TNET 10-K & 10-Q changes, risk factors and insider trading

Below is a discussion of the risks that we face and believe are significant to our business. These risks are not the only ones we face. We may face additional risks that we do not currently consider to be significant or of which we are not currently aware, and any of these risks could cause our actual results to differ materially from historical or anticipated results. You should carefully consider these risks along with the other information provided in this Form 10-K, including the information in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our accompanying consolidated financial statements, as well as the information under the heading "Cautionary Note Regarding Forward-Looking Statements" before investing in any of our securities. We may amend, supplement or add to the risk factors described below from time to time in future reports filed with the SEC.

Under our risk-based health insurance policies, which make up the majority of our health plans and claims paid in 2024,2025, we assume the risk of variability in future health claims costs for our enrollees.enrollees and do not influence the use of covered services by enrollees, other than through the structural terms of such policies. We have experienced variability, and may experience variability in the future, in the amounts that we are required to pay within our deductible layer under these policies.policies, and that variability has resulted and may continue to result in greater than expected insurance costs. This variability arises from changes to the components of MCT, defined as changes in participant use of services, including the introduction of new treatment options, changes in treatment guidelines and mandates, events, circumstances or situations that require increases in the volume of healthcare, such as a global pandemic and changes in the mix, cost of providing treatment, and timing of services provided to plan participants. MCT trends change over time, and other seasonal trends and variability may develop, which makes it difficult for us to predict this aspect of our business and our failure to accurately predict these trends could have a material adverse effect on our business, financial condition and results of operations. For example, while our insurance costs were only moderately higher than our expectations in 2024,2025, higher medical claims had a significant impact on our results due to volume.volume, and should plan participants continue to submit a higher number of medical claims, those claims may continue to have a significant impact on our results. Insurance costs of claims outpacing the growth in insurance services revenues in 2025 led to an increase in our insurance cost ratio (ICR), a trend driven in part by higher rates paid for outpatient and professional services as well as increased utilization of high-cost specialty drugs. This trend may continue and could further pressure our ICR and financial condition if not offset by pricing actions or successful cost containment efforts. In addition, if we underestimate future levels of healthcare cost inflation, it could increase our cost of claims, which in turn could have a material adverse effect on our financial condition and results of operations. In turn, increased pricing of our services in response to such variability has affected and may continue to affect our ability to maintain or expand our base of WSEs.

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 will not be known until all the claims are settled. If we do not accurately predict the risks that we assume, for example, due to the factors that may impact costs described above, we may not charge adequate fees to cover our costs, which could reduce our net income and result in a material adverse effect on our business. Our ability to predict these costs is impacted by unexpected increases in frequency or severity of claims, which can vary due to changes in the cost of treatments or claim settlements.

We accrue for the estimated future costs of reimbursing our workers' compensation and health insurance carriers under our insurance policies. We use internal actuaries to develop health claims estimates, and we use external actuaries and our own experience to develop workers’ compensation estimates, but the volume and severity of claims activity is difficult to accurately predict. Estimating these accrued costs requires us to consider a number of factors, such as the components of MCT, seasonal trends and the impact of events such as the COVID-19 global pandemic, which requires significant judgment. In addition, the usefulness of historic claims data is impacted by our rates of WSE and client turnover and we renew our carrier contracts and set fees in advance of benefit periods.periods, and thus we cannot guarantee that historic claims data will allow us to accurately estimate future costs.

In past periods, we have experienced insurance costs that were either higher or lower than our expectations and estimates. If we were to continue to experience either outcome in the future, as we expect at times we may do, it could have a material adverse effect on our business, financial condition and results of operation. Higher-than-expected insurance costs result in lower net income. Because we set fees in advance of plan periods, lower-than-expected insurance costs 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.

In addition, claims are not static, and if we subsequently receive updated information indicating that the volume and severity of insurance claims were higher or lower than previously estimated and reported, our insurance costs could be higher or lower, respectively, in that period or subsequent periods as we adjust our accrued costs accordingly, which could have a material adverse effect on our business, financial condition and results of operations. We have experienced both favorable and unfavorable insurance cost variability due to claims activity in the past and expect that, at times, we could have similar or worse experiences in the future. Refer to Critical Accounting Judgments and Estimates in Part II, Item 7. MD&A, of this Form 10-K for further discussion of these estimates.

As a co-employer of client WSEs, we assume some of the risks and obligations of an employer. For instance, inat the pasttimes we have beenare required to provide access to health benefits to WSEs even when the cost of providing those benefits exceeded the service fees received from our clients. The extent of our responsibility for other aspects of our co-employer relationship with WSEs remains subject to regulatory uncertainty at the federal, state and local levels. For example, in certain states, PEOs are responsible for paying salaries, wages and related payroll taxes of WSEs, even if our clients have not timely remitted payments to us whether due to insolvency, their bank going into receivership, or other events that may be out of our control.

We have been and will be undertaking certain transformation initiatives, which are designed to evolve the technology and processes we use to support our sales and marketing efforts and our financialcore andcustomer-facing reportingoperational systems,activities, enhance our customer support model, provide industry-leading benefits offerings and strengthen our talent and culture, while supporting our revenue growth, margin improvement and productivity. If we do not successfully manage and execute these initiatives, or if they are inadequateinadequate, ineffective, less effective relative to those of our competitors, or ineffective,are not accepted by our clients, we may fail to meet our financial goals and achieve anticipated benefits, improvements and cost-efficient initiatives may be delayed, not sustained or not realized and our business, operations and competitive position could be adversely affected. TheseIn addition to the complexity of our efforts to expand our operations at our new office in Hyderabad, India, these initiatives, or our failure to successfully manage them, could result in unintended consequences or unforeseen costs, including distraction of our management and employees, attrition, inability to attract or retain key personnel, and reduced employee productivity, which could adversely affect our business, financial condition, and results of operations.

