-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rit6EQnKYE4+BYoodDCfJuJwzVQeRZQvUjRP5tLUO5gc0r0Lz1mbzrqa9mOwPAYB p+5ZMtiZ7+D6fVR8ZElOwA== 0000912057-00-007098.txt : 20000224 0000912057-00-007098.hdr.sgml : 20000224 ACCESSION NUMBER: 0000912057-00-007098 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 DATE AS OF CHANGE: 20000223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROBUSINESS SERVICES INC CENTRAL INDEX KEY: 0001028751 STANDARD INDUSTRIAL CLASSIFICATION: 7374 IRS NUMBER: 942976066 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22227 FILM NUMBER: 545855 BUSINESS ADDRESS: STREET 1: 4125 HOPYARD RD CITY: PLEASANTON STATE: CA ZIP: 94588 BUSINESS PHONE: 9257373500 MAIL ADDRESS: STREET 1: 4125 HOPYARD RD CITY: PLEASANTON STATE: CA ZIP: 94588 10-Q 1 FORM 10-Q - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q (MARK ONE) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED DECEMBER 31, 1999 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------ PROBUSINESS SERVICES, INC. (Exact name of Registrant as specified in its charter) DELAWARE 94-2976066 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.)
4125 HOPYARD ROAD PLEASANTON, CA 94588 (Address of principal executive offices) (925) 737-3500 (Registrant's telephone number, including area code) ------------------------ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO As of February 8, 2000, there were 23,406,019 shares of the Registrant's Common Stock outstanding. - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- PROBUSINESS SERVICES, INC. INDEX
PAGE NO. -------- PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED): Condensed Consolidated Balance Sheets as of December 31, 1999 and June 30, 1999.................................... 3 Condensed Consolidated Statements of Operations for the three and six months ended December 31, 1999 and 1998..... 4 Condensed Consolidated Statement of Stockholders' Equity for the six months ended December 31, 1999.................... 5 Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 1999 and 1998................... 6 Notes to Condensed Consolidated Financial Statements........ 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 9 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK..... 17 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS........................................... 19 ITEM 2. CHANGES IN SECURITIES....................................... 19 ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................. 19 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 19 ITEM 5. OTHER INFORMATION........................................... 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 19 SIGNATURES.................................................. 21
2 PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PROBUSINESS SERVICES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS)
DECEMBER 31, 1999 JUNE 30, 1999 ----------------- ------------- ASSETS Current assets: Cash and cash equivalents................................. $ 52,131 $ 73,575 Accounts receivable, net of allowances.................... 9,457 4,599 Prepaid expenses and other current assets................. 4,307 3,777 -------- -------- 65,895 81,951 Payroll tax funds invested................................ 703,816 580,452 -------- -------- Total current assets........................................ 769,711 662,403 Equipment, furniture and fixtures, net...................... 37,914 31,024 Other assets................................................ 20,042 16,997 -------- -------- Total assets................................................ $827,667 $710,424 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, accrued liabilities, current portion of capital lease obligations and deferred revenue.......... $ 32,274 $ 29,894 Payroll tax funds collected but unremitted................ 703,816 580,452 -------- -------- Total current liabilities................................... 736,090 610,346 Capital lease obligations, less current portion............. 467 548 Stockholders' equity........................................ 91,110 99,530 -------- -------- Total liabilities and stockholders' equity.................. $827,667 $710,424 ======== ========
See notes to consolidated financial statements. 3 PROBUSINESS SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, ------------------- ------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Revenue................................................ $23,073 $16,102 $ 44,027 $30,357 Operating expenses: Cost of providing services........................... 11,938 8,325 23,086 16,036 General and administrative........................... 3,830 2,658 7,225 5,223 Research and development............................. 2,496 2,353 5,849 4,269 Client acquisition costs............................. 11,214 6,659 21,272 13,115 ------- ------- -------- ------- Total operating expenses........................... 29,478 19,995 57,432 38,643 Loss from operations................................... (6,405) (3,893) (13,405) (8,286) Interest expense....................................... (33) (16) (162) (246) Interest income and other, net......................... 783 804 1,752 990 ------- ------- -------- ------- Net loss............................................... $(5,655) $(3,105) $(11,815) $(7,542) ======= ======= ======== ======= Basic and diluted net loss per share................... $ (0.24) $ (0.14) $ (0.51) $ (0.38) ======= ======= ======== ======= Shares used in computing basic and diluted net loss per share................................................ 23,163 21,491 23,014 19,820 ======= ======= ======== =======
See notes to condensed consolidated financial statements. 4 PROBUSINESS SERVICES, INC. CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
NOTES COMMON STOCK ADDITIONAL RECEIVABLE TOTAL --------------------- PAID-IN ACCUMULATED FROM STOCKHOLDERS' SHARES AMOUNT CAPITAL DEFICIT STOCKHOLDERS EQUITY ---------- -------- ---------- ----------- ------------ ------------- Balances at June 30, 1999.......... 22,942,362 $23 $148,284 $(47,896) $(881) $99,530 Exercise of stock options.......... 209,336 -- 1,370 -- -- 1,370 Issuance of Stock under the Employee Stock Purchase Plan..... 228,011 -- 1,905 -- -- 1,905 Exercise of warrants............... -- -- 120 -- -- 120 Net loss and comprehensive loss.... -- -- -- (11,815) -- (11,815) ---------- --- -------- -------- ----- ------- Balances at December 31, 1999...... 23,379,709 $23 $151,679 $(59,711) $(881) $91,110 ========== === ======== ======== ===== =======
