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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, 2023
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
Logo.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: (510) 352-5000
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 18, 2023 was 50,508,283.

TABLE OF CONTENTS


TRINET GROUP, INC.
Form 10-Q - Quarterly Report
For the Quarterly Period Ended September 30, 2023

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.
Part II, Item 1A.
Part II, Item 2.
Part II, Item 3.
Part II, Item 4.
Part II, Item 5.
Part II, Item 6.
TRINET
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2023 Q3 FORM 10-Q
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.
2021 CreditsOur announced 2021 credits, which provided eligible clients with discretionary credits, subject to certain predefined conditions.
2022 CreditsIncludes both of our announced 2022 credits, each of which provides eligible clients with discretionary credits, subject to certain predefined conditions.
2021 Credit Agreement
Our credit agreement dated February 26, 2021, as amended, supplemented or modified from time to time, most recently August 16, 2023.
2021 Revolver
Our $700 million revolving line of credit included in our 2021 Credit Agreement
2029 NotesOur $500 million senior unsecured notes maturing in March 2029
2031 NotesOur $400 million senior unsecured notes maturing in August 2031
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
ColleagueTriNet’s internal employees (as distinguished from WSEs and HRIS Users)
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
HRISHuman resources information system
HRIS UserA client employee who is not co-employed by a TriNet PEO (for example, employees of a TriNet Zenefits client)
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 Credit
Our 2020 Recovery Credit to provide eligible clients with one-time reductions against fees for future services
Recovery CreditsCollectively, our Recovery Credit, 2021 Credits, and 2022 Credits
Reg FDRegulation Fair Disclosure
ROURight-of-use
RSARestricted Stock Award
RSURestricted Stock Unit
TRINET
3
2023 Q3 FORM 10-Q
SBCStock Based Compensation
S&MSales and marketing
S&PStandard & Poor's
SD&PSystems development and programming
SECU.S. Securities and Exchange Commission
SMBSmall and medium-size business
U.S.United States
WSEA worksite employee who is co-employed by, or otherwise receiving services from a TriNet PEO
YTDYear to date
ZenefitsYourPeople, Inc. (dba Zenefits) and its subsidiaries

TRINET
4
2023 Q3 FORM 10-Q
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: the impact of the Zenefits and Clarus R+D acquisitions on our business; our ability to successfully diversify our overall service and technology offerings to support SMBs throughout their lifecycle; our plans and ability to grow our client base; the impact of our ongoing efforts to ensure that our billing practices best match the expectation of our customers and the impact on our WSE count; our expectations regarding medical utilization rates by our WSEs and the impact of inflation on our insurance costs; the effect that our stock repurchase and tender offer programs will have on our business; the repayment or voluntary redemption of our notes; our ability to leverage our scale and industry HR experience to deliver vertical focused offerings and the impact of such offerings; planned improvements to our technology platform and HRIS software; our ability to improve operating efficiencies; the impact of our client service initiatives and whether they enhance client experience and satisfaction; our continued ability to provide access to a broad range of benefit programs on a cost-effective basis; our expectations regarding the volume and severity of insurance claims and insurance claim trends; the effectiveness of our risk strategies for, and management of, workers' compensation, health benefit insurance costs and deductibles, and EPLI risk; the metrics that may be indicators of future financial performance; the relative value of our benefit offerings versus those SMBs can independently obtain; the impact that our benefit offerings have for SMBs seeking to attract and retain employees; the principal competitive drivers in our market; the impact of our plans to improve our sales performance, grow new 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; 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; our belief that we can meet our present and reasonably foreseeable operating cash needs and future commitments through existing liquid assets and continuing cash flows from corporate operating activities; 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, 2022 filed with the SEC on February 15, 2023 (our 2022 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 2022 Form 10-K, and those appearing in the other periodic filings we make with the SEC, and including risk factors associated with: our ability to manage unexpected changes in workers’ compensation and health insurance claims and costs by worksite employees; our ability to mitigate the unique 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; loss of clients for reasons beyond our control and 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 and service centers we rely upon; the impact of our Recovery Credits on our business and client loyalty and retention; changes in our insurance coverage or our relationships with key insurance carriers; our ability to improve our services and technology to satisfy client and regulatory expectations; our ability to effectively integrate businesses we have acquired or may acquire in the future; our ability to effectively manage and improve our operational effectiveness and resiliency; 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, breaches, disclosures and other data-related incidents; our ability to protect against and remediate cyber-attacks, breaches, disclosures and other data-related incidents, whether intentional or inadvertent and whether attributable to us or our service providers; our ability to comply with 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 and for our benefits plans to satisfy all requirements under federal and state regulations; changes in the laws and regulations that govern what it means to be an employer, employee or independent contractor; the impact of new and changing laws regarding remote work; our ability to comply with the licensing requirements that govern our HCM solutions; the outcome of existing and future legal and tax
TRINET
5
2023 Q3 FORM 10-Q
FORWARD LOOKING STATEMENTS AND OTHER FINANCIAL INFORMATION
proceedings; fluctuation in our results of operations and stock price due to factors outside of our control; 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 by Atairos Group, Inc. and other large stockholders. 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 in a manner that would imply any form of association with any of those companies.
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2023 Q3 FORM 10-Q
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 comprehensive and flexible HCM solutions designed to address a wide range of SMB needs as they change over time. Our flexible HCM solutions free SMBs from HR complexities and empower SMBs to focus on what matters most - growing their business and enabling their people.
TriNet offers access to human capital expertise, benefits, payroll, risk mitigation and compliance, all enabled by industry leading technology capabilities. TriNet's suite of products also includes services and software-based solutions to help streamline workflows by connecting HR, benefits, payroll, time and attendance, and employee engagement. Clients can use our industry tailored PEO services and technology platform to receive the full benefit of our HCM services enabling their WSEs to participate in our TriNet-sponsored employee benefit plans. Clients can alternatively choose to use our self-directed, cloud-based HRIS software solution and add HR services such as payroll and access to benefits management as needed. By providing PEO and HRIS services, we believe that we can support a wider range of SMBs and create a pipeline of HRIS clients that may be able to benefit from and transition to TriNet’s higher-touch PEO services at future points in their business lifecycle.
Operational Highlights
Our consolidated results for the nine months ended September 30, 2023 reflect our continuing efforts to serve our clients through the current economic uncertainty and invest in our platform.
So far in 2023 we:
•improved customer retention and sales performance,
•utilized our scale and knowledge to assist our WSEs, PEO and HRIS clients during and following the liquidity challenges in regional banks ensuring that all of our clients were able to successfully run payroll during that time,
•executed a series of transactions to rebalance our capital structure in order to achieve our targeted leverage ratios, including:
◦issued $400 million of our senior unsecured notes maturing in August 2031,
◦executed our 2023 Credit Amendment, to among other things (1) increase the aggregate capacity under our 2021 Revolver from $500 million to $700 million, and (2) extend the maturity date of our 2021 Revolver to August 16, 2028,
◦completed approximately $1 billion in share repurchases of TriNet common stock through a public tender offer in August and a private repurchase from our largest stockholder, Atairos Group, Inc. in September,
•hosted the 4th annual TriNet PeopleForce, our showcase client and prospect conference focused on business transformation, agility and innovation for SMBs, and
•successfully completed the migration of our applications to the cloud.