We haveexpect to and will continue to devote substantial time, money and management resources to these projects. Managing these projects also typically requires changes to our internal operational, financial and management controls as well as our reporting systems and procedures. We cannot guarantee that our efforts will achieve our goals in a timely or cost-effective manner or at all, and we cannot guarantee that we can carry out these projects without a negative impact on our day-to-day operationsoperations, current service offerings and client satisfaction. If our current and future projects are delayed or unsuccessful, of if any changes to our controls, reporting systems, or procedures are deficient, prices of our services may increase, client satisfaction may suffer, we may loseexperience clientssignificant client attrition or fail to onboard new clients at expected rates, and we may incur substantial unanticipated costs to complete these projects. Any of these outcomes could have a material adverse effect on our business, financial condition and results of operations.

SMBs can be particularly susceptible to changes in the level of overall economic activity in the markets in which they operate. These businesses are often exposed to credit and cash liquidity risks, including exposure as a result of the failure of their financial institutions, that larger businesses may be able to avoid,avoid. Economic activities, increased regulations, policy changes and duringuncertainty may impact SMBs to a greater degree than larger business. During periods of weak economic conditions, including periods of increased inflation and increased borrowing costs, SMB failures tend to increase, and employment levels tend to decrease. During these periods, our clients can and do freeze hiring, terminate or furlough their employees, and reduce compensation and benefits levels, any of which would negatively affect our revenues and margins if we are unable to reduce our operating expenses sufficiently or quickly enough. During these periods, we have also seen and expect to continue to see, reduced demand for our services, increased client terminations, fewer new clients, and clients seeking to renegotiate our contracts and prices. In addition, our growth is partially dependent on hiring of new employees by existing clients, which may be negatively impacted during periods of tight labor markets, or may be impacted long term by technological changes including, without limitation, decreases in client headcounts driven by AI. When our clients leave us or reduce their headcount, we typically see increases in the volume and severity of unemployment claims, COBRA claims, disability claims, and workers’ compensation claims. We may be unable to recover costs related to these claims based on the fees established in our client service agreements, and any failure to recover such costs may have a material adverse effect on our business, financial condition and results of operations.

Our standard client service agreements can generally be canceled by our clients with 30 days’ prior written notice. We regularly experience client attrition and decreases in new client sales due to a variety of factors that are difficult for us to control or predict, including the overall global and national economic conditions, client mergers and acquisitions, changes in medical utilization and related costs, client business failure and liquidity issues, the effects of competition, pricing of our services, and client decisions to administer all or a portion of their HR needs in-house without using our services. If we experience clientClient attrition for any of the above reasons in excess of our historic and estimated rates ithas couldhad and may at times continue to have a material adverse effect on our business, financial condition and results of operations.

PEO services remain our core business. Our top five PEO markets, California, New York, Florida, Texas and Massachusetts, accounted for approximately 63%64% in aggregate of our paid WSEs for the year ended December 31, 2024.2025. If any of those geographic regions suffers a downturn, even if the economy at the national level remains strong, or experiences higher than expected medical services utilization, due to regional health issues or other regional specific issues, the portion of our business attributable to clients in that region could be adversely affected, which could have a material adverse effect on our financial condition or results of operations.

These centers and systems have been, and could be disrupted by equipment failures, computer server or systems failures, network outages, ransomware attacks and other malicious acts, software errors or defects, vendor performance problems, banking failures, power failures, natural disasters, terrorist actions or similar events. We have, for example, experienced office closures on the east coast on multiple occasions over the past few years due to hurricane and storm threats, in Texas due to climate-related power grid issues, and in California due to increased wildfire threats in the state.threats. Our offices and service centers in these and other locations will continue to face the risk of closure or damage in the future due to climate related events.

In addition, broad adoption of our services in certain geographic regions or industries may make it more difficult for us to obtain competitive health and/or workers' compensation insurance rates due to concentration of clients within a particular region or industry. For example, we have significant concentrations of PEO clients in California, New York, Florida, Texas and Massachusetts, which account for approximately 64% in aggregate of our paid WSEs for the year ended December 31, 2024.2025. The loss of any one or more of our key insurance vendors in these areas, including, without limitation, for any legal, political, or economic reasons, or our inability to partner with the most desirable carriers in these areas, could have a material adverse effect on our financial condition and results of operations.

•our ability to innovateinnovate, provide innovative solutions and software and technology platforms and respond to client needs and regulatory mandates rapidly,

•the performanceperformance, reliability and ease of use of our online and mobile solutions, software and technology platforms, and

The expectations of our clients and prospective clients in these areas change over time as a result of many factors outside of our control, such as competition, regulatory and technical changes, technological changes, and changing trends in the demands employees place on SMB employers.

