TriNet Group Inc

NYSE:TNET

Earnings Call Transcript 2019-Q4

[Operator]

Good day and welcome to TriNet’s Fourth Quarter 2019 Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Alex Bauer, Investor Relations. Please go ahead.

[Alex Bauer, Investor Relations]

Thank you, operator. Good afternoon, everyone, and welcome to TriNet’s 2019 fourth quarter conference call. Joining me today are Burton M. Goldfield, our President and CEO; and Richard Beckert, our Chief Financial Officer. Our prepared remarks were prerecorded. Burton will begin with an overview of our fourth quarter operating and financial performance. Richard will then review our financial results in more detail. We will then open up the call for the Q&A session.

Before we begin, please note that today’s discussion will include our 2020 first quarter and full year guidance and other statements that are not historical in nature or 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, future events or otherwise. We encourage you to review our most recent public filings with the SEC, including our 10-K 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 non-GAAP net service revenues, adjusted EBITDA margin and adjusted net income per share.

For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see our earnings release or 10-Q filing for our fourth quarter and full year 2019, respectively, both of which are available on our website or through the SEC website. A reconciliation of our non-GAAP forward-looking guidance to the most directly comparable GAAP measures is also available on our website.

With that, I will turn the call over to Burton for his opening remarks.

[Burton Goldfield, President and Chief Executive Officer]

Thank you, Alex. As I reflect on TriNet’s 2019 fiscal year and fourth quarter performance, I’m especially pleased with our Q4 sales, improved customer retention and WSE growth. We delivered improved retention as a result of excellent execution by our customer services team. Customer satisfaction continues to be strong. We benefited from robust hiring within our installed base by servicing customers in our targeted verticals. Our fourth quarter financial results were in line with revised guidance. Looking forward, I’m confident that we have taken the necessary steps to mitigate 2019’s higher health costs.

In the fourth quarter, we grew GAAP total revenues 11% year-over-year to $1 billion. This is the first time TriNet generated over $1 billion in GAAP revenue in a quarter. I’m excited for this significant milestone for our company, which highlights the distinct value of our offering in the marketplace.

Net service revenues were flat year-over-year at $226 million. Professional service revenues grew 10% year-over-year to $137 million. During the fourth quarter, we grew insurance service revenues by 11% year-over-year to $881 million. Net insurance service revenues declined 12% year-over-year to $89 million for the quarter.

Our Q4 GAAP earnings per share grew 70% year-over-year to $0.68 per share. Q4 adjusted net income per share grew 43% to $0.84 per share. For 2019, we grew GAAP total revenues 10% year-over-year to $3.9 billion, while net service revenues grew 4% year-over-year to $929 million. We grew GAAP earnings per share 13% year-over-year to $2.99 per share and we grew adjusted net income per share 10% to $3.33 per share.

Finally, we finished the year with approximately 340,000 work site employees, up 4% year-over-year. We believe our business has reached an inflection point. Our volume growth is now sustainable and giving us a strong tailwind for 2020 and beyond. Our approach to sustainable revenue growth is driven by improved sales productivity, improved retention and growth in our installed base. We will continue to pair our revenue growth with cost discipline, which positions us well to drive profitable returns for our shareholders. It is this approach which has allowed us to grow 2019 GAAP EPS from $2.65 to $2.99 per share year-over-year.

As I’ve already noted, our vertical strategy allows us to identify unique selling opportunities, where we leverage our differentiated value and attract the right customers for the long-term. In TriNet life sciences, we won the business of an innovative digital health startup. This company is solving the enormous problem of medication nonadherence by leveraging AI and data analytics. The customer’s fast-growing and was looking for a partner to help in their next phase of growth. They were attracted to TriNet for our competitive benefits offering, especially as they compete for talent in this tight labor market. By leveraging our technology platform, the company reduced manual processes and created operational efficiencies. Through their partnership with TriNet, they are now better positioned to grow successfully in pursuit of their large market opportunity.

I’m particularly proud of our focus on marketing. 2019 saw us make long-term investments in our brand, resulting in significantly improved unaided brand awareness. 2020 will see us leverage this improved brand recognition to drive further awareness and incremental lead generation. We are excited to see the impact of these efforts.

As we continue to focus on new sales in 2020, we will place a strong emphasis on keeping all of our customers longer to ensure they are able to grow their business. A little over a year ago, we highlighted that we would be investing more on process improvements with special emphasis on enhancing the customer experience. This resulted in our single biggest accomplishment for 2019.

