Form 8-K BLUCORA, INC. For: Nov 05
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
November�5, 2014
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
Registrants 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 November�5, 2014, Blucora announced its financial results for the quarter ended September�30, 2014. 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 | November�5, 2014 |
99.2 | Investor presentation dated | November�5, 2014 |
-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 | ||
November�5, 2014 |
-3-
EXHIBIT INDEX
�
Exhibit No | Description | ||
99.1 | Press release dated | November�5, 2014 |
99.2 | Investor presentation dated | November�5, 2014 |
-4-
Exhibit 99.1
�
Blucora Reports Third Quarter Results
BELLEVUE, Wash., November�5, 2014 (Marketwired) Blucora, Inc. (NASDAQ: BCOR) today announced financial results for the third quarter ended September�30, 2014.
Our multi-year transformation continues to progress," said Bill Ruckelshaus, President and Chief Executive Officer of Blucora. Results for the third quarter were in line with expectations as we continue to navigate market pressures in our search and content segment. The challenges at InfoSpace underscore the importance of our diversification strategy, and the continued execution at TaxACT and Monoprice."
Summary Financial Performance: Q3 2014
($ in millions except per share amounts)
Q3 | Q3 | |||||||||
2014 | 2013 | Change | ||||||||
Revenues | $ | 114.9 | $ | 124.1 | (7 | )% | ||||
Search and Content | $ | 74.4 | $ | 107.7 | (31 | )% | ||||
Tax Preparation | $ | 2.5 | $ | 1.7 | 41 | �% | ||||
E-Commerce | $ | 38.0 | $ | 14.6 | 160 | �% | ||||
Adjusted EBITDA | $ | 10.7 | $ | 16.6 | (36 | )% | ||||
Non-GAAP Net Income | $ | 6.5 | $ | 13.0 | (50 | )% | ||||
Non-GAAP Diluted EPS | $ | 0.15 | $ | 0.30 | (50 | )% | ||||
GAAP Net Loss | $ | (2.2 | ) | $ | (6.5 | ) | (65 | )% | ||
GAAP Diluted EPS | $ | (0.05 | ) | $ | (0.16 | ) | (69 | )% | ||
See reconciliation of non-GAAP to GAAP measures in table below. |
Segment Information
Search and Content
Search and content segment income for the third quarter of 2014 was $12.7 million or 17 percent of segment revenue for the third quarter of 2014.
Tax Preparation
Tax preparation segment loss for the third quarter of 2014 was $1.9 million.
E-Commerce
E-Commerce segment income for the third quarter of 2014 was $3.3 million or 9 percent of segment revenue for the third quarter of 2014.
Corporate Operating Expenses
Unallocated corporate operating expenses for the third quarter of 2014 were $3.5 million, compared to $4.0 million for the third quarter of 2013.
Fourth Quarter Outlook
For the fourth quarter of 2014, the Company expects revenues to be between $97.5 million and $108.5 million, Adjusted EBITDA to be between $2.4 million and $6.4 million, Non-GAAP Net Income (Loss) to be between ($1.5) million and $2.5 million, or ($0.04) to $0.06 per diluted share, and GAAP Net Loss to be between $9.1 million and $6.4 million, or ($0.22) to ($0.16)�per share.
Conference Call and Webcast
A conference call and live webcast will be held today at 2�p.m. Pacific Time / 5�p.m. Eastern Time during which the Company will further discuss third quarter results, and its outlook for the fourth quarter of 2014. The live webcast and supplemental materials are included in a current report on form 8-K filed today and can be accessed in the Investor Relations section of the Blucora corporate website at http://www.blucora.com. A replay of the call will also be available on our website.
About Blucora�
Blucora, Inc. (NASDAQ: BCOR) operates a diverse group of Internet businesses.�Its mission is to deliver long-term value to its customers, partners and shareholders through financial discipline, operational expertise, and technology innovation. Named one of Fortune� Magazines 100 Fastest-Growing Companies for the past two years, Blucoras online businesses reach millions of users worldwide every day. Blucora is headquartered in Bellevue, Washington. For more information, please visit www.Blucora.com. Follow and subscribe to Blucora on Twitter, LinkedIn, and YouTube.
