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Published: 2021-04-26 00:00:00 ET
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EX-99.1 2 tnet-33121xexhibit991.htm EX-99.1 Document

 
TriNet Announces First Quarter 2021 Results

1% Growth in GAAP Total Revenues and 9% Growth in Net Service Revenues for the First Quarter 2021
11% Growth in GAAP Net Income and 14% Growth in Adjusted Net Income for the First Quarter 2021
$1.51 in Net Income and $1.66 in Adjusted Net Income per Diluted Share for the First Quarter 2021

DUBLIN, Calif. April 26, 2021 TriNet Group, Inc. (NYSE: TNET), a leading provider of comprehensive human resources solutions for small and medium-size businesses, today announced financial results for the first quarter ended March 31, 2021. The first quarter highlights below include non-GAAP financial measures which are reconciled later in this release.
First quarter highlights include:
Total revenues increased 1% to $1.1 billion and Net Service Revenues increased 9% to $309 million, as compared to the same period last year.
Net income was $101 million, or $1.51 per diluted share, compared to net income of $91 million, or $1.31 per diluted share, in the same period last year.
Adjusted Net Income was $111 million, or $1.66 per diluted share, compared to Adjusted Net Income of $97 million, or $1.41 per diluted share, in the same period last year.
Adjusted EBITDA was $163 million, representing an Adjusted EBITDA Margin of 53%.
Total Worksite Employees (WSEs) decreased 3% compared to the same period last year, to approximately 326,000.
Average WSEs decreased 4% as compared to the same period last year, to approximately 321,000.

"Our business model continued to add significant value to our customers during these challenging times,” said Burton M. Goldfield, TriNet’s President and CEO. “Our customers sought help not just with traditional HR functions such as payroll, but also with strategic HR questions as they addressed the difficult economic environment. Through our vertical strategy, we have successfully aligned the right customers, with the right service model, at the right price. We once again leveraged our differentiated business model and financial performance to establish the 2021 credit program for the benefit of all of our stakeholders. We are encouraged by the economic reopening underway, and we are excited for a return to growth in 2021.”
TriNet’s total revenues for the first quarter of 2021 increased 1% from the first quarter of 2020 to $1.1 billion, while Net Service Revenues (total revenues less insurance costs) for the first quarter of 2021 increased 9% to $309 million compared to first quarter 2020. Net Insurance Service Revenues consisted of insurance service revenues of $907 million, less insurance costs of $751 million. Professional service revenues for the first quarter of 2021 decreased 2%, and Net Insurance Service Revenues for the first quarter of 2021 increased 23%, each as compared to the first quarter of 2020.
At March 31, 2021, TriNet had cash and cash equivalents of $500 million and total debt of $494 million.