Beginning in February, we saw a steady improvement in retention of our high-value customers. Customer retention outperformed our expectations and was directly related to a better customer experience. The fact is that customers are staying longer with TriNet than they have in the past. We transformed our customer services team with both qualitative and quantitative analytics to better tailor our service models.

As we look to 2020, we will continue our elevated spend on process improvement initiatives. The spend is focused on developing the modularity of our offering, automation and creating further efficiencies. These investments should result in enhanced accessibility and improved customer interactions with TriNet. Additionally, our ability to quickly resolve the complex issues facing each of our different verticals should improve. Our investment should extend our customer relationships, enabling them to grow, evolve and scale with TriNet. As previously noted, our investment in process improvements in 2019 had a quick payback and improved retention. The next phase of process improvements should have a similar return but play out over a longer timeframe.

Turning to the economy, the United States finished 2019 with a 3.5% unemployment rate, while adding nearly 2 million jobs throughout the year. Our customers are growing. We believe that by targeting the right business and organizations within our core verticals allows us to benefit from this strong labor market. As we execute our growth plan, we must continue to manage our costs so we can deliver the financial performance our shareholders expect. To address the elevated insurance costs we experienced in 2019, we took a number of actions as previously stated. We expect the 2020 performance of insurance costs as measured by net insurance margin to be in the 11% to 12% range.

Given our recipe for growth, coupled with our cost management efforts, I believe TriNet is well positioned to deliver strong 2020 financial performance. I’m pleased to announce that our Board of Directors has authorized an additional $300 million for our share repurchase program, leaving us with over $500 million available for our repurchase program. The expansion of our share repurchase program leverages a core strength of our business, strong and consistent cash generation and it reflects our optimism for the future. Additionally, I would like to formally welcome Dr. Jacqueline Kosecoff and Shawn Guertin, who recently joined our Board of Directors. Both executives bring to our Board invaluable experience and insights, particularly within the healthcare and insurance spaces. We look forward to working closely with both of them.

Finally, I would like to announce that Richard Beckert is transitioning from TriNet effective May 15. We have engaged a global executive search firm and a formal process has commenced to recruit a replacement, which will include both internal and external candidates. Richard will be with us through our first quarter earnings report and will assist us with the search for his replacement. On behalf of the TriNet team, I would like to thank Richard for his partnership over the last three years.

I will now turn the call over to Richard for a review of the financials. Richard?

[Richard Beckert, Chief Financial Officer]

Thank you, Burton. As we review the financials, I will focus on the GAAP and non-GAAP numbers where appropriate. During the fourth quarter, GAAP total revenues increased 11% year-over-year to $1 billion, and net service revenues were flat year-over-year at $226 million. We finished the fourth quarter with approximately 340,000 work site employees, showing 4% year-over-year growth. Average WSE count for the fourth quarter was approximately 337,000, a 5% year-over-year increase.

Professional service revenue for the fourth quarter increased 10% year-over-year to $137 million. Professional service revenue once again benefited from improved WSE retention as customer services continued to constructively engage our customers and continued strong hiring from our installed base as a result of our vertical strategy.

Insurance service revenue for the fourth quarter increased 11% year-over-year to $881 million and net insurance service revenues decreased 12% year-over-year to $89 million. Net insurance service revenues performed in line with our forecast as provided on our third quarter conference call.

As we look to 2020, we believe we have mitigated many of the drivers of our higher 2019 insurance costs by capturing former rebates from underperforming national carriers, improving our visibility into the drivers of our insurance cost trends, repricing your book, and no longer targeting sub-five WSE companies. Our fourth quarter GAAP effective tax rate was 25%, higher than recent quarters as we did not receive a benefit from the tax treatment of employee equity compensation. For the quarter, our non-GAAP tax rate was 26%. GAAP net income increased 66% year-over -year to $48 million or $0.68 per share compared to $29 million or $0.40 per share in the same quarter last year.

Adjusted net income increased 40% year-over-year to $59 million or $0.84 per share compared to $42 million or $0.59 per share in the same quarter last year. Adjusted EBITDA for the fourth quarter increased 31% year-over-year to $92 million compared to $70 million during the prior year period for an adjusted EBITDA margin of 41%.