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2023 Q3 FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
Performance Highlights
Our results for the third quarter and nine months ended September 30, 2023, when compared to the same periods of 2022, are noted below:
Q3 2023
$1.2B$116M84%
Total revenuesOperating incomeInsurance cost ratio
(2)%decrease(3)%decrease1 %increase
$94M$1.63$109M
Net incomeDiluted EPSAdjusted Net income *
22 %increase33 %increase5 %increase
333,286335,741210,863
Average WSEs **Total WSEs **Average HRIS Users
(5)%decrease(5)%decrease(15)%decrease
*
Non-GAAP measure. See definitions below under the heading "Non-GAAP Financial Measures".
** Total WSEs includes approximately 4,600 additional service recipients and Average WSEs includes approximately 1,500 additional service recipients, in each case identified as a result of our ongoing effort to ensure that our billing practices best match the expectations of our customers. For details, refer to the heading "Operating Metrics – Worksite Employees (WSEs).”
Our total revenues decreased 2% compared to the same period in 2022, driven by lower volume due to decreases in Average WSEs. This decrease was partially offset by insurance and services fee rate increases.
During the third quarter of 2023, our Average WSEs and Total WSEs decreased 5% compared to the same periods in 2022 primarily due to the cumulative impact of lower hiring in our installed base during the past twelve months, particularly within our Technology vertical, which did not offset our normal attrition. This trend was partially offset by stronger new client additions and retention during the third quarter of 2023.
Our ICR was 1% higher compared to the same period in 2022 driven by increased health benefits utilization rates and inflation in health costs.
Lower operating expenses and lower investment losses, and higher interest income, partially offset by lower revenues, resulted in increases of net income and Adjusted Net income of 22% and 5%, respectively, as compared to the same periods in 2022.
YTD 2023
$3.7B$382M83%
Total revenuesOperating incomeInsurance cost ratio
— %flat(14)%decrease1 %increase
$308M$5.20$365M
Net incomeDiluted EPSAdjusted Net income *
— %flat8 %increase(3)%decrease
329,257335,741219,058
Average WSEs **Total WSEs **Average HRIS Users
(6)%decrease(5)%decrease(13)%decrease
*
Non-GAAP measure. See definitions below under the heading "Non-GAAP Financial Measures".
** Total WSEs includes approximately 4,600 additional service recipients and Average WSEs includes approximately 1,500 additional service recipients, in each case identified as a result of our ongoing effort to ensure that our billing practices best match the expectations of our customers. For details, refer to the heading "Operating Metrics – Worksite Employees (WSEs).”
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2023 Q3 FORM 10-Q
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, 2023 when compared to the same periods of 2022. 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 2022 Form 10-K.
 Three Months Ended September 30,Nine Months Ended September 30,
(in millions, except operating metrics data)20232022% Change20232022% Change
Income Statement Data:
Professional service revenues$185 $189 (2)%$567 $565 — %
Insurance service revenues1,037 1,052 (1)3,110 3,094 1 
Total revenues1,222 1,241 (2)3,677 3,659 — 
Insurance costs874 872 — 2,594 2,547 2 
Operating expenses232 249 (7)701 669 5 
Total costs and operating expenses1,106 1,121 (1)3,295 3,216 2 
Operating income116 120 (3)382 443 (14)
Other income (expense):
Interest expense, bank fees and other(10)(22)(55)(23)(33)(30)
Interest income18 5 260 57 8 613 
Income before provision for income taxes124 103 20 416 418 — 
Income taxes30 26 15 108 111 (3)
Net income$94 $77 22 %$308 $307 — %
Cash Flow Data:
Net cash provided by (used in) operating activities(43)76 (157)
Net cash used in investing activities(57)(205)(72)
Net cash used in financing activities(523)(392)33 
Non-GAAP measures (1):
Adjusted EBITDA$172 173 (1)$557 577 (3)
Adjusted Net income$109 104 5 $365 378 (3)
Corporate Operating Cash Flows386 436 (11)
Operating Metrics:
Insurance Cost Ratio84 %83 %1 %83 %82 %1 %
Average WSEs (2)
333,286 351,888 (5)%329,257 348,833 (6)%
Total WSEs (2)
335,741 351,839 (5)%335,741 351,839 (5)%
Average HRIS Users (3)
210,863 247,375 (15)%219,058 251,707 (13)%
(1)    Refer to Non-GAAP measures definitions and reconciliations from GAAP measures under the heading "Non-GAAP Financial Measures".
(2)    Total WSEs includes approximately 4,600 additional service recipients and Average WSEs includes approximately 1,500 additional service recipients for the third quarter of 2023, in each case identified as a result of our ongoing effort to ensure that our billing practices best match the expectations of our customers. For details, refer to the heading "Operating Metrics – Worksite Employees (WSEs)".
(3)    For the nine months ended September 30, 2022, reflects HRIS 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, 2023 compared to December 31, 2022.
(in millions)September 30,
2023		December 31,
2022		% Change
Balance Sheet Data:
Working capital$150 $338 (56)%
Total assets2,966 3,443 (14)
Debt1,091 496 120 
Total stockholders’ equity10 775 (99)
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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, which include transaction and integration costs, as well as certain non-cash charges such as depreciation and amortization, and 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 the prior period 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,
- 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-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, other payroll assets 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 insurance 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 25.6% for the third quarter and full year of 2023 and 25.5% for the third quarter and full year of 2022, which excludes the income tax impact from stock-based compensation, changes in uncertain tax positions, and nonrecurring benefits or expenses from federal legislative changes.


