BCOR 8-K Q3 2014 earnings release

0001068875-14-000013.txt : 20141105 0001068875-14-000013.hdr.sgml : 20141105 20141105162854 ACCESSION NUMBER: 0001068875-14-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20141105 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20141105 DATE AS OF CHANGE: 20141105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUCORA, INC. CENTRAL INDEX KEY: 0001068875 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 911718107 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-25131 FILM NUMBER: 141197297 BUSINESS ADDRESS: STREET 1: 10900 NE 8TH STREET STREET 2: SUITE 800 CITY: BELLEVUE STATE: WA ZIP: 98004 BUSINESS PHONE: 4258821602 MAIL ADDRESS: STREET 1: 10900 NE 8TH STREET STREET 2: SUITE 800 CITY: BELLEVUE STATE: WA ZIP: 98004 FORMER COMPANY: FORMER CONFORMED NAME: INFOSPACE INC DATE OF NAME CHANGE: 20000428 FORMER COMPANY: FORMER CONFORMED NAME: INFOSPACE COM INC DATE OF NAME CHANGE: 19980824 8-K 1 bcor8-kq32014earningsrelea.htm 8-K BCOR 8-K Q3 2014 earnings release

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

November 5, 2014

Date of Report

(Date of earliest event reported)

BLUCORA, INC.

(Exact name of registrant as specified in its charter)



DELAWARE	000-25131	91-1718107
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

10900 NE 8th Street, Suite 800

Bellevue, Washington 98004

(Address of principal executive offices)

(425) 201-6100

Registrant’s telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:



o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On November 5, 2014, Blucora announced its financial results for the quarter ended September 30, 2014. Copies of the press release and a supplemental investor presentation are furnished to, but not filed with, the Commission as Exhibits 99.1 and 99.2 hereto.

Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS



99.1	Press release dated	November 5, 2014



99.2	Investor presentation dated	November 5, 2014

-2-

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	BLUCORA, INC.

	By	/s/ Eric M. Emans
		Eric M. Emans
		Chief Financial Officer

		November 5, 2014

-3-

EXHIBIT INDEX



Exhibit No	Description

99.1	Press release dated	November 5, 2014



99.2	Investor presentation dated	November 5, 2014

-4-

EX-99.1 2 ex-991q32014.htm EXHIBIT EX-99.1 Q3 2014

Exhibit 99.1

Blucora Reports Third Quarter Results

BELLEVUE, Wash., November 5, 2014 (Marketwired) — Blucora, Inc. (NASDAQ: BCOR) today announced financial results for the third quarter ended September 30, 2014.

“Our multi-year transformation continues to progress," said Bill Ruckelshaus, President and Chief Executive Officer of Blucora. “Results for the third quarter were in line with expectations as we continue to navigate market pressures in our search and content segment. The challenges at InfoSpace underscore the importance of our diversification strategy, and the continued execution at TaxACT and Monoprice."

Summary Financial Performance: Q3 2014

($ in millions except per share amounts)



	Q3			Q3
	2014			2013			Change
Revenues	$	114.9		$	124.1		(7	)%
Search and Content	$	74.4		$	107.7		(31	)%
Tax Preparation	$	2.5		$	1.7		41	%
E-Commerce	$	38.0		$	14.6		160	%
Adjusted EBITDA	$	10.7		$	16.6		(36	)%
Non-GAAP Net Income	$	6.5		$	13.0		(50	)%
Non-GAAP Diluted EPS	$	0.15		$	0.30		(50	)%
GAAP Net Loss	$	(2.2	)	$	(6.5	)	(65	)%
GAAP Diluted EPS	$	(0.05	)	$	(0.16	)	(69	)%
See reconciliation of non-GAAP to GAAP measures in table below.

Segment Information

Search and Content

Search and content segment income for the third quarter of 2014 was $12.7 million or 17 percent of segment revenue for the third quarter of 2014.

Tax Preparation

Tax preparation segment loss for the third quarter of 2014 was $1.9 million.

E-Commerce

E-Commerce segment income for the third quarter of 2014 was $3.3 million or 9 percent of segment revenue for the third quarter of 2014.

Corporate Operating Expenses

Unallocated corporate operating expenses for the third quarter of 2014 were $3.5 million, compared to $4.0 million for the third quarter of 2013.

Fourth Quarter Outlook

For the fourth quarter of 2014, the Company expects revenues to be between $97.5 million and $108.5 million, Adjusted EBITDA to be between $2.4 million and $6.4 million, Non-GAAP Net Income (Loss) to be between ($1.5) million and $2.5 million, or ($0.04) to $0.06 per diluted share, and GAAP Net Loss to be between $9.1 million and $6.4 million, or ($0.22) to ($0.16) per share.

