Blucora Announces Second Quarter 2017 Results

July 27, 2017
Continued Business Momentum with Double-Digit Revenue Growth and Strengthened Financial Position

IRVING, Texas, July 27, 2017 (GLOBE NEWSWIRE) -- 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, 2017.

Second Quarter Highlights and Recent Developments

  • Increased revenue and operating income by 16% and 34%, respectively, year-over-year
  • HD Vest achieved record levels in AUA of $41.4 billion and AUM of $11.6 billion
  • Grew TaxAct revenue and segment income by 16% for the six months ending June 30, 2017 vs. prior-year period
  • Achieved 2.7x net leverage ratio following successful refinancing and $35 million in net debt reduction
  • Executed agreement with new clearing partner at HD Vest

“Blucora continued its positive momentum in the second quarter, with strong double-digit growth in revenue and segment income across both businesses, and achieved its stated net leverage goal,” said John Clendening, Blucora’s President and Chief Executive Officer.  “HD Vest set new records in several categories, including total assets under administration (AUA), fee-based assets under management (AUM) and AUM as a percentage of AUA. TaxAct completed a strong tax season, as expected, and has turned its attention to enhancing its competitive positioning for next season.”

"In addition to our strong performance in the second quarter, I am pleased to announce today that HD Vest has selected Fidelity Clearing & Custody Solutions as its new clearing provider.  We believe this relationship, which is expected to go into effect in mid-2018, will provide new capabilities, enable a better advisor experience, and allow us to capture significant financial benefits over the long-term.”

Summary Financial Performance: Q2 2017
($ in millions except per share amounts)
 
  Q2   Q2    
  2017   2016   Change
Revenue $ 139.2     $ 120.1     16 %
Wealth Management $ 85.3     $ 76.1     12 %
Tax Preparation $ 53.9     $ 44.0     22 %
Segment Income $ 48.9     $ 39.7     23 %
Wealth Management $ 12.4     $ 9.9     25 %
Tax Preparation $ 36.5     $ 29.8     23 %
Unallocated Corporate Operating Expenses $ (6.5 )   $ (4.5 )   45 %
GAAP:          
Operating Income $ 30.0     $ 22.4     34 %
Net Income (Loss) Attributable to Blucora, Inc. $ 3.3     $ (14.4 )   123 %
Diluted Net Income (Loss) Per Share Attributable to Blucora, Inc. (EPS)  $ 0.07     $ (0.34 )   121 %
Non-GAAP:          
Adjusted EBITDA $ 42.5     $ 35.3     20 %
Net Income $ 32.9     $ 23.4     41 %
Diluted Net Income Per Share (EPS) $ 0.70     $ 0.55     27 %
See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.

Third Quarter and Full Year 2017 Outlook

For the third quarter of 2017, the Company expects revenues to be between $88.8 million and $91.3 million, GAAP net loss attributable to Blucora, Inc. to be between $18.7 million and $14.8 million, or $(0.42) to $(0.33) per diluted share, Adjusted EBITDA to be between $(2.9) million and $0.9 million, and Non-GAAP net loss to be between $10.9 million and $6.3 million, or $(0.24) to $(0.14) per diluted share.

For the full year 2017, the Company expects revenues to be between $500.0 million and $506.5 million, GAAP net income (loss) attributable to Blucora, Inc. to be between $(3.8) million and $4.6 million, or $(0.09) to $0.10 per diluted share, Adjusted EBITDA to be between $94.1 million and $102.3 million, and Non-GAAP net income to be between $58.7 million and $67.8 million, or $1.25 to $1.45 per diluted share.

The third quarter and fiscal 2017 outlook for GAAP net income or loss attributable to Blucora assumes an estimated tax rate of approximately 15%.  Our actual tax rate may differ significantly from this estimated tax rate due to our projected near break even pre-tax income, and the adoption of Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Accounting (“ASU 2016-09”).  In addition, our GAAP net income or loss attributable to Blucora outlook excludes any impact to tax expense for discrete items, which are affected by ASU 2016-09, and variable stock-based compensation related to grants to non-employee advisors, and including these items in our actual results when they occur may cause our actual results to differ significantly from the outlook provided.

Conference Call and Webcast

A conference call and live webcast will be held today at 8:30 a.m. Eastern Time during which the Company will further discuss second quarter results, its outlook for the third quarter and full year 2017 and other business matters.  We will also provide the prepared remarks for the conference call along with supplemental financial information to our results on the Investor Relations section of the Blucora corporate website at http://www.blucora.com prior to the call.  The supplemental financial information has also been filed with the SEC on Form 8-K.  A replay of the call 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, respectively, 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.

