TriNet Group - Earnings Call - Q2 2020
July 27, 2020
Transcript
Speaker 0
Day, and welcome to the TriNet Second Quarter twenty twenty Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Alex Bauer, Investor Relations.
Please go
Speaker 1
Thank you, operator. Good afternoon, everyone, and welcome to TriNet's twenty twenty second quarter conference call. Joining me today are Burton M. Goldfield, our President and CEO and Mike Murphy, our Chief Financial Officer. Our prepared remarks were prerecorded.
Burton will begin with an overview of our second quarter operating and financial performance. Mike will then review our financial results in more detail and provide our forward looking guidance.
Speaker 2
We will then open up
Speaker 1
the call for the q and a session. Before we begin, please note that today's discussion will include our twenty twenty third quarter and full year guidance 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, 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 our 10 Q filing for our second quarter, which is 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.
Speaker 3
Thank you, Alex. As a result of COVID-nineteen and the subsequent economic downturn, the second quarter proved to be a complex operating environment. I am pleased with our financial results, which are attributable to our strategy, execution and the resiliency of our customers. In the second quarter, we grew GAAP total revenues 1% year over year to $948,000,000 Net service revenues grew 45% year over year to $335,000,000 Professional service revenues decreased 5% year over year to $121,000,000 During the second quarter, insurance service revenues increased 2% year over year to $827,000,000 In the quarter, insurance service revenues outperformed due to better than expected retention and a health plan participation rate exceeding 70%. This is the highest recorded health participation rate we have experienced.
It is largely due to a mix shift in the TriNet customer base. Net insurance service revenues increased 106% year over year to $214,000,000 The growth in our net insurance service revenues was the result of significantly lower insurance costs. The drivers behind the decline in insurance costs were one time in nature and driven by lower health utilization as a result of the decrease in medical services, partially offset by COVID cases. The cost savings in the second quarter were significant and we intend to leverage these savings for the benefit of our customers. Our press release on July 16 announcing the return of certain administrative fees to our customers in the form of a fee credit is one example of these savings.
Additionally, we are creating a recovery credit program which we expect will have an even larger impact on our customers moving forward. This program will support our incredible customers as we jointly commit to our ongoing relationship. Later in the call, Mike will share additional details regarding this innovative and impactful program that we are announcing here today. Our Q2 GAAP earnings per share grew 192% year over year to $1.87 per share. Q2 adjusted net income per share also grew 190% to $2.3 per share.
From a cost perspective, we were able to actively manage our operating expenses during the quarter. This is a direct result of previously described investments in process improvements over the last eighteen months. However, we continue to invest in these types of initiatives including modularity and automation. Additionally, these initiatives resulted in a significant improvement in our second quarter installed base net promoter score polling. We realized a 33% improvement in our NPS score, accelerating a multi quarter trend.
I am very proud of this improvement in customer satisfaction, and I am thankful to our colleagues for their commitment to our customers in this difficult time. We finished the quarter with approximately 313,000 worksite employees, down 3% year over year. Our ending second quarter WSE count exceeded our forecast. In late April, when we reported our first quarter earnings, we provided an intra quarter WSE count which was between three hundred and three hundred and five thousand WSEs. In hindsight, that volume count proved to be our intra quarter low.
In May and June, with states reopening and the positive effects of the Paycheck Protection Program being felt, our installed base stabilized. The rate of customer attrition, layoffs and furloughs all declined resulting in the TriNet customer base being comprised of nearly 80% white collar workers. Incredibly, our customers returned to positive change in existing in June, predominantly in our white collar verticals. In the quarter, despite the difficult operating and economic environment, our cash flow remained strong. We spent $60,000,000 repurchasing 1,400,000.0 shares in accordance with our capital management strategy.
As previously mentioned, we experienced our highest level of health enrollment rates in Q2 at over seventy percent. We found that customers who secure their health benefits through TriNet are likely to stay longer with us. Along with health benefits, the challenges our customers face as a result of COVID-nineteen highlight the importance of our technology and service model. For the last several years, we have been investing in our technology and service model. A result of this investment is our omnichannel service model where we can efficiently service customers how, when, and where they want to be served.
