adjusted EBITDA$173 132 31 %$577 $449 29 %
Adjusted Net income$104 87 20 $378 $302 25 
Corporate Operating Cash Flows$436 $334 31 
Operating Metrics:
Insurance Cost Ratio83 %86 %(3)%82 %84 %(2)%
Average WSEs351,888 347,502 %348,833 333,839 %
Total WSEs351,839 351,267 — %351,839 351,267 — %
Average HCM Users (2)
247,375 N/AN/A251,707 N/AN/A
(1)    Refer to Non-GAAP measures definitions and reconciliations from GAAP measures under the heading "Non-GAAP Financial Measures".
(2)    For the nine months ended September 30, 2022, reflects HCM Users from February 15, 2022, the date on which we acquired Zenefits, to the end of the period.
The following table summarizes our balance sheet data as of September 30, 2022 compared to December 31, 2021.
(in millions)September 30,
2022
December 31,
2021
% Change
Balance Sheet Data:
Working capital$444 $700 (37)%
Total assets3,079 3,309 (7)
Debt496 495 — 
Total stockholders’ equity856 881 (3)
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Non-GAAP Financial Measures
In addition to financial measures presented in accordance with GAAP, we monitor other non-GAAP financial measures that we use to manage our business, to make planning decisions, to allocate resources and to use as performance measures in our executive compensation plan. These key financial measures provide an additional view of our operational performance over the long-term and provide information that we use to maintain and grow our business.
The presentation of these non-GAAP financial measures is used to enhance the understanding of certain aspects of our financial performance. It is not meant to be considered in isolation from, superior to, or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.
Non-GAAP MeasureDefinition
How We Use The Measure
Adjusted EBITDA
• Net income, excluding the effects of:
- income tax provision,
- interest expense, bank fees and other,
- depreciation,
- amortization of intangible assets,
- stock based compensation expense,
- amortization of cloud computing arrangements, and
- transaction and integration costs.
• Provides period-to-period comparisons on a consistent basis and an understanding as to how our management evaluates the effectiveness of our business strategies by excluding certain non-recurring costs, such as transaction and integration costs, and non-cash charges, such as depreciation and amortization, stock-based compensation, and certain impairment charges recognized based on the estimated fair values. We believe these charges are either not directly resulting from our core operations or not indicative of our ongoing operations.
• Enhances comparisons to prior periods and, accordingly, facilitates the development of future projections and earnings growth prospects.
• Provides a measure, among others, used in the determination of incentive compensation for management.
• We also sometimes refer to Adjusted EBITDA margin, which is the ratio of Adjusted EBITDA to total revenues.
Adjusted Net Income
• Net income, excluding the effects of:
- effective income tax rate (1),
- stock based compensation,
- amortization of intangible assets, net,
- non-cash interest expense (2),
- transaction and integration costs, and
- the income tax effect (at our effective tax rate (1) of these pre-tax adjustments.
• Provides information to our stockholders and board of directors to understand how our management evaluates our business, to monitor and evaluate our operating results, and analyze profitability of our ongoing operations and trends on a consistent basis by excluding certain non-recurring costs and non-cash charges.
Corporate Operating Cash Flows• Net cash provided by (used in) operating activities, excluding the effects of:
- Assets associated with WSEs (accounts receivable, unbilled revenue, prepaid expenses and other current assets) and
- Liabilities associated with WSEs (client deposits and other client liabilities, accrued wages, payroll tax liabilities and other payroll withholdings, accrued health benefit costs, accrued workers' compensation costs, insurance premiums and other payables, and other current liabilities).
• Provides information that our stockholders and management can use to evaluate our cash flows from operations independent of the current assets and liabilities associated with our WSEs.
• Enhances comparisons to prior periods and, accordingly, used as a liquidity measure to manage liquidity between corporate and WSE related activities, and to help determine and plan our cash flow and capital strategies.
(1)    Non-GAAP effective tax rate is 25.5% for 2022 and 2021, which excludes the income tax impact from stock-based compensation, changes in uncertain tax positions and nonrecurring benefits or expenses from federal legislative changes.
(2)    Non-cash interest expense represents amortization and write-off of our debt issuance costs and loss on a terminated derivative.


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Reconciliation of GAAP to Non-GAAP Measures

The table below presents a reconciliation of Net income to Adjusted EBITDA:
Three Months Ended September 30,Nine Months Ended
September 30,
(in millions)
2022202120222021
Net income
$77 $77 $307 $269 
Provision for income taxes
26 26 111 86 
Stock based compensation
16 13 46 37 
Interest expense, bank fees and other (1)
22 33 15 
Depreciation and amortization of intangible assets17 11 46 42 
Amortization of cloud computing arrangements1 — 3 — 
Transaction and integration costs14 — 31 — 
Adjusted EBITDA$173 $132 $577 $449 
Adjusted EBITDA Margin
14.0 %11.5 %15.7 %13.6 %
(1)    Interest expense, bank fees and other includes $17M of realized investments losses on sales and impairments related to AFS securities.
The table below presents a reconciliation of Net income to Adjusted Net Income:
Three Months Ended September 30,Nine Months Ended
September 30,
(in millions)
2022202120222021
Net income
$77 $77 $307 $269 
Effective income tax rate adjustment — 4 (4)
Stock based compensation16 13 46 37 
Amortization of intangible assets, net5 13 11 
Non-cash interest expense 1 — 1 
Transaction and integration costs14 — 31 — 
Income tax impact of pre-tax adjustments(9)(4)(24)(14)
Adjusted Net Income$104 $87 $378 $302 

