Close

Form 8-K BLUCORA, INC. For: Jul 28

FREE Breaking News Alerts from StreetInsider.com!

E-mail Address

StreetInsider.com Top Tickers, 4/25/2024

1. META
2. CMG
3. LRCX
4. IBM
5. SPY
6. BA
7. HCP
8. SNAP
9. TMUS
10. MSFT


July 28, 2016 6:33 AM EDT


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
July 28, 2016
Date of Report
(Date of earliest event reported)
  
 
BLUCORA, INC.
(Exact name of registrant as specified in its charter)
 

DELAWARE
000-25131
91-1718107
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
10900 NE 8th Street, Suite 800
Bellevue, Washington 98004
(Address of principal executive offices)
(425) 201-6100
Registrant’s telephone number, including area code
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


 





Item 2.02    RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On July 28, 2016, Blucora announced its financial results for the quarter ended June 30, 2016. Copies of the press release and a supplemental investor presentation are furnished to, but not filed with, the Commission as Exhibits 99.1 and 99.2 hereto.

Item 9.01    FINANCIAL STATEMENTS AND EXHIBITS

99.1
 
Press release dated
July 28, 2016
99.2
 
Investor presentation dated
July 28, 2016




-2-


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.
 
 
BLUCORA, INC.
 
 
 
 
By
/s/ Eric M. Emans
 
 
Eric M. Emans
 
 
Chief Financial Officer
 
 
 
 
 
July 28, 2016


-3-



EXHIBIT INDEX
 
Exhibit No
 
Description
 
 
 
 
 
99.1
 
Press release dated
July 28, 2016
99.2
 
Investor presentation dated
July 28, 2016





-4-


Exhibit 99.1
 
Blucora Announces Second Quarter 2016 Results
Segment Income up 30 Percent Year Over Year
BELLEVUE, WA — (GLOBE NEWSWIRE) — July 28, 2016 — Blucora, Inc. (NASDAQ: BCOR), a leading provider of technology-enabled financial solutions to consumers, small businesses and tax professionals, today announced financial results for the second quarter ended June 30, 2016.
Second Quarter Highlights and Recent Developments
•
Increased Blucora operating income and Adjusted EBITDA by 99 percent and 36 percent, respectively, in the second quarter compared to the same period last year
•
Increased Tax Preparation revenue and segment income by 18 percent and 21 percent, respectively, for the six months through June 30, 2016 compared to the same period last year
•
Experienced a decline in Wealth Management revenue and segment income of 6 and 7 percent, respectively, in the second quarter compared to the same period last year
•
Signed definitive agreement to sell Infospace to OpenMail for $45 million
•
Repaid $20 million of debt, bringing the Company’s total debt reduction for the first half of the year to $88 million
“We continue to make significant progress toward our transformation,” said John Clendening, president and chief executive officer of Blucora. “We have pivoted TaxAct’s go-to-market strategy, realigned our price points and achieved another strong tax season with double-digit revenue and segment income growth. At HD Vest we are experiencing headwinds manifesting themselves in challenges in advisor driven revenue, especially transactional revenue. We are focused on driving advisor engagement through increased adoption of client financial plans,and utilization of the 1040 Analyst® tool.”
Clendening continued, “Throughout the second quarter, we continued our efforts to streamline our businesses and bolster our balance sheet through the agreement to sell Infospace and de-levering initiatives, including repaying $20 million of debt, bringing our total debt reduction for the first half of the year to $88 million. We remain focused on maximizing performance while positioning the Company for long term growth and shareholder value creation.”
The following presentation includes pro forma financial information and HD Vest. In addition, it excludes the Search and Content and E-Commerce segments which have been classified as discontinued operations for all periods presented. The Company believes that this presentation most accurately reflects the financial performance of the Company on a go-forward basis.
Summary Financial Performance: Q2 2016
($ in millions except per share amounts)
 
Q2
 
Q2
 
 
 
2016
 
2015
 
Change
 
As reported
 
Pro forma
 
 
Revenue
$
120.1

 
$
111.7

 
7
 %
Wealth Management
$
76.1

 
$
80.8

 
(6
)%
Tax Preparation
$
44.0

 
$
30.9

 
42
 %
Segment Income
$
39.7

 
$
30.5

 
30
 %
Wealth Management
$
9.9

 
$
10.6

 
(7
)%
Tax Preparation
$
29.8

 
$
19.9

 
50
 %
Unallocated Corporate Operating Expenses
$
4.5

 
$
4.7

 
(4
)%
GAAP:
 
 
 
 
 
Operating Income
$
22.4

 
$
11.2

 
99
 %
Net Income (Loss) Attributable to Blucora, Inc.
$
(14.4
)
 
$
2.3

 
(721
)%
Diluted Net Income (Loss) Per Share Attributable to Blucora, Inc.
$
(0.34
)
 
$
0.06

 
(667
)%
Non-GAAP:
 
 
 
 
 
Adjusted EBITDA
$
35.3

 
$
25.8

 
36
 %
Net Income
$
23.4

 
$
14.6

 
61
 %
Diluted Net Income Per Share
$
0.55

 
$
0.35

 
57
 %
See reconciliations of as reported and pro forma non-GAAP to GAAP measures in tables below.





Other
During the second quarter of 2016, the Company repaid $20.0 million on the TaxAct - HD Vest credit facility. As a result, at the end of the second quarter, Blucora’s net leverage ratio was lowered by 0.7x.
Third Quarter and Full Year 2016 Outlook
For the third quarter of 2016, the Company expects revenues to be between $77.0 million and $81.0 million, GAAP loss from continuing operations to be between $16.2 million and $14.8 million, or $(0.39) to $(0.36) per diluted share, Adjusted EBITDA to be between $(2.3) million and $(0.2) million, and Non-GAAP loss from continuing operations to be between $15.0 million and $12.6 million, or $(0.36) to $(0.30) per diluted share.
For the full year 2016, the Company expects revenues to be between $440.5 million and $451.5 million, GAAP loss from continuing operations to be between $5.5 million and $2.0 million, or $(0.13) to $(0.05) per diluted share, Adjusted EBITDA to be between $85.8 million and $90.5 million, and Non-GAAP income from continuing operations to be between $35.8 million and $40.9 million, or $0.84 to $0.96 per diluted share.
Conference Call and Webcast
A conference call and live webcast will be held today at 5:30 a.m. Pacific Time / 8:30 a.m. Eastern Time during which the Company will further discuss second quarter results and its outlook for the third quarter of 2016. We have also provided supplemental financial information to our results that can be accessed in the Investor Relations section of the Blucora corporate website at http://www.blucora.com and filed with the SEC on Form 8-K. A replay of the call and management's prepared remarks will also be available on our website.
About Blucora®
Blucora, Inc. (NASDAQ: BCOR) is a leading provider of technology-enabled financial solutions to consumers, small businesses and tax professionals. Our products and services in tax preparation and wealth management, through TaxAct and HD Vest, help consumers manage their financial lives. TaxAct is an affordable digital tax preparation solution for individuals, business owners and tax professionals. HD Vest Financial Services ® supports an independent network of tax professionals who provide comprehensive financial planning solutions. For more information on Blucora or its businesses, please visit www.blucora.com.