Whether it's a high touch interaction with experts, a call center transaction, or a chat box, we are there to respond to and address our customers' needs twenty four hours a day. Additionally, our mobile app is highly rated and well utilized. We regularly produce content which addresses various employment benefits and government program related issues. Much of our content is posted on our COVID TriNet Business Resiliency and Preparedness Center found on our website. So far we have posted 11 webinars with over 20,000 attendees.
Several webinars targeted the PPP loan process. As an example, to date we've produced four webinars on just PPP, garnering over 10,000 views. Presently, our PPP related efforts have pivoted to helping our customers generate the reports necessary to achieve PPP loan forgiveness. Given the critical support provided by this program, we are hopeful the government will continue to support SMBs through the remainder of this pandemic. TriNet's customers are the small and medium sized businesses that are supporting our country through this crisis.
Customers like Re three d. Re three d is a manufacturing startup which provides affordable three d printers for the global market. The Re three d printer Gigabot is easily transportable, can use recycled plastic, and allows its users to build products where they are needed. Reed three d is currently hiring full time engineering, sales, and manufacturing employees. Over the past several months, in response to COVID-nineteen, Re3D leveraged their internal R and D to design and prototype PPE and other life saving devices.
The company mobilized its global customer base to produce necessary health care equipment on-site, filling regional supply gaps while eliminating shipping delays. Working with customers like Reed three d is an example of the important role TriNet plays in helping these amazing customers have a positive impact on our world. We understand, however, that many of our customers are still facing significant challenges as they navigate this uncertain and difficult environment. For example, our main street vertical has been hit the hardest with layoffs, furloughs, and customer attrition. As we look forward, uncertainty around the economic environment continues.
We remain cognizant that the economic recovery may be more drawn out than originally predicted. With respect to new sales, we see continued interest in TriNet's products and services. The sales paradigm has shifted significantly with meetings being held remotely. This has elongated the decision making process. However, average deal size in the first half has nearly doubled year over year as we pivoted to larger customers.
We expect to continue to make new sales through the balance of 2020, although at a significantly lower rate than in previous years. That said, we do expect to leverage our improved customer satisfaction to drive growth through referrals as the economy rebounds. Finally, we continue to pursue inorganic growth where it makes sense.
Speaker 4
For
Speaker 3
us, that means exploring opportunities to expand into new geographies or into attractive verticals. As you saw today, we announced the acquisition of Little Bird. Little Bird represents our ability to identify industries where our value proposition is particularly well suited. Through this acquisition, we are expanding our footprint in an attractive area of our nonprofit vertical while adding significant industry expertise. While the financial and volume impacts from this acquisition are limited, we are excited about this deal as it represents an expansion into one of our core verticals with a large attractive market opportunity.
The entire TriNet team welcomes Little Bird to our company. With that, I will turn the call over to Mike for the financial review. Mike?
Speaker 2
Thanks, Burton. As I review the financials, I'm going to focus on the GAAP and non GAAP numbers where appropriate. But first, on our last earnings call, I previewed that our q two results and 2020 guidance would be significantly impacted by timing as a result of COVID nineteen. And this is what has happened and what we expect to happen. And this timing includes timing of our insurance performance.
For the second quarter, we guided to a net insurance margin range of 19 to 23%, and we delivered 26% as cost savings exceeded our forecast. We expect to see a reversal of this in the second half. COVID nineteen also impacted our volume of WSEs as we exited the second quarter with higher WSEs than our forecast, and insurance costs due to reduced utilization of health services, partially offset by direct costs of COVID care, and finally, our revenue as we began to accrue for our client recovery credit program. And while I won't separate out the COVID-nineteen impact on our WSE volume, I will reference how it impacted our revenue results. As Burton referenced, we finished the second quarter with approximately 313 worksite employees, a 3% decline year over year.