The table below presents a reconciliation of net cash provided by operating activities to Corporate Operating Cash Flows:
Nine Months Ended
September 30,
(in millions)20222021
Net cash provided by (used in) operating activities$76 $(16)
  Less: Change in WSE related other current assets(101)(50)
  Less: Change in WSE related liabilities(259)(300)
Net cash provided by (used in) operating activities - WSE$(360)$(350)
Net cash provided by operating activities - Corporate$436 $334 

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MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating Metrics
Worksite Employees (WSE)
Average WSE growth is a volume measure we use to monitor the performance of our PEO services. Average WSEs increased 1% when comparing the third quarter of 2022 to the same period in 2021, primarily due hiring in our Technology and Life Science verticals, partially offset by slower hiring and attrition in our Main Street and Financial Services verticals as compared to 2021.
Total WSEs can be used to estimate our beginning WSEs for the next period and, as a result, can be used as an indicator of our potential future revenues, insurance costs and COPS.
Anticipated revenues for future periods can diverge from the revenue expectation derived from Average WSEs or Total WSEs due to pricing differences across our HR solutions and services and the degree to which clients and WSEs elect to participate in our solutions during future periods. In addition to focusing on growing our Average WSE and Total WSE counts, we also focus on pricing strategies, benefit participation and service differentiation to expand our revenue opportunities. We report the impact of client and WSE participation differences as a change in mix.
In addition to focusing on retaining and growing our WSE base, we continue to review acquisition opportunities that would add appropriately to our scale. We continue to invest in efforts intended to enhance client experience and manage attrition, through operational and process improvements.
tnet-20220930_g2.jpg
HCM Users

Average HCM Users is a volume measure we use to monitor the performance of our cloud-based HCM services. Average HCM Users for the third quarter and nine months ended September 30, 2022 was 247,375 and 251,707, respectively.
Insurance Cost Ratio (ICR)
ICR is a performance measure calculated as the ratio of insurance costs to insurance service revenues. We believe that ICR promotes an understanding of our insurance cost trends and our ability to align our relative pricing to risk performance.
We purchase workers' compensation and health benefits coverage for our colleagues and WSEs. Under the insurance policies for this coverage, we bear claims costs up to a defined deductible amount. Our insurance costs, which comprise a significant portion of our overall costs, are significantly affected by our WSEs’ health and workers' compensation insurance claims experience. We set our insurance service fees for workers’ compensation and health benefits in advance for fixed benefit periods. As a result, increases in these insurance costs above our
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MANAGEMENT'S DISCUSSION AND ANALYSIS
projections, reflected as a higher ICR, result in lower net income. Conversely, decreases in these insurance costs below our projections, reflected as a lower ICR, result in higher net income.
Under our fully-insured workers' compensation insurance policies, we assume the risk for losses up to $1 million per claim occurrence (deductible layer). The ultimate cost of the workers’ compensation services provided cannot be known until all the claims are settled. Our ability to predict these costs is limited by unexpected increases in frequency or severity of claims, which can vary due to changes in the cost of treatments or claim settlements.
Under our risk-based health insurance policies, we assume the risk of variability in future health claims costs for our enrollees. This variability typically results from changing trends in the volume, severity and ultimate cost of medical and pharmaceutical claims, due to changes to the components of medical cost trend. These trends change, and other seasonal trends and variability may develop. As a result, it is difficult for us to predict our insurance costs with accuracy and a significant increase in these costs could have a material adverse effect on our business.

 Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2022202120222021
Insurance costs$872 $851 $2,547 $2,400 
Insurance service revenues1,052 992 3,094 2,843 
Insurance Cost Ratio83 %86 %82 %84 %

ICR decreased for the third quarter as the increase in ISR in 2022 more than offset the increase in insurance costs that resulted from increased medical services utilization and COVID-19 testing, treatment and vaccination costs.

ICR decreased for the nine months ended September 30, 2022 due to the increase in ISR, resulting from higher Average WSEs, rate increases and the expiration of our credit programs created in prior years. This was partially offset by the reduction in revenue recognized for the 2022 Credit Program recognized in the second quarter of 2022.

ICR for the third quarter and nine months ended September 30, 2022 also benefited from favorable prior year development on our accrued workers' compensation costs, primarily due to lower than expected claim frequency as WSEs have shifted to remote work during the pandemic.