Source: Blucora
Blucora Contact:
Stacy Ybarra, 425-709-8127




This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: general economic, industry, and market sector conditions; the effect of current, pending and future legislation, regulation and regulatory actions, including the DOL rule; the availability of products to sell; the timing and extent of market acceptance of developed products and services and related costs; our dependence on companies to distribute our products and services; the successful execution of the Company’s strategic initiatives, technology enhancements, operating plans, and marketing strategies; the condition of our cash investments; and the Company’s ability to control operating risks, information technology system risks and cybersecurity risks. A more detailed description of these and certain other factors that could affect actual results is included in Blucora, Inc.’s most recent Quarterly Report on Form 10-Q and subsequent reports filed with or furnished to the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Blucora, Inc. undertakes no obligation to update any forward-looking statements to reflect new information, events, or circumstances after the date of this release or to reflect the occurrence of unanticipated events.






Blucora, Inc.
Preliminary Condensed Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share data)
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Revenue:
 
 
 
 
 
 
 
Wealth management services revenue
$
76,117

 
$
—

 
$
153,408

 
$
—

Tax preparation services revenue
43,991

 
30,900

 
132,465

 
111,968

Total revenue
120,108

 
30,900

 
285,873

 
111,968

Operating expenses:
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
Wealth management services cost of revenue
51,023

 
—

 
103,292

 
—

Tax preparation services cost of revenue
2,023

 
1,373

 
5,230

 
3,510

Amortization of acquired technology
49

 
1,863

 
716

 
3,725

Total cost of revenue (1)
53,095

 
3,236

 
109,238

 
7,235

Engineering and technology (1)
3,959

 
1,130

 
8,254

 
2,220

Sales and marketing (1)
19,913

 
7,693

 
63,750

 
40,711

General and administrative (1)
11,508

 
7,653

 
24,261

 
14,799

Depreciation
963

 
356

 
1,938

 
707

Amortization of other acquired intangible assets
8,316

 
3,185

 
16,632

 
6,371

Total operating expenses
97,754

 
23,253

 
224,073

 
72,043

Operating income
22,354

 
7,647

 
61,800

 
39,925

Other loss, net (2)
(10,916
)
 
(3,034
)
 
(18,430
)
 
(6,029
)
Income from continuing operations before income taxes
11,438

 
4,613

 
43,370

 
33,896

Income tax expense
(5,793
)
 
(2,202
)
 
(17,436
)
 
(12,070
)
Income from continuing operations
5,645

 
2,411

 
25,934

 
21,826

Discontinued operations, net of income taxes
(19,975
)
 
1,840

 
(17,453
)
 
5,525

Net income (loss)
(14,330
)
 
4,251

 
8,481

 
27,351

Net income attributable to noncontrolling interests
(115
)
 
—

 
(259
)
 
—

Net income (loss) attributable to Blucora, Inc.
$
(14,445
)
 
$
4,251

 
$
8,222

 
$
27,351

Net income (loss) per share attributable to Blucora, Inc. - basic:
 
 
 
 
 
 
 
Continuing operations
$
0.13

 
$
0.06

 
$
0.62

 
$
0.53

Discontinued operations
(0.48
)
 
0.04

 
(0.42
)
 
0.14

Basic net income (loss) per share
$
(0.35
)
 
$
0.10

 
$
0.20

 
$
0.67

Net income (loss) per share attributable to Blucora, Inc. - diluted:
 
 
 
 
 
 
 
Continuing operations
$
0.13

 
$
0.06

 
$
0.61

 
$
0.52

Discontinued operations
(0.47
)
 
0.04

 
(0.41
)
 
0.13

Diluted net income (loss) per share
$
(0.34
)
 
$
0.10

 
$
0.20

 
$
0.65

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
41,405

 
40,918

 
41,288

 
40,953

Diluted
42,298

 
41,936

 
41,954

 
41,918

(1) Stock-based compensation expense was allocated among the following captions (in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Cost of revenue
$
23

 
$
19

 
$
65

 
$
48

Engineering and technology
322

 
91

 
733

 
224

Sales and marketing
426

 
185

 
1,027

 
380

General and administrative
2,252

 
1,700

 
5,427

 
3,248

Total stock-based compensation expense
$
3,023

 
$
1,995

 
$
7,252

 
$
3,900

(2) Other loss, net consisted of the following (in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Interest income
$
(11
)
 
$
(138
)
 
$
(36
)
 
$
(260
)
Interest expense
8,381

 
2,242

 
17,572

 
4,630

Amortization of debt issuance costs
417

 
280

 
1,027

 
556

Accretion of debt discounts
1,094

 
958

 
2,500

 
1,898

(Gain) loss on debt extinguishment and modification expense
997

 
—

 
(2,846
)
 
—

Gain on third party bankruptcy settlement
(26
)
 
(366
)
 
(44
)
 
(842
)
Other
64

 
58

 
257

 
47

Other loss, net
$
10,916

 
$
3,034

 
$
18,430

 
$
6,029






Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
 
June 30,
2016
 
December 31,
2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
74,273

 
$
55,473

Cash segregated under federal or other regulations
2,025

 
3,557

Available-for-sale investments
7,821

 
11,301

Accounts receivable, net of allowance
6,474

 
7,884

Commissions receivable
14,808

 
16,328

Other receivables
4,947

 
24,407

Prepaid expenses and other current assets, net
5,192

 
10,062

Current assets of discontinued operations
157,251

 
211,663

Total current assets
272,791

 
340,675

Long-term assets:
 
 
 
Property and equipment, net
10,923

 
11,308

Goodwill, net
551,030

 
548,959

Other intangible assets, net
378,994

 
396,295

Other long-term assets
2,147

 
2,311

Total long-term assets
943,094

 
958,873

Total assets
$
1,215,885

 
$
1,299,548

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
3,198

 
$
4,689

Commissions and advisory fees payable
15,002

 
16,982

Accrued expenses and other current liabilities
12,282

 
13,006

Deferred revenue
6,157

 
11,521

Current portion of long-term debt, net
3,200

 
31,631

Current liabilities of discontinued operations
58,288

 
88,275

Total current liabilities
98,127

 
166,104

Long-term liabilities:
 
 
 