This release 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: risks associated with the Company’s strategic transformation and the successful execution of its strategic initiatives, operating plans and marketing strategies; general economic, political, industry, and market conditions; the Company’s ability to attract and retain productive advisors; the Company’s ability to successfully make technology enhancements and introduce new products and services; information technology and cybersecurity risks; the effect of current, pending and future legislation, regulation and regulatory actions, such as the new Department of Labor rule and any changes in tax laws; dependence on third parties to distribute products and services; litigation risks; the Company’s ability to hire, retain and motivate key employees; the Company’s ability to protect its intellectual property; and financing risks, including risks related to the Company’s existing debt obligations.  A more detailed description of these and certain other factors that could affect actual results is included in the Company’s filings with 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.  The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this release.

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,
  2017   2016   2017   2016
Revenue:              
Wealth management services revenue $ 85,296     $ 76,117     $ 167,963     $ 153,408  
Tax preparation services revenue 53,866     43,991     153,574     132,465  
Total revenue 139,162     120,108     321,537     285,873  
Operating expenses:              
Cost of revenue:              
Wealth management services cost of revenue 56,963     51,023     112,837     103,292  
Tax preparation services cost of revenue 2,411     2,023     6,229     5,230  
Amortization of acquired technology 47     49     95     716  
Total cost of revenue (1) 59,421     53,095     119,161     109,238  
Engineering and technology (1) 4,242     3,959     8,990     8,254  
Sales and marketing (1) 22,296     19,913     71,294     63,750  
General and administrative (1) 13,715     11,508     27,198     24,261  
Depreciation 873     963     1,813     1,938  
Amortization of other acquired intangible assets 8,289     8,316     16,577     16,632  
Restructuring (1) 331         2,620      
Total operating expenses 109,167     97,754     247,653     224,073  
Operating income 29,995     22,354     73,884     61,800  
Other loss, net (2) (24,200 )   (10,916 )   (33,908 )   (18,430 )
Income from continuing operations before income taxes 5,795     11,438     39,976     43,370  
Income tax expense (2,315 )   (5,793 )   (5,786 )   (17,436 )
Income from continuing operations 3,480     5,645     34,190     25,934  
Discontinued operations, net of income taxes     (19,975 )       (17,453 )
Net income (loss) 3,480     (14,330 )   34,190     8,481  
Net income attributable to noncontrolling interests (176 )   (115 )   (302 )   (259 )
Net income (loss) attributable to Blucora, Inc. $ 3,304     $ (14,445 )   $ 33,888     $ 8,222  
Net income (loss) per share attributable to Blucora, Inc. - basic:              
Continuing operations $ 0.08     $ 0.13     $ 0.79     $ 0.62  
Discontinued operations     (0.48 )       (0.42 )
Basic net income (loss) per share $ 0.08     $ (0.35 )   $ 0.79     $ 0.20  
Net income (loss) per share attributable to Blucora, Inc. - diluted:               
Continuing operations $ 0.07     $ 0.13     $ 0.73     $ 0.61  
Discontinued operations     (0.47 )       (0.41 )
Diluted net income (loss) per share $ 0.07     $ (0.34 )   $ 0.73     $ 0.20  
Weighted average shares outstanding:              
Basic 43,644     41,405     42,895     41,288  
Diluted 46,937     42,298     46,182     41,954  

(1) Stock-based compensation expense was allocated among the following captions (in thousands):

  Three months ended June 30,   Six months ended June 30,
  2017   2016   2017   2016
Cost of revenue $ 88     $ 23     $ 134     $ 65  
Engineering and technology 224     322     509     733  
Sales and marketing 581     426     1,272     1,027  
General and administrative 1,844     2,252     3,387     5,427  
Restructuring 538         981      
Total stock-based compensation expense  $ 3,275     $ 3,023     $ 6,283     $ 7,252  

(2) Other loss, net consisted of the following (in thousands):

  Three months ended June 30,   Six months ended June 30,
  2017   2016   2017   2016
Interest income $ (25 )   $ (11 )   $ (45 )   $ (36 )
Interest expense 5,529     8,381     11,965     17,572  
Amortization of debt issuance costs  327     417     714     1,027  
Accretion of debt discounts 755     1,094     1,840     2,500  
(Gain) loss on debt extinguishment 17,801     997     19,581     (2,846 )
Other (187 )   38     (147 )   213  
Other loss, net $ 24,200     $ 10,916     $ 33,908     $ 18,430  


Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
 
  June 30,
 2017
  December 31,
 2016
ASSETS      
Current assets:      
Cash and cash equivalents $ 78,312     $ 51,713  
Cash segregated under federal or other regulations  799     2,355  
Available-for-sale investments     7,101  
Accounts receivable, net of allowance 7,254     10,209  
Commissions receivable 15,563     16,144  
Other receivables 432     4,004  
Prepaid expenses and other current assets, net 7,041     6,321  
Total current assets 109,401     97,847  
Long-term assets:      
Property and equipment, net 8,677     10,836  
Goodwill, net 548,890     548,741  
Other intangible assets, net 345,521     362,178  
Other long-term assets 2,677     3,057  
Total long-term assets 905,765     924,812  
Total assets $ 1,015,166     $ 1,022,659  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 3,741     $ 4,536  
Commissions and advisory fees payable 16,143     16,587  
Accrued expenses and other current liabilities 21,484     18,528  
Deferred revenue 4,753     12,156  
Current portion of long-term debt, net 2,560     2,560  
Total current liabilities 48,681     54,367  
Long-term liabilities:      
Long-term debt, net 353,848     248,221  
Convertible senior notes, net     164,176  
Deferred tax liability, net 58,905     111,126  
Deferred revenue 759     1,849  
Other long-term liabilities 8,628     10,205  
Total long-term liabilities 422,140     535,577  
Total liabilities 470,821     589,944  
       
Redeemable noncontrolling interests 15,998     15,696  
       
Stockholders’ equity:      
Common stock 4     4  
Additional paid-in capital 1,535,858     1,510,152  
Accumulated deficit (1,007,325 )   (1,092,756 )
Accumulated other comprehensive loss (190 )   (381 )
Total stockholders’ equity 528,347     417,019  
Total liabilities and stockholders’ equity $ 1,015,166     $ 1,022,659  


Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
 
  Six months ended June 30,
  2017   2016
Operating Activities:      
Net income $ 34,190     $ 8,481  
Less: Discontinued operations, net of income taxes     (17,453 )
Net income from continuing operations 34,190     25,934  
Adjustments to reconcile net income from continuing operations to net cash from operating activities:       
Stock-based compensation 5,302     7,252  
Depreciation and amortization of acquired intangible assets 18,865     19,597  
Restructuring (non-cash) 1,402      
Deferred income taxes (681 )   (8,806 )
Amortization of premium on investments, net 10     155  
Amortization of debt issuance costs 714     1,027  
Accretion of debt discounts 1,840     2,500  
(Gain) loss on debt extinguishment 19,581     (2,846 )
Revaluation of acquisition-related contingent consideration liability     391  
Other     13  
Cash provided (used) by changes in operating assets and liabilities:      
Accounts receivable 2,956     1,395  
Commissions receivable 581     1,520  
Other receivables 2,544     19,460  
Prepaid expenses and other current assets (545 )   4,870  
Other long-term assets 341     95  
Accounts payable (795 )   (1,491 )
Commissions and advisory fees payable (444 )   (1,980 )
Deferred revenue (8,493 )   (4,257 )
Accrued expenses and other current and long-term liabilities 3,768     26,057  
Net cash provided by operating activities from continuing operations 81,136     90,886  
Investing Activities:      
Business acquisition, net of cash acquired     (1,788 )
Purchases of property and equipment (1,911 )   (1,528 )
Proceeds from sales of investments 249      
Proceeds from maturities of investments 7,252     4,000  
Purchases of investments (409 )   (659 )
Net cash provided by investing activities from continuing operations 5,181     25  
Financing Activities:      
Proceeds from credit facility 367,212      
Payments on convertible notes (172,827 )   (20,667 )
Payments on credit facility (275,000 )   (60,000 )
Proceeds from stock option exercises 23,996     1,142  
Proceeds from issuance of stock through employee stock purchase plan 662     562  
Tax payments from shares withheld for equity awards (5,267 )   (901 )
Contingent consideration payments for business acquisition (946 )    
Net cash used by financing activities from continuing operations (62,170 )   (79,864 )
Net cash provided by continuing operations 24,147     11,047  
       
Net cash provided by operating activities from discontinued operations     14,198  
Net cash provided (used) by investing activities from discontinued operations 1,028     (970 )
Net cash used by financing activities from discontinued operations     (7,000 )
Net cash provided by discontinued operations 1,028     6,228  
       
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 43     (7 )
Net increase in cash, cash equivalents, and restricted cash 25,218     17,268  
Cash, cash equivalents, and restricted cash, beginning of period 54,868     59,830  
Cash, cash equivalents, and restricted cash, end of period $ 80,086     $ 77,098  


Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
 
  Three months ended June 30,   Six months ended June 30,
  2017   2016   2017   2016
Revenue:              
Wealth Management (1) $ 85,296     $ 76,117     $ 167,963     $ 153,408  
Tax Preparation (1) 53,866     43,991     153,574     132,465  
Total revenue 139,162     120,108     321,537     285,873  
Operating income:              
Wealth Management 12,406     9,924     24,259     20,830  
Tax Preparation 36,515     29,796     89,648     77,369  
Corporate-level activity (2) (18,926 )   (17,366 )   (40,023 )   (36,399 )
Total operating income 29,995     22,354     73,884     61,800  
Other loss, net (24,200 )   (10,916 )   (33,908 )   (18,430 )
Income tax expense (2,315 )   (5,793 )   (5,786 )   (17,436 )
Discontinued operations, net of income taxes      (19,975 )       (17,453 )
Net income (loss) $ 3,480     $ (14,330 )   $ 34,190     $ 8,481  

(1) Revenues by major category within each segment are presented below (in thousands):

  Three months ended June 30,   Six months ended June 30,
  2017   2016   2017   2016
Wealth Management:              
Commission $ 38,154     $ 35,252     $ 77,749     $ 72,108  
Advisory 35,914     31,522     $ 69,490     63,054  
Asset-based 6,784     5,395     $ 12,750     11,213  
Transaction and fee 4,444     3,948     $ 7,974     7,033  
Total Wealth Management revenue  $ 85,296     $ 76,117     $ 167,963     $ 153,408  
Tax Preparation:              
Consumer $ 51,848     $ 42,257     $ 140,090     $ 119,728  
Professional 2,018     1,734     13,484     12,737  
Total Tax Preparation revenue $ 53,866     $ 43,991     $ 153,574     $ 132,465  

(2) Corporate-level activity included the following (in thousands):

  Three months ended June 30,   Six months ended June 30,
  2017   2016   2017   2016
Operating expenses $ 6,463     $ 4,460     $ 13,236     $ 9,159  
Stock-based compensation 2,737     3,023     5,302     7,252  
Acquisition-related costs     391         391  
Depreciation 1,059     1,127     2,193     2,249  
Amortization of acquired intangible assets  8,336     8,365     16,672     17,348  
Restructuring 331         2,620      
Total corporate-level activity $ 18,926     $ 17,366     $ 40,023     $ 36,399  


Blucora, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures
 
Preliminary Adjusted EBITDA Reconciliation (1)
(Unaudited)
(Amounts in thousands)
 
(In thousands) Three months ended June 30,   Six months ended June 30,
  2017   2016   2017   2016
Net income (loss) attributable to Blucora, Inc.(2)
$ 3,304     $ (14,445 )   $ 33,888     $ 8,222  
Stock-based compensation 2,737     3,023     5,302     7,252  
Depreciation and amortization of acquired intangible assets  9,395     9,492     18,865     19,597  
Restructuring 331         2,620      
Other loss, net (3) 24,200     10,916     33,908     18,430  
Net income attributable to noncontrolling interests 176     115     302     259  
Income tax expense 2,315     5,793     5,786     17,436  
Discontinued operations, net of income taxes     19,975         17,453  
Acquisition-related costs     391         391  
Adjusted EBITDA $ 42,458     $ 35,260     $ 100,671     $ 89,040  



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,
  2017   2016   2017   2016
Net income (loss) attributable to Blucora, Inc.(2) $ 3,304     $ (14,445 )   $ 33,888     $ 8,481  
Discontinued operations, net of income taxes     19,975         17,453  
Stock-based compensation 2,737     3,023     5,302     7,252  
Amortization of acquired intangible assets 8,336     8,365     16,672     17,348  
Accretion of debt discount on Convertible Senior Notes 633     885     1,567     1,848  
Accelerated accretion of debt discount on Convertible Senior Notes repurchased             1,628  
Gain on Convertible Senior Notes repurchased             (7,724 )
Write-off of debt discount and debt issuance costs on terminated Convertible Senior Notes 6,715         6,715      
Write-off of debt discount and debt issuance costs on closed TaxAct - HD Vest 2015 credit facility  9,593         9,593      
Acquisition-related costs     391         391  
Restructuring 331         2,620      
Impact of noncontrolling interests 176     115     302     259  
Cash tax impact of adjustments to GAAP net income (1,819 )   (78 )   (2,406 )   261  
Non-cash income tax expense (1) 2,941     5,193     6,101     15,772  
Non-GAAP net income $ 32,947     $ 23,424     $ 80,354     $ 62,710  
Per diluted share:              
Net income (loss) attributable to Blucora, Inc. $ 0.07     $ (0.34 )   $ 0.73     $ 0.20  
Discontinued operations, net of income taxes     0.47         0.41  
Stock-based compensation 0.06     0.07     0.11     0.17  
Amortization of acquired intangible assets 0.19     0.20     0.36     0.40  
Accretion of debt discount on Convertible Senior Notes 0.01     0.02     0.03     0.04  
Accelerated accretion of debt discount on Convertible Senior Notes repurchased             0.04  
Gain on Convertible Senior Notes repurchased             (0.18 )
Write-off of debt discount and debt issuance costs on terminated Convertible Senior Notes 0.14         0.15      
Write-off of debt discount and debt issuance costs on closed TaxAct - HD Vest 2015 credit facility 0.20         0.21      
Acquisition-related costs     0.01         0.01  
Restructuring 0.01         0.06      
Impact of noncontrolling interests 0.00     0.00     0.01     0.01  
Cash tax impact of adjustments to GAAP net income (0.04 )   (0.00 )   (0.05 )   0.01  
Non-cash income tax expense 0.06     0.12     0.13     0.38  
Non-GAAP net income $ 0.70     $ 0.55     $ 1.74     $ 1.49  
Weighted average shares outstanding used in computing per diluted share amounts 46,937     42,298     46,182     41,954  


Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
 
  Ranges for the three months ending   Ranges for the year ending
  September 30, 2017   December 31, 2017
  Low   High   Low   High
Net income (loss) attributable to Blucora, Inc. $ (18,700 )   $ (14,800 )   $ (3,800 )   $ 4,600  
Stock-based compensation 3,400     3,300     12,100     11,900  
Depreciation and amortization of acquired intangible assets  9,400     9,400     37,700     37,700  
Restructuring 200     100     3,000     2,800  
Other loss, net (3) 5,300     4,900     44,600     43,800  
Impact of noncontrolling interests 200     200     400     700  
Income tax (benefit) expense (2,700 )   (2,200 )   100     800  
Adjusted EBITDA $ (2,900 )   $ 900     $ 94,100     $ 102,300  


Preliminary Non-GAAP Net Income (Loss) Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
 
  Ranges for the three months ending   Ranges for the year ending
  September 30, 2017   December 31, 2017
  Low   High   Low   High
Net income (loss) attributable to Blucora, Inc. $ (18,700 )   $ (14,800 )   $ (3,800 )   $ 4,600  
Stock-based compensation 3,400     3,300     12,100     11,900  
Amortization of acquired intangible assets 8,300     8,300     33,300     33,300  
Accretion of debt discount on Convertible Senior Notes          1,400     1,400  
Loss on debt extinguishment         16,500     16,400  
Restructuring 200     100     3,000     2,800  
Impact of noncontrolling interests 200     200     400     700  
Cash tax impact of adjustments to net income (loss) (300 )   (200 )   (2,400 )   (2,400 )
Non-cash income tax benefit (4,000 )   (3,200 )   (1,800 )   (900 )
Non-GAAP net income (loss) $ (10,900 )   $ (6,300 )   $ 58,700     $ 67,800  


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

(1) We define Adjusted EBITDA as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation, amortization of acquired intangible assets (including acquired technology), restructuring, other loss, net, the impact of noncontrolling interests, income tax expense,  the effects of discontinued operations, and acquisition-related costs. Restructuring costs relate to the move of our corporate headquarters, which was announced in the fourth quarter of 2016.  Acquisition-related costs include professional services fees and other direct transaction costs and changes in the fair value of contingent consideration liabilities related to acquired companies.  The SimpleTax acquisition that was completed in 2015 included contingent consideration, for which the fair value of that liability was revalued in the second quarter of 2016.

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 as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of discontinued operations, stock-based compensation, amortization of acquired intangible assets (including acquired technology), accretion of debt discount and accelerated accretion of debt discount on the Convertible Senior Notes (the "Notes"), gain on the Notes repurchased, write-off of debt discount and debt issuance costs on the Notes that were redeemed and the terminated TaxAct - HD Vest 2015 credit facility, acquisition-related costs (described further under Adjusted EBITDA above), restructuring costs (described further under Adjusted EBITDA above), the impact of noncontrolling interests, the related cash tax impact of those adjustments, and non-cash income taxes.  The write-off of debt discount and debt issuance costs on the terminated Notes and the closed TaxAct - HD Vest 2015 credit facility relates to the debt refinancing that occurred in the second quarter of 2017.  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, and gain/loss on debt extinguishment.

Blucora Contact:
Bill Michalek (972) 870-6463
VP, Investor Relations

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