Blucora Announces Third Quarter 2017 Results

October 26, 2017
Continued Business Momentum with Double-Digit Revenue Growth and Strengthened Financial Position

IRVING, Texas, Oct. 26, 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 third quarter ended September 30, 2017.

Third Quarter Highlights and Recent Developments

  • Increased total revenue by 8% year-over-year
  • Continued to strengthen balance sheet with net leverage ratio down to 2.6x
  • Segment income of $6.2 million, lower year-over-year due to strategic investment in Tax Preparation business
  • Assets under management up 17% year-over-year to $11.9 billion, total assets under administration up 11% year-over-year to $42.7 billion

“Our performance in the third quarter with solid revenue growth, a stronger balance sheet and improvement across our key performance indicators, continues our recent business momentum,” commented John Clendening, Blucora’s President and Chief Executive Officer.  “In addition to achieving record levels of AUA and AUM in our wealth management business, the percentage of AUM over AUA also hit an all-time-high of 28%.  Our tax preparation business also showed good revenue growth in the quarter as we continue to prepare for next season.”

“In addition to a solid quarter, we recently conducted the first comprehensive strategic planning process since Bob Oros and Sanjay Baskaran joined us to lead the HD Vest and TaxAct businesses,” Clendening continued. “During the process we outlined the near-term objectives that will allow us to best leverage our unique business model. This plan, combined with our strong performance and the re-positioning work we have completed over the past few years, positions us to capitalize on the significant organic growth opportunities we see ahead.”

Summary Financial Performance: Q3 2017
($ in millions except per share amounts)

  Q3   Q3
  2017   2016
Revenue $ 90.2     $ 83.2  
Wealth Management $ 86.8     $ 80.1  
Tax Preparation $ 3.4     $ 3.1  
Segment Income $ 6.2     $ 7.2  
Wealth Management $ 12.4     $ 11.6  
Tax Preparation $ (6.2 )   $ (4.4 )
Unallocated Corporate Operating Expenses $ (4.6 )   $ (4.9 )
GAAP:      
Operating Loss $ (11.3 )   $ (10.5 )
Net Loss Attributable to Blucora, Inc. $ (16.9 )   $ (54.1 )
Diluted Net Loss Per Share Attributable to Blucora, Inc. (EPS) $ (0.37 )   $ (1.30 )
Non-GAAP:      
Adjusted EBITDA $ 1.6     $ 2.3  
Net Loss $ (5.5 )   $ (10.1 )
Diluted Net Loss Per Share (EPS) $ (0.12 )   $ (0.24 )
See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.

Fourth Quarter and Full Year 2017 Outlook

For the fourth quarter of 2017, the Company expects revenues to be between $90.0 million and $93.2 million, GAAP net loss attributable to Blucora, Inc. to be between $17.2 million and $15.0 million, or $(0.35) to $(0.31) per diluted share, Adjusted EBITDA to be between $(4.5) million and $(1.9) million, and Non-GAAP net loss to be between $12.6 million and $9.1 million, or $(0.26) to $(0.19) per diluted share.

For the full year 2017, the Company expects revenues to be between $501.7 million and $504.9 million, GAAP net income attributable to Blucora, Inc. to be between $0.0 million and $2.2 million, or $0.00 to $0.05 per diluted share, Adjusted EBITDA to be between $97.8 million and $100.4 million, and Non-GAAP net income to be between $62.7 million and $66.1 million, or $1.32 to $1.40 per diluted share.

The fourth 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.

2017 Tax Season Outlook

For the 2017 tax season, or the first half of 2018, we expect Tax Preparation segment revenue growth of 7.5% to 10.0% versus comparable prior year period at a segment margin in the range of 55.5% to 57.0%.

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 third quarter results, its outlook for the fourth quarter and full year 2017, an update on its strategic growth initiative planning 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.