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Second Quarter and Full-Year 2021 Guidance
In addition to announcing our first quarter 2021 results, we provide our second quarter and full-year 2021 guidance. Non-GAAP financial measures are reconciled later in this release. Percentages reflect the increase or (decrease) from the prior year quarter and prior year end.
Q2 2021Full Year 2021
LowHighLowHigh
Total revenues12 %14 %%11 %
Professional Service Revenues10 %14 %%10 %
Net Insurance Margin10 %11 %10 %11 %
Adjusted EBITDA Margin35 %39 %38 %40 %
Diluted net income per share of common stock$0.59 $0.74 $2.86 $3.31 
Adjusted Net Income per share - diluted$0.70 $0.86 $3.42 $3.90 
Quarterly Report on Form 10-Q
We anticipate filing our Quarterly Report on Form 10-Q (“Form 10-Q”) for the three months ended March 31, 2021 with the U.S. Securities and Exchange Commission (SEC) and making it available at http://www.trinet.com today, April 26, 2021. This press release should be read in conjunction with the Form 10-Q and the related Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Form 10-Q.
Earnings Conference Call and Audio Webcast
TriNet will host a conference call at 2:00 p.m. PT (5:00 p.m. ET) today to discuss its first quarter results for 2021 and provide second quarter and full-year financial guidance for 2021. TriNet encourages participants to pre-register for the conference call. Callers who pre-register will be given a unique PIN to gain immediate access to the call and bypass the live operator. To pre-register, go to: https://dpregister.com/sreg/10154653/e69f504b4b. For those who would like to join the call but have not pre-registered, they can do so by dialing +1 (412) 317-5426 and requesting the “TriNet Conference Call.” The live webcast of the conference call can be accessed on the Investor Relations section of TriNet’s website at http://investor.trinet.com. A replay of the webcast will be available on this website for approximately one year. A telephonic replay will be available for one week following the conference call at +1 (412) 317-0088 conference ID: 10154656.
About TriNet
TriNet is a leading provider of a comprehensive human resources solution for small to medium-size businesses, or SMBs. We enhance business productivity by enabling our clients to outsource their human resources, or HR, function to us, allowing them to focus on operating and growing their core businesses. Our HR solutions include services such as payroll processing, human capital consulting, employment law compliance and employee benefits, including health insurance, retirement plans and workers compensation insurance. Our services are delivered by our expert team of HR professionals and enabled by our technology platform, with online and mobile tools, which allow our clients and their employees to efficiently conduct their HR transactions anytime and anywhere. For more information, please visit http://www.trinet.com.
Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to TriNet’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section titled “Non-GAAP Financial Measures.”

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Forward-Looking Statements
This press release contains, and statements made during the above referenced conference call will contain, statements that are not historical in nature, are predictive in nature, or that depend upon or refer to future events or conditions or otherwise contain forward-looking statements within the meaning of Section 21 of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including, among other things, TriNet’s expectations and assumptions regarding: TriNet's financial guidance for the second quarter and full-year 2021 and the underlying assumptions, and the extent, length and growth impact of economic reopening efforts. Forward-looking statements are often identified by the use of words such as, but not limited to, “ability,” “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” "guidance," “impact,” “intend,” “may,” “plan,” "predict," “project,” “seek,” “should,” “strategy,” “target,” “value,” “will,” “would” and similar expressions or variations. These statements are not guarantees of future performance, but are based on management’s expectations as of the date hereof and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from our current expectations and any past or future results, performance or achievements. Investors are cautioned not to place undue reliance upon any forward-looking statements.

Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include: the economic, health and business disruption caused by the COVID-19 pandemic; the impact of the COVID-19 pandemic on our clients and prospects, insurance costs and operations; the impact of the COVID-19 pandemic on the laws and regulations that impact our industry and clients; our ability to mitigate the business risks we face as a co-employer; our ability to manage unexpected changes in workers’ compensation and health insurance claims and costs by worksite employees; the effects of volatility in the financial and economic environment on the businesses that make up our client base, and the concentration of our clients in certain geographies and industries; the impact of failures or limitations in the business systems we rely upon; the impact of our Recovery Credit program; adverse changes in our insurance coverage or our relationships with key insurance carriers; our ability to improve our technology to satisfy regulatory requirements and meet the expectations of our clients and manage client attrition; our ability to effectively integrate businesses we have acquired or may acquire in the future; our ability to effectively manage and improve our operational processes; our ability to attract and retain qualified personnel; the effects of increased competition and our ability to compete effectively; the impact on our business of cyber-attacks and security breaches; our ability to secure our information technology infrastructure and our confidential, sensitive and personal information; our ability to comply with constantly evolving data privacy and security laws; our ability to manage changes in, uncertainty regarding, or adverse application of the complex laws and regulations that govern our business; changing laws and regulations governing health insurance and employee benefits; our ability to be recognized as an employer of worksite employees under federal and state regulations; changes in the laws and regulations that govern what it means to be an employer, employee or independent contractor; our ability to comply with the laws and regulations that govern PEOs and other similar industries; the outcome of existing and future legal and tax proceedings; fluctuation in our results of operation and stock price due to factors outside of our control, such as the volume and severity of our workers’ compensation and health insurance claims and the amount and timing of our insurance costs, operating expenses and capital expenditure requirements; our ability to comply with the restrictions of our credit facility and meet our debt obligations; and the impact of concentrated ownership in our stock. Any of these factors could cause our actual results to differ materially from our anticipated results.


