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.