0001068875-16-000194.txt : 20160211 0001068875-16-000194.hdr.sgml : 20160211 20160211164811 ACCESSION NUMBER: 0001068875-16-000194 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20160211 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20160211 DATE AS OF CHANGE: 20160211 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: 161412313 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-kq42015earningsrelea.htm 8-K 8-K


 
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
February 11, 2016
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 February 11, 2016, Blucora announced its financial results for the quarter and year ended December 31, 2015. 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
February 11, 2016
99.2
 
Investor presentation dated
February 11, 2016

-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
 
 
 
 
 
February 11, 2016


-3-


EXHIBIT INDEX 
Exhibit No
 
Description
 
 
 
 
 
99.1
 
Press release dated
February 11, 2016
99.2
 
Investor presentation dated
February 11, 2016

-4-
 EX-99.1 2 ex-991earningsreleaseq42015.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
 
Blucora Reports Fourth Quarter and Full Year 2015 Results
BELLEVUE, WA — (Marketwired) — February 11, 2016 — Blucora, Inc. (NASDAQ: BCOR) today announced financial results for the fourth quarter and full year ended December 31, 2015.
2015 Highlights and Recent Developments
•
Blucora completed the acquisition of HD Vest on December 31, 2015, which reported a 5% increase in revenue and a 7% increase in income for 2015.
•
TaxAct posted a 13% increase in revenue and a 15% increase in segment income for 2015, marking the fourth consecutive year of double-digit top and bottom line growth under Blucora’s ownership.
•
TaxAct introduced a new forms based pricing structure for the current tax season, offering Free State and Federal for simple returns.
•
TaxAct recently debuted a robust new set of enhancements to its Preparer’s editions and a new client portal.
•
HD Vest recruiting at highest levels in more than eight years at the firm and exited the year with 4,600 advisors up 2% and marks the third consecutive year of advisor growth. 
“Blucora made transformational changes in 2015,” said Bill Ruckelshaus, President and Chief Executive Officer of Blucora. “Our acquisition of HD Vest last year was guided by two principal beliefs. First, the HD Vest market opportunity is compelling, the Company has a differentiated business model, and proven team. Second, there are meaningful opportunities in bringing HD Vest and TaxAct under common ownership to create a more strategically focused Blucora going forward. With the HD Vest acquisition now complete, our attention is fixed on executing in the current season at TaxAct, integrating HD Vest and laying the groundwork for future cross-collaboration between our two businesses. Our divestiture processes for Monoprice and Infospace are proceeding as planned.”
The following presentation represents pro forma financial information and includes HD Vest. In addition, it excludes the Search and Content and E-Commerce segments which have been classified as discontinued operations for all periods presented. The Company believes that this presentation most accurately reflects the financial performance of the Company on a go-forward basis.
Pro Forma Summary Financial Performance: Q4 and Full Year 2015
($ in millions except per share amounts)
 
Q4
 
Q4
 
 
 
Full Year
 
Full Year
 
 
 
2015
 
2014
 
Change
 
2015
 
2014
 
Change
Pro Forma Revenues
$
85.0

 
$
81.6

 
4
 %
 
$
437.4

 
$
408.6

 
7
 %
Wealth Management
82.1

 
79.1

 
4
 %
 
319.7

 
304.9

 
5
 %
Tax Preparation
2.9

 
2.5

 
14
 %
 
117.7

 
103.7

 
13
 %
Pro Forma Segment Income
7.7

 
7.3

 
6
 %
 
100.0

 
90.0

 
11
 %
Wealth Management
12.2

 
10.4

 
18
 %
 
43.0

 
40.3

 
7
 %
Tax Preparation
(4.5
)
 
(3.1
)
 
47
 %
 
57.0

 
49.7

 
15
 %
Pro Forma Unallocated Corporate Operating Expenses
4.3

 
4.3

 
—
 %
 
17.8

 
14.2

 
25
 %
Pro Forma Adjusted EBITDA
$
3.5

 
$
3.0

 
15
 %
 
$
82.2

 
$
75.8

 
9
 %
Pro Forma Non-GAAP:
 
 
 
 
 
 
 
 
 
 
 
Income (Loss) from Continuing Operations
$
(8.0
)
 
$
(8.5
)
 
(6
)%
 
$
37.0

 
$
30.1

 
23
 %
Diluted Income (Loss) per Share from Continuing Operations
$
(0.19
)
 
$
(0.21
)
 
(10
)%
 
$
0.88

 
$
0.70

 
26
 %
Pro Forma GAAP:
 
 
 
 
 
 
 
 
 
 
 
Income (Loss) from Continuing Operations
$
(13.9
)
 
$
(13.8
)
 
1
 %
 
$
(11.5
)
 
$
(15.5
)
 
(26
)%
Diluted Income (Loss) per Share from Continuing Operations
$
(0.34
)
 
$
(0.34
)
 
—
 %
 
$
(0.28
)
 
$
(0.37
)
 
(24
)%
See reconciliation of pro forma non-GAAP to GAAP measures in table below.




First Quarter and Full Year 2016 Outlook
For the first quarter of 2016, the Company expects revenues to be between $162.5 million and $167.0 million, Adjusted EBITDA to be between $49.0 million and $52.0 million, Non-GAAP income from continuing operations to be between $36.7 million and $39.9 million, or $0.88 to $0.96 per diluted share, and GAAP income from continuing operations to be between $14.4 million and $16.6 million, or $0.35 to $0.40 per diluted share.
For the full year 2016, the Company expects revenues to be between $444.0 million and $462.5 million, Adjusted EBITDA to be between $86.0 million and $91.5 million, Non-GAAP income from continuing operations to be between $40.6 million and $47.5 million, or $0.96 to $1.12 per diluted share, and GAAP loss from continuing operations to be between $(7.5) million and $(2.2) million, or $(0.18) to $(0.05) per diluted share.
As Reported Summary Financial Performance: Q4 and Full Year 2015
($ in millions except per share amounts)
 
Q4
 
Q4
 
 
 
Full Year
 
Full Year
 
 
 
2015
 
2014
 
Change
 
2015
 
2014
 
Change
Revenues
 
 
 
 
 
 
 
 
 
 
 
Tax Preparation
$
2.9

 
$
2.5

 
14
%
 
$
117.7

 
$
103.7

 
13
%
Segment Income
 
 
 
 
 
 
 
 
 
 
 
Tax Preparation
$
(4.5
)
 
$
(3.1
)
 
47
%
 
$
57.0

 
$
49.7

 
15
%
Adjusted EBITDA
$
(8.8
)
 
$
(7.3
)
 
20
%
 
$
39.2

 
$
35.5

 
11
%
Non-GAAP:
 
 
 
 
 
 
 
 
 
 
 
Income (Loss) from Continuing Operations
$
(11.5
)
 
$
(9.5
)
 
21
%
 
$
28.2

 
$
23.3

 
21
%
Diluted Income (Loss) per Share from Continuing Operations
$
(0.28
)
 