See notes to condensed consolidated financial statements. 5 PROBUSINESS SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS ENDED DECEMBER 31, ------------------- 1999 1998 -------- -------- OPERATING ACTIVITIES Net loss.................................................... $(11,815) $ (7,542) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization........................... 5,256 2,666 Accretion of discount on redeemable convertible preferred stock....................................... -- 96 Issuance of warrants.................................... -- 93 Changes in operating assets and liabilities: Accounts receivable, net.............................. (4,858) (1,012) Prepaid expenses and other current assets............. (530) (898) Other assets.......................................... (525) 838 Accounts payable, accrued liabilities, current portion of capital lease obligations and deferred revenue... 2,764 (1,384) -------- -------- Net cash used in operating activities....................... (9,708) (7,143) -------- -------- INVESTING ACTIVITIES Purchases of equipment, furniture and fixtures.............. (11,549) (8,667) Capitalization of software development costs................ (3,117) (2,050) -------- -------- Net cash used in investing activities....................... (14,666) (10,717) -------- -------- FINANCING ACTIVITIES Repayments under long term debt and notes payable........... -- (323) Proceeds from long-term debt and notes payable.............. -- 451 Proceeds from notes receivable from stockholder............. -- 153 Principal payments on capital lease obligations............. (465) (579) Proceeds from issuance of redeemable and convertible preferred stock........................................... 5,045 Net proceeds from issuance of common stock.................. 3,395 82,791 -------- -------- Net cash provided by financing activities................... 2,930 87,538 -------- -------- Net increase (decrease) in cash and cash equivalents........ (21,444) 69,678 Cash and cash equivalents, beginning of period.............. 73,575 13,946 -------- -------- Cash and cash equivalents, end of period.................... $ 52,131 $ 83,624 ======== ======== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Purchase of equipment, furniture and fixtures under capital leases.......................................... $ -- $ 215 ======== ========
See notes to condensed consolidated financial statements. 6 PROBUSINESS SERVICES, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION ProBusiness Services, Inc., ("ProBusiness" or the "Company") has prepared its interim condensed consolidated financial statements without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The information included in this report should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's 1999 Annual Report on Form 10-K. The condensed consolidated balance sheet as of June 30, 1999 has been prepared from the audited consolidated financial statements of the Company. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the consolidated financial position, results of operations and cash flows for such periods. The results for the interim period ended December 31, 1999 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2000 or for any future periods. 2. BASIC AND DILUTED NET LOSS PER SHARE Shares used in computing basic and diluted net income (loss) per share are based on the weighted average shares outstanding in each period. Basic net income (loss) per share excludes any dilutive effects of stock options. Diluted net income (loss) per share includes the dilutive effect of the assumed exercise of stock options using the treasury stock method. However, the effect of outstanding stock options has been excluded from the calculation of diluted net loss per share as their inclusion would be antidilutive. If the Company had reported net income, the calculation of diluted net income per share would have included the shares used in the computation of net loss per share as well as an additional 1,132,000 and 1,442,000 common equivalent shares related to outstanding stock options and warrants not included above (using the treasury stock method) for the first six months of fiscal 2000 and 1999, respectively. 3. SEGMENT INFORMATION The Company's Chief Operating Decision Maker who is the President and Chief Executive Officer, evaluates performance based on a measure of consolidated gross margin, operating profit before client acquisition costs and profit or loss from operations. The accounting policies of the reportable segment are the same as those described in the Company's Annual Report on Form 10-K for the year ended June 30, 1999. The Company's condensed consolidated statements of operations disclose the financial information of its reportable segment in accordance with Statement of Financial Accounting Standards ("SFAS") SFAS No. 131 "Disclosures about Segments of an Enterprise." 4. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") and in June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133" ("SFAS 137"). SFAS 133 established methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. SFAS 137 deferred for one year the effective date of SFAS 133. The Company is required to adopt this statement in fiscal 2001 and has not determined the 7 PROBUSINESS SERVICES, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (CONTINUED) 4. RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED) effect, if any, that adoption will have on its consolidated financial position or consolidated results of operations. 5. BUSINESS COMBINATIONS In April 1999, the Company acquired Clemco, Inc. ("Conduit Parent"), the parent and sole stockholder of Conduit Software, Inc., a provider of employee relationship management applications. The merger was accounted for using the pooling of interests method of accounting and as such the Company's historical financial results for all dates and periods prior to the merger have been restated to reflect the merger. In connection with the acquisition, the Company issued 1,714,973 shares of its common stock to Conduit Parent's stockholders in exchange for all of the outstanding common and preferred stock of Conduit Parent. All outstanding options and warrants to purchase Conduit Parent's capital stock were converted into options and warrants to purchase 82,987 shares of ProBusiness common stock. In connection with the business combination, the Company incurred direct transaction costs of approximately $3,500,000, which consisted primarily of fees for investment banking, legal and accounting services incurred in conjunction with the merger. Of this, $3,138,000 was paid before December 31, 1999. The balance of $362,000 is included in current liabilities on the consolidated balance sheet and is anticipated to be paid within 12 months. The Company's consolidated results of operations include adjustments to conform the presentation and accounting policies of Conduit Parent to ProBusiness' accounting policies. 8 PROBUSINESS SERVICES, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (CONTINUED) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS. POTENTIAL RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS, THOSE SET FORTH UNDER "OVERVIEW" AND "ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS" INCLUDED IN THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THE FOLLOWING DISCUSSION ALSO SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS QUARTERLY REPORT. OVERVIEW ProBusiness Services, Inc. is a leading provider of outsourced employee administrative services for large employers. The Company's primary service offerings are payroll processing, payroll tax filing, benefits administration, human resources software and self-service applications. The Company's proprietary PC-based payroll system offers the cost-effective benefits of outsourcing and high levels of client service, while providing the flexibility, control, customization and integration of an in-house system. The Company derives its revenue from fees charged to clients for services and income earned from investing payroll tax funds. Since 1997, the Company has experienced significant growth of its revenue, client base and average client size. Revenue increased from $27.7 million in fiscal 1997 to $70.1 million in fiscal 1999. From December 31, 1997 to December 31, 1999, the client base for payroll processing services increased from approximately 440 clients to approximately 585 clients, while the average size of the Company's payroll clients increased from approximately 1,080 employees to approximately 1,850 employees. The