TriNet Group, Inc. (NYSE:TNET) Q3 2020 Earnings Conference Call - Final Transcript
Oct 26, 2020 • 05:00 pm ET
Burton M. Goldfield
our last earnings report include, we realized strong WSE volume in Q3 and growth in our volume over Q2. This compared favorably to the broader economic environment and our own forecast. We implemented the industry-leading recovery credit program and shared the program details with the first cohort of TriNet customers. It was greeted with widespread appreciation. And we hosted our first ever conference focused on small and medium-sized business leaders, the TriNet PeopleForce Conference.
In the face of COVID-19 we delivered strong financial performance due to our resilient customer base, which has been acquired through a verticalized go-to-market strategy and a unique business model that add significant value across a wide range of strategic and operational issues facing small businesses in America.
During the third quarter, GAAP total revenues increased 1% year-over-year, while GAAP earnings per share declined 38% year-over-year. Please note that our reported financial performance in the quarter includes a revenue accrual for our recovery credit program which Mike will address later. The recovery credit program is our effort to share with our customers the excess cost savings we generated from under-utilized health services, primarily in April. Historically, our business model has been to assume a deductible layer for the majority of our health plans. We are able to take this layer in part due to our strong balance sheet. Because of this plan construct, we had immediate access to the significant savings generated in April. Leveraging those savings, we created the recovery credit program, our explicit effort to ensure a portion of these savings are used for the benefit of our customers, all within one year. Said another way, the recovery credit program ensures that those customers who are committed to us and our partnership have access to the savings when they need them most. We believe the recovery credit program represents the best usage of these savings.
Through this program, we are investing in the success of our customers, rather than choosing to subsidize new customers or set low expectations for ongoing health costs. Importantly, the first customer cohort received notice of their recovery credit during the third quarter. These are customers whose contracts renewed with us on October 1st. The preliminary response rates were very encouraging and indications for future retention are positive. We will be able to report on the full benefits of the program in 2021.
Despite the ongoing economic uncertainty, our third quarter was distinguished by stable volumes. We ended the quarter with approximately 321,000 WSEs, down 3% year-over-year, but up 2% sequentially versus the second quarter. Our acquisition of Little Bird HR accounted for approximately 1% of incremental WSE volume in the quarter. We attribute our volume outperformance to our amazing customer base and our unique approach to customer selection. The installed base continues to be comprised of nearly 80% white-collar workers, which thus far have withstood the impact from the pandemic better than our blue-collar verticals. Continuing a trend we saw emerge in June, our white-collar verticals continued to add