The following table presents the Company’s condensed consolidated statements of income (loss) as previously reported, restatement adjustments and the condensed consolidated statements of income (loss) as restated for the three and six months ended June 30, 2016 (in thousands, except per share amounts):



Condensed Consolidated Statements of Income (Loss)(Unaudited)
(In thousands, except per share amounts)

	Three Months Ended June 30, 2016										Six Months Ended June 30, 2016
	As Previously Reported			Adjustments				As Restated			As Previously Reported			Adjustments				As Restated
Revenues:
Healthcare	$	48,070		$	(2,455	)	(a)	$	45,615		$	98,440		$	(2,455	)	(a)	$	95,985
Commuter	17,383			83			(b)	17,466			34,759			83			(b)	34,842
COBRA	17,879			(672		)	(c)	17,207			33,285			(672		)	(c)	32,613
Other	4,393			(18		)	(b)	4,375			8,243			(18		)	(b)	8,225
Total revenues	87,725			(3,062		)		84,663			174,727			(3,062		)		171,665
Operating expenses:
Cost of revenues (excluding amortization of internal use software)	28,411			18			(d)	28,429			59,671			18			(d)	59,689
Technology and development	11,157			(321		)	(e)	10,836			20,988			(321		)	(e)	20,667
Sales and marketing	14,385			(249		)	(f)	14,136			28,305			(249		)	(f)	28,056
General and administrative	17,130			(1,662		)	(g)	15,468			31,745			(1,662		)	(g)	30,083
Amortization, impairment and change in contingent consideration	11,695			3,669			(h)	15,364			19,140			3,669			(h)	22,809
Employee termination and other charges	313			—				313			313			—				313
Total operating expenses	83,091			1,455				84,546			160,162			1,455				161,617
Income (loss) from operations	4,634			(4,517		)		117			14,565			(4,517		)		10,048
Other income (expense):
Interest income	97			—				97			183			—				183
Interest expense	(409		)	(413		)	(i)	(822		)	(814		)	(413		)	(i)	(1,227		)
Other income (expense)	6			(132		)	(j)	(126		)	2			(132		)	(j)	(130		)
Income before income (loss) taxes	4,328			(5,062		)		(734		)	13,936			(5,062		)		8,874
Income tax (provision) benefit	(1,475		)	2,089				614			(5,287		)	2,089				(3,198		)
Net income (loss)	$	2,853		$	(2,973	)		$	(120	)	$	8,649		$	(2,973	)		$	5,676
Net income (loss) per share:
Basic	$	0.08		$	(0.08	)		$	—		$	0.24		$	(0.08	)		$	0.16
Diluted	$	0.08		$	(0.08	)		$	—		$	0.23		$	(0.08	)		$	0.15
Shares used in computing net income (loss) per share:
Basic	36,361							36,361			36,139							36,139
Diluted	37,195							36,361			36,862							36,862

(a)

Revenue adjustment of $2.5 million was primarily due to (i) a $1.1 million reversal of OPM revenue as discussed above, (ii) $0.7 million reversal of revenue as a result of the correction of billing errors and the recognition of invoices and related invoice adjustments in the proper reporting period, and (iii) a $0.6 million reversal of revenue due to the netting of healthcare revenue against certain cost of revenue expenses.


(b)	Revenue adjustment related to the correction of billing errors and the recognition of invoices and credit memos in the correct reporting periods.


(c)	Revenue adjustment of $0.7 million related to the correction of billing errors and the recognition of credit memos in the correct reporting periods.


(d)	Adjustment of $0.6 million primarily related to the reserve of potentially uncollectible customer obligations for pass through employee participant reimbursement, offset by a $0.6 million reversal related to the netting of healthcare revenue against certain cost of revenue expenses.


(e)	Reduction primarily related to the over-accrual of platform technology related expenses.


(f)	Reduction related primarily to the over-accrual of commission expenses.

(g)

Adjustments related to (i) a $1.2 million reduction in stock-based compensation expense as a result of reduced target attainment percentages expected for performance-based restricted stock units (see above for details), (ii) the reversal of $0.2 million related to the re-valuation of the allowance for bad debt and (iii) a $0.2 million expense reduction related to the re-valuation and write-off of customer obligations.


(h)	Adjustment related to the impairment charge of Internally Developed Software ("IDS") in connection with a joint development agreement with a customer as discussed above in the Internally Developed Software Impairment section.


(i)	Adjustment related to accrued interest expense on unreported employee participant and employer clients unclaimed property.


(j)	Adjustment related to accrued penalties on unreported employee participant and employer clients unclaimed property.

The following table presents the condensed consolidated balance sheet as previously reported, restatement adjustments and the condensed consolidated balance sheet as restated at June 30, 2016 (in thousands):



Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)

	June 30, 2016
	As Previously Reported			Adjustments				As Restated
Assets
Current assets:
Cash and cash equivalents	$	568,993		$	(323	)	(a)	$	568,670
Restricted cash	332			—				332
Accounts receivable, net	93,979			(7,103		)	(b)	86,876
Prepaid expenses and other current assets	18,239			63			(c)	18,302
Total current assets	681,543			(7,363		)		674,180
Property and equipment, net	48,426			(3,123		)	(d)	45,303
Goodwill	157,109			—				157,109
Acquired intangible assets, net	90,769			—				90,769
Deferred tax assets	9,837			—				9,837
Other assets	4,275			(1		)		4,274
Total assets	$	991,959		$	(10,487	)		$	981,472
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	71,399		$	(275	)	(e)	$	71,124
Customer obligations	468,153			(2,015		)	(f)	466,138
Other current liabilities	1,589			242			(g)	1,831
Total current liabilities	541,141			(2,048		)		539,093
Long-term debt	79,064			—				79,064
Other non-current liabilities	10,152			(2,060		)	(h)	8,092
Total liabilities	630,357			(4,108		)		626,249
Stockholders' Equity:
Common stock	38			—				38
Additional paid-in capital	368,519			(3,406		)	(i)	365,113
Treasury stock at cost	(14,374		)	—				(14,374		)
Retained earnings	7,419			(2,973		)		4,446
Total stockholders' equity	361,602			(6,379		)		355,223
Total liabilities and stockholders' equity	$	991,959		$	(10,487	)		$	981,472


