Blucora Announces First Quarter 2017 Results and Preliminary Tax Season Results
First Quarter Highlights and Recent Developments
TaxAct revenue and segment income expected to grow approximately 15 and 14 percent respectively for the six months throughJune 30, 2017 compared to the same period last year- HD Vest exceeded
$11 billion in fee-based assets under management, up 16 percent versus prior year - Repaid
$38 million in debt and exited the quarter with a 3.3x leverage ratio down from 5.2x in the same period last year - Expect to close new credit facility in
May 2017 that we believe will simplify capital structure, increase tenor and reduce interest expense by approximately$3.4 million in cash annually - Appointed two new independent directors with substantial financial services and public company board experience
"A focus on operational execution, a continued shift to profitable customers in tax preparation, and market tailwinds in wealth management have together driven double-digit revenue and segment income growth for the first quarter," said
Summary Financial Performance: Q1 2017 | ||||||||||
($ in millions except per share amounts) | ||||||||||
Q1 | Q1 | |||||||||
2017 | 2016 | Change | ||||||||
Revenue | $ | 182.4 | $ | 165.8 | 10 | % | ||||
Wealth Management | $ | 82.7 | $ | 77.3 | 7 | % | ||||
Tax Preparation | $ | 99.7 | $ | 88.5 | 13 | % | ||||
Segment Income | $ | 65.0 | $ | 58.5 | 11 | % | ||||
Wealth Management | $ | 11.9 | $ | 10.9 | 9 | % | ||||
Tax Preparation | $ | 53.1 | $ | 47.6 | 12 | % | ||||
Unallocated Corporate Operating Expenses | $ | (6.8 | ) | $ | (4.7 | ) | 44 | % | ||
GAAP: | ||||||||||
Operating Income | $ | 43.9 | $ | 39.4 | 11 | % | ||||
Net Income Attributable to | $ | 30.6 | $ | 22.7 | 35 | % | ||||
Diluted Net Income Per Share Attributable to | $ | 0.67 | $ | 0.54 | 24 | % | ||||
Non-GAAP: | ||||||||||
Adjusted EBITDA | $ | 58.2 | $ | 53.8 | 8 | % | ||||
Net Income | $ | 47.4 | $ | 39.3 | 21 | % | ||||
Diluted Net Income Per Share (EPS) | $ | 1.04 | $ | 0.94 | 11 | % | ||||
See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below. |
Tax Season Update
"This is our second year in a
multi-year pivot in our
(in thousands, except %s) | Tax seasons ended | |||||||
% change | ||||||||
Consumer: | ||||||||
Online e-files | 3,958 | 4,613 | (14 | )% | ||||
Desktop e-files | 184 | 234 | (21 | )% | ||||
Sub-total e-files | 4,142 | 4,847 | (15 | )% | ||||
164 | 158 | 4 | % | |||||
Total consumer e-files | 4,306 | 5,005 | (14 | )% | ||||
Professional tax preparer: | ||||||||
E-files | 1,717 | 1,630 | 5 | % | ||||
Total e-files (consumer and preparer) | 6,023 | 6,635 | (9 | )% | ||||
Tax season begins on the first day that the |
Second Quarter and Full Year 2017 Outlook
For the second quarter of 2017, the Company expects revenues to be between
For the full year 2017, the Company expects revenues to be between
The second quarter and fiscal 2017 outlook for GAAP net income or loss attributable to
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 first quarter results, its outlook for the second quarter and full year 2017, tax season update, 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
About Blucora®
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
Preliminary Condensed Consolidated Statements of Operations | |||||||
(Unaudited) | |||||||
(Amounts in thousands, except per share data) | |||||||
Three months ended | |||||||
2017 | 2016 | ||||||
Revenue: | |||||||
Wealth management services revenue | $ | 82,667 | $ | 77,291 | |||
Tax preparation services revenue | 99,708 | 88,474 | |||||
Total revenue | 182,375 | 165,765 | |||||
Operating expenses: | |||||||
Cost of revenue: | |||||||
