Document

0001068875-17-000010.txt : 20170216 0001068875-17-000010.hdr.sgml : 20170216 20170216063312 ACCESSION NUMBER: 0001068875-17-000010 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20170216 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20170216 DATE AS OF CHANGE: 20170216 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: 17616407 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-kq42016earningsrelea.htm 8-K Document

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 16, 2017

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 16, 2017, Blucora announced its financial results for the quarter and year ended December 31, 2016. 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 16, 2017
99.2	Investor presentation dated	February 16, 2017

-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 16, 2017

-3-

EXHIBIT INDEX



Exhibit No	Description

99.1	Press release dated	February 16, 2017
99.2	Investor presentation dated	February 16, 2017

-4-

EX-99.1 2 ex-991earningsreleaseq42016.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1

Blucora Reports Fourth Quarter and Full Year 2016 Results

BELLEVUE, WA — (GLOBE NEWSWIRE) — February 16, 2017 — 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 fourth quarter and full year ended December 31, 2016.

“Our business results exceeded our expectations in the fourth quarter,” said John Clendening, President and Chief Executive Officer of Blucora. “HD Vest was the primary driver, as segment income was up 13 percent versus last year. We are pleased with the focus of our teams and the significant progress we made on our multi-stage business transformation.”

2016 Highlights and Recent Developments


•	Exceeded $10 billion in fee-based assets under management, up 7 percent versus prior year


•	Increased Tax Preparation revenue and segment income by 18 percent and 17 percent, respectively, versus prior year


•	Repaid $172 million in debt, in part driven by the sales of Infospace and Monoprice


•	Strengthened leadership team with the appointment of Sanjay Baskaran as President of TaxAct and Bob Oros as HD Vest chief executive officer

Clendening added, “Looking ahead, we continue to build momentum at HD Vest and are strategically investing in technology and upgrading trading platforms to enhance our capabilities. To enable long-term growth in Tax Preparation, we are in the early stages of re-establishing TaxAct as the challenger brand in the digital space, with a strong user experience at a superior value for customers. Blucora now consists of HD Vest and TaxAct as our operational foundation, a simplified, streamlined and synergistic business. With new leadership and an energized team, we are taking the steps necessary to deliver value for Blucora shareholders in 2017 and beyond.”

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: Q4 and Full Year 2016

($ in millions except per share amounts)



	Q4			Q4					Full Year			Full Year
	2016			2015			Change		2016			2015			Change
	As reported			Pro forma					As reported			Pro forma
Revenue	$	86.8		$	85.0		2	%	$	455.9		$	437.4		4	%
Wealth Management	$	83.0		$	82.1		1	%	$	316.5		$	319.7		(1	)%
Tax Preparation	$	3.8		$	2.9		31	%	$	139.4		$	117.7		18	%
Segment Income (Loss)	$	7.7		$	7.7		—	%	$	113.2		$	100.0		13	%
Wealth Management	$	13.8		$	12.2		13	%	$	46.3		$	43.0		8	%
Tax Preparation	$	(6.1	)	$	(4.5	)	35	%	$	66.9		$	57.0		17	%
Unallocated Corporate Operating Expenses	$	4.9		$	4.3		15	%	$	19.0		$	17.8		7	%
GAAP:
Operating Income (Loss)	$	(14.2	)	$	(12.0	)	18	%	$	37.1		$	23.2		60	%
Net Loss Attributable to Blucora, Inc.	$	(19.3	)	$	(48.4	)	(60	)%	$	(65.2	)	$	(38.9	)	68	%
Diluted Net Loss Per Share Attributable to Blucora, Inc.	$	(0.46	)	$	(1.18	)	(61	)%	$	(1.53	)	$	(0.93	)	65	%
Non-GAAP:
Adjusted EBITDA	$	2.8		$	3.5		(19	)%	$	94.2		$	82.2		15	%
Net Income (Loss)	$	(7.5	)	$	(8.0	)	(6	)%	$	45.1		$	37.0		22	%
Diluted Net Income (Loss) per Share	$	(0.18	)	$	(0.19	)	(5	)%	$	1.06		$	0.88		20	%
See reconciliation of as reported and pro forma non-GAAP to GAAP measures in tables below.

