EX-99.1 2 ex-991earningsreleaseq32016.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
 blucoragraphica05.jpg
Blucora Announces Third Quarter 2016 Results
BELLEVUE, WA — (GLOBE NEWSWIRE) — October 27, 2016 — Blucora, Inc. (NASDAQ: BCOR), a leading provider of technology-enabled financial solutions to consumers, small businesses and tax professionals, today announced financial results for the third quarter ended September 30, 2016.
Third Quarter Highlights and Recent Developments
•
Exceeded $10.0 billion in assets under management up 9 percent in the third quarter versus prior year; third quarter net flows of $132.0 million marks best quarter of net flows since first quarter 2015
•
Achieved better than expected performance from advisor-driven revenue; transaction revenue up 18 percent sequentially
•
Closed the sale of Infospace to OpenMail for $45.2 million
•
Repaid $45.0 million of debt, bringing Blucora’s total debt reduction for the nine months ended September 30, 2016 to $133.4 million
•
Strengthened executive team with appointment of Mathieu Stevenson as Chief Marketing Officer and Pamela Turay as Chief Human Resources Officer
John Clendening, president and chief executive officer of Blucora, noted that “during the third quarter, we continued to execute the strategic initiatives we outlined last quarter, including successfully divesting the Infospace business and continuing to de-lever. We are making strong progress on our transformation strategy as we organize around our new operating model and solidify our position as a technology-enabled financial solutions company,” said Clendening. “We are taking the actions necessary to maximize the performance of our businesses, and are seeing positive results from these efforts. We are committed to investing in our people, our capability, and our technology to enable us to capture the substantial growth opportunities ahead in both the HD Vest and TaxAct businesses,” he explained.
The following presentation includes pro forma financial information and HD Vest. In addition, it excludes the Search and Content and E-Commerce segments which have been classified as discontinued operations for all periods presented. The Company believes that this presentation most accurately reflects the financial performance of the Company on a go-forward basis.
Summary Financial Performance: Q3 2016
($ in millions except per share amounts)
 
Q3
 
Q3
 
 
 
2016
 
2015
 
Change
 
As reported
 
Pro forma
 
 
Revenue
$
83.2

 
$
82.9

 
—
 %
Wealth Management
$
80.1

 
$
80.0

 
—
 %
Tax Preparation
$
3.1

 
$
2.9

 
10
 %
Segment Income
$
7.2

 
$
8.9

 
(19
)%
Wealth Management
$
11.6

 
$
11.5

 
1
 %
Tax Preparation
$
(4.4
)
 
$
(2.5
)
 
72
 %
Unallocated Corporate Operating Expenses
$
4.9

 
$
4.4

 
11
 %
GAAP:
 
 
 
 
 
Operating Loss
$
(10.5
)
 
$
(10.3
)
 
2
 %
Net Loss Attributable to Blucora, Inc.
$
(54.1
)
 
$
(11.3
)
 
381
 %
Diluted Net Loss Per Share Attributable to Blucora, Inc.
$
(1.30
)
 
$
(0.27
)
 
381
 %
Non-GAAP:
 
 
 
 
 
Adjusted EBITDA
$
2.3

 
$
4.5

 
(48
)%
Net Loss
$
(10.1
)
 
$
(7.0
)
 
46
 %
Diluted Net Loss Per Share
$
(0.24
)
 
$
(0.17
)
 
41
 %
See reconciliations of as reported and pro forma non-GAAP to GAAP measures in tables below.
Company Restructuring
“As we continue to implement our new ‘One Company’ operating model,” Clendening stated, “we plan to move our corporate headquarters from Bellevue, WA to Irving, TX by June 2017. We’ve moved from our prior holding company model to an