Wealth management services cost of revenue | 55,874 | 52,269 | |||||
Tax preparation services cost of revenue | 3,818 | 3,207 | |||||
Amortization of acquired technology | 48 | 667 | |||||
Total cost of revenue (1) | 59,740 | 56,143 | |||||
Engineering and technology (1) | 4,748 | 4,295 | |||||
Sales and marketing (1) | 48,998 | 43,837 | |||||
General and administrative (1) | 13,483 | 12,753 | |||||
Depreciation | 940 | 975 | |||||
Amortization of other acquired intangible assets | 8,288 | 8,316 | |||||
Restructuring (1) | 2,289 | — | |||||
Total operating expenses | 138,486 | 126,319 | |||||
Operating income | 43,889 | 39,446 | |||||
Other loss, net (2) | (9,708 | ) | (7,514 | ) | |||
Income from continuing operations before income taxes | 34,181 | 31,932 | |||||
Income tax expense | (3,471 | ) | (11,643 | ) | |||
Income from continuing operations | 30,710 | 20,289 | |||||
Discontinued operations, net of income taxes | — | 2,522 | |||||
Net income | 30,710 | 22,811 | |||||
Net income attributable to noncontrolling interests | (126 | ) | (144 | ) | |||
Net income attributable to | $ | 30,584 | $ | 22,667 | |||
Net income per share attributable to | |||||||
Continuing operations | $ | 0.73 | $ | 0.49 | |||
Discontinued operations | — | 0.06 | |||||
Basic net income per share | $ | 0.73 | $ | 0.55 | |||
Net income per share attributable to | |||||||
Continuing operations | $ | 0.67 | $ | 0.48 | |||
Discontinued operations | — | 0.06 | |||||
Diluted net income per share | $ | 0.67 | $ | 0.54 | |||
Weighted average shares outstanding: | |||||||
Basic | 42,145 | 41,171 | |||||
Diluted | 45,428 | 41,610 | |||||
(1) Stock-based compensation expense was allocated among the following captions (in thousands): | |||||||
Three months ended
| |||||||
2017 | 2016 | ||||||
Cost of revenue | $ | 46 | $ | 42 | |||
Engineering and technology | 285 | 411 | |||||
Sales and marketing | 691 | 601 | |||||
General and administrative | 1,543 | 3,175 | |||||
Restructuring | 443 | — | |||||
Total stock-based compensation expense | $ | 3,008 | $ | 4,229 | |||
(2) Other loss, net consisted of the following (in thousands): | |||||||
Three months ended | |||||||
2017 | 2016 | ||||||
Interest income | $ | (20 | ) | $ | (25 | ) | |
Interest expense | 6,436 | 9,191 | |||||
Amortization of debt issuance costs | 387 | 610 | |||||
Accretion of debt discounts | 1,085 | 1,406 | |||||
(Gain) loss on debt extinguishment and modification expense | 1,780 | (3,843 | ) | ||||
Other | 40 | 175 | |||||
Other loss, net | $ | 9,708 | $ | 7,514 | |||
Preliminary Condensed Consolidated Balance Sheets | |||||||
(Unaudited) | |||||||
(Amounts in thousands) | |||||||
2017 | 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 74,609 | $ | 51,713 | |||
Cash segregated under federal or other regulations | 1,872 | 2,355 | |||||
Available-for-sale investments | 160 | 7,101 | |||||
Accounts receivable, net of allowance | 11,448 | 10,209 | |||||
Commissions receivable | 15,402 | 16,144 | |||||
Other receivables | 2,380 | 4,004 | |||||
Prepaid expenses and other current assets, net | 6,800 | 6,321 | |||||
Total current assets | 112,671 | 97,847 | |||||
Long-term assets: | |||||||
Property and equipment, net | 8,990 | 10,836 | |||||
548,778 | 548,741 | ||||||
Other intangible assets, net | 353,847 | 362,178 | |||||
Other long-term assets | 2,897 | 3,057 | |||||
Total long-term assets | 914,512 | 924,812 | |||||
Total assets | $ | 1,027,183 | $ | 1,022,659 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 7,223 | $ | 4,536 | |||
Commissions and advisory fees payable | 16,389 | 16,587 | |||||
Accrued expenses and other current liabilities | 25,887 | 18,528 | |||||