ToIn satisfyaddition, client expectations and regulatory requirements, we must timely and effectively identify and develop, or license and contract appropriate technologies and services, and incorporate such technologies and services into the solutions that we provide. Newnew services or upgrades may not be released according to schedule or may contain defects when released. If our new technologies and services perform poorly, or fail to satisfy regulatory requirements, we could experience client dissatisfaction, adverse publicity, loss of sales, and client claims against us, any of which could materially harm our business. Even where we can satisfy client expectations and regulatory requirements, we may not be able to do so on a cost-effective basis, which could have a material adverse effect on our financial condition and our results of operations. We could lose market share if our competitors develop superior technologies and services or satisfy client or regulatory demands before we are able to do so. If we are unable to satisfy the evolving technology and service expectations and regulatory requirements, then we may experience lower client satisfaction, fewer new clients and higher client attrition, which could have a material adverse effect on our business.

We have completed numerous acquisitions of other businesses and technologies overin the years,past, and we expect that we will continue to pursue future acquisitions. Acquisitions involve numerous risks, some of which we have experienced in the past and which we may experience in the future, including:

•unforeseen liabilities or litigation resulting from the activities of the acquired business,

We may not be able to keep pace with changes in technologytechnology, including as a result of AI, or provide timely enhancements to our solutions and support.

The market forAccordingly, our solutions is characterized by rapid technological advancements, changes in customer requirements, frequent new product introductions and enhancements, and changing industry standards. To maintain our growth strategy, we must adapt and respond to technological advances and technological requirements of our clients. Our future success will depend on our ability to: enhance our current solutions and introduce new solutions in order to keep pace with solutions offered by our competitors.competitors, and to market those solutions effectively to existing and potential clients. We continue to make significant investments related to the development of new technology. If our systems become outdated, it may negatively impact our ability to meet performance expectations related to quality, time to market, cost and innovation relative to our competitors. The failure to provide a more efficient and user-friendly customer-facing digital experience across internet and mobile platforms as well as in physical locations may adversely impact our business and operating results. We cannot assure you that our efforts to update and integrate systems will be successful. If we do not integrate and update our systems in a timely manner, or if our investments in technology fail to provide the expected results, there could be a material adverse effect to our business and results of operations.

We and our third-party service providers and subcontractors collect, store, use, retain, disclose, transfer and process a significant amount of confidential, sensitive and personal information from and about our actual and potential clients, WSEs and colleagues, including bank account numbers, social security numbers, tax information, PHI, health claim information, retirement account information, and payroll data. MaintainingWe also collect significant amounts of funds from the securityaccounts of our clients and confidentialitytransmit of this information is critically importantthem to ourtheir clients,employees, WSEstax authorities and colleagues.other For more information regarding our cybersecurity risk management framework and governance, refer to Part I, Item 1C. Cybersecurity.payees.

Cybersecurity threats can take a variety of forms. Malicious actors may develop and deploy viruses, worms and other malicious software programs that attack our networks and data centers or those of our service providers. Malicious actors may also direct social engineering, phishing, credential stuffing, ransomware, denial or degradation of service attacks and similar types of attacks against any or all of us, our clients and our service providers. Other threats include inadvertent security breaches or disclosures, misuse or unauthorized access or other improper actions by our colleagues, clients, WSEs, service providers and other business partners. Cyber-attacks, breaches, disclosures and other data-related incidents are increasing in frequency and evolving in nature.nature (including due to the use of AI). In addition, new computing technologies, including quantum computing, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms we or our authorized third parties use or have used to encrypt or protect data. While we devote substantial time and resources to training our colleagues to identify and avoid such incidents, no training or cybersecurity program can offer absolute protection against such attacks and incidents.

Any actual or attempted cyber-attack, breach, disclosure or other data-related incident, could result in data loss, the unauthorized access or use of personally identifiable information, theft of sensitive information or our clients’ or our own funds, or business interruption, which could have a material adverse effect on our business, reputation, financial condition or results of operation. PublicAny delays or failures caused by network outages, software or hardware failures, or other data processing disruptions, could result in our inability to provide services in a timely manner or at all. The speed to closure of significant cybersecurity incidents may be influenced by the cooperation of government or law enforcement agencies. In addition, since the security of our information technology infrastructure is an important consideration in our clients’ purchasing decisions, and public perception of, or even inaccurate or unfounded rumors of, any such cyber-attacks, breaches, disclosures, or other data-related incidents, could have a material adverse effect on our business, reputation, financial condition or results of operation.

TriNetWe doesdo not need to be the direct target of such cyber-attacks, breaches, disclosures or other data-related incidents, for them to have a material adverse effect on our operations. A cyber-attack on a key third-party software service provider, or a new vulnerability identified in software that we use, could disrupt our services or compromise client data entrusted to that service provider. New software vulnerabilities are identified regularly, by organizations like the U.S. Cybersecurity and Infrastructure Security Agency. Similar cyber-attacks, breaches, disclosures and other data-related incidents, including those resulting from a vulnerability, involving a client could also result in access to TriNet’sour systems. Any such incidents, even if not initially directed at TriNet,us, could also have a material adverse effect on our business operations, result in liability, fines and penalties or other regulatory sanctions, a loss of confidence in our ability to provide our services, and/or harm our reputation and relationships with current or potential clients.

We must comply with constantlyconstantly-evolving evolving,privacy, data privacy,protection, AI and securitycybersecurity laws and regulations, which may require substantial costs or changes to our business, and any actual or perceived compliance failure could result in reduced revenue, increased costs, liability claims, regulatory penalties, and damage to our reputation.

