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Good day and welcome to the TriNet Group, Inc. Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. Now I would like to turn the conference over to Alex Bauer, Head of Investor Relations. Please go ahead. Thank you, Operator. Good morning. My name is Alex Bauer, TriNet Group, Inc.'s Head of Investor Relations.

Thank you for joining us, and welcome to TriNet Group, Inc.'s fourth quarter conference call and webcast. I am joined today by our President and CEO, Michael Quinn Simonds, and our CFO, Kelly Lee Tuminelli. Before we begin, I would like to preview this morning's call. First, I will pass the call to Michael for his comments regarding our fourth quarter and full year performance. Kelly will then review our Q4 and full year financial performance in greater detail and conclude with our 2026 financial guidance and outlook. Please note that today's discussion will include our 2026 full year financial outlook. Our midterm outlook, and other statements that are not historical in nature, are predictive in nature, or depend upon or refer to future events or conditions, such as our expectations, estimates, predictions, strategies, beliefs, or other statements that might be considered forward-looking. These forward-looking statements are based on management's current expectations and assumptions and are inherently subject to risks, uncertainties, and changes in circumstances that are difficult to predict and that may cause actual results to differ materially from statements being made today or in the future. Except as may be required by law, we do not undertake to update any of these statements in light of new information or future events. We encourage you to review our most recent public filings with the SEC, including our 10-Ks and 10-Q filings, for a more detailed discussion of the risks, uncertainties, and changes in circumstances that may affect our future results or the market price of our stock. In addition, our discussion today will include non-GAAP financial measures, including our forward-looking guidance for adjusted EBITDA margin and adjusted net income per diluted share. For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see our earnings release, 10-Q filings, or 10-K filings, which are available on our website or through the SEC website. With that, I will turn the call over to Michael. Michael?

Thank you, Alex, and thank you all for joining us this morning. 2025 was a challenging year across the SMB landscape, marked by elevated medical cost inflation and muted hiring activity. Against that backdrop, I am proud of how the TriNet Group, Inc. team stayed focused on our clients and executed with discipline against our strategy. As a result of that execution, we delivered solid financial performance. We finished the year at the top end of our earnings guidance and generated 16% growth in free cash flow. We significantly improved the quality of our pricing processes, successfully completing a comprehensive health fee renewal across our customer base, strengthening our risk position heading into 2026. And we made meaningful progress against our most important initiatives: improving client service, strengthening our go-to-market execution, and driving greater operational discipline. We are making progress on what we control, repositioning TriNet Group, Inc. for durable, long-term growth, and staying focused on our clients, and in an environment like this—health care inflation at levels not seen in more than two decades, and the slowest hiring market since 2020—our clients need us more than ever. The ASO and PEO model typically delivers a mid to high teens ROI to SMBs, by leveraging our scale and technology to lower HR and benefits expense. However, beyond cost, we help our clients manage risk while acting as a trusted adviser in a time of change, something an increasingly big number of our clients are dealing with today. For example, we worked with one technology client—a sector dealing with significant disruption—to help restructure their 160-person organization. We helped them reduce costs by more than 20%, flatten the management structure, prioritize critical skills, and implement a compensation framework aligned with their long-term objectives. This is the positive impact TriNet Group, Inc. can have on an SMB. And while we cannot control external headwinds, we are gaining momentum, adding new capabilities designed to bring in more clients and serve them longer.

The growth-focused investments we made in 2025 are beginning to take hold. Sales were up nicely in January, and we expect momentum to continue through 2026. Our broker channel is a long-term build but off to a strong start. We entered 2026 with four national partners and expect to add more over time. We have improved our quoting, service, technology, and incentive alignment with our key partners. Health brokers contributed disproportionately to both our January sales growth and to our pipeline for the coming months. Second, we invested meaningfully in our sales organization in 2025 with a focus on maturing and retaining senior sales talent. We are coming into 2026 with double-digit growth in tenured reps—those with greater than four years of experience. One senior rep is more productive than four first-year reps, and as a group, they are critical for effective collaboration with successful brokers in each local market. To build a sustainable rep pipeline, we launched the Ascend program in 2025, bringing recent graduates into an immersive trainee experience in Atlanta. We are pleased with the results and excited about the first cohort entering the market aligned with the fall selling season. These new reps combined with the growth in tenured reps will result in nearly a 20% expansion in selling capacity later this year. Looking even further out, last week, we announced the expansion of Ascend to six regional hubs. This program is helping us attract motivated talent, embed our culture early, and build long-term sales capacity. We are also seeing how this influx of AI-native talent is accelerating adoption of AI across our sales processes. While it does not happen overnight, we are excited about the sustainable way our salesforce is being built. Third, we are simplifying our PEO health plan offering through benefit bundles. We are increasingly presenting prospects with streamlined geographic and risk-adjusted bundles. Early feedback has been positive, and we expect momentum to build as the year progresses. Finally, ASO is now a core growth driver in 2026. After discontinuing our SaaS-only HRIS platform at the start of 2025, conversion rates to ASO exceeded expectations. We ended the year with more than 39,000 ASO users at an average of approximately $50, roughly three times our SaaS-only offering, and stronger-than-expected new sales. Having a successful ASO offering in our portfolio gives our reps and brokers more opportunities to grow their businesses when PEO may not be a fit.