operating company model, in which the corporate team adds value by directly contributing to business unit results. The best way to foster this is by co-locating the corporate team with one of the operating units. In addition to increasing impact, this approach will also enable us to maximize cost savings. Together, these steps will facilitate value creation for our shareholders.”
Eric Emans, Chief Financial Officer and Treasurer, does not intend to move to the Irving office. Accordingly, Blucora has retained Heidrick & Struggles, a leading executive search firm, to help identify and recruit candidates. Eric remains fully committed to the company and it’s shareholders, and plans to stay on until long after a successor has been named, well into 2017, in order to ensure a smooth transition. Clendening added, “Eric has been a terrific partner and I'm delighted that he has agreed to remain actively involved in the management of the company through this transition.”
The Company expects to incur cash restructuring charges of $5.6 million to $8.7 million that primarily relate to employee severance costs and costs associated with the exit of our Bellevue facility. We also expect to record non-cash restructuring charges of $1.9 million to $2.6 million for total restructuring charges of $7.5 million to $11.3 million. Additionally, we expect to incur transition-related costs of $3.0 million to $4.0 million related to the transitioning of roles from Bellevue, WA to Irving, TX primarily related to overlap in staffing and recruiting search fees. The majority of these costs will be recorded over the next three quarters.
Fourth Quarter and Full Year 2016 Outlook
For the fourth quarter of 2016, the Company expects revenues to be between $82.2 million and $85.5 million, GAAP loss from continuing operations to be between $17.7 million and $15.6 million, or $(0.42) to $(0.37) per diluted share, Adjusted EBITDA to be between $(1.5) million and $0.8 million, and Non-GAAP loss from continuing operations to be between $12.7 million and $9.7 million, or $(0.30) to $(0.23) per diluted share.
For the full year 2016, the Company expects revenues to be between $451.3 million and $454.6 million, GAAP loss from continuing operations to be between $5.2 million and $3.1 million, or $(0.13) to $(0.07) per diluted share, Adjusted EBITDA to be between $89.9 million and $92.2 million, and Non-GAAP income from continuing operations to be between $39.9 million and $42.9 million, or $0.93 to $1.00 per diluted share.
Conference Call and Webcast
A conference call and live webcast will be held today at 5:30 a.m. Pacific Time / 8:30 a.m. Eastern Time during which the Company will further discuss third quarter results and its outlook for the fourth quarter of 2016. 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 effect of current, pending and future legislation, regulation and regulatory actions, including the DOL rule; 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 successful execution of the Company’s strategic initiatives, technology enhancements, operating plans, and marketing strategies; the condition of our cash investments; and the Company’s ability to control operating risks, information technology system risks and cybersecurity risks. 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,
 
2016
 
2015
 
2016
 
2015
Revenue:
 
 
 
 
 
 
 
Wealth management services revenue
$
80,088

 
$
—

 
$
233,496

 
$
—

Tax preparation services revenue
3,149

 
2,875

 
135,614

 
114,843

Total revenue
83,237

 
2,875

 
369,110

 
114,843

Operating expenses:
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
Wealth management services cost of revenue
54,921

 
—

 
158,213

 
—

Tax preparation services cost of revenue
1,319

 
1,170

 
6,549

 
4,680

Amortization of acquired technology
49

 
1,911

 
765

 
5,636

Total cost of revenue (1)
56,289

 
3,081

 
165,527

 
10,316

Engineering and technology (1)
4,588

 
1,251

 
12,842

 
3,471

Sales and marketing (1)
11,965

 
2,113

 
75,715

 
42,824

General and administrative (1)
11,638

 
8,895

 
35,899

 
23,694

Depreciation
968

 
394

 
2,906

 
1,101

Amortization of other acquired intangible assets
8,297

 
3,195

 
24,929

 
9,566

Total operating expenses
93,745

 
18,929

 
317,818

 
90,972

Operating income (loss)
(10,508
)
 
(16,054
)
 
51,292

 
23,871

Other loss, net (2)
(11,453
)
 
(3,080
)
 
(29,883
)
 
(9,109
)
Income (loss) from continuing operations before income taxes
(21,961
)
 
(19,134
)
 
21,409

 
14,762

Income tax benefit (expense)
8,537

 
6,926

 
(8,899
)
 
(5,144
)
Income (loss) from continuing operations
(13,424
)
 
(12,208
)
 
12,510

 
9,618

Discontinued operations, net of income taxes
(40,528
)
 
1,597

 
(57,981
)
 