We are subject to various international, federal, state and local laws, rules, and regulations, as well as contractual obligations, relating to the collection, storage, use, retention, security, disclosure, transfer and other processing of confidential, sensitive and personal information. Existing laws and regulations are constantly evolving, and new laws and regulations that apply to our business are being introduced at every level of government inside and outside of the United States.

We believe that providing insights and content from data, including AI and ML, will become increasingly important to the value that our solutions and services deliver to our clients are exploring thehow usebest ofto integrate generative AI technologies and MLdevelop in an effort toand deploy capabilities that are beneficial to our clients and WSEs. In recent years, legislation that creates obligations with respect to the development and/or use of AI has been adopted or is under consideration in the U.S. at both the federal and state level, as well as abroad. In addition, self-regulatory frameworks like the National Institute of Standards and Technology AI Risk Management Framework are being promulgated and adherence to such regulatory frameworks may become an industry standard or a client expectation. As a result, the ability to provide data-driven insights and otherwise leverage AI and ML may be constrained by current or future laws (including product liability regimes), regulatory or self-regulatory requirements or ethical considerations, including our own published, guiding ethical principles regarding AI and ML, that could restrict or impose burdensome and costly requirements on our ability to leverage data and/or these technologies in innovative ways. Our use of generative AI in our solutions and operations also introduces additional risks, including risks related to accuracy, bias, transparency, security, and privacy. For example, if data used to train a model or the model’s output is inaccurate or biased, or alleged to be inaccurate or biased, we could be subject to reputational damage or litigation.

For details regarding these data privacy and security laws and regulations discussed above and that apply to our operations, refer to Part I, Item 1. Business, of this Form 10-K, under the heading “The Laws and Regulations that affect Our Business: Data Privacy and Security Regulations”. Complying with these and any other data privacy and security laws, rules and regulations, and with any new laws or regulations or changes to existing laws, could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business, divert resources from other initiatives and projects, and restrict the way products and services involving data are offered, all of which may have a material adverse effect on our business. Despite our efforts, in the future we may be unable to make required changes and modifications to our business practices in a commercially reasonable manner, or at all. Given the rapid development of cybersecurity and data privacy laws, we may be required to incur significant, unexpected compliance costs and weWe may be exposed to significant penalties or liability for non-compliance, the possibility of fines, lawsuits (including class action privacy litigation), regulatory investigations, criminal or civil sanctions, audits, adverse media coverage, public censure, other claims, significant costs for remediation and damage to our reputation, all of which could have a material adverse effect on our business and operations. Any inability, or the perception of any inability, to adequately address data privacy or data-related concerns, even if unfounded, or to comply with applicable laws, regulations, standards and other obligations relating to data privacy and security, could result in additional cost and liability to us, damage our relationships with clients and have a material adverse effect on our business.

The services we provide to our clients are subject to numerous complex federal, state and local laws and regulations, including those described in Part I, Item 1. Business, of this Form 10-K.regulations. These laws and regulations cover aan diverseextensive range of topics, including employer status, employee and independent contractor classifications, employee benefits, health and retirement plans, workers' compensation, banking and money transmission, employment and payroll tax, worksite safety, insurance, wage and hour, anti-discrimination, and many topics specific to the industries of our clients. Many of these laws do not specifically address PEOs or co-employment relationships, and regulators are often unfamiliar with the PEO industry and co-employment relationships, which can lead to unpredictable application, interpretation and enforcement of these laws and regulations at the federal, state and local levels in relation to our business. Our ASO services can also be subject to complex federal, state and local laws and regulations regarding payroll agents, employment and payroll taxes, insurance producers, banking and money transmission, and other licensing requirements. The tax credit support services we provide are also subject to federal, state and local regulations regarding tax preparation and practice that limit the services we can provide to SMBs. While regulations governing ASO services and tax credit support services do not involve the complexity of a co-employment relationship, these services are in some ways also highly regulated and such regulations can, and do, change regularly at the federal, state and local levels.

Any new laws, changes in existing laws, or any adverse application, interpretation or enforcement of new or existing laws, including those described in Part I, Item 1. Business, of this Form 10-K, whether they apply to employers generally or specifically to PEOs or to our co-employment relationships could:

SomeOne of these programs includeincludes the 2015 PATH Act, which allows SMBs to use R&D tax credits submitted on the SMB’s income tax return to reduce the SMB’s payroll taxes, and the CARES Act and FFCRA payroll tax credit and payroll tax deferral program enacted in 2020 and 2021, which allow SMBs to defer certain payroll tax obligations to a later date or to receive payroll tax credits based on SMB employment practices that are beyond our control.taxes. The IRS has taken positions that we and other PEOs, rather than clients, are responsible for client errors and repaying rejected tax credit claims under these and similar programs. While our clients are contractually responsible for repaying us for any rejected tax credits under these programs, a contract does not guarantee our ability to recover rejected tax credits and any failure to recover rejected tax credits from our clients would increase our operating expenses, which could result in a material adverse effect on our financial condition and results of operations. Similarly, the IRS has taken positions that the tax benefits under some of these programs should be calculated on an aggregate PEO, rather than individual client, basis, which can limit whether and how we obtain credits for our clients. We cannot predict how these positions will ultimately be resolved and if they are resolved unfavorably, we may be forced to discontinue supporting some or all of these programs, incur tax expenses that we cannot recover from our clients, and divert management’s attention to defending our positions, any one of which could have a material adverse effect on our ability to attract and retain SMB clients or on our business, financial condition and results of operations.