Of course, another major lever for client growth is driving improved retention. For us to return to our targeted insurance cost ratio in the current medical cost inflationary environment required a significant repricing effort. For 2025, our ICR was 90.8%, slightly better than the midpoint of our guidance with year-over-year improvement in the fourth quarter. We addressed a cohort that had been significantly underpriced in 2023 and early 2024. And while the repricing resulted in an increase to client attrition, I am pleased to report that January renewals represented the final major true-up for this cohort. Remaining clients have now cycled through two renewals and are trending toward expected ICR levels in 2026. Looking ahead, barring a significant uptick in health care trend beyond already elevated levels, health fee pricing pressure will moderate. To give you some sense for this, in looking at our April 1 renewals, the percentage of clients receiving health fee increases above 30% declined by more than half versus January 1 renewals. This is a significant move closer to a normalized distribution. With these catch-up renewals behind us, retention will increasingly be driven by strong capabilities and service quality, and here we are making great progress. In 2025, TriNet Group, Inc. achieved an all-time high net promoter score. While encouraged by this progress, our ambition is higher. In the coming weeks, we will launch TriNet Assistant, an AI-powered HR tool that enables customers to receive accurate, immediate answers across a broad range of HR topics. Built on more than thirty years of curated expertise, this represents a meaningful advancement, importantly, in how we deliver value. The assistant will be expanding and improving rapidly post launch. The foundational work has been laid with the right security and compliance layers in place. Over the coming quarters, we believe TriNet Assistant will become an indispensable tool for customers. Beyond AI, we are enhancing the client experience through strategic integrations. We plan to announce new capabilities in international employment, contractor management, IT provisioning and security, and leave of absence, significantly expanding the value provided via the TriNet platform.

In summary, we have built real momentum with our people, partnerships, and our platform investments. It is important to note that we are making these investments while remaining disciplined on expenses. We are exiting 2025 with expenses down 7% year over year, and expect further improvement in 2026. We laid out our medium-term strategy a year ago with a base case that called for modest improvement in the macro environment over time. We have not seen any improvement to date, resulting in pressure to our revenue expectations even as we have progressed to plan on margin improvement. Our guidance for 2026, based on our own data and benchmarked externally, does not assume any improvement on health care cost trend or hiring. Instead, we will stay focused on getting better, doing the things we can control: go-to-market execution, improved value to clients, disciplined pricing, and prudent expense management. We have made difficult decisions in response to a challenging macro environment—choices that are making us a stronger, more disciplined, more client-focused company. A company that will generate good outcomes in 2026 with building momentum. And with that, I would like to ask our new Chief Financial Officer, Kelly Lee Tuminelli, to share more details on the quarter and the outlook for 2026. Kelly is a little over two months on the job and has already made a positive impact while coming rapidly up to speed. Welcome, Kelly. Thank you, Michael.

Our fourth quarter and full year financial performance reflected the difficult macro business environment we faced throughout 2025. Over the last two years, the U.S. economy has experienced high medical cost inflation and low job growth, and TriNet Group, Inc. could not escape the impact of these factors. Entering 2025, we committed to reprice our health fees so pricing reflected the current cost environment and TriNet Group, Inc. would return to its long-term targeted insurance cost ratio range. We took these pricing actions to address a cohort that had been significantly underpriced. Although we were measured in our health fee repricing, spreading it over multiple cycles, it still required trend-plus increases to our customers, and the impact on new sales and retention was considerable. In the face of this challenging backdrop, TriNet Group, Inc. stayed focused and disciplined in execution and delivered bottom-line financial results at the top end of our full year guidance along with strong cash flow growth on a year-over-year basis. As we look ahead to 2026, we expect the challenging SMB macro business environment to persist, new sales growth throughout 2026, and retention to improve as the year progresses. To lay out my comments, I am going to first recap Q4 and 2025, provide the rationale for our 2026 guidance, and conclude with initial thoughts on TriNet Group, Inc. two and a half months in. With that, let us dive into our 2025 financial performance and 2026 outlook in greater detail.