While medical services utilization has increased in 2022, ICR remains below pre-pandemic levels, as access to medical systems was constrained earlier in 2022 in regions where increases in hospitalizations due to a surge in COVID-19 cases reduced preventative and elective procedures.
Total Revenues
Our revenues consist of professional service revenues (PSR) and insurance service revenues (ISR). PSR represents fees charged to clients for processing payroll-related transactions on behalf of our clients, access to our HR expertise, employment and benefit law compliance services, other HR-related services and fees charged to access our cloud-based HCM services. Starting in the third quarter of 2022, PSR includes revenues from Clarus R+D. ISR consists of insurance-related billings and administrative fees collected from clients and withheld from WSEs for workers' compensation insurance and health benefit insurance plans provided by third-party insurance carriers.
In the second quarter of 2022, we recognized a $25 million reduction to revenue under our 2022 Credit Program. This amount reflects estimated credits that will be paid to eligible clients under this program, based on the expected performance of our health insurance costs in 2022, and is currently limited to $25 million. These credits are recorded as a reduction to ISR and are payable within 12 months to eligible clients as of June 30, 2022. To the extent we experience higher than expected health insurance costs during the remainder of 2022, this estimate, and our actual payment, may be reduced.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Monthly total revenues per Average WSE is a measure we use to monitor the success of our PEO pricing strategies. This measure increased 6% during the third quarter of 2022 compared to the same period in 2021.
We also use the following measures to further analyze changes in total revenue:
Volume - the percentage change in period over period Average WSEs,
Rate - the combined weighted average percentage changes in service fees for each vertical service and changes in service fees associated with each insurance service offering,
Mix - the change in composition of Average WSEs within our verticals, the composition of our enrolled WSEs within our insurance service offerings, the composition of products and services our clients receive, including Clarus R+D,
Credit - the weighted average change in amounts recognized for the Recovery Credit, 2021 Credit Program and 2022 Credit Program, and
HCM - incremental HCM cloud services revenue from our acquisition of Zenefits in February 2022.

tnet-20220930_g3.jpg tnet-20220930_g4.jpg
PSR

ISR - % represents proportion of insurance service revenues to total revenues
tnet-20220930_g5.jpgtnet-20220930_g6.jpg
The growth in total revenues for the third quarter and the nine months ended September 30, 2022 was primarily driven by growth in rate, the addition of HCM cloud services following the acquisition of Zenefits, and higher average WSEs.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating Income
Our operating income consists of total revenues less insurance costs and OE. Our insurance costs include insurance premiums for coverage provided by insurance carriers, reimbursement of claims payments made by insurance carriers or third-party administrators, and changes in accrued costs related to contractual obligations with our workers' compensation and health benefit carriers. Our OE consists primarily of our corporate employees' compensation related expenses, which includes payroll, payroll taxes, SBC, bonuses, commissions and other payroll-and benefits-related costs.
The table below provides a view of the changes in components of operating income for the third quarter and nine months ended September 30, 2022, as compared to the same periods in 2021.
(in millions)
$105Third Quarter 2021 Operating Income
+93 
Higher total revenues primarily driven by rate increases and higher average WSEs
-21 Higher insurance costs primarily as a result of higher medical services utilization and higher volume driven by higher average WSEs.
-57 Higher OE primarily as a result of higher compensation and consulting expenses to support initiatives to improve client experience, enhance service offerings, and improve processes, together with incremental expenses, including transaction and integration costs from our acquisition of Zenefits and Clarus R+D.
$120Third Quarter 2022 Operating Income
(in millions)
$364YTD 2021 Operating Income
+351 
Higher total revenues primarily driven by higher average WSEs, rate increases and the expiration of credit programs we created in prior years to benefit our customers, which reduced revenue by $42 million in the prior year, partially offset by our 2022 Credit Program.
-147 Higher insurance costs primarily as a result of higher medical services utilization and higher volume driven by the growth in WSEs.
-125 Higher OE primarily as a result of higher compensation and consulting expenses to support initiatives to improve the client experience, enhance service offerings, and improve processes, together with incremental expenses, including transaction and integration costs, from our acquisition of Zenefits and Clarus R+D.
$443YTD 2022 Operating Income


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15
2022 Q3 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS
Professional Service Revenues
Our PEO clients are primarily billed on a fee per WSE per month per transaction. Our vertical approach provides us the flexibility to offer our clients in different industries with varied services at different prices, which we believe potentially reduces the value of solely using Average WSE and Total WSE counts as indicators of future potential revenue performance. Our HCM cloud services clients are primarily billed a monthly fee per user, with certain fees earned on a per transaction basis. Revenues earned from our other products, including Clarus R&D and TriNet Enrich, are captured in Professional Service Revenue. Clarus R&D customers are primarily billed upon the completion and delivery of an R&D study, while TriNet Enrich customers are billed a monthly fee per user.
PSR from PEO Services customers and HCM cloud services clients was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2022202120222021
PEO Services$177 $156 $535 $465 
HCM Cloud Services (1)
12 — 30 — 
Total$189 $156 $565 $465 
(1)    Represents revenue since our acquisition of Zenefits on February 15, 2022.
We also analyze changes in PSR with the following measures:
Volume - the percentage change in period over period Average WSEs,
Rate - the weighted average percentage change in fees for each vertical,
Mix - the change in composition of Average WSEs across our verticals and the composition of products and services our clients receive, including Clarus R+D and TriNet Enrich
Recovery Credit - the weighted average change in amounts recognized for the Recovery Credit program, and
HCM - incremental HCM cloud services revenue from our acquisition of Zenefits in February 2022.
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2022 Q3 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS
The growth in PSR for the third quarter and the nine months ended 2022 was driven by a growth in rate, the addition of Zenefits and higher Average WSEs. We continued to experience a favorable change in our vertical mix of WSEs, as SMBs in our Technology and Professional Services verticals, who generally utilize more services, had more WSE growth than other verticals. Our new HCM Cloud Services revenue also contributed to the increase.
Insurance Service Revenues
ISR consists of insurance services-related billings and administrative fees collected from our PEO clients and withheld from WSE payroll for health benefits and workers' compensation insurance provided by third-party insurance carriers.
We use the following measures to analyze changes in ISR:
Volume - the percentage change in period over period Average WSEs,
Rate - the weighted average percentage change in fees associated with each of our insurance service offerings,
Mix - all other changes including the composition of our enrolled WSEs within our insurance service offerings (health plan enrollment), and
Credit - the weighted average change in amounts recognized for the Recovery Credit, 2021 Credit Program and 2022 Credit Program.