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 managements expectations due to various risks and uncertainties including, but not limited to: general economic, industry, and market sector conditions; 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 ability to successfully integrate acquired businesses; future acquisitions; the successful execution of the Companys strategic initiatives, technology enhancements, operating plans, and marketing strategies; and the condition of our cash investments. 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 September 30, | Nine months ended September 30, | |||||||||||||
� | 2014 | 2013 | 2014 | 2013 | |||||||||||
Revenues: | |||||||||||||||
Services revenue | $ | 76,885 | $ | 109,491 | $ | 362,199 | $ | 392,010 | |||||||
Product revenue, net | 37,970 | 14,630 | 110,408 | 14,630 | |||||||||||
Total revenues | 114,855 | 124,121 | 472,607 | 406,640 | |||||||||||
Operating expenses: | |||||||||||||||
Cost of revenues: | |||||||||||||||
Services cost of revenue (1) | 49,754 | 72,935 | 177,280 | 219,274 | |||||||||||
Product cost of revenue | 25,605 | 10,622 | 73,771 | 10,622 | |||||||||||
Total cost of revenues (2) | 75,359 | 83,557 | 251,051 | 229,896 | |||||||||||
Engineering and technology (2) | 5,970 | 2,905 | 14,922 | 7,951 | |||||||||||
Sales and marketing�(2) | 18,152 | 18,230 | 96,275 | 71,409 | |||||||||||
General and administrative (2) | 9,495 | 8,421 | 28,552 | 21,362 | |||||||||||
Depreciation | 1,085 | 697 | 3,278 | 1,738 | |||||||||||
Amortization of intangible assets | 6,118 | 4,184 | 17,463 | 10,521 | |||||||||||
Total operating expenses | 116,179 | 117,994 | 411,541 | 342,877 | |||||||||||
Operating income (loss) | (1,324 | ) | 6,127 | 61,066 | 63,763 | ||||||||||
Other loss, net (3) | (3,208 | ) | (13,118 | ) | (11,001 | ) | (20,427 | ) | |||||||
Income (loss) before income taxes | (4,532 | ) | (6,991 | ) | 50,065 | 43,336 | |||||||||
Income tax benefit (expense) | 2,294 | 510 | (17,579 | ) | (17,803 | ) | |||||||||
Net income (loss) | $ | (2,238 | ) | $ | (6,481 | ) | $ | 32,486 | $ | 25,533 | |||||
Net income (loss) per share: | |||||||||||||||
Basic | $ | (0.05 | ) | $ | (0.16 | ) | $ | 0.78 | $ | 0.62 | |||||
Diluted | $ | (0.05 | ) | $ | (0.16 | ) | $ | 0.75 | $ | 0.60 | |||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 41,034 | 41,088 | 41,589 | 41,048 | |||||||||||
Diluted | 41,034 | 41,088 | 43,303 | 42,878 |
(1) Includes amortization of acquired intangible assets of $1.9 million and $1.9 million for the three months ended September�30, 2014 and 2013, respectively, and $5.6 million and $5.8 million for the nine months ended September 30, 2014 and 2013, respectively.
(2) Stock-based compensation expense was allocated among the following captions (in thousands):
� | Three months ended September 30, | Nine months ended September 30, | |||||||||||||
� | 2014 | 2013 | 2014 | 2013 | |||||||||||
Cost of revenues | $ | 101 | $ | 94 | $ | 373 | $ | 541 | |||||||
Engineering and technology | 568 | 370 | 1,312 | 942 | |||||||||||
Sales and marketing | 74 | 649 | 1,715 | 1,652 | |||||||||||
General and administrative | 1,865 | 2,139 | 5,574 | 5,355 | |||||||||||
Total stock-based compensation expense | $ | 2,608 | $ | 3,252 | $ | 8,974 | $ | 8,490 |
(3) Other loss, net was allocated among the following captions (in thousands):
� | Three months ended September 30, | Nine months ended September 30, | |||||||||||||
� | 2014 | 2013 | 2014 | 2013 | |||||||||||
Interest income | $ | (71 | ) | $ | (42 | ) | $ | (267 | ) | $ | (206 | ) | |||
Interest expense | 2,706 | 2,669 | 8,485 | 6,707 | |||||||||||
Amortization of debt issuance costs | 288 | 258 | 853 | 841 | |||||||||||
Accretion of debt discounts | 931 | 862 | 2,753 | 1,972 | |||||||||||
Loss on debt extinguishment and modification expense | 1,593 | 1,593 | |||||||||||||
Loss on derivative instrument | 3,956 | 5,931 | |||||||||||||
Impairment of equity investment in privately-held company | 3,711 | 3,711 | |||||||||||||
Decrease in pre-acquisition liability | (665 | ) | (665 | ) | |||||||||||
Other | 19 | 111 | (158 | ) | (122 | ) | |||||||||
Other loss, net | $ | 3,208 | $ | 13,118 | $ | 11,001 | $ | 20,427 |
Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
September�30, 2014 | December�31, 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 60,194 | $ | 130,225 | |||
Available-for-sale investments | 220,200 | 203,480 | |||||
Accounts receivable, net | 31,806 | 48,081 | |||||
Other receivables | 4,143 | 8,292 | |||||
Inventories | 27,759 | 28,826 | |||||
Prepaid expenses and other current assets, net | 8,967 | 9,774 | |||||
Total current assets | 353,069 | 428,678 | |||||
Property and equipment, net | 16,347 | 16,108 | |||||
Goodwill | 364,054 | 348,957 | |||||
Other intangible assets, net | 180,330 | 178,064 | |||||
Other long-term assets | 5,274 | 6,223 | |||||
Total assets | $ | 919,074 | $ | 978,030 | |||
LIABILITIES AND STOCKHOLDERS EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 42,886 | $ | 61,268 | |||
Accrued expenses and other current liabilities | 18,699 | 31,109 | |||||
Deferred revenue | 6,945 | 7,510 | |||||
Short-term portion of long-term debt, net | 7,917 | 7,903 | |||||
Convertible senior notes, net (1) | 181,583 | ||||||
Total current liabilities | 76,447 | 289,373 | |||||
Long-term liabilities: | |||||||
Long-term debt, net | 55,261 | 113,193 | |||||
Convertible senior notes, net (1) | 184,254 | ||||||
Deferred tax liability, net | 41,341 | 56,861 | |||||
Deferred revenue | 2,331 | 1,814 | |||||
Other long-term liabilities | 2,610 | 2,719 | |||||
Total long-term liabilities | 285,797 | 174,587 | |||||
Total liabilities | 362,244 | 463,960 | |||||
Stockholders equity: | |||||||
Common stock | 4 | 4 | |||||
Additional paid-in capital | 1,476,148 | 1,466,043 | |||||
Accumulated deficit | (919,491 | ) | (951,977 | ) | |||
Accumulated other comprehensive income | 169 | ||||||
Total stockholders equity | 556,830 | 514,070 | |||||
Total liabilities and stockholders equity | $ | 919,074 | $ | 978,030 |
(1) The convertibility of the Notes is determined at the end of each reporting period. If the Notes are determined to be convertible, they remain convertible until the end of the subsequent quarter and are classified in Current liabilities; otherwise, they are classified in Long-term liabilities. Depending upon the price of our common stock or the trading price of the Notes within the reporting period, the Notes could be convertible during one reporting period but not convertible during a comparable reporting period.
Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
� | Nine months ended September 30, | ||||||
� | 2014 | 2013 | |||||
Operating Activities: | |||||||
Net income | $ | 32,486 | $ | 25,533 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Stock-based compensation | 8,974 | 8,490 | |||||
Depreciation and amortization of intangible assets | 27,298 | 19,413 | |||||
Excess tax benefits from stock-based award activity | (29,801 | ) | (24,596 | ) | |||
Deferred income taxes | (15,621 | ) | (8,209 | ) | |||
Amortization of premium on investments, net | 3,095 | 2,154 | |||||
Amortization of debt issuance costs | 853 | 841 | |||||
Accretion of debt discounts | 2,753 | 1,972 | |||||
Loss on debt extinguishment and modification expense | 1,593 | ||||||
Loss on derivative instrument | 5,931 | ||||||
Impairment loss on equity investment in privately-held company | 3,711 | ||||||
Other | 72 | 608 | |||||
Cash provided (used) by changes in operating assets and liabilities: | |||||||
Accounts receivable | 16,212 | (8,756 | ) | ||||
Other receivables | 4,134 | 1,090 | |||||
Inventories | 1,067 | 900 | |||||
Prepaid expenses and other current assets | 849 | 6,694 | |||||
Other long-term assets | 43 | (2,296 | ) | ||||
Accounts payable | (18,382 | ) | 1,873 | ||||
Deferred revenue | (48 | ) | 2,563 | ||||
Accrued expenses and other current and long-term liabilities | 17,174 | 27,176 | |||||
Net cash provided by operating activities | 51,158 | 66,685 | |||||
Investing Activities: | |||||||
Business acquisitions, net of cash acquired | (44,927 | ) | (180,500 | ) | |||
Purchases of property and equipment | (4,247 | ) | (3,066 | ) | |||
Change in restricted cash | 2,491 | ||||||
Equity investment in privately-held company | (4,000 | ) | |||||
Proceeds from sales of investments | 26,620 | 25,812 | |||||
Proceeds from maturities of investments | 195,296 | 150,277 | |||||
Purchases of investments | (237,063 | ) | (234,771 | ) | |||
Net cash used by investing activities | (64,321 | ) | (243,757 | ) | |||
Financing Activities: | |||||||
Proceeds from issuance of convertible notes, net of debt issuance costs of $6,432 | 194,818 | ||||||
Proceeds from credit facilities | 4,000 | ||||||
Repayment of credit facilities | (62,000 | ) | (10,000 | ) | |||
Debt issuance costs on credit facility | (28 | ) | |||||
Stock repurchases | (29,923 | ) | (3,525 | ) | |||
Excess tax benefits from stock-based award activity | 29,801 | 24,596 | |||||
Proceeds from stock option exercises | 2,447 | 1,700 | |||||
Proceeds from issuance of stock through employee stock purchase plan | 1,376 | 1,065 | |||||
Tax payments from shares withheld upon vesting of restricted stock units | (2,569 | ) | (2,011 | ) | |||
Net cash provided (used) by financing activities | (56,868 | ) | 206,615 | ||||
Net increase (decrease) in cash and cash equivalents | (70,031 | ) | 29,543 | ||||
Cash and cash equivalents, beginning of period | 130,225 | 68,278 | |||||
Cash and cash equivalents, end of period | $ | 60,194 | $ | 97,821 |
Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
� | Three months ended September 30, | Nine months ended September 30, | |||||||||||||
� | 2014 | 2013 | 2014 | 2013 | |||||||||||
Revenues: | |||||||||||||||
Search and Content | $ | 74,416 | $ | 107,742 | $ | 260,999 | $ | 302,840 | |||||||
Tax Preparation | 2,469 | 1,749 | 101,200 | 89,170 | |||||||||||
E-Commerce | 37,970 | 14,630 | 110,408 | 14,630 | |||||||||||
Total revenues | 114,855 | 124,121 | 472,607 | 406,640 | |||||||||||
Operating income (loss): | |||||||||||||||
Search and Content | 12,709 | 21,319 | 45,971 | 57,501 | |||||||||||
Tax Preparation | (1,859 | ) | (1,605 | ) | 52,754 | 43,617 | |||||||||
E-Commerce | 3,336 | 906 | 9,192 | 906 | |||||||||||
Corporate-level activity (1) | (15,510 | ) | (14,493 | ) | (46,851 | ) | (38,261 | ) | |||||||
Total operating income (loss) | (1,324 | ) | 6,127 | 61,066 | 63,763 | ||||||||||
Other loss, net | (3,208 | ) | (13,118 | ) | (11,001 | ) | (20,427 | ) | |||||||
Income tax benefit (expense) | 2,294 | 510 | (17,579 | ) | (17,803 | ) | |||||||||
Net income (loss) | $ | (2,238 | ) | $ | (6,481 | ) | $ | 32,486 | $ | 25,533 |
(1) Corporate-level activity included the following (in thousands):
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
� | 2014 | 2013 | 2014 | 2013 | |||||||||||
Operating expenses | $ | 3,524 | $ | 4,025 | $ | 10,579 | $ | 10,358 | |||||||
Stock-based compensation | 2,608 | 3,252 | 8,974 | 8,490 | |||||||||||