Total revenues declined 2% year over year in the fourth quarter, and for the full year, total revenues declined 1% in line with our full year guidance. Total revenues in the year benefited from insurance and professional service revenue pricing. Those gains were offset by declining WSE volumes. We finished the year with approximately 320,000 total WSEs, down 10% year over year. As a reminder, total WSEs include platform users, or those users who are accessing our platform, as well as co-employed WSEs, or those users receiving the full benefit of our PEO services. We ended the year with 294,000 co-employed WSEs, down 11%. Retention dropped to roughly 80%, down five points year over year, with pricing cited most often as the reason for leaving TriNet Group, Inc. Our final outsized repricing for renewals was delivered on January 1. As we exit January, we expect our retention to improve. Regarding customer hiring, in the fourth quarter, CIE growth was in line with our forecast, and for 2025, we finished with a CIE rate in the low single digits, well below our historical average for the second consecutive year. Across our verticals, and specifically within our technology, professional services, and main street verticals, we once again saw weakness in CIE. In this macro environment, SMBs remain reluctant to grow their teams. Interestingly, in our book, gross layoffs have also declined. Hiring just has not returned.

Professional services revenue in the fourth quarter declined 7%. For the year, professional services revenue declined 6%, landing above the midpoint of our guidance range. Professional services revenue performance for the full year was driven by a mix of factors, including, first, the impact of declining co-employed WSEs, partially offset by pricing that was in line with our expectations in the low single digits. Second, very strong growth in our ASO business, which is an exciting opportunity for TriNet Group, Inc. Third, the discontinuation of HRIS that offset our ASO growth, resulting in a net $7 million headwind. This was better than our projections, as conversion rates from HRIS to ASO were higher than expected, and more HRIS users stayed on the platform longer. Finally, we discontinued a technology fee which represented a $22 million headwind. Interest revenue in the fourth quarter was $14 million, down $1 million, a decline of 7% versus prior year, reflecting recent interest rate cuts. For the full year, interest revenue was $67 million, up 5% year over year, benefiting from the unexpected timing and size of certain tax refunds, coupled with higher-than-forecast interest rates.

Turning to insurance, insurance services revenues declined 1% in the fourth quarter. Insurance services revenue for 2025 was flat when compared with 2024. For the year, insurance services revenue per average co-employed WSE grew 9% as we passed through average health fee increases of over 9%. Insurance costs in the fourth quarter declined by 2% year over year, impacted mostly by lower volumes. For the year, total insurance costs grew 1% as medical cost inflation outpaced the decline in WSEs. Our fourth quarter insurance cost ratio came in at 94%, a 0.6 point year-over-year improvement, and we finished 2025 with an approximately 90.8% ICR, in line with our full year guidance. In the fourth quarter, operating expenses, which exclude insurance costs and interest expense, declined 16% year over year, and for the full year, declined 7%. Operating expenses benefited from our talent optimization and automation efforts. For the fourth quarter, we had a $0.10 GAAP loss per share, and we finished the year with GAAP earnings per diluted share of $3.20. Our adjusted earnings per diluted share was $0.46 in the quarter, and totaled $4.73 for the year, at the top end of our full year guidance range.

Despite our challenges in 2025, TriNet Group, Inc. is a durable, strong, cash-generative business. During the quarter, we generated $57 million in adjusted EBITDA and for the year, $425 million, which represented an adjusted EBITDA margin in 2025 of 8.5% within our full year guidance range. In the fourth quarter, we generated $61 million in net cash provided by operating activities and $43 million in free cash flow. For the year, we generated $303 million in net cash provided by operating activities, and $234 million in free cash flow, which represented 16% year-over-year growth. Free cash flow benefited from improvements in working capital. Our 2025 free cash flow conversion was 55%, a significant improvement when compared to our 2024 ratio of 41%, and moved us closer to our medium-term target range of 60% to 65% free cash flow conversion. Over the course of the year, we leveraged that cash generation to fund dividends, purchase shares, and reduce our outstanding debt. We paid a $0.275 dividend during the fourth quarter, and paid $1.075 per share in dividends in 2025. During Q4, we repurchased approximately 1,000,000 shares for $61 million. For the year, we repurchased approximately 2,800,000 shares for $182 million. In total, during 2025, we returned $235 million to shareholders across share repurchases and dividends. In addition to the capital return to shareholders, we paid off the remaining $90 million balance of our revolving credit facility and exited 2025 with a debt to adjusted EBITDA ratio of 2.1 times, just above our targeted 1.5 to 2.0 times range.

