TRINET GROUP, INC. (TNET) FY 2023 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Operational Highlights

Our consolidated results for 2023 reflect our continuing efforts to serve our clients, attract new clients and invest in our platform.

During 2023 we:

•improved sales performance and customer retention,

•continued to grow total revenues, manage expense prudently, and grow earnings per share,

•utilized our scale and knowledge to assist our PEO and HRIS clients during and following the liquidity challenges in regional banks ensuring that our clients were able to successfully run payroll during that time,

•executed a series of transactions to rebalance our capital structure in order to enhance our leverage ratios, including:

◦issued $400 million of our senior unsecured notes maturing in August 2031,

◦executed our 2021 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 TriNet PeopleForce, our showcase client and prospect conference focused on business transformation, agility and innovation for SMBs, and

•successfully completed the migration of our general business applications to the cloud.

Performance Highlights

Our results for 2023 when compared to 2022 are noted below:

Our total revenues increased 1%, primarily driven by inflationary rate increases, partially offset by lower volume due to decreases in Average WSEs.

Our Average WSEs decreased 5% and Total WSEs was approximately flat year over year. The decrease in Average WSEs was 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 attrition. This trend was partially offset by stronger new client additions and retention during the year.

Our ICR was approximately flat year over year as health insurance costs grew at a faster rate than health ISR, partially offset by favorable workers' compensation prior period claims development.

Higher revenues and interest income, partially offset by higher health insurance costs and operating expenses from our investments in sales and marketing, resulted in the 6% increase in net income. Adjusted Net income was flat as the increase in net income was offset by lower transaction and integration costs as compared to 2022.

Results of Operations

The following table summarizes our results of operations for the three years ended December 31, 2023, 2022 and 2021. For details of the critical accounting judgments and estimates that could affect the Results of Operations, see the Critical Accounting Judgments and Estimates section within MD&A.

(1)    Refer to Non-GAAP measures definitions and reconciliations from GAAP measures under the heading "Non-GAAP Financial Measures".

(2)     Total WSEs includes approximately 12,000 incremental WSEs for December 31, 2023 and Average WSEs includes approximately 4,000 incremental WSEs for the fourth quarter of 2023 (1,000 for the full year 2023) that were charged a platform user access fee. Additionally, Total WSEs includes approximately 4,500 incremental WSEs for December 31, 2023 and Average WSEs includes approximately 4,800 for the fourth quarter of 2023 (1,500 for the full year 2023) additional service recipients. These were 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 year ended December 31, 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 December 31, 2023, 2022 and 2021.

A discussion regarding our financial condition and results of operations for 2022 compared to 2021 can be found under Part II, Item 7. Management's Discussion and Analysis in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 15, 2023.

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.

(1)     Non-GAAP effective tax rate is 25.6% for 2023, and 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.

Reconciliation of GAAP to Non-GAAP Measures

The table below presents a reconciliation of Net income to Adjusted EBITDA:

(1)    2022 Interest expense, bank fees and other includes $17M of realized investments losses on sales and impairments related to AFS securities.

(2)    Amount includes impairment of customer relationship intangibles in 2021.

The table below presents a reconciliation of Net income to Adjusted Net Income:

(1)    Amount includes impairment of customer relationship intangibles in 2021.

The table below presents a reconciliation of net cash provided by operating activities to Corporate Operating Cash Flows:

Operating Metrics

Worksite Employees (WSE)

Average WSE change is a volume measure we use to monitor the performance of our PEO business. Our PEO 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 PEO clients joining and existing clients terminating in the month of January. PEO client attrition, new PEO client additions and changes in employment levels within our installed PEO client base all impact our Average WSEs and Total WSEs as we move through a calendar year.

We support WSEs from the date on which their co-employment with TriNet commences through the end of their co-employment with TriNet and also after their co-employment period. We define WSEs to include co-employees and other individuals receiving PEO services, such as individuals who receive COBRA benefits post co-employment or are subject to K-1 tax reporting as well as individuals who utilize our PEO platform on behalf of TriNet PEO clients. As part of an ongoing effort to ensure that our billing practices best match the expectations of our customers, in the third quarter of 2023 we determined that certain individuals such as those described above and certain co-employees were not previously or consistently counted in Total WSEs and Average WSEs.] This resulting adjustment increased our reported Total WSEs by approximately 4,500 for December 31, 2023 and Average WSEs by approximately 4,800 and 1,500 for the fourth quarter of 2023 and the full year 2023, respectively. We intend to continue our ongoing effort to ensure that our billing practices best match the expectations of our customers and in the future we may identify additional individuals that should be included in Total WSEs and Average WSEs.