Average WSE count for the second quarter was approximately 314,000, a year over year decrease of 2%. During the second quarter, GAAP total revenues increased 1% year over year to $948,000,000 and net service revenues grew 45% year over year to $335,000,000. GAAP total revenues were offset by 6% or $56,000,000 as a result of our initial accrual for our recovery credit program. Professional service revenues for the second quarter decreased 5% year over year to $121,000,000. While our professional service revenues in the quarter outperformed our forecast, the year over year decline was driven by our year over year decrease in WSE volumes and a 5% accrual for the recovery credit.
Insurance service revenues for the second quarter increased 2% year over year to $827,000,000 The growth in insurance service revenues was also offset by the 6% recovery credit accrual. Net insurance service revenues increased a 106% year over year to $214,000,000 with a net insurance margin of 26%. The growth in net insurance service revenues was the result of reduced health utilization of all services as a result of shelter in place orders and lower COVID nineteen incidents as the shelter in place orders were effective in reducing initial positivity rates combined with COVID nineteen costs that were slightly lower per patient and less testing costs. As we have said on prior calls, our pre COVID expectation for the net insurance margin was about 11 to 12%. So we estimate that the net favorable impact of COVID nineteen on our second quarter insurance costs was approximately a $160,000,000.
When we exclude the impact of our recovery credit and our estimate of the favorable impact from COVID nineteen, we estimate our net service revenue was roughly flat year over year. Our second quarter GAAP effective tax rate was 26% for the quarter. Our non GAAP tax rate was 25.5. GAAP net income increased a 174% year over year to a $126,000,000 or $1.87 per share compared to $46,000,000 or 64¢ per share in the same quarter last year. Adjusted net income increased a 172% year over year to $136,000,000 or $2.03 per share compared to $50,000,000 or 70¢ per share in the same quarter last year.
Adjusted EBITDA for the second quarter increased a 134% year over year to $199,000,000 compared to $85,000,000 during the prior year period for an adjusted EBITDA margin of 59%. Adjusted EBITDA benefited from both timing and prudent expense management as we carefully managed colleague related expenses. We closed the quarter with total cash of $637,000,000. Working capital was $364,000,000 in the second quarter versus $284,000,000 in the 2020. Through the six months ended 06/30/2020, we generated $315,000,000 of positive corporate cash flow from operating activities and used $445,000,000 primarily in settlement of WSE related payroll tax obligations.
As a result, total cash outflow from operations was a $130,000,000. We spent approximately $60,000,000 to repurchase 1,400,000.0 shares of stock in the second quarter in accordance with our capital management approach. We will continue to repurchase stock in the second half at a similar pace to the first half subject to the price of our stock. Most of the EPS accretion benefit from our second half repurchases will be realized in 2021. Turning now to our twenty twenty third quarter and full year outlook, I will provide both GAAP and non GAAP guidance.
And in an effort to be transparent given these unprecedented times, I will provide a summary of the changes to our guidance before providing a more comprehensive review. For the year, we are raising our GAAP total revenue guidance due to our higher than originally forecasted WSE count and our higher health participation rate experienced in Q2. We are also raising the top end of our adjusted EBITDA margin range to reflect our full year OpEx expectations. As a result, the top end of our EPS guidance ranges will also be raised. Please recognize that as we referenced previously, there are significant timing differences between the first half and the second half results for 2020.
First, the health cost savings that we realized in the second quarter are expected to reverse in the second half as we continue to accrue for the recovery credit and realize incremental COVID nineteen insurance related costs that are no longer offset by savings from health care utilization. Second, you will see an increase in OpEx in the second half as we invest in growth and IT initiatives. We would characterize this spend as project based and not permanent spending increases. Our top end of guidance presumes that US policymakers will continue to support employment and SMBs using programs like its paychecks protection program for the balance of 2020. The low end of our guidance now assumes limited or no direct additional support of employment via liquidity funding to SMBs.