We closed the fourth quarter with total cash of $213 million in working capital of $228 million versus $216 million and $253 million respectively in the third quarter of 2019. Through the year-end December 31, 2019, we generated $233 million of positive corporate cash flow from operating activities and generated $238 million primarily comprised of WSE-related payroll tax obligations. As a result, total cash inflow from operations was $471 million. We spent approximately $56 million to repurchase approximately 1 million shares of stock in the fourth quarter.

Turning to our 2019 full year results, we grew GAAP total revenues 10% to $3.9 billion and we grew net service revenues by 4% year-over-year to $929 million. Total adjusted EBITDA increased 9% to $378 million with an adjusted EBITDA margin of 41%. GAAP net income in 2019 increased 10% to $212 million or $2.99 per share and adjusted net income increased 8% to $236 million or $3.33 per share. Our 2019 GAAP effective tax rate was 21%. Finally, we spent $140 million in 2019 to repurchase approximately 2.5 million shares of stock. As Burton stated, our Board of Directors authorized $300 million expansion of our share repurchase program, leaving us with over $500 million available in our share buyback program.

Turning to our 2020 first quarter and full year outlook, I’ll provide both GAAP and non-GAAP guidance. Before I begin, please note that given the absolute dollar amount of our reported financials, we have transitioned our guidance to percent ranges. For our pro forma tax rate, we are now assuming 25.5% due to an improvement in our statutory tax rate.

Finally, given the acceleration of our share repurchase in 2019, our full year 2020 forecast assumes 69.5 million diluted shares. For Q1 2020, we expect GAAP revenue year-over-year growth of 10% to 11% and net service revenues in the range of down 5% to up 3% year-over-year. Please recall that in Q1 of 2019 we’ve benefited from strong net insurance revenue performance, represented by a net insurance margin of 14% making for a difficult year-over-year compare. The strong performance in Q1 of 2019 was driven by worker’s comp, favorable prior period development and reduced health costs.

We are forecasting our adjusted EBITDA margin to be in the range of 40% to 43%. We expect Q1 GAAP earnings per share to perform year-over-year in the range of down 12% to up 6%, and adjusted net income per share performing the range of down 12% to up 4%. For our full year 2020 guidance, we are forecasting year-over-year GAAP revenue growth to be 10% to 13% and net service revenue growth to be between 6% and 10% year-over-year.

Our full year 2020 adjusted EBITDA margin is expected to be approximately 40%. GAAP earnings per share are expected to grow in the range of 4% to 12% year-over-year with adjusted net income per share expected to grow year-over-year in the range of 7% to 14%.

Finally, I’d like to announce that I’m transitioning out of my role as CFO of TriNet. I would like to thank the Board of Directors for their support and confidence in me. I’d like to thank Burton for his leadership and support over the last three years. We have accomplished a great deal in a short amount of time as we start our next chapter of growth, leveraging our industry leading product and service. It became the right time for me to transition.

The TriNet team, and especially my team, successfully remediated five material weaknesses. We expanded our GAAP and non-GAAP margins by 370 basis points and 1,200 basis points respectively since 2016. We’ve reorganized the finance team and partnered with our line organizations, accelerating the great transformation we have seen thus far. We successfully completed the migration and return to growth while significantly improving retention. Finally, we reshaped treasury by refinancing our debt and establishing an investment strategy, which has driven over $20 million of investment income.

We achieved these goals that were laid out when I joined the company and I look forward to moving back East, starting the next chapter of my life. I’m extremely proud of the TriNet team and I truly appreciate them letting me participate in their current and future success.

With that, I will return the call to Burton for his closing remarks. Burton?

[Burton Goldfield, President and Chief Executive Officer]

Thank you, Richard. I’m pleased with how we finished 2019, and as a result, we are well positioned for 2020. In 2020, we are growing. We are guiding towards GAAP revenue growth of 10% to 13% with mid single to double digit earnings growth. Our customers are staying longer and they are growing. We are differentiated in the market and we choose to invest in our growth through process improvements and automation. I’m very excited for the year ahead and want to thank the entire TriNet team for their hard work and execution. Operator?

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Kevin McVeigh with Credit Suisse.

[Kevin McVeigh, Credit Suisse]

Great. Thank you. Hey, Rich, best of luck. Appreciate everything you’ve done, really a wonderful job at TriNet here, and thanks for the 2020 guidance. I wonder, could you give us a sense because it seems like the year, there’s some progression over the course of the year. Just any sense of how we should think about the pace of net interest – the margins as we think about kind of the quarterly progression on that? And is there a way to weave in the buyback?