Deferred revenue | 7,435 | 12,156 | |||||
Current portion of long-term debt, net | 2,560 | 2,560 | |||||
Total current liabilities | 59,494 | 54,367 | |||||
Long-term liabilities: | |||||||
Long-term debt, net | 212,264 | 248,221 | |||||
Convertible senior notes, net | 165,350 | 164,176 | |||||
Deferred tax liability, net | 59,102 | 111,126 | |||||
Deferred revenue | 1,145 | 1,849 | |||||
Other long-term liabilities | 8,546 | 10,205 | |||||
Total long-term liabilities | 446,407 | 535,577 | |||||
Total liabilities | 505,901 | 589,944 | |||||
Redeemable noncontrolling interests | 15,822 | 15,696 | |||||
Stockholders' equity: | |||||||
Common stock | 4 | 4 | |||||
Additional paid-in capital | 1,516,421 | 1,510,152 | |||||
Accumulated deficit | (1,010,628 | ) | (1,092,756 | ) | |||
Accumulated other comprehensive loss | (337 | ) | (381 | ) | |||
Total stockholders' equity | 505,460 | 417,019 | |||||
Total liabilities and stockholders' equity | $ | 1,027,183 | $ | 1,022,659 |
Preliminary Condensed Consolidated Statements of Cash Flows | |||||||
(Unaudited) | |||||||
(Amounts in thousands) | |||||||
Three months ended | |||||||
2017 | 2016 | ||||||
Operating Activities: | |||||||
Net income | $ | 30,710 | $ | 22,811 | |||
Less: Discontinued operations, net of income taxes | — | 2,522 | |||||
Net income from continuing operations | 30,710 | 20,289 | |||||
Adjustments to reconcile net income from continuing operations to net cash from operating activities: | |||||||
Stock-based compensation | 2,565 | 4,229 | |||||
Depreciation and amortization of acquired intangible assets | 9,470 | 10,105 | |||||
Restructuring (non-cash) | 864 | — | |||||
Deferred income taxes | (481 | ) | (5,127 | ) | |||
Amortization of premium on investments, net | 10 | 79 | |||||
Amortization of debt issuance costs | 387 | 610 | |||||
Accretion of debt discounts | 1,085 | 1,406 | |||||
(Gain) loss on debt extinguishment and modification expense | 1,780 | (3,843 | ) | ||||
Other | — | 13 | |||||
Cash provided (used) by changes in operating assets and liabilities: | |||||||
Accounts receivable | (1,239 | ) | (2,967 | ) | |||
Commissions receivable | 742 | 1,266 | |||||
Other receivables | 2,198 | 20,146 | |||||
Prepaid expenses and other current assets | (479 | ) | 2,709 | ||||
Other long-term assets | 122 | 95 | |||||
Accounts payable | 2,687 | 5,217 | |||||
Commissions and advisory fees payable | (198 | ) | (1,705 | ) | |||
Deferred revenue | (5,425 | ) | (2,610 | ) | |||
Accrued expenses and other current and long-term liabilities | 8,102 | 18,809 | |||||
Net cash provided by operating activities from continuing operations | 52,900 | 68,721 | |||||
Investing Activities: | |||||||
Purchases of property and equipment | (1,165 | ) | (677 | ) | |||
Proceeds from sales of investments | 249 | — | |||||
Proceeds from maturities of investments | 7,092 | — | |||||
Purchases of investments | (409 | ) | (403 | ) | |||
Net cash provided (used) by investing activities from continuing operations | 5,767 | (1,080 | ) | ||||
Financing Activities: | |||||||
Repurchase of convertible notes | — | (20,667 | ) | ||||
Repayment of credit facility | (38,000 | ) | (40,000 | ) | |||
Proceeds from stock option exercises | 4,234 | 1,088 | |||||
Proceeds from issuance of stock through employee stock purchase plan | 662 | 562 | |||||
Tax payments from shares withheld for equity awards | (2,209 | ) | (329 | ) | |||
Contingent consideration payments for business acquisition | (946 | ) | — | ||||
Net cash used by financing activities from continuing operations | (36,259 | ) | (59,346 | ) | |||
Net cash provided by continuing operations | 22,408 | 8,295 | |||||