$
(0.23
)
 
22
%
 
$
0.67

 
$
0.54

 
24
%
GAAP:
 
 
 
 
 
 
 
 
 
 
 
Income (Loss) from Continuing Operations
$
(22.3
)
 
$
(11.7
)
 
91
%
 
$
(12.7
)
 
$
(5.5
)
 
130
%
Diluted Income (Loss) per Share from Continuing Operations
$
(0.55
)
 
$
(0.29
)
 
90
%
 
$
(0.31
)
 
$
(0.13
)
 
138
%
See reconciliation of non-GAAP to GAAP measures in table below.
Other
For the full year 2015, the Company repurchased 0.6 million shares for approximately $7.7 million. The Company has approximately $28.7 million authorized under the current plan.
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 fourth quarter and full year results, its outlook for the first quarter and full year of 2016, and other business matters. We have also provided supplemental financial information to our results that can be accessed in the Investor Relations section of the Blucora corporate website at http://www.blucora.com and filed with the SEC on Form 8-K. A replay of the call and management's prepared remarks will also be available on our website.





About Blucora®
Blucora, Inc. (NASDAQ: BCOR) is a leading provider of technology-enabled financial solutions to consumers, small businesses and tax professionals. Our products and services in tax preparation and wealth management, through TaxAct and HD Vest, help consumers manage their financial lives. TaxAct is an affordable digital tax preparation solution for individuals, business owners and tax professionals. HD Vest Financial Services ® supports an independent network of tax professionals who provide comprehensive financial planning solutions. For more information on Blucora or its businesses, please visit www.blucora.com.

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 availability of products to sell; 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 December 31,
 
Years ended December 31,
 
2015
 
2014
 
2015
 
2014
Services revenue
$
2,865

 
$
2,519

 
$
117,708

 
$
103,719

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
Services cost of revenue
1,487

 
1,176

 
6,167

 
5,880

Amortization of acquired technology
1,910

 
1,862

 
7,546

 
7,450

Total cost of revenue (1)
3,397

 
3,038

 
13,713

 
13,330

Engineering and technology (1)
1,636

 
1,028

 
5,107

 
3,758

Sales and marketing (1)
3,030

 
2,857

 
45,854

 
42,671

General and administrative (1)
19,869

 
7,113

 
43,563

 
25,315

Depreciation
420

 
334

 
1,521

 
1,300

Amortization of other acquired intangible assets
3,191

 
3,186

 
12,757

 
12,742

Total operating expenses
31,543

 
17,556

 
122,515

 
99,116

Operating income (loss)
(28,678
)
 
(15,037
)
 
(4,807
)
 
4,603

Other loss, net (2)
(3,433
)
 
(3,333
)
 
(12,542
)
 
(13,489
)
Loss from continuing operations before income taxes
(32,111
)
 
(18,370
)
 
(17,349
)
 
(8,886
)
Income tax benefit
9,767

 
6,675

 
4,623

 
3,342

Loss from continuing operations
(22,344
)
 
(11,695
)
 
(12,726
)
 
(5,544
)
Loss from discontinued operations, net of income taxes (3)
(34,470
)
 
(56,338
)
 
(27,348
)
 
(30,003
)
Net loss
$
(56,814
)
 
$
(68,033
)
 
$
(40,074
)
 
$
(35,547
)
Net loss per share - basic:
 
 
 
 
 
 
 
Continuing operations
$
(0.55
)
 
$
(0.29
)
 
$
(0.31
)
 
$
(0.13
)
Discontinued operations
(0.84
)
 
(1.38
)
 
(0.67
)
 
(0.73
)
Basic net loss per share
$
(1.39
)
 
$
(1.67
)
 
$
(0.98
)
 
$
(0.86
)
Net loss per share - diluted:
 
 
 
 
 
 
 
Continuing operations
$
(0.55
)
 
$
(0.29
)
 
$
(0.31
)
 
$
(0.13
)
Discontinued operations
(0.84
)
 
(1.38
)
 
(0.67
)
 
(0.73
)
Diluted net loss per share
$
(1.39
)
 
$
(1.67
)
 
$
(0.98
)
 
$
(0.86
)
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
40,979

 
40,820

 
40,959

 
41,396

Diluted
40,979

 
40,820

 
40,959

 
41,396

(1) Stock-based compensation expense was allocated among the following captions (in thousands):
 
Three months ended December 31,
 
Years ended December 31,
 
2015
 
2014
 
2015
 
2014
Cost of revenue
$
25

 
$
37

 
$
96

 
$
254

Engineering and technology
148

 
119

 
484

 
516

Sales and marketing
161

 
192

 
771

 
829

General and administrative
2,386

 
1,779

 
7,343

 
7,095

Total stock-based compensation expense
$
2,720

 
$
2,127

 
$
8,694

 
$
8,694

(2) Other loss, net was allocated among the following captions (in thousands):
 
Three months ended December 31,
 
Years ended December 31,
 
2015
 
2014
 
2015
 
2014
Interest income
$
(179
)
 
$
(87
)
 
$
(609
)
 
$
(355
)
Interest expense
2,211

 
2,308

 
9,044

 
9,476

Amortization of debt issuance costs
291

 
272

 
1,133

 
1,059

Accretion of debt discounts
993

 
923

 
3,866

 
3,594

Loss on debt extinguishment and modification expense
398

 
—

 
398

 
—

Gain on third party bankruptcy settlement
(62
)
 
(119
)
 
(1,128
)
 
(286
)
Other
(219
)
 
36

 
(162
)
 
1

Other loss, net
$
3,433

 
$
3,333

 
$
12,542

 
$
13,489

(3) Loss from discontinued operations included goodwill and trade name impairments, totaling $59.0 million and $62.6 million for the years ended December 31, 2015 and 2014, respectively.





Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
 
December 31,
 
2015
 
2014
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
55,473

 
$
41,968

Cash segregated under federal or other regulations
3,557

 
—

Available-for-sale investments
11,301

 
251,620

Accounts receivable, net
7,884

 
292

Commissions receivable
16,328

 
—

Other receivables
24,407

 
1,890

Prepaid expenses and other current assets, net
10,062

 
6,466

Current assets of discontinued operations
211,663

 
72,253

Total current assets
340,675

 
374,489

Long-term assets:
 
 
 
Property and equipment, net
11,308

 
6,542

Goodwill, net
548,959

 
188,541

Other intangible assets, net
396,295

 
92,119

Long-term assets of discontinued operations
—

 
202,707

Other long-term assets
2,311

 
1,377

Total long-term assets
958,873

 
491,286

Total assets
$
1,299,548

 
$
865,775

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
4,689

 
$
419

Commissions and advisory fees payable
16,982

 
—

Accrued expenses and other current liabilities
13,006

 
7,227

Deferred revenue
11,521

 
6,320

Current portion of long-term debt, net
31,631

 
—

Current liabilities of discontinued operations
88,275

 
61,092

Total current liabilities
166,104

 
75,058

Long-term liabilities:
 