Turning now to our 2026 outlook. Our guidance reflects a range of broadly held forecasts on key variables such as CIE growth and medical cost trends. We also assume economic conditions remain consistent with 2025, and the quarterly cadence of our financial performance should mirror that of 2025. For 2026, we expect total revenues to be in the range of $4.75 billion to $4.90 billion. Revenues are impacted by our lower beginning WSE base. We expect elevated attrition in Q1 due to our January renewal, the last catch-up renewal. In 2025, we ended the year with approximately 80% retention. Attrition accumulated through 2025 was driven by increasing health fees. In 2026, we expect retention to improve slightly overall. However, based on the schedule of our renewals, including our last catch-up renewal on January 1, we expect to see elevated attrition and a bigger drop in Q1 when compared to last year. With moderating health fee increases starting with our April 1 renewal, we expect improving attrition as we go through the year. Early indications from our April 1 renewal are supportive of this assumption. We expect new sales growth to positively impact volumes in 2026 as our investments in go-to-market begin to pay off and insurance pricing stabilizes in line with cost trends. The early indications from Q1 indicate that we are on track, and we are optimistic that new sales will improve year over year as we move sequentially through 2026.

On CIE, the midpoint of our guidance assumes growth in the low single digits, similar to our 2025 experience, given persistent weakness in the SMB macro business environment. On interest income, we expect a $25 million to $30 million headwind when compared to 2025. We expect interest income to be impacted by lower interest rates in 2026 versus 2025, and by lower cash balances due to the declining amounts of certain tax refunds. The timing of the distribution of those refunds also remains uncertain. For professional services revenue, we are forecasting a range of approximately $625 million to $645 million. Here are a few drivers that are important to understand. First, our lower WSE forecast. We assume a modest single-digit price increase which will partially offset these WSE declines. Second, we expect ASO services growth of double digits. A portion of the ASO growth is being fueled by a migration from our legacy SaaS HRIS business which we expect will continue declining, posing a $10 million to $15 million headwind and offsetting the growth in ASO. Finally, there was a change in reporting methodology for state tax-related revenue we record in one state, which will represent a headwind of about a point of PSR. This change is specific to a single state. In 2026, we are tightening our ICR guidance range by 50 basis points reflecting our stronger actuarial capabilities and more stable cost trends. Underpinning our ICR guidance is our expectation for medical cost growth between high single and low double-digit rates, very similar to our 2025 experience. Pharmaceutical cost inflation remains a headwind, with growth rates expected to be in the low double digits, as GLP-1 usage continues, specialty drug utilization remains high, and cancer treatments remain elevated. Our combined insurance cost ratio is expected to be in the range of 90.75% to 89.25%. The high end signals some improvement towards our target from 2025 with health cost trends still elevated, stabilization, and the low end reflects further medical and pharma cost trend increases. As a reminder, our historical quarterly ICR performance sees our Q1 performance on average two points better than our target, and our Q4 performance two points worse.

In 2026, we expect a reduction in reported operating expenses in the mid-single digits. I want to make one thing especially clear. Even while we drive further year-over-year decreases in operating expenses, we plan to reinvest a portion of the savings in our value creation initiative. For 2026, our adjusted EBITDA margin is forecasted in the range of 7.5% to 8.7%. We are forecasting stable adjusted EBITDA margins despite the decline in revenue due to lower ICR and OpEx discipline. GAAP earnings per diluted share are expected to be in the range of $2.15 to $3.05 and adjusted earnings per diluted share in the range of $3.70 to $4.70. Our capital return priorities remain unchanged. As we generate cash throughout the year, we will continue to deliver to our shareholders by making targeted investments in our value creation initiatives to drive profitable growth, using our cash flows to evaluate tuck-in acquisitions, fund dividends and share repurchases, while maintaining an appropriate liquidity buffer in line with our financial policy. The Board has authorized an increase in our share repurchase program, bringing the total available for repurchase to $400 million.