Depreciation | 1,385 | 1,126 | 4,194 | 3,119 | |||||||||||
Amortization of intangible assets | 7,993 | 6,090 | 23,104 | 16,294 | |||||||||||
Total corporate-level activity | $ | 15,510 | $ | 14,493 | $ | 46,851 | $ | 38,261 |
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 September 30, | Nine months ended September 30, | ||||||||||||||
� | 2014 | 2013 | 2014 | 2013 | |||||||||||
Net income (loss) (2) | $ | (2,238 | ) | $ | (6,481 | ) | $ | 32,486 | $ | 25,533 | |||||
Stock-based compensation | 2,608 | 3,252 | 8,974 | 8,490 | |||||||||||
Depreciation and amortization of intangible assets | 9,378 | 7,216 | 27,298 | 19,413 | |||||||||||
Other loss, net (3) | 3,208 | 13,118 | 11,001 | 20,427 | |||||||||||
Income tax (benefit) expense | (2,294 | ) | (510 | ) | 17,579 | 17,803 | |||||||||
Adjusted EBITDA | $ | 10,662 | $ | 16,595 | $ | 97,338 | $ | 91,666 |
Preliminary Non-GAAP Net Income Reconciliation (1)�
(Unaudited)
(Amounts in thousands, except per share amounts)
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
� | 2014 | 2013 | 2014 | 2013 | |||||||||||
Net income (loss) (2) | $ | (2,238 | ) | $ | (6,481 | ) | $ | 32,486 | $ | 25,533 | |||||
Stock-based compensation | 2,608 | 3,252 | 8,974 | 8,490 | |||||||||||
Amortization of acquired intangible assets | 7,993 | 6,090 | 23,104 | 16,294 | |||||||||||
Accretion of debt discount on Convertible Senior Notes | 907 | 843 | 2,671 | 1,816 | |||||||||||
Loss on debt extinguishment and modification expense | 1,593 | 1,593 | |||||||||||||
Loss on derivative instrument | 3,956 | 5,931 | |||||||||||||
Impairment of equity investment in privately-held company | 3,711 | 3,711 | |||||||||||||
Decrease in non-cash pre-acquisition liability | (665 | ) | (665 | ) | |||||||||||
Cash tax impact of adjustments to GAAP net income | (44 | ) | (1 | ) | (295 | ) | (181 | ) | |||||||
Non-cash income tax (benefit) expense (1) | (2,017 | ) | 7 | 14,180 | 16,412 | ||||||||||
Non-GAAP net income | $ | 6,544 | $ | 12,970 | $ | 80,455 | $ | 79,599 | |||||||
Per diluted share: | |||||||||||||||
Net income (loss) | $ | (0.05 | ) | $ | (0.16 | ) | $ | 0.75 | $ | 0.60 | |||||
Stock-based compensation | 0.06 | 0.08 | 0.21 | 0.20 | |||||||||||
Amortization of acquired intangible assets | 0.19 | 0.14 | 0.53 | 0.38 | |||||||||||
Accretion of debt discount on Convertible Senior Notes | 0.02 | 0.02 | 0.06 | 0.04 | |||||||||||
Loss on debt extinguishment and modification expense | 0.04 | 0.04 | |||||||||||||
Loss on derivative instrument | 0.09 | 0.13 | |||||||||||||
Decrease in non-cash pre-acquisition liability | (0.02 | ) | (0.01 | ) | |||||||||||
Impairment of equity investment in privately-held company | 0.09 | 0.09 | |||||||||||||
Cash tax impact of adjustments to GAAP net income | (0.00 | ) | (0.00 | ) | (0.01 | ) | (0.00 | ) | |||||||
Non-cash income tax (benefit) expense | (0.05 | ) | 0.00 | 0.33 | 0.38 | ||||||||||
Non-GAAP net income per share | $ | 0.15 | $ | 0.30 | $ | 1.86 | $ | 1.86 | |||||||
Weighted average shares outstanding used in computing diluted non-GAAP net income per share and its components | 42,305 | 43,142 | 43,303 | 42,878 |
Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
� | Ranges�for�the�three�months�ending | ||||||
December�31, 2014 | |||||||
Net loss | $ | (9,100 | ) | $ | (6,400 | ) | |
Stock-based compensation | 3,200 | 3,000 | |||||
Depreciation and amortization of intangible assets | 9,500 | 9,400 | |||||
Other loss, net (3) | 3,900 | 3,900 | |||||
Income tax benefit | (5,100 | ) | (3,500 | ) | |||
Adjusted EBITDA | $ | 2,400 | $ | 6,400 |
Preliminary Non-GAAP Net Income Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
� | Ranges�for�the�three�months�ending | ||||||
December�31, 2014 | |||||||
Net loss | $ | (9,100 | ) | $ | (6,400 | ) | |
Stock-based compensation | 3,200 | 3,000 | |||||
Amortization of acquired intangible assets | 8,000 | 8,000 | |||||
Accretion of debt discount on Convertible Senior Notes | 900 | 900 | |||||
Non-cash income tax benefit | (4,500 | ) | (3,000 | ) | |||
Non-GAAP net income (loss) | $ | (1,500 | ) | $ | 2,500 |
Notes to Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures:
(1) We define Adjusted EBITDA as net income, determined in accordance with the accounting principles generally accepted in the United States of America (GAAP), excluding the effects of income taxes, depreciation, amortization of intangible assets, stock-based compensation, and other loss, net (as described in note (3)�below).