First Quarter Outlook

For the first quarter of 2017, the Company expects revenues to be between $176.3 million and $181.5 million, GAAP income from continuing operations to be between $14.5 million and $15.2 million, or $0.32 to $0.34 per diluted share, Adjusted EBITDA to be between $51.0 million and $54.5 million, and Non-GAAP income from continuing operations to be between $40.2 million and $43.9 million, or $0.90 to $0.98 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 fourth quarter and full year results, its outlook for the first quarter, tax season update 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 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 December 31,						Years ended December 31,
	2016			2015			2016			2015
Revenue:
Wealth management services revenue	$	83,050		$	—		$	316,546		$	—
Tax preparation services revenue	3,751			2,865			139,365			117,708
Total revenue	86,801			2,865			455,911			117,708
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue	55,783			—			213,996			—
Tax preparation services cost of revenue	1,819			1,487			8,368			6,167
Amortization of acquired technology	47			1,910			812			7,546
Total cost of revenue ⁽¹⁾	57,649			3,397			223,176			13,713
Engineering and technology ⁽¹⁾	4,938			1,636			17,780			5,107
Sales and marketing⁽¹⁾	13,645			3,030			89,360			45,854
General and administrative ⁽¹⁾	11,497			19,869			47,396			43,563
Depreciation	975			420			3,881			1,521
Amortization of other acquired intangible assets	8,402			3,191			33,331			12,757
Restructuring ⁽¹⁾	3,870			—			3,870			—
Total operating expenses	100,976			31,543			418,794			122,515
Operating income (loss)	(14,175		)	(28,678		)	37,117			(4,807		)
Other loss, net ⁽²⁾	(9,898		)	(3,433		)	(39,781		)	(12,542		)
Loss from continuing operations before income taxes	(24,073		)	(32,111		)	(2,664		)	(17,349		)
Income tax benefit	10,184			9,767			1,285			4,623
Loss from continuing operations	(13,889		)	(22,344		)	(1,379		)	(12,726		)
Discontinued operations, net of income taxes⁽³⁾	(5,140		)	(34,470		)	(63,121		)	(27,348		)
Net loss	(19,029		)	(56,814		)	(64,500		)	(40,074		)
Net income attributable to noncontrolling interests	(232		)	—			(658		)	—
Net loss attributable to Blucora, Inc.	$	(19,261	)	$	(56,814	)	$	(65,158	)	$	(40,074	)
Net loss per share attributable to Blucora, Inc. - basic:
Continuing operations	$	(0.34	)	$	(0.55	)	$	(0.05	)	$	(0.31	)
Discontinued operations	(0.12		)	(0.84		)	(1.52		)	(0.67		)
Basic net loss per share	$	(0.46	)	$	(1.39	)	$	(1.57	)	$	(0.98	)
Net loss per share attributable to Blucora, Inc. - diluted:
Continuing operations	$	(0.34	)	$	(0.55	)	$	(0.05	)	$	(0.31	)
Discontinued operations	(0.12		)	(0.84		)	(1.52		)	(0.67		)
Diluted net loss per share	$	(0.46	)	$	(1.39	)	$	(1.57	)	$	(0.98	)
Weighted average shares outstanding:
Basic	41,766			40,979			41,494			40,959
Diluted	41,766			40,979			41,494			40,959



⁽¹⁾ Stock-based compensation expense was allocated among the following captions (in thousands):
	Three months ended December 31,					Years ended December 31,
	2016			2015		2016			2015
Cost of revenue	$	49		$	25	$	166		$	96
Engineering and technology	473			148		1,640			484
Sales and marketing	860			161		2,548			771
General and administrative	2,130			2,386		9,774			7,343
Restructuring	(364		)	—		(364		)	—
Total stock-based compensation expense	$	3,148		$	2,720	$	13,764		$	8,694



⁽²⁾ Other loss, net consisted of the following (in thousands):
	Three months ended December 31,						Years ended December 31,
	2016			2015			2016			2015
Interest income	$	(27	)	$	(179	)	$	(81	)	$	(609	)
Interest expense	7,028			2,211			32,424			9,044
Amortization of debt issuance costs	400			291			1,840			1,133
Accretion of debt discounts	1,091			993			4,690			3,866
Loss on debt extinguishment and modification expense	1,677			398			1,036			398
Gain on third party bankruptcy settlement	(44		)	(62		)	(172		)	(1,128		)
Other	(227		)	(219		)	44			(162		)
Other loss, net	$	9,898		$	3,433		$	39,781		$	12,542

⁽³⁾ Discontinued operations included loss on sale of discontinued operations before income taxes of $73.8 million and goodwill and trade name impairments totaling $59.0 million for the years ended December 31, 2016 and 2015, respectively.

Blucora, Inc.