Source: Blucora

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

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 September 30,   Nine months ended September 30,
  2017   2016   2017   2016
Revenue:              
Wealth management services revenue $ 86,809     $ 80,088     $ 254,772     $ 233,496  
Tax preparation services revenue 3,362     3,149     156,936     135,614  
Total revenue 90,171     83,237     411,708     369,110  
Operating expenses:              
Cost of revenue:              
Wealth management services cost of revenue 59,607     54,921     172,444     158,213  
Tax preparation services cost of revenue 1,314     1,319     7,543     6,549  
Amortization of acquired technology 50     49     145     765  
 Total cost of revenue (1) 60,971     56,289     180,132     165,527  
Engineering and technology (1) 5,051     4,588     14,041     12,842  
Sales and marketing (1) 13,680     11,965     84,974     75,715  
General and administrative (1) 12,207     11,638     39,405     35,899  
Depreciation 867     968     2,680     2,906  
Amortization of other acquired intangible assets 8,615     8,297     25,192     24,929  
Restructuring (1) 106         2,726      
Total operating expenses 101,497     93,745     349,150     317,818  
Operating income (loss) (11,326 )   (10,508 )   62,558     51,292  
Other loss, net (2) (5,241 )   (11,453 )   (39,149 )   (29,883 )
Income (loss) from continuing operations before income taxes (16,567 )   (21,961 )   23,409     21,409  
Income tax benefit (expense) (166 )   8,537     (5,952 )   (8,899 )
Income (loss) from continuing operations (16,733 )   (13,424 )   17,457     12,510  
Discontinued operations, net of income taxes     (40,528 )       (57,981 )
Net income (loss) (16,733 )   (53,952 )   17,457     (45,471 )
Net income attributable to noncontrolling interests (164 )   (167 )   (466 )   (426 )
Net income (loss) attributable to Blucora, Inc. $ (16,897 )   $ (54,119 )   $ 16,991     $ (45,897 )
Net income (loss) per share attributable to Blucora, Inc. - basic:              
Continuing operations $ (0.37 )   $ (0.33 )   $ 0.39     $ 0.29  
Discontinued operations     (0.97 )       (1.40 )
Basic net income (loss) per share $ (0.37 )   $ (1.30 )   $ 0.39     $ (1.11 )
Net income (loss) per share attributable to Blucora, Inc. - diluted:              
Continuing operations $ (0.37 )   $ (0.33 )   $ 0.36     $ 0.29  
Discontinued operations     (0.97 )       (1.37 )
Diluted net income (loss) per share $ (0.37 )   $ (1.30 )   $ 0.36     $ (1.08 )
Weighted average shares outstanding:              
Basic 45,459     41,635     43,749     41,404  
Diluted 45,459     41,635     46,813     42,329  

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

  Three months ended September 30,   Nine months ended September 30,
  2017   2016   2017   2016
Cost of revenue $ 412     $ 52     $ 546     $ 117  
Engineering and technology 225     434     734     1,167  
Sales and marketing 529     661     1,801     1,688  
General and administrative 1,966     2,217     5,353     7,644  
Restructuring 97         1,078      
Total stock-based compensation expense $ 3,229     $ 3,364     $ 9,512     $ 10,616  

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

  Three months ended September 30,   Nine months ended September 30,
  2017   2016   2017   2016
Interest income $ (31 )   $ (18 )   $ (76 )   $ (54 )
Interest expense 4,781     7,824     16,746     25,396  
Amortization of debt issuance costs 177     413     891     1,440  
Accretion of debt discounts 53     1,099     1,893     3,599  
(Gain) loss on debt extinguishment 183     2,205     19,764     (641 )
Other 78     (70 )   (69 )   143  
Other loss, net $ 5,241     $ 11,453     $ 39,149     $ 29,883  


Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
       
  September 30,
 2017
  December 31,
 2016
ASSETS      
Current assets:      
Cash and cash equivalents $ 78,558     $ 51,713  
Cash segregated under federal or other regulations 313     2,355  
Available-for-sale investments     7,101  
Accounts receivable, net of allowance 6,952     10,209  
Commissions receivable 16,432     16,144  
Other receivables 592     4,004  
Prepaid expenses and other current assets, net 4,777     6,321  
Total current assets 107,624     97,847  
Long-term assets:      
Property and equipment, net 9,552     10,836  
Goodwill, net 549,064     548,741  
Other intangible assets, net 336,872     362,178  
Other long-term assets 2,557     3,057  
Total long-term assets 898,045     924,812  
Total assets $ 1,005,669     $ 1,022,659  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 3,161     $ 4,536  
Commissions and advisory fees payable 16,564     16,587  
Accrued expenses and other current liabilities 18,768     18,528  
Deferred revenue 7,118     12,156  
Current portion of long-term debt, net 2,560     2,560  
Total current liabilities 48,171     54,367  
Long-term liabilities:      
Long-term debt, net 344,232     248,221  
Convertible senior notes, net     164,176  
Deferred tax liability, net 59,118     111,126  
Deferred revenue 1,031     1,849  
Other long-term liabilities 8,530     10,205  
Total long-term liabilities 412,911     535,577  
Total liabilities 461,082     589,944  
       
Redeemable noncontrolling interests 16,162     15,696  
       
Stockholders’ equity:      
Common stock 5     4  
Additional paid-in capital 1,552,609     1,510,152  
Accumulated deficit (1,024,222 )   (1,092,756 )
Accumulated other comprehensive income (loss) 33     (381 )
Total stockholders’ equity 528,425     417,019  
Total liabilities and stockholders’ equity $ 1,005,669     $ 1,022,659  


Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
   
  Nine months ended September 30,
  2017   2016
Operating Activities:      
Net income (loss) $ 17,457     $ (45,471 )
Less: Discontinued operations, net of income taxes     (57,981 )
Net income from continuing operations 17,457     12,510  
Adjustments to reconcile net income from continuing operations to net cash from operating activities:      
Stock-based compensation 8,434     10,616  
Depreciation and amortization of acquired intangible assets 28,553     29,080  
Restructuring (non-cash) 1,499      
Deferred income taxes (473 )   (12,484 )
Amortization of premium on investments, net 10     164  
Amortization of debt issuance costs 891     1,440  
Accretion of debt discounts 1,893     3,599  
(Gain) loss on debt extinguishment 19,764     (641 )
Revaluation of acquisition-related contingent consideration liability     391  
Other     18  
Cash provided (used) by changes in operating assets and liabilities:      
Accounts receivable 3,259     793  
Commissions receivable (288 )   1,034  
Other receivables 2,384     19,656  
Prepaid expenses and other current assets 1,720     6,003  
Other long-term assets 432     (1,174 )
Accounts payable (1,375 )   1,151  
Commissions and advisory fees payable (23 )   (1,600 )
Deferred revenue (5,856 )   (1,805 )
Accrued expenses and other current and long-term liabilities 949     19,786  
Net cash provided by operating activities from continuing operations 79,230     88,537  
Investing Activities:      
Business acquisition, net of cash acquired     (1,788 )
Purchases of property and equipment (3,809 )   (2,648 )
Proceeds from sales of investments 249      
Proceeds from maturities of investments 7,252     11,808  
Purchases of investments (409 )   (5,147 )
Net cash provided by investing activities from continuing operations 3,283     2,225  
Financing Activities:      
Proceeds from credit facility 367,212      
Payments on convertible notes (172,827 )   (20,667 )
Payments on credit facility (285,000 )   (105,000 )
Proceeds from stock option exercises 38,228     1,141  
Proceeds from issuance of stock through employee stock purchase plan 1,428     1,402  
Tax payments from shares withheld for equity awards (6,744 )   (1,447 )
Contingent consideration payments for business acquisition (946 )    
Net cash used by financing activities from continuing operations (58,649 )   (124,571 )
Net cash provided (used) by continuing operations 23,864     (33,809 )
       