Finally, I want to comment briefly on the multiple medium-term financial scenarios that the company provided a year ago. Since then, the SMB macro business environment has shown little improvement. Our CIE remains below normal levels, and medical cost trends remain high. The extent to which this weakness persists will determine how we perform vis-à-vis those financial scenarios. I will finish with a few thoughts on TriNet Group, Inc., after two and a half months as CFO. First, I am impressed with the TriNet Group, Inc. team. My colleagues at TriNet Group, Inc. are committed to putting our SMB customers at the center of everything they do. They believe in TriNet Group, Inc. and are working hard to bring our medium-term strategy to fruition, which will benefit all of our stakeholders. Second, I believe in the large untapped market opportunity. Between elevated medical cost inflation and divergent regulatory regimes across the federal government, states, and municipalities, there is a huge opportunity for TriNet Group, Inc. services. Third, capturing that market opportunity requires more work. TriNet Group, Inc. has a clear set of priorities for improving the customer experience, expanding our distribution footprint through channels and sales capacity growth, innovating and adapting our product to emerging technologies and customer needs, and executing this in a financially disciplined manner. Our results in 2025 demonstrate our financial discipline, in both the significant progress we have made in managing our insurance cost ratio and our OpEx. Stepping into this company as CFO, I believe in our future growth opportunities, and I know that our sales, retention, and business momentum will be improving through 2026 as we execute with focus and urgency. With that, I will pass the call to the Operator for Q&A. Operator?

Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. And this morning's first question comes from Jared Marshall Levine with TD Cowen. Thank you. To start here, Kelly, can you discuss your guidance philosophy, including how it might differ versus your predecessor here, just given it is your first earnings and initial fiscal year guide here?

Yes. Thank you for the question, Jared. You know, the way I think about our guidance philosophy is based on a few drivers. So let me go through it. The first is, obviously, we have to look at what is happening in the business in 2025 and how is the momentum in that business changing as we go through the year and how we exit the year, right? Because that is obviously what sets us up partly for 2026. And if you look at the results we printed, Jared, I would say to you, certainly, we have had WSE declines as we have articulated. However, if you look at the progress we have made as we have gone through the year on ICR, that is an important data point, in fact, that we have considered as we have gone into 2026. The second thing I would say is the OpEx discipline that we have shown all year is definitely something that also we are continuing to make progress on, and we can talk about the various drivers of that later on in the call, but that is also something that is informing us about guidance. And then, most importantly, there are the drivers of our revenue as we exit 2025 and go into 2026. Definitely, we have talked about the different components that are driving our revenue momentum. As we go into 2026, Jared, there is the last significant repricing that we have done in January that certainly has an impact on attrition early on in the year, therefore WSE as we roll through the year. The second, and we are pleased with our ASO growth, that will continue to show momentum. The thing that we are absolutely focusing on with urgency is around executing all of my priorities, right, whether it be go-to-market execution, whether it be retention, focus on NPS, and continuing to show pricing discipline that we have shown in 2025. So if I summarize it all, I would say the way I am thinking about the setup for guidance is around how we exit the year in terms of things we control. Second is, what are we actually doing from a perspective on our various priorities and investments, again on the controllable side. And then, of course, we have been relatively transparent with you in our guidance assumptions on exogenous factors between CIE and medical trends that candidly are informing the bookends of our guidance. So that is exogenous. We are going to continue to monitor that very carefully, but that is something that is absolutely informing our range of guidance.

Great. And then, Michael, in terms of bookings expectations for 2026, I did hear you call out you expect to grow capacity at some point in the year, I think around 20%. Is that a reasonable expectation for how bookings should grow for 2026 in terms of what you are targeting? Or is there any kind of puts and takes with productivity impacts to also be mindful of? Just any color there would be helpful.

Yes. Good morning, Jared. Appreciate the question. We did see sales improving on a year-over-year basis as we were kind of coming through that variance, the gap for the prior year, closing as we went through 2025. And it was very encouraging to see a very good January and uptick over the prior year. That is certainly our outlook. Like Kelly said, I think on the things we control, and I would say the two that really are going to drive volume growth are new sales and retention. And we do feel like our line of sight is to growing momentum on both of those fronts. So having stronger than we have experienced in recent years retention of our senior folks—you know, we have talked about a fourth-year rep generating four first-year reps’ worth of production—and pairing those up with our Ascend graduates that are coming in, that bodes very well for us. So the exact percent growth is going to be a factor. There are going to be a lot of factors that play into that, but the direction of travel is a positive one, having already started to post some growth in 2026.

Great. Thank you.

Thanks, Jared.

Thank you. And the next question comes from Ross Cole with Needham and Company LLC. Hi, thank you for taking my question. I will be asking on behalf of Kyle David Peterson. I was wondering if you can talk a little bit more about insurance pricing and the impact of attrition in new sales.