(a)	Adjustment due to the timing differences between the obligation payments from employer clients and the receipt of cash in the Company's bank accounts, which resulted in a reclassification from cash and cash equivalents to customer obligations.

(b)

Adjustment relates to (i) a $4.1 million reduction in accounts receivable from the restatement of OPM revenue as discussed above, of which $1.1 million relates to the reduction of revenue and $3.0 million relates to the reduction of short-term and long-term deferred revenue, (ii) a $1.8 million reduction from the reclassification of accounts receivable to customer obligations based on the correction of the timing of customer billing and payments, and (iii) a $1.2 million decrease due to accruals to correct the recording of invoices, credit memos and billing adjustments in the proper period.


(c)	Adjustment primarily to record other receivables for the anticipated collection of commission over-payments.


(d)	Adjustments relates to the impairment charge for IDS of $3.7 million, as discussed above, partially offset by $0.6 million of assets under capital lease obligations originally recognized incorrectly as operating leases.

(e)

Adjustment relates to a $0.7 million reduction in short-term deferred revenue as result of the OPM restatement discussed above and a $0.4 million reduction due to the over accrual of operating expenses, partially offset by a $0.5 million accrual related to interest and penalties for unreported employee participant and employer clients unclaimed property, and a $0.3 million accrual for a customer cash refund related to billing errors.

(f)

Adjustment relates to (i) a $1.8 million decrease due to the reclassification of customer obligations from accounts receivable based on the correction of the timing of employer client billings and payments, (ii) a $0.3 million decrease due to the timing differences between the obligation payments from employer clients and the receipt of cash in the Company's bank accounts, which resulted in a reclassification from cash and cash equivalents to customer obligations, (iii) a $0.6 million decrease related to the re-valuation and write-off of customer obligations, and (iv) an increase of $0.7 million to record a reserve for potentially uncollectible customer obligations for pass-through employee participant reimbursements.


(g)	Adjustment to record the current portion of capital lease obligations originally recognized incorrectly as operating leases.


(h)	Adjustment relates to the reduction of long-term deferred revenue of $2.4 million in connection with the Company's OPM restatement as noted above, partially offset by an increase of $0.3 million related to the long-term portion of capital lease obligations originally reported incorrectly as operating leases.


(i)	Adjustment relates to a tax provision reduction of $2.1 million for the six months ended June 30, 2016 due to the reduction in net income as a result of the misstatements and a reduction in stock compensation of $1.3 million as a result of reduced target attainment percentages expected for performance-based restricted stock units.

The following table presents the Company's condensed consolidated statement of cash flows as previously reported, restatement adjustments and the condensed consolidated statement of cash flows as restated for the six months ended June 30, 2016 (in thousands):



Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)

	Six Months Ended June 30, 2016
	As Previously Reported			Adjustments			As Restated
Cash flows from operating activities:
Net income	$	8,649		$	(2,973	)	$	5,676
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	3,813			78			3,891
Amortization, impairment and change in contingent consideration	19,042			3,835			22,877
Stock-based compensation expense	14,842			(1,318		)	13,524
Loss on disposal of fixed assets	199			—			199
Provision for doubtful accounts	996			(197		)	799
Deferred taxes	—			—			—
Excess tax benefit related to stock-based compensation arrangements	(5,287		)	2,088			(3,199		)
Changes in operating assets and liabilities:				—
Accounts receivable	(22,704		)	7,300			(15,404		)
Prepaid expenses and other current assets	302			(2,151		)	(1,849		)
Other assets	172			—			172
Accounts payable and accrued expenses	(1,848		)	(275		)	(2,123		)
Customer obligations	67,332			(2,015		)	65,317
Other liabilities	1,136			(2,331		)	(1,195		)
Net cash provided by operating activities	86,644			2,041			88,685
Cash flows from investing activities:
Purchases of property and equipment	(10,430		)	—			(10,430		)
Cash paid for acquisition of intangible assets	(14,259		)	—			(14,259		)
Net cash used in investing activities	(24,689		)	—			(24,689		)
Cash flows from financing activities:
Proceeds from exercise of common stock options	9,665			—			9,665
Proceeds from issuance of common stock under Employee Stock Purchase Plan	1,192			—			1,192
Payment of contingent consideration	(653		)	(97		)	(750		)
Payment for treasury stock acquired	(9,371		)	—			(9,371		)
Payment of capital lease obligations	—			(179		)	(179		)
Excess tax benefit related to stock-based compensation arrangements	5,287			(2,088		)	3,199
Net cash provided by financing activities	6,120			(2,364		)	3,756
Net increase in cash and cash equivalents	68,075			(323		)	67,752
Cash and cash equivalents at beginning of the year	500,918						500,918
Cash and cash equivalents at end of period	$	568,993		$	(323	)	$	568,670
Noncash financing and investing activities:
Property and equipment purchased under capital lease obligations	$	—		$	626		$	626