Long-term debt, net
326,252

 
353,850

Convertible senior notes, net
161,892

 
185,918

Deferred tax liability, net
89,197

 
103,520

Deferred revenue
3,009

 
1,902

Other long-term liabilities
10,976

 
10,932

Total long-term liabilities
591,326

 
656,122

Total liabilities
689,453

 
822,226

 
 
 
 
Redeemable noncontrolling interests
15,297

 
15,038

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock
4

 
4

Additional paid-in capital
1,530,701

 
1,490,405

Accumulated deficit
(1,019,376
)
 
(1,027,598
)
Accumulated other comprehensive loss
(194
)
 
(527
)
Total stockholders’ equity
511,135

 
462,284

Total liabilities and stockholders’ equity
$
1,215,885

 
$
1,299,548






Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
 
Six months ended June 30,
 
2016
 
2015
Operating Activities:
 
 
 
Net income
$
8,481

 
$
27,351

Less: Discontinued operations, net of income taxes
(17,453
)
 
5,525

Net income from continuing operations
25,934

 
21,826

Adjustments to reconcile net income from continuing operations to net cash from operating activities:
 
 
 
Stock-based compensation
7,252

 
3,900

Depreciation and amortization of acquired intangible assets
19,597

 
11,172

Excess tax benefits from stock-based award activity
(26,930
)
 
(27,565
)
Deferred income taxes
(8,806
)
 
(17,994
)
Amortization of premium on investments, net
155

 
902

Amortization of debt issuance costs
1,027

 
556

Accretion of debt discounts
2,500

 
1,898

Gain on debt extinguishment and modification expense
(2,846
)
 
—

Revaluation of acquisition-related contingent consideration liability
391

 
—

Other
13

 
58

Cash provided (used) by changes in operating assets and liabilities:
 
 
 
Cash segregated under federal or other regulations
1,532

 
—

Accounts receivable
1,395

 
103

Commissions receivable
1,520

 
—

Other receivables
19,460

 
1,099

Prepaid expenses and other current assets
4,870

 
3,319

Other long-term assets
95

 
16

Accounts payable
(1,491
)
 
1,264

Commissions and advisory fees payable
(1,980
)
 
—

Deferred revenue
(4,257
)
 
(930
)
Accrued expenses and other current and long-term liabilities
26,057

 
30,176

Net cash provided by operating activities from continuing operations
65,488

 
29,800

Investing Activities:
 
 
 
Business acquisition, net of cash acquired
(1,788
)
 
—

Purchases of property and equipment
(1,528
)
 
(625
)
Proceeds from sales of investments
—

 
14,000

Proceeds from maturities of investments
4,000

 
113,406

Purchases of investments
(659
)
 
(112,090
)
Net cash provided by investing activities from continuing operations
25

 
14,691

Financing Activities:
 
 
 
Repurchase of convertible notes
(20,667
)
 
—

Repayment of credit facilities
(60,000
)
 
(51,940
)
Stock repurchases
—

 
(5,521
)
Excess tax benefits from stock-based award activity
26,930

 
27,565

Proceeds from stock option exercises
1,142

 
2,093

Proceeds from issuance of stock through employee stock purchase plan
562

 
608

Tax payments from shares withheld for equity awards
(901
)
 
(934
)
Net cash used by financing activities from continuing operations
(52,934
)
 
(28,129
)
Net cash provided by continuing operations
12,579

 
16,362

 
 
 
 
Net cash provided by operating activities from discontinued operations
10,148

 
5,636

Net cash used by investing activities from discontinued operations
(970
)
 
(1,168
)
Net cash used by financing activities from discontinued operations
(2,950
)
 
(7,030
)
Net cash provided (used) by discontinued operations
6,228

 
(2,562
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(7
)
 
—

Net increase in cash and cash equivalents
18,800

 
13,800

Cash and cash equivalents, beginning of period
55,473

 
41,968

Cash and cash equivalents, end of period
$
74,273

 
$
55,768






Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Revenue:
 
 
 
 
 
 
 
Wealth Management
$
76,117

 
$
—

 
$
153,408

 
$
—

Tax Preparation
43,991

 
30,900

 
132,465

 
111,968

Total revenue
120,108

 
30,900

 
285,873

 
111,968

Operating income:
 
 
 
 
 
 
 
Wealth Management
9,924

 
—

 
20,830

 
—

Tax Preparation
29,796

 
19,890

 
77,369

 
64,035

Corporate-level activity (1)
(17,366
)
 
(12,243
)
 
(36,399
)
 
(24,110
)
Total operating income
22,354

 
7,647

 
61,800

 
39,925

Other loss, net
(10,916
)
 
(3,034
)
 
(18,430
)
 
(6,029
)
Income tax expense
(5,793
)
 
(2,202
)
 
(17,436
)
 
(12,070
)
Discontinued operations, net of income taxes
(19,975
)
 
1,840

 
(17,453
)
 
5,525

Net income (loss)
$
(14,330
)
 
$
4,251

 
$
8,481

 
$
27,351

(1) Corporate-level activity included the following (in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Operating expenses
$
4,460

 
$
4,662

 
$
9,159

 
$
9,038

Stock-based compensation
3,023

 
1,995

 
7,252

 
3,900

Acquisition-related costs
391

 
—

 
391

 
—

Depreciation
1,127

 
538

 
2,249

 
1,076

Amortization of acquired intangible assets
8,365

 
5,048

 
17,348

 
10,096

Total corporate-level activity
$
17,366

 
$
12,243

 
$
36,399

 
$
24,110






Blucora, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures
Preliminary Adjusted EBITDA Reconciliation (1) 
(Unaudited)
(Amounts in thousands)
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Operating income (2)
$
22,354

 
$
7,647

 
$
61,800

 
$
39,925

Stock-based compensation
3,023

 
1,995

 
7,252

 
3,900

Depreciation and amortization of acquired intangible assets
9,492

 
5,586

 
19,597

 
11,172

Acquisition-related costs
391

 
—

 
391

 
—

Adjusted EBITDA
$
35,260

 
$
15,228

 
$
89,040

 
$
54,997


Preliminary Non-GAAP Net Income Reconciliation (1) 
(Unaudited)
(Amounts in thousands, except per share amounts)
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Net income (loss) attributable to Blucora, Inc.(2)
$
(14,445
)
 
$
4,251

 
$
8,222

 
$
27,351

Discontinued operations, net of income taxes
19,975

 
(1,840
)
 
17,453

 
(5,525
)
Stock-based compensation
3,023

 
1,995

 
7,252

 
3,900

Amortization of acquired intangible assets
8,365

 
5,048

 
17,348

 
10,096

Accretion of debt discount on Convertible Senior Notes
885

 
958

 
1,848

 
1,898

Accelerated accretion of debt discount on Convertible Senior Notes
—

 
—

 
1,628

 
—

Gain on Convertible Senior Notes repurchased
—

 
—

 
(7,724
)
 