The definition of employer under the Code and ERISA is not uniformuniform, and is defined in part by different facts and circumstances tests, and there is no definitive judicial interpretation of employer in the context of PEOs. Generally, the tests used under the Code or ERISA are designed to evaluate whether an individual is an independent contractor or employee, and they confer substantial weight to whether a purported employer has the right to direct and control the details of an individual's work. Some factors that may be considered important under these tests have included the employer’s degree of behavioral control (for example the extent of instructions, training and evaluation of the work), financial control and the economic aspects of the work relationship, the type of relationship, as evidenced by the specific contract, if any, whether employee benefits are provided, whether the work is indefinite in duration or project-based, and whether it is a regular part of the employer’s business.

We will continue to vigorously defend our opinion that we are the sole employer of our WSEs for the purposes of SectionsSection 3(5) and 3(40) of ERISA, and therefore that our health plans are single employer plans entitled to ERISA’s preemption of applicable state laws. Although we do not currently have any ongoing DOL audit on this issue, we have received requests for information on the issue from other government agencies. It is possible that these requests, or future DOL audits, could lead a government agency to disagree with the Company’sCompany's interpretation. If it were ultimately determined that health plans sponsoredwe by TriNetsponsor are multiple employer plans and subject to potential regulation at the state level, we would likely adjust our business model and the manner in which we provide employee health benefits to WSEs. Any such outcome or adjustment would require significant investment in time, cost and management attention and would have an adverse impact on our clients and WSEs and the type of products and services we provide to them, which could have a material adverse effect on our business and results of operations.

•beganmade severalprogress strategicon restructuringour initiativesmedium-term tostrategy focusfocusing our business on our core value proposition, growing ASO, andimproving the efficiency and effectiveness of our operations.operations, which has helped us realize all time high net promoter scores,

Our total revenues increaseddecreased 1%, primarily driven by higherlower co-employed Average co-employed WSEs and rate increases, partially offset by lowerhigher healthrates plancharged enrollment.for our services. Average WSEs and Total WSEs increaseddecreased 6%5% and 4%,10%, respectively, compared to the same period in 2023,2024, primarily due to additionalWSE PEOdecreases Platformin Usersour Technology, Professional Services, and additionalMain serviceStreet recipientsverticals, identifiedwhich aswere apartially resultattributable to repricing of our ongoinghealth effortbenefits to ensure that our billing practices best match the expectations of our customers.services.

Higher insurance costs and interest expense, partially offset by higherlower revenues, resulted in decreases of net income and Adjusted Net income of 54%10% and 40%,14%, respectively, as compared to the same period in 2023. The decrease in net income was also driven by impairment and severance charges recognized as part of our efforts to realign our strategy.2024.

(1) Non-GAAP effective tax rate is 25.0% for 2025, and 25.6% for 2024 and 2023, and 25.5% for 2022,2024, which excludes the income tax impact from stock-based compensation, changes in uncertain tax positions, and nonrecurring benefits or expenses from federal legislative changes.

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 or are subject to partnership 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 is reflected in Total WSEs for both December 31, 2024 and 2023, and increased Average WSEs by approximately 5,400 and 1,500 related to COBRA users for the years ended December 31, 2024 and 2023, respectively. We intend to continue our ongoing effort to ensure that our billing practices best match the services we provide and the expectations of our customers and in the future we may identify additional individuals that should be included in Total WSEs and Average WSEs.

InWe December 2023, we implementedcharge a platform user access fee to charge clients for those users of our PEO platform that may not be co-employed by us andas towell charge clientsas for co-employees for whom payroll may not be regularly run. In addition to co-employees for whom payroll may not be regularly run, such as partners in a partnership, this group of users also includes individuals authorized by our clients to access and use the PEO platform for functions such as bookkeeping and benefits management. WhileWe the amount of revenue we recognized for this servicerefer to date has not been significant, these users of theas PEO platformPlatform forUsers. whoseStarting accessin 2023 and rolled out through 2024, we chargedbegan thisbilling feeclients increasedin ourgroups reportedover Totaltime, WSEsdriving bya approximatelylarge 30,600increase asin ofPEO DecemberPlatform 31,Users 2024over andthat Average WSEs by approximately 20,200 and 1,000 for the years ended December 31, 2024 and 2023, respectively.period.

The effect of this new fee is that we are now receivingreceive 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 capacity. The table below illustrates how those two components comprise our Total WSE and Average WSE metrics.

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 successrevenue in generating revenue, growing ourgrowth, business growth, and retainingclient clients.retention. Total WSEs increaseddecreased 4%10% when compared to the same period in 2023,2024, primarily due to higherdeclines PEOin Platformour UsersTechnology, asProfessional theServices, PEOand platformMain userStreet accessverticals. fee described aboveThis was fullypartially implementedattributable duringto 2024.necessary repricing of our health benefits services.

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 or other opportunities that wouldto expand our product offering and provide further scale.

Under our risk-based health insurance policies, we assume some of 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.

ICR increased for the year ended December 31, 20242025 as compared to 2023,2024, primarily driven by higher health benefits insurance costs outpacingthat therose growthat a higher rate than our insurance services revenues for health benefits. The increase in ISR. Insuranceinsurance costs increasedwas primarily due to more severe medical service utilization in all categories (inpatient, outpatient and professional services), higher rates paid for thoseoutpatient and professional services, as well as pharmacy costs includingfor increased utilization of specialty drugs,drugs and other high-cost prescriptions, particularly medications for diabetes and obesity. DuringThis the year ended December 31, 2024, thisincrease was partially offset by favorablelower prior period development in workers' compensation.volume.