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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)
2023202220232022
Net income
$94 $77 $308 $307 
Provision for income taxes
30 26 108 111 
Stock based compensation
15 16 43 46 
Interest expense, bank fees and other (1)
10 22 23 33 
Depreciation and amortization of intangible assets17 17 53 46 
Amortization of cloud computing arrangements3 1 7 3 
Transaction and integration costs3 14 15 31 
Adjusted EBITDA$172 $173 $557 $577 
Adjusted EBITDA Margin
14.1 %14.0 %15.1 %15.7 %
(1)    2022 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)
2023202220232022
Net income
$94 $77 $308 $307 
Effective income tax rate adjustment(2)— 1 4 
Stock based compensation15 16 43 46 
Amortization of other intangible assets, net5 5 16 13 
Non-cash interest expense — 1 1 1 
Transaction and integration costs3 14 15 31 
Income tax impact of pre-tax adjustments(6)(9)(19)(24)
Adjusted Net Income$109 $104 $365 $378 

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)20232022
Net cash provided by (used in) operating activities$(43)$76 
  Less: Change in WSE related other current assets(134)(101)
  Less: Change in WSE related liabilities(295)(259)
Net cash used in operating activities - WSE$(429)$(360)
Net cash provided by operating activities - Corporate$386 $436 

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MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating Metrics
Worksite Employees (WSE)
Average WSE change is a volume measure we use to monitor the performance of our business. Our clients generally change their payroll service providers at the beginning of the payroll tax and benefits enrollment year; as a result, we have historically experienced our highest volumes of new clients and terminating clients in the month of January. Client attrition, new client additions and increases in employment within our installed client base all impact our Average WSEs and Total WSEs as we move through a calendar year.
We provide WSE services to individuals from the date of their hire by a TriNet client through the end of their employment and also during the post-employment period. As a result, we define WSEs to include co-employees and other individuals receiving TriNet services, such as individuals who receive COBRA benefits or are subject to K-1 tax reporting. As part of an ongoing effort to ensure that our billing practices best match the expectations of our customers, we determined in the third quarter that we under counted certain individuals who receive TriNet services in counting Total WSEs and Average WSEs. This increased our reported Total WSEs by approximately 4,600 for September 30, 2023 and Average WSEs by approximately 1,500 for the third quarter of 2023. We intend to continue our ongoing effort to ensure that our billing practices best match the expectations of our customers and we may identify additional service recipients in the future that should be included in Total WSEs and Average WSEs.
Average WSEs decreased 5% when comparing the third quarter of 2023 to the same period in 2022 primarily due to lower hiring in our installed base across most verticals during the past twelve months, especially within our Technology vertical. This trend was partially offset by stronger new client additions and retention in 2023.
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 success in generating revenue, growing our business and retaining clients. Total WSEs decreased 5% when compared to the same period in 2022, due to net client attrition over the past year, partially offset by improvements in new client additions and retention during 2023.
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.
We continue to invest in efforts intended to enhance client experience, improve our new sales performance, and manage client attrition, through product development as well as operational and process improvements. In addition to focusing on retaining and growing our WSE base, we continue to review acquisition opportunities that would expand our product offering and provide further scale.
Screenshot 2023-10-13 104027.jpg

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HRIS Users

Average HRIS Users is a volume measure we use to monitor the performance of our cloud-based HRIS services. Average HRIS Users for the third quarter and nine months ended September 30, 2023 was 210,863, and 219,058, respectively. Average HRIS Users for the third quarter and nine months ended 2022 was 247,375 and 251,707, respectively. The decrease in Average HRIS Users was primarily driven by client attrition outpacing new client additions.
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 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 insurance costs above our projections, reflected as a higher ICR, result in lower net income. Decreases in insurance costs below our projections, reflected as a lower ICR, result in higher net income, but can be an indicator that insurance costs are developing more slowly than our projections, which are reflected in our fees, and this can have a negative impact on client retention and new sales.
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, which we define as changes in participant use of services, including the introduction of new treatment options, changes in treatment guidelines and mandates, and changes in the mix, cost of providing treatment and timing of services provided to plan participants. 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)2023202220232022
Insurance costs$874 $872 $2,594 $2,547 
Insurance service revenues1,037 1,052 3,110 3,094 
Insurance Cost Ratio84 %83 %83 %82 %

ICR increased slightly for the third quarter as compared to the same period in 2022 primarily driven by lower ISR. The decrease in ISR for the third quarter was primarily driven by lower volume due to lower Average WSEs and lower health plan enrollment, partially offset by higher rates. Insurance costs increased in the third quarter as compared to the same period in 2022, despite the lower enrollments, due to higher costs associated with medical services utilization.

ICR increased slightly for the nine months ended September 30, 2023 as insurance costs grew at a higher rate than ISR. Insurance costs increased for the nine months ended September 30, 2023 due to higher costs associated with medical services utilization, in particular outpatient services and pharmacy costs. This was partially offset by lower volume due to lower Average WSEs.
Total Revenues
Our revenues consist of PSR and ISR. PSR represents fees charged to clients for processing payroll-related transactions on behalf of our PEO and HRIS clients, access to our HR expertise, employment and benefit law compliance services, other HR-related services and fees charged to access our cloud-based HRIS services. ISR
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
Monthly total revenues per Average WSE is a measure we use to monitor our PEO pricing strategies. This measure increased 4% and 6% during the third quarter and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.
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 combined with the composition of our enrolled WSEs within our insurance service offerings and the composition of products and services our clients receive, including Clarus R+D,
•Credit - the weighted average change in amounts recognized for our previously announced 2022 Credits, and
•HRIS - incremental HRIS cloud services revenue.