—

Acquisition-related costs
391

 
—

 
391

 
—

Impact of noncontrolling interests
115

 
—

 
259

 
—

Cash tax impact of adjustments to GAAP net income
(78
)
 
(67
)
 
261

 
(101
)
Non-cash income tax expense (1)
5,193

 
2,143

 
15,772

 
11,954

Non-GAAP net income
$
23,424

 
$
12,488

 
$
62,710

 
$
49,573

 
 
 
 
 
 
 
 
Per diluted share:
 
 
 
 
 
 
 
Net income (loss) attributable to Blucora, Inc.
$
(0.34
)
 
$
0.10

 
$
0.20

 
$
0.65

Discontinued operations, net of income taxes
0.47

 
(0.04
)
 
0.41

 
(0.13
)
Stock-based compensation
0.07

 
0.05

 
0.17

 
0.09

Amortization of acquired intangible assets
0.20

 
0.12

 
0.40

 
0.23

Accretion of debt discount on Convertible Senior Notes
0.02

 
0.02

 
0.04

 
0.05

Accelerated accretion of debt discount on Convertible Senior Notes
—

 
—

 
0.04

 
—

Gain on Convertible Senior Notes repurchased
—

 
—

 
(0.18
)
 
—

Acquisition-related costs
0.01

 
—

 
0.01

 
—

Impact of noncontrolling interests
0.00

 
—

 
0.01

 
—

Cash tax impact of adjustments to GAAP net income
(0.00
)
 
(0.00
)
 
0.01

 
(0.00
)
Non-cash income tax expense
0.12

 
0.05

 
0.38

 
0.29

Non-GAAP net income
$
0.55

 
$
0.30

 
$
1.49

 
$
1.18

Weighted average shares outstanding used in computing per diluted share amounts
42,298

 
41,936

 
41,954

 
41,918






Blucora, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures
(As Reported and Pro Forma)
Preliminary Adjusted EBITDA Reconciliation (As Reported and Pro Forma) (1) 
(Unaudited)
(Amounts in thousands)
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
 
As reported
 
Pro forma
 
As reported
 
Pro forma
Operating income
$
22,354

 
$
11,238

 
$
61,800

 
$
45,436

Stock-based compensation
3,023

 
3,289

 
7,252

 
6,178

Depreciation and amortization of acquired intangible assets
9,492

 
11,318

 
19,597

 
22,647

Acquisition-related costs
391

 
—

 
391

 
—

Adjusted EBITDA
$
35,260

 
$
25,845

 
$
89,040

 
$
74,261


Preliminary Non-GAAP Net Income Reconciliation (As Reported and Pro Forma) (1) 
(Unaudited)
(Amounts in thousands, except per share amounts)
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
 
As reported
 
Pro forma
 
As reported
 
Pro forma
Net income (loss) attributable to Blucora, Inc.
$
(14,445
)
 
$
2,325

 
$
8,222

 
$
20,740

Discontinued operations, net of income taxes
19,975

 
(1,840
)
 
17,453

 
(5,525
)
Stock-based compensation
3,023

 
3,289

 
7,252

 
6,178

Amortization of acquired intangible assets
8,365

 
10,185

 
17,348

 
20,370

Accretion of debt discount on Convertible Senior Notes
885

 
958

 
1,848

 
1,898

Accelerated accretion of debt discount on Convertible Senior Notes
—

 
—

 
1,628

 
—

Gain on Convertible Senior Notes repurchased
—

 
—

 
(7,724
)
 
—

Acquisition-related costs
391

 
—

 
391

 
—

Impact of noncontrolling interests
115

 
—

 
259

 
—

Cash tax impact of adjustments to GAAP net income
(78
)
 
(100
)
 
261

 
(200
)
Non-cash income tax (benefit) expense
5,193

 
(245
)
 
15,772

 
8,426

Non-GAAP net income
$
23,424

 
$
14,572

 
$
62,710

 
$
51,887

 
 
 
 
 
 
 
 
Per diluted share:
 
 
 
 
 
 
 
Net income (loss) attributable to Blucora, Inc.
$
(0.34
)
 
$
0.06

 
$
0.20

 
$
0.49

Discontinued operations, net of income taxes
0.47

 
(0.04
)
 
0.41

 
(0.13
)
Stock-based compensation
0.07

 
0.08

 
0.17

 
0.15

Amortization of acquired intangible assets
0.20

 
0.24

 
0.40

 
0.49

Accretion of debt discount on Convertible Senior Notes
0.02

 
0.02

 
0.04

 
0.05

Accelerated accretion of debt discount on Convertible Senior Notes
—

 
—

 
0.04

 
—

Gain on Convertible Senior Notes repurchased
—

 
—

 
(0.18
)
 
—

Acquisition-related costs
0.01

 
—

 
0.01

 
—

Impact of noncontrolling interests
0.00

 
—

 
0.01

 
—

Cash tax impact of adjustments to GAAP net income
(0.00
)
 
(0.00
)
 
0.01

 
(0.00
)
Non-cash income tax (benefit) expense
0.12

 
(0.01
)
 
0.38

 
0.19

Non-GAAP net income
$
0.55

 
$
0.35

 
$
1.49

 
$
1.24

Weighted average shares outstanding used in computing per diluted share amounts
42,298

 
41,936

 
41,954

 
41,918







Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
 
Ranges for the three months ending
 
Ranges for the year ending
 
September 30, 2016
 
December 31, 2016
Loss from continuing operations
$
(16,200
)
 
$
(14,800
)
 
$
(5,500
)
 
$
(2,000
)
Stock-based compensation
3,700

 
3,500

 
15,700

 
14,700

Depreciation and amortization of acquired intangible assets
9,600

 
9,600

 
38,900

 
38,700

Acquisition-related costs
—

 
—

 
400

 
400

Other loss, net (3)
11,400

 
11,400

 
39,900

 
39,900

Income tax benefit
(10,800
)
 
(9,900
)
 
(3,600
)
 
(1,200
)
Adjusted EBITDA
$
(2,300
)
 
$
(200
)
 
$
85,800

 
$
90,500

Preliminary Non-GAAP Income (Loss) from Continuing Operations Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
 
Ranges for the three months ending
 
Ranges for the year ending
 
September 30, 2016
 
December 31, 2016
Loss from continuing operations
$
(16,200
)
 
$
(14,800
)
 
$
(5,500
)
 
$
(2,000
)
Stock-based compensation
3,700

 
3,500

 
15,700

 
14,700

Amortization of acquired intangible assets
8,400

 
8,400

 
34,100

 
34,100

Accretion of debt discount on Convertible Senior Notes
900

 
900

 
3,700

 
3,700

Accelerated accretion of debt discount on Convertible Senior Notes
—

 
—

 
1,600

 
1,600

Gain on Convertible Senior Notes repurchased
—

 
—

 
(7,700
)
 