Company's revenue growth is primarily due to continued growth in its client base, the introduction of its payroll tax service in fiscal 1996, an increase in the average number of employees of its clients, the introduction of new features and other services, and a high retention rate of existing payroll clients (approximately 90% for fiscal 1999). The Company does not anticipate it will sustain this rate of growth in the future. The establishment of new client relationships involves lengthy and extensive sales and implementation processes. The sales process generally takes six to twelve months or longer, and the implementation process generally takes an additional three to nine months or longer. The Company has experienced significant operating losses since its inception and expects to incur significant operating losses in the future due to continued client acquisition costs, investments in research and development and costs associated with expanding sales efforts and operations in new geographic regions. As of December 31, 1999, the Company had an accumulated deficit of $59.7 million. There can be no assurance that the Company will achieve or sustain profitability in the future. The Company's cost of providing services consists primarily of ongoing account management, tax and benefits administration operations and production costs. General and administrative expenses consist primarily of personnel costs, professional fees, and other overhead costs for finance, human resources, corporate services and information technology. Research and development expenses consist primarily of personnel costs. Client acquisition costs consist of sales and implementation expenses and, to a lesser extent, marketing expenses. 9 RESULTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, ------------------------ ----------------------- 1999 1998 1999 1998 -------- -------- -------- -------- STATEMENTS OF OPERATIONS DATA: Revenue............................................. 100.0 % 100.0 % 100.0 % 100.0 % Operating expenses: Cost of providing services........................ 51.7 % 51.7 % 52.4 % 52.8 % General and administrative........................ 16.7 % 16.5 % 16.4 % 17.2 % Research and development.......................... 10.8 % 14.6 % 13.3 % 14.1 % Client acquisition costs.......................... 48.6 % 41.4 % 48.3 % 43.2 % ----- ----- ----- ----- Total operating expenses............................ 127.8 % 124.2 % 130.4 % 127.3 % Loss from operations................................ (27.8)% (24.2)% (30.4)% (27.3)% Interest expense.................................... (0.1)% (0.1)% (0.4)% (0.8)% Interest income and other, net...................... 3.4 % 5.0 % 4.0 % 3.3 % ----- ----- ----- ----- Net loss............................................ (24.5)% (19.3)% (26.8)% (24.8)% ===== ===== ===== =====
The following table sets forth certain financial data as a percentage of revenue for the periods indicated: REVENUE. Revenue increased 43.3% in the second quarter and 45.0% in the first six months of fiscal 2000 when compared with the same periods of fiscal 1999, primarily due to increases in the number and average size of the Company's payroll and tax clients. Interest income earned on payroll tax funds invested was $6.1 million and $11.4 million for the second quarter and for the first six months of fiscal 2000, respectively, as compared to $3.8 million and $6.9 million for the same periods of fiscal 1999. The increases were primarily attributable to higher average daily payroll tax fund balances. COST OF PROVIDING SERVICES. Cost of providing services increased 43.4% in the second quarter and 44.0% for the first six months of fiscal 2000 when compared with the same periods of fiscal 1999 and remained unchanged as a percentage of revenue at 51.7% for the second quarter of fiscal year 2000 and fiscal 1999 and decreased as a percentage of revenue to 52.4% in the first six months of fiscal 2000 from 52.8% in the first six months of fiscal 1999. The increases in absolute dollars were primarily due to increased personnel in operations such as account management, production and payroll tax services resulting from an increase in payroll and tax client base, and to a lesser extent, increases in personnel expenses related to the Company's benefits administrative services. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased 44.1% in the second quarter and 38.3% for the first six months of fiscal 2000 when compared with the same periods of fiscal 1999 and increased as a percentage of revenue to 16.7% in the second quarter of fiscal 2000 and decreased as a percentage of revenue to 16.4% in the first six months of fiscal 2000 from 16.5% and 17.2% in the second quarter and first six months of fiscal 1999. The increases in absolute dollars were primarily due to hiring of additional management and administrative personnel to support the Company's growth. RESEARCH AND DEVELOPMENT. Research and development expenses increased 6.1% in the second quarter and 37.0% for the first six months of fiscal 2000 when compared with the same periods of fiscal 1999 and decreased as a percentage of revenue to 10.8% and 13.3% in the second quarter and first six months of fiscal 2000 from 14.6% and 14.1% in the second quarter and first six months of fiscal 1999. The increases in absolute dollars were primarily a result of increases in personnel costs related to the development of the web-enabled portion of Golden Gate, the Company's next-generation, fully-integrated product and to costs related to the development of enhancements to and new features for the Company's 10 existing services. Capitalized software development costs were $1.6 and $3.1million for the second quarter and first six months of fiscal 2000 and $1.0 million and $2.1 million for the second quarter and first six months of fiscal 1999. In the second quarter and first six months of fiscal 2000, capitalized software costs primarily included costs incurred for the development of Golden Gate. The Company believes that software development costs are essential to developing new technology and product leadership and expects such costs to continue to be significant as a percentage of revenue. CLIENT ACQUISITION COSTS. Client acquisition costs increased 68.4% and 62.2% in the second quarter and first six months of fiscal 2000 when compared with the same periods of fiscal 1999 and increased as a percentage of revenue to 48.6% and 48.3% in the second quarter and first six months of fiscal 2000 and from 41.4% and 43.2% in the second quarter and first six months of fiscal 1999. The increases in both absolute dollars and percentage of revenue were primarily attributable to additional investments made to capture market share by expanding the Company's sales and implementation workforce for payroll and tax services. INTEREST EXPENSE. Interest expense increased 106.3% for the second quarter and decreased 34.1% in the first six months of fiscal 2000 when compared with the same period of fiscal 1999, remained unchanged as a percentage of revenue at 0.1% for the second quarter of fiscal year 2000 and fiscal 1999 and decreased as a percentage of revenue to 0.4% in the first six months of fiscal 2000 from 0.8% in the first six months of fiscal 1999. The decrease in absolute dollars for the six month period was primarily due to a decrease in interest expense attributable to capital leases. INTEREST INCOME AND OTHER, NET. Other income decreased 2.6% in the second quarter and increased 77.0% in the first six months of fiscal 2000 when compared with the same periods of fiscal 1999 and decreased as a percentage of revenue to 3.4% in the second quarter and increased as a percentage of revenue to 4.0% in the first six months of fiscal 2000 from 5.0% and 3.3% in the second quarter and first six months of fiscal 1999. The increases in interest income was primarily due to higher cash and investment balances resulting from the Company's follow-on public offering in September 1998. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1999, the Company's principal sources of liquidity included $52.1 million of cash and cash equivalents and a secured $20 million revolving line of credit which expires in December 2000. There were no outstanding borrowings under the line of credit as of December 31, 1999. Net cash used in operating activities was $9.7 million and $7.1 million for the first six months of fiscal 2000 and 1999, respectively. The net cash used in operating activities for the first six months of fiscal 2000 was primarily attributable to the net loss for the period and an increase in net accounts receivable, prepaid expenses and other assets, partially offset by depreciation and amortization and an increase in accounts payable, accrued liabilities, and deferred revenue. Net cash used in investing activities was $14.7 million and $10.7 million for the first six months of fiscal 2000 and 1999, respectively. The increase in net cash used in investing activities related primarily to purchases of equipment, furniture and fixtures and an increase in capitalization of software development costs. Net cash provided by financing activities was $2.9 and $87.5 million for the first six months of fiscal 2000 and 1999, respectively. The decrease in net cash provided by financing activities for first six months of fiscal 2000 related primarily to $80.7 million of net proceeds from the Company's follow-on public offering of common stock in September 1998. The Company believes that existing cash and cash equivalent balances, amounts available under its current credit facility and anticipated cash flows from operations will be sufficient to meet its working capital and capital expenditure requirements for at least the next 12 months. 11 ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS OPERATING LOSSES; NEED TO COMMIT TO EXPENSE IN ADVANCE OF REVENUES. The Company has experienced significant operating losses since its inception and expects to incur significant operating losses in the future due to continued client acquisition costs, investments in research and development and costs associated with expanding its sales efforts and operations to new geographic regions. As of December 31, 1999, the Company had an accumulated deficit of $59.7 million. The establishment of new client relationships involves lengthy and extensive sales and implementation processes. The sales process generally takes six to twelve months or longer, and the implementation process generally takes an additional three to nine months or longer. In connection with the acquisition of each new client, the Company incurs substantial client acquisition costs, which consist primarily of sales and implementation expenses. The Company's ability to achieve profitability will depend in part upon its ability to attract and retain new clients, offer new services and features and achieve market acceptance of new services. There can be no assurance that the Company will achieve or sustain profitability in the future. Failure to achieve or sustain profitability in the future could have a material adverse effect on the Company's business, financial condition and consolidated results of operations. SEASONALITY; FLUCTUATION IN QUARTERLY RESULTS. The Company's business is characterized by significant seasonality. As a result, the Company's revenue has been subject to significant seasonal fluctuations, with the largest percentage of annual revenue being realized in the third and fourth fiscal quarters, primarily due to new clients beginning services in the beginning of the tax year (the Company's third fiscal quarter) and higher interest income earned on payroll tax funds invested. Further, the Company's operating expenses are typically higher as a percentage of revenue in the first and second fiscal quarters as the Company increases personnel to acquire new clients and to implement and provide services to such new clients, a large percentage of whom begin services in the third quarter. The Company's quarterly operating results have in the past varied and will in the future vary significantly depending on a variety of factors, including the number and size of new clients starting services, the decision of one or more clients to delay or cancel implementation or ongoing services, interest rates, seasonality, the ability of the Company to design, develop and introduce new services and features for existing services on a timely basis, costs associated with strategic acquisitions and alliances or investments in technology, the success of any such strategic acquisition, alliance or investment, costs to transition to new technologies, expenses incurred for geographic expansion, risks associated with payroll tax and benefits administrative services, price competition, a reduction in the number of employees of its clients and general economic factors. Revenue from new clients typically represents a significant portion of quarterly revenue in the third and fourth fiscal quarters. A substantial majority of the Company's operating expenses, particularly personnel and related costs, depreciation and rent, is relatively fixed in advance of any particular quarter. The Company's agreements with its clients generally do not have significant penalties for cancellation. As a result, any decision by a client to delay or cancel implementation of the Company's services or the Company's underutilization of personnel may cause significant variations in operating results in a particular quarter and could result in losses for such quarter. As the Company secures larger clients, the time required for implementing the Company's services increases, which could contribute to larger fluctuations in revenue. Interest income earned from investing payroll tax funds, which is a significant portion of the Company's revenue, is vulnerable to fluctuations in interest rates. In addition, the Company's business may be affected by shifts in the general condition of the economy, client staff reductions, strikes, acquisitions of its clients by other companies and other downturns. There can be no assurance that the Company's future revenue and results of operations will not vary substantially. It is possible that in some future quarter the Company's results of operations will be below the expectations of public market analysts and investors. In either case, the market price of the Company's common stock could be materially adversely affected. RISKS ASSOCIATED WITH STRATEGIC ACQUISITIONS AND INVESTMENTS. In April 1999, the Company acquired Conduit Parent, a leading provider of Employee Relationship Management applications, in a transaction 12 accounted for using the pooling of interests method of accounting. There can be no assurance that this acquisition will be effectively assimilated into the Company's business. The integration of Conduit Parent will place a burden on the Company's management. Such integration is subject to risks commonly encountered in making such acquisitions, including, among others, loss of key personnel of the acquired company, the difficulty associated with assimilating the personnel and operations of the acquired company, the potential disruption