 
 
Long-term debt, net
353,850

 
51,940

Convertible senior notes, net
185,918

 
181,063

Deferred tax liability, net
103,520

 
20,282

Deferred revenue
1,902

 
1,915

Long-term liabilities of discontinued operations
—

 
53,764

Other long-term liabilities
10,932

 
2,728

Total long-term liabilities
656,122

 
311,692

Total liabilities
822,226

 
386,750

 
 
 
 
Redeemable non-controlling interests
15,038

 
—

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock
4

 
4

Additional paid-in capital
1,490,405

 
1,467,658

Accumulated deficit
(1,027,598
)
 
(987,524
)
Accumulated other comprehensive loss
(527
)
 
(1,113
)
Total stockholders’ equity
462,284

 
479,025

Total liabilities and stockholders’ equity
$
1,299,548

 
$
865,775





Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
 
Years ended December 31,
 
2015
 
2014
Operating Activities:
 
 
 
Net loss
$
(40,074
)
 
$
(35,547
)
Less: Discontinued operations, net of income taxes
(27,348
)
 
(30,003
)
Net loss from continuing operations
(12,726
)
 
(5,544
)
Adjustments to reconcile net loss from continuing operations to cash from operating activities:
 
 
 
Stock-based compensation
8,694

 
8,694

Depreciation and amortization of acquired intangible assets
22,590

 
22,164

Excess tax benefits from stock-based award activity
(7,967
)
 
(6,398
)
Deferred income taxes
(12,607
)
 
(9,858
)
Amortization of premium on investments, net
1,589

 
3,772

Amortization of debt issuance costs
1,133

 
1,059

Accretion of debt discounts
3,866

 
3,594

Loss on debt extinguishment and modification expense
398

 
—

Other
203

 
77

Cash provided (used) by changes in operating assets and liabilities:
 
 
 
Accounts receivable
(1,862
)
 
47

Other receivables
651

 
367

Prepaid expenses and other current assets
(493
)
 
(3,457
)
Other long-term assets
(15
)
 
191

Accounts payable
369

 
(258
)
Deferred revenue
1,875

 
1,130

Accrued expenses and other current and long-term liabilities
10,643

 
4,548

Net cash provided by operating activities from continuing operations
16,341

 
20,128

Investing Activities:
 
 
 
Business acquisitions, net of cash acquired
(573,366
)
 
—

Purchases of property and equipment
(1,512
)
 
(2,037
)
Change in restricted cash
150

 
—

Proceeds from sales of investments
156,506

 
28,535

Proceeds from maturities of investments
296,455

 
255,994

Purchases of investments
(214,257
)
 
(336,495
)
Net cash used by investing activities from continuing operations
(336,024
)
 
(54,003
)
Financing Activities:
 
 
 
Proceeds from credit facility
378,270

 
36,556

Repayment of credit facility
(51,940
)
 
(56,000
)
Stock repurchases
(7,735
)
 
(38,650
)
Excess tax benefits from stock-based award activity
7,967

 
6,398

Proceeds from stock option exercises
2,409

 
6,730

Proceeds from issuance of stock through employee stock purchase plan
1,193

 
1,376

Tax payments from shares withheld upon vesting of restricted stock units
(1,545
)
 
(2,875
)
Net cash provided (used) by financing activities from continuing operations
328,619

 
(46,465
)
Net cash provided (used) by continuing operations
8,936

 
(80,340
)
 
 
 
 
Net cash provided by operating activities from discontinued operations
14,108

 
41,406

Net cash used by investing activities from discontinued operations
(540
)
 
(47,933
)
Net cash provided (used) by financing activities from discontinued operations
(8,982
)
 
8,886

Net cash provided by discontinued operations
4,586

 
2,359

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(17
)
 
—

Net increase (decrease) in cash and cash equivalents
13,505

 
(77,981
)
Cash and cash equivalents, beginning of period
41,968

 
119,949

Cash and cash equivalents, end of period
$
55,473

 
$
41,968





Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
 
Three months ended December 31,
 
Years ended December 31,
 
2015
 
2014
 
2015
 
2014
Revenue:
 
 
 
 
 
 
 
Tax Preparation
$
2,865

 
$
2,519

 
$
117,708

 
$
103,719

Operating income (loss):
 
 
 
 
 
 
 
Tax Preparation
(4,509
)
 
(3,058
)
 
56,984

 
49,696

Corporate-level activity (1)
(24,169
)
 
(11,979
)
 
(61,791
)
 
(45,093
)
Total operating income (loss)
(28,678
)
 
(15,037
)
 
(4,807
)
 
4,603

Other loss, net
(3,433
)
 
(3,333
)
 
(12,542
)
 
(13,489
)
Loss from continuing operations before income taxes
(32,111
)
 
(18,370
)
 
(17,349
)
 
(8,886
)
Income tax benefit
9,767

 
6,675

 
4,623

 
3,342

Loss from continuing operations
(22,344
)
 
(11,695
)
 
(12,726
)
 
(5,544
)
Discontinued operations, net of income taxes
(34,470
)
 
(56,338
)
 
(27,348
)
 
(30,003
)
Net loss
$
(56,814
)
 
$
(68,033
)
 
$
(40,074
)
 
$
(35,547
)
(1) Corporate-level activity included the following (in thousands):
 
Three months ended December 31,
 
Years ended December 31,
 
2015
 
2014
 
2015
 
2014
Operating expenses
$
15,722

 
$
4,278

 
$
30,507

 
$
14,235

Stock-based compensation
2,720

 
2,127

 
8,694

 
8,694

Depreciation
626

 
526

 
2,287

 
1,972

Amortization of acquired intangible assets
5,101

 
5,048

 
20,303

 
20,192

Total corporate-level activity
$
24,169

 
$
11,979

 
$
61,791

 
$
45,093






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 December 31,
 
Years ended December 31,
 
2015
 
2014
 
2015
 
2014
Loss from continuing operations (2)
$
(22,344
)
 
$
(11,695
)
 
$
(12,726
)
 
$
(5,544
)
Stock-based compensation
2,720

 
2,127

 
8,694

 
8,694

Depreciation and amortization of acquired intangible assets
5,727

 
5,574

 
22,590

 
22,164

Acquisition-related transaction costs
9,674

 
—

 
10,988

 
—

CEO separation-related costs
1,769

 
—

 
1,769

 
—

Other loss, net (3)
3,433

 
3,333

 
12,542

 
13,489

Income tax benefit
(9,767
)
 
(6,675
)
 
(4,623
)
 
(3,342
)
Adjusted EBITDA
$
(8,788
)
 
$
(7,336
)
 
$
39,234

 
$
35,461

Preliminary Non-GAAP Income (Loss) from Continuing Operations Reconciliation (1) 
(Unaudited)
(Amounts in thousands, except per share amounts)
 
Three months ended December 31,
 
Years ended December 31,
 
2015
 
2014
 
2015
 
2014
Loss from continuing operations (2)
$
(22,344
)
 
$
(11,695
)
 