In December 2023, we implemented a platform user access fee to charge clients for those users of our PEO platform that may not be co-employed by us and to charge clients for co-employees for whom payroll may not be regularly run. In addition to co-employees for whom payroll may not be regularly run, this includes individuals authorized by our clients to access and use the PEO platform for functions such as bookkeeping and benefits management. The amount of the fee is comparable to the fee we charge for users of our HRIS platform. While the amount of revenue we recognized in 2023 for this service was not significant, these users of the PEO platform for whose access we charged this fee increased our reported Total WSEs by approximately 12,000 as of December 31, 2023 and Average WSEs by approximately 4,000 and 1,000 for the fourth quarter of 2023 and the full year ended December 31, 2023, respectively.

The effect of this new fee is that we are now receiving revenue from two types of users on our PEO platform, those that are co-employed in our PEO business and those that are utilizing our PEO platform, albeit in a more limited fashion. The table below illustrates how those two components comprise our Total WSE and Average WSE metrics.

Average WSEs decreased 5% when comparing 2023 to 2022, primarily due to lower hiring in our installed base across most verticals during the past twelve months, especially within our Technology vertical. This market trend was partially offset by strong new client additions and improved client 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 was flat when comparing 2023 to 2022 due to the combined effects of lower hiring by our clients and net client attrition over the past year being, offset by the combined effect of improvements in new client additions and improved client retention during 2023 and the additional WSEs described above.

Anticipated revenues for future periods can diverge from the revenue expectation derived from Average WSEs or Total WSEs due to pricing differences across our HCM 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 the value we provide to our clients and our resulting 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. As we continue our work in combining our PEO platform and our HRIS SaaS capabilities into a single platform, these various types of TriNet users will all be served from the same platform. 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.

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 period ended December 31, 2023 and 2022 was 215,295 and 248,496, respectively. This decline is being driven by both higher client attrition as compared to new client additions and lower hiring by HRIS clients similar to SMB hiring trends that we have observed in our PEO business.]

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 over time 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 MCT, 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.

ICR was approximately flat when comparing 2023 to 2022 as health insurance costs grew at a faster rate than health ISR, partially offset by favorable workers' compensation prior period claims development. Insurance costs increased due to higher costs associated with medical services utilization, in particular outpatient services and pharmacy costs. This was partially offset by favorable prior period development in workers' compensation and lower volume due to lower Average WSEs. ISR increased due to rate increases partially offset by lower volume due to lower Average WSEs. In addition, ISR in 2023 did not include any reductions for credit programs whereas ISR in 2022 included a $75 million reduction related to our 2022 Credits.

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 and tax credit filing services and fees charged to access our cloud-based HRIS services . ISR consists of insurance-related billings and administrative fees collected from PEO 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 6% in 2023 compared to 2022.

We also use the following measures to further analyze changes in total revenue:

•Volume - the percentage change in period over period co-employed 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 2022 Credits, and

•HRIS - incremental HRIS cloud services revenue.

The increase in total revenue for the year was primarily driven by inflationary rate increases. In addition, as part of our 2022 Credit program, we recognized a $75 million reduction in revenue in 2022, which did not recur in 2023. This was partially offset by lower health plan enrollment and lower volume due to lower Average WSEs.

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 on a year-over-year basis.

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:

We also analyze changes in PSR with the following measures:

•Volume - the percentage change in period over period co-employed 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 TriNet Clarus R+D, and

•HRIS - incremental HRIS cloud services revenue.

PSR was flat for the year as rate increases from our PEO services, as well as the higher HRIS revenue from a full year of revenue in 2023 compared to a ten month period in 2022, 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 co-employed 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 2022 Credits.

The increase in ISR for the year was primarily driven by rate increases. In addition, as part of our 2022 Credit program, we recognized a $75 million reduction in revenue in 2022, which did not recur in 2023. This was partially offset by lower health plan enrollment and lower volume due to lower Average WSEs.

Insurance Costs

Insurance costs include insurance premiums for coverage provided by insurance carriers, payments for claims costs and expenses for 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 co-employed 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).

The increase in insurance costs for the year was primarily driven by higher rates paid for services, partially offset by lower health plan enrollment and 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.

Operating Expenses

OE includes COPS, S&M, G&A, SD&P, and D&A.

We had approximately 3,600 colleagues as of December 31, 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 65% and 63% of our OE in 2023 and 2022, respectively.

Transaction and integration costs associated with our 2022 acquisitions of Zenefits and Clarus R+D are included in G&A. These costs include advisory, legal, employee retention costs tied to ongoing employment.

In 2023, we experienced OE growth of 2% compared to 2022. The ratio of OE to total revenues was 19% in 2023 and 2022.

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.