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tnet-20220930_g13.jpgtnet-20220930_g14.jpg
The growth in ISR for the third quarter and the nine months ended September 30, 2022 was primarily driven by higher Average WSEs, rate increases and the decrease in the Recovery Credit and 2021 Credit Program. This was partially offset by the $25 million reduction in revenue recognized in the second quarter under our 2022 Credit Program.
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2022 Q3 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS
Insurance Costs
Insurance costs include insurance premiums for coverage provided by insurance carriers, payments for claims costs and expenses for other risk management and insurance administration services, reimbursement of claims payments made by insurance carriers or third-party administrators below a predefined deductible limit, and changes in accrued costs related to contractual obligations with our workers' compensation and health benefit carriers.
We use the following measures to analyze changes in insurance costs:
Volume - the percentage change in period over period Average WSEs,
Rate - the weighted average percentage change in cost trend associated with each of our insurance service offerings, and
Mix - all other changes including the composition of our enrolled WSEs within our insurance service offerings (health plan enrollment).
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tnet-20220930_g17.jpgtnet-20220930_g18.jpg
Medical services utilization increased in the third quarter and the nine months ended September 30, 2022 as enrollees returned to outpatient medical, dental and vision care and elective procedures. The higher utilization was partially offset by reductions in some regions due to a surge of COVID-19 cases, which constrained access to medical systems from mid-December 2021 through January 2022 and in June 2022. As a result, our medical services utilization for the quarter remained below pre-pandemic levels. The decrease in utilization in December 2021 also contributed to positive claims development as our accrued health costs were paid during the first half of 2022.
The increase in medical services utilization, combined with increased COVID-19 testing, treatment and vaccination costs, caused the increase in rate. The increase in volume was primarily driven by higher Average WSEs.
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2022 Q3 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating Expenses
OE includes cost of providing services (COPS), sales and marketing (S&M), general and administrative (G&A), systems development and programming (SD&P), and depreciation and amortization expenses (D&A).
We had approximately 3,500 corporate employees as of September 30, 2022 primarily located across the U.S. Our corporate employees' compensation-related expenses represent a majority of our operating expenses. Compensation costs for our corporate employees include payroll, payroll taxes, SBC, bonuses, commissions and other payroll- and benefits-related costs. Compensation-related expense represented 61% and 60% of our OE in the third quarters of 2022 and 2021 and 65% and 62% in the nine months ended September 30, 2022 and 2021, respectively.
Transaction and integration costs associated with our acquisition of Zenefits and Clarus R+D are included in G&A. These costs include advisory, legal, employee retention and cash consideration tied to ongoing employment. Refer to Note 6 in Part I, Item 1. Financial Statements and Supplementary Data, of this Form 10-Q for further discussion.
During the third quarter and the nine months ended September 30, 2022, OE increased 30% and 23%, respectively, when compared to the same periods in 2021. During the third quarter and the nine months ended September 30, 2022, the ratio of OE to total revenues were 20% and 18%, respectively, when compared to the same periods in 2021.
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% represents portion of compensation related expense included in operating expenses

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2022 Q3 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS
We analyze and present our OE based upon the business functions COPS, S&M, G&A and SD&P and D&A. The charts below provide a view of the expenses of the business functions. Dollars are presented in millions and percentages represent year-over-year change.
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(in millions)
$192Q3 2021 Operating Expenses
+18 COPS increased, driven primarily by additional hiring to support more WSEs and incremental costs related to our HCM Cloud Services.
+16 
S&M increased, driven primarily by additional hiring and higher compensation to support sales, and incremental marketing costs related to our HCM Cloud Services, and increased spending on in-person events and trade shows.
+11 G&A increased, driven primarily by higher compensation, consulting and technology spend and $14 million of transaction and integration costs related to the Zenefits and Clarus R+D acquisitions.
+6 SD&P increased, driven primarily by higher compensation and technology services expenses as we continue to work to improve our client experience and our systems and processes.
+6 
D&A increased due to the amortization of intangible assets recognized for the Zenefits and Clarus R+D acquisitions.
$249Q3 2022 Operating Expenses
(in millions)
$544YTD 2021 Operating Expenses
+34 COPS increased, driven primarily by additional hiring to support more WSEs and incremental costs related to our HCM Cloud Services.
+32 S&M increased, due to increased compensation, technology spend, travel and entertainment, partially offset by reduction in broker commissions.
+37 G&A increased, driven primarily by the $31 million of transaction and integration costs related to the Zenefits and Clarus R+D acquisitions, higher compensation and technology services expenses to improve our client experience, our systems and processes, and to enhance our service offerings.
+18 SD&P increased, driven primarily by increased compensation and technology services expenses as we continue to work to improve our client experience and our systems and processes.
+4 
D&A increased due to the offset by the amortization of intangible assets recognized for the Zenefits and Clarus R+D acquisitions.
$669YTD 2022 Operating Expenses
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2022 Q3 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS
The primary drivers to the changes in our OE are presented below:
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Other Income (Expense)
Other income (expense) consists primarily of interest and dividend income from investments and interest expense on our 3.50% Senior Notes due 2029 (our 2029 Notes) issued in February 2021.
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2022 Q3 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS
Interest income, interest expense, bank fees and other for the third quarter and the nine months ended September 30, 2022 was consistent with the prior periods. Interest expense, bank fees and other for the third quarter and the nine months ended September 30, 2022 increased due to $11 million of realized losses on the sales of AFS securities and $7 million of realized non credit-related impairment losses related to the probability that management may execute further sales in the future.
Income Taxes
Our effective tax rate (ETR) was 26% and 25% for the third quarters of 2022 and 2021, respectively, and 27% and 24% for the nine months ended September 30, 2022 and 2021, respectively. The increases in the third quarter of 2022 and nine months ended 2022 when compared to the same periods in 2021 were primarily due to decreases in excludable income for state tax purposes and tax benefits related to stock-based compensation. Furthermore, our ETR in the prior periods benefited from a favorable adjustment of our previously disputed receivable from the IRS.