1528 1532
PSR

ISR - % represents proportion of insurance service revenues to total revenues
*Total revenues generated from PEO services only
1536 1538
The decline in total revenue for the third quarter ended 2023 was primarily driven by lower average volume from our PEO services and lower health plan enrollment, partially offset by rate increases. Total revenue for the nine months ended September 30, 2023 was effectively flat as the decrease in volume related to lower Average WSEs was offset by increases in rates.
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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, expenses for claims costs and risk management and administrative services, and changes in accrued costs related to contractual obligations with our workers' compensation and health benefit carriers. Our OE consists primarily of our colleagues' 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, 2023, as compared to the same periods in 2022.
(in millions)
$120Third Quarter 2022 Operating Income
-19 
Lower total revenues primarily driven by lower average volume from our PEO services and lower health plan enrollment, partially offset by rate increases.
-2 
Flat insurance costs as higher health cost rates were offset by lower health plan enrollment and lower volume due to lower Average WSEs.
+17 Lower OE primarily as a result of lower spend in consulting, facilities, and tax and licenses, partially offset by higher conference and event expenses.
$116Third Quarter 2023 Operating Income
(in millions)
$443YTD 2022 Operating Income
+18 
Higher total revenues primarily driven by rate increases and that no reduction in revenue was recognized in 2023 related to our 2022 Credits, partially offset by lower Average WSEs.
-47 Higher insurance costs primarily as a result of higher health cost rates, partially offset by lower Average WSEs.
-32 Higher OE primarily as a result of higher compensation, S&M and technology spend to improve client experience, enhance service offerings, and improve processes, including a full nine months of supporting the HRIS product, together with higher sales and marketing expenses to support sales efforts. This was partially offset by lower spend in consulting and facilities.
$382YTD 2023 Operating Income

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MANAGEMENT'S DISCUSSION AND ANALYSIS
Professional Service Revenues
Our PEO and HRIS clients are primarily billed on a fee per WSE or HRIS User per month per transaction. Our vertical approach provides us the flexibility to offer our PEO 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.
PSR from PEO Services customers and HRIS cloud services clients was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2023202220232022
PEO Services$168 $177 $527 $535 
HRIS Cloud Services
17 12 12 40 30 
Total$185 $189 $567 $565 

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
•HRIS - incremental HRIS cloud services revenue.
974975
977978
The decrease in PSR for the third quarter of 2023 was primarily driven by lower Average WSEs, primarily in our Technology vertical due to client attrition and lower client hiring within our installed base during the past twelve months. The decrease was partially offset by rate increases from our PEO services and higher HRIS cloud service revenue. The increase in HRIS revenues relates to the impact of termination agreements in the broker partner product as we refine our strategic broker strategy.
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PSR was flat for the nine months ended September 30, 2023 as rate increases from our PEO services, as well as the higher HRIS revenue were offset by lower WSEs, primarily in our Technology vertical due to client attrition and lower client hiring within our installed base.
Insurance Service Revenues
ISR consists of insurance services-related billings and administrative fees collected from 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 amounts recognized for our previously announced 2022 Credits.

734735
737738
The decrease in ISR for the third quarter was primarily driven by lower volume due to lower Average WSEs and lower health plan enrollment, offset by rate increases.

The increase in ISR for the nine months ended September 30, 2023 was primarily driven by rate increases. In addition, as part of our 2022 Credit program, we recognized a $25 million reduction in revenue in the second quarter of 2022, which did not recur in 2023. This was partially offset by lower volume due to lower Average WSEs.
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Insurance Costs
Insurance costs include insurance premiums for coverage provided by insurance carriers, expenses for claims costs and other risk management and administrative 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).
834835
837838

Insurance costs were approximately flat for the third quarter as higher rates were offset by lower health plan enrollment and lower volume due to lower Average WSEs. The increase in insurance costs for the nine months ended September 30, 2023 was primarily driven by higher rates, partially offset by lower volume due to lower Average WSEs. The rate increases were primarily driven by higher costs associated with medical services utilization, in particular outpatient services and pharmacy costs.
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Operating Expenses
OE includes COPS, S&M, G&A, SD&P, and D&A.
We had approximately 3,600 corporate employees as of September 30, 2023 primarily across the U.S. but also in India and Canada. Compensation costs for our colleagues include payroll, payroll taxes, SBC, bonuses, commissions and other payroll- and benefits-related costs. Compensation-related expense represented 67% and 61% of our OE in the third quarters of 2023 and 2022 and 65% in the nine months ended September 30, 2023 and 2022.

Transaction and integration costs associated with our acquisitions of Zenefits and Clarus R+D are included in G&A. These costs include advisory, legal, and employee retention costs tied to ongoing employment.
During the third quarter and nine months ended September 30, 2023, OE decreased 7% and increased 5%, respectively, when compared to the same periods in 2022. During the third quarter and nine months ended September 30, 2023, the ratio of OE to total revenues was 19%.
106910701071
% represents portion of compensation related expense included in operating expenses