Net cash provided by operating activities from discontinued operations | — | 9,795 | |||||
Net cash used by investing activities from discontinued operations | — | (479 | ) | ||||
Net cash used by financing activities from discontinued operations | — | (5,000 | ) | ||||
Net cash provided by discontinued operations | — | 4,316 | |||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 5 | — | |||||
Net increase in cash, cash equivalents, and restricted cash | 22,413 | 12,611 | |||||
Cash, cash equivalents, and restricted cash, beginning of period | 54,868 | 59,830 | |||||
Cash, cash equivalents, and restricted cash, end of period | $ | 77,281 | $ | 72,441 |
Preliminary Segment Information | |||||||
(Unaudited) | |||||||
(Amounts in thousands) | |||||||
Three months ended | |||||||
2017 | 2016 | ||||||
Revenue: | |||||||
Wealth Management (1) | $ | 82,667 | $ | 77,291 | |||
Tax Preparation (1) | 99,708 | 88,474 | |||||
Total revenue | 182,375 | 165,765 | |||||
Operating income: | |||||||
Wealth Management | 11,853 | 10,906 | |||||
Tax Preparation | 53,133 | 47,573 | |||||
Corporate-level activity (2) | (21,097 | ) | (19,033 | ) | |||
Total operating income | 43,889 | 39,446 | |||||
Other loss, net | (9,708 | ) | (7,514 | ) | |||
Income tax expense | (3,471 | ) | (11,643 | ) | |||
Discontinued operations, net of income taxes | — | 2,522 | |||||
Net income | $ | 30,710 | $ | 22,811 | |||
(1) Revenues by major category within each segment are presented below (in thousands): | |||||||
Three months ended | |||||||
2017 | 2016 | ||||||
Wealth Management: | |||||||
Commission | $ | 39,595 | $ | 36,856 | |||
Advisory | 33,576 | 31,532 | |||||
Asset-based | 5,966 | 5,818 | |||||
Transaction and fee | 3,530 | 3,085 | |||||
Total Wealth Management revenue | $ | 82,667 | $ | 77,291 | |||
Tax Preparation: | |||||||
Consumer | $ | 88,242 | $ | 77,471 | |||
Professional | 11,466 | 11,003 | |||||
Total Tax Preparation revenue | $ | 99,708 | $ | 88,474 | |||
(2) Corporate-level activity included the following (in thousands): | |||||||
Three months ended | |||||||
2017 | 2016 | ||||||
Operating expenses | $ | 6,773 | $ | 4,699 | |||
Stock-based compensation | 2,565 | 4,229 | |||||
Depreciation | 1,134 | 1,122 | |||||
Amortization of acquired intangible assets | 8,336 | 8,983 | |||||
Restructuring | 2,289 | — | |||||
Total corporate-level activity | $ | 21,097 | $ | 19,033 | |||
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures | |||||||
Preliminary Adjusted EBITDA Reconciliation (1) | |||||||
(Unaudited) | |||||||
(Amounts in thousands) | |||||||
Three months ended | |||||||
2017 | 2016 | ||||||
Operating income (loss) (2) | $ | 43,889 | $ | 39,446 | |||
Stock-based compensation | 2,565 | 4,229 | |||||
Depreciation and amortization of acquired intangible assets | 9,470 | 10,105 | |||||
Restructuring | 2,289 | — | |||||
Adjusted EBITDA | $ | 58,213 | $ | 53,780 |
Preliminary Non-GAAP Net Income Reconciliation (1) | |||||||
(Unaudited) | |||||||
(Amounts in thousands, except per share amounts) | |||||||
Three months ended | |||||||
2017 | 2016 | ||||||
Net income attributable to | $ | 30,584 | $ | 22,667 | |||
Discontinued operations, net of income taxes | — | (2,522 | ) | ||||
Stock-based compensation | 2,565 | 4,229 | |||||
Amortization of acquired intangible assets | 8,336 | 8,983 | |||||
Accretion of debt discount on Convertible Senior Notes | 934 | 963 | |||||
Accelerated accretion of debt discount on Convertible Senior Notes | — | 1,628 | |||||
Gain on Convertible Senior Notes repurchased | — | (7,724 | ) | ||||
Restructuring | 2,289 | — | |||||
Impact of noncontrolling interests | 126 | 144 | |||||
Cash tax impact of adjustments to GAAP net income | (587 | ) | 339 | ||||
