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
 

1



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

2



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.

3



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.

4



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

5



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
%

 

6



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.


7