Conference Call and Webcast

A conference call and live webcast will be held today at 2 p.m. Pacific Time / 5 p.m. Eastern Time during which the Company will further discuss third quarter results, and its outlook for the fourth quarter of 2014. The live webcast and supplemental materials are included in a current report on form 8-K filed today and can be accessed in the Investor Relations section of the Blucora corporate website at http://www.blucora.com. A replay of the call will also be available on our website.

About Blucora®

Blucora, Inc. (NASDAQ: BCOR) operates a diverse group of Internet businesses. Its mission is to deliver long-term value to its customers, partners and shareholders through financial discipline, operational expertise, and technology innovation. Named one of Fortune® Magazine’s 100 Fastest-Growing Companies for the past two years, Blucora’s online businesses reach millions of users worldwide every day. Blucora is headquartered in Bellevue, Washington. For more information, please visit www.Blucora.com. Follow and subscribe to Blucora on Twitter, LinkedIn, and YouTube.

Source: Blucora

Blucora Contact:

Stacy Ybarra, 425-709-8127

stacy.ybarra@blucora.com

This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: general economic, industry, and market sector conditions; the timing and extent of market acceptance of developed products and services and related costs; our dependence on companies to distribute our products and services; the ability to successfully integrate acquired businesses; future acquisitions; the successful execution of the Company’s strategic initiatives, technology enhancements, operating plans, and marketing strategies; and the condition of our cash investments. A more detailed description of these and certain other factors that could affect actual results is included in Blucora, Inc.’s most recent Quarterly Report on Form 10-Q and subsequent reports filed with or furnished to the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Blucora, Inc. undertakes no obligation to update any forward-looking statements to reflect new information, events, or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

Blucora, Inc.

Preliminary Condensed Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands, except per share data)



	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Revenues:
Services revenue	$	76,885		$	109,491		$	362,199		$	392,010
Product revenue, net	37,970			14,630			110,408			14,630
Total revenues	114,855			124,121			472,607			406,640
Operating expenses:
Cost of revenues:
Services cost of revenue ⁽¹⁾	49,754			72,935			177,280			219,274
Product cost of revenue	25,605			10,622			73,771			10,622
Total cost of revenues ⁽²⁾	75,359			83,557			251,051			229,896
Engineering and technology ⁽²⁾	5,970			2,905			14,922			7,951
Sales and marketing⁽²⁾	18,152			18,230			96,275			71,409
General and administrative ⁽²⁾	9,495			8,421			28,552			21,362
Depreciation	1,085			697			3,278			1,738
Amortization of intangible assets	6,118			4,184			17,463			10,521
Total operating expenses	116,179			117,994			411,541			342,877
Operating income (loss)	(1,324		)	6,127			61,066			63,763
Other loss, net ⁽³⁾	(3,208		)	(13,118		)	(11,001		)	(20,427		)
Income (loss) before income taxes	(4,532		)	(6,991		)	50,065			43,336
Income tax benefit (expense)	2,294			510			(17,579		)	(17,803		)
Net income (loss)	$	(2,238	)	$	(6,481	)	$	32,486		$	25,533
Net income (loss) per share:
Basic	$	(0.05	)	$	(0.16	)	$	0.78		$	0.62
Diluted	$	(0.05	)	$	(0.16	)	$	0.75		$	0.60
Weighted average shares outstanding:
Basic	41,034			41,088			41,589			41,048
Diluted	41,034			41,088			43,303			42,878

⁽¹⁾ Includes amortization of acquired intangible assets of $1.9 million and $1.9 million for the three months ended September 30, 2014 and 2013, respectively, and $5.6 million and $5.8 million for the nine months ended September 30, 2014 and 2013, respectively.

⁽²⁾ Stock-based compensation expense was allocated among the following captions (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2014		2013		2014		2013
Cost of revenues	$	101	$	94	$	373	$	541
Engineering and technology	568		370		1,312		942
Sales and marketing	74		649		1,715		1,652
General and administrative	1,865		2,139		5,574		5,355
Total stock-based compensation expense	$	2,608	$	3,252	$	8,974	$	8,490

⁽³⁾ Other loss, net was allocated among the following captions (in thousands):



	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Interest income	$	(71	)	$	(42	)	$	(267	)	$	(206	)
Interest expense	2,706			2,669			8,485			6,707
Amortization of debt issuance costs	288			258			853			841
Accretion of debt discounts	931			862			2,753			1,972
Loss on debt extinguishment and modification expense	—			1,593			—			1,593
Loss on derivative instrument	—			3,956			—			5,931
Impairment of equity investment in privately-held company	—			3,711			—			3,711
Decrease in pre-acquisition liability	(665		)	—			(665		)	—
Other	19			111			(158		)	(122		)
Other loss, net	$	3,208		$	13,118		$	11,001		$	20,427

Blucora, Inc.