$
(12,726
)
 
$
(5,544
)
Stock-based compensation
2,720

 
2,127

 
8,694

 
8,694

Amortization of acquired intangible assets
5,101

 
5,048

 
20,303

 
20,192

Accretion of debt discount on Convertible Senior Notes
993

 
923

 
3,866

 
3,594

Loss on debt extinguishment and modification expense
398

 
—

 
398

 
—

Acquisition-related transaction costs
9,674

 
—

 
10,988

 
—

CEO separation-related costs
1,769

 
—

 
1,769

 
—

Cash tax impact of adjustments to GAAP net income
61

 
(5
)
 
(236
)
 
(151
)
Non-cash income tax benefit (1)
(9,827
)
 
(5,884
)
 
(4,857
)
 
(3,459
)
Non-GAAP income (loss) from continuing operations
$
(11,455
)
 
$
(9,486
)
 
$
28,199

 
$
23,326

 
 
 
 
 
 
 
 
Per diluted share:
 
 
 
 
 
 
 
Loss from continuing operations
$
(0.55
)
 
$
(0.29
)
 
$
(0.30
)
 
$
(0.13
)
Stock-based compensation
0.07

 
0.05

 
0.21

 
0.20

Amortization of acquired intangible assets
0.13

 
0.13

 
0.49

 
0.47

Accretion of debt discount on Convertible Senior Notes
0.02

 
0.02

 
0.09

 
0.08

Loss on debt extinguishment and modification expense
0.01

 
—

 
0.01

 
—

Acquisition-related transaction costs
0.24

 
—

 
0.26

 
—

CEO separation-related costs
0.04

 
—

 
0.04

 
—

Cash tax impact of adjustments to GAAP net income
0.00

 
0.00

 
(0.01
)
 
0.00

Non-cash income tax benefit
(0.24
)
 
(0.14
)
 
(0.12
)
 
(0.08
)
Non-GAAP income (loss) from continuing operations per share
$
(0.28
)
 
$
(0.23
)
 
$
0.67

 
$
0.54

Weighted average shares outstanding used in computing per diluted share amounts, including the "Loss from continuing operations" amount
40,979

 
40,820

 
41,861

 
42,946





Blucora, Inc.
Reconciliations of Pro Forma Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures
Preliminary Pro Forma Adjusted EBITDA Reconciliation
(Unaudited)
(Amounts in thousands)
 
Three months ended December 31,
 
Years ended December 31,
 
2015
 
2014
 
2015
 
2014
Pro forma loss from continuing operations
$
(13,893
)
 
$
(13,779
)
 
$
(11,536
)
 
$
(15,498
)
Pro forma stock-based compensation
4,034

 
3,441

 
13,591

 
13,591

Pro forma depreciation and amortization of acquired intangible assets
11,406

 
11,312

 
45,464

 
44,712

Pro forma other loss, net (3)
10,608

 
10,670

 
41,934

 
42,672

Pro forma income tax benefit
(8,698
)
 
(8,626
)
 
(7,222
)
 
(9,702
)
Pro forma adjusted EBITDA
$
3,457

 
$
3,018

 
$
82,231

 
$
75,775

Preliminary Pro Forma Non-GAAP Income (Loss) from Continuing Operations Reconciliation
(Unaudited)
(Amounts in thousands, except per share amounts)
 
Three months ended December 31,
 
Years ended December 31,
 
2015
 
2014
 
2015
 
2014
Pro forma loss from continuing operations
$
(13,893
)
 
$
(13,779
)
 
$
(11,536
)
 
$
(15,498
)
Pro forma stock-based compensation
4,034

 
3,441

 
13,591

 
13,591

Pro forma amortization of acquired intangible assets
10,238

 
10,185

 
40,851

 
40,740

Pro forma accretion of debt discount on Convertible Senior Notes
993

 
923

 
3,866

 
3,594

Pro forma cash tax impact of adjustments to pro forma net income
(100
)
 
(100
)
 
(400
)
 
(400
)
Pro forma non-cash income tax benefit
(9,248
)
 
(9,176
)
 
(9,422
)
 
(11,902
)
Pro forma non-GAAP income (loss) from continuing operations
$
(7,976
)
 
$
(8,506
)
 
$
36,950

 
$
30,125

 
 
 
 
 
 
 
 
Per diluted share:
 
 
 
 
 
 
 
Pro forma loss from continuing operations
$
(0.34
)
 
$
(0.34
)
 
$
(0.28
)
 
$
(0.36
)
Pro forma stock-based compensation
0.10

 
0.08

 
0.32

 
0.32

Pro forma amortization of acquired intangible assets
0.25

 
0.25

 
0.98

 
0.95

Pro forma accretion of debt discount on Convertible Senior Notes
0.02

 
0.02

 
0.09

 
0.08

Pro forma cash tax impact of adjustments to pro forma net income
0.00

 
0.00

 
(0.01
)
 
(0.01
)
Pro forma non-cash income tax benefit
(0.22
)
 
(0.22
)
 
(0.22
)
 
(0.28
)
Pro forma non-GAAP income (loss) from continuing operations per share
$
(0.19
)
 
$
(0.21
)
 
$
0.88

 
$
0.70

Weighted average shares outstanding used in computing per diluted share amounts, including the "Pro forma loss from continuing operations" amount
40,979

 
40,820

 
41,861

 
42,946






Preliminary Adjusted EBITDA Reconciliation
For Forward-Looking Guidance
(Amounts in thousands)
 
Ranges for the three months ending
 
Ranges for the year ending
 
March 31, 2016
 
December 31, 2016
Income (loss) from continuing operations
$
14,400

 
$
16,600

 
$
(7,500
)
 
$
(2,200
)
Stock-based compensation
3,500

 
3,400

 
16,800

 
15,800

Depreciation and amortization of acquired intangible assets
10,400

 
10,300

 
40,500

 
39,200

Other loss, net (3)
11,200

 
11,100

 
41,200

 
40,200

Income tax (benefit) expense
9,500

 
10,600

 
(5,000
)
 
(1,500
)
Adjusted EBITDA
$
49,000

 
$
52,000

 
$
86,000

 
$
91,500

Preliminary Non-GAAP Income from Continuing Operations Reconciliation
For Forward-Looking Guidance
(Amounts in thousands)
 
Ranges for the three months ending
 
Ranges for the year ending
 
March 31, 2016
 
December 31, 2016
Income (loss) from continuing operations
$
14,400

 
$
16,600

 
$
(7,500
)
 
$
(2,200
)
Stock-based compensation
3,500

 
3,400

 
16,800

 
15,800

Amortization of acquired intangible assets
9,000

 
9,000

 
35,000

 
34,000

Accretion of debt discount on Convertible Senior Notes
1,000

 
1,000

 
4,200

 
4,200

Non-cash income tax (benefit) expense
8,800

 
9,900

 
(7,900
)
 