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Further information on risks that could affect TriNet’s results is included in our filings with the SEC, including under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are available on our investor relations website at http://investor.trinet.com and on the SEC website at www.sec.gov. Copies of these filings are also available by contacting TriNet Corporation's Investor Relations Department at (510) 875-7201. Except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements in this press release, and any forward-looking statements in this press release speak only as of the date of this press release. In addition, we do not assume any obligation, and do not intend, to update any of our forward-looking statements, except as required by law.

Contacts: 
Investors:Media:
Alex BauerRenee Brotherton
TriNetTriNet
Investorrelations@TriNet.comRenee.Brotherton@TriNet.com
(510) 875-7201(408) 646-5103
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FINANCIAL HIGHLIGHTS
Key Financial and Operating Metrics
We regularly review certain key financial and operating metrics to evaluate growth trends, measure our performance and make strategic decisions. These key financial and operating metrics may change over time. Our key financial and operating metrics for the periods presented were as follows:
Three Months Ended March 31,
(in millions, except per share and WSE data)20212020% Change
Income Statement Data:
Total revenues$1,060 $1,048 %
Operating income138 120 15 
Net income101 91 11 
Diluted net income per share of common stock1.51 1.31 15 
Non-GAAP measures (1):
Net Service Revenues
309 283 
Net Insurance Service Revenues
156 127 23 
Adjusted EBITDA 163 145 12 
Adjusted Net income 111 9714 
Operating Metrics:
Average WSEs321,295 336,348 (4)%
Total WSEs at period end326,216 336,846 (3)
(1) Refer to Non-GAAP measures definitions and reconciliations from GAAP measures under the heading "Non-GAAP Financial Measures".
(in millions)March 31, 2021December 31, 2020% Change
Balance Sheet Data:
Working capital$520 290 79 %
Total assets3,005 3,043 (1)
Debt494 370 34 
Total stockholders’ equity653 607 
Three Months Ended March 31,
(in millions)20212020% Change
Cash Flow Data:
Net cash used in operating activities$(175)$(282)(38)%
Net cash used in investing activities(3)(94)(97)
Net cash provided by financing activities56 185 (70)
Non-GAAP measure (1):
Corporate Operating Cash Flows131 119 10 
(1) Refer to Non-GAAP measures definitions and reconciliations from GAAP measures under the heading "Non-GAAP Financial Measures".

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FINANCIAL STATEMENTS
TRINET GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
 Three Months Ended March 31,
(in millions except per share data)20212020
Professional service revenues
$153 $156 
Insurance service revenues
907 892 
Total revenues
1,060 1,048 
Insurance costs
751 765 
Cost of providing services
64 64 
Sales and marketing
46 46 
General and administrative
36 33 
Systems development and programming
13 
Depreciation and amortization of intangible assets
12 11 
Total costs and operating expenses
922 928 
Operating income
138 120 
Other income (expense):
Interest expense, bank fees and other
(5)(4)
Interest income
2 
Income before provision for income taxes
135 121 
Income taxes
34 30 
Net income
$101 $91 
Other comprehensive (loss) income, net of income taxes(1)
Comprehensive income
$100 $93 
Net income per share:
Basic
$1.53 $1.32 
Diluted
$1.51 $1.31 
Weighted average shares:
Basic
66 68 
Diluted
67 69 


 

 
 