Preliminary Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands)



	September 30, 2014			December 31, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	60,194		$	130,225
Available-for-sale investments	220,200			203,480
Accounts receivable, net	31,806			48,081
Other receivables	4,143			8,292
Inventories	27,759			28,826
Prepaid expenses and other current assets, net	8,967			9,774
Total current assets	353,069			428,678
Property and equipment, net	16,347			16,108
Goodwill	364,054			348,957
Other intangible assets, net	180,330			178,064
Other long-term assets	5,274			6,223
Total assets	$	919,074		$	978,030
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	42,886		$	61,268
Accrued expenses and other current liabilities	18,699			31,109
Deferred revenue	6,945			7,510
Short-term portion of long-term debt, net	7,917			7,903
Convertible senior notes, net ⁽¹⁾	—			181,583
Total current liabilities	76,447			289,373
Long-term liabilities:
Long-term debt, net	55,261			113,193
Convertible senior notes, net ⁽¹⁾	184,254			—
Deferred tax liability, net	41,341			56,861
Deferred revenue	2,331			1,814
Other long-term liabilities	2,610			2,719
Total long-term liabilities	285,797			174,587
Total liabilities	362,244			463,960

Stockholders’ equity:
Common stock	4			4
Additional paid-in capital	1,476,148			1,466,043
Accumulated deficit	(919,491		)	(951,977		)
Accumulated other comprehensive income	169			—
Total stockholders’ equity	556,830			514,070
Total liabilities and stockholders’ equity	$	919,074		$	978,030

⁽¹⁾The convertibility of the Notes is determined at the end of each reporting period. If the Notes are determined to be convertible, they remain convertible until the end of the subsequent quarter and are classified in “Current liabilities”; otherwise, they are classified in “Long-term liabilities.” Depending upon the price of our common stock or the trading price of the Notes within the reporting period, the Notes could be convertible during one reporting period but not convertible during a comparable reporting period.

Blucora, Inc.

Preliminary Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)



	Nine months ended September 30,
	2014			2013
Operating Activities:
Net income	$	32,486		$	25,533
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	8,974			8,490
Depreciation and amortization of intangible assets	27,298			19,413
Excess tax benefits from stock-based award activity	(29,801		)	(24,596		)
Deferred income taxes	(15,621		)	(8,209		)
Amortization of premium on investments, net	3,095			2,154
Amortization of debt issuance costs	853			841
Accretion of debt discounts	2,753			1,972
Loss on debt extinguishment and modification expense	—			1,593
Loss on derivative instrument	—			5,931
Impairment loss on equity investment in privately-held company	—			3,711
Other	72			608
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable	16,212			(8,756		)
Other receivables	4,134			1,090
Inventories	1,067			900
Prepaid expenses and other current assets	849			6,694
Other long-term assets	43			(2,296		)
Accounts payable	(18,382		)	1,873
Deferred revenue	(48		)	2,563
Accrued expenses and other current and long-term liabilities	17,174			27,176
Net cash provided by operating activities	51,158			66,685
Investing Activities:
Business acquisitions, net of cash acquired	(44,927		)	(180,500		)
Purchases of property and equipment	(4,247		)	(3,066		)
Change in restricted cash	—			2,491
Equity investment in privately-held company	—			(4,000		)
Proceeds from sales of investments	26,620			25,812
Proceeds from maturities of investments	195,296			150,277
Purchases of investments	(237,063		)	(234,771		)
Net cash used by investing activities	(64,321		)	(243,757		)
Financing Activities:
Proceeds from issuance of convertible notes, net of debt issuance costs of $6,432	—			194,818
Proceeds from credit facilities	4,000			—
Repayment of credit facilities	(62,000		)	(10,000		)
Debt issuance costs on credit facility	—			(28		)
Stock repurchases	(29,923		)	(3,525		)
Excess tax benefits from stock-based award activity	29,801			24,596
Proceeds from stock option exercises	2,447			1,700
Proceeds from issuance of stock through employee stock purchase plan	1,376			1,065
Tax payments from shares withheld upon vesting of restricted stock units	(2,569		)	(2,011		)
Net cash provided (used) by financing activities	(56,868		)	206,615
Net increase (decrease) in cash and cash equivalents	(70,031		)	29,543
Cash and cash equivalents, beginning of period	130,225			68,278
Cash and cash equivalents, end of period	$	60,194		$	97,821

Blucora, Inc.