Hey, good morning, Ross. Happy to help there. So we came into 2025 knowing that we had a pretty sizable need to move health fee pricing up. And I think it is important—there are really sort of two factors there. The first, of course, is what is happening in the broader industry and health care cost trend being quite elevated. So we needed to price forward for those expected cost increases. The second, as we talked about, a pretty sizable cohort of business acquired in the 2023, early 2024 time period and knowing that we had priced that business too low and needed to catch up on that front. So those clients needed both the catch-up and the trend pricing on top of that. As we took a measured approach but worked it through in 2025, and as Kelly said, through the January 1 renewal here in 2026, we are encouraged that the health fee component in the ICR overall showed some improvement in the fourth quarter. The guidance that we put out for next year, the midpoint shows some additional improvement there. That pricing, having completed the catch-up as we look to April 1, it is more encouraging that we are sort of done with the second part, and we can focus really on just pricing for what we think the aggregate increase that the whole market is feeling. So as we communicated with clients before April 1 increases—our next big cohort that comes online—we are encouraged by the receptiveness there and the competitiveness there. We are encouraged by the retention projection we have on that April 1. Kind of much more closer to a normalized distribution of the percent increase in health fees across our WSE base. And, again, barring any sort of unusual occurrence where the already elevated macro jumps, it feels like we are in for a sort of more in-line set of outcomes and therefore improving retention through the year.

Hey. Thank you.

Then, also, in terms of CIE, could you talk a little bit more about what you are seeing in terms of hiring trends?

Yes. When it comes to CIE, what we are seeing, interestingly, is at least in our book of business, hiring continues to remain suppressed. What we are also seeing is terminations and layoffs are relatively stable. So it is those kinds of factors that are informing our CIE assumptions embedded in our guidance for 2026. It is sort of in line, low single digits, in line with what we saw in 2025.

Great. Thank you. Thank you.

Thank you. And the next question comes from Andrew Owen Nicholas with William Blair. Hi, good morning. Thanks for taking my questions. The first line of questioning here is just on retention. I think you said from 85% to 80% this year, but I think you also mentioned that quite a bit of that was tied to the price increases. I guess, I am curious, first, were the other typical reasons for attrition relatively consistent year over year? And second, is there any way to think about retention outside of kind of that mispriced cohort from 2023 and 2024? Just curious if you are seeing moderation outside of that cohort that we might be able to attribute to industry-wide churn.

Yes. Thanks. Good morning, Andrew. Yes. Exactly. I think you have got it. If you look at the attrition that we experience, you can kind of look at it on two dimensions and sort of triangulate it. One, look at the percent health fee increases that a client is seeing. When you get to some of the outsized increases that are necessary for that cohort, that is absolutely where we saw a higher percent attrition coming through. Second thing we use to get smart on reasons for termination is the offboarding survey work that we do. And we look at all those different reasons that you would expect, and health fee—sort of pretty dramatic increase in health fee—as a driver for the termination, and again correlating back to where that fee increase was more outsized. To your specific question, when you look at things like the value delivered through the platform and the service quality, we have actually, through the year, seen a very heartening and consistent decline in those “for term” reasons. And I think that correlates to survey work that we do on Net Promoter Score and being at an all-time high last year. So I actually think once you get through this catch-up component, keeping up with trend—that is absolutely a challenge, but that is a challenge that everyone in the market is experiencing right now. And it feels like again, as we look to April 1 and we look to the rest of the year, health fee will certainly be a big part of the conversation, but increasingly, the overall value proposition is coming to the fore. With the investments that we are making there and the momentum we build around service delivery, I think that the team is executing at a pace that we have not seen in a while. That is very encouraging for us.

In terms of how the back half of the year looks from a retention point of view?

Yes. If I add one comment to what Michael just said, if we think about the drivers of attrition, it is, again, something that we monitor actually fairly granularly—what are the different reasons? You know, certainly, price was a very key factor over the last few quarters. We are already seeing encouraging signs of a significant reduction in price being quoted as the reason for dissatisfaction as we look into Q2, etcetera. And we already have some early visibility into that. So then it really comes down to the other usual factors that drive attrition, right? It is between their own business conditions, etcetera, which, as you know, are not a surprise given the macroeconomic uncertainties that persist, especially for SMBs. So I would say to you, if I think about price alone relative to all of the other factors, yes, in the surveys we do, it is showing improvement.

That is helpful. Thank you. And then for my follow-up, I wanted to ask on the ASO services growth that you mentioned—I think double-digit expectation in growth for 2026. Can you speak to the sources of that growth? How much of that is HRIS or SaaS-only clients transitioning there versus existing clients maybe upgrading into it, or, I should say, as they get larger, moving to an ASO versus a brand-new client coming into the model via the ASO channel? Thank you.