Non-cash income tax expense (1) | 3,160 | 10,579 | |||||
Non-GAAP net income | $ | 47,407 | $ | 39,286 | |||
Per diluted share: | |||||||
Net income attributable to | $ | 0.67 | $ | 0.54 | |||
Discontinued operations, net of income taxes | — | (0.06 | ) | ||||
Stock-based compensation | 0.06 | 0.10 | |||||
Amortization of acquired intangible assets | 0.18 | 0.23 | |||||
Accretion of debt discount on Convertible Senior Notes | 0.02 | 0.02 | |||||
Accelerated accretion of debt discount on Convertible Senior Notes | — | 0.04 | |||||
Gain on Convertible Senior Notes repurchased | — | (0.19 | ) | ||||
Restructuring | 0.05 | — | |||||
Impact of noncontrolling interests | 0.00 | 0.00 | |||||
Cash tax impact of adjustments to GAAP net income | (0.01 | ) | 0.01 | ||||
Non-cash income tax expense | 0.07 | 0.25 | |||||
Non-GAAP net income | $ | 1.04 | $ | 0.94 | |||
Weighted average shares outstanding used in computing per diluted share amounts | 45,428 | 41,610 |
Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance | |||||||||||||||
(Amounts in thousands) | |||||||||||||||
Ranges for the three months ending | Ranges for the year ending | ||||||||||||||
Net income (loss) attributable to | $ | (4,000 | ) | $ | (200 | ) | $ | (3,400 | ) | $ | 2,900 | ||||
Stock-based compensation | 3,500 | 3,400 | 12,600 | 12,400 | |||||||||||
Depreciation and amortization of acquired intangible assets | 9,600 | 9,400 | 38,100 | 37,900 | |||||||||||
Restructuring | 700 | 600 | 3,300 | 3,100 | |||||||||||
Other loss, net (3) | 25,600 | 25,300 | 45,800 | 45,400 | |||||||||||
Impact of noncontrolling interests | 200 | 200 | 400 | 700 | |||||||||||
Income tax (benefit) expense | 3,800 | 3,300 | (800 | ) | 900 | ||||||||||
Adjusted EBITDA | $ | 39,400 | $ | 42,000 | $ | 96,000 | $ | 103,300 |
Preliminary Non-GAAP Net Income Reconciliation for Forward-Looking Guidance | |||||||||||||||
(Amounts in thousands) | |||||||||||||||
Ranges for the three months ending | Ranges for the year ending | ||||||||||||||
Net income (loss) attributable to | $ | (4,000 | ) | $ | (200 | ) | $ | (3,400 | ) | $ | 2,900 | ||||
Stock-based compensation | 3,500 | 3,400 | 12,600 | 12,400 | |||||||||||
Amortization of acquired intangible assets | 8,400 | 8,300 | 33,400 | 33,300 | |||||||||||
Accretion of debt discount on Convertible Senior Notes | 800 | 800 | 1,800 | 1,800 | |||||||||||
Loss on debt extinguishment and modification expense | 16,100 | 16,100 | 16,100 | 16,100 | |||||||||||
Restructuring | 700 | 600 | 3,300 | 3,100 | |||||||||||
Impact of noncontrolling interests | 200 | 200 | 400 | 700 | |||||||||||
Cash tax impact of adjustments to net income (loss) | — | — | (600 | ) | (600 | ) | |||||||||
Non-cash income tax (benefit) expense | 2,800 | 2,300 | (4,600 | ) | (2,900 | ) | |||||||||
Non-GAAP net income | $ | 28,500 | $ | 31,500 | $ | 59,000 | $ | 66,800 |
Notes to Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures
(1) We define Adjusted EBITDA as operating income, determined in accordance with GAAP, excluding the effects of depreciation, amortization of acquired intangible assets (including acquired technology), stock-based compensation, and restructuring costs. Restructuring costs relate to the upcoming move of our corporate headquarters, which was announced in the fourth 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. 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 attributable to
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, and gain/loss on debt extinguishment and modification expense.
Blucora Contact:Source:Bill Michalek (972) 870-6463 bill.michalek@blucora.com
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