(4,300
)
Non-GAAP income from continuing operations
$
36,700

 
$
39,900

 
$
40,600

 
$
47,500





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

(1) We define Adjusted EBITDA differently for this report than we have defined it in the past, due to the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, as well as transaction costs related to the HD Vest acquisition and separation-related costs in connection with the upcoming departure of our chief executive officer both of which were announced in the fourth quarter of 2015. We define Adjusted EBITDA as income (loss) from continuing operations, 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 acquired intangible assets (including acquired technology), stock-based compensation, acquisition-related transaction costs, CEO separation-related costs, 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 income (loss) from continuing operations. 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 income (loss) from continuing operations differently for this report than we have defined it in the past, due to the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, as well as transaction costs related to the HD Vest acquisition and separation-related costs in connection with the upcoming departure of our chief executive officer both of which were announced in the fourth quarter of 2015. For this report, we define non-GAAP income (loss) from continuing operations as income (loss) from continuing operations, determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets (including acquired technology), accretion of debt discount on the Convertible Senior Notes, loss on debt extinguishment and modification expense, acquisition-related transaction costs, CEO separation-related costs, 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 net operating losses will expire, if unutilized, between 2020 and 2024.

We believe that non-GAAP income (loss) from continuing operations and non-GAAP income (loss) from continuing operations 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 income (loss) from continuing operations and non-GAAP income (loss) from continuing operations per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP income (loss) from continuing operations 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 income (loss) from continuing operations. Other companies may calculate non-GAAP income (loss) from continuing operations differently, and, therefore, our non-GAAP income (loss) from continuing operations 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, and gain on third party bankruptcy settlement.


 EX-99.2 3 ex-992earningsreleaseq42015.htm EXHIBIT 99.2 Exhibit


Exhibit 99.2
Blucora, Inc.
Supplemental Information
December 31, 2015
Table of Contents
 


Pro Forma - Blucora Consolidated Financial Results (1) 
 
2014
 
2015
(in thousands except %s and per share amounts, rounding differences may exist)
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
 
Segment Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Wealth Management (2)
$
304,854

 
$
76,795

 
$
80,834

 
$
79,977

 
$
82,133

 
$
319,739

 
Tax Preparation
103,719

 
81,068

 
30,900

 
2,875

 
2,865

 
117,708

 
Total
$
408,573

 
$
157,863

 
$
111,734

 
$
82,852

 
$
84,998

 
$
437,447

 
Segment Income (Loss)
 
 
 
 
 
 
 
 
 
 
 
 
Wealth Management (2)
$
40,314

 
$
8,647

 
$
10,617

 
$
11,488

 
$
12,245

 
$
42,997

 
Tax Preparation
49,696

 
44,145

 
19,890

 
(2,542
)
 
(4,509
)
 
56,984

 
Total
$
90,010

 
$
52,792

 
$
30,507

 
$
8,946

 
$
7,736

 
$
99,981

 
Segment Income (Loss) % of Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Wealth Management
13
%
 
11
%
 
13
%
 
14
 %
 
15
 %
 
13
%
 
Tax Preparation
48
%
 
54
%
 
64
%
 
(88
)%
 
(157
)%
 
48
%
 
Total
22
%
 
33
%
 
27
%
 
11
 %
 
9
 %
 
23
%
 
Unallocated Corporate Operating Expense (3)
$
14,235

 
$
4,376

 
$
4,662

 
$
4,433

 
$
4,279

 
$
17,750

 
Adjusted EBITDA
$
75,775

 
$
48,416

 
$
25,845

 
$
4,513

 
$
3,457

 
$
82,231

 
Other Unallocated
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation (4)
$
13,591

 
$
2,889

 
$
3,289

 
$
3,379

 
$
4,034

 
$
13,591

 
Depreciation
3,972

 
1,144

 
1,133

 
1,168

 
1,168

 
4,613

 
Amortization of acquired intangible assets (4)
40,740

 
10,185

 
10,185

 
10,243

 
10,238

 
40,851

 
Interest income
(355
)
 
(122
)
 
(138
)
 
(170
)
 
(179
)
 
(609
)
 
Interest expense (5)
37,034

 
9,224

 
9,220

 
9,298

 
9,317

 
37,059

 
Amortization of debt issuance costs (5)
1,753

 
454

 
467

 
482

 
491

 
1,894

 
Accretion of debt discounts (5)
4,525

 
1,178

 
1,207

 
1,235

 
1,260

 
4,880

 
Other (income) loss, net
(285
)
 
(487
)
 
(308
)
 
(214
)
 
(281
)
 
(1,290
)
 
Total
$
100,975

 
$
24,465

 
$
25,055

 
$
25,421

 
$
26,048

 
$
100,989

 
Income (Loss) from Continuing Operations before Taxes
$
(25,200
)
 
$
23,951

 
$
790

 
$
(20,908
)
 
$
(22,591
)
 
$
(18,758
)
 
Income Tax (Benefit) Expense (6)
 
 
 
 
 
 
 
 
 
 
 
 
Cash
$
2,200

 
$
550

 
$
550

 
$
550

 
$
550

 
$
2,200

 
Non-cash
(11,902
)
 
8,671

 
(245
)
 
(8,600
)
 
(9,248
)
 
(9,422
)
 
Total
$
(9,702
)
 
$
9,221

 
$
305

 
$
(8,050
)
 
$
(8,698
)
 
$
(7,222
)
 
GAAP Income (Loss) from Continuing Operations (7)
$
(15,498
)
 
$
14,730

 
$
485

 
$
(12,858
)
 
$
(13,893
)
 
$
(11,536
)
 
GAAP Income (Loss) from Continuing Operations per Share - diluted
$
(0.37
)
 
$
0.35

 
$
0.01

 
$
(0.31
)
 
$
(0.34
)
 
$
(0.28
)
 
Non-GAAP Income (Loss) from Continuing Operations
$
30,125

 
$
37,315

 
$
14,572

 
$
(6,961
)
 
$
(7,976
)
 
$
36,950

 
Non-GAAP Income (Loss) from Continuing Operations per Share - diluted
$
0.70

(8)
$
0.89

 
$
0.35

 
$
(0.17
)
 
$
(0.19
)
 