(7,700
)
Acquisition-related costs
—

 
—

 
400

 
400

Cash tax impact of adjustments to loss from continuing operations
—

 
—

 
300

 
300

Non-cash income tax benefit
(11,800
)
 
(10,600
)
 
(6,800
)
 
(4,200
)
Non-GAAP income (loss) from continuing operations
$
(15,000
)
 
$
(12,600
)
 
$
35,800

 
$
40,900






Notes to Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures

(1) We define Adjusted EBITDA differently for this report than we have defined it in the past, due to the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016, the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, and acquisition-related costs in connection with the HD Vest and SimpleTax acquisitions that we would not have otherwise incurred as part of our business operations. Acquisition-related costs include professional fees and other direct transaction costs and changes in the fair value of contingent consideration liabilities related to acquired companies. The HD Vest acquisition closed in the fourth quarter of 2015 and resulted in significant transaction costs. The SimpleTax acquisition included contingent consideration, for which the fair value of that liability was revalued in the second quarter of 2016. We define Adjusted EBITDA as operating income, determined in accordance with GAAP, excluding the effects of depreciation, amortization of acquired intangible assets (including acquired technology), stock-based compensation, and acquisition-related costs.

We believe that Adjusted EBITDA provides meaningful supplemental information regarding our performance. We use this non-GAAP financial measure for internal management and compensation purposes, when publicly providing guidance on possible future results, and as a means to evaluate period-to-period comparisons. We believe that Adjusted EBITDA is a common measure used by investors and analysts to evaluate our performance, that it provides a more complete understanding of the results of operations and trends affecting our business when viewed together with GAAP results, and that management and investors benefit from referring to this non-GAAP financial measure. Items excluded from Adjusted EBITDA are significant and necessary components to the operations of our business and, therefore, Adjusted EBITDA should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income (loss). Other companies may calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

We define non-GAAP net income differently for this report than we have defined it in the past, due to the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016, the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, and acquisition-related costs in connection with the HD Vest and SimpleTax acquisitions that we would not have otherwise incurred as part of our business operations. Acquisition-related costs are described further under the first paragraph in this note (1). For this report, we define non-GAAP net income as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets (included acquired technology), accretion of debt discount and accelerated accretion of debt discount on the Convertible Senior Notes, gain on Convertible Senior Notes repurchased, acquisition-related costs, discontinued operations, the impact of noncontrolling interests, and the related cash tax impact of those adjustments, and non-cash income taxes. We exclude the non-cash portion of income taxes because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which primarily consist of U.S. federal net operating losses. The majority of these net operating losses will expire, if unutilized, between 2020 and 2024.

We believe that non-GAAP net income and non-GAAP net income per share provide meaningful supplemental information to management, investors, and analysts regarding our performance and the valuation of our business by excluding items in the statement of operations that we do not consider part of our ongoing operations or have not been, or are not expected to be, settled in cash. Additionally, we believe that non-GAAP net income and non-GAAP net income per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP net income should be evaluated in light of our financial results prepared in accordance with GAAP and should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income (loss). Other companies may calculate non-GAAP net income differently, and, therefore, our non-GAAP net income may not be comparable to similarly titled measures of other companies.

(2) As presented in the Preliminary Condensed Consolidated Statements of Operations (unaudited).

(3) Other loss, net primarily includes items such as interest income, interest expense, amortization of debt issuance costs, accretion of debt discounts, gain/loss on debt extinguishment and modification expense, and gain on third party bankruptcy settlement.





Exhibit 99.2
Blucora, Inc.
Supplemental Information
June 30, 2016
Table of Contents
 



Blucora Consolidated Financial Results (1) 
 
2014
 
2015
 
2016
(in thousands except %s and per share amounts, rounding differences may exist)
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
 
1Q
 
2Q
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
as reported
 
as reported
Segment revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wealth Management (1)
$
304,854

 
$
76,795

 
$
80,834

 
$
79,977

 
$
82,133

 
$
319,739

 
$
77,291

 
$
76,117

Tax Preparation (2)
103,719

 
81,068

 
30,900

 
2,875

 
2,865

 
117,708

 
88,474

 
43,991

Total
$
408,573

 
$
157,863

 
$
111,734

 
$
82,852

 
$
84,998

 
$
437,447

 
$
165,765

 
$
120,108

Segment income (loss): (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wealth Management (1)
$
40,314

 
$
8,647

 
$
10,617

 
$
11,488

 
$
12,245

 
$
42,997

 
$
10,906

 
$
9,924

Tax Preparation (2)
49,696

 
44,145

 
19,890

 
(2,542
)
 
(4,509
)
 
56,984

 
47,573

 
29,796

Total
$
90,010

 
$
52,792

 
$
30,507

 
$
8,946

 
$
7,736

 
$
99,981

 
$
58,479

 
$
39,720

Segment income (loss) % of revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wealth Management (1)
13
%
 
11
%
 
13
%
 
14
 %
 
15
 %
 
13
%
 
14
%
 
13
%
Tax Preparation (2)
48
%
 
54
%
 
64
%
 
(88
)%
 
(157
)%
 
48
%
 
54
%
 
68
%
Total
22
%
 
33
%
 
27
%
 
11
 %
 
9
 %
 
23
%
 
35
%
 
33
%
Unallocated corporate operating expenses (3)
$
14,235

 
$
4,376

 
$
4,662

 
$
4,433

 
$
4,279

 
$
17,750

 
$
4,699

 
$
4,460

Adjusted EBITDA
$
75,775

 
$
48,416

 
$
25,845

 
$
4,513

 
$
3,457

 
$
82,231

 
$
53,780

 
$
35,260

Other unallocated operating expenses: (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation (4)
$
13,591

 
$
2,889

 
$
3,289

 
$
3,379

 
$
4,034

 
$
13,591

 
$
4,229

 
$
3,023

Depreciation
3,972

 
1,144

 
1,133

 
1,168

 
1,168

 
4,613

 
1,122

 
1,127

Amortization of acquired intangible assets (4)
40,740

 
10,185

 
10,185

 
10,243

 
10,238

 
40,851

 
8,983

 
8,365

Acquisition-related costs
—

 
—

 
—

 
—

 
—

 
—

 
—

 
391

Operating income (loss)
$
17,472

 
$
34,198

 
$
11,238

 
$
(10,277
)
 
$
(11,983
)
 
$
23,176

 
$
39,446

 
$
22,354

Unallocated other income/loss: (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
(355
)
 
$
(122
)
 
$
(138
)
 
$
(170
)
 
$
(179
)
 
$
(609
)
 
$
(25
)
 
