TriNet Group Inc (NYSE: TNET) stock fell over 4.4% on 27th October, 2020 (As of 12:02 pm GMT-4; Source: Google finance) after the company posted lower than expected results for the third quarter of FY 20. Given the ongoing economic uncertainty, the third quarter witnessed bad volumes. The company ended the third quarter with approximately 321,000 WSEs, down 3% year-over-year, but up 2% sequentially versus the second quarter. The acquisition of Little Bird HR accounted for approximately 1% of incremental WSE volume in the third quarter.
TNET in the third quarter of FY 20 has reported the adjusted earnings per share of 56 cents, while adjusted revenue growth of 1 percent to $216 million in the third quarter of FY 20. The total revenues outperformed the top of the guidance range by 4%. The total revenue growth was driven by a 5% growth in total price or rate combined with 5% growth from a change in mix in WSEs, which is the proportion of WSEs in each vertical and the offerings that they’re enrolling. This is offset by a 4% year-over-year decline in average WSEs to 318,000, which includes the impact of the acquisition of Little Bird HR and also a 5% or $48 million reduction in revenue from the continued accrual for the recovery credit program. Over the last two quarters, the company has accrued $104 million for the recovery credit program and the company continues to see net savings from the under-utilization of health services.
Moreover, net service revenues in the quarter declined 2% year-over-year, outperforming the top-end of the guidance range by 15 points. For the third quarter, the company delivered a net insurance margin of 11% versus the Q3 guided range of 6% to 8%. The outperformance in net insurance margin during the third quarter was driven by reduced health utilization and the change in the pattern of the expected incremental investments in the customers as a result of COVID-19.
For the fourth quarter of 2020, the company expects GAAP revenue to be in the range of flat to up 2%. The company expects the fourth quarter net service revenue to be in the range of down 27% to down 12% year-over-year. The company expects the fourth quarter net insurance margin to be in the range of 4% to 8%. The company expects an adjusted EBITDA margin range to be in the quarter of 8% to 21%. The company expects adjusted net income per share is expected to be in the range of breakeven to up $0.32 or down 100% to down 62% year-over-year.