Yes. So the big driver of the growth in 2025 was the conversion of that SaaS-only business. And as you always do, you have to set some set of assumptions that you put into your financial plan, and ultimately your guidance, and we were surprised to the upside on the rate of conversion into the ASO. And I think that sort of underpins the strategy here, which is really good technology with really good people providing service on top of it. As we look into 2026, we largely will have completed, very early in the year, the exit of the SaaS business. And so the growth that comes in ASO as we work through the year is going to be, obviously, good solid retention, but the growth will come from new sales. And so seeing a good strong fourth quarter from sales, we like our pipeline here in the first quarter. It is still a relatively small contributor to the aggregate picture here for us, but over time, we see this as a really good additional arrow in the quiver and a growth driver. It gives our reps a place to pivot to when the PEO may not be a perfect fit. And also, as we build out relationships in the brokerage channel, there are more chances and a broader set of opportunities to build those relationships and open that channel up as well.

Thank you.

Thanks, Andrew.

Thank you. And the next question comes from Tobey Sommer with Truist.

Good morning. This is Tyler Barashaw on for Tobey. Could you discuss the assumptions that get you to the high end or the low end of your insurance ratio guidance?

Yes. So if we think about the insurance ratios itself, first thing to note is we showed improvement in that ratio as we rolled through Q4. As we noted in our prepared remarks, our Q4 ICR, in particular, actually was more favorable on a year-over-year basis compared to 2024. As we think about how that informs 2026, we have essentially, at our midpoint of guidance, assumed a continuation of those trends, and to be crystal clear, that is testament to the capabilities that we have developed internally from an actuarial and from just a knowledge-based perspective about our book of business and about our plan. We are in a much different place today than we were in early 2025. What that means is, on the medical side, we are talking about high single-digit inflation; on the pharmaceutical side, we are talking about low double-digit inflation, and that is informed by really greater utilization of specialty and cancer-type drugs that we are seeing in our book. In terms of the range, number one, we have tightened the range, right? So again, that reflects the growing grasp and control we have on ICR, and we have tightened the range relative to what we had at the start of 2025 by 50 basis points. Where we land on that range is really dependent on how, candidly, medical trends do. If you think about the more favorable end of the range, that would assume better trends, if you will, from an inflation perspective. And if you think about the more unfavorable end of the range, it would assume that there is a degradation.

Super helpful. Thank you. And then on WSE growth in the quarter, can you discuss how it played out on a month-to-month basis? Were any months better or worse than others? Was it consistent throughout the quarter?

Yes. That is not something we give you more color on from a month-to-month basis. What I would generally say is, if you think about the WSEs, you would typically expect to see early in the year, in first quarter, generally more of a decline in WSEs, typically as they would offboard. But other than that, we do not really—and then, you know, we ramp back up as we go through the year. But beyond that, we do not give you any month-to-month color.

And what I would add is, as we kind of took a step back and looked at the whole year, like Kelly was saying, we sort of look at the trajectory of our business from the forecasting for the plan and for guidance for 2026. It moved; it oscillated a little bit around that low single-digit number, but we did not see a discernible trend either month to month or quarter to quarter that would suggest it would be a better pick—either more favorable or less favorable—as we went into 2026.

Thank you.

Thank you.

Thank you. And once again, please press—

And the next question comes from Andrew Polkovitz with JPMorgan.

Morning, and Kelly, welcome to the earnings call. My first question, I wanted to ask about pricing. So obviously, you are done with the catch-up period post January 1. So I wanted to ask, if you look ahead and put the April cohort, how does your pricing look relative to your peers? Are there still peers that are catching up to effectively doing both parts of the reprice, the cost trend plus catch-up, or would you characterize the pricing environment as more in line with how you are approaching it?

Good morning, Andrew. I think you are exactly right. So we come through that catch-up period. It is very good to have that largely behind us for those cohorts, which, to your point, I do not want to go too far and—the reality is, health care trend remains quite elevated, which is a challenge for our clients, and it is a challenge for us, and it is a challenge for the whole market. I do feel as though the investments that we have made in our insurance services group, the processes we put in place, have put us in a spot where the application of that sort of elevated set of trends to our quarterly pricing process has us moving pretty quick relative to the rest of the market. And I think you saw that in the impact on some of our volumes, but also the stabilization here in Q4 and improvement in the ICR. I think it is a reasonable thing to say, as we look forward to April 1, I feel confident we are very much in line with the market. And to the extent there are players that have a little bit more catch-up work still to do, then I would position us favorably.