The increase in totalTotal revenue decreased slightly for the year ended December 31, 20242025, wasas primarily driven by higherlower co-employed Average WSEs and rate increases,was partially offset by lowerrate healthincreases planfor enrollment.both professional services and insurance services revenues.

Our PEO and ASO clients are primarily billed on a fee per WSE or HRISASO 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.

During 2025, we began migrating our clients from our predecessor HRIS services to our ASO product. PSR from PEO Services customers and HRIS and ASO services clients was as follows:

The increasedecrease in PSR for the year ended December 31, 20242025 was primarily driven by higherlower co-employed Average WSEsWSEs, and increasesthe indiscontinuance rate.of Theboth decreasea inclient-level technology fee and our Clarus R+D product. PSR from HRIS revenueservices comparedhas decreased as we continue to thewind priordown periodsthis wasproduct dueand migrate clients to aour decreaseASO in HRIS Users in 2024 and an acceleration of revenue in 2023 related to a termination agreement in a broker partner which did not recur in 2024.services.

TheISR increasewas in ISRflat for the year was primarily driven byas rate increases and higher co-employed Average WSEs, partiallywere offset by lower healthco-employed planAverage enrollment.WSEs.

Interest income primarily includes interest income earned from cash held for our PEO and ASO clients as a result of the requirement of our clients to prefund their payroll and related taxes and other withholding liabilities before payroll is processed or due for payment. Interest income also includes our portion of interest received from tax jurisdictions related to payroll and other tax refunds. Interest income from tax refunds is recognized when the amount and timing of the interest become determinable.

The slight increase in insurance costs for the year was primarily due to more severe medical service utilization, higher rates paid for all categories of service (inpatient, outpatient and professional services) and increased utilization of high-cost drugs, particularly for specialty drugs utilization,and particularlynon-specialty medications for diabetes and obesity. This trendincrease wasis partially offset by favorablelower workers'co-employed compensationAverage prior period claims development.WSEs.

We had approximately 3,6003,400 colleagues as of December 31, 20242025 primarily across the U.S. but also in India and Canada.Canada, down approximately 200 colleagues from 2024. Compensation costs for our colleagues include payroll, payroll taxes, SBC, bonuses, commissions and other payroll- and benefits-related costs. Compensation-related expenseexpenses represented 63%66% and 66%63% of our expenses in 20242025 and 2023,2024, respectively.

In 2024,2025, we experiencedhad an expense growthdecrease of 5%7% compared to 2023.2024. This increasedecrease was primarilydriven drivenlargely by severancelower costs and non-cash impairment chargesexpenses related to the execution of our restructuringmedium effortsterm strategy, which includes process optimization, further development of our product offerings, and go-to-market innovations compared to the higher asset impairment and severance expenses seen in 2024 as wella asresult higherof interestthe expenseinitial relatedimplementation toof oursuch debt instruments issued in 2023.strategy. The ratio of expenses to total revenues was 19% and 20% in 20242025 and 2023.2024, respectively.

Our ETR was 23%29% and 25%23% for 20242025 and 2023,2024, respectively. The decreaseincrease in the rate was primarily attributable to an increase in tax benefits related to excludable income for state tax purposes and tax credits, offset by a decreasedecreases in tax benefits for stockstock-based basedcompensation compensation.and charges to valuation allowances.

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.

In December of 2023, TriNet createdTrust, awhich trustis forconsolidated theinto purposeour offinancial holdingstatements, holds funds provided by HRISASO clients for the remittance to HRISASO Users, tax authorities and other recipients. This trust is consolidated into our financial statements. During the first quarter of 2024, TriNet Trust assumedalso holds ownership and responsibility of certain bank accounts that hold ASO client funds. The associated cash is reflected on our consolidated balance sheetsheets as restricted cash and the associated liabilities are classified as accrued wages, payroll tax liabilities and other payroll withholdings, and clientaccounts depositspayable and other client liabilities and assumed relatedcurrent liabilities. As of December 31, 2024,2025, the balance of restricted cash in TriNet Trust was $87$79 million. Beginning in the second quarter of 2024, weWe include the assets and liabilities related to the TriNet Trust in the "WSE & TriNet Trust" category because the underlying cash flows of TriNet Trust are related to the same type of payroll and payroll related liabilities as our WSE cash flows. This trust structure willWe continue to beuse usedthis trust structure as we transition our HRIS services to ASO services.

Corporate working capital as of December 31, 20242025 increased $84$32 million from December 31, 2023,2024, primarily drivendue byto athe $72 million increasedecreases in our corporate unrestricted cash and cash equivalents, partially offset by a $65 million decrease in the current portionliabilities. of our unrestricted investment portfolio and a $54 millionThe decrease in corporate current liabilities,liabilities mostlyis primarily driven by the $34repayment millionof reductionthe outstanding balance on our revolving credit facility in the currentthird portionquarter of our2025, leaving no outstanding debt.balance on our $700 million revolving line of credit.

The year-over-year change in net cash provided by operating activities was primarily driven by the decrease in our net income and the timing of collections of receivables and our payments of corporate obligations.