7,122

Net income (loss)
(53,952
)
 
(10,611
)
 
(45,471
)
 
16,740

Net income attributable to noncontrolling interests
(167
)
 
—

 
(426
)
 
—

Net income (loss) attributable to Blucora, Inc.
$
(54,119
)
 
$
(10,611
)
 
$
(45,897
)
 
$
16,740

Net income (loss) per share attributable to Blucora, Inc. - basic:
 
 
 
 
 
 
 
Continuing operations
$
(0.33
)
 
$
(0.30
)
 
$
0.29

 
$
0.23

Discontinued operations
(0.97
)
 
0.04

 
(1.40
)
 
0.18

Basic net income (loss) per share
$
(1.30
)
 
$
(0.26
)
 
$
(1.11
)
 
$
0.41

Net income (loss) per share attributable to Blucora, Inc. - diluted:
 
 
 
 
 
 
 
Continuing operations
$
(0.33
)
 
$
(0.30
)
 
$
0.29

 
$
0.23

Discontinued operations
(0.97
)
 
0.04

 
(1.37
)
 
0.17

Diluted net income (loss) per share
$
(1.30
)
 
$
(0.26
)
 
$
(1.08
)
 
$
0.40

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
41,635

 
40,950

 
41,404

 
40,952

Diluted
41,635

 
40,950

 
42,329

 
41,911

(1) Stock-based compensation expense was allocated among the following captions (in thousands):
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Cost of revenue
$
52

 
$
23

 
$
117

 
$
71

Engineering and technology
434

 
112

 
1,167

 
336

Sales and marketing
661

 
230

 
1,688

 
610

General and administrative
2,217

 
1,709

 
7,644

 
4,957

Total stock-based compensation expense
$
3,364

 
$
2,074

 
$
10,616

 
$
5,974

(2) Other loss, net consisted of the following (in thousands):
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Interest income
$
(18
)
 
$
(170
)
 
$
(54
)
 
$
(430
)
Interest expense
7,824

 
2,203

 
25,396

 
6,833

Amortization of debt issuance costs
413

 
286

 
1,440

 
842

Accretion of debt discounts
1,099

 
975

 
3,599

 
2,873

(Gain) loss on debt extinguishment and modification expense
2,205

 
—

 
(641
)
 
—

Gain on third party bankruptcy settlement
(84
)
 
(224
)
 
(128
)
 
(1,066
)
Other
14

 
10

 
271

 
57

Other loss, net
$
11,453

 
$
3,080

 
$
29,883

 
$
9,109






Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
 
September 30,
2016
 
December 31,
2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
71,165

 
$
55,473

Cash segregated under federal or other regulations
630

 
3,557

Available-for-sale investments
4,492

 
11,301

Accounts receivable, net of allowance
7,076

 
7,884

Commissions receivable
15,294

 
16,328

Other receivables
6,827

 
24,407

Prepaid expenses and other current assets, net
4,059

 
10,062

Current assets of discontinued operations
70,432

 
211,663

Total current assets
179,975

 
340,675

Long-term assets:
 
 
 
Property and equipment, net
10,711

 
11,308

Goodwill, net
549,582

 
548,959

Other intangible assets, net
370,640

 
396,295

Other long-term assets
3,380

 
2,311

Total long-term assets
934,313

 
958,873

Total assets
$
1,114,288

 
$
1,299,548

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
5,840

 
$
4,689

Commissions and advisory fees payable
15,382

 
16,982

Accrued expenses and other current liabilities
11,446

 
13,006

Deferred revenue
9,139

 
11,521

Current portion of long-term debt, net
3,200

 
31,631

Current liabilities of discontinued operations
37,539

 
88,275

Total current liabilities
82,546

 
166,104

Long-term liabilities:
 
 
 
Long-term debt, net
283,801

 
353,850

Convertible senior notes, net
163,024

 
185,918

Deferred tax liability, net
104,236

 
103,520

Deferred revenue
2,479

 
1,902

Other long-term liabilities
11,233

 
10,932

Total long-term liabilities
564,773

 
656,122

Total liabilities
647,319

 
822,226

 
 
 
 