$
0.88

(9)
Diluted Shares - GAAP
41,396

 
41,899

 
41,936

 
40,950

 
40,979

 
40,959

 
Notes to Pro Forma Consolidated Financial Results on next page

2

Notes to Pro Forma Consolidated Financial Results
 
(1) 
On October 14, 2015, Blucora announced the acquisition of HD Vest, which closed on December 31, 2015. As part of that announcement, we also stated our plans to divest the Search and Content and E-Commerce businesses in order to focus more strategically on the technology-enabled financial solutions market. The pro forma information represents the combination of HD Vest, TaxAct, and corporate expenses as if the acquisition closed on January 1, 2014. The Company believes that this presentation most accurately reflects the financial performance of the Company on a go-forward basis.
(2) 
As presented in the Pro Forma - Wealth Management Segment Financial Results on page 5.
(3) 
Unallocated corporate expenses exclude transaction costs related to the HD Vest acquisition and CEO separation-related costs.
(4) 
Includes stock-based compensation for Blucora share-based award grants to HD Vest employees and amortization of the definite-lived intangible assets identified in the HD Vest acquisition.
(5) 
Excludes interest expense and amortization of debt-related costs associated with the TaxAct 2013 credit facility and HD Vest's previous debt facility, both of which were paid off at the acquisition date, and includes similar expenses associated with the HD Vest - TaxAct 2015 credit facility that was used to finance the acquisition.
(6) 
Excludes historical tax expense and includes tax expense using an effective tax rate of 38.5% with anticipated cash taxes of $2.2 million per year, given expected net operating loss utilization.
(7) 
Excludes impacts of non-controlling interest associated with HD Vest management rollover equity ownership of 4.48%. Impacts of accounting for non-controlling interest are recorded after GAAP Income (Loss) from Continuing Operations.
(8) 
Calculation in FY 2014 used 42,946,000 diluted shares due to pro forma non-GAAP net income.
(9) 
Calculation in FY 2015 used 41,861,000 diluted shares due to pro forma non-GAAP net income.

3

Reconciliation of Pro Forma Non-GAAP Financial Measures (1) (2) 
 
2014
 
2015
(in thousands except per share amounts, rounding differences may exist)
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
Pro Forma Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
Pro forma income (loss) from continuing operations (3)
$
(15,498
)
 
$
14,730

 
$
485

 
$
(12,858
)
 
$
(13,893
)
 
$
(11,536
)
Pro forma stock-based compensation
13,591

 
2,889

 
3,289

 
3,379

 
4,034

 
13,591

Pro forma depreciation and amortization of acquired intangible assets
44,712

 
11,329

 
11,318

 
11,411

 
11,406

 
45,464

Pro forma other loss, net (4)
42,672

 
10,247

 
10,448

 
10,631

 
10,608

 
41,934

Pro forma income tax (benefit) expense
(9,702
)
 
9,221

 
305

 
(8,050
)
 
(8,698
)
 
(7,222
)
Pro forma adjusted EBITDA
$
75,775

 
$
48,416

 
$
25,845

 
$
4,513

 
$
3,457

 
$
82,231

Pro Forma Non-GAAP Income (Loss) from Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
Pro forma income (loss) from continuing operations (3)
$
(15,498
)
 
$
14,730

 
$
485

 
$
(12,858
)
 
$
(13,893
)
 
$
(11,536
)
Pro forma stock-based compensation
13,591

 
2,889

 
3,289

 
3,379

 
4,034

 
13,591

Pro forma amortization of acquired intangible assets
40,740

 
10,185

 
10,185

 
10,243

 
10,238

 
40,851

Pro forma accretion of debt discount on Convertible Senior Notes
3,594

 
940

 
958

 
975

 
993

 
3,866

Pro forma cash tax impact of adjustments to pro forma net income
(400
)
 
(100
)
 
(100
)
 
(100
)
 
(100
)
 
(400
)
Pro forma non-cash income tax (benefit) expense
(11,902
)
 
8,671

 
(245
)
 
(8,600
)
 
(9,248
)
 
(9,422
)
Pro forma non-GAAP income (loss) from continuing operations
$
30,125

 
$
37,315

 
$
14,572

 
$
(6,961
)
 
$
(7,976
)
 
$
36,950

 
 
 
 
 
 
 
 
 
 
 
 
Pro forma non-GAAP income (loss) per share from continuing operations
$
0.70

 
$
0.89

 
$
0.35

 
$
(0.17
)
 
$
(0.19
)
 
$
0.88

Pro forma diluted shares
42,946

 
41,899

 
41,936

 
40,950

 
40,979

 
41,861


(1) 
On October 14, 2015, Blucora announced the acquisition of HD Vest, which closed on December 31, 2015. As part of that announcement, we also stated our plans to divest the Search and Content and E-Commerce businesses in order to focus more strategically on the technology-enabled financial solutions market. The pro forma information represents the combination of HD Vest, TaxAct, and corporate expenses as if the acquisition closed on January 1, 2014. The Company believes that this presentation most accurately reflects the financial performance of the Company on a go-forward basis.
(2) 
For definitions of these non-GAAP financial measures and their relationship to our GAAP financial statements, see Note 1 to our Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures in exhibit 99.1 to the February 11, 2016 Current Report on Form 8-K.
(3) 
As presented in the Pro Forma - Blucora Consolidated Financial Results (unaudited) on page 2.
(4) 
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, and gain on third party bankruptcy settlement.

4

Pro Forma - Wealth Management Segment Financial Results
 
2014
 
2015
(in thousands except %s, rounding differences may exist)
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
Pro Forma Segment Revenue
$
304,854

 
$
76,795

 
$
80,834

 
$
79,977

 
$
82,133

 
$
319,739

Pro Forma Segment Net Revenue (1)
$
96,735

 
$
23,798

 
$
25,587

 
$
24,752

 
$
25,612

 
$
99,749

Pro Forma Segment Income (2)
$
40,314

 
$
8,647

 
$
10,617

 
$
11,488

 
$
12,245

 
$
42,997

Pro Forma Segment Income % of Revenue
13
%
 
11
%
 
13
%
 
14
%
 
15
%
 
13
%
Pro Forma Segment Income % of Net Revenue
42
%
 
36
%
 
41
%
 
46
%
 
48
%
 
43
%
(in thousands except %s, rounding differences may exist)
2014
 
2015
 
Sources of Revenue
Primary Drivers
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
Advisor-driven

Commission
- Transactions
- Asset levels
$
152,344

 
$
37,476

 
$
39,142

 
$
38,835

 
$
41,490

 
$
156,943

Advisory
- Advisory asset levels
120,185

 
31,734

 
32,799

 
33,327

 
31,573

 
129,434

Attachment revenue retained by us
Asset-Based
- Cash balances
- Interest rates
- Number of accounts
- Client asset levels
18,658

 
4,590

 
5,016

 
4,580

 
4,685

 
18,871

Transaction and Fee
- Account activity
- Number of clients
- Number of advisors
- Number of accounts
13,666

 
2,996

 
3,876

 
3,235

 
4,385

 
14,492

 
Total Revenue
 
$
304,854

 
$
76,795

 
$
80,834

 
$
79,977

 
$
82,133

 
$
319,739

 
Total Recurring Revenue
 
$
236,100

 
$
60,540

 
$
63,409

 
$
62,373

 
$
61,671

 
$
247,994


(1) 
Amount represents pro forma segment revenue less advisor commission payout.
(2) 
Excludes expenses associated with non-recurring projects.