Net cash provided by operating activities from discontinued operations     12,359  
Net cash provided by investing activities from discontinued operations 1,028     43,230  
Net cash used by financing activities from discontinued operations     (9,000 )
Net cash provided by discontinued operations 1,028     46,589  
       
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 86     (15 )
Net increase in cash, cash equivalents, and restricted cash 24,978     12,765  
Cash, cash equivalents, and restricted cash, beginning of period 54,868     59,830  
Cash, cash equivalents, and restricted cash, end of period $ 79,846     $ 72,595  


Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
       
  Three months ended September 30,   Nine months ended September 30,
  2017   2016   2017   2016
Revenue:              
Wealth Management (1) $ 86,809     $ 80,088     $ 254,772     $ 233,496  
Tax Preparation (1) 3,362     3,149     156,936     135,614  
Total revenue 90,171     83,237     411,708     369,110  
Operating income (loss):              
Wealth Management 12,425     11,628     36,684     32,458  
Tax Preparation (6,238 )   (4,382 )   83,410     72,987  
Corporate-level activity (2) (17,513 )   (17,754 )   (57,536 )   (54,153 )
Total operating income (loss) (11,326 )   (10,508 )   62,558     51,292  
Other loss, net (5,241 )   (11,453 )   (39,149 )   (29,883 )
Income tax benefit (expense) (166 )   8,537     (5,952 )   (8,899 )
Discontinued operations, net of income taxes     (40,528 )       (57,981 )
Net income (loss) $ (16,733 )   $ (53,952 )   $ 17,457     $ (45,471 )

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

  Three months ended September 30,   Nine months ended September 30,
  2017   2016   2017   2016
Wealth Management:              
Commission $ 39,432     $ 38,962     $ 117,181     $ 111,070  
Advisory 37,588     32,705     107,078     95,759  
Asset-based 6,526     5,476     19,276     16,689  
Transaction and fee 3,263     2,945     11,237     9,978  
Total Wealth Management revenue $ 86,809     $ 80,088     $ 254,772     $ 233,496  
Tax Preparation:              
Consumer $ 3,149     $ 2,950     $ 143,239     $ 122,678  
Professional 213     199     13,697     12,936  
Total Tax Preparation revenue $ 3,362     $ 3,149     $ 156,936     $ 135,614  

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

  Three months ended September 30,   Nine months ended September 30,
  2017   2016   2017   2016
Operating expenses $ 4,587     $ 4,907     $ 17,823     $ 14,066  
Stock-based compensation 3,132     3,364     8,434     10,616  
Acquisition-related costs             391  
Depreciation 1,023     1,137     3,216     3,386  
Amortization of acquired intangible assets 8,665     8,346     25,337     25,694  
Restructuring 106         2,726      
Total corporate-level activity $ 17,513     $ 17,754     $ 57,536     $ 54,153  


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 September 30,   Nine months ended September 30,
  2017   2016   2017   2016
Net income (loss) attributable to Blucora, Inc.(2) $ (16,897 )   $ (54,119 )   $ 16,991     $ (45,897 )
Stock-based compensation 3,132     3,364     8,434     10,616  
Depreciation and amortization of acquired intangible assets 9,688     9,483     28,553     29,080  
Restructuring 106         2,726      
Other loss, net (3) 5,241     11,453     39,149     29,883  
Net income attributable to noncontrolling interests 164     167     466     426  
Income tax expense 166     (8,537 )   5,952     8,899  
Discontinued operations, net of income taxes     40,528         57,981  
Acquisition-related costs             391  
Adjusted EBITDA $ 1,600     $ 2,339     $ 102,271     $ 91,379  


Preliminary Non-GAAP Net Income (Loss) Reconciliation(1)
(Unaudited)
(Amounts in thousands, except per share amounts)
       