Our GAAP revenue guidance is now informed by our volume growth assumptions under these two economic outlooks as well as our recovery credit accrual. When compared to our outlook last quarter, we have changed the shape of our WSE forecast from a steep decline followed by a rapid recovery to a shallow decline which we realized in the second quarter to be followed by a much more flat recovery and later in the year. We also believe new sales will continue to be low in the third and fourth quarters hindered by economic uncertainty and deferred decision making. Overall, we assume the impact from the pandemic will be much more regionalized and fragmented with some areas returning to business growth while others returning to various forms of business shutdown. Our GAAP revenue guidance will also be impacted by our recovery credit accrual.
We expect to accrue most of the remainder of our forecasted savings over the second half. Currently, we anticipate this to be about 2% to 4% of GAAP revenue. Before we go any further, let me talk through the mechanics of the recovery credit. First, the recovery credit will be accrued in financial year 2020 and payable beginning late twenty twenty through financial year 2021 at the time TriNet and our clients choose to extend our relationship. Second, the accrual is classified on our balance sheet as restricted cash and the changes in cash flow through our WOC related cash.
As a result of these assumptions, we now forecast our full year 2020 net insurance margin to be in the range of 12% to 14%. And excluding the impact from the recovery credit and COVID-nineteen costs, we are forecasting our second half net insurance margin to be in the range of 10% to 11%. Finally, we expect to return to a more normalized net insurance margin in financial year 2021. Now I'd like to set out our financial guidance, which includes the acquisition of Little Bird. The acquisition did not materially alter our growth expectation for 2020 revenue or of EBITDA.
For the 2020, we expect GAAP revenue to be down approximately 3%. We expect net service revenues to be down in the range of down 22% to down 17% year over year. And as I mentioned previously, our third quarter net service revenue guidance is impacted by the timing of our recovery accrual and our expected COVID-nineteen insurance costs. As a result, we expect our net insurance margin to be in the range of 6% to 8%. We are forecasting an adjusted EBITDA margin in the range of 12% to 18% for the quarter.
Again, our adjusted EBITDA margin in the quarter is impacted by timing related to the recovery credit accrual, expected COVID-nineteen impacts on insurance costs and onetime OpEx investments. We expect Q3 GAAP earnings per share to be down year over year in the range of down 102% to down 93% and adjusted net income per share to be down year over year in the range of down 90% to down 75%. Turning to our full year 2020 guidance, because of the outperformance of our volume in the second quarter, the change shape of our second half volume forecast, the realized mix shift to our white collar verticals and the cumulative first half financial performance, we're taking the top end of our guidance higher. For GAAP revenue, we now expect the year over year change to be in the range of flat to up 1%, up from our previous guidance of down 8% to down 3% year over year. We now forecast our net service revenue to be flat to up 5% year over year versus our previous guidance of flat to up 4% year over year.
Our full year 2020 adjusted EBITDA margin is now expected to be approximately 38% to 41%, up two points at the top end. GAAP earnings per share are now expected to be down 8% but growing nine percent year over year, raised from our previous guidance of down 8% to down 1% year over year. Adjusted net income per share is now expected to be down 3% to up 14% raised from our previous guidance of down 3% to up 4% year over year. With that, I will return the call to Burton for his closing remarks. Burton?
Speaker 3
I am very proud of the entire TriNet team for the results delivered in the second quarter in the face of COVID nineteen. The positive results related to revenue, profit, cash flow, client retention, NPS surveys, cost control and marketing impact reflect a strong outcome as we help our customers navigate these difficult times. I am equally proud of the many resilient customers we serve every single day. They are the innovators and entrepreneurs who represent the backbone of our economy. These are the companies that will lead us through our nation's recovery.
With the recovery credit program we've announced today, we will be pleased to stand by them as they survive and thrive. The current TriNet operating model is working well, and we will continue to leverage it in the face of the uncertainty that confronts us. We are passionate about helping our customers navigate and implement new constructs like PPP loan forgiveness as they become available. Regardless if this is the new normal or a short lived blip in our country's history, TriNet is well positioned to provide the resources necessary to help our customers pursue their business goals and secure future success. Operator?
Speaker 0
We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. And at this time, there will be a free pause until the first question.
And our first question today will come from Tien Tsin Huang with JPMorgan. Please go ahead.