$
(11
)
Interest expense (5)
37,034

 
9,224

 
9,220

 
9,298

 
9,317

 
37,059

 
9,191

 
8,381

Amortization of debt issuance costs (5)
1,753

 
454

 
467

 
482

 
491

 
1,894

 
610

 
417

Accretion of debt discounts (5)
4,525

 
1,178

 
1,207

 
1,235

 
1,260

 
4,880

 
1,406

 
1,094

(Gain) loss on debt extinguishment and modification expense (6)
—

 
—

 
—

 
—

 
—

 
—

 
(3,843
)
 
997

Other (income) loss, net
(285
)
 
(487
)
 
(308
)
 
(214
)
 
(281
)
 
(1,290
)
 
175

 
38

Total
$
42,672

 
$
10,247

 
$
10,448

 
$
10,631

 
$
10,608

 
$
41,934

 
$
7,514

 
$
10,916

Income (loss) from continuing operations before income taxes
$
(25,200
)
 
$
23,951

 
$
790

 
$
(20,908
)
 
$
(22,591
)
 
$
(18,758
)
 
$
31,932

 
$
11,438

Income tax (benefit) expense: (3) (7)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
$
2,200

 
$
550

 
$
550

 
$
550

 
$
550

 
$
2,200

 
$
1,064

 
$
600

Non-cash (8)
(11,902
)
 
8,671

 
(245
)
 
(8,600
)
 
(9,248
)
 
(9,422
)
 
10,579

 
5,193

Total
$
(9,702
)
 
$
9,221

 
$
305

 
$
(8,050
)
 
$
(8,698
)
 
$
(7,222
)
 
$
11,643

 
$
5,793

GAAP income (loss) from continuing operations (9)
$
(15,498
)
 
$
14,730

 
$
485

 
$
(12,858
)
 
$
(13,893
)
 
$
(11,536
)
 
$
20,289

 
$
5,645

GAAP income (loss) from continuing operations per share - diluted
$
(0.37
)
 
$
0.35

 
$
0.01

 
$
(0.31
)
 
$
(0.34
)
 
$
(0.28
)
 
$
0.48

 
$
0.13

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP discontinued operations, net of income taxes (10)
$
(30,003
)
 
$
3,685

 
$
1,840

 
$
1,597

 
$
(34,470
)
 
$
(27,348
)
 
$
2,522

 
$
(19,975
)
GAAP impact of noncontrolling interests (9)
—

 
—

 
—

 
—

 
—

 
—

 
(144
)
 
(115
)
GAAP net income (loss) attributable to Blucora, Inc.
$
(45,501
)
 
$
18,415

 
$
2,325

 
$
(11,261
)
 
$
(48,363
)
 
$
(38,884
)
 
$
22,667

 
$
(14,445
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP net income (loss)
$
30,125

 
$
37,315

 
$
14,572

 
$
(6,961
)
 
$
(7,976
)
 
$
36,950

 
$
39,286

 
$
23,424

Non-GAAP net income (loss) per share - diluted
$
0.70

(11)
$
0.89

 
$
0.35

 
$
(0.17
)
 
$
(0.19
)
 
$
0.88

(12
)
$
0.94

 
$
0.55

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding Shares
40,882

 
40,851

 
40,944

 
40,951

 
40,954

 
40,954

 
41,245

 
41,495

Basic shares - GAAP
41,396

 
40,987

 
40,918

 
40,950

 
40,979

 
40,959

 
41,171

 
41,405

Diluted shares - GAAP
41,396

 
41,899

 
41,936

 
40,950

 
40,979

 
40,959

 
41,610

 
42,298

Notes to Consolidated Financial Results on next page

2


Notes to Consolidated Financial Results
 
(1) 
On October 14, 2015, Blucora announced the acquisition of HD Vest, which closed on December 31, 2015. As part of that announcement, we also stated our plans to divest the Search and Content and E-Commerce businesses in order to focus more strategically on the technology-enabled financial solutions market. The pro forma information represents the combination of HD Vest, TaxAct, and corporate expenses as if the acquisition closed on January 1, 2014. The Company believes that this presentation most accurately reflects the financial performance of the Company on a go-forward basis.
(2) 
As a highly seasonal business, almost all of the Tax Preparation revenue is generated in the first four months of the calendar year.
(3) 
We do not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, depreciation, amortization of acquired intangible assets, acquisition-related costs, other income/loss, or income taxes to the reportable segments.  The general and administrative costs are included in "Unallocated corporate operating expenses." In addition, "Unallocated corporate operating expenses" for the pro forma quarterly and fiscal year 2015 results exclude transaction costs related to the HD Vest acquisition and CEO separation-related costs.
(4) 
Includes stock-based compensation for Blucora share-based award grants to HD Vest employees and amortization of the definite-lived intangible assets identified in the HD Vest acquisition.
(5) 
Excludes interest expense and amortization of debt-related costs associated with the TaxAct 2013 credit facility and HD Vest's previous debt facility, both of which were paid off at the acquisition date, and includes similar expenses associated with the TaxAct - HD Vest 2015 credit facility that was used to finance the acquisition.
(6) 
1Q16 gain on debt extinguishment and modification expense related to the repurchase of a portion of the Convertible Senior Notes below par value, offset by a loss on debt extinguishment and modification expense related to the prepayment of a portion of the TaxAct - HD Vest 2015 credit facility, which resulted in the write-down of a portion of the unamortized discount and debt issuance costs. 2Q16 loss on debt extinguishment and modification expense related to the prepayment of a portion of the TaxAct - HD Vest 2015 credit facility.
(7) 
Pro forma excludes historical tax expense and includes tax expense using an effective tax rate of 38.5% with anticipated cash taxes of $2.2 million per year, given expected net operating loss utilization.
(8) 
Amounts represent the non-cash portion of income taxes from continuing operations. We exclude the non-cash portion of income taxes because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which primarily consist of U.S. federal net operating losses. The majority of these deferred tax assets will expire, if unutilized, between 2020 and 2024.
(9) 
GAAP income/loss from continuing operations excludes the impact of noncontrolling interests associated with HD Vest management rollover equity ownership of 4.48%. The impact of noncontrolling interests is recorded separately and after GAAP income/loss from continuing operations.
(10) 
On October 14, 2015, Blucora announced plans to divest of the Search and Content and E-Commerce businesses. Accordingly, our financial condition, results of operations, and cash flows reflect the Search and Content and E-Commerce businesses as discontinued operations for all periods presented.
(11) 
Calculation in FY 2014 used 42,946,000 diluted shares due to non-GAAP net income.
(12) 
Calculation in FY 2015 used 41,861,000 diluted shares due to non-GAAP net income.