Preliminary Segment Information

(Unaudited)

(Amounts in thousands)



	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Revenues:
Search and Content	$	74,416		$	107,742		$	260,999		$	302,840
Tax Preparation	2,469			1,749			101,200			89,170
E-Commerce	37,970			14,630			110,408			14,630
Total revenues	114,855			124,121			472,607			406,640
Operating income (loss):
Search and Content	12,709			21,319			45,971			57,501
Tax Preparation	(1,859		)	(1,605		)	52,754			43,617
E-Commerce	3,336			906			9,192			906
Corporate-level activity ⁽¹⁾	(15,510		)	(14,493		)	(46,851		)	(38,261		)
Total operating income (loss)	(1,324		)	6,127			61,066			63,763
Other loss, net	(3,208		)	(13,118		)	(11,001		)	(20,427		)
Income tax benefit (expense)	2,294			510			(17,579		)	(17,803		)
Net income (loss)	$	(2,238	)	$	(6,481	)	$	32,486		$	25,533

⁽¹⁾ Corporate-level activity included the following (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2014		2013		2014		2013
Operating expenses	$	3,524	$	4,025	$	10,579	$	10,358
Stock-based compensation	2,608		3,252		8,974		8,490
Depreciation	1,385		1,126		4,194		3,119
Amortization of intangible assets	7,993		6,090		23,104		16,294
Total corporate-level activity	$	15,510	$	14,493	$	46,851	$	38,261

Blucora, Inc.

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

Preliminary Adjusted EBITDA Reconciliation ⁽¹⁾

(Unaudited)

(Amounts in thousands)



	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014		2013
Net income (loss) ⁽²⁾	$	(2,238	)	$	(6,481	)	$	32,486	$	25,533
Stock-based compensation	2,608			3,252			8,974		8,490
Depreciation and amortization of intangible assets	9,378			7,216			27,298		19,413
Other loss, net ⁽³⁾	3,208			13,118			11,001		20,427
Income tax (benefit) expense	(2,294		)	(510		)	17,579		17,803
Adjusted EBITDA	$	10,662		$	16,595		$	97,338	$	91,666

Preliminary Non-GAAP Net Income Reconciliation ⁽¹⁾

(Unaudited)

(Amounts in thousands, except per share amounts)



	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Net income (loss) ⁽²⁾	$	(2,238	)	$	(6,481	)	$	32,486		$	25,533
Stock-based compensation	2,608			3,252			8,974			8,490
Amortization of acquired intangible assets	7,993			6,090			23,104			16,294
Accretion of debt discount on Convertible Senior Notes	907			843			2,671			1,816
Loss on debt extinguishment and modification expense	—			1,593			—			1,593
Loss on derivative instrument	—			3,956			—			5,931
Impairment of equity investment in privately-held company	—			3,711			—			3,711
Decrease in non-cash pre-acquisition liability	(665		)	—			(665		)	—
Cash tax impact of adjustments to GAAP net income	(44		)	(1		)	(295		)	(181		)
Non-cash income tax (benefit) expense ⁽¹⁾	(2,017		)	7			14,180			16,412
Non-GAAP net income	$	6,544		$	12,970		$	80,455		$	79,599

Per diluted share:
Net income (loss)	$	(0.05	)	$	(0.16	)	$	0.75		$	0.60
Stock-based compensation	0.06			0.08			0.21			0.20
Amortization of acquired intangible assets	0.19			0.14			0.53			0.38
Accretion of debt discount on Convertible Senior Notes	0.02			0.02			0.06			0.04
Loss on debt extinguishment and modification expense	—			0.04			—			0.04
Loss on derivative instrument	—			0.09			—			0.13
Decrease in non-cash pre-acquisition liability	(0.02		)	—			(0.01		)	—
Impairment of equity investment in privately-held company	—			0.09			—			0.09
Cash tax impact of adjustments to GAAP net income	(0.00		)	(0.00		)	(0.01		)	(0.00		)
Non-cash income tax (benefit) expense	(0.05		)	0.00			0.33			0.38
Non-GAAP net income per share	$	0.15		$	0.30		$	1.86		$	1.86
Weighted average shares outstanding used in computing diluted non-GAAP net income per share and its components	42,305			43,142			43,303			42,878

Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance

(Amounts in thousands)



	Ranges for the three months ending
	December 31, 2014
Net loss	$	(9,100	)	$	(6,400	)
Stock-based compensation	3,200			3,000
Depreciation and amortization of intangible assets	9,500			9,400
Other loss, net ⁽³⁾	3,900			3,900
Income tax benefit	(5,100		)	(3,500		)
Adjusted EBITDA	$	2,400		$	6,400

Preliminary Non-GAAP Net Income Reconciliation for Forward-Looking Guidance

(Amounts in thousands)



	Ranges for the three months ending
	December 31, 2014
Net loss	$	(9,100	)	$	(6,400	)
Stock-based compensation	3,200			3,000
Amortization of acquired intangible assets	8,000			8,000
Accretion of debt discount on Convertible Senior Notes	900			900
Non-cash income tax benefit	(4,500		)	(3,000		)
Non-GAAP net income (loss)	$	(1,500	)	$	2,500

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

⁽¹⁾ We define Adjusted EBITDA as net income, determined in accordance with the accounting principles generally accepted in the United States of America (“GAAP”), excluding the effects of income taxes, depreciation, amortization of intangible assets, stock-based compensation, and other loss, net (as described in note ⁽³⁾below).