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FINANCIAL STATEMENTS
TRINET GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions)March 31, 2021December 31, 2020
Assets
Current assets: 
Cash and cash equivalents
$500 $301 
Investments
71 57 
Restricted cash, cash equivalents and investments
1,081 1,388 
Accounts receivable, net
5 18 
Unbilled revenue, net
340 246 
Prepaid expenses, net
58 63 
Other current assets
105 87 
Total current assets2,160 2,160 
Restricted cash, cash equivalents and investments, noncurrent
184 210 
Investments, noncurrent
130 138 
Property, equipment and software, net
75 79 
Operating lease right-of-use asset
51 51 
Goodwill
294 294 
Other intangible assets, net
17 18 
Other assets
94 93 
Total assets$3,005 $3,043 
Liabilities and stockholders’ equity 
Current liabilities: 
Accounts payable and other current liabilities
$84 $50 
Long-term debt
 22 
Client deposits and other client liabilities
151 134 
Accrued wages
488 309 
Accrued health insurance costs, net
165 172 
Accrued workers' compensation costs, net
59 59 
Payroll tax liabilities and other payroll withholdings
668 1,095 
Operating lease liabilities
12 11 
Insurance premiums and other payables
13 18 
Total current liabilities1,640 1,870 
Long-term debt, noncurrent
494 348 
Accrued workers' compensation costs, noncurrent, net
138 138 
Deferred taxes
21 22 
Operating lease liabilities, noncurrent
49 49 
Other non-current liabilities
10 
Total liabilities2,352 2,436 
Stockholders’ equity:
Preferred stock
 — 
Common stock and additional paid-in capital
758 747 
Accumulated deficit
(108)(144)
Accumulated other comprehensive income
3 
Total stockholders’ equity653 607 
Total liabilities and stockholders’ equity$3,005 $3,043 

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FINANCIAL STATEMENTS
TRINET GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Three Months Ended March 31,
(in millions)20212020
Operating activities
Net income
$101 $91 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
19 15 
Amortization of ROU asset3 
Accretion of discount rate on lease liabilities1 — 
Amortization of premium of investments1 — 
Stock based compensation
11 
Changes in operating assets and liabilities:
Accounts receivable, net
13 — 
Unbilled revenue, net
(94)(95)
Prepaid expenses, net
5 (3)
Accounts payable and other current liabilities
33 29 
Client deposits and other client liabilities17 (6)
Accrued wages
179 38 
Accrued health insurance costs, net
(7)(2)
Accrued workers' compensation costs, net
 