The primary spend type drivers to the changes in our OE are presented below:

Other Income (Expense)

Other income (expense) consists primarily of interest income from cash and investments and interest expense on our outstanding debt.

The growth in interest income for the year was primarily driven by higher interest earned on cash deposits due to higher market interest rates in 2023.

In 2022, interest expense, bank fees and other for the year included $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. In 2023, interest expense, bank fees and other included 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.

Provision for Income Taxes

Our effective tax rate (ETR) was 25% and 26% for 2023 and 2022, respectively. The decrease in rates was primarily due to an increase in excludable income for state tax purposes and an increase in tax benefits related to stock-based compensation.

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.

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:

As of December 31, 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.

The following table summarizes our workers' compensation obligations, gross of collateral, as of December 31, 2023,

(1) Represents estimated payments that are expected to be made to carriers for various workers' compensation programs under the contractual obligations. These obligations include the costs of reimbursing the carriers for paying claims within the deductible layer in accordance with the workers' compensation insurance policy.

Working capital for corporate purposes

Corporate working capital as of December 31, 2023 decreased $223 million from December 31, 2022, primarily due to the $109 million increase in current liabilities from our borrowings under our 2021 Revolver and the $67 million decrease in corporate unrestricted cash and cash equivalents. This decrease in corporate unrestricted cash and cash equivalents was largely driven by the net impacts of our capital transactions the third quarter of 2023, when we purchased approximately $1 billion of our stock partially financed by $600 million of debt issuances. This was partially offset by positive cash flows from operations over the year.

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 hold both corporate cash and cash associated with WSEs across multiple financial institutions to reduce concentrations of counterparty risk. 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.

The following table summarizes our purchase obligations as of December 31, 2023,

(1) Our purchase obligations primarily consist of software licenses, consulting and maintenance agreements, and future sales and marketing events.

Cash Flows

The following table presents our cash flow activities for the stated periods:

Operating Activities

Components of net cash provided by operating activities are as follows:

The year-over-year change in net cash provided by 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 2023 increased when compared to 2022 due to the increase in our net income and the timing of our payments of corporate obligations.

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.

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 December 31, 2023, our investments had a weighted average duration of less than two years and an average S&P credit rating of AA.

As of December 31, 2023, we held approximately $1.9 billion in restricted and unrestricted cash, cash equivalents and investments, of which $287 million was unrestricted cash and cash equivalents and $208 million was unrestricted investments. Refer to Note 2 in Part II, Item 8. Financial Statements and Supplemental Data, in this Form 10-K for a summary of these funds.

Capital Expenditures

During the twelve months ended December 31, 2023 and 2022, 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.

Financing Activities

Net cash used in financing activities in the years ended December 31, 2023 and 2022 consisted of our debt and equity-related activities.

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.

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 year ended December 31, 2023, we repurchased 10,734,790 shares of our common stock for approximately $1,112 million through our existing stock repurchase program in addition to 128,551 shares acquired to satisfy tax withholding obligations related to SBC vesting. As of December 31, 2023, approximately $433 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 share repurchases in the third quarter of 2023 noted above.

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. 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) 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.

In February of 2024, our board of directors declared a cash dividend of $0.25 per share, for a total payment of approximately $13 million.

Capital Resources

As of December 31, 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 revolver. 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 December 31, 2023.

Critical Accounting Judgments and Estimates

Our consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates, judgments, and assumptions that affect reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities. These estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Some of the assumptions are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial statements could be materially affected. For additional information about our accounting policies, refer to Note 1 in Part II, Item 8. Financial Statements and Supplementary Data, of this Form 10-K.

The following items require significant estimation or judgment:

Insurance Costs

We purchase workers' compensation and health benefits coverage for our colleagues and WSEs. As part of these insurance policies, we bear claims costs up to a defined deductible amount and as a result, we establish accrued insurance costs including both known claims filed and estimates for incurred but not reported claims.

We use qualified actuaries to evaluate, review and recommend estimates of our accrued workers' compensation and health insurance costs. The accrued costs studies performed by these qualified actuaries analyze historical claims data to develop a range of our potential ultimate costs using loss development, expected loss ratio and frequency/severity methods in accordance with Actuarial Standards of Practice. These methods are applied to classes of the claims data organized by policy year and risk class.

Key judgments and evaluations in arriving at loss estimates by class and the accrued costs selection overall include:

•the selection of method used and the relative weights given to selecting the method used for each policy year,

•the underlying assumptions of LDF used in these models,

•the effect of any changes to the insurers' claims handling and payment processes,

•evaluation of medical and indemnity cost trends, costs from changes in the risk exposure being evaluated and any applicable changes in legal, regulatory or judicial environment.