We believe that Adjusted EBITDA provides meaningful supplemental information regarding our performance. We use this non-GAAP financial measure for internal management and compensation purposes, when publicly providing guidance on possible future results, and as a means to evaluate period-to-period comparisons. We believe that Adjusted EBITDA is a common measure used by investors and analysts to evaluate our performance, that it provides a more complete understanding of the results of operations and trends affecting our business when viewed together with GAAP results, and that management and investors benefit from referring to this non-GAAP financial measure. Items excluded from Adjusted EBITDA are significant and necessary components to the operations of our business and, therefore, Adjusted EBITDA should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income. Other companies may calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

We define non-GAAP net income differently for this report than we have defined it in the past, due to adjustments recorded in other loss, net that resulted from finalizing Monoprice's 2013 federal and state tax returns in the third quarter of 2014. For this report, we define non-GAAP net income as net income, determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, accretion of debt discount on the Convertible Senior Notes, loss on debt extinguishment and modification expense, loss on derivative instrument, other-than-temporary impairment loss on equity investments, changes in non-cash pre-acquisition liabilities, and the related cash tax impact of those adjustments, and non-cash income taxes. We exclude the non-cash portion of income taxes because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which consist primarily of U.S. federal net operating losses. The majority of these deferred tax assets will expire, if unutilized, between 2020 and 2024.

We believe that non-GAAP net income and non-GAAP net income per share provide meaningful supplemental information to management, investors, and analysts regarding our performance and the valuation of our business by excluding items in the statement of operations that we do not consider part of our ongoing operations or have not been, or are not expected to be, settled in cash. Additionally, we believe that non-GAAP net income and non-GAAP net income per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP net income should be evaluated in light of our financial results prepared in accordance with GAAP and should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income. Other companies may calculate non-GAAP net income differently, and, therefore, our non-GAAP net income may not be comparable to similarly titled measures of other companies.

⁽²⁾ As presented in the Preliminary Condensed Consolidated Statements of Operations (unaudited).

⁽³⁾ Other loss, net primarily includes items such as interest income, interest expense, amortization of debt issuance costs, accretion of debt discounts, loss on debt extinguishment and modification expense, loss on derivative instrument, other-than-temporary impairment loss on equity investments, and adjustments to contingent liabilities related to business combinations.

EX-99.2 3 ex-992q32014.htm EXHIBIT EX-99.2 Q3 2014

Exhibit 99.2

Blucora, Inc.

Supplemental Information

September 30, 2014

Table of Contents



Financial Information
Consolidated Financial Results	2
Reconciliation of Non-GAAP Financial Measures	4
Stock Price Sensitivity Analysis for Diluted Shares	5

Operating Metrics
Search and Content	6
E-Commerce	7

Blucora Consolidated Financial Results

(in thousands except %s and net income per share, rounding differences may exist)