of the Company's ongoing business, the maintenance of uniform standards, controls, procedures and policies, and the impairment of the Company's reputation and relationships with employees and clients. There can be no assurance that the Company will be successful in overcoming these risks or any other problems encountered in connection with its acquisition of Conduit Parent. The Company has no other current agreements or negotiations under way other than those described above with respect to any acquisition of, or investment in, businesses that provide complementary services or technologies to those of the Company. The Company has in the past and intends in the future to make additional acquisitions of, and investments in, such businesses. In addition, future acquisitions could result in the issuance of dilutive equity securities, the incurrence of debt or contingent liabilities. Furthermore, there can be no assurance that any strategic acquisition or investment will succeed. Any future acquisitions or investments could have a material adverse effect on the Company's business, financial condition and consolidated results of operations. RISKS ASSOCIATED WITH PAYROLL TAX SERVICE AND BENEFITS ADMINISTRATIVE SERVICES. The Company's payroll tax filing service is subject to various risks resulting from errors and omissions in filing client tax returns and paying tax liabilities owed to tax authorities on behalf of clients. The Company's clients transfer to the Company contributed employer and employee tax funds. The Company processes the data received from the client and remits the funds along with a tax return to the appropriate tax authorities when due. Tracking, processing and paying such tax liabilities is complex. Errors and omissions have occurred in the past and may occur in the future in connection with such service. The Company is subject to large cash penalties imposed by tax authorities for late filings or underpayment of taxes. To date, such penalties have not been significant. However, there can be no assurance that any liabilities associated with such penalties will not have a material adverse effect on the Company's business, financial condition and results of operations. There can be no assurance that the Company's reserves or insurance for such penalties will be adequate. In addition, failure by the Company to make timely or accurate tax return filings or pay tax liabilities when due on behalf of clients may damage the Company's reputation and could adversely affect its relationships with existing clients and its ability to gain new clients. The Company's payroll tax filing service is also dependent upon government regulations, which are subject to continual changes. Failure by the Company to implement these changes into its services and technology in a timely manner would have a material adverse effect on the Company's business, financial condition and results of operations. In addition, since a significant portion of the Company's revenue is derived from interest earned from investing on collected but unremitted payroll tax funds, changes in policies relating to withholding federal or state income taxes or reduction in the time allowed for taxpayers to remit payment for taxes owed to government authorities would have a material adverse effect on the Company's business, financial condition and consolidated results of operations. The Company's benefits administrative services are subject to various risks resulting from errors and omissions in processing and filing COBRA or other benefit plan forms in accordance with governmental regulations and the respective plans. The Company processes data received from employees and employers and is subject to penalties for any late or misfiled plan forms. There can be no assurance the Company's reserves or insurance for such penalties will be adequate. In addition, failure to properly file plan forms would have a material adverse effect on the Company's reputation, which could adversely affect its relationships with existing clients and its ability to gain new clients. The Company's benefits administrative services are also dependent upon government regulations, which are subject to continuous changes that could reduce or eliminate the need for benefits administrative services. The Company has access to confidential information and to client funds. As a result, the Company is subject to potential claims by its 13 clients for the actions of the Company's employees arising from damages to the client's business or otherwise. There can be no assurance that the Company's fidelity bond and errors and omissions insurance will be adequate to cover any such claims. Such claims could have a material adverse effect on the Company's business, financial condition and consolidated results of operations. INVESTMENT RISKS. The Company invests funds, including payroll tax funds transferred to it by clients in short-term financial instruments such as overnight repurchase agreements, commercial paper and money market funds, which are subject to credit risks and interest rate fluctuations. These investments are exposed to several risks, including credit risks from the possible inability of the borrowers to meet the terms of their obligations under the financial instruments. The Company would be liable for any losses on such investments. Interest income earned from the investment of client tax funds represents a significant portion of the Company's revenues. As a result, the Company's business, financial condition and results of operations are significantly impacted by interest rate fluctuations. The Company enters into interest rate swap agreements to minimize the impact of interest rate fluctuations. There can be no assurance, however, that the Company's swap agreements will protect the Company from all interest rate risks. Under certain circumstances, if interest rates rise, the Company would have payment obligations under its interest rate swap agreements, which may not be offset by interest earned by the Company on deposited funds. A payment obligation under the Company's swap agreements could have a material adverse effect on the Company's business, financial condition and results of operations. A default by the Company under its swap agreements could result in acceleration and setoff by the bank of all outstanding contracts under the swap agreement and could result in cross-defaults of other debt agreements of the Company, any of which could have a material adverse effect on the Company's business, financial condition and consolidated results of operations. MANAGEMENT OF GROWTH. The Company's business has grown significantly in size and complexity over the past five years. This growth has placed, and is expected to continue to place, significant demands on the Company's management, systems, internal controls and financial and physical resources. In order to meet such demands, the Company intends to continue to hire new employees, open new offices to attract clients in new geographic regions, increase expenditures on research and development, invest in new equipment and make other capital expenditures. In addition, the Company expects that it will need to develop further its financial and managerial controls and reporting systems and procedures to accommodate any future growth. Failure to expand any of the foregoing areas in an efficient manner could have a material adverse effect on the Company's business, financial condition and results of operations. The Company established facilities for sales and implementation in New Jersey and in Georgia and