We review and evaluate these judgments and the associated recommendations in concluding the adequacy of accrued costs. Our quarterly reserving process involves the collaboration of our internal qualified actuaries and our actuarial and finance departments to approve a single point best estimate. In selecting this best estimate, management considers the actuarial estimates and applies informed judgment regarding qualitative factors that may not be fully captured in these actuarial estimates. Such factors include but are not limited to: the timing, volume, severity and complexity of claims, social and judicial trends, medical treatment trends, the extent of our historical loss data versus industry information, rates of participant turnover, the impact of MCT and seasonal trends, the impact of setting prices in advance of benefit periods, and the impact of unanticipated events. Where adjustments are necessary these are recorded in the period in which the adjustments are identified.

These accrued costs may vary in subsequent quarters from the amount estimated. Certain assumptions used in estimating these accrued costs are highly judgmental. Our accrued costs, results of operations and financial condition can be materially impacted if actual experience differs from the assumptions used in establishing these accrued costs.

Accrued Workers' Compensation Costs

Under our policies, we are responsible for reimbursing the insurance carriers for workers' compensation losses up to $1 million per claim occurrence (Deductible Layer). As workers' compensation costs for a particular period are not known for many years after the losses have occurred, these costs represent our best estimate of unpaid claim

losses and loss adjustment expenses within the Deductible Layer in accordance with our insurance policies. We use actuaries to evaluate, review and recommend accrued workers' compensation costs on a quarterly basis. The data is segmented by class and state and analyzed by policy year, and states where we have small exposure are aggregated into a single grouping.

We use a combination of loss development, expected loss ratio and frequency/severity methods which include the following inputs, assumptions and analytical techniques:

•Historical volume and severity of workers' compensation cost experience, exposure data and industry loss experience related to TriNet’s insurance policies,

•inputs of WSEs’ job responsibilities and location,

•estimates of future cost trends,

•expected loss ratios for the latest accident year or prior accident years, adjusted for the loss trend, the effect of rate changes and other quantifiable factors, and

•LDFs to project the reported losses for each accident year to an ultimate basis.

Final cost settlements may vary materially from the present estimates, particularly when payments do not occur until well into the future. In our experience, plan years related to workers' compensation programs may take 10 years or more to be fully settled.

We believe that our estimate of accrued workers' compensation costs is most sensitive to LDFs given the long reporting and paid development patterns for our workers' compensation loss costs. Our methods of estimating accrued workers' compensation costs rely on these LDFs and an estimate of future cost trend.

The following table illustrates the sensitivity of changes in the LDFs on our year end estimate of insurance costs (in millions of dollars):

Accrued Health Insurance Costs

We sponsor and administer a number of employee benefit plans for our WSEs, including group health, dental, vision and life insurance as an employer plan sponsor under section 3(5) of the ERISA. Approximately 86% of our group health insurance costs relate to risk-based plans in which we agree to reimburse our carriers for any claims paid within an agreed-upon per-person deductible layer up to a maximum aggregate exposure limit per policy. These deductible dollar limits and maximum limits vary by carrier and year.

Costs covered by these insurance plans generally develop on average within three to six months so insurance costs and accrued health insurance costs include estimates of claims IBNP. Data is grouped and analyzed by insurance carrier.

To estimate accrued health benefits costs we use a number of inputs, assumptions and analytical techniques:

•historical loss claims payment patterns and MCT rates related to TriNet’s insurance policies,

•current period claims costs and claims reporting patterns (completion factors), and

•plan enrollment.

MCT rates are a significant factor we use in developing our accrued health insurance costs. MCT are developed through an analysis of claims incurred in prior months, provider pricing and indicators of health care utilization, including pharmacy utilization trends, and outpatient and inpatient utilization. Many factors may cause MCT to vary from our estimates. Such factors include, but are not limited to: the timing of the emergence of claims, volume,

severity and complexity of claims, social and judicial trends, medical treatment trends, the extent of our historical loss data versus industry information, rates of participant turnover, the impact of MCT and seasonal trends, the impact of setting prices in advance of benefit periods, new treatment options, and the impact of unanticipated events.

The following table illustrates the sensitivity of changes in the MCT on our year end estimate of insurance costs (in millions of dollars):

Completion factors are an actuarial estimate based on historical experience and analysis of current trends, of paid costs to carriers as a percentage of the expected ultimate costs to carriers. Many factors may cause actual claims submissions rates from our carriers to vary from our estimated completion factors, including carrier claims processing patterns, the mix of providers and the mix of electronic versus manual claims submitted to our carriers.

The following table illustrates the sensitivity of changes in completion factors on our year end estimate of insurance costs (in millions of dollars):

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 16 in Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K .

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 sheets.

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

Refer to Note 1 in Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K for additional information related to recent accounting pronouncements.