	2012				2013																			2014
	FY 12/31				1Q				2Q				3Q				4Q				FY 12/31			1Q			2Q				3Q
Segment Revenue
Search and Content ⁽¹⁾	$	344,814			$	100,601			$	94,497			$	107,742			$	125,624			$	428,464		$	106,765		$	79,818			$	74,416
Tax Preparation ⁽²⁾	62,105				64,737				22,684				1,749				2,043				91,213			72,279			26,452				2,469
E-Commerce⁽³⁾	—				—				—				14,630				39,673				54,303			37,139			35,299				37,970
Total	$	406,919			$	165,338			$	117,181			$	124,121			$	167,340			$	573,980		$	216,183		$	141,569			$	114,855
Segment Income (Loss) ⁽⁴⁾
Search and Content ⁽¹⁾	$	62,185			$	18,270			$	17,912			$	21,319			$	25,003			$	82,504		$	19,230		$	14,032			$	12,709
Tax Preparation ⁽²⁾	30,052				30,784				14,438				(1,605		)		(3,018		)		40,599			37,402			17,211				(1,859		)
E-Commerce ⁽³⁾	—				—				—				906				4,061				4,967			3,478			2,378				3,336
Total	$	92,237			$	49,054			$	32,350			$	20,620			$	26,046			$	128,070		$	60,110		$	33,621			$	14,186
Segment Income (Loss) % of Revenue
Search and Content	18		%		18		%		19		%		20		%		20		%		19		%	18		%	18		%		17		%
Tax Preparation	48		%		48		%		64		%		(92		)%		(148		)%		45		%	52		%	65		%		(75		)%
E-Commerce	na				na				na				na				10		%		9		%	9		%	7		%		9		%
Total	23		%		30		%		28		%		17		%		16		%		22		%	28		%	24		%		12		%
Unallocated Corporate Operating Expense ⁽⁴⁾	$	11,798		(5)	$	3,198			$	3,135			$	4,025		(6)	$	3,471			$	13,829		$	3,222		$	3,833			$	3,524
Adjusted EBITDA	$	80,439			$	45,856			$	29,215			$	16,595			$	22,575			$	114,241		$	56,888		$	29,788			$	10,662
Other Unallocated ⁽⁴⁾
Stock-based compensation	$	13,223		(7)	$	2,485			$	2,753			$	3,252		(8)	$	3,037			$	11,527		$	3,408		$	2,958		(9)	$	2,608
Depreciation	3,812				1,003				990				1,126				1,357				4,476			1,395			1,414				1,385
Amortization of intangible assets	19,199				5,109				5,095				6,090			(10)	7,495				23,789			7,469			7,642			(11)	7,993
Interest income	(131		)		(55		)		(109		)		(42		)		(94		)		(300		)	(108		)	(88		)		(71		)
Interest expense	3,522				1,148				2,890			(12)	2,669				2,756				9,463			3,015			2,764				2,706
Amortization of debt issuance costs	820				107				476			(12)	258				267				1,108			281			284				288
Accretion of debt discounts	325				161				949			(12)	862				866				2,838			906			916				931
Loss on debt extinguishment and modification expense	—				—				—				1,593				—				1,593			—			—				—
(Gain) loss on derivative instrument	2,346				(348		)		2,323				3,956				5,721			(13)	11,652			—			—				—
Impairment of equity investment in privately-held company	—				—				—				3,711				—				3,711			—			—				—
Other (income) loss, net	(205		)		(8		)		(225		)		111				(320		)		(442		)	(25		)	(152		)		(646		)
Total	$	42,911			$	9,602			$	15,142			$	23,586			$	21,085			$	69,415		$	16,341		$	15,738			$	15,194
Income (Loss) Before Taxes	$	37,528			$	36,254			$	14,073			$	(6,991	)		$	1,490			$	44,826		$	40,547		$	14,050			$	(4,532	)
Income Tax (Benefit) Expense
Cash	$	1,443			$	1,472			$	435			$	(517	)		$	498			$	1,888		$	2,241		$	1,435			$	(277	)
Non-cash ⁽¹⁴⁾	13,559				11,174				5,232				7				2,126				18,539			12,319			3,878				(2,017		)
Total	$	15,002			$	12,646			$	5,667			$	(510	)		$	2,624			$	20,427		$	14,560		$	5,313			$	(2,294	)
GAAP Net Income (Loss)	$	22,526			$	23,608			$	8,406			$	(6,481	)		$	(1,134	)		$	24,399		$	25,987		$	8,737			$	(2,238	)
GAAP Net Income (Loss) Per Share - diluted	$	0.54			$	0.53		(15)	$	0.20			$	(0.16	)		$	(0.03	)		$	0.56		$	0.58		$	0.20			$	(0.05	)
Non-GAAP Net Income	$	70,760			$	41,997			$	24,632			$	12,970			$	18,095			$	97,694		$	50,003		$	23,908			$	6,544
Non-GAAP Net Income Per Share - diluted	$	1.70			$	0.95			$	0.58			$	0.30		(16)	$	0.40		(17)	$	2.25		$	1.12		$	0.55			$	0.15		(18)
Outstanding Shares	40,832				40,933				41,143				41,176				42,083				42,083			42,203			41,039				40,977
Basic Shares - GAAP	40,279				40,911				41,050				41,088				41,566				41,201			42,162			41,570				41,034
Diluted Shares - GAAP	41,672				44,294				42,724				41,088				41,566				43,480			44,521			43,084				41,034
Cash & Short-term Investments	$	162,288			$	401,677			$	415,493			$	248,382			$	333,705			$	333,705		$	336,390		$	278,620			$	280,394
Outstanding Debt - Principal Amount ⁽¹⁹⁾	74,496				275,746				265,746				266,634				322,634				322,634			278,634			266,634				264,634
Net Cash	$	87,792			$	125,931			$	149,747			$	(18,252	)		$	11,071			$	11,071		$	57,756		$	11,986			$	15,760

Notes to Consolidated Financial Results on next page

Notes to Consolidated Financial Results


⁽¹⁾	On May 30, 2014, we acquired HowStuffWorks ("HSW"). The Search and Content segment, formerly known as the Search segment, includes the financial results of HSW beginning on May 30, 2014.