Redeemable noncontrolling interests
15,464

 
15,038

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock
4

 
4

Additional paid-in capital
1,525,267

 
1,490,405

Accumulated deficit
(1,073,495
)
 
(1,027,598
)
Accumulated other comprehensive loss
(271
)
 
(527
)
Total stockholders’ equity
451,505

 
462,284

Total liabilities and stockholders’ equity
$
1,114,288

 
$
1,299,548






Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
 
Nine months ended September 30,
 
2016
 
2015
Operating Activities:
 
 
 
Net income (loss)
$
(45,471
)
 
$
16,740

Less: Discontinued operations, net of income taxes
(57,981
)
 
7,122

Net income from continuing operations
12,510

 
9,618

Adjustments to reconcile net income from continuing operations to net cash from operating activities:
 
 
 
Stock-based compensation
10,616

 
5,974

Depreciation and amortization of acquired intangible assets
29,080

 
16,863

Excess tax benefits from stock-based award activity
(21,369
)
 
(28,632
)
Deferred income taxes
(12,484
)
 
(25,194
)
Amortization of premium on investments, net
164

 
1,250

Amortization of debt issuance costs
1,440

 
842

Accretion of debt discounts
3,599

 
2,873

Gain on debt extinguishment and modification expense
(641
)
 
—

Revaluation of acquisition-related contingent consideration liability
391

 
—

Other
18

 
60

Cash provided (used) by changes in operating assets and liabilities:
 
 
 
Cash segregated under federal or other regulations
2,927

 
—

Accounts receivable
793

 
136

Commissions receivable
1,034

 
—

Other receivables
19,656

 
1,166

Prepaid expenses and other current assets
6,003

 
4,665

Other long-term assets
(1,174
)
 
(63
)
Accounts payable
1,151

 
4,930

Commissions and advisory fees payable
(1,600
)
 
—

Deferred revenue
(1,805
)
 
(1,691
)
Accrued expenses and other current and long-term liabilities
19,786

 
28,149

Net cash provided by operating activities from continuing operations
70,095

 
20,946

Investing Activities:
 
 
 
Business acquisition, net of cash acquired
(1,788
)
 
(1,740
)
Purchases of property and equipment
(2,648
)
 
(866
)
Proceeds from sales of investments
—

 
16,507

Proceeds from maturities of investments
11,808

 
210,699

Purchases of investments
(5,147
)
 
(209,112
)
Net cash provided by investing activities from continuing operations
2,225

 
15,488

Financing Activities:
 
 
 
Repurchase of convertible notes
(20,667
)
 
—

Repayment of credit facilities
(105,000
)
 
(51,940
)
Stock repurchases
—

 
(7,068
)
Excess tax benefits from stock-based award activity
21,369

 
28,632

Proceeds from stock option exercises
1,141

 
2,374

Proceeds from issuance of stock through employee stock purchase plan
1,402

 
1,193

Tax payments from shares withheld for equity awards
(1,447
)
 
(1,193
)
Net cash used by financing activities from continuing operations
(103,202
)
 
(28,002
)
Net cash provided (used) by continuing operations
(30,882
)
 
8,432

 
 
 
 
Net cash provided by operating activities from discontinued operations
10,836

 
6,138

Net cash provided (used) by investing activities from discontinued operations
43,230

 
(206
)
Net cash used by financing activities from discontinued operations
(7,477
)
 
(5,020
)
Net cash provided by discontinued operations
46,589

 
912

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(15
)
 
(6
)
Net increase in cash and cash equivalents
15,692

 
9,338

Cash and cash equivalents, beginning of period
55,473

 
41,968

Cash and cash equivalents, end of period
$
71,165

 
$
51,306






Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Revenue:
 
 
 
 
 
 
 
Wealth Management
$
80,088

 
$
—

 
$
233,496

 
$
—

Tax Preparation
3,149

 
2,875

 
135,614

 
114,843

Total revenue
83,237

 
2,875

 
369,110

 
114,843

Operating income (loss):
 
 
 
 
 
 
 
Wealth Management
11,628

 
—

 
32,458

 
—

Tax Preparation
(4,382
)
 