  Three months ended September 30,   Nine months ended September 30,
  2017   2016   2017   2016
Net income (loss) attributable to Blucora, Inc.(2) $ (16,897 )   $ (54,119 )   $ 16,991     $ (45,897 )
Discontinued operations, net of income taxes     40,528         57,981  
Stock-based compensation 3,132     3,364     8,434     10,616  
Amortization of acquired intangible assets 8,665     8,346     25,337     25,694  
Accretion of debt discount on Convertible Senior Notes     901     1,567     2,749  
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      
Write-off of debt discount and debt issuance costs on closed TaxAct - HD Vest 2015 credit facility         9,593      
Acquisition-related costs             391  
Restructuring 106         2,726      
Impact of noncontrolling interests 164     167     466     426  
Cash tax impact of adjustments to GAAP net income (928 )   (17 )   (3,334 )   244  
Non-cash income tax expense (1) 224     (9,312 )   6,325     6,460  
Non-GAAP net income (loss) $ (5,534 )   $ (10,142 )   $ 74,820     $ 52,568  
Per diluted share:              
Net income (loss) attributable to Blucora, Inc. $ (0.37 )   $ (1.30 )   $ 0.36     $ (1.08 )
Discontinued operations, net of income taxes     0.97         1.37  
Stock-based compensation 0.07     0.08     0.18     0.25  
Amortization of acquired intangible assets 0.20     0.21     0.55     0.60  
Accretion of debt discount on Convertible Senior Notes     0.02     0.03     0.06  
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      
Write-off of debt discount and debt issuance costs on closed TaxAct - HD Vest 2015 credit facility         0.20      
Acquisition-related costs             0.01  
Restructuring         0.06      
Impact of noncontrolling interests 0.00     0.00     0.01     0.01  
Cash tax impact of adjustments to GAAP net income (0.02 )   (0.00 )   (0.07 )   0.01  
Non-cash income tax (benefit) expense     (0.22 )   0.14     0.15  
Non-GAAP net income (loss) $ (0.12 )   $ (0.24 )   $ 1.60     $ 1.24  
Weighted average shares outstanding used in computing per diluted share amounts 45,459     41,635     46,813     42,329  


 Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
       
  Ranges for the three months ending   Ranges for the year ending
  December 31, 2017   December 31, 2017
  Low   High   Low   High
Net income (loss) attributable to Blucora, Inc. $ (17,200 )   $ (15,000 )   $     $ 2,200  
Stock-based compensation 3,400     3,300     11,800     11,700  
Depreciation and amortization of acquired intangible assets 9,300     9,300     37,800     37,800  
Restructuring 500     400     3,200     3,100  
Other loss, net (3) 5,400     5,000     44,500     44,100  
Impact of noncontrolling interests 200     200     700     700  
Income tax (benefit) expense (6,100 )   (5,100 )   (200 )   800  
Adjusted EBITDA $ (4,500 )   $ (1,900 )   $ 97,800     $ 100,400  


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
  December 31, 2017   December 31, 2017
  Low   High   Low   High
Net income (loss) attributable to Blucora, Inc. $ (17,200 )   $ (15,000 )   $     $ 2,200  
Stock-based compensation 3,400     3,300     11,800     11,700  
Amortization of acquired intangible assets 8,300     8,300     33,600     33,600  
Accretion of debt discount on Convertible Senior Notes         1,600     1,600  
Loss on debt extinguishment         16,300     16,300  
Restructuring 500     400     3,200     3,100  
Impact of noncontrolling interests 200     200     700     700  
Cash tax impact of adjustments to net income (loss) (300 )   (200 )   (3,300 )   (3,300 )
Non-cash income tax (benefit) expense (7,500 )   (6,100 )   (1,200 )   200  
Non-GAAP net income (loss) $ (12,600 )   $ (9,100 )   $ 62,700     $ 66,100  


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 (loss) 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 (loss) and non-GAAP net income (loss) 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 (loss) and non-GAAP net income (loss) per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business.  Non-GAAP net income (loss) 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.

 

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Source: Blucora, Inc.