Payroll taxes payable and other payroll withholdings
(426)(334)
Operating lease liabilities
(3)(5)
Other assets
(24)(28)
Other liabilities
(4)
Net cash used in operating activities(175)(282)
Investing activities
Purchases of marketable securities
(82)(155)
Proceeds from sale and maturity of marketable securities
84 67 
Acquisitions of property and equipment(5)(6)
Net cash used in investing activities
(3)(94)
Financing activities
Repurchase of common stock
(60)(40)
Awards effectively repurchased for required employee withholding taxes
(5)(3)
Proceeds from revolving credit agreement borrowings  234 
Payment of long-term financing fees(2)— 
Payment of debt issuance costs(7)— 
Proceeds from issuance of 2029 Notes500 — 
Repayment of debt
(370)(6)
Net cash provided by financing activities56 185 
Net decrease in cash and cash equivalents, unrestricted and restricted(122)(191)
Cash and cash equivalents, unrestricted and restricted:
Beginning of period
1,643 1,456 
End of period
$1,521 $1,265 
Supplemental disclosures of cash flow information
Interest paid
$2 $
Income taxes paid, net
2 
Supplemental schedule of noncash investing and financing activities
Payable for purchase of property and equipment
$3 $
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NON-GAAP FINANCIAL MEASURES
Non-GAAP Financial Measures
In addition to the selected financial measures presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), we monitor other non-GAAP financial measures that we use to manage our business, to make planning decisions, to allocate resources and to use as performance measures in our executive compensation plan. These key financial measures provide an additional view of our operational performance over the long term and provide information that we use to maintain and grow our business.
The presentation of these non-GAAP financial measures is used to enhance the understanding of certain aspects of our financial performance. It is not meant to be considered in isolation from, superior to, or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.
Non-GAAP MeasureDefinitionHow We Use The Measure
Net Service Revenues• Sum of professional service revenues and Net Insurance Service Revenues,
 or total revenues less insurance costs.
• Provides a comparable basis of revenues on a net basis. Professional service revenues are presented net of client payroll costs whereas insurance service revenues are presented gross of insurance costs for financial reporting purposes.
• Acts as the basis to allocate resources to different functions and evaluates the effectiveness of our business strategies by each business function.
• Provides a measure, among others, used in the determination of incentive compensation for management.
Net Insurance Service Revenues• Insurance service revenues less insurance costs.• Is a component of Net Service Revenues.
• Provides a comparable basis of revenues on a net basis. Professional service revenues are presented net of client payroll costs whereas insurance service revenues are presented gross of insurance costs for financial reporting purposes. Promotes an understanding of our insurance services business by evaluating insurance service revenues net of our WSE related costs which are substantially pass-through for the benefit of our WSEs. Under GAAP, insurance service revenues and costs are recorded gross as we have latitude in establishing the price, service and supplier specifications.
Net Insurance Margin• Net Insurance Margin (NIM) is the ratio of Net Insurance Services Revenues to insurance service revenues. • Provides a comparable basis of Net Insurance Service Revenues relative to insurance service revenues. Promotes an understanding of our pricing to risk performance.
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NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA• Net income, excluding the effects of:
- income tax provision,
- interest expense, bank fees and other,
- depreciation,
- amortization of intangible assets, and
- stock based compensation expense.
• Provides period-to-period comparisons on a consistent basis and an understanding as to how our management evaluates the effectiveness of our business strategies by excluding certain non-cash charges such as depreciation and amortization, and stock-based compensation recognized based on the estimated fair values. We believe these charges are either not directly resulting from our core operations or not indicative of our ongoing operations.
• Enhances comparisons to prior periods and, accordingly, facilitates the development of future projections and earnings growth prospects.
• Provides a measure, among others, used in the determination of incentive compensation for management.
• We also sometimes refer to Adjusted EBITDA margin, which is the ratio of Adjusted EBITDA to Net Service Revenue.
Adjusted Net Income• Net income, excluding the effects of:
- effective income tax rate (1),
- stock based compensation,
- amortization of intangible assets,
- non-cash interest expense (2), and
- the income tax effect (at our effective tax rate (1) of these pre-tax adjustments.
• Provides information to our stockholders and board of directors to understand how our management evaluates our business, to monitor and evaluate our operating results, and analyze profitability of our ongoing operations and trends on a consistent basis by excluding certain non-cash charges.



Corporate Operating Cash Flows• Net cash provided by (used in) operating activities, excluding the effects of:
- Assets associated with WSEs (accounts receivable, unbilled revenue, prepaid expenses and other current assets) and
- Liabilities associated with WSEs (client deposits and other client liabilities, accrued wages, payroll tax liabilities and other payroll withholdings, accrued health benefit costs, accrued workers' compensation costs, insurance premiums and other payables, and other current liabilities).
• Provides information that our stockholders and management can use to evaluate our cash flows from operations independent of the current assets and liabilities associated with our WSEs.
• Enhances comparisons to prior periods and, accordingly, used as a liquidity measure to manage liquidity between corporate and WSE related activities, and to help determine and plan our cash flow and capital strategies.
(1)     Non-GAAP effective tax rate is 25.5% for the first quarters of 2021 and 2020, which excludes the income tax impact from stock-based compensation, changes in uncertain tax positions, and nonrecurring benefits or expenses from federal legislative changes.
(2)    Non-cash interest expense represents amortization and write-off of our debt issuance costs and loss on derivative.