Preliminary Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands)



	December 31,
	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	51,713		$	55,473
Cash segregated under federal or other regulations	2,355			3,557
Available-for-sale investments	7,101			11,301
Accounts receivable, net of allowance	10,209			7,884
Commissions receivable	16,144			16,328
Other receivables	4,004			24,407
Prepaid expenses and other current assets, net	6,321			10,062
Current assets of discontinued operations	—			211,663
Total current assets	97,847			340,675
Long-term assets:
Property and equipment, net	10,836			11,308
Goodwill, net	548,741			548,959
Other intangible assets, net	362,178			396,295
Other long-term assets	3,057			2,311
Total long-term assets	924,812			958,873
Total assets	$	1,022,659		$	1,299,548
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,536		$	4,689
Commissions and advisory fees payable	16,587			16,982
Accrued expenses and other current liabilities	18,528			13,006
Deferred revenue	12,156			11,521
Current portion of long-term debt, net	2,560			31,631
Current liabilities of discontinued operations	—			88,275
Total current liabilities	54,367			166,104
Long-term liabilities:
Long-term debt, net	248,221			353,850
Convertible senior notes, net	164,176			185,918
Deferred tax liability, net	111,126			103,520
Deferred revenue	1,849			1,902
Other long-term liabilities	10,205			10,932
Total long-term liabilities	535,577			656,122
Total liabilities	589,944			822,226

Redeemable noncontrolling interests	15,696			15,038

Stockholders’ equity:
Common stock	4			4
Additional paid-in capital	1,510,152			1,490,405
Accumulated deficit	(1,092,756		)	(1,027,598		)
Accumulated other comprehensive loss	(381		)	(527		)
Total stockholders’ equity	417,019			462,284
Total liabilities and stockholders’ equity	$	1,022,659		$	1,299,548

Blucora, Inc.

Preliminary Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)



	Years ended December 31,
	2016			2015
Operating Activities:
Net loss	$	(64,500	)	$	(40,074	)
Less: Discontinued operations, net of income taxes	(63,121		)	(27,348		)
Net loss from continuing operations	(1,379		)	(12,726		)
Adjustments to reconcile net loss from continuing operations to net cash from operating activities:
Stock-based compensation	13,764			8,694
Depreciation and amortization of acquired intangible assets	38,688			22,590
Excess tax benefits from stock-based award activity	(15,957		)	(7,967		)
Deferred income taxes	(18,055		)	(12,607		)
Amortization of premium on investments, net	174			1,589
Amortization of debt issuance costs	1,840			1,133
Accretion of debt discounts	4,690			3,866
Loss on debt extinguishment and modification expense	1,036			398
Revaluation of acquisition-related contingent consideration liability	391			—
Other	19			203
Cash provided (used) by changes in operating assets and liabilities:
Cash segregated under federal or other regulations	1,202			—
Accounts receivable	(2,340		)	(1,862		)
Commissions receivable	184			—
Other receivables	22,875			651
Prepaid expenses and other current assets	3,741			(493		)
Other long-term assets	(887		)	(15		)
Accounts payable	(153		)	369
Commissions and advisory fees payable	(395		)	—
Deferred revenue	582			1,875
Accrued expenses and other current and long-term liabilities	21,195			10,643
Net cash provided by operating activities from continuing operations	71,215			16,341
Investing Activities:
Business acquisitions, net of cash acquired	(1,788		)	(573,366		)
Purchases of property and equipment	(3,812		)	(1,512		)
Change in restricted cash	—			150
Proceeds from sales of investments	—			156,506
Proceeds from maturities of investments	12,807			296,455
Purchases of investments	(8,767		)	(214,257		)
Net cash used by investing activities from continuing operations	(1,560		)	(336,024		)
Financing Activities:
Proceeds from credit facility, net of debt issuance costs and debt discount of $9,730 and $12,000 in 2015	—			378,270
Repurchase of convertible notes	(20,667		)	—
Repayment of credit facility	(140,000		)	(51,940		)
Repayment of note payable with related party	(3,200		)	—
Stock repurchases	—			(7,735		)
Excess tax benefits from stock-based award activity	15,957			7,967
Proceeds from stock option exercises	2,216			2,409
Proceeds from issuance of stock through employee stock purchase plan	1,402			1,193
Tax payments from shares withheld for equity awards	(1,752		)	(1,545		)
Net cash provided (used) by financing activities from continuing operations	(146,044		)	328,619
Net cash provided (used) by continuing operations	(76,389		)	8,936

Net cash provided by operating activities from discontinued operations	14,047			14,108
Net cash provided (used) by investing activities from discontinued operations	83,608			(540		)
Net cash provided (used) by financing activities from discontinued operations	(25,000		)	(8,982		)
Net cash provided by discontinued operations	72,655			4,586

Effect of exchange rate changes on cash and cash equivalents	(26		)	(17		)
Net increase (decrease) in cash and cash equivalents	(3,760		)	13,505
Cash and cash equivalents, beginning of period	55,473			41,968
Cash and cash equivalents, end of period	$	51,713		$	55,473

Blucora, Inc.