Speaker 5
Great, thank you. Thanks so much for all the detail as well. I know there's a lot of moving pieces. Maybe I'll ask on retention because I understand that sales is a little bit more difficult. Retention sort of stood out to me here with the higher NPS scores.
You you talked about high you higher higher utilization helping, automation helping. So where is it now as you're thinking on how high it can go changed given what you've learned through this initial COVID period?
Speaker 2
Sure. Hi, Tien Tsin. This is Mike. Way I think about it is there's really two pieces that affect our WIC volume. The first is attrition, which is client attrition.
And what we've seen is that our pattern of attrition this year compared to this time last year is about the same for the half year. And I think the other aspect is our clients laying off their employees, and that's really the driver of the force and the performance in the second quarter.
Speaker 4
Got
Speaker 5
you. Got you. And then if I if I heard you correctly, for the quarter, talked about net service revenue was roughly flat. If we excluded the recovery credit as well as the COVID impact here, is that here your messaging on how we should consider the baseline assumption here for the second quarter, what a clean baseline would be? Is that the intent?
Speaker 2
Yes. Yes, that's right.
Speaker 5
Understood. And then lastly, maybe for you, Burton, just on the acquisition here. I think you mentioned it was relatively small in terms of impact. Anything else you can share in terms of size or a number of WSEs, the risk model? What else do they bring that you lack?
Speaker 3
Yeah. So look, Tien Tsin, this is, really exciting for me. Our vertical oriented business model is working very well in this economy, and it's allowed us to focus on exactly what these verticals need and what these industries are asking for. The Little Bird acquisition represents exactly that. You know I'm passionate about the nonprofit space, the education space as well.
And they have expertise that's gonna come on to TriNet and help us get even better in this particular space. They're based out of New York, a stronghold for TriNet, and I'm excited that they're on board. The size is very, very small, but the impact I can have over time with them helping us in this particular vertical is exciting.
Speaker 2
And as to the financials overall, Tien Tsin, it's immaterial to our financials. But to give you some color, it's about 1% of our volume, and we believe it will be accretive over time.
Speaker 5
Yeah. I don't I don't doubt that you can amplify the growth rate. Thank you for all the details.
Speaker 3
Hey. Thank you, Tien, Jim. We appreciate you.
Speaker 0
And our next question will come from Andrew Nicholas with William Blair. Please go ahead.
Speaker 6
Hi, good afternoon. Thank you for taking my questions. The first one I wanted to ask about, think, Burton, in your prepared remarks, you made a comment about the average deal size has nearly doubled year over year. I was just hoping you could parse that out a little bit further. What's driving that change?
And what does that mean for for your addressable market more broadly, sales cycles, growth outlook, that sort of thing?
Speaker 3
So the the solution that we're delivering is landing very well with our customer base. And we believe by going upmarket, which was a conscious decision on the part of TriNet, allows us to expand that value proposition for those particular customers. So what you will see over time is that we will expand on the size of the customers that come to TriNet, and they will avail themselves of the medical, the technology, and the risk transfer that our unique model offers. So we're focused on the customers that really understand the direct value proposition, and we find that as the customers grow, that value proposition grows with the customers.
Speaker 6
Got it. Got it. Makes sense. And then, just on the balance sheet, you have nearly $650,000,000 in cash, at quarter end. And obviously, what seems to be a little bit more stable of a backdrop or at least less uncertain than it was last quarter when you drew down on your credit facility.
Was just hoping you could speak to near and medium term capital allocation priorities, where repurchases fit alongside M and A outlook. Thank you.
Speaker 2
Sure. So this is, thank you. So as I said in my prepared remarks, our plan is unchanged as in regards to capital allocation, and our plan is to buy in the second half of the year roughly the same amount as we purchased in the first half of the year subject to the stock price. I think with regards to m and a, our view is that nothing has changed. We're always in the market for the right kind of transaction.
And as we look at multiples and the fit, we'll examine those opportunities.
Speaker 0
Great. Thank you.
Speaker 7
Thank you.
Speaker 0
And our next question will come from Kevin McVeigh with Credit Suisse. Please go ahead.