5


Pro Forma - Blucora Leverage Ratio

 
2015
(in thousands except ratio, rounding differences may exist)
FY 12/31
CASH:
 
     Cash and cash equivalents
$
55,473

     Available-for-sale investments
11,301

 
$
66,774

 
 
DEBT:
 
     Convertible senior notes
$
201,250

     TaxAct - HD Vest 2015 credit facility
400,000

     Note payable, related party
6,400

 
$
607,650

 
 
NET CASH / (DEBT) FROM CONTINUING OPERATIONS
$
(540,876
)
 
 
OTHER:
 
     Add: Escrow receivable (1)
$
20,000

     Add: Cash and cash equivalents with discontinued operations
2,158

     Less: Debt associated with discontinued operations
(25,000
)
 
$
(2,842
)
 
 
TOTAL NET CASH / (DEBT)
$
(543,718
)
 
 
SEGMENT INCOME:
 
     Tax Preparation
$
56,984

     Wealth Management
42,997

     Discontinued Operations
36,093

 
136,074

    Unallocated corporate operating expenses
(17,750
)
ADJUSTED EBITDA
$
118,324

 
 
LEVERAGE RATIO
(4.60
)

(1) 
Amount represents consideration funded to escrow that is contingent upon HD Vest's 2015 earnings performance. The contingent consideration was not achieved; therefore, the amount will be returned to the Company from escrow.

6


Blucora Operating Metrics - Wealth Management
 
2014
 
2015
(in thousands except %s and as indicated below, rounding differences may exist)
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
Total Assets Under Administration ("AUA")
$
37,132,757

 
$
37,791,025

 
$
37,839,908

 
$
35,625,032

 
$
36,573,766

 
$
36,573,766

 
 
 
 
 
 
 
 
 
 
 
 
Advisory Assets Under Management ("AUM")
$
9,552,876

 
$
9,860,064

 
$
9,899,542

 
$
9,396,557

 
$
9,692,244

 
$
9,692,244

% of Total Assets Under Administration
25.7
%
 
26.1
%
 
26.2
%
 
26.4
%
 
26.5
%
 
26.5
%
 

 

 

 

 

 

Cash Sweep Assets
$
1,376,929

 
$
1,322,701

 
$
1,327,644

 
$
1,480,025

 
$
1,684,861

 
$
1,684,861

 


 


 


 


 


 


Number of Advisors (in ones)
4,515

 
4,564

 
4,579

 
4,625

 
4,600

 
4,600

 
 
 
 
 
 
 
 
 
 
 
 
Recurring Revenue Rate
77.4
%
 
78.8
%
 
78.4
%
 
78.0
%
 
75.1
%
 
77.6
%



7


Blucora Operating Metrics - Tax Preparation
(in thousands except %s, rounding differences may exist) 
Tax seasons ended April 16,
 
Years ended December 31,
Consumer e-files
2015
 
2014
 
% change
 
2015
 
2014
 
% change
Online e-files
5,058

 
5,067

 
0
 %
 
5,235

 
5,262

 
(1
)%
Desktop e-files
261

 
246

 
6
 %
 
273

 
258

 
6
 %
Sub-total e-files
5,319

 
5,313

 
0
 %
 
5,508

 
5,520

 
0
 %
Free File Alliance e-files (1)
172

 
210

 
(18
)%
 
181

 
222

 
(18
)%
Total e-files
5,491

 
5,523

 
(1
)%
 
5,689

 
5,742

 
(1
)%
 

(1) 
Free File Alliance e-files are provided as part of an IRS partnership that provides free electronic tax filing services to taxpayers meeting certain income-based guidelines.

8


As Reported - Blucora Consolidated Financial Results
 
2014
 
2015
(in thousands except %s and per share amounts, rounding differences may exist)
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
 
Segment Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Tax Preparation (1)
$
103,719

 
$
81,068

 
$
30,900

 
$
2,875

 
$
2,865

 
$
117,708

 
Segment Income (Loss) (2)
 
 
 
 
 
 
 
 
 
 
 
 
Tax Preparation (1)
$
49,696

 
$
44,145

 
$
19,890

 
$
(2,542
)
 
$
(4,509
)
 
$
56,984

 
Segment Income (Loss) % of Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Tax Preparation (1)
48
%
 
54
%
 
64
%
 
(88
)%
 
(157
)%
 
48
%
 
Unallocated Corporate Operating Expense (2)
$
14,235

 
$
4,376

 
$
4,662

 
$
5,747

 
$
15,722

 
$
30,507

 
Other Unallocated (2)
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation
$
8,694

 
$
1,905

 
$
1,995

 
$
2,074

 
$
2,720

 
$
8,694

 
Depreciation
1,972

 
538

 
538

 
585

 
626

 
2,287

 
Amortization of acquired intangible assets
20,192

 
5,048

 
5,048

 
5,106

 
5,101

 
20,303

 
Interest income
(355
)
 
(122
)
 
(138
)
 
(170
)
 
(179
)
 
(609
)
 
Interest expense
9,476

 
2,388

 
2,242

 
2,203

 
2,211

 
9,044

 
Amortization of debt issuance costs
1,059

 
276

 
280

 
286

 
291

 
1,133

 
Accretion of debt discounts
3,594

 
940

 
958

 
975

 
993

 
3,866

 
Loss on debt extinguishment and modification expense
—

 
—

 
—

 
—

 
398

 
398

 
Other (income) loss, net
(285
)
 
(487
)
 
(308
)
 
(214
)
 
(281
)
 
(1,290
)
 
Total
$
44,347

 
$
10,486

 
$
10,615

 
$
10,845

 
$
11,880

 
$
43,826

 
Income (Loss) from Continuing Operations before Taxes
$
(8,886
)
 
$
29,283

 
$
4,613

 
$
(19,134
)
 
$
(32,111
)
 
$
(17,349
)
 
Income Tax (Benefit) Expense
 
 
 
 
 
 
 
 
 
 
 
 
Cash
$
117

 
$
57

 
$
59

 
$
58

 
$
60

 
$
234

 
Non-cash (3)
(3,459
)
 
9,811

 
2,143

 
(6,984
)
 
(9,827
)
 
(4,857
)
 
Total
$
(3,342
)
 
$
9,868

 
$
2,202

 
$
(6,926
)
 
$
(9,767
)
 
$
(4,623
)
 
GAAP Income (Loss) from Continuing Operations
$
(5,544
)
 
$
19,415

 
$
2,411

 
$
(12,208
)
 
$
(22,344
)
 
$
(12,726
)
 
GAAP Income (Loss) from Continuing Operations per Share - diluted
$
(0.13
)
 
$
0.46

 
$
0.06

 
$
(0.30
)
 
$
(0.55
)
 
$
(0.31
)
 
GAAP Discontinued Operations (4)
$
(30,003
)
 
$
3,685

 
$
1,840

 
$
1,597

 
$
(34,470
)
 
$
(27,348
)
 
GAAP Discontinued Operations per Share - diluted
$
(0.73
)
 
$
0.09

 
$
0.04

 
$
0.04

 
$
(0.84
)
 
$
(0.67
)
 
GAAP Net Income (Loss)
$
(35,547
)
 
$
23,100

 
$
4,251

 
$
(10,611
)
 
$
(56,814
)
 
$
(40,074
)
 