Okay. Great. Very clear. And just for my follow-up question, I wanted to know if you could sort of characterize the drivers of the sales improvement you are expecting to see in 2026 between broker channel and improving rep tenure and then, of course, the Ascend program.

Sure. Absolutely. So they are all big contributors, some a little bit more in the immediate term, some a little bit more in the longer term. But I would say the brokerage channel is a little bit of a longer burn. We got onto that pretty early, even in late 2024 and through 2025, and we are really starting to see the fruit of those investments. So in terms of the impact in January and in our pipeline for first quarter, that is kind of an outsized contributor to our growth. And, to be honest with you, I think we are just kind of getting started in terms of how deep we can go with the key partners that we have identified and then also find a few more key partners that are well aligned to the kinds of clients and the long-term relationships we are trying to build. I think there is nothing like keeping a really good, experienced rep motivated. I think the things we have rolled into the market this year—the new set of integrations that expand our capabilities, TriNet Assistant—we are putting more things in the bag here for our senior folks. They are sticking with us here, and that is a big driver. The Ascend program, the last one you mentioned, that is actually going to be a nice contributor in the championship selling season this year, but that will be the longer-term investment for us, and we would see that growing—certainly a contributor here in 2026, but more so in 2027 and years beyond.

Thank you, and congrats again on the results.

Thank you. Appreciate it.

Thank you. And the next question comes from David Michael Grossman with Stifel. Good morning. Thank you. So I wanted to just go back to the WSE dynamic. I think I understand the algebra around the deceleration in 2025 as a result of the repricing of the book, and since we have another kind of retention-below-normalized-retention dynamic in the first quarter, I guess I am just curious—I know you do not want to guide to WSEs for the year—but I am just trying to understand the magnitude of the debit that we face in the first quarter and how that impacts the year. So, for example, if CIE stays relatively constant, which is, I think, the assumption in your guidance, are we going to have the same issue in 2026 going into 2027, or are the go-to-market changes and improvements and efforts that you are making sufficient so that we would not face the same dynamic in 2027 as we are facing in 2026? Just algebraically, of course, looking at the retention dynamic around the repricing.

David, yes. Thanks for the question. I just think it is really important to start with the retention dynamic and the work that we need to do to both catch up on a couple of those cohorts and then also price forward for trend. And you know this, David, really well, but we are not talking about just a little bit higher than normal, but, like, the last couple of decades—this level of sustained health care cost inflation is pretty unique. So there is real work to be done there. It absolutely has impacted retention. We have signaled that we are completing that with January 1, but I am glad you asked the question. We are not trying to signal that there was an outsized attrition event on January 1 relative to what we experienced in 2025. It is just that we had a bit more work to do to get all the way through. Then we focus on what we can control around growing new sales—the go-to-market pieces, experiencing growth in January, having a positive outlook here for the first quarter, having a lot of things coming online that give us more optimism about the back half of the year—that is certainly going to be a contributor. I do think the retention for April 1 is going to be better. I do think that, barring a big change in the macro, the health care pricing that we will be putting out will be absent the catch-up component and very in line with the market. All those things are really positive. So with a low and, I think, prudent CIE assumption, like you were saying, that gives us growing confidence that we are slowing the decline of the WSEs and working our way back toward growth. So I think what is really important, David, is working our way back to growth in a sustainable fashion. You know, putting things in place that we can go back to again and again and again, and investing in keeping our reps, growing new reps that are embedded in our culture, differentiating how we do benefits, driving that NPS. I think these are things that are going to serve us well beyond 2026.

Right. So just kind of to wrap it all together, Michael, if the macro environment does not improve, is it reasonable to assume that we will not have that rollover issue in WSEs in 2027 versus 2026?

Yes. There is so much ground to cover between now and then that it is probably not a question to say exactly what is going to happen, but our confidence is really quite high that the trend in general is going to be an improving one as we go through 2026.

Got it. Alright, guys. Thanks very much. Good luck.

Thanks, David.

Thank you.

This concludes our question and answer session. I would like to return the conference to Michael Quinn Simonds for any closing comments.

Thanks, Keith. Appreciate it. I appreciate everyone taking the time to join us this morning. Hopefully, Kelly and I have given you a good sense for the strong, decisive actions we are taking to improve the areas that we control. I think the growing momentum we have got on this front. So Alex and Kelly and I will look forward to connecting with many of you in the coming weeks and months as we are out on the road. With that, Keith, this concludes this morning's call.