Speaker 4
Great. Thanks. Hey, Port, you talked about a 70% participation rate on the health care side. Can you help us frame that a little bit in terms of where it's been historically, where you think it can go to, and just, I I guess, any thoughts around that if we could start there?
Speaker 2
So, Ken, Burton, let me take that one for you.
Speaker 4
Okay. We Thank you.
Speaker 2
We have historically, had about, mid sixties kind of performance previously, and so it represents about a four or 5% mix shift to the favorable for us right now.
Speaker 8
And what you'll see is
Speaker 2
a pattern what you'll see is a pattern of white collar participants being much more enrolled, whereas our blue collar is much generally much lower enrollment.
Speaker 3
And, Kevin, I'll add to that. The 80% white collar mix in our book is a direct you know, that 70% is a direct outcome of the mix shift. But what's good about that is that we are finding that customers who take our medical insurance generally stay longer with TriNet. And that's part of the comment I was trying to make about selling the whole value proposition and finding the verticals, the industries, and the right customer size where the entire value proposition, resonates best.
Speaker 4
No. That makes sense. And then is there any way to think about, within that 70%, how much take takes workers' comp as well?
Speaker 2
So, generally, Kevin, all of our customers are offered workers' compensation and take it.
Speaker 4
Got it. That's helpful. And then any sense of just, Mike, how risky it about WSE over over the this third and fourth quarter? Just remind us of that if you could.
Speaker 2
So sure. We don't actually give out volume for the in our guide. Our GAAP revenue for the full year is about zero to 5%, and that's a reasonable proxy net of rate and mix for our volume guide.
Speaker 4
Awesome. Thank you.
Speaker 5
Thanks, Kevin.
Speaker 0
And our next question comes from David Grossman with Stifel Financial. Please go ahead.
Speaker 7
Thank you. Good afternoon. You know, there's just so many moving pieces in this environment for you guys. And I'm wondering if maybe just kind of help us think at a high level about just the impact of retention, which sounds like if I heard you right, is roughly flat year over year. Maybe I got that wrong, but it sounded like it was flat.
We have some deferred decision making on the new bookings, and WSCs is probably anybody's guess, but definitely trending better than we thought. So as we and I know you don't want to comment beyond this year, but can you give us any kind of high level way to think about how each of these different you know, factors may impact next year excluding, of course, the net insurance margin, which I think we all, you know, understand will be going down year over year next year?
Speaker 2
So we don't really give out our guide for 2021. I would tell you that the way we think about exiting the year is that the recovery from where we are now is going to be flatter and longer. We see that, new sales will continue at lower levels through the second quarter and through the remainder of the year, and our gap guide is a reasonable proxy for volume net of rate and mix.
Speaker 7
Got it. And did I hear you right, that attrition was flat year over year as of the June?
Speaker 2
So for the six months this year versus six months last year, it was broadly similar.
Speaker 7
Got it. Okay. And as we think about David
Speaker 3
David, what I would say about that is I'm particularly pleased with the retention rates. I'm particularly pleased as you think about it with the NPS scores. We have seen a direct correlation between customer satisfaction, referrals, and new business, which I believe will pay off over time. I think that the recovery credit program is particularly exciting as it relates to 2021, and the team is just performing very well in this COVID environment. I believe that it distinguishes us from a cobbled together set of solutions.
Having a single provider that can provide the technology, the service, and the risk reduction is showing well in this economy.
Speaker 7
Right. So thanks for that, Burton. So let's just take that a step further and think about the professional services revenue, which I think declines less than WSCs probably because of the mix shift, the white collar. But as you think about your pipeline, and you gave some good detail about that previously, should we expect that professional services revenue to start kind of distancing itself or seeing more significant increases relative to the WFC count just based on what's in your sales pipeline?
Speaker 4
So
Speaker 2
what I would say is that we see that our rate and mix continues throughout the year on professional service revenues at the same rate and pace and that the gap guide really gives you the the the insight into how to think about volume for the rest of the year.