moved their administrative services center from Bellevue to Bothell Washington during fiscal 1999. Any inability to manage growth effectively could have a material adverse effect on the Company's business, financial condition and consolidated results of operations. SUBSTANTIAL COMPETITION. The market for the Company's services is intensely competitive, subject to rapid change and significantly affected by new service introductions and other market activities of industry participants. The Company primarily competes with several public and private payroll service providers, such as Automatic Data Processing, Inc., Ceridian Corporation and Paychex, Inc., as well as smaller, regional competitors. Many of these companies have longer operating histories, greater financial, technical, marketing and other resources, greater name recognition and a larger number of clients than the Company. In addition, certain of these companies offer more services or features than the Company and have processing facilities located throughout the United States. The Company also competes with in-house employee services departments and, to a lesser extent, banks and local payroll companies. With respect to benefits administrative services, the Company competes with insurance companies, benefits consultants and other local benefits outsourcing companies. The Company may also compete with marketers of related products and services that may offer payroll or benefits administrative services in the future. The Company has experienced, and expects to continue to experience, competition from new entrants into its markets. Increased competition, the failure of the Company to compete successfully, pricing pressures, loss of 14 market share and loss of clients could have a material adverse effect on the Company's business, financial condition and consolidated results of operations. RISKS ASSOCIATED WITH THE DEVELOPMENT AND INTRODUCTION OF NEW OR ENHANCED SERVICES; RISKS OF SOFTWARE DEFECTS. The technologies in which the Company has invested to date are rapidly evolving and have short life cycles, which requires the Company to anticipate and rapidly adapt to technological changes. In addition, the Company's industry is characterized by increasingly sophisticated and varied needs of clients, frequent new service and feature introductions and emerging industry standards. The introduction of services embodying new technologies and the emergence of new industry standards and practices can render existing services obsolete and unmarketable. The Company's future success will depend, in part, on its ability to develop or acquire advanced technologies, enhance its existing services with new features, add new services that address the changing needs of its clients, and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. Several of the Company's competitors invest substantially greater amounts in research and development than the Company, which may allow them to introduce new services or features before the Company. Even if the Company is able to develop or acquire new technologies in a timely manner, it may incur substantial costs in developing or acquiring such technologies and in deploying new services and features to its clients, including costs associated with acquiring in-process technology, amortization expenses related to intangible assets and costs of additional personnel. If the Company is unable to develop or acquire and successfully introduce new services and new features of existing services in a timely or cost-effective manner, the Company's business, financial condition and results of operations could be materially adversely affected. Application software used by the Company may contain defects or failures when introduced or when new versions or enhancements are released. The Company has in the past discovered software defects in certain of its applications, in some cases only after clients have used its systems. There can be no assurance that future defects will not be discovered in existing or new applications or releases. Any such occurrence could have a material adverse effect upon the Company's business, financial condition and consolidated results of operations. DEPENDENCE ON THIRD-PARTY PROVIDERS. The Company depends on third-party courier services to deliver paychecks to clients. The Company does not have any formal written agreements with any of the courier services that it uses. Such courier services have been in the past and may be in the future unable to pick up or deliver the paychecks from the Company to its clients in a timely manner for a variety of reasons, including employee strikes, storms or other adverse weather conditions, earthquakes or other natural disasters, logistical or mechanical failures or accidents. Failure by the Company to deliver client paychecks in a timely manner could damage the Company's reputation and have a material adverse effect on the Company's business, financial condition and consolidated results of operations. DISASTER RECOVERY; RISK OF LOSS OF CLIENT DATA. The Company currently conducts substantially all of its payroll and payroll tax processing at the Company's headquarters in Pleasanton, California, and divides the payroll printing and finishing between its Pleasanton and Irvine, California, facilities. The Irvine facility serves both as an alternative processing center and a back-up payroll center. The Company's benefits administrative services are conducted solely in Bothell, Washington, and no benefits administration back-up facility exists. The Company establishes for each payroll client a complete set of payroll data at the Pleasanton processing center, as well as at the client's site. In the event of a disaster in Pleasanton, clients would have the ability to process payroll checks based on the data they have on site if necessary. In addition, the Company has developed business continuity plans for each of the Company's mission critical business units. There can be no assurance that the Company's disaster recovery procedures are sufficient or that the payroll data recovered at the client site would be sufficient to allow the client to calculate and produce payroll in a timely fashion. The Company's operations are dependent on its ability to protect its computer systems against damage from a major catastrophe (such as an earthquake or other natural disaster), fire, power loss, 15 security breach, telecommunications failure or similar event. No assurance can be given that the precautions that the Company has taken to protect itself from or minimize the impact of such events will be adequate. Any damage to the Company's data centers, failure of telecommunications links or breach of the security of the Company's computer systems could result in an interruption of the Company's operations or other loss that may not be covered by the Company's insurance. Any such event could have a material adverse effect on the Company's business, financial condition and consolidated results of operations. DEPENDENCE ON KEY PERSONNEL. The Company's success will depend on the performance of the Company's senior management and other key employees. The loss of the services of any senior management or other key employee could have a material adverse effect on the Company's business, financial condition and consolidated results of operations. The Company generally does not enter into employment or noncompetition agreements with its employees. If one or more of the Company's key employees resigns from the Company to join a competitor or to form a competitor, the loss of such personnel and