[Richard Beckert, Chief Financial Officer]

So, again, the buyback as we’ve talked about before is to absolutely offset dilution. It also – the increase is because we believe that our stock is undervalued versus our peers. We also believe that we have a very strong cash position and allows us to continue to do that. We will do it opportunistically, and we also have a set schedule as we’ve talked about historically. As you guys are aware, we did $56 million of buyback in Q4 and $140 million throughout the course of the year. So that answers your question on the buyback.

If you’re asking, I think your second was on a net insurance margin. As we had said, it’s between that 11% and 12% for the full year. We don’t give guidance by quarter, but as you can imagine, we have a difficult compare from last year because it was a 14% in Q1 of last year, which is really all you’re seeing is a year where we had a lot of worker’s comp relief coming in Q1 of last year. And the building of that national carrier started to build throughout the back half of the year. So this year we’ll have a similar pattern, where as you can imagine most people burn through their deductibles in the first quarter and as they work through the year that starts to build. But other than that, it should kind of act in a normal pattern.

[Kevin McVeigh, Credit Suisse]

Understood. And then just one quick follow-up. Rich or Burton, did you say you’re not going to include sub-five WSE employees? And is that just a different kind of risk profile that it’s just better to know kind of?

[Richard Beckert, Chief Financial Officer]

Yes. So what we had said on the last call and will continue is we’re not necessarily targeting them. And so what that means is that when we started the program originally, most of them came from spinoff out of either someone starting another company or things of that nature. What we found was that subsidy of customers, they tended to grow very quickly. They were early in our installed base, so we had a good view of their health, and therefore it was a low risk considering such a small pool. That kind of expanded to the point where we found that the risk reward on the health side specifically wasn’t there. So we’re not looking to necessarily target that group, which is what we had said on our last earnings call.

[Kevin McVeigh, Credit Suisse]

Super. Thanks, and congrats and best of luck.

[Burton Goldfield, President and Chief Executive Officer]

Thanks so much.

[Operator]

Our next question comes from Andrew Nicholas with William Blair.

[Andrew Nicholas, William Blair]

Hi, good afternoon. Thanks for taking my questions. Just I wanted to start with the brand awareness and marketing comments that you made. You talked about seeing that improvement in unaided brand awareness and the potential to capitalize that – on that in 2020. I’m just wondering, if that’s something that you plan to hire into or do you feel like you’re already in a pretty good spot with respect to sales headcount and your ability to handle increased inbound?

[Burton Goldfield, President and Chief Executive Officer]

Great question. So I’m really pleased with the increase, particularly in the unaided brand awareness in our key markets like New York where we concentrated. And we do have the capacity in the core markets to absorb the increased amount of leads and opportunities that come from the brand awareness and the subsequent demand generation.

[Andrew Nicholas, William Blair]

Great. And then I was hoping you could talk a little bit about your expectations for professional services revenue growth in 2020. Is this a business that can be a double-digit grower? And then just maybe how we should be thinking about the different growth drivers within that line, whether it’d be productivity gains, unit growth, pricing, so on and so forth? Thanks.

[Richard Beckert, Chief Financial Officer]

Yes. So just let’s review on Q4, as you saw we grew 10% in our pro serve revenue and we were happy with that. The work that we did and Burton touchdown on retention that started almost a year and a half ago, really started to payoff, as we said, all a year starting in February and has continued over time, which helps build installed base. So that again is a tailwind for us as we move forward.

Part of what we are doing is trying to move upstream, so you’ll see the deal size gets slightly larger, which might put a little pressure on an individual PEPM, but our mix has changed significantly to a predominantly white collar. And within the blue collar it behaves like white collar. So it gives us a better price per PEPM. So those things give us a good feel for where we’re headed for the full year. So we’re feeling pretty good about the year.

[Andrew Nicholas, William Blair]

Thank you.

[Operator]

[Operator Instructions] Our next question comes from Tien-Tsin Huang with JPMorgan.

[Tien-Tsin Huang, JPMorgan]

Hi. Thanks so much. Rich, just want to say upfront, I’ve really enjoyed working with you and you’ve made a lot of positive changes there. I want to ask on unit growth. I know you just talked about – a little bit on the last question. With the 4% was in line with last quarter and our thinking, I’m just curious for either of you, maybe for Burton, just on the industry growth, it feels like maybe it’s slowing a little bit across the peer group. What are you seeing just in terms of overall demand? And you’ve heard me ask you this a million times, where the pendulum is in terms of the demand to outsource and [indiscernible]?

[Burton Goldfield, President and Chief Executive Officer]

Yes, Tien-Tsin, look, I think the market opportunity is strong. It’s a large addressable market and I believe we’ve already inflected in, should return to mid single to double digit growth. I’m pleased with Q4 sales. I’m pleased with the demand in the market coupled with the brand awareness and the competitive landscape remains attractive. Now, the key for us as you’ve heard me talk about over and over again is about really targeting the right customers at the right price and having a laser focus on getting those high-value customers to TriNet. And that’s what we’ve been trying to do for a long time. You’re very familiar with the headwinds and the tailwinds, but I think we’re at a pretty good point right now when you couple that with the attrition performing better and the fact that our clients continue to hire, I liked the volume growth that we’re seeing.

[Tien-Tsin Huang, JPMorgan]

Okay, good. And then just as my follow-up, I caught the share repurchase program, primarily for offsetting dilution, et cetera. But is it also a signal that maybe you’re less interested in doing deals or the appetite to do deals or the pipeline to do deals on the M&A front isn’t quite there?

[Richard Beckert, Chief Financial Officer]

No, I would not say that. I would say, it really reflects our strong cash and consistent cash generation. We now have significantly been able to demonstrate continued expansion inside our cash. As we highlighted on the call, treasury team now is delivering double-digit, other income every year. So those are all adding to our ability. The last part and most importantly is we’re looking at ourselves reflective versus our peers. And we think we’re undervalued. So we think this is opportunistic time for us to be in the market.

[Tien-Tsin Huang, JPMorgan]

Understood. Okay. Thank you.

[Operator]

Our next question comes from David Grossman with Stifel Financial.

[David Grossman, Stifel Financial]

Thanks, good afternoon. If we could just step back to the third quarter and some of the challenges that came up in the quarter and how you were going to address them. And I think you mentioned, you thought you were in pretty good position vis-à-vis would be hitting your 11% to 12% insurance margin in 2020. So with that said, was the book fully repriced, by the end of the year including whatever renegotiations were going on the farmer rebates. And is the attrition fully reflected in the year end WSE count or do we see some of the attrition from the repricing coming in the first quarter?

[Richard Beckert, Chief Financial Officer]

So you had several questions there. So just to remind people, we engage with the carrier to be able to get pharmaceutical rebates starting in 2020 so that will happen over the course of the year. We worked with an insurance carrier, we’re continued to work with insurance carriers to get better headlights and better visibility and working with them together so that we can make some changes. We’ve asked certain clients as we have repriced them to risk, they’ve made decisions on how much do they want to take the risk themselves, meaning have a higher deductible layer amongst themselves before they have. And some chose to do that.

We did reprice some of that book of business that we talked about was the sub-five. And in some cases they did receive large increases in a percentage of them decided to shop around and stay and some of them left and that was okay with us. So when you put all those things together, it got us comfortable that we’re on track for 2020 in that 11% to 12% that we talked about in Q3. It does not mean that any one point in time we will have carriers that are running hot and in geographic region that will happen. We do not see a change in the volatility of our business. It will continue to be 2% health in any fiscal year and 4% in any one quarter. And that has, when we look through this last year and where we are today, that that seems to hold still and we will let you guys know if that changes.

So I think our ability to price to risk has improved. We clearly could not have repriced the entire book of business because you have some of the business goes every quarter, Q2 and Q3 are the lightest quarter. So therefore, clearly the biggest part to come would be Q3 and Q4 of next year or Q4 and Q1 of next year. So we’ve repriced all that we could, we are on targets to repriced, the ones that we see need to have their price service adjusted and we are doing it in a very systematic way.

[Burton Goldfield, President and Chief Executive Officer]

David, I’m going to add to that if no problem. This is Burton, I just want to add a little bit to that. Because when I think about the medical insurance and you’re on the right issue, I think about it and in three different vectors, one is price, which Rich just addressed, we are doing everything that we can to price the risk, each individual client and we will continue to do that and we will continue to try to do that better. The second issue is choice. The advantage that we have is we have multiple national carriers and we have many regional carriers. So the benefit of that choice is twofold. One, it helps our customers make a choice for the best plan for their use. And second, it derisks our program at a global level.

And then third is user experience. Our customer services team is doing an excellent job of working with the customers as they make the choices that are right for their organization. So again, as Richard said, I feel like we are making good progress on both the customer experience as well as the overall medical insurance program.

[David Grossman, Stifel Financial]

Great. Thanks for that clarification. So just to kind of get, a mindset for next year though, is that, do we have any quarters where we’ve got that incremental headwind from repricing the book where you would see it in the WSE count in an individual quarter or do you expect those numbers to be relatively small? So it really wouldn’t necessarily impact the WSE growth in any particular quarter?

[Richard Beckert, Chief Financial Officer]

So to remind you when we repriced the sub-five last year, that was less than 1% of the book to give you kind of a magnitude. So it’s not the same as if you’re trying to draw a correlation to when we are migrating people and you had thousands of customers all migrating in a particular quarter. It’ll be slightly different than that if that’s what your question is.

[David Grossman, Stifel Financial]

Yes. Yes. That was it. Thanks for that. And then just maybe Burton, this is a question for you, because you did talk about just how happy you were with the improved retention over the course of the year. So can you give us, I know you don’t report that metric, but can you give us any sense in – the overall growth – unit growth you saw on 2019, how much of that was retention and how much of that was new sales or any quantitative metrics that may help us better understand the improvement in retention over the course of the year?

[Burton Goldfield, President and Chief Executive Officer]

Yes. So what I would say, David was as we’ve talked about 2019 was focused on customer services and improved processes. As I said, our biggest achievement was the direct correlation between the investment and the work that’s being done by our CS team in this improved retention. And that is something I’m going to continue to focus on and invest in. So that exceeded my expectations. But look, as you know, the growth is three pronged. It’s new sales, it’s retention of our clients, and its growth of the install base and the customers are growing. So I’m pretty good across the Board. But specifically to answer your question about retention, the best I’ll tell you is it is the highest it’s been since 2015 and we’re focused on making it even better.

[David Grossman, Stifel Financial]

Got it. Great. Thanks very much.

[Richard Beckert, Chief Financial Officer]

Thank you.

[Operator]

Our next question comes from Sam England with Berenberg.

[Sam England, Berenberg]

Hi guys. Just a couple from me. The first one, could you talk a bit about new client win rates and conversion in the quarter? I know you apparently suggested that a tough quarter and lost downs and pitches. So just wondering if you got benefited from that?

[Richard Beckert, Chief Financial Officer]

No, we don’t – we don’t share that information, but what I can say is that behaved as we had anticipated. So we can’t say that we had that headwind that they had. I also think, just in general, if you compare us to our peers, we’ve been pretty consistent about mid-to-high single digits. We didn’t get into the double digits type of discussion and then have to back out of that. So I think we were consistent with what we thought we could achieve and we achieved it. We came in, as we had anticipated. I think Burton had said it earlier we still see our PEO peers about a third of the time. There’s still a great tailwind that we’re seeing just in general.

The fact that the labor market is tight is helpful for us, because remember what we’re looking for is white collar or blue collar, that’s actually white collar and this is sticking point for those companies. So this is a selling Apple for them when they’re trying to recruit and retain people. So we have not found that we have not found price pressure on the professional services side of the business. Any kind of price pressure that we’ve talked about last year, it was really more about just the normal insurance that ebbs and flows.

[Sam England, Berenberg]

Okay, great. And then the follow-up was just around the marketing campaign this year. I just wondered whether you’ve seen a difference in the type of clients you’re pitching to any significant changes. So since you don’t start campaign versus who you are pitching to before?

[Burton Goldfield, President and Chief Executive Officer]

Well, the answer is – the short answer is yes, because it’s generating demand for TriNet and I’m focusing the sales team on the high value clients, the target. So having more of those is really important for the sales force. But what you’ll see is we’ll continue to narrow the scope and target those high value clients.

[Sam England, Berenberg]

Okay, great. Thanks very much.

[Burton Goldfield, President and Chief Executive Officer]

Thanks.

[Richard Beckert, Chief Financial Officer]

Thank you.

[Operator]

This concludes our question-and-answer session as well as TriNet’s fourth quarter 2019 conference call. Thank you for attending today’s presentation. You may now disconnect.