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.
13311332133313341335
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MANAGEMENT'S DISCUSSION AND ANALYSIS
(in millions)
$249Q3 2022 Operating Expenses
-5 COPS decreased, driven primarily by lower spend in tax and licenses, corporate insurance, and office expenses.
+3 
S&M increased, driven primarily by higher conferences and events expenses and higher compensation from the growth in our sales force, partially offset by lower advertising expenses.
-12 G&A decreased, driven primarily by lower transaction and integration expenses as well as lower consulting, facilities and recruiting expenses.
-3 SD&P decreased, driven primarily by lower compensation and consulting expenses.
— 
D&A was consistent with the prior period.
$232Q3 2023 Operating Expenses
(in millions)
$669YTD 2022 Operating Expenses
+6 COPS increased, driven primarily by higher compensation expense to support WSEs and incremental costs related to our HRIS cloud services, partially offset by lower corporate insurance and office expenses.
+35 S&M increased, driven primarily by higher compensation from the growth in our sales force, higher conference and events expenses and higher broker commissions
-11 G&A decreased, driven primarily by transaction and integration expenses as well as lower costs in consulting, facilities and recruiting expenses.
-5 SD&P decreased, driven primarily by lower compensation and consulting expenses.
+7 
D&A increased, due to the amortization of intangible assets recognized for the Zenefits and Clarus R+D acquisitions.
$701YTD 2023 Operating Expenses
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The primary spend type drivers to the changes in our OE are presented below:
1418
1420
Other Income (Expense)
Other income (expense) consists primarily of interest and dividend income from cash and investments and interest expense on our outstanding debt.
293 304
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The growth in interest income for the third quarter and nine months ended September 30, 2023 was primarily driven by higher interest earned on cash deposits due to higher market interest rates in 2023.
The lower interest expense, bank fees and other for the third quarter and nine months ended September 30, 2023 was primarily due to the $17M of realized investments losses on sales and impairments related to AFS securities in the third quarter of 2022, which did not reoccur in the current year. This was partially offset by the additional interest on our newly issued 2031 Notes and our $200 million drawdown of our 2021 Revolver in order to partially fund share repurchases in the third quarter of 2023. In addition, we incurred additional interest expense earlier in 2023 related to our temporary draw-down under our 2021 Revolver following the Silicon Valley Bank failure.
Income Taxes
Our ETR was 24% and 26% for the third quarter of 2023 and 2022, respectively and 26% and 27% for the nine months ended September 30, 2023 and 2022, respectively. The decrease in rates was primarily due to an increase in excludable income for state tax purposes, an increase in tax benefits related to stock-based compensation and a decrease in nondeductible compensation.
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2023 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 PEO clients. To minimize the credit risk associated with remitting the payroll and associated taxes and benefits costs, we require PEO clients to prefund the payroll and related payroll taxes and benefits costs.
We believe that we can meet our present and reasonably foreseeable operating cash needs and future commitments through existing liquid assets and continuing cash flows from corporate operating activities. We hold both corporate cash and cash associated with WSEs across multiple financial institutions to reduce concentrations of counterparty risk.
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, 2023December 31, 2022
(in millions)CorporateWSETotalCorporateWSETotal
Current assets:
Cash and cash equivalents$170 $— $170 $354 $— $354 
Investments75 — 75 76 — 76 
Restricted cash, cash equivalents and investments21 812 833 22 1,241 1,263 
Other current assets86 689 775 78 555 633 
Total current assets$352 $1,501 $1,853 $530 $1,796 $2,326 
Total current liabilities$202 $1,501 $1,703 $192 $1,796 $1,988 
Working capital$150 $— $150 $338 $— $338 
As of September 30, 2023, we did not have any material off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.
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. 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Working capital for corporate purposes
Corporate working capital as of September 30, 2023 decreased $188 million from December 31, 2022, primarily driven by the $184 million decrease in corporate unrestricted cash and cash equivalents driven by our stock repurchases in the third quarter of 2023.
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.
Cash Flows
The following table presents our cash flow activities for the stated periods:
 Nine Months Ended September 30,
(in millions)20232022
CorporateWSETotalCorporateWSETotal
Net cash provided by (used in):  
Operating activities$386 $(429)$(43)$436 $(360)$76 
Investing activities(56)(1)(57)(199)(6)(205)
Financing activities(523)— (523)(392)— (392)
Net decrease in cash and cash equivalents, unrestricted and restricted$(193)$(430)$(623)$(155)$(366)$(521)
Cash and cash equivalents, unrestricted and restricted:
Beginning of period$406 $1,131 $1,537 $660 $1,078 $1,738 
End of period$213 $701 $914 $505 $712 $1,217 
Net increase (decrease) in cash and cash equivalents:
Unrestricted$(184)$— $(184)$(158)$— $(158)
Restricted$(9)$(430)$(439)$3 $(366)$(363)
Operating Activities
Components of net cash provided by (used in) operating activities are as follows:
 Nine Months Ended September 30,
(in millions)20232022
Net cash provided by (used in) operating activities$(43)$76 
Net cash used in operating activities - WSE(429)(360)
Net cash provided by operating activities - Corporate386 436 
The year-over-year change in net cash used in operating activities for WSE purposes was primarily driven by timing of client payments, payments of payroll and payroll taxes, settlement of our previously announced 2022 Credits, and insurance claim activities. We expect the changes in restricted cash and cash equivalents to correspond to WSE cash provided by (or used in) operations as we manage our obligations associated with WSEs through restricted cash.
Our corporate operating cash flows in the nine months ended September 30, 2023 decreased, when compared to the same period in 2022, primarily due to the timing of our payments of corporate obligations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Investing Activities
Cash used in investing activities for the periods presented below primarily consisted of purchases of investments, capital expenditures and acquisition of business, partially offset by proceeds from the sale and maturity of investments.
 Nine Months Ended September 30,
(in millions)20232022
Investments:
Purchases of investments$(226)$(337)
Proceeds from sale and maturity of investments223 390 
Acquisition of subsidiaries— (219)
Cash used in investments$(3)$(166)
Cash used in capital expenditures$(54)$(39)
Cash used in investing activities$(57)$(205)
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 consider industry and issuer concentrations in our investment policy.
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, 2023, 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, 2023, we held approximately $1.4 billion in restricted and unrestricted cash, cash equivalents and investments, of which $170 million was unrestricted cash and cash equivalents and $218 million was unrestricted investments. Refer to Note 2 in the condensed consolidated financial statements and related notes included in this Form 10-Q.
Capital Expenditures
During the nine months ended September 30, 2023 and 2022, we continued to make investments in software and hardware and we enhanced our existing service offerings and technology platform. We expect capital investments in our software and hardware to continue in the future.
We had lower cash used in investing activities in the nine months ended September 30, 2023 as compared to the same period in 2022 primarily as a result of our acquisitions of Zenefits and Clarus in 2022.
Financing Activities
Net cash used in financing activities in the nine months ended September 30, 2023 and 2022 consisted of our debt and equity-related activities.
 Nine Months Ended September 30,
(in millions)20232022
Financing activities
Repurchase of common stock, net of issuance costs(1,114)(392)
Proceeds from issuance of 2031 Notes400 — 