⁽²⁾	On January 31, 2012, we acquired TaxACT, Inc. As a highly seasonal business, almost all of the TaxACT revenue is generated in the first four months of the calendar year. Amounts for 2012 represented the results of operations for the TaxACT business from January 31, 2012 to December 31, 2012.


⁽³⁾	On August 22, 2013, we acquired Monoprice, Inc. Amounts for 2013 represented the results of operations for the Monoprice business from August 22, 2013 to December 31, 2013.


⁽⁴⁾	We do not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, depreciation, amortization of intangible assets, other income/loss, net, or income taxes to the reportable segments. The general and administrative costs are included in Unallocated Corporate Operating Expense.


⁽⁵⁾	Amount in 2012 included $1.1 million in transaction costs related to the TaxACT acquisition.


⁽⁶⁾	Amount for 3Q13 included $0.6 million in transaction costs related to the Monoprice acquisition.


⁽⁷⁾	Amount in 2012 included $5.2 million in stock-based compensation in association with the modification of the terms of a warrant and the vesting of non-employee performance-based stock options upon completion of the TaxACT acquisition.


⁽⁸⁾	In 3Q13, $0.5 million in stock-based compensation was recorded in association with the vesting of performance-based stock options upon completion of the Monoprice acquisition.


⁽⁹⁾	In 2Q14, $0.3 million in stock-based compensation was recorded in association with the vesting of performance-based stock options upon completion of the HSW acquisition.


⁽¹⁰⁾	Amount for 3Q13 included $1.0 million related to amortization of acquired intangible assets related to the Monoprice acquisition.


⁽¹¹⁾	Amount for 2Q14 included $0.2 million related to amortization of acquired intangible assets related to the HSW acquisition.


⁽¹²⁾	Interest expense, amortization of debt issuance costs, and accretion of debt discounts included amounts associated with the Convertible Senior Notes issued on March 15, 2013.


⁽¹³⁾	Warrant was exercised during 4Q13.


⁽¹⁴⁾	Amounts represent the non-cash portion of income taxes from continuing operations. We exclude the non-cash portion of income taxes because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which consist primarily of US federal net operating losses. The majority of these deferred tax assets will expire, if unutilized, between 2020 and 2024.


⁽¹⁵⁾	Calculation excluded the income effect of a dilutive derivative instrument and the Convertible Senior Notes in 1Q13. Related to the Notes, we received shareholder approval for flexible settlement in May 2013.


⁽¹⁶⁾	Calculation in 3Q13 used 43,142,000 diluted shares due to non-GAAP net income.


⁽¹⁷⁾	Calculation in 4Q13 used 45,716,000 diluted shares due to non-GAAP net income.


⁽¹⁸⁾	Calculation in 3Q14 used 42,305,000 diluted shares due to non-GAAP net income.


⁽¹⁹⁾	2012 included the TaxACT 2012 credit facility, issued in January 2012 in connection with the TaxACT acquisition and refinanced during 3Q13 on more favorable terms (the TaxACT 2013 credit facility), 1Q13 included the Convertible Senior Notes issued in March 2013, and 4Q13 included the Monoprice 2013 credit facility issued in November 2013.

Blucora Reconciliation of Non-GAAP Financial Measures ⁽¹⁾

(in thousands except net income per share, rounding differences may exist)