Preliminary Segment Information

(Unaudited)

(Amounts in thousands)



	Three months ended December 31,						Years ended December 31,
	2016			2015			2016			2015
Revenue:
Wealth Management ⁽¹⁾	$	83,050		$	—		$	316,546		$	—
Tax Preparation ⁽¹⁾	3,751			2,865			139,365			117,708
Total revenue	86,801			2,865			455,911			117,708
Operating income (loss):
Wealth Management	13,838			—			46,296			—
Tax Preparation	(6,090		)	(4,509		)	66,897			56,984
Corporate-level activity ⁽²⁾	(21,923		)	(24,169		)	(76,076		)	(61,791		)
Total operating income (loss)	(14,175		)	(28,678		)	37,117			(4,807		)
Other loss, net	(9,898		)	(3,433		)	(39,781		)	(12,542		)
Income tax benefit	10,184			9,767			1,285			4,623
Discontinued operations, net of income taxes	(5,140		)	(34,470		)	(63,121		)	(27,348		)
Net loss	$	(19,029	)	$	(56,814	)	$	(64,500	)	$	(40,074	)



⁽¹⁾ Revenues by major category within each segment are presented below (in thousands):
	Three months ended December 31,				Years ended December 31,
	2016		2015		2016		2015
Wealth Management:
Commission	$	39,055	$	—	$	150,125	$	—
Advisory	33,658		—		129,417		—
Asset-based	5,964		—		22,653		—
Transaction and fee	4,373		—		14,351		—
Total Wealth Management revenue	$	83,050	—		$	316,546	—
Tax Preparation:
Consumer	$	3,611	$	2,715	$	126,289	$	105,367
Professional	140		150		13,076		12,341
Total Tax Preparation revenue	$	3,751	$	2,865	$	139,365	$	117,708



⁽²⁾ Corporate-level activity included the following (in thousands):
	Three months ended December 31,				Years ended December 31,
	2016		2015		2016		2015
Operating expenses	$	4,933	$	4,279	$	18,999	$	17,750
Stock-based compensation	3,512		2,720		14,128		8,694
Acquisition-related costs	—		9,674		391		10,988
CEO separation-related costs	—		1,769		—		1,769
Depreciation	1,159		626		4,545		2,287
Amortization of acquired intangible assets	8,449		5,101		34,143		20,303
Restructuring	3,870		—		3,870		—
Total corporate-level activity	$	21,923	$	24,169	$	76,076	$	61,791

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,
	2016			2015			2016		2015
Operating income (loss) ⁽²⁾	$	(14,175	)	$	(28,678	)	$	37,117	$	(4,807	)
Stock-based compensation	3,512			2,720			14,128		8,694
Depreciation and amortization of acquired intangible assets	9,608			5,727			38,688		22,590
Acquisition-related costs	—			9,674			391		10,988
CEO separation-related costs	—			1,769			—		1,769
Restructuring	3,870			—			3,870		—
Adjusted EBITDA	$	2,815		$	(8,788	)	$	94,194	$	39,234

Preliminary Non-GAAP Net Income (Loss) Reconciliation ⁽¹⁾

(Unaudited)

(Amounts in thousands, except per share amounts)



	Three months ended December 31,						Years ended December 31,
	2016			2015			2016			2015
Net loss attributable to Blucora, Inc.⁽²⁾	$	(19,261	)	$	(56,814	)	$	(65,158	)	$	(40,074	)
Discontinued operations, net of income taxes	5,140			34,470			63,121			27,348
Stock-based compensation	3,512			2,720			14,128			8,694
Amortization of acquired intangible assets	8,449			5,101			34,143			20,303
Accretion of debt discount on Convertible Senior Notes	917			993			3,666			3,866
Accelerated accretion of debt discount on Convertible Senior Notes	—			—			1,628			—
Gain on Convertible Senior Notes repurchased	—			—			(7,724		)	—
Write-off of debt issuance costs on closed TaxAct 2013 credit facility	—			398			—			398
Acquisition-related costs	—			9,674			391			10,988
CEO separation-related costs	—			1,769			—			1,769
Restructuring	3,870			—			3,870			—
Impact of noncontrolling interests	232			—			658			—
Cash tax impact of adjustments to GAAP net income	(69		)	61			175			(236		)
Non-cash income tax benefit ⁽¹⁾	(10,262		)	(9,827		)	(3,802		)	(4,857		)
Non-GAAP net income (loss)	$	(7,472	)	$	(11,455	)	$	45,096		$	28,199