Payment of long-term financing fees and debt issuance costs(9)— 
Proceeds from revolving credit agreement borrowings695 — 
Repayment of borrowings under revolving credit facility(495)
Cash used in financing activities$(523)$(392)
In February 2023, our board of directors authorized a $300 million incremental increase to our ongoing stock repurchase program initiated in May 2014. In July 2023, our board of directors authorized a further $1 billion incremental increase to this stock repurchase program. 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
On August 28, 2023, we completed a public tender offer through which we repurchased 5,981,308 shares of common stock at a price of $107.00 per share, for total consideration of approximately $640 million. On September 13, 2023, we repurchased 3,364,486 shares of common stock at a price of $107.00 per share, for total consideration of approximately $360 million, through a private repurchase from our largest stockholder, Atairos Group, Inc.
During the nine months ended September 30, 2023, we repurchased 10,611,683 shares of our common stock for approximately $1.1 billion through our existing stock repurchase program in addition to 56,519 shares acquired to satisfy tax withholding obligations related to stock based compensation vesting. As of September 30, 2023, approximately $446 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 March 2023, to ensure that we maintained liquidity during the regional banking liquidity challenges, we drew down the available $495 million of capacity under our 2021 Revolver. As concerns about market liquidity subsided, we repaid $200 million in March and $295 million in April. In September of 2023, we drew down $200 million under our 2021 Revolver to partially fund our announced share repurchases in the third quarter of 2023.
In August 2023, we issued $400 million aggregate principal amount of our 2031 Notes to partially fund share repurchases in the third quarter of 2023. Refer to Note 5 in the condensed consolidated financial statements and related notes included in this Form 10-Q for further information.
In August 2023, concurrently with the issuance of the 2031 Notes, we amended certain provisions of our 2021 Credit Agreement, dated February 26, 2021, as amended, to, among other things (1) increasing the aggregate capacity under our 2021 Revolver from $500 million to $700 million and (2) extending the maturity date of our 2021 Revolver to August 16, 2028.
Capital Resources
As of September 30, 2023, $500 million and $400 million aggregate principal of our 2029 Notes and 2031 Notes was outstanding, respectively. The indenture governing our 2029 Notes and 2031 Notes each includes restrictive covenants limiting our ability to: (i) create liens on certain assets to secure debt; (ii) grant a subsidiary guarantee of certain debt without also providing a guarantee of the 2029 Notes or 2031 Notes, as applicable; 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 $700 million revolving credit facility. In September of 2023, we drew down $200 million of this revolver to partially fund our third quarter of 2023 share repurchases. 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, 2029 Notes and 2031 Notes at September 30, 2023.
Critical Accounting Policies, Estimates and Judgments
There have been no material changes to our critical accounting policies, estimates and judgments as discussed in our 2022 Form 10-K.
Recent Accounting Pronouncements
There have been no material changes to our recent accounting pronouncements as discussed in our 2022 Form 10-K.
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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, 2023 and December 31, 2022.
As of September 30, 2023, we had drawn down $200 million under our floating rate 2021 Revolver. The impact of a 100 basis point increase or decrease in market interest rates to interest expense on our 2021 Revolver as of September 30, 2023 over the next twelve months was not material.
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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 CEO and our CFO, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023, 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, 2023, 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
There were no 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, 2023, 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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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)2023202220232022
Professional service revenues
$185 $189 $567 $565 
Insurance service revenues
1,037 1,052 3,110 3,094 
Total revenues
1,222 1,241 3,677 3,659 
Insurance costs
874 872 2,594 2,547 
Cost of providing services
74 79 231 225 
Sales and marketing
75 72 214 179 
General and administrative
51 63 154 165 
Systems development and programming
15 18 49 54 
Depreciation and amortization of intangible assets
17 17 53 46 
Total costs and operating expenses
1,106 1,121 3,295 3,216 
Operating income
116 120 382 443 
Other income (expense):
Interest expense, bank fees and other
(10)(22)(23)(33)
Interest income
18 5 57 8 
Income before provision for income taxes
124 103 416 418 
Income taxes
30 26 108 111 
Net income
$94 $77 $308 $307 
Other comprehensive income (loss), net of income taxes(2)7 (3)(4)
Comprehensive income
$92 $84 $305 $303 
Net income per share:
Basic
$1.65 $1.23 $5.23 $4.85 
Diluted
$1.63 $1.22 $5.20 $4.81 
Weighted average shares:
Basic
57 62 59 63 
Diluted
58 63 59 64 
See accompanying notes.
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FINANCIAL STATEMENTS
TRINET GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30,December 31,
(in millions, except share and per share data)20232022
ASSETS
Current assets:
Cash and cash equivalents
$170 $354 
Investments
75 76 
Restricted cash, cash equivalents and investments
833 1,263 
Accounts receivable, net
21 19 
Unbilled revenue, net
404 375 
Prepaid expenses, net
75 71 
Other payroll assets226 122 
Other current assets
49 46 
Total current assets1,853 2,326 
Restricted cash, cash equivalents and investments, noncurrent
154 153 
Investments, noncurrent
143 151 
Property and equipment, net16 24 
Operating lease right-of-use asset
24 31 
Goodwill
462 462 
Software and other intangible assets, net169 163 
Other assets
145 133 
Total assets$2,966 $3,443 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and other current liabilities
$109 $98 
Client deposits and other client liabilities
73 106 
Accrued wages
458 437 
Accrued health insurance costs, net
183 174 
Accrued workers' compensation costs, net
51 54 
Payroll tax liabilities and other payroll withholdings
804 1,087 
Operating lease liabilities
15 15 
Insurance premiums and other payables
10 17 
Total current liabilities1,703 1,988 
Long-term debt, noncurrent
1,091 496 
Accrued workers' compensation costs, noncurrent, net
122 128 
Deferred taxes
5 8 
Operating lease liabilities, noncurrent
30 41 
Other non-current liabilities
5 7 
Total liabilities2,956 2,668 
Commitments and contingencies (see Note 6)
Stockholders' equity:
Preferred stock— — 
($0.000025 par value per share; 20,000,000 shares authorized; no shares issued or outstanding at September 30, 2023 and December 31, 2022)
Common stock and additional paid-in capital953 899 
($0.000025 par value per share; 750,000,000 shares authorized; 50,507,590 and 60,555,661 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively)
Accumulated deficit(935)(119)
Accumulated other comprehensive loss(8)(5)
Total stockholders' equity10 775 
Total liabilities & stockholders' equity$2,966 $3,443 
See accompanying notes.
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FINANCIAL STATEMENTS
TRINET GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)
2023202220232022
Total Stockholders' Equity, beginning balance$915 $763 $775 $881 
Common Stock and Additional Paid-In Capital
Beginning balance
934 861 899 808 
Issuance of common stock from exercise of stock options
3 — 3 1 
Issuance of common stock for employee stock purchase plan
— — 6 5 
Issuance of common stock for the acquisition of Zenefits— — — 17 
Stock based compensation expense
16 17 45 47 
Ending balance
953 878 953 878 
Retained Earnings (Accumulated Deficit)
Beginning balance
(13)(86)(120)74 
Net income
94 77 308 307 
Repurchase of common stock
(1,004)(1)(1,102)(383)
Stock repurchase excise tax(7)— (7)— 
Awards effectively repurchased for required employee withholding taxes
(5)(7)(14)(15)
Ending balance
(935)(17)(935)(17)
Accumulated Other Comprehensive Income
Beginning balance
(6)(12)(5)(1)
Other comprehensive income (loss)(2)7 (3)(4)
Ending balance
(8)(5)(8)(5)
Total Stockholders' Equity, ending balance
$10 $856 $10 $856 
See accompanying notes.