3


Blucora Reconciliation of Non-GAAP Financial Measures (1) (2) 
 
2014
 
2015
 
2016
(in thousands except per share amounts, rounding differences may exist)
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
 
1Q
 
2Q
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
as reported
 
as reported
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss) (3)
$
17,472

 
$
34,198

 
$
11,238

 
$
(10,277
)
 
$
(11,983
)
 
$
23,176

 
$
39,446

 
$
22,354

Stock-based compensation
13,591

 
2,889

 
3,289

 
3,379

 
4,034

 
13,591

 
4,229

 
3,023

Depreciation and amortization of acquired intangible assets
44,712

 
11,329

 
11,318

 
11,411

 
11,406

 
45,464

 
10,105

 
9,492

Acquisition-related costs
—

 
—

 
—

 
—

 
—

 
—

 
—

 
391

Adjusted EBITDA (4)
$
75,775

 
$
48,416

 
$
25,845

 
$
4,513

 
$
3,457

 
$
82,231

 
$
53,780

 
$
35,260

Non-GAAP Net Income (Loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Blucora, Inc. (3)
$
(45,501
)
 
$
18,415

 
$
2,325

 
$
(11,261
)
 
$
(48,363
)
 
$
(38,884
)
 
$
22,667

 
$
(14,445
)
Discontinued operations, net of income taxes
30,003

 
(3,685
)
 
(1,840
)
 
(1,597
)
 
34,470

 
27,348

 
(2,522
)
 
19,975

Stock-based compensation
13,591

 
2,889

 
3,289

 
3,379

 
4,034

 
13,591

 
4,229

 
3,023

Amortization of acquired intangible assets
40,740

 
10,185

 
10,185

 
10,243

 
10,238

 
40,851

 
8,983

 
8,365

Accretion of debt discount on Convertible Senior Notes
3,594

 
940

 
958

 
975

 
993

 
3,866

 
963

 
885

Accelerated accretion of debt discount on Convertible Senior Notes
—

 
—

 
—

 
—

 
—

 
—

 
1,628

 
—

Gain on Convertible Senior Notes repurchased
—

 
—

 
—

 
—

 
—

 
—

 
(7,724
)
 
—

Acquisition-related costs
—

 
—

 
—

 
—

 
—

 
—

 
—

 
391

Impact of noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
144

 
115

Cash tax impact of adjustments to GAAP net income
(400
)
 
(100
)
 
(100
)
 
(100
)
 
(100
)
 
(400
)
 
339

 
(78
)
Non-cash income tax (benefit) expense
(11,902
)
 
8,671

 
(245
)
 
(8,600
)
 
(9,248
)
 
(9,422
)
 
10,579

 
5,193

Non-GAAP net income (loss) (4)
$
30,125

 
$
37,315

 
$
14,572

 
$
(6,961
)
 
$
(7,976
)
 
$
36,950

 
$
39,286

 
$
23,424

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP net income (loss) per share
$
0.70

 
$
0.89

 
$
0.35

 
$
(0.17
)
 
$
(0.19
)
 
$
0.88

 
$
0.94

 
$
0.55

Diluted shares
42,946

 
41,899

 
41,936

 
40,950

 
40,979

 
41,861

 
41,610

 
42,298

 
(1) 
On October 14, 2015, Blucora announced the acquisition of HD Vest, which closed on December 31, 2015. As part of that announcement, we also stated our plans to divest the Search and Content and E-Commerce businesses in order to focus more strategically on the technology-enabled financial solutions market. The pro forma information represents the combination of HD Vest, TaxAct, and corporate expenses as if the acquisition closed on January 1, 2014. The Company believes that this presentation most accurately reflects the financial performance of the Company on a go-forward basis.
(2) 
For definitions of these non-GAAP financial measures and their relationship to our GAAP financial statements, please see Note 1 to our Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures in exhibit 99.1 to the July 28, 2016 Current Report on Form 8-K.
(3) 
As presented in the Blucora Consolidated Financial Results (unaudited) on page 2.
(4) 
We define Adjusted EBITDA and Non-GAAP Net Income (Loss) differently than we have defined it in the past, due to the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in 1Q16, the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in 4Q15, separation-related costs in connection with the departure of our chief executive officer as announced in 4Q15, and acquisition-related costs in connection with the HD Vest and SimpleTax acquisitions that we would not have otherwise incurred as part of our business operations. Acquisition-related costs include professional fees and other direct transaction costs and changes in the fair value of contingent consideration liabilities related to acquired companies. The HD Vest acquisition closed in 4Q15 and resulted in significant transaction costs. The SimpleTax acquisition included contingent consideration, for which the fair value of that liability was revalued in 2Q16. Effective with 1Q16, we also define Non-GAAP Net Income (Loss) to exclude the gain on Convertible Senior Notes repurchased, which we repurchased below par value, and the related accelerated accretion of debt discount in 1Q16.

4


Blucora Net Leverage Ratio
 
2015
 
2016
 
(in thousands except ratio, rounding differences may exist)
FY 12/31
 
1Q
 
2Q
 
CASH:
 
 
 
 
 
 
Cash and cash equivalents
$
55,473

 
$
67,955

 
$
74,273

 
Available-for-sale investments
11,301

 
11,642

 
7,821

 
 
$
66,774

 
$
79,597

 
$
82,094

 
DEBT:

 

 

 
Convertible Senior Notes
$
201,250

 
$
172,859

 
$
172,859

 
TaxAct - HD Vest 2015 credit facility
400,000

 
360,000

 
340,000

 
Note payable, related party
6,400

 
6,400

 
6,400

 
 
$
607,650

 
$
539,259

 
$
519,259

 
 
 
 
 
 
 
 
NET DEBT FROM CONTINUING OPERATIONS
$
(540,876
)
 
$
(459,662
)
 
$
(437,165
)
 
 
 
 
 
 
 
 
OTHER:
 
 
 
 
 
 
Add: Escrow receivable (1)
$
20,000

 
$
—

 
$
—

 
 
 
 
 
 
 
 
TOTAL NET DEBT FROM CONTINUING OPERATIONS
$
(520,876
)
 
$
(459,662
)
 
$
(437,165
)
 
 
 
 
 
 
 
 
Last twelve months (pro forma): (2)
 
 
 
 
 
 
SEGMENT INCOME:
 
 
 
 
 
 
Wealth Management
$
42,997

 
$
45,256

 
$
44,563

 
Tax Preparation
56,984

 
60,412

 
70,318

 
 
99,981

 
105,668

 
114,881

 
Unallocated corporate operating expenses
(17,750
)
 
(18,073
)
 
(17,871
)
 
 
 
 
 
 
 
 
ADJUSTED EBITDA
$
82,231

 
$
87,595

 
$
97,010

 
 
 
 
 
 
 
 
LEVERAGE RATIO
6.3

x
5.2

x
4.5

x
(1) 
Amount represents consideration funded to escrow that was contingent upon HD Vest's 2015 earnings performance. The contingent consideration was not achieved; therefore, the amount was returned to the Company from escrow in 1Q 2016.
(2) 
The pro forma information represents the combination of HD Vest, TaxAct, and corporate expenses as if the acquisition closed on January 1, 2014. The Company believes that this presentation most accurately reflects the financial performance of the Company on a go-forward basis.