ThereOther than the risk factor below, there have been no material changes in our risk factors disclosed in Part 1, Item 1A, of our 2025 Form 10-K.

TriNet is a leading provider of HR solutions for SMBs. We offer a comprehensive suite of technology-enabled services through our PEO and ASO models that includeincluding human capital expertise, employee benefits such as health insurance and retirement plans, payroll and payroll tax administration, risk mitigation, and compliance consulting.

We deliver a comprehensive suite of services that help our clients administer and manage various HR-related needs and functions, such as compensation, benefits, payroll processing, tax credit support, employee data, health insurance, workers' compensation, EPLI and other employment risk mitigation programs, employee performance management and training, on-boarding and off-boarding, and other transactional HR needs using our PEO technology platform and benefits and compliance expertise.

OurIn addition, our ASO services, which includesinclude our “HR Plus” product, consist of a SaaS solution with a significant service component.component, ASO services includeincluding payroll processing, benefits management, HR administration and compliance management to provide HCM solutions that our clients can tailor dynamically over time based on their specific needs. Unlike our PEO services, ASO services do not include co-employment.

Our consolidated results for the threefirst monthshalf ended March 31,of 2026 reflect our continuing efforts to serveenhance our existingclient clients,experience, attractimprove newour clients,sales performance, and manage expensesclient attrition, through product development and investinvestments in our platform.platform, as well as operational and process improvements.

•continued to execute on our medium-term strategy, includingreflecting substantivesignificant progress in our efforts to reset the rates of our health benefits services,

•through initiative with key partners, launched tools to assist our clients with IT automation, global workforce management and retirement plan connectivity to TriNet’s platform,

•in April of 2026, announcedcompleted the purchase of Cocoon, a leading provider of leave management technology that we planare to integrateintegrating into TriNet’s platform.

Our results for the quarter ended MarchJune 31,30, 2026 when compared to the same period of 2025, are noted below:

Our total revenue decreased in the firstsecond quarter of 2026, compared to the same period in 2025, primarily driven by lower co-employed Average WSEs partially offset by higher rates charged for our services.

During the firstsecond quarter of 2026, our Average WSEs decreased by 11% and Total WSEs decreased by 12%,12% compared to the same period in 2025, primarily due to WSE decreases in our Technology, Professional Services, and Main Street verticals, which were partially attributable to repricing of our health benefits services.

Our results are highly influenced by health care cost and utilization trends. Our ICR in the firstsecond quarter of 2026 decreased compared to the same period in 2025, primarily driven by lower claims development and one time recovery of costs of $21 million from prior years. It also reflects the cumulative results of our repricing efforts over the past year to align our insurance services rates with the current insurance cost trends and lower claims development from the prior year.trend.

Lower revenue,insurance costs, partially offset by lower insurance costs,revenue, resulted in increases of net income and Adjusted Net Income of 5%43% and 17%,31%, respectively, in the firstsecond quarter of 2026, as compared to the same period in 2025.

The following table summarizes our results of operations for the firstsecond quarter ended MarchJune 31,30, 2026, when compared to the same period of 2025. 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 2025 Form 10-K.

The following table summarizes our balance sheet data as of MarchJune 31,30, 2026 compared to December 31, 2025.

(1) Non-GAAP effective tax rate is 25.5% and 25% for the first quarters of 2026 and 2025, respectively, which excludes the income tax impact from stock-based compensation, changes in uncertain tax positions, and nonrecurring benefits or expenses from federal legislative changes.

Average WSEs decreased 12%11% when comparing the firstsecond quarter of 2026 to the same period in 2025, driven by client attrition outpacing new client additions which was partially offset by modest additional hiring of WSEs by our clients over the past twelve months. These declines were primarily in our Technology, Professional Services, and Main Street verticals. Client attrition has been higher than our historical rates in the past twelve months primarily due to the repricing increases of our health benefits services driven by increasing health care costs.

ASO Users grew from approximately 39,700 users as of December 31, 2025 to approximately 40,80040,400 users as of MarchJune 31,30, 2026. This increase is primarily related to the addition of new clients as we continue to migrate from our former HRIS product to our ASO product.

ICR decreased for the second quarter and first quarterhalf of 2026, respectively, as compared to the same periodperiods in 2025, primarily driven by lower than expected claims development and a one-time recovery of costs of $21 million from prior years. Our ICR also decreased due to rate increases in our insurance services revenue for health benefits outpacing the corresponding increase in insurance costs due to our repricing efforts. The overall decrease in insurance costs and insurance services revenue was primarily due to lower co-employed Average WSEs.

Monthly revenues per co-employed Average WSE is a measure we use to monitor our PEO pricing strategies. This measure increased by 9%8% during the threesecond monthsquarter ended March 31,of 2026 compared to the same period in 2025 and increased by 9% during the first half of 2026 when compared to same period in 2025.

•Mix - the change in composition of co-employed Average WSEs within our verticals combined with the composition of our enrolled co-employed WSEs within our insurance service offerings and the composition of products and services our clients receive, such as PEO Platform Users,Users and revenue we earn specific to our new Cocoon product,

Total revenue decreased for the second quarter and first quarterhalf of 2026, as lower co-employed Average WSEs was partially offset by rate increases for both professional services and insurance services revenues.