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FINANCIAL STATEMENTS
TRINET GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Nine Months Ended September 30,
(in millions)20232022
Operating activities
Net income
$308 $307 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets53 48 
Amortization of deferred costs31 26 
Amortization of ROU asset, lease modification, impairment, and abandonment5 15 
Stock based compensation43 46 
Deferred income taxes
(2)1 
Provision for doubtful accounts
2 1 
Losses and impairment on investments— 18 
Losses from disposition of assets— 3 
Other1 — 
Changes in operating assets and liabilities:
Accounts receivable, net
(4)10 
Unbilled revenue, net(29)(38)
Prepaid expenses, net (4)3 
Other assets(44)(30)
Other payroll assets(104)(56)
Accounts payable and other liabilities9 5 
Client deposits and other client liabilities(33)(43)
Accrued wages21 40 
Accrued health insurance costs, net9 (10)
Accrued workers' compensation costs, net(9)(5)
Payroll taxes payable and other payroll withholdings(283)(252)
Operating lease liabilities(13)(13)
Net cash provided by (used in) operating activities(43)76 
Investing activities
Purchases of marketable securities
(226)(337)
Proceeds from sale and maturity of marketable securities223 390 
Acquisitions of property and equipment(54)(39)
Acquisition of subsidiary, net of cash acquired— (219)
Net cash used in investing activities
(57)(205)
Financing activities
Repurchase of common stock
(1,109)(383)
Proceeds from issuance of common stock
9 6 
Proceeds from issuance of 2031 Notes400 — 
Awards effectively repurchased for required employee withholding taxes
(14)(15)
Proceeds from revolving credit agreement borrowings
695 — 
Payment of long-term financing fees and debt issuance costs(9)— 
Repayment of borrowings under revolving credit facility(495)— 
Net cash used in financing activities(523)(392)
Net decrease in cash and cash equivalents, unrestricted and restricted(623)(521)
Cash and cash equivalents, unrestricted and restricted:
Beginning of period
1,537 1,738 
End of period
$914 $1,217 
Supplemental disclosures of cash flow information
Interest paid
$21 $18 
Income taxes paid, net$89 $60 
Supplemental schedule of noncash investing and financing activities
Payable for purchase of property and equipment$2 $7 
Acquisitions of subsidiaries paid in stock$— $4 
See accompanying notes.
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FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
TriNet Group, Inc. (TriNet, or the Company, we, our and us) provides comprehensive HCM solutions for small and medium-size businesses under both a co-employment model and an administrative services only model. These HCM solutions include multi-state payroll processing and tax administration, employee benefits programs, including health insurance and retirement plans, workers' compensation insurance and claims management, employment and benefit law compliance, and other HR-related services. Through our PEO service model, we are the employer of record for certain employment-related administrative and regulatory purposes for the WSEs, including:
•compensation through wages and salaries,
•certain employer payroll-related tax payments,
•employee payroll-related tax withholdings and payments,
•employee benefit programs, including health and life insurance, and
•workers' compensation coverage.
Our clients are responsible for the day-to-day job responsibilities of the WSEs.
Through our HCM services model, we provide cloud-based HCM services to small and medium-size businesses that allows them to manage hiring, onboarding and managing employee information, payroll processing and payroll tax administration, health insurance, and other benefits, from a single cloud-based software platform. We are not the co-employer or employer of record for such users.
We operate in one reportable segment. All of our service revenues are generated from external clients. Less than 1% of our revenue is generated outside of the U.S.
Basis of Presentation
These unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Rules and Regulations of the Securities and Exchange Commission. Certain information and note disclosures included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, that are normal and recurring in nature, necessary for fair financial statement presentation. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the operating results anticipated for the full year. These financial statements should be read in conjunction with the audited Consolidated Financial Statements included in Part II, Item 8. Financial Statements and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2022. Certain prior year amounts have been reclassified to conform to current period presentation.
Reclassifications
Certain prior year amounts within operating activities of the Consolidated Statement of Cash Flows have been reclassified to conform to current period presentation. In particular, the amortization of deferred costs, consisting of costs to obtain contracts with customers, cloud computing implementation and debt issuance costs, were previously included in depreciation and amortization and are now separately classified as Amortization of deferred costs.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect certain reported amounts and related disclosures.
These estimates are based on historical experience and on various other assumptions that we believe to be reasonable from the facts available to us. Some of the assumptions are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our condensed consolidated financial statements could be materially affected.
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FINANCIAL STATEMENTS
Revenue Recognition
Variable Consideration and Pricing Allocation
From time to time, we may offer credits to our clients considered to be variable consideration. Incentive credits related to contract renewals are recorded as a reduction to revenue as part of the transaction price at contract inception and are allocated among the performance obligations based on their relative standalone selling prices.
We allocate the total transaction price to each performance obligation based on the estimated relative standalone selling prices of the promised services underlying each performance obligation. The transaction price for the payroll and payroll tax processing performance obligations is determined upon establishment of the contract that contains the final terms of the arrangement, including the description and price of each service purchased. The estimated service fee is determined based on observable inputs and include the following key assumptions: target profit margin, pricing strategies including the mix of services purchased and competitive factors, and client and industry specifics.