Per diluted share:
Net loss attributable to Blucora, Inc.⁽²⁾	$	(0.46	)	$	(1.39	)	$	(1.53	)	$	(0.96	)
Discontinued operations, net of income taxes	0.12			0.84			1.48			0.66
Stock-based compensation	0.08			0.07			0.33			0.21
Amortization of acquired intangible assets	0.21			0.13			0.80			0.49
Accretion of debt discount on Convertible Senior Notes	0.02			0.02			0.09			0.09
Accelerated accretion of debt discount on Convertible Senior Notes	—			—			0.04			—
Gain on Convertible Senior Notes repurchased	—			—			(0.18		)	—
Write-off of debt issuance costs on closed TaxAct 2013 credit facility	—			0.01			—			0.01
Acquisition-related costs	—			0.24			0.01			0.26
CEO separation-related costs	—			0.04			—			0.04
Restructuring	0.09			—			0.09			—
Impact of noncontrolling interests	0.01			—			0.02			—
Cash tax impact of adjustments to GAAP net income	(0.00		)	0.00			0.00			(0.01		)
Non-cash income tax benefit	(0.25		)	(0.24		)	(0.09		)	(0.12		)
Non-GAAP net income (loss)	$	(0.18	)	$	(0.28	)	$	1.06		$	0.67
Weighted average shares outstanding used in computing per diluted share amounts	41,766			40,979			42,686			41,861

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 December 31,						Years ended December 31,
	2016			2015			2016		2015
	As reported			Pro forma			As reported		Pro forma
Operating income (loss)	$	(14,175	)	$	(11,983	)	$	37,117	$	23,176
Stock-based compensation	3,512			4,034			14,128		13,591
Depreciation and amortization of acquired intangible assets	9,608			11,406			38,688		45,464
Acquisition-related costs	—			—			391		—
Restructuring	3,870			—			3,870		—
Adjusted EBITDA	$	2,815		$	3,457		$	94,194	$	82,231

Preliminary Non-GAAP Net Income (Loss) Reconciliation (As Reported and Pro Forma) ⁽¹⁾

(Unaudited)

(Amounts in thousands, except per share amounts)



	Three months ended December 31,						Years ended December 31,
	2016			2015			2016			2015
	As reported			Pro forma			As reported			Pro forma
Net loss attributable to Blucora, Inc.	$	(19,261	)	$	(48,363	)	$	(65,158	)	$	(38,884	)
Discontinued operations, net of income taxes	5,140			34,470			63,121			27,348
Stock-based compensation	3,512			4,034			14,128			13,591
Amortization of acquired intangible assets	8,449			10,238			34,143			40,851
Accretion of debt discount on Convertible Senior Notes	917			993			3,666			3,866
Accelerated accretion of debt discount on Convertible Senior Notes	—			—			1,628			—
Gain on Convertible Senior Notes repurchased	—			—			(7,724		)	—
Acquisition-related costs	—			—			391			—
Restructuring	3,870			—			3,870			—
Impact of noncontrolling interests	232			—			658			—
Cash tax impact of adjustments to GAAP net income	(69		)	(100		)	175			(400		)
Non-cash income tax benefit	(10,262		)	(9,248		)	(3,802		)	(9,422		)
Non-GAAP net income (loss)	$	(7,472	)	$	(7,976	)	$	45,096		$	36,950

