Trinet (TNET) - Fundamental Investment Case (Trade closed on 25 October 2019)

TriNet is a leading provider of human resource solutions for small and medium sized businesses.  The company is organized as a professional service organization or PEO.  Under the co-employment or PEO model, TriNet assumes certain responsibilities of being an employer and helps clients mitigate certain employer-related risks and manage many of the complex and burdensome administrative and compliance responsibilities associated with employment. The company offers a wide range of solutions including: Payroll Procession, Tax Administration, Employee Benefits (including health care), and Human Resource Technology Platform.  The company has clients and then "employees" in a co-employment framework. The "employees" are the employees of their clients. These individuals are referred to as worksite employees or WSEs. Therefore, effectively the number of customers TriNet services is the number of WSEs.  TriNet was founded in 1988. As of FY18, the company has grown both organically and inorganically to $37.7bn in payroll payments processed. Worksite employees totaled 325,616 by the end of FY18, flat year over year. The average WSE was 317,104, down (2%). The decline was due to client migration from a legacy platform.

Vision Research previously initiated on TriNet Group (TNET) in August 2018.  We exited in December as the stock fell sharply compared to the S&P 500.  Given the recovery in the stock, Vision believes TNET is again a compelling opportunity.

Bottom Line: Business service provider facing intense competition, more difficult comps, and a more challenging macro environment.