Blucora President and Chief Executive Officer Sends Annual Letter to Stockholders
Dear Fellow Stockholder –
I am writing to provide an update on the progress we are making at
We began 2021 with a new management team and refreshed board of directors, keenly focused on executing a refined strategy to achieve long-term, sustainable and profitable growth while exploring all approaches to creating value for our shareholders.
I am happy to report that we have achieved measurable improvements over the last year in our two tax-focused businesses –
In 2021, we achieved a number of important milestones:
- We accelerated our top-line growth trajectory while delivering meaningful profit growth. Total revenue rose 15% to
$862 million, net income improved by over $250 millionand adjusted EBITDA grew 57% to $145 million, for the 12 months ended September 30, 2021, versus the prior period.
- Avantax total client assets reached
$87 billionas of September 30, 2021, up $10.5 billionfrom just a year earlier. As of September 30, 2021, Avantax had $39.8 billionin Advisory Assets, representing 45.9% of total assets, a record for the business. TaxActserved more than 5.5 million end consumers either directly or through our 24,500 tax professional users. This represents a 5% year-over-year increase.
- Our satisfaction scores continued to improve with net promoter scores (NPS) for
TaxActconsumer up an additional 1.5 points on top of the prior season’s historical high because of our continued investments in product and user experience. Our fall 2021 financial professional satisfaction survey results improved by 20 percentage points since spring 2021 and 33 percentage points since fall 2020.
- Our employee engagement scores continued to see improvement with an additional 12% increase versus 2020.
In Avantax, our purposeful focus on financial professional and end-client experience is driving satisfaction gains across a number of the key metrics we track for the business. Combined with our improvements in recruited assets and consistent performance on asset growth amongst existing financial professionals, we are confident we will have positive net new assets in 2022. With approximately
We have more work to do, both in our execution and in gaining recognition by the stock market for our positive momentum, but we achieved our major 2021 performance milestones, which we believe will position us for success in 2022 and beyond.
We raised our full-year 2021 guidance again in November, with the midpoint of our outlook for net income greatly improved versus 2020 and the midpoint of our Adjusted EBITDA outlook exceeding both 2020 and 2019 , which was a record year for
Our progress is supported by extensive Board involvement including actively helping refine the strategy for the Company and ensuring that execution of that strategy is the best way for us to create value. Our Board met dozens of times in 2021, received thoughtful input from a number of independent advisors and deliberated carefully over the future of the Company and business. These discussions were aided immensely by the presence of our four new directors – each added since the beginning of 2020 – who have deep industry expertise as well as wealth management, tax, turnaround, M&A and technology experience. We believe that through our differentiated strategy, there is significant value to be created by continuing to grow both
It is very important to recognize that the successes of the past year were made possible through the hard work and dedication of our employees and Financial Professionals. It was a joy to see our people and our affiliates reconnect in the office and at multiple events throughout the year, rekindling old relationships and making new ones. As we hopefully see the tail end of the pandemic, we look forward to many more chances to interact in person in 2022.
On behalf of the entire
 Non-GAAP financial measure. See reconciliations of all non-GAAP to GAAP measures presented in this letter in the tables below.
Blucora Investor Relations
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecasts,” “future,” “will,” “projects,” “predicts,” “potential,” “continues,” “target,” “outlook,” “guidance” and similar expressions and variations. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: our ability to effectively compete within our industries; our ability to attract and retain financial professionals, qualified employees, clients, and customers, as well as our ability to provide strong customer/client service; the impact of the COVID-19 pandemic on our results of operations and our business, including the impact of the resulting economic and market disruption, the extension of tax filing deadlines and other related government actions; our ability to retain employees and acquired client assets following acquisitions; our future capital requirements and the availability of financing, if necessary; our ability to meet our current and future debt service obligations, including our ability to maintain compliance with our debt covenants; any downgrade of our credit ratings; our ability to generate strong performance for our clients and the impact of the financial markets on our clients’ portfolios; the impact of new or changing legislation and regulations (or interpretations thereof) on our business, including our ability to successfully address and comply with such legislation and regulations (or interpretations thereof) and increased costs, reductions of revenue, and potential fines, penalties or disgorgement to which we may be subject as a result thereof; risks, burdens, and costs, including fines, penalties, or disgorgement, associated with our business being subjected to regulatory inquiries, investigations, or initiatives including those of the
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures
Adjusted EBITDA Reconciliation (1)
(Unaudited) (Amounts in thousands)
|12 months ended
|Net income (loss) (2)||$||(19,249||)||$||(274,727||)|
|Depreciation and amortization of acquired intangible assets||42,786||41,749|
|Other loss, net||32,120||28,619|
|Acquisition and integration—Excluding change in the fair value of
acquisition-related contingent consideration
|Acquisition and integration—Change in the fair value of
acquisition-related contingent consideration
|Impairment of goodwill and an intangible asset||—||270,625|
|Executive transition costs||476||10,225|
|Headquarters relocation costs||—||1,863|
|Contested proxy and other legal and consulting costs||7,293||—|
|Income tax (benefit) expense||22,014||(25,347||)|
Adjusted EBITDA Reconciliation (1)
(Unaudited) (Amounts in thousands)
|Years Ended December 31,|
|Net income (loss) (2)||$||(342,755||)||$||48,148|
|Depreciation and amortization of acquired intangible assets||39,907||44,208|
|Other loss, net||31,304||16,915|
|Acquisition and integration—Excl. Change in fair value of acquisition-related
|Acquisition and integration—Change in fair value of acquisition-related
|Impairment of goodwill and an intangible asset||270,625||50,900|
|Executive transition costs||10,701||—|
|Headquarters relocation costs||1,863||—|
|Income tax (benefit) expense||42,331||(65,054||)|
Notes to Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures
(1) We define Adjusted EBITDA as net income (loss), determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation and amortization of acquired intangible assets, other loss, net, acquisition and integration costs, impairment of goodwill, executive transition costs, headquarters relocation costs, contested proxy and other legal and consulting costs, and income tax expense. Other loss, net primarily consists of interest expense, net and non-capitalized debt issuance expenses. Acquisition and integration costs primarily relate to the HKFS Acquisition and 1st Global Acquisition. Impairment of goodwill relates to the impairment of our Wealth Management reporting unit goodwill in the first quarter of 2020. Executive transition costs relate to the departure of certain Company executives in the first quarter of 2020. Headquarters relocation costs relate to the process of moving from our
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), determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, gain on the sale of a business, acquisition and integration costs, impairment of goodwill, executive transition costs, headquarters relocation costs, contested proxy and other legal and consulting costs, non-capitalized debt issuance expenses, the related cash tax impact of those adjustments, and non-cash income tax (benefit) expense. We exclude the non-cash portion of income tax expense because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which primarily consist of
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) and non-GAAP net income (loss) per share 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) and net income (loss) per share. Other companies may calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share differently, and, therefore, our non-GAAP net income (loss) and non-GAAP net income (loss) per share may not be comparable to similarly titled measures of other companies.
(2) As presented in the condensed consolidated statements of operations (unaudited).
Source: Blucora, Inc.