	2012			2013															2014
	FY 12/31			1Q			2Q			3Q			4Q			FY 12/31			1Q			2Q			3Q
Adjusted EBITDA
Net income (loss)⁽²⁾	$	22,526		$	23,608		$	8,406		$	(6,481	)	$	(1,134	)	$	24,399		$	25,987		$	8,737		$	(2,238	)
Stock-based compensation	13,223			2,485			2,753			3,252			3,037			11,527			3,408			2,958			2,608
Depreciation and amortization of intangible assets	23,011			6,112			6,085			7,216			8,852			28,265			8,864			9,056			9,378
Other loss, net ⁽³⁾	6,677			1,005			6,304			13,118			9,196			29,623			4,069			3,724			3,208
Income tax (benefit) expense	15,002			12,646			5,667			(510		)	2,624			20,427			14,560			5,313			(2,294		)
Adjusted EBITDA	$	80,439		$	45,856		$	29,215		$	16,595		$	22,575		$	114,241		$	56,888		$	29,788		$	10,662
Non-GAAP Net Income
Net income (loss) ⁽²⁾	$	22,526		$	23,608		$	8,406		$	(6,481	)	$	(1,134	)	$	24,399		$	25,987		$	8,737		$	(2,238	)
Stock-based compensation	13,223			2,485			2,753			3,252			3,037			11,527			3,408			2,958			2,608
Amortization of acquired intangible assets	19,199			5,109			5,095			6,090			7,495			23,789			7,469			7,642			7,993
Accretion of debt discount on Convertible Senior Notes	—			132			841			843			858			2,674			874			890			907
Loss on debt extinguishment and modification expense	—			—			—			1,593			—			1,593			—			—			—
(Gain) loss on derivative instrument	2,346			(348		)	2,323			3,956			5,721			11,652			—			—			—
Impairment of equity investment in privately-held company	—			—			—			3,711			—			3,711			—			—			—
Decrease in non-cash pre-acquisition liability	—			—			—			—			—			—			—			—			(665		)
Cash tax impact of adjustments to GAAP net income	(93		)	(163		)	(17		)	(1		)	(8		)	(189		)	(54		)	(197		)	(44		)
Non-cash income tax (benefit) expense ⁽¹⁾	13,559			11,174			5,231			7			2,126			18,538			12,319			3,878			(2,017		)
Non-GAAP net income ⁽⁴⁾	$	70,760		$	41,997		$	24,632		$	12,970		$	18,095		$	97,694		$	50,003		$	23,908		$	6,544
Non-GAAP Net Income Per Share
Non-GAAP net income	$	70,760		$	41,997		$	24,632		$	12,970		$	18,095		$	97,694		$	50,003		$	23,908		$	6,544
Non-GAAP net income per share	$	1.70		$	0.95		$	0.58		$	0.30		$	0.40		$	2.25		$	1.12		$	0.55		$	0.15
Diluted shares	41,672			44,294			42,724			43,142			45,716			43,480			44,521			43,084			42,305


⁽¹⁾	For definitions of these non-GAAP financial measures and their relationship to our GAAP financial statements, please see Note 1 to our Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures in exhibit 99.1 to the November 5, 2014 Current Report on Form 8-K.


⁽²⁾	As presented in the Preliminary Condensed Consolidated Statements of Operations (unaudited).


⁽³⁾	Other loss, net primarily includes items such as interest income, interest expense, amortization of debt issuance costs, accretion of debt discounts, loss on debt extinguishment and modification expense, gain or loss on derivative instrument, other-than-temporary impairment loss on equity investments, and adjustments to contingent liabilities related to business combinations.

⁽⁴⁾

We define Non-GAAP net income differently effective with 1Q13 to include accretion of debt discount on Convertible Senior notes, 3Q13 to include other-than-temporary impairment losses on equity investments and loss on debt extinguishment and modification expense, and 3Q14 to include decrease in non-cash pre-acquisition liability. Our new definition of non-GAAP net income did not impact presentation of this non-GAAP financial measure for prior periods.

Blucora Stock Price Sensitivity Analysis for Diluted Shares

(in thousands except share prices)

The following table illustrates the potential impact of a change in average stock price on the number of shares included in diluted shares associated with the conversion premium on the convertible notes:



Stock Price		Diluted Shares ^(a)
$	16.53	—	^(b)
$	21.66	—	^(c)
$	22.00	144
$	22.50	347
$	23.00	541
$	23.50	728
$	24.00	906
$	24.50	1,077
$	25.00	1,241
$	25.50	1,399
$	26.00	1,551
$	26.50	1,697
$	27.00	1,838
$	27.50	1,973
$	28.00	2,104
$	28.50	2,230
$	29.00	2,352
$	29.50	2,470
$	30.00	2,583


^(a)	Indicative shares associated with conversion premium on convertible notes


^(b)	Average stock price for the current quarter did not exceed the conversion price of the convertible notes


^(c)	Approximate conversion price

Blucora Operating Metrics - Search and Content



	2012		2013										2014
Revenue by source	FY 12/31		1Q		2Q		3Q		4Q		FY 12/31		1Q		2Q		3Q
Owned & Operated (B2C)	12	%	12	%	15	%	19	%	20	%	17	%	22	%	17	%	21	%
Distribution (B2B)	88	%	88	%	85	%	81	%	80	%	83	%	78	%	83	%	79	%

Blucora Operating Metrics - E-Commerce



	2013										2014
	1Q		2Q		3Q		4Q		FY 12/31		1Q		2Q		3Q
Order numbers % change ⁽¹⁾	16	%	22	%	15	%	10	%	15	%	(2	)%	(7	)%	(5	)%


⁽¹⁾	Figures represent increase (decrease) in order numbers as compared to the comparable prior period.

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