The fees for access to health benefits and workers' compensation insurance performance obligations is determined during the new client on-boarding and enrollment processes based on the types of benefits coverage the WSEs have elected and the applicable risk profile of the client. We estimate our service fees based on actuarial forecasts of our expected insurance premiums and loss sensitive premium costs and amounts to cover our costs to administer these programs.
We require our clients to prefund payroll and related taxes and other withholding liabilities before payroll is processed or due for payment. Under the provision of our contracts with clients, we generally will process the payment of a client’s payroll only when the client successfully funds the amount required. As a result, there is no financing arrangement for the contracts. However, certain contracts to provide payroll and payroll tax processing services permit the client to pay certain payroll tax components ratably over periods of up to 12 months rather than as payroll tax is otherwise determined and due, which may be considered a significant financing arrangement under ASC Topic 606. However, as the period between our performing the service under the contract and when the client pays for the service is less than one year, we have elected, as a practical expedient, not to adjust the transaction price.
In previous years, we created our previously announced Recovery Credits to assist in the economic recovery of our existing PEO clients and enhance our ability to retain these clients. These credits were based on the performance of our insurance costs and were recorded as a reduction to insurance services revenues and included in client deposits and other client liabilities on the balance sheet. The change in balance for the liability for credits previously accrued is the following:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2023202220232022
Balance at beginning of period$50 $26 $75 $48 
(+) Accruals— — — 25 
(-) Distributions to clients(8)(1)(33)(48)
Balance at end of period$42 $25 $42 $25 
Accrued Health Insurance Costs
We sponsor and administer a number of employee benefit plans for our PEO WSEs, including group health, dental, and vision as an employer plan sponsor under section 3(5) of the ERISA. In the nine months ended September 30, 2023, the majority of our group health insurance costs related to risk-based plans. Our remaining group health insurance costs were for guaranteed-cost policies.
Accrued health insurance costs are established to provide for the estimated unpaid costs of reimbursing the carriers for paying claims within the deductible layer in accordance with risk-based health insurance policies. These accrued costs include estimates for reported losses, plus estimates for claims incurred but not paid. We assess accrued health insurance costs regularly based upon actuarial studies that include other relevant factors such as current and historical claims payment patterns, plan enrollment and medical trend rates.
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In certain carrier contracts we are required to prepay our obligations for the expected claims activity for subsequent periods. These prepaid balances by agreement permit net settlement of obligations and offset the accrued health insurance costs. As of September 30, 2023 and December 31, 2022, prepayments and miscellaneous receivables offsetting accrued health insurance costs were $49 million and $57 million, respectively. When the prepaid amount is in excess of our recorded liability the net asset position is included in prepaid expenses. As of September 30, 2023 and December 31, 2022, accrued health insurance costs offsetting prepaid expenses were $78 million and $73 million, respectively.
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NOTE 2. CASH, CASH EQUIVALENTS AND INVESTMENTS - UNRESTRICTED AND RESTRICTED
Under the terms of the agreements with certain of our workers' compensation and health benefit insurance carriers, we are required to maintain collateral in trust accounts for the benefit of specified insurance carriers and to reimburse the carriers’ claim payments within our deductible layer. We invest a portion of the collateral amounts in marketable securities. We report the current and noncurrent portions of these trust accounts as restricted cash, cash equivalents and investments on the consolidated balance sheets.
We require our clients to prefund their payroll and related taxes and other withholding liabilities before payroll is processed or due for payment. This prefund is included in restricted cash, cash equivalents and investments as payroll funds collected, which is designated to pay pending payrolls, payroll tax liabilities and other payroll withholdings.
We also invest available corporate funds, primarily in fixed income securities which meet the requirements of our corporate investment policy and are classified as AFS.
Our total cash, cash equivalents and investments are summarized below:
September 30, 2023December 31, 2022
(in millions)Cash and cash equivalentsAvailable-for-sale marketable securitiesTotalCash and cash equivalentsAvailable-for-sale marketable securitiesTotal
Cash and cash equivalents$170 $— $170 $354 $— $354 
Investments— 75 75 — 76 76 
Restricted cash, cash equivalents and investments:
Payroll funds collected635 — 635 1,062 — 1,062 
Collateral for health benefits claims31 110 141 29 110 139 
Collateral for workers' compensation claims55 — 55 58 — 58 
Other security deposits2 — 2 4 — 4 
Total restricted cash, cash equivalents and investments723 110 833 1,153 110 1,263 
Investments, noncurrent— 143 143 — 151 151 
Restricted cash, cash equivalents and investments, noncurrent
Collateral for workers' compensation claims21 133 154 27 123 150 
Other security deposits— — 3 — 3 
Total$914 $461 $1,375 $1,537 $460 $1,997 


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NOTE 3. INVESTMENTS
The following tables summarize our financial instruments by significant categories and fair value measurement on a recurring basis as of September 30, 2023 and December 31, 2022 and the amortized cost, gross unrealized gains, gross unrealized losses, fair value of our AFS investments:
(in millions)Fair Value LevelAmortized CostGross Unrealized GainsGross Unrealized LossesFair ValueCash and Cash EquivalentsInvestmentsRestricted Cash, Cash Equivalents and Investments
September 30, 2023
Cash equivalents:
Money market mutual fundsLevel 1$134 $— $— $134 $47 $— $87