Per diluted share:
Net loss attributable to Blucora, Inc.	$	(0.46	)	$	(1.18	)	$	(1.53	)	$	(0.93	)
Discontinued operations, net of income taxes	0.12			0.84			1.48			$	0.65
Stock-based compensation	0.08			0.10			0.33			$	0.32
Amortization of acquired intangible assets	0.21			0.25			0.80			$	0.98
Accretion of debt discount on Convertible Senior Notes	0.02			0.02			0.09			$	0.09
Accelerated accretion of debt discount on Convertible Senior Notes	—			—			0.04			$	—
Gain on Convertible Senior Notes repurchased	—			—			(0.18		)	$	—
Acquisition-related costs	—			—			0.01			$	—
Restructuring	0.09			—			0.09			$	—
Impact of noncontrolling interests	0.01			—			0.02			$	—
Cash tax impact of adjustments to GAAP net income	(0.00		)	(0.00		)	0.00			$	(0.01	)
Non-cash income tax benefit	(0.25		)	(0.22		)	(0.09		)	$	(0.22	)
Non-GAAP net income (loss)	$	(0.18	)	$	(0.19	)	$	1.06		$	0.88
Weighted average shares outstanding used in computing per diluted share amounts	41,766			40,979			42,686			41,861

Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance

(Amounts in thousands)



	Ranges for the three months ending
	March 31, 2017
Income from continuing operations	$	14,500	$	15,200
Stock-based compensation	3,200		3,100
Depreciation and amortization of acquired intangible assets	9,800		9,600
Restructuring	700		600
Other loss, net ⁽³⁾	9,400		9,500
Income tax expense	13,400		16,500
Adjusted EBITDA	$	51,000	$	54,500

Preliminary Non-GAAP Income from Continuing Operations Reconciliation for Forward-Looking Guidance

(Amounts in thousands)



	Ranges for the three months ending
	March 31, 2017
Income from continuing operations	$	14,500	$	15,200
Stock-based compensation	3,200		3,100
Amortization of acquired intangible assets	8,500		8,400
Accretion of debt discount on Convertible Senior Notes	900		900
Restructuring	700		600
Non-cash income tax expense	12,400		15,700
Non-GAAP income from continuing operations	$	40,200	$	43,900

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: (i) restructuring costs related to the upcoming move of our corporate headquarters which was announced in the fourth quarter of 2016, (ii) the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016, (iii) the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, (iv) separation-related costs in connection with the departure of our former chief executive office which was announced in the fourth quarter of 2015, and (v) 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 services 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, acquisition-related costs, CEO separation-related costs, and restructuring 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 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 differently for this report than we have defined it in the past, due to: (i) restructuring costs related to the upcoming move of our corporate headquarters which was announced in the fourth quarter of 2016, (ii) the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016, (iii) the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, (iv) separation-related costs in connection with the departure of our former chief executive office which was announced in the fourth quarter of 2015, and (v) 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 as net loss attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of discontinued operations, 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, write-off of debt issuance costs on closed TaxAct 2013 credit facility, acquisition-related costs, CEO separation-related costs, restructuring costs, 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 and non-GAAP net income per share provide meaningful supplemental information to management, investors, and analysts regarding our performance and the valuation of our business by excluding items in the statement of operations that we do not consider part of our ongoing operations or have not been, or are not expected to be, settled in cash. Additionally, we believe that non-GAAP net income and non-GAAP net income per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP net income should be evaluated in light of our financial results prepared in accordance with GAAP and should be considered as a supplement to, and not as a substitute for or superior to, GAAP net 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). Any difference in "per diluted share" between the Preliminary Condensed Consolidated Statements of Operations (unaudited) and non-GAAP table is due to using different weighted average shares outstanding in the event that there is GAAP net loss but non-GAAP net income and vice versa.

⁽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.

EX-99.2 3 ex-992earningsreleaseq42016.htm EXHIBIT 99.2 Exhibit

Exhibit 99.2

Blucora, Inc.

Supplemental Information

December 31, 2016

Table of Contents



Financial Information
Consolidated Financial Results	2
Reconciliation of Non-GAAP Financial Measures	4
Net Leverage Ratio	5
Reconciliation of Operating Free Cash Flow	6