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2022 Q3 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
Liquidity
Liquidity is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations. Our principal source of liquidity for operations is derived from cash provided by operating activities. We rely on cash provided by operating activities to meet our short-term liquidity requirements, which primarily relate to the payment of corporate payroll and other operating costs, and capital expenditures. Our cash flow related to WSE payroll and benefits is generally matched by advance collection from our clients. To minimize the credit risk associated with remitting the payroll and associated taxes and benefits costs, we require clients to prefund the payroll and related payroll taxes and benefits costs.
Included in our balance sheets are assets and liabilities resulting from transactions directly or indirectly associated with WSEs, including payroll and related taxes and withholdings, our sponsored workers' compensation and health insurance programs, and other benefit programs. Although we are not subject to regulatory restrictions that require us to do so, we distinguish and manage our corporate assets and liabilities separately from those current assets and liabilities held by us to satisfy our employer obligations associated with our WSEs as follows:
September 30, 2022December 31, 2021
(in millions)CorporateWSETotalCorporateWSETotal
Current assets:
Cash and cash equivalents$454 $ $454 $612 $— $612 
Investments95  95 135 — 135 
Restricted cash, cash equivalents and investments21 816 837 19 1,176 1,195 
Other current assets72 507 579 91 406 497 
Total current assets$642 $1,323 $1,965 $857 $1,582 $2,439 
Total current liabilities$198 $1,323 $1,521 $157 $1,582 $1,739 
Working capital$444 $ $444 $700 $— $700 
Working capital for WSEs related activities
We designate funds to ensure that we have adequate current assets to satisfy our current obligations associated with WSEs and our 2022 Credit Program liability. We manage our WSE payroll and benefits obligations through collections of payments from our clients which generally occur two to three days in advance of client payroll dates. We regularly review our short-term obligations associated with our WSEs (such as payroll and related taxes, insurance premium and claim payments) and designate funds required to fulfill these short-term obligations, which we refer to as PFC. PFC is included in current assets as restricted cash, cash equivalents and investments.
We manage our sponsored benefit and workers' compensation insurance obligations by maintaining collateral funds in restricted cash, cash equivalents and investments. These collateral amounts are generally determined at the beginning of each plan year and we may be required by our insurance carriers to adjust our collateral balances when facts and circumstances change. We regularly review our collateral balances with our insurance carriers and anticipate funding further collateral in the future based upon our capital requirements. We classify our restricted cash, cash equivalents and investments as current and noncurrent assets to match against the anticipated timing of payments to carriers.
Working capital for corporate purposes

Corporate working capital as of September 30, 2022 decreased $256 million from December 31, 2021, primarily driven by the $158 million decrease in corporate unrestricted cash and cash equivalents which as we paid cash to repurchase our stock and acquire Zenefits and Clarus R+D.
We use our available cash and cash equivalents to satisfy our operational and regulatory requirements and to fund capital expenditures. We believe that we can meet our present and reasonably foreseeable operating cash needs and future commitments through existing liquid assets, continuing cash flows from corporate operating activities and the potential issuance of debt or equity securities. We believe our existing corporate cash and cash equivalents and positive working capital will be sufficient to meet our working capital expenditure needs for at least the next twelve months.
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2022 Q3 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS
Cash Flows
The following table presents our cash flow activities for the stated periods:
 Nine Months Ended September 30,
(in millions)20222021
CorporateWSETotalCorporateWSETotal
Net cash provided by (used in):  
Operating activities$436 $(360)$76 $334 $(350)$(16)
Investing activities(199)(6)(205)(133)(12)(145)
Financing activities(392) (392)20 — 20 
Net increase (decrease) in cash and cash equivalents, unrestricted and restricted$(155)$(366)$(521)$221 $(362)$(141)
Cash and cash equivalents, unrestricted and restricted:
Beginning of period660 1,078 1,738 352 1,291 1,643 
End of period$505 $712 $1,217 $573 $929 $1,502 
Net increase (decrease) in cash and cash equivalents:
Unrestricted$(158)$ $(158)$224 $— $224 
Restricted3 (366)(363)(3)(362)(365)
Operating Activities
Components of net cash provided by (used in) operating activities are as follows:
 Nine Months Ended September 30,
(in millions)20222021
Net cash provided by (used in) operating activities$76 $(16)
Net cash provided by (used in) operating activities - WSE(360)(350)
Net cash provided by operating activities - Corporate436 334 

The year-over-year change in net cash used in operating activities for WSE purposes was primarily driven by timing of client payments, payments of payroll and payroll taxes, settlement of the Recovery Credit, and insurance claim activities. We expect the changes in restricted cash and cash equivalents to correspond to WSE cash provided by (or used in) operations as we manage our obligations associated with WSEs through restricted cash.

Our corporate operating cash flows in the nine months ended September 30, 2022 increased, when compared to the same period in 2021, due to our higher Net income and the timing of our payments of corporate obligations.
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2022 Q3 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS
Investing Activities
Cash used in investing activities for the periods presented below primarily consisted of purchases of investments and capital expenditures, partially offset by proceeds from the sale and maturity of investments.
 Nine Months Ended September 30,
(in millions)20222021
Investments:
Purchases of investments(337)(348)
Proceeds from sale and maturity of investments390 232 
Acquisition of subsidiaries$(219)$— 
Cash provided by (used in) investments$(166)$(116)
Cash used in capital expenditures$(39)$(29)
Cash used in investing activities$(205)$(145)
Investments
We invest a portion of available cash in investment-grade securities with effective maturities less than five years that are classified on our balance sheets as investments.
We also invest funds held as collateral to satisfy our long-term obligation towards workers' compensation liabilities. These investments are classified on our balance sheets as restricted cash, cash equivalents and investments. We review the amount and the anticipated holding period of these investments regularly in conjunction with our estimated long-term workers' compensation liabilities and anticipated claims payment trend. At September 30, 2022, our investments had a weighted average duration of less than two years and an average S&P credit rating of AA+.
As of September 30, 2022, we held approximately $1.7 billion in restricted and unrestricted cash, cash equivalents and investments, of which $454 million was unrestricted cash and cash equivalents and $237 million was unrestricted investments. Refer to Note 2 in the condensed consolidated financial statements and related notes included in this Form 10-Q.
In February 2022, we acquired Zenefits for a total purchase price of $209 million, settled by the issuance of $17 million of TriNet stock to eligible selling shareholders, with the remainder paid in cash from corporate working capital. Refer to Note 10 in the condensed consolidated financial statements and related notes included in this Form 10-Q.
In September 2022, we acquired Clarus R+D for a total purchase price of $48 million. Refer to Note 10 in the condensed consolidated financial statements and related notes included in this Form 10-Q.
Capital Expenditures
During the nine months ended September 30, 2022 and 2021, we continued to make investments in software and hardware as we enhanced our existing service offerings and technology platform. We expect capital investments in our software and hardware to continue in the future.
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2022 Q3 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS
Financing Activities
Net cash provided by (used in) financing activities in the nine months ended 2022 and 2021 consisted of our debt and equity-related activities.
 Nine Months Ended September 30,
(in millions)20222021
Financing activities
Repurchase of common stock$(392)$(101)
Proceeds from issuance of 2029 Notes 500 
Repayment of borrowings (370)
Payment of debt issuance costs (7)
Payment of long-term financing fees (2)
Cash provided by (used in) financing activities$(392)$20 
In February 2022, our board of directors authorized a $300 million incremental increase to our ongoing stock repurchase program, which was initiated in May 2014. We use this program to return value to our stockholders and to offset dilution from the issuance of stock under our equity-based incentive plan and employee purchase plan.
Also in February 2022, we announced a tender offer to purchase for cash up to $300 million in value of our issued and outstanding common stock, plus the right to accept for purchase up to an additional 2% of our outstanding shares. The tender offer expired on March 17, 2022. In accordance with the terms and conditions of the tender offer, we accepted the tender of, and purchased, 3,653,690 shares at a price of $86.50 per share, for an aggregate cost of approximately $319 million, including fees and expenses relating to the tender offer. Included in the 3,653,690 shares that we accepted for purchase were 185,971 shares that we elected to purchase pursuant to our right to purchase up to an additional 2% of our outstanding shares.
During the nine months ended September 30, 2022, we repurchased a total of 4,419,423 shares of our common stock for approximately $380 million, plus costs, through our stock repurchase program, including the completed tender offer. As of September 30, 2022, approximately $184 million remained available for repurchase under all authorizations by our board of directors. We plan to use current cash and cash generated from ongoing operating activities to fund this stock repurchase program.
In February 2021, we issued $500 million aggregate principal amount of our 2029 Notes. $370 million of the proceeds was used to repay and terminate our 2018 Term Loan. The remaining funds were used for general corporate purposes. Refer to Note 9 in Part II, Item 8. Financial Statements and Supplementary Data, of our 2021 Form 10-K for further information.
Capital Resources
As of September 30, 2022, $500 million aggregate principal of our 2029 Notes was outstanding. The Indenture governing the 2029 Notes includes restrictive covenants limiting our ability to: (i) create liens on certain assets to secure debt; (ii) grant subsidiary guarantees of certain debt without also providing a guarantee of the 2029 Notes; and (iii) consolidate or merge with or into, or sell or otherwise dispose of all or substantially all of our assets to, another person, subject, in each case, to certain customary exceptions.
Our 2021 Credit Agreement includes a $500 million revolving credit facility. At September 30, 2022, we had $495 million available under our 2021 Credit Agreement. The 2021 Credit Agreement includes negative covenants that limit our ability to incur indebtedness and liens, sell assets and make restricted payments, including dividends and investments, subject to certain exceptions. In addition, the 2021 Credit Agreement also contains other customary affirmative and negative covenants and customary events of default. The 2021 Credit Agreement also contains a financial covenant that requires the Company to maintain certain maximum total net leverage ratios.
We were in compliance with all financial covenants under our 2021 Credit Agreement at September 30, 2022.

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2022 Q3 FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS
Critical Accounting Policies, Estimates and Judgments
Other than the inclusion of the following additional item that required significant estimation or judgment, there have been no material changes in our critical accounting policies as discussed in our 2021 Form 10-K.

Business Combinations
Under the acquisition method of accounting we generally recognize the identifiable assets acquired and the liabilities assumed in an acquiree at their estimated fair values as of the date of acquisition. We measure goodwill as the excess of the fair value of consideration transferred over the net of the estimated fair values of the identifiable assets acquired and liabilities assumed. Refer to Note 10 in Part I, Item 1. Financial Statements and Supplementary Data, of this Form 10-Q.
The acquisition method of accounting requires us to exercise judgment and make significant estimates and assumptions regarding the fair values of the elements of a business combination as of the date of acquisition, including the estimated fair values of identifiable intangible assets, deferred tax asset valuation allowances, liabilities related to uncertain tax positions, and contingencies. This method also allows us to refine these estimates over a one-year measurement period to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. If we are required to retroactively adjust provisional amounts that we have recorded for the fair values of assets and liabilities in connection with acquisitions, these adjustments could materially decrease net income and result in lower asset values on our consolidated balance sheet.
These significant estimates are inherently uncertain as they relate to future economic conditions, future cash flows that we expect to generate from the acquired assets and customer behavior. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could record impairment charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expenses could be accelerated or slowed.
Recent Accounting Pronouncements
There have been no material changes to our recent accounting pronouncements as discussed in our 2021 Form 10-K.
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2022 Q3 FORM 10-Q

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
AND CONTROLS AND PROCEDURES
Quantitative and Qualitative Disclosures About Market Risk
Our exposure to changes in interest rates relates primarily to our investment portfolio. Changes in U.S. interest rates affect the interest earned on the Company's cash, cash equivalents and the fair value of our investments.
Our cash equivalents consist primarily of money market mutual funds, which are not significantly exposed to interest rate risk. Our investments are subject to interest rate risk because these securities generally include a fixed interest rate. As a result, the market values of these securities are affected by changes in prevailing interest rates. We attempt to limit our exposure to interest rate risk and credit risk by investing in instruments that meet the minimum credit quality, liquidity, diversification and other requirements of our investment policy. Our investments consist of liquid, investment-grade securities. The risk of rate changes on investment balances was not material at September 30, 2022 and December 31, 2021.

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2022 Q3 FORM 10-Q

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
AND CONTROLS AND PROCEDURES
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We have, with the participation of our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act.
Based on the evaluation of our disclosure controls and procedures as of September 30, 2022, our CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of such date in ensuring that (i) information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the CEO and CFO, to allow timely decisions regarding required disclosure and (ii) such information is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.
We have concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.
Changes in Internal Control Over Financial Reporting
During the quarter ended June 30, 2022, we substantially completed the implementation of our new Enterprise Resource Planning (ERP) system, including a new general ledger and subledgers. This has resulted in changes to certain back-office processes and procedures which, in turn, have resulted in material changes to our system of internal control over financial reporting. The ERP system, among other things, is intended to provide efficiencies through automation and standardization of certain manual business processes and functions as an important component of our internal control over financial reporting.
There were no other changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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2022 Q3 FORM 10-Q

FINANCIAL STATEMENTS

TRINET GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
(in millions except per share data)2022202120222021
Professional service revenues
$189 $156 $565 $465 
Insurance service revenues
1,052 992 3,094 2,843 
Total revenues
1,241 1,148 3,659 3,308 
Insurance costs
872 851 2,547 2,400 
Cost of providing services
79 61 225 191 
Sales and marketing
72 56 179 147 
General and administrative
63 52 165 128 
Systems development and programming
18 12 54 36 
Depreciation and amortization of intangible assets
17 11 46 42 
Total costs and operating expenses
1,121 1,043 3,216 2,944 
Operating income
120 105 443 364 
Other income (expense):
Interest expense, bank fees and other
(22)(5)(33)(15)
Interest income
5 3 8 6 
Income before provision for income taxes
103 103 418 355 
Income taxes
26 26 111 86 
Net income
$77 $77 $307 $269 
Other comprehensive income/(loss), net of income taxes7 (2)(4)(3)
Comprehensive income
$84 $75 $303 $266 
Net income per share:
Basic
$1.23 $1.17 $4.85 $4.08 
Diluted
$1.22 $1.16 $4.81 $4.03 
Weighted average shares:
Basic
62 66 63 66 
Diluted
63 67 64 67 
 See accompanying notes.
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2022 Q3 FORM 10-Q