5


Blucora Reconciliation of Operating Free Cash Flow from Continuing Operations (1) 
 
2016
(in thousands, rounding differences may exist)
1Q
 
2Q
Net cash provided by operating activities from continuing operations
$
51,727

 
$
13,761

Excess tax benefits from stock-based award activity (2)
16,865

 
10,065

Purchases of property and equipment
(677
)
 
(851
)
Operating free cash flow from continuing operations
$
67,915

 
$
22,975

(1) 
We define operating free cash flow from continuing operations as net cash provided by operating activities from continuing operations plus the excess tax benefits from stock-based award activity and less purchases of property and equipment. We believe operating free cash flow is an important liquidity measure that reflects the cash generated by the continuing businesses, after the purchases of property and equipment, that can then be used for, among other things, strategic acquisitions and investments in the businesses, stock repurchases, and funding ongoing operations.
(2) 
The significant majority of excess tax benefits from stock-based award activity represents the utilization of equity net operating loss carryforwards from prior years.

6


Blucora Operating Metrics - Wealth Management
 
2014
 
2015
 
2016
(in thousands except %s, rounding differences may exist)
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
 
1Q
 
2Q
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
as reported
 
as reported
Segment revenue
$
304,854

 
$
76,795

 
$
80,834

 
$
79,977

 
$
82,133

 
$
319,739

 
$
77,291

 
$
76,117

Segment net revenue (1)
$
96,735

 
$
23,798

 
$
25,587

 
$
24,752

 
$
25,612

 
$
99,749

 
$
25,022

 
$
25,094

Segment income (2)
$
40,314

 
$
8,647

 
$
10,617

 
$
11,488

 
$
12,245

 
$
42,997

 
$
10,906

 
$
9,924

Segment income % of revenue
13
%
 
11
%
 
13
%
 
14
%
 
15
%
 
13
%
 
14
%
 
13
%
Segment income % of net revenue
42
%
 
36
%
 
41
%
 
46
%
 
48
%
 
43
%
 
44
%
 
40
%
(in thousands except %s, rounding differences may exist)
2014
 
2015
 
2016
 
Sources of Revenue
Primary Drivers
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
 
1Q
 
2Q
 
 
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
as reported
 
as reported
Advisor-driven

Commission
- Transactions
- Asset levels
$
152,344

 
$
37,475

 
$
39,143

 
$
38,835

 
$
41,490

 
$
156,943

 
$
36,856

 
$
35,252

Advisory
- Advisory asset levels
120,185

 
31,734

 
32,799

 
33,327

 
31,573

 
129,433

 
31,532

 
31,522

Other revenue
Asset-based
- Cash balances
- Interest rates
- Number of accounts
- Client asset levels
18,659

 
4,590

 
5,016

 
4,580

 
4,685

 
18,871

 
5,818

 
5,395

Transaction and fee
- Account activity
- Number of clients
- Number of advisors
- Number of accounts
13,666

 
2,996

 
3,876

 
3,235

 
4,385

 
14,492

 
3,085

 
3,948

 
Total revenue
$
304,854

 
$
76,795

 
$
80,834

 
$
79,977

 
$
82,133

 
$
319,739

 
$
77,291

 
$
76,117

 
Total recurring revenue (3)
$
236,100

 
$
60,540

 
$
63,409

 
$
62,373

 
$
61,671

 
$
247,993

 
$
60,069

 
$
61,160

 
Recurring revenue rate (3)
77.4
%
 
78.8
%
 
78.4
%
 
78.0
%
 
75.1
%
 
77.6
%
 
77.7
%
 
80.3
%
 
2014
 
2015
 
2016
(in thousands except %s and as otherwise indicated, rounding differences may exist)
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
 
1Q
 
2Q
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
pro forma
 
as reported
 
as reported
Total Assets Under Administration ("AUA")
$
37,132,757

 
$
37,791,025

 
$
37,839,908

 
$
35,625,032

 
$
36,573,766

 
$
36,573,766

 
$
36,505,384

 
$
37,233,522

Advisory Assets Under Management ("AUM")
$
9,552,876

 
$
9,860,064

 
$
9,899,542

 
$
9,396,557

 
$
9,692,244

 
$
9,692,244

 
$
9,592,025

 
$
9,814,232

% of total AUA
25.7
%
 
26.1
%
 
26.2
%
 
26.4
%
 
26.5
%
 
26.5
%
 
26.3
%
 
26.4
%
Number of advisors (in ones)
4,515

 
4,564

 
4,579

 
4,625

 
4,600

 
4,600

 
4,584

 
4,561

(1) 
Amount represents segment revenue less advisor commission payout.
(2) 
Excludes expenses associated with non-recurring projects.
(3) 
Recurring revenue consists of trailing commissions, advisory fees, fees from cash sweep programs, and certain transaction and fee revenue.


7


Blucora Operating Metrics - Tax Preparation
(in thousands except %s, rounding differences may exist)
U.S. tax seasons ended
 
Six months ended June 30,
Consumers
April 19, 2016
 
April 16, 2015
 
% change
 
2016
 
2015
 
% change
Online e-files
4,613

 
5,058

 
(9
)%
 
4,690

 
5,158

 
(9
)%
Desktop e-files
234

 
261

 
(10
)%
 
238

 
266

 
(11
)%
Sub-total e-files
4,847

 
5,319

 
(9
)%
 
4,928

 
5,424

 
(9
)%
Free File Alliance e-files (1)
158

 
172

 
(8
)%
 
163

 
177

 
(8
)%
Total e-files
5,005

 
5,491

 
(9
)%
 
5,091

 
5,601

 
(9
)%
(in thousands except %s and as otherwise indicated, rounding differences may exist)
U.S. tax seasons ended
 
Six months ended June 30,
Preparers
April 19, 2016
 
April 16, 2015
 
% change
 
2016
 
2015
 
% change
E-files
1,630

 
1,475

 
10
%
 
1,690

 
1,532

 
10
%
Units sold (in ones)
20,114

 
19,284

 
4
%
 
20,142

 
19,334

 
4
%
E-files per unit sold (in ones)
81.0

 
76.5

 
6
%
 
83.9

 
79.2

 
6
%
(1) 
Free File Alliance e-files are provided as part of an IRS partnership that provides free electronic tax filing services to taxpayers meeting certain income-based guidelines.

8

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

SEC Filings