•Mix - the change in composition of co-employed Average WSEs across our verticals and the composition of products and services our clients receive, including PEO Platform Users,Users and revenue we earn specific to our new Cocoon product, and

PSR for the second quarter and first quarterhalf of 2026 decreased compared to prior period,periods, primarily driven by lower co-employed Average WSEs.WSEs and lower ASO revenue, partially offset by rate increases. PSR from ASO services has decreased as we continue to wind down our former HRIS services product and migrate clients to our ASO services.

ISR decreased for the second quarter and first quarterhalf of 2026, primarily due to lower health plan enrollment driven by lower co-employed Average WSEs. This decrease was partially offset by higher rates.

Interest income for the second quarter and first quarterhalf of 2026 was lower than the prior period, primarily driven by lower interest received related to payroll tax refunds.

Insurance costs for the second quarter and first quarterhalf of 2026 decreased, primarily due to lower co-employed Average WSEsWSEs, and betterlower than expected claims development from the prior year.year and one-time recovery of costs of $21 million from prior years. This decrease was partially offset by higher rates paid for professional services, increased outpatient utilization, and continued growth in the use of high-cost drugs, particularly for specialty medications and on-specialtynon-specialty drugs for diabetes and obesity.

We had approximately 3,4003,300 colleagues as of MarchJune 31,30, 2026 primarily across the U.S. and India, approximately the same as in MarchJune 31,30, 2025. Compensation costs for our colleagues include payroll, payroll taxes, SBC, bonuses, commissions and other payroll- and benefits-related costs. Compensation-related expenses represented approximately 69%64% and 68%66% of our expenses in the firstsecond quarters of 2026 and 2025 respectively, and 67% in each of the six months ended 2026 and 2025.

During the firstsecond quarter of 2026 expenses decreased 1% when compared to the same period in 2025, largely driven by lower compensation expenses. During the six months ended June 30, 2026, expenses increased 5%,2% when compared to the same period in 2025. ThisThe increase wasis largely driven largely by higher expenses related to severance charges incurred in the first quarter of 2026 as part of our efforts to rebalance our workforce in line with our medium term strategy. The ratio of expenses to total revenues was 20% for the firstsecond quarter and 18%20% for the six months ended June 30, 2026 and 19% for the same periodrespective periods in 2025.

Our ETR was 28% for the second quarters of 2026 and 2025, and 28% and 26% for the first quartershalf of 2026 and 2025, respectively. The increase in the rate for the first half of 2026 compared to the same period in 2025 was primarily attributable to decreases in tax benefits for stock-based compensation and increasesdecreases in nondeductibleexcludable compensation.income for state tax purposes.

TriNet Trust, which is consolidated into our financial statements, holds funds provided by ASO clients for the remittance to ASO Users, tax authorities and other recipients. TriNet Trust also holds ownership and responsibility of certain bank accounts that hold ASO client funds. The associated cash is reflected on our condensed consolidated balance sheets as restricted cash and the associated liabilities are classified as accrued wages, payroll tax liabilities and other payroll withholdings, and accounts payable and other current liabilities. As of MarchJune 31,30, 2026, the balance of restricted cash in TriNet Trust was $54$44 million. We include the assets and liabilities related to the TriNet Trust in the "WSE & TriNet Trust" category because the underlying cash flows of TriNet Trust are related to the same type of payroll and payroll related liabilities as our WSE cash flows. We continue to use this trust structure as we complete the transition of our HRIS services to ASO services.

As of MarchJune 31,30, 2026, 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.

Corporate working capital as of MarchJune 31,30, 2026 increased $27$38 million from December 31, 2025, primarily due to the increases in our corporate cash and cash equivalents. This increase was driven by earnings during the first quarterhalf of 2026 partially offset by share repurchases and dividends paid.

The year-over-year change in net cash provided by operating activities was primarily driven by higher net income coupled with the timing collections of receivables and our payments of corporate obligations.

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 MarchJune 31,30, 2026, our investments had a weighted average duration of three-yeartwo-year and an average S&P credit rating of AA+.

As of MarchJune 31,30, 2026, we held approximately $1.6$1.5 billion in restricted and unrestricted cash, cash equivalents and investments, of which $340$358 million was unrestricted cash and cash equivalents. Refer to Note 2 in the condensed consolidated financial statements and related notes included in this Form 10-Q.

During the threefirst monthshalf ended March 31,of 2026 and 2025, we continued to make investments in software and hardware as we enhanced our existing service offerings and technology platform. In the second quarter of 2026 we acquired Cocoon in an all cash transaction. We also made significant investments in furniture and fixtures for our recently leased space in Atlanta during the quarter.first half of 2026. We expect capital investments in our software and hardware to continue in the future.

Net cash used in financing activities in the threefirst monthshalf ended March 31,of 2026 and 2025 consisted of WSE and TriNet Trust related activities and our debt and equity-related activities.

During the threefirst monthshalf ended March 31,of 2026, we repurchased 1,348,5131,789,100 shares of our common stock for approximately $58$76 million through our existing stock repurchase program in addition to 57,48463,119 shares acquired to satisfy tax withholding obligations related to SBC vesting. As of MarchJune 31,30, 2026, approximately $347$329 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.

We paid a common stock dividend of $0.275 per share in January 2026 and $0.29 per share in April 2026. We also declared common stock dividendsdividend of $0.29 per share to be paid in the second quarter ofJuly 2026.

As of MarchJune 31,30, 2026, $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 July 2025, we paid off the remaining outstanding balance and as of DecemberJune 31,30, 2025,2026, no outstanding balance remained. 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 MarchJune 31,30, 2026.