FINANCIAL STATEMENTS
TRINET GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30,December 31,
(in millions, except share and per share data)20222021
ASSETS
Current assets:
Cash and cash equivalents
$454 $612 
Investments
95 135 
Restricted cash, cash equivalents and investments
837 1,195 
Accounts receivable, net
9 15 
Unbilled revenue, net
363 324 
Prepaid expenses, net
63 67 
Other current assets
144 91 
Total current assets1,965 2,439 
Restricted cash, cash equivalents and investments, noncurrent
151 166 
Investments, noncurrent
142 168 
Property, equipment and software, net
90 79 
Operating lease right-of-use asset
38 42 
Goodwill
462 294 
Other intangible assets, net
103 6 
Other assets
128 115 
Total assets$3,079 $3,309 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and other current liabilities
$122 $86 
Client deposits and other client liabilities
54 97 
Accrued wages
413 369 
Accrued health insurance costs, net
165 174 
Accrued workers' compensation costs, net
55 55 
Payroll tax liabilities and other payroll withholdings
677 929 
Operating lease liabilities
15 11 
Insurance premiums and other payables
20 18 
Total current liabilities1,521 1,739 
Long-term debt, noncurrent
496 495 
Accrued workers' compensation costs, noncurrent, net
129 135 
Deferred taxes
29 11 
Operating lease liabilities, noncurrent
41 41 
Other non-current liabilities
7 7 
Total liabilities2,223 2,428 
Commitments and contingencies (see Note 5)
Stockholders' equity:
Preferred stock  
($0.000025 par value per share; 20,000,000 shares authorized; no shares issued or outstanding at September 30, 2022 and December 31, 2021)
Common stock and additional paid-in capital878 808 
($0.000025 par value per share; 750,000,000 shares authorized; 62,229,506 and 65,968,224 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively)
Retained earnings (Accumulated deficit) (17)74 
Accumulated other comprehensive loss(5)(1)
Total stockholders' equity856 881 
Total liabilities & stockholders' equity$3,079 $3,309 
See accompanying notes.
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2022 Q3 FORM 10-Q

FINANCIAL STATEMENTS
TRINET GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)
2022202120222021
Total Stockholders' Equity, beginning balance$763 $744 $881 $607 
Common Stock and Additional Paid-In Capital
Beginning balance
861 776 808 747 
Issuance of common stock from exercise of stock options
 1 1 1 
Issuance of common stock for employee stock purchase plan
 — 5 5 
Issuance of common stock for the acquisition of Zenefits — 17 — 
Stock based compensation expense
17 13 47 37 
Ending balance
878 790 878 790 
Retained Earnings (Accumulated Deficit)
Beginning balance
(86)(35)74 (144)
Net income
77 77 307 269 
Repurchase of common stock
(1)(20)(383)(94)
Awards effectively repurchased for required employee withholding taxes
(7)(4)(15)(13)
Ending balance
(17)18 (17)18 
Accumulated Other Comprehensive Income
Beginning balance
(12)3 (1)4 
Other comprehensive income/(loss)7 (2)(4)(3)
Ending balance
(5)1 (5)1 
Total Stockholders' Equity, ending balance
$856 $809 $856 $809 
See accompanying notes.

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2022 Q3 FORM 10-Q

FINANCIAL STATEMENTS
TRINET GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Nine Months Ended September 30,
(in millions)20222021
Operating activities
Net income
$307 $269 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
72 63 
Amortization of ROU asset, lease modification and impairment15 10 
Stock based compensation46 37 
Deferred income taxes
1  
Provision for doubtful accounts
1  
Loss from sales and impairments of investments18  
Loss from dispositions of assets3  
Other2 4 
Changes in operating assets and liabilities:
Accounts receivable, net
10 10 
Unbilled revenue, net(38)(59)
Other assets and prepaid expenses, net(83)(44)
Accounts payable and other liabilities5 16 
Client deposits and other client liabilities(43)(14)
Accrued wages40 246 
Accrued health insurance costs, net(10)(10)
Accrued workers' compensation costs, net(5)(6)
Payroll taxes payable and other payroll withholdings(252)(528)
Operating lease liabilities(13)(10)
Net cash provided by (used in) operating activities76 (16)
Investing activities
Purchases of marketable securities
(337)(348)
Proceeds from sale and maturity of marketable securities390 232 
Purchases of property and equipment(39)(29)
Acquisition of subsidiaries, net of cash acquired(219) 
Net cash used in investing activities
(205)(145)
Financing activities
Repurchase of common stock
(383)(94)
Proceeds from issuance of common stock
6 6 
Awards effectively repurchased for required employee withholding taxes
(15)(13)
Payment of long-term financing fees and debt issuance costs (9)
Proceeds from issuance of 2029 Notes 500 
Repayment of debt
 (370)
Net cash provided by (used in) financing activities(392)20 
Net decrease in cash and cash equivalents, unrestricted and restricted(521)(141)
Cash and cash equivalents, unrestricted and restricted:
Beginning of period
1,738 1,643 
End of period
$1,217 $1,502 
Supplemental disclosures of cash flow information
Interest paid
$