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. 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 adjustments recorded in other loss, net that resulted from finalizing Monoprice's 2013 federal and state tax returns in the third quarter of 2014. For this report, we define non-GAAP net income as net income, determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, accretion of debt discount on the Convertible Senior Notes, loss on debt extinguishment and modification expense, loss on derivative instrument, other-than-temporary impairment loss on equity investments, changes in non-cash pre-acquisition liabilities, 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 consist primarily of U.S. federal net operating losses. The majority of these deferred tax assets 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. 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, loss on debt extinguishment and modification expense, loss on derivative instrument, other-than-temporary impairment loss on equity investments, and adjustments to contingent liabilities related to business combinations.
Exhibit 99.2
Blucora, Inc.
Supplemental Information
September�30, 2014
Table of Contents
�
1
Blucora Consolidated Financial Results
(in thousands except %s and net income per share, rounding differences may exist)
� | 2012 | 2013 | 2014 | |||||||||||||||||||||||||||||||||
� | FY�12/31 | 1Q | 2Q | 3Q | 4Q | FY�12/31 | 1Q | 2Q | 3Q | |||||||||||||||||||||||||||
Segment Revenue | ||||||||||||||||||||||||||||||||||||
Search and Content (1) | $ | 344,814 | $ | 100,601 | $ | 94,497 | $ | 107,742 | $ | 125,624 | $ | 428,464 | $ | 106,765 | $ | 79,818 | $ | 74,416 | ||||||||||||||||||
Tax Preparation (2) | 62,105 | 64,737 | 22,684 | 1,749 | 2,043 | 91,213 | 72,279 | 26,452 | 2,469 | |||||||||||||||||||||||||||
E-Commerce�(3) | 14,630 | 39,673 | 54,303 | 37,139 | 35,299 | 37,970 | ||||||||||||||||||||||||||||||
Total | $ | 406,919 | $ | 165,338 | $ | 117,181 | $ | 124,121 | $ | 167,340 | $ | 573,980 | $ | 216,183 | $ | 141,569 | $ | 114,855 | ||||||||||||||||||
Segment Income (Loss) (4) | ||||||||||||||||||||||||||||||||||||
Search and Content (1) | $ | 62,185 | $ | 18,270 | $ | 17,912 | $ | 21,319 | $ | 25,003 | $ | 82,504 | $ | 19,230 | $ | 14,032 | $ | 12,709 | ||||||||||||||||||
Tax Preparation (2) | 30,052 | 30,784 | 14,438 | (1,605 | ) | (3,018 | ) | 40,599 | 37,402 | 17,211 | (1,859 | ) | ||||||||||||||||||||||||
E-Commerce (3) | 906 | 4,061 | 4,967 | 3,478 | 2,378 | 3,336 | ||||||||||||||||||||||||||||||
Total | $ | 92,237 | $ | 49,054 | $ | 32,350 | $ | 20,620 | $ | 26,046 | $ | 128,070 | $ | 60,110 | $ | 33,621 | $ | 14,186 | ||||||||||||||||||
Segment Income (Loss) % of Revenue | ||||||||||||||||||||||||||||||||||||
Search and Content | 18 | % | 18 | % | 19 | % | 20 | �% | 20 | �% | 19 | % | 18 | % | 18 | % | 17 | �% | ||||||||||||||||||
Tax Preparation | 48 | % | 48 | % | 64 | % | (92 | )% | (148 | )% | 45 | % | 52 | % | 65 | % | (75 | )% | ||||||||||||||||||
E-Commerce | na | na | na | na | 10 | �% | 9 | % | 9 | % | 7 | % | 9 | �% | ||||||||||||||||||||||
Total | 23 | % | 30 | % | 28 | % | 17 | �% | 16 | �% | 22 | % | 28 | % | 24 | % | 12 | �% | ||||||||||||||||||
Unallocated Corporate Operating Expense (4) | $ | 11,798 | (5) | $ | 3,198 | $ | 3,135 | $ | 4,025 | (6) | $ | 3,471 | $ | 13,829 | $ | 3,222 | $ | 3,833 | $ | 3,524 | ||||||||||||||||
Adjusted EBITDA | $ | 80,439 | $ | 45,856 | $ | 29,215 | $ | 16,595 | $ | 22,575 | $ | 114,241 | $ | 56,888 | $ | 29,788 | $ | 10,662 | ||||||||||||||||||
Other Unallocated (4) | ||||||||||||||||||||||||||||||||||||
Stock-based compensation | $ | 13,223 | (7) | $ | 2,485 | $ | 2,753 | $ | 3,252 | (8) | $ | 3,037 | $ | 11,527 | $ | 3,408 | $ | 2,958 | (9) | $ | 2,608 | |||||||||||||||
Depreciation | 3,812 | 1,003 | 990 | 1,126 | 1,357 | 4,476 | 1,395 | 1,414 | 1,385 | |||||||||||||||||||||||||||
Amortization of intangible assets | 19,199 | 5,109 | 5,095 | 6,090 | (10) | 7,495 | 23,789 | 7,469 | 7,642 | (11) | 7,993 | |||||||||||||||||||||||||
Interest income | (131 | ) | (55 | ) | (109 | ) | (42 | ) | (94 | ) | (300 | ) | (108 | ) | (88 | ) | (71 | ) | ||||||||||||||||||