GAAP Net Income (Loss) per Share - diluted
$
(0.86
)
 
$
0.55

 
$
0.10

 
$
(0.26
)
 
$
(1.39
)
 
$
(0.98
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
35,461

 
$
39,769

 
$
15,228

 
$
(6,975
)
 
$
(8,788
)
 
$
39,234

 
Non-GAAP Income (Loss) from Continuing Operations
$
23,326

 
$
37,085

 
$
12,488

 
$
(9,919
)
 
$
(11,455
)
 
$
28,199

 
Non-GAAP Income (Loss) from Continuing Operations per Share - diluted
$
0.54

(5)
$
0.89

 
$
0.30

 
$
(0.24
)
 
$
(0.28
)
 
$
0.67

(6)
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding Shares
40,882

 
40,851

 
40,944

 
40,951

 
40,954

 
40,954

 
Basic Shares - GAAP
41,396

 
40,987

 
40,918

 
40,950

 
40,979

 
40,959

 
Diluted Shares - GAAP
41,396

 
41,899

 
41,936

 
40,950

 
40,979

 
40,959

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash & Short-term Investments
$
293,588

 
$
306,899

 
$
291,234

 
$
283,689

 
$
66,774

 
$
66,774

 
Outstanding Debt - Principal Amount
253,190

 
229,250

 
231,250

 
231,250

 
607,650

 
607,650

 
Net Cash (Debt)
$
40,398

 
$
77,649

 
$
59,984

 
$
52,439

 
$
(540,876
)
 
$
(540,876
)
 
Notes to As Reported Consolidated Financial Results on next page

9


Notes to As Reported Consolidated Financial Results
 
(1) 
As a highly seasonal business, almost all of the Tax Preparation revenue is generated in the first four months of the calendar year.
(2) 
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 segment.  The general and administrative costs are included in Unallocated Corporate Operating Expense.
(3) 
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.
(4) 
On October 14, 2015, we announced plans to divest of the Search and Content and E-Commerce businesses. Accordingly, our financial condition, results of operations, and cash flows reflect the Search and Content and E-Commerce businesses as discontinued operations for all periods presented.
(5) 
Calculation in FY 2014 used 42,946,000 diluted shares due to non-GAAP net income.
(6) 
Calculation in FY 2015 used 41,861,000 diluted shares due to non-GAAP net income.

10


As Reported - Blucora Reconciliation of Non-GAAP Financial Measures (1) 
 
2014
 
2015
(in thousands except per share amounts, rounding differences may exist)
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations (2)
$
(5,544
)
 
$
19,415

 
$
2,411

 
$
(12,208
)
 
$
(22,344
)
 
$
(12,726
)
Stock-based compensation
8,694

 
1,905

 
1,995

 
2,074

 
2,720

 
8,694

Depreciation and amortization of acquired intangible assets
22,164

 
5,586

 
5,586

 
5,691

 
5,727

 
22,590

Acquisition-related transaction costs
—

 
—

 
—

 
1,314

 
9,674

 
10,988

CEO separation-related costs
—

 
—

 
—

 
—

 
1,769

 
1,769

Other loss, net (3)
13,489

 
2,995

 
3,034

 
3,080

 
3,433

 
12,542

Income tax (benefit) expense
(3,342
)
 
9,868

 
2,202

 
(6,926
)
 
(9,767
)
 
(4,623
)
Adjusted EBITDA (4)
$
35,461

 
$
39,769

 
$
15,228

 
$
(6,975
)
 
$
(8,788
)
 
$
39,234

Non-GAAP Income (Loss) from Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations (2)
$
(5,544
)
 
$
19,415

 
$
2,411

 
$
(12,208
)
 
$
(22,344
)
 
$
(12,726
)
Stock-based compensation
8,694

 
1,905

 
1,995

 
2,074

 
2,720

 
8,694

Amortization of acquired intangible assets
20,192

 
5,048

 
5,048

 
5,106

 
5,101

 
20,303

Accretion of debt discount on Convertible Senior Notes
3,594

 
940

 
958

 
975

 
993

 
3,866

Loss on debt extinguishment and modification expense
—

 
—

 
—

 
—

 
398

 
398

Acquisition-related transaction costs
—

 
—

 
—

 
1,314

 
9,674

 
10,988

CEO separation-related costs
—

 
—

 
—

 
—

 
1,769

 
1,769

Cash tax impact of adjustments to GAAP net income
(151
)
 
(34
)
 
(67
)
 
(196
)
 
61

 
(236
)
Non-cash income tax (benefit) expense
(3,459
)
 
9,811

 
2,143

 
(6,984
)
 
(9,827
)
 
(4,857
)
Non-GAAP income (loss) from continuing operations (4)
$
23,326

 
$
37,085

 
$
12,488

 
$
(9,919
)
 
$
(11,455
)
 
$
28,199

 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP income (loss) from continuing operations per share
$
0.54

 
$
0.89

 
$
0.30

 
$
(0.24
)
 
$
(0.28
)
 
$
0.67

Diluted shares
42,946

 
41,899

 
41,936

 
40,950

 
40,979

 
41,861

 

(1) 
For definitions of these non-GAAP financial measures and their relationship to our GAAP financial statements, see Note 1 to our Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures in exhibit 99.1 to the February 11, 2016 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, and gain on third party bankruptcy settlement.
(4) 
We define Adjusted EBITDA and Non-GAAP income (loss) from continuing operations differently effective with 4Q15 due to the discontinued operations treatment of our Search and Content and E-Commerce businesses, as well as transaction costs related to the HD Vest acquisition and separation-related costs in connection with the upcoming departure of our chief executive officer both of which were announced in 4Q15.

11


As Reported - Blucora Reconciliation of Operating Free Cash Flow (1) 
 
2014
 
2015
(in thousands, rounding differences may exist)
FY 12/31
 
1Q
 
2Q
 
3Q
 
4Q
 
FY 12/31
Net cash provided (used) by operating activities from continuing operations
$
20,128

 
$
28,187

 
$
1,613

 
$
(8,854
)
 
$
(4,605
)
 
$
16,341

Excess tax benefits from stock-based award activity (2)
6,398

 
22,081

 
5,484

 
1,067

 
(20,665
)
 
7,967

Purchases of property and equipment
(2,037
)
 
(259
)
 
(366
)
 
(241
)
 
(646
)
 
(1,512
)
Operating free cash flow
$
24,489

 
$
50,009

 
$
6,731

 
$
(8,028
)
 
$
(25,916
)
 
$
22,796


(1) 
We define operating free cash flow as net cash provided by operating activities from continuing operations plus the excess tax benefits from stock-based award activity and less purchases of property and equipment. We believe operating free cash flow is an important liquidity measure that reflects the cash generated by the business after the purchase of property and equipment that can then be used for, among other things, strategic acquisitions and investments in the business, stock repurchases, and funding ongoing operations.
(2) 
The significant majority of excess tax benefits from stock-based award activity represents the utilization of equity net operating loss carryforwards from prior years.

12
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