(2,542
)
 
72,987

 
61,493

Corporate-level activity (1)
(17,754
)
 
(13,512
)
 
(54,153
)
 
(37,622
)
Total operating income (loss)
(10,508
)
 
(16,054
)
 
51,292

 
23,871

Other loss, net
(11,453
)
 
(3,080
)
 
(29,883
)
 
(9,109
)
Income tax benefit (expense)
8,537

 
6,926

 
(8,899
)
 
(5,144
)
Discontinued operations, net of income taxes
(40,528
)
 
1,597

 
(57,981
)
 
7,122

Net income (loss)
$
(53,952
)
 
$
(10,611
)
 
$
(45,471
)
 
$
16,740

(1) Corporate-level activity included the following (in thousands):
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Operating expenses
$
4,907

 
$
4,433

 
$
14,066

 
$
13,471

Stock-based compensation
3,364

 
2,074

 
10,616

 
5,974

Acquisition-related costs
—

 
1,314

 
391

 
1,314

Depreciation
1,137

 
585

 
3,386

 
1,661

Amortization of acquired intangible assets
8,346

 
5,106

 
25,694

 
15,202

Total corporate-level activity
$
17,754

 
$
13,512

 
$
54,153

 
$
37,622






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,
 
2016
 
2015
 
2016
 
2015
Operating income (loss) (2)
$
(10,508
)
 
$
(16,054
)
 
$
51,292

 
$
23,871

Stock-based compensation
3,364

 
2,074

 
10,616

 
5,974

Depreciation and amortization of acquired intangible assets
9,483

 
5,691

 
29,080

 
16,863

Acquisition-related costs
—

 
1,314

 
391

 
1,314

Adjusted EBITDA
$
2,339

 
$
(6,975
)
 
$
91,379

 
$
48,022


Preliminary Non-GAAP Net Income (Loss) Reconciliation (1) 
(Unaudited)
(Amounts in thousands, except per share amounts)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Net income (loss) attributable to Blucora, Inc.(2)
$
(54,119
)
 
$
(10,611
)
 
$
(45,897
)
 
$
16,740

Discontinued operations, net of income taxes
40,528

 
(1,597
)
 
57,981

 
(7,122
)
Stock-based compensation
3,364

 
2,074

 
10,616

 
5,974

Amortization of acquired intangible assets
8,346

 
5,106

 
25,694

 
15,202

Accretion of debt discount on Convertible Senior Notes
901

 
975

 
2,749

 
2,873

Accelerated accretion of debt discount on Convertible Senior Notes
—

 
—

 
1,628

 
—

Gain on Convertible Senior Notes repurchased
—

 
—

 
(7,724
)
 
—

Acquisition-related costs
—

 
1,314

 
391

 
1,314

Impact of noncontrolling interests
167

 
—

 
426

 
—

Cash tax impact of adjustments to GAAP net income
(17
)
 
(196
)
 
244

 
(297
)
Non-cash income tax (benefit) expense (1)
(9,312
)
 
(6,984
)
 
6,460

 
4,970

Non-GAAP net income (loss)
$
(10,142
)
 
$
(9,919
)
 
$
52,568

 
$
39,654

 
 
 
 
 
 
 
 
Per diluted share:
 
 
 
 
 
 
 
Net income (loss) attributable to Blucora, Inc.
$
(1.30
)
 
$
(0.26
)
 
$
(1.08
)
 
$
0.40

Discontinued operations, net of income taxes
0.97

 
(0.04
)
 
1.37

 
(0.17
)
Stock-based compensation
0.08

 
0.05

 
0.25

 
0.14

Amortization of acquired intangible assets
0.21

 
0.13

 
0.60

 
0.37

Accretion of debt discount on Convertible Senior Notes
0.02

 
0.02

 
0.06

 
0.07

Accelerated accretion of debt discount on Convertible Senior Notes
—

 
—

 
0.04

 
—

Gain on Convertible Senior Notes repurchased
—

 
—

 
(0.18
)
 
—

Acquisition-related costs
—

 
0.03

 
0.01

 
0.03

Impact of noncontrolling interests
0.00

 
—

 
0.01

 
—

Cash tax impact of adjustments to GAAP net income
(0.00
)
 
(0.00
)
 
0.01

 
(0.01
)
Non-cash income tax (benefit) expense
(0.22
)
 
(0.17
)
 
0.15

 
0.12

Non-GAAP net income (loss)
$
(0.24
)
 
$
(0.24
)
 
$
1.24

 
$
0.95

Weighted average shares outstanding used in computing per diluted share amounts
41,635

 
40,950

 
42,329

 
41,911






Blucora, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures
(As Reported and Pro Forma)
Preliminary Adjusted EBITDA Reconciliation (As Reported and Pro Forma) (1) 
(Unaudited)
(Amounts in thousands)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
 
As reported
 
Pro forma
 
As reported
 
Pro forma
Operating income (loss)
$
(10,508
)
 
$
(10,277
)
 
$
51,292

 
$
35,159

Stock-based compensation
3,364

 
3,379

 
10,616

 
9,557

Depreciation and amortization of acquired intangible assets
9,483

 
11,411

 
29,080

 
34,058

Acquisition-related costs
—

 
—

 
391

 
—

Adjusted EBITDA
$
2,339

 
$
4,513

 
$
91,379

 
$
78,774


Preliminary Non-GAAP Net Income (Loss) Reconciliation (As Reported and Pro Forma) (1) 
(Unaudited)
(Amounts in thousands, except per share amounts)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
 
As reported
 
Pro forma
 
As reported
 
Pro forma
Net income (loss) attributable to Blucora, Inc.
$
(54,119
)
 
$
(11,261
)
 
$
(45,897
)
 
$
9,479

Discontinued operations, net of income taxes
40,528

 
(1,597
)
 
57,981

 
(7,122
)
Stock-based compensation
3,364

 
3,379

 
10,616

 
9,557

Amortization of acquired intangible assets
8,346

 
10,243

 
25,694

 
30,613

Accretion of debt discount on Convertible Senior Notes
901

 
975

 
2,749

 
2,873

Accelerated accretion of debt discount on Convertible Senior Notes
—

 
—

 
1,628

 
—

Gain on Convertible Senior Notes repurchased
—

 
—

 
(7,724
)
 
—

Acquisition-related costs
—

 
—

 
391

 
—

Impact of noncontrolling interests
167

 
—

 
426

 
—

Cash tax impact of adjustments to GAAP net income
(17
)
 
(100
)
 
244

 
(300
)
Non-cash income tax (benefit) expense
(9,312
)
 
(8,600
)
 
6,460

 
(174
)
Non-GAAP net income (loss)
$
(10,142
)
 
$
(6,961
)
 
$
52,568

 
$
44,926

 
 
 
 
 
 
 
 
Per diluted share:
 
 
 
 
 
 
 
Net income (loss) attributable to Blucora, Inc.
$
(1.30
)
 
$
(0.27
)
 
$
(1.08
)
 
$
0.23

Discontinued operations, net of income taxes
0.97

 
(0.04
)
 
1.37

 
(0.17
)
Stock-based compensation
0.08

 
0.08

 
0.25

 
0.23

Amortization of acquired intangible assets
0.21

 
0.25

 
0.60

 
0.73

Accretion of debt discount on Convertible Senior Notes
0.02

 
0.02

 
0.06

 
0.07

Accelerated accretion of debt discount on Convertible Senior Notes
—

 
—

 
0.04

 
—

Gain on Convertible Senior Notes repurchased
—

 
—

 
(0.18
)
 
—

Acquisition-related costs
—

 
—

 
0.01

 
—

Impact of noncontrolling interests
0.00

 
—

 
0.01

 
—

Cash tax impact of adjustments to GAAP net income
(0.00
)
 
(0.00
)
 
0.01

 
(0.01
)
Non-cash income tax (benefit) expense
(0.22
)
 
(0.21
)
 
0.15

 
(0.01
)
Non-GAAP net income (loss)
$
(0.24
)
 
$
(0.17
)
 
$
1.24

 
$
1.07

Weighted average shares outstanding used in computing per diluted share amounts
41,635

 
40,950

 
42,329

 
41,911







Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
 
Ranges for the three months ending
 
Ranges for the year ending
 
December 31, 2016
 
December 31, 2016
Loss from continuing operations
$
(17,700
)
 
$
(15,600
)
 
$
(5,200
)
 
$
(3,100
)
Stock-based compensation
3,400

 
3,300

 
14,000

 
13,900

Depreciation and amortization of acquired intangible assets
9,600

 
9,500

 
38,700

 
38,600

Restructuring costs
5,200

 
4,400

 
5,200

 
4,400

Acquisition-related costs
—

 
—

 
400

 
400

Other loss, net (3)
9,800

 
9,500

 
39,700

 
39,400

Income tax benefit
(11,800
)
 
(10,300
)
 
(2,900
)
 
(1,400
)
Adjusted EBITDA
$
(1,500
)
 
$
800

 
$
89,900

 
$
92,200

Preliminary Non-GAAP Income (Loss) from Continuing Operations Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
 
Ranges for the three months ending
 
Ranges for the year ending
 
December 31, 2016
 
December 31, 2016
Loss from continuing operations
$
(17,700
)
 
$
(15,600
)
 
$
(5,200
)
 
$
(3,100
)
Stock-based compensation
3,400

 
3,300

 
14,000

 
13,900

Amortization of acquired intangible assets
8,400

 
8,400

 
34,100

 
34,100

Accretion of debt discount on Convertible Senior Notes
900

 
900

 
3,700

 
3,700

Accelerated accretion of debt discount on Convertible Senior Notes
—

 
—

 
1,600

 
1,600

Gain on Convertible Senior Notes repurchased
—

 
—

 
(7,700
)
 
(7,700
)
Restructuring costs
5,200

 
4,400

 
5,200

 
4,400

Acquisition-related costs
—

 
—

 
400

 
400

Cash tax impact of adjustments to loss from continuing operations
—

 
—

 
200

 
200

Non-cash income tax benefit
(12,900
)
 
(11,100
)
 
(6,400
)
 
(4,600
)
Non-GAAP income (loss) from continuing operations
$
(12,700
)
 
$
(9,700
)
 
$
39,900

 
$
42,900






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 impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016, the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, and acquisition-related costs in connection with the HD Vest and SimpleTax acquisitions that we would not have otherwise incurred as part of our business operations. Acquisition-related costs include professional fees and other direct transaction costs and changes in the fair value of contingent consideration liabilities related to acquired companies. The HD Vest acquisition closed in the fourth quarter of 2015 and resulted in significant transaction costs. The SimpleTax acquisition included contingent consideration, for which the fair value of that liability was revalued in the second quarter of 2016. We define Adjusted EBITDA as operating income (loss), determined in accordance with GAAP, excluding the effects of depreciation, amortization of acquired intangible assets (including acquired technology), stock-based compensation, and acquisition-related costs.

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

We define non-GAAP net income (loss) differently for this report than we have defined it in the past, due to the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016, the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, and acquisition-related costs in connection with the HD Vest and SimpleTax acquisitions that we would not have otherwise incurred as part of our business operations. Acquisition-related costs are described further under the first paragraph in this note (1). For this report, we define non-GAAP net income (loss) as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets (including acquired technology), accretion of debt discount and accelerated accretion of debt discount on the Convertible Senior Notes, gain on Convertible Senior Notes repurchased, acquisition-related costs, discontinued operations, the impact of noncontrolling interests, 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 primarily consist 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 net income (loss) and non-GAAP net income (loss) per share provide meaningful supplemental information to management, investors, and analysts regarding our performance and the valuation of our business by excluding items in the statement of operations that we do not consider part of our ongoing operations or have not been, or are not expected to be, settled in cash. Additionally, we believe that non-GAAP net income (loss) and non-GAAP net income (loss) per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP net income (loss) should be evaluated in light of our financial results prepared in accordance with GAAP and should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income (loss). 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, gain/loss on debt extinguishment and modification expense, and gain on third party bankruptcy settlement.