Interest expense | 3,522 | 1,148 | 2,890 | (12) | 2,669 | 2,756 | 9,463 | 3,015 | 2,764 | 2,706 | ||||||||||||||||||||||||||
Amortization of debt issuance costs | 820 | 107 | 476 | (12) | 258 | 267 | 1,108 | 281 | 284 | 288 | ||||||||||||||||||||||||||
Accretion of debt discounts | 325 | 161 | 949 | (12) | 862 | 866 | 2,838 | 906 | 916 | 931 | ||||||||||||||||||||||||||
Loss on debt extinguishment and modification expense | 1,593 | 1,593 | ||||||||||||||||||||||||||||||||||
(Gain) loss on derivative instrument | 2,346 | (348 | ) | 2,323 | 3,956 | 5,721 | (13) | 11,652 | ||||||||||||||||||||||||||||
Impairment of equity investment in privately-held company | 3,711 | 3,711 | ||||||||||||||||||||||||||||||||||
Other (income) loss, net | (205 | ) | (8 | ) | (225 | ) | 111 | (320 | ) | (442 | ) | (25 | ) | (152 | ) | (646 | ) | |||||||||||||||||||
Total | $ | 42,911 | $ | 9,602 | $ | 15,142 | $ | 23,586 | $ | 21,085 | $ | 69,415 | $ | 16,341 | $ | 15,738 | $ | 15,194 | ||||||||||||||||||
Income (Loss) Before Taxes | $ | 37,528 | $ | 36,254 | $ | 14,073 | $ | (6,991 | ) | $ | 1,490 | $ | 44,826 | $ | 40,547 | $ | 14,050 | $ | (4,532 | ) | ||||||||||||||||
Income Tax (Benefit) Expense | ||||||||||||||||||||||||||||||||||||
Cash | $ | 1,443 | $ | 1,472 | $ | 435 | $ | (517 | ) | $ | 498 | $ | 1,888 | $ | 2,241 | $ | 1,435 | $ | (277 | ) | ||||||||||||||||
Non-cash (14) | 13,559 | 11,174 | 5,232 | 7 | 2,126 | 18,539 | 12,319 | 3,878 | (2,017 | ) | ||||||||||||||||||||||||||
Total | $ | 15,002 | $ | 12,646 | $ | 5,667 | $ | (510 | ) | $ | 2,624 | $ | 20,427 | $ | 14,560 | $ | 5,313 | $ | (2,294 | ) | ||||||||||||||||
GAAP Net Income (Loss) | $ | 22,526 | $ | 23,608 | $ | 8,406 | $ | (6,481 | ) | $ | (1,134 | ) | $ | 24,399 | $ | 25,987 | $ | 8,737 | $ | (2,238 | ) | |||||||||||||||
GAAP Net Income (Loss) Per Share - diluted | $ | 0.54 | $ | 0.53 | (15) | $ | 0.20 | $ | (0.16 | ) | $ | (0.03 | ) | $ | 0.56 | $ | 0.58 | $ | 0.20 | $ | (0.05 | ) | ||||||||||||||
Non-GAAP Net Income | $ | 70,760 | $ | 41,997 | $ | 24,632 | $ | 12,970 | $ | 18,095 | $ | 97,694 | $ | 50,003 | $ | 23,908 | $ | 6,544 | ||||||||||||||||||
Non-GAAP Net Income Per Share - diluted | $ | 1.70 | $ | 0.95 | $ | 0.58 | $ | 0.30 | (16) | $ | 0.40 | (17) | $ | 2.25 | $ | 1.12 | $ | 0.55 | $ | 0.15 | (18) | |||||||||||||||
Outstanding Shares | 40,832 | 40,933 | 41,143 | 41,176 | 42,083 | 42,083 | 42,203 | 41,039 | 40,977 | |||||||||||||||||||||||||||
Basic Shares - GAAP | 40,279 | 40,911 | 41,050 | 41,088 | 41,566 | 41,201 | 42,162 | 41,570 | 41,034 | |||||||||||||||||||||||||||
Diluted Shares - GAAP | 41,672 | 44,294 | 42,724 | 41,088 | 41,566 | 43,480 | 44,521 | 43,084 | 41,034 | |||||||||||||||||||||||||||
Cash�& Short-term Investments | $ | 162,288 | $ | 401,677 | $ | 415,493 | $ | 248,382 | $ | 333,705 | $ | 333,705 | $ | 336,390 | $ | 278,620 | $ | 280,394 | ||||||||||||||||||
Outstanding Debt - Principal Amount�(19) | 74,496 | 275,746 | 265,746 | 266,634 | 322,634 | 322,634 | 278,634 | 266,634 | 264,634 | |||||||||||||||||||||||||||
Net Cash | $ | 87,792 | $ | 125,931 | $ | 149,747 | $ | (18,252 | ) | $ | 11,071 | $ | 11,071 | $ | 57,756 | $ | 11,986 | $ | 15,760 |
Notes to Consolidated Financial Results on next page
2
Notes to Consolidated Financial Results
�
(1)� | On May 30, 2014, we acquired HowStuffWorks ("HSW"). The Search and Content segment, formerly known as the Search segment, includes the financial results of HSW beginning on May 30, 2014. |
(2)� | On January�31, 2012, we acquired TaxACT, Inc. As a highly seasonal business, almost all of the TaxACT revenue is generated in the first four months of the calendar year. Amounts for 2012 represented the results of operations for the TaxACT business from January�31, 2012 to December�31, 2012. |
(3)� | On August�22, 2013, we acquired Monoprice, Inc. Amounts for 2013 represented the results of operations for the Monoprice business from August�22, 2013 to December�31, 2013. |
(4)� | We do not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, depreciation, amortization of intangible assets, other income/loss, net, or income taxes to the reportable segments.�The general and administrative costs are included in Unallocated Corporate Operating Expense. |
(5)� | Amount in 2012 included $1.1 million in transaction costs related to the TaxACT acquisition. |
(6)� | Amount for 3Q13 included $0.6 million in transaction costs related to the Monoprice acquisition. |
(7)� | Amount in 2012 included $5.2 million in stock-based compensation in association with the modification of the terms of a warrant and the vesting of non-employee performance-based stock options upon completion of the TaxACT acquisition. |
(8)� | In 3Q13, $0.5 million in stock-based compensation was recorded in association with the vesting of performance-based stock options upon completion of the Monoprice acquisition. |
(9)� | In 2Q14, $0.3 million in stock-based compensation was recorded in association with the vesting of performance-based stock options upon completion of the HSW acquisition. |
(10)� | Amount for 3Q13 included $1.0 million related to amortization of acquired intangible assets related to the Monoprice acquisition. |
(11)� | Amount for 2Q14 included $0.2 million related to amortization of acquired intangible assets related to the HSW acquisition. |
(12)� | Interest expense, amortization of debt issuance costs, and accretion of debt discounts included amounts associated with the Convertible Senior Notes issued on March�15, 2013. |
(13)� | Warrant was exercised during 4Q13. |
(14)� | 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 consist primarily of US federal net operating losses. The majority of these deferred tax assets will expire, if unutilized, between 2020 and 2024. |
(15)� | Calculation excluded the income effect of a dilutive derivative instrument and the Convertible Senior Notes in 1Q13. Related to the Notes, we received shareholder approval for flexible settlement in May 2013. |
(16)� | Calculation in 3Q13 used 43,142,000 diluted shares due to non-GAAP net income. |
(17)� | Calculation in 4Q13 used 45,716,000 diluted shares due to non-GAAP net income. |
(18)� | Calculation in 3Q14 used 42,305,000 diluted shares due to non-GAAP net income. |
(19)� | 2012 included the TaxACT 2012 credit facility, issued in January 2012 in connection with the TaxACT acquisition and refinanced during 3Q13 on more favorable terms (the TaxACT 2013 credit facility), 1Q13 included the Convertible Senior Notes issued in March 2013, and 4Q13 included the Monoprice 2013 credit facility issued in November 2013. |
3
Blucora Reconciliation of Non-GAAP Financial Measures (1)�
(in thousands except net income per share, rounding differences may exist)
� | 2012 | 2013 | 2014 | ||||||||||||||||||||||||||||||||
� | FY�12/31 | 1Q | 2Q | 3Q | 4Q | FY�12/31 | 1Q | 2Q | 3Q | ||||||||||||||||||||||||||
Adjusted EBITDA | |||||||||||||||||||||||||||||||||||
Net income (loss)�(2) | $ | 22,526 | $ | 23,608 | $ | 8,406 | $ | (6,481 | ) | $ | (1,134 | ) | $ | 24,399 | $ | 25,987 | $ | 8,737 | $ | (2,238 | ) | ||||||||||||||
Stock-based compensation | 13,223 | 2,485 | 2,753 | 3,252 | 3,037 | 11,527 | 3,408 | 2,958 | 2,608 | ||||||||||||||||||||||||||
Depreciation and amortization of intangible assets | 23,011 | 6,112 | 6,085 | 7,216 | 8,852 | 28,265 | 8,864 | 9,056 | 9,378 | ||||||||||||||||||||||||||
Other loss, net (3) | 6,677 | 1,005 | 6,304 | 13,118 | 9,196 | 29,623 | 4,069 | 3,724 | 3,208 | ||||||||||||||||||||||||||
Income tax (benefit) expense | 15,002 | 12,646 | 5,667 | (510 | ) | 2,624 | 20,427 | 14,560 | 5,313 | (2,294 | ) | ||||||||||||||||||||||||
Adjusted EBITDA | $ | 80,439 | $ | 45,856 | $ | 29,215 | $ | 16,595 | $ | 22,575 | $ | 114,241 | $ | 56,888 | $ | 29,788 | $ | 10,662 | |||||||||||||||||
Non-GAAP Net Income | |||||||||||||||||||||||||||||||||||
Net income (loss) (2) | $ | 22,526 | $ | 23,608 | $ | 8,406 | $ | (6,481 | ) | $ | (1,134 | ) | $ | 24,399 | $ | 25,987 | $ | 8,737 | $ | (2,238 | ) | ||||||||||||||
Stock-based compensation | 13,223 | 2,485 | 2,753 | 3,252 | 3,037 | 11,527 | 3,408 | 2,958 | 2,608 | ||||||||||||||||||||||||||
Amortization of acquired intangible assets | 19,199 | 5,109 | 5,095 | 6,090 | 7,495 | 23,789 | 7,469 | 7,642 | 7,993 | ||||||||||||||||||||||||||
Accretion of debt discount on Convertible Senior Notes | 132 | 841 | 843 | 858 | 2,674 | 874 | 890 | 907 | |||||||||||||||||||||||||||
Loss on debt extinguishment and modification expense | 1,593 | 1,593 | |||||||||||||||||||||||||||||||||
(Gain) loss on derivative instrument | 2,346 | (348 | ) | 2,323 | 3,956 | 5,721 | 11,652 | ||||||||||||||||||||||||||||
Impairment of equity investment in privately-held company | 3,711 | 3,711 | |||||||||||||||||||||||||||||||||
Decrease in non-cash pre-acquisition liability | (665 | ) | |||||||||||||||||||||||||||||||||
Cash tax impact of adjustments to GAAP net income | (93 | ) | (163 | ) | (17 | ) | (1 | ) | (8 | ) | (189 | ) | (54 | ) | (197 | ) | (44 | ) | |||||||||||||||||
Non-cash income tax (benefit) expense (1) | 13,559 | 11,174 | 5,231 | 7 | 2,126 | 18,538 | 12,319 | 3,878 | (2,017 | ) | |||||||||||||||||||||||||
Non-GAAP net income (4) | $ | 70,760 | $ | 41,997 | $ | 24,632 | $ | 12,970 | $ | 18,095 | $ | 97,694 | $ | 50,003 | $ | 23,908 | $ | 6,544 | |||||||||||||||||
Non-GAAP Net Income Per Share | |||||||||||||||||||||||||||||||||||
Non-GAAP net income | $ | 70,760 | $ | 41,997 | $ | 24,632 | $ | 12,970 | $ | 18,095 | $ | 97,694 | $ | 50,003 | $ | 23,908 | $ | 6,544 | |||||||||||||||||
Non-GAAP net income per share | $ | 1.70 | $ | 0.95 | $ | 0.58 | $ | 0.30 | $ | 0.40 | $ | 2.25 | $ | 1.12 | $ | 0.55 | $ | 0.15 | |||||||||||||||||
Diluted shares | 41,672 | 44,294 | 42,724 | 43,142 | 45,716 | 43,480 | 44,521 | 43,084 | 42,305 |
(1)� | 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 November�5, 2014 Current Report on Form�8-K. |
(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, loss on debt extinguishment and modification expense, gain or loss on derivative instrument, other-than-temporary impairment loss on equity investments, and adjustments to contingent liabilities related to business combinations. |
(4)� | We define Non-GAAP net income differently effective with 1Q13 to include accretion of debt discount on Convertible Senior notes, 3Q13 to include other-than-temporary impairment losses on equity investments and loss on debt extinguishment and modification expense, and 3Q14 to include decrease in non-cash pre-acquisition liability. Our new definition of non-GAAP net income did not impact presentation of this non-GAAP financial measure for prior periods. |
4
Blucora Stock Price Sensitivity Analysis for Diluted Shares
(in thousands except share prices)
The following table illustrates the potential impact of a change in average stock price on the number of shares included in diluted shares associated with the conversion premium on the convertible notes:
Stock�Price | Diluted Shares�(a) | � | ||||
$ | 16.53 | �(b)�� | ||||
$ | 21.66 | �(c)�� | ||||
$ | 22.00 | 144 | �� | |||
$ | 22.50 | 347 | �� | |||
$ | 23.00 | 541 | �� | |||
$ | 23.50 | 728 | �� | |||
$ | 24.00 | 906 | �� | |||
$ | 24.50 | 1,077 | �� | |||
$ | 25.00 | 1,241 | �� | |||
$ | 25.50 | 1,399 | �� | |||
$ | 26.00 | 1,551 | �� | |||
$ | 26.50 | 1,697 | �� | |||
$ | 27.00 | 1,838 | �� | |||
$ | 27.50 | 1,973 | �� | |||
$ | 28.00 | 2,104 | �� | |||
$ | 28.50 | 2,230 | �� | |||
$ | 29.00 | 2,352 | �� | |||
$ | 29.50 | 2,470 | �� | |||
$ | 30.00 | 2,583 | �� |
(a)� | Indicative shares associated with conversion premium on convertible notes |
(b)� | Average stock price for the current quarter did not exceed the conversion price of the convertible notes |
(c)� | Approximate conversion price |
5
Blucora Operating Metrics - Search and Content
� | 2012 | 2013 | 2014 | |||||||||||||||||||||||
Revenue by source | FY�12/31 | 1Q | 2Q | 3Q | 4Q | FY�12/31 | 1Q | 2Q | 3Q | |||||||||||||||||
Owned�& Operated (B2C) | 12 | % | 12 | % | 15 | % | 19 | % | 20 | % | 17 | % | 22 | % | 17 | % | 21 | % | ||||||||
Distribution (B2B) | 88 | % | 88 | % | 85 | % | 81 | % | 80 | % | 83 | % | 78 | % | 83 | % | 79 | % |
�
6
Blucora Operating Metrics - E-Commerce
2013 | 2014 | ||||||||||||||||||||||
1Q | 2Q | 3Q | 4Q | FY�12/31 | 1Q | 2Q | 3Q | ||||||||||||||||
Order numbers % change (1) | 16 | % | 22 | % | 15 | % | 10 | % | 15 | % | (2 | )% | (7 | )% | (5 | )% |
(1)� | Figures represent increase (decrease) in order numbers as compared to the comparable prior period. |
7
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