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NON-GAAP FINANCIAL MEASURES
Reconciliation of GAAP to Non-GAAP Measures
The table below presents a reconciliation of total revenues to Net Service Revenues:
Three Months Ended March 31,
(in millions)20212020
Total revenues$1,060 $1,048 
Less: Insurance costs751 765 
Net Service Revenues$309 $283 
The table below presents a reconciliation of insurance service revenues to Net Insurance Service Revenues:
Three Months Ended March 31,
(in millions)20212020
Insurance service revenues$907 $892 
Less: Insurance costs751 765 
Net Insurance Service Revenues$156 $127 
NIM17 %14 %
The table below presents a reconciliation of net income to Adjusted EBITDA:
Three Months Ended March 31,
(in millions)20212020
Net income$101 $91 
Provision for income taxes34 30 
Stock based compensation11 
Interest expense, bank fees and other5 
Depreciation and amortization of intangible assets12 11 
Adjusted EBITDA$163 $145 
Adjusted EBITDA Margin53 %51 %
The table below presents a reconciliation of net income to Adjusted Net Income and Adjusted Net Income per share - diluted:
Three Months Ended March 31,
(in millions, except per share data)20212020
Net income $101 $91 
Effective income tax rate adjustment (1)
Stock based compensation11 
Amortization of intangible assets1 
Non-cash interest expense2 — 
Income tax impact of pre-tax adjustments(4)(3)
Adjusted Net Income$111 $97 
GAAP weighted average shares of common stock - diluted67 69 
Adjusted Net Income per share - diluted$1.66 $1.41 

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NON-GAAP FINANCIAL MEASURES
The table below presents a reconciliation of net cash (used in) provided by operating activities to Corporate Operating Cash flows:
Three Months Ended
March 31,
(in millions)
20212020
Net cash used in operating activities$(175)$(282)
  Less: Change in WSE related other current assets(85)(110)
  Less: Change in WSE related liabilities(221)(291)
Net cash used in operating activities - WSE$(306)$(401)
Net cash provided by operating activities - Corporate$131 $119 
Reconciliation of GAAP to Non-GAAP Measures for the second quarter and full-year 2021 guidance.
Low and high percentages represent increases (decreases) from the same period in the previous year.
The table below presents a reconciliation of insurance service revenues to Net Insurance Service Revenues and NIM:
Q2 2020Q2 2021 GuidanceFY 2020Year 2021 Guidance
(in millions)ActualLowHighActualLowHigh
Insurance service revenues$827 13 %14 %$3,490 %11 %
Less: Insurance costs613 38 38 2,979 15 15 
Net Insurance Service Revenues$214 (59)%(53)%$511 (25)%(17)%
NIM26 %9.5 %10.7 %15 %10 %11 %
The table below presents a reconciliation of net income to Adjusted EBITDA:
Q2 2020Q2 2021 GuidanceFY 2020Year 2021 Guidance
(in millions)ActualLowHighActualLowHigh
Net income$126 (69)%(61)%$272 (30)%(18)%
Provision for income taxes45 (81)(73)85 (32)(18)
Stock based compensation11 15 20 43 18 22 
Interest expense, bank fees and other4 29 29 21 (8)(8)
Depreciation and amortization of
 intangible assets
13 47 (4)(4)
Adjusted EBITDA$199 (61)%(54)%$468 (22)%(13)%
Adjusted EBITDA Margin59 %35 %39 %44 %38 %40 %
The table below presents a reconciliation of net income to Adjusted Net Income and Adjusted Net Income per share - diluted:
Q2 2020Q2 2021 GuidanceFY 2020Year 2021 Guidance
(in millions, except per share data)ActualLowHighActualLowHigh
Net income $126 (69)%(61)%$272 (30)%(18)%
Effective income tax rate adjustment1 (403)(371)(6)(2)(19)
Stock based compensation11 15 20 43 18 22 
Amortization of intangible assets1 (1)(1)5 (1)(1)
Non-cash interest expense 31 31 1 286 286 
Income tax impact of pre-tax adjustments(3)14 18 (12)21 24 
Adjusted Net Income$136 (66)%(58)%$303 (24)%(13)%
GAAP weighted average shares of common stock - diluted68 68 
Adjusted Net Income per share - diluted$2.03 $0.70 $0.86 $4.44 $3.42 $3.90 
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