any resulting loss of existing or potential clients to any such competitor could have a material adverse effect on the Company's business, financial condition and results of operations. In the event of the loss of any key personnel, there can be no assurance that the Company would be able to prevent the unauthorized disclosure or use of its technical knowledge, practices, procedures or client lists by a former employee or that such disclosure or use would not have a material adverse effect on the Company's business, financial condition and consolidated results of operations. NEED TO ATTRACT AND RETAIN EXPERIENCED PERSONNEL. The Company's success depends to a significant degree on its ability to attract and retain experienced employees. There is substantial competition for experienced personnel, which the Company expects to continue. Many of the companies with which the Company competes for experienced personnel have greater financial and other resources than the Company. The Company has in the past and may in the future experience difficulty in recruiting sufficient numbers of qualified personnel. In particular, the Company's ability to find and train implementation employees is critical to the Company's ability to achieve its growth objectives. The inability to attract and retain experienced personnel as required could have a material adverse effect on the Company's business, financial condition and consolidated results of operations. RISK ASSOCIATED WITH GEOGRAPHIC EXPANSION. A substantial majority of the Company's revenue historically has been derived from clients located in the western United States. The Company's ability to achieve significant future revenue growth will in large part depend on its ability to gain new clients throughout the United States. Growth and geographic expansion have resulted in new and increased responsibilities for management personnel and have placed and continue to place a strain on the Company's management and operating and financial systems. The Company will be required to continue to implement and improve its systems on a timely basis and in such a manner as is necessary to accommodate the increased number of transactions and clients and the increased size of the Company's operations. Any failure to implement and improve the Company's systems or to hire and retain the appropriate personnel to manage its operations would have a material adverse effect on the Company's business, financial condition and consolidated results of operations. YEAR 2000 ISSUES. To date the Company has not experienced any problems with its Year 2000 ("Y2K") readiness. The Company believes it has achieved Y2K readiness and that software applications used for providing payroll, tax and HR services at the Company are Y2K compliant. All clients are processing on the Company's Y2K compliant applications. Although the Company believes that it has successfully addressed any significant disruption from Y2K, it will continue to monitor all mission critical systems for the appearance of delayed complications or disruptions, as well as continue to monitor its suppliers and customers. LIMITATIONS ON PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS. The Company's success is dependent in part upon its proprietary software technology. The Company has no patents, patent 16 applications or registered copyrights. The Company relies on a combination of contract, copyright and trade secret laws to establish and protect its proprietary technology. The Company distributes its services under software license agreements that grant clients licenses to use the Company's services and contain various provisions protecting the Company's ownership and the confidentiality of the underlying technology. The Company generally enters into confidentiality and/or license agreements with its employees and existing and potential clients and limits access to and distribution of its software, documentation and other proprietary information. There can be no assurance that the steps taken by the Company in this regard will be adequate to deter misappropriation or independent third-party development of the Company's technology. There can be no assurance that the Company's services and technology do not infringe any existing patents, copyrights or other proprietary rights of others, or that third parties will not assert infringement claims in the future. If any such claims are asserted and upheld, the costs of defense could be substantial and any resulting liability to the Company could have a material adverse effect on the Company's business, financial condition and consolidated results of operations. POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Company's common stock is likely to be highly volatile and could be subject to wide fluctuations in response to quarterly variations in operating results, announcements of technological innovations or new services by the Company or its competitors, market conditions in the information services industry, changes in financial estimates by securities analysts or other events or factors, many of which are beyond the Company's control. In addition, the stock market has experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of many technology and services companies and that often have been unrelated to the operating performance of such companies. These broad market fluctuations may adversely affect the market price of the Company's common stock. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK There have been no material changes in the Company's market risk during the six month period ended December 31, 1999. For additional information on market risk see "Additional Factors That May Affect Future Results Investment Risks" contained on page 14 of this quarterly report and page 7 of the Company's 1999 Annual Report to Stockholders under the heading "Additional Factors That May Affect Future Results Investment Risks" (which is incorporated by reference into Part II, Item 7A of the Company's Annual Report on Form 10-K for the year ended June 30, 1999.) SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS. Forward-looking statements contained in this quarterly report are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are highly dependent upon a variety of important factors that could cause actual results to differ materially from those reflected in such forward-looking statements. When used in this document and documents referenced herein, the words "intend," "anticipate," "believe," "estimate" and "expect" and similar expressions as they relate to the Company are included to identify such forward-looking statements. These forward-looking statements include statements regarding the demand for outsourcing employee administrative services; the Company's expansion of its client base; the Company's intention to increase its direct sales force; the development of a comprehensive and fully integrated suite of employee administrative services; the Company's ability to offer additional services; the initiation or completion of any strategic acquisition, investment or alliance; the Company's ability to extend its technology leadership; the Company's ability to attract and retain new clients; market acceptance of any new services offered by the Company; the Company's ability to minimize the impact of interest rate fluctuations; the Company's ability to develop its financial and managerial controls and systems; the opening of additional facilities; the sufficiency of the Company's back-up facilities and disaster recovery procedures; the Company's ability to develop or acquire new technologies; the Company's ability to attract and retain experienced employees; the Company's ability to maintain a high payroll client retention rate and the Company's ability to increase its national presence. These forward-looking statements are based largely on the Company's current expectations and are subject to a number of risks and uncertainties, including, without limitation, those 17 identified under "Additional Factors That May Affect Future Results" and elsewhere in this quarterly report and other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission. Actual results could differ materially from these forward-looking statements. In addition, important factors to consider in evaluating such forward-looking statements include changes in external market factors, changes in the Company's business or growth strategy or an inability to execute its strategy due to changes in its industry or the economy generally, the emergence of new or growing competitors and various other competitive factors. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this quarterly report will in fact occur. 18 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no material pending legal proceedings. ITEM 2. CHANGES IN SECURITIES (b) On September 25, 1998, the Company commenced a secondary public offering (the "Secondary Offering"), which consisted of 3,191,250 shares of its Common Stock at $27.00 per share pursuant to a registration statement (No. 333-60745) declared effective by the Securities and Exchange Commission on September 25, 1998. As of September 30, 1999, $61.5 million of the Company's net proceeds from the offering were invested in short-term financial instruments. During the period October 1, 1999 to December 31, 1999 approximately $9.4 million of the proceeds was used for working capital. At January 1, 2000, approximately $52.1 million of the net offering proceeds from the Secondary Offering were invested in short-term financial instruments. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Company held its Annual Meeting of Stockholders (the "Annual Meeting") on November 18, 1999. (b) At the Annual Meeting, the stockholders elected William T. Clifford and David C. Hodgson as Class II Directors to serve for terms of three years. (c) The stockholders of the Company voted on the following matters at the Annual Meeting: 1. the election of Class II directors to serve for terms of three years; 2. approval of an amendment to the Company's 1996 Stock Option Plan to increase the number of shares reserved for issuance thereunder by 1,500,000 shares; and 3. Ratification of the appointment of Ernst & Young LLP as independent auditors of the Company for the fiscal year ending June 30, 2000. Votes were cast for the election of William T. Clifford and David C. Hodgson as Class II directors as follows:
VOTES FOR VOTES WITHHELD ---------- -------------- William T. Clifford......................................... 18,432,253 66,144 David C. Hodgson............................................ 18,432,298 66,099
The amendment to the Company's 1996 Stock Option Plan to increase the number of shares reserved for issuance thereunder was approved as follows: 11,882,231 votes for approval; 3,395,614 votes against; 21,295 abstentions; and 3,199,257 broker non-votes. 19 The appointment of Ernst & Young LLP as auditors for fiscal year ending June 30, 2000 was approved as follows: 18,486,162 votes for approval; 11,837 votes against; and 398 abstentions. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (b) Exhibits. See exhibit list following signature page. (c) No reports on Form 8-K were filed during the quarter ended December 31, 1999. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: February 14, 2000 PROBUSINESS SERVICES, INC. (Registrant) /s/ THOMAS H. SINTON --------------------------------------------- President and Chief Executive Officer /s/ STEVEN E. KLEI --------------------------------------------- Senior Vice President, Finance and Chief Financial Officer
21 INDEX TO EXHIBITS
FOOTNOTE NUMBER EXHIBIT DESCRIPTION - - --------------------- -------- ------------------------------------------------------------ (1) 2.1 Agreement and Plan of Reorganization, dated May 23, 1996, between Registrant and Dimension Solutions. (1) 2.2 Stock Acquisition Agreement, dated January 1, 1997 between Registrant and BeneSphere Administrators, Inc. (3) 2.3 Agreement and Plan of Reorganization, dated as of April 27, 1999, among ProBusiness Services, Inc. Runway Acquisition Corp., Clemco, Inc. and certain other parties. (2) 3.1 Amended and Restated Certificate of Incorporation. (1) 3.2 Bylaws of Registrant. (1) 4.1 Specimen Common Stock Certificate of Registrant. (1) 4.2 Amended and Restated Registration Rights Agreement, dated March 12, 1997, between Registrant, General Atlantic Partners 39, L.P., GAP Coinvestment Partners, L.P. and certain stockholders of Registrant. (1) 4.3 Warrant to Purchase Stock, dated January 13, 1995, between Registrant and Silicon Valley Bank and related Antidilution and Registration Rights Agreements. (1) 4.4(a) Warrant to Purchase Stock, dated April 30, 1996, between Registrant and Coast Business Credit and related Antidilution and Registration Rights Agreement. (1) 4.4(b) Warrant to Purchase Stock, dated October 25, 1996, between Registrant and Coast Business Credit and related Antidilution and Registration Rights Agreement. (1) 4.5 Warrant to Purchase Series E Preferred Stock, dated July 31, 1996, between Registrant and LINC Capital Management. (1) 4.6(a) Warrant Purchase Agreement, dated November 14, 1996, between Registrant and certain purchasers. (1) 4.6(b) Warrant to Purchase Series E Preferred Stock, dated November 14, 1996, between Registrant and T.J. Bristow and Elizabeth S. Bristow. (1) 4.6(c) Warrant to Purchase Series E Preferred Stock, dated November 14, 1996, between Registrant and SDK Incorporated. (1) 4.6(d) Warrant to Purchase Series E Preferred Stock, dated November 14, 1996, between Registrant and Laurence Shushan and Magdalena Shushan. (1) 4.7(a) Warrant to Purchase Common Stock, dated January 7, 1997, between Registrant and Louis R. Baransky. (1) 4.7(b) Warrant to Purchase Common Stock, dated January 7, 1997, between Registrant and Ben W. Reppond. (1) 4.8 Form of Note issued by Registrant on October 20, 1995 and December 12, 1995. (3) 4.9 Waiver and Amendment dated as of April 27, 1999, among ProBusiness Services, Inc., General Atlantic Partners 39, L.P., GAP Coinvestment Partners, L.P. and certain stockholder. (3) 4.10 Registration Rights Agreement dated as of April 27, 1999, between ProBusiness Services, Inc. and certain stockholders. 27.1 Financial Data Schedule.
- - ------------------------ (1) Incorporated by reference to the Registrant's Registration Statement on Form S-1, as amended (File No. 333-23189), declared effective on September 18, 1997. (2) Incorporated by reference from the Registrant's Registration Statement on Form S-8 (File No. 333-37129) filed with the Securities and Exchange Commission on October 3, 1997. (3) Incorporated by reference from the Registrant's report on Form 8-K filed with the Securities and Exchange Commission on May 12, 1999. EX-27.1 2 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PROBUSINESS SERVICES, INC., FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-2000 OCT-01-1999 DEC-31-1999 52,131 0 11,245 1,788 0 769,711 55,726 17,812 827,667 736,090 0 0 0 23 91,087 827,667 0 44,027 0 23,086 34,346 0 162 (11,815) 0 (11,815) 0 0 0 (11,815) (.51) (.51)
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