Speaker 7
Right. But I think I was talking about mix within the volume. So, you know, white versus blue. And so
Speaker 2
I think I think the way we're thinking about it right now is we may see some in our down scenario, we may see some more increase in mix. But in our up scenario, our mix would stay broadly stable.
Speaker 7
Got it. And then just one last thing, just on the workers' comp side. Is there any kind of significant adjustments year over year or sequentially to the workers' comp accrual that we should think about or through the balance of the year that you've reflected in guidance?
Speaker 2
So in our results, we posted favorable developments of about 5 to $6,000,000, and we haven't seen any particular significant material impact from COVID right yet. Workers' compensation developed slowly. We we don't see anything changing right now.
Speaker 7
So you don't see any material risk based on what you're seeing right now of people coming back and and claiming workers' comp, you know, COVID worker or COVID related workers' comp claims?
Speaker 2
It's too early to tell. I think that there are various legislative pressures in different locations that could swing it one way or the other, and, it remains uncertainty. And that's to a certain extent why we've widened the range of our potential of our guidance for the year to capture more potential outcomes.
Speaker 7
Got it. Alright, guys. Congratulations. Good luck.
Speaker 3
Thank you so much. And and I am incredibly humbled by this customer base and their resilience and their focus, David. So hopefully, that'll continue.
Speaker 0
And our next question will come from Sam England with Berenberg. Please go ahead.
Speaker 8
Hi, guys. Just a couple for me. Just around the new business pipeline, can you give us an idea of what you've seen in terms of postponements or cancellations in q two? And can we expect there's been any work that maybe got postponed due to everything that was going on in q two that will kick in in q three and in q four?
Speaker 3
So I have seen deferred decision making. What I would say is in its simplest form, what I'm seeing is that prospects, frankly, are most concerned about the front of the shop right now. They're concerned about staying in business. So while we can help with that, it's difficult for them to make a decision to change the back end in the current environment. So we're staying focused on servicing our customers and know there's a direct correlation between this customer satisfaction, referrals, and the new business, which should pay off over time.
Additionally, the marketing efforts are paying off as well.
Speaker 8
Okay. Great. Thanks. And then I suppose looking at it for the rest of the going ahead to the rest of this year, how are you thinking about the ramp up times for new clients given what's going on with remote working? Is it taking longer to deploy with your clients now, or can you do things as quickly as you could before?
Speaker 3
That's an awesome question. The team is doing the onboarding remotely, and they're doing a very good job. We measured the NPS results immediately after implementation, which, as you know, is quite complex in moving a client over to TriNet. And I am really thrilled with the type of scores we're getting and the team's adaptability to the onboarding of these new clients. A lot of this is gonna depend on how the curve ultimately forms, but I believe that, the team is doing a good job on the implementation remotely.
Speaker 8
Great. Thanks. And then maybe just one more. I'm sorry if I You didn't catch mentioned some increased OpEx investment in the back half of this year. What was that related to?
What's that investment going into?
Speaker 2
So as we said on the last quarter, we were gonna be prudent with expenses through the rest of the year. And, as a result, we have definitely been careful with our colleague related expenses. We we have pivoted and remained focused on some long term investments, and Burton discussed process improvement and platform modularity issues. Clearly, we got the financial levers to pull if we have any changes to the outcome. But for now, we think it makes sense to continue to focus on the long term.
Speaker 3
And and just to add to what Mike just said is we're planning to invest further in 2020, particularly in process improvements in automation. We believe that the q two performance indicates that these investments are paying off as evidenced by our ability to work remotely, which I have 3,000 people doing, and servicing our customers how they want to be serviced. We're continuing these investments in the third quarter and in the second half. But to be clear, the spend that Mike's talking about are project based investments, not a ramp up in people.
Speaker 8
Okay. Great. Thanks very much, guys.
Speaker 0
Ladies and gentlemen, this will conclude our question and answer session, also concluding today's conference.
Speaker 5
We'd like to thank
Speaker 0
you for attending today's presentation.
Speaker 5
And at this time, you
Speaker 0
may now disconnect your lines, and have a great day.