Operating Metrics
Wealth Management	7
Tax Preparation	8

Blucora Consolidated Financial Results⁽¹⁾



(in thousands except %s and per share amounts, rounding differences may exist)	2014				2015																2016
	FY 12/31				1Q			2Q			3Q			4Q			FY 12/31				1Q			2Q			3Q			4Q			FY 12/31
	pro forma				pro forma			pro forma			pro forma			pro forma			pro forma				as reported			as reported			as reported			as reported			as reported
Segment revenue:
Wealth Management ⁽¹⁾	$	304,854			$	76,795		$	80,834		$	79,977		$	82,133		$	319,739			$	77,291		$	76,117		$	80,088		$	83,050		$	316,546
Tax Preparation ⁽²⁾	103,719				81,068			30,900			2,875			2,865			117,708				88,474			43,991			3,149			3,751			139,365
Total	$	408,573			$	157,863		$	111,734		$	82,852		$	84,998		$	437,447			$	165,765		$	120,108		$	83,237		$	86,801		$	455,911
Segment income (loss): ⁽³⁾
Wealth Management ⁽¹⁾	$	40,314			$	8,647		$	10,617		$	11,488		$	12,245		$	42,997			$	10,906		$	9,924		$	11,628		$	13,838		$	46,296
Tax Preparation ⁽²⁾	49,696				44,145			19,890			(2,542		)	(4,509		)	56,984				47,573			29,796			(4,382		)	(6,090		)	66,897
Total	$	90,010			$	52,792		$	30,507		$	8,946		$	7,736		$	99,981			$	58,479		$	39,720		$	7,246		$	7,748		$	113,193
Segment income (loss) % of revenue:
Wealth Management ⁽¹⁾	13		%		11		%	13		%	14		%	15		%	13		%		14		%	13		%	15		%	17		%	15		%
Tax Preparation ⁽²⁾	48		%		54		%	64		%	(88		)%	(157		)%	48		%		54		%	68		%	(139		)%	(162		)%	48		%
Total	22		%		33		%	27		%	11		%	9		%	23		%		35		%	33		%	9		%	9		%	25		%
Unallocated corporate operating expenses ⁽³⁾	$	14,235			$	4,376		$	4,662		$	4,433		$	4,279		$	17,750			$	4,699		$	4,460		$	4,907		$	4,933		$	18,999
Adjusted EBITDA	$	75,775			$	48,416		$	25,845		$	4,513		$	3,457		$	82,231			$	53,780		$	35,260		$	2,339		$	2,815		$	94,194
Other unallocated operating expenses: ⁽³⁾
Stock-based compensation ⁽⁴⁾	$	13,591			$	2,889		$	3,289		$	3,379		$	4,034		$	13,591			$	4,229		$	3,023		$	3,364		$	3,512		$	14,128
Acquisition-related costs	—				—			—			—			—			—				—			391			—			—			391
Depreciation	3,972				1,144			1,133			1,168			1,168			4,613				1,122			1,127			1,137			1,159			4,545
Amortization of acquired intangible assets ⁽⁴⁾	40,740				10,185			10,185			10,243			10,238			40,851				8,983			8,365			8,346			8,449			34,143
Restructuring	—				—			—			—			—			—				—			—			—			3,870			3,870
Operating income (loss)	$	17,472			$	34,198		$	11,238		$	(10,277	)	$	(11,983	)	$	23,176			$	39,446		$	22,354		$	(10,508	)	$	(14,175	)	$	37,117
Unallocated other income/loss: ⁽³⁾
Interest income	$	(355	)		$	(122	)	$	(138	)	$	(170	)	$	(179	)	$	(609	)		$	(25	)	$	(11	)	$	(18	)	$	(27	)	$	(81	)
Interest expense ⁽⁵⁾	37,034				9,224			9,220			9,298			9,317			37,059				9,191			8,381			7,824			7,028			32,424
Amortization of debt issuance costs⁽⁵⁾	1,753				454			467			482			491			1,894				610			417			413			400			1,840
Accretion of debt discounts⁽⁵⁾	4,525				1,178			1,207			1,235			1,260			4,880				1,406			1,094			1,099			1,091			4,690
(Gain) loss on debt extinguishment and modification expense⁽⁶⁾	—				—			—			—			—			—				(3,843		)	997			2,205			1,677			1,036
Other (income) loss, net	(285		)		(487		)	(308		)	(214		)	(281		)	(1,290		)		175			38			(70		)	(271		)	(128		)
Total	$	42,672			$	10,247		$	10,448		$	10,631		$	10,608		$	41,934			$	7,514		$	10,916		$	11,453		$	9,898		$	39,781
Income (loss) from continuing operations before income taxes	$	(25,200	)		$	23,951		$	790		$	(20,908	)	$	(22,591	)	$	(18,758	)		$	31,932		$	11,438		$	(21,961	)	$	(24,073	)	$	(2,664	)
Income tax (benefit) expense:^{(3) (7)}
Cash	$	2,200			$	550		$	550		$	550		$	550		$	2,200			$	1,064		$	600		$	775		$	78		$	2,517
Non-cash ⁽⁸⁾	(11,902		)		8,671			(245		)	(8,600		)	(9,248		)	(9,422		)		10,579			5,193			(9,312		)	(10,262		)	(3,802		)
Total	$	(9,702	)		$	9,221		$	305		$	(8,050	)	$	(8,698	)	$	(7,222	)		$	11,643		$	5,793		$	(8,537	)	$	(10,184	)	$	(1,285	)
GAAP income (loss) from continuing operations ⁽⁹⁾	$	(15,498	)		$	14,730		$	485		$	(12,858	)	$	(13,893	)	$	(11,536	)		$	20,289		$	5,645		$	(13,424	)	$	(13,889	)	$	(1,379	)
GAAP income (loss) from continuing operations per share - diluted	$	(0.37	)		$	0.35		$	0.01		$	(0.31	)	$	(0.34	)	$	(0.28	)		$	0.48		$	0.13		$	(0.33	)	$	(0.34	)	$	(0.05	)

GAAP discontinued operations, net of income taxes ⁽¹⁰⁾	$	(30,003	)		$	3,685		$	1,840		$	1,597		$	(34,470	)	$	(27,348	)		$	2,522		$	(19,975	)	$	(40,528	)	$	(5,140	)	$	(63,121	)
GAAP impact of noncontrolling interests ⁽⁹⁾	—				—			—			—			—			—				(144		)	(115		)	(167		)	(232		)	(658		)
GAAP net income (loss) attributable to Blucora, Inc.	$	(45,501	)		$	18,415		$	2,325		$	(11,261	)	$	(48,363	)	$	(38,884	)		$	22,667		$	(14,445	)	$	(54,119	)	$	(19,261	)	$	(65,158	)

Non-GAAP net income (loss)	$	30,125			$	37,315		$	14,572		$	(6,961	)	$	(7,976	)	$	36,950			$	39,286		$	23,424		$	(10,142	)	$	(7,472	)	$	45,096
Non-GAAP net income (loss) per share - diluted	$	0.70		(11)	$	0.89		$	0.35		$	(0.17	)	$	(0.19	)	$	0.88		(12)	$	0.94		$	0.55		$	(0.24	)	$	(0.18	)	$	1.06		(13)

Outstanding Shares	40,882				40,851			40,944			40,951			40,954			40,954				41,245			41,495			41,711			41,845			41,845
Basic Shares - GAAP	41,396				40,987			40,918			40,950			40,979			40,959				41,171			41,405			41,635			41,766			41,494
Diluted Shares - GAAP	41,396				41,899			41,936			40,950			40,979			40,959				41,610			42,298			41,635			41,766			41,494

Notes to Consolidated Financial Results on next page

Notes to 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 a highly seasonal business, almost all of the Tax Preparation revenue is generated in the first four months of the calendar year.

⁽³⁾

We do not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, acquisition-related costs, depreciation, amortization of acquired intangible assets, restructuring, other income/loss, or income taxes to the reportable segments. The general and administrative costs are included in "Unallocated corporate operating expenses." In addition, "Unallocated corporate operating expenses" for the pro forma quarterly and fiscal year 2015 results 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 TaxAct - HD Vest 2015 credit facility that was used to finance the HD Vest acquisition.

⁽⁶⁾

1Q16 gain on debt extinguishment and modification expense related to the repurchase of a portion of the Convertible Senior Notes below par value, offset by a loss on debt extinguishment and modification expense related to the prepayment of a portion of the TaxAct - HD Vest 2015 credit facility, which resulted in the write-down of a portion of the unamortized discount and debt issuance costs. 2Q16, 3Q16 and 4Q16 loss on debt extinguishment and modification expense related to the prepayment of a portion of the TaxAct - HD Vest 2015 credit facility during each of those quarters.


⁽⁷⁾	Pro forma 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.


⁽⁸⁾	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 U.S. federal net operating losses. The majority of these net operating losses will expire, if unutilized, between 2020 and 2024.


⁽⁹⁾	GAAP income (loss) from continuing operations excludes the impact of noncontrolling interests associated with the HD Vest management rollover equity ownership of 4.48%. The impact of noncontrolling interests is recorded separately and after GAAP income (loss) from continuing operations.

⁽¹⁰⁾

On October 14, 2015, Blucora 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. On August 9, 2016, we closed on an agreement with OpenMail, under which OpenMail acquired substantially all of the assets and assumed certain specified liabilities of the Search and Content business for $45.2 million. On November 17, 2016, we closed on an agreement with YFC, under which YFC acquired the E-Commerce business for $40.5 million. As a result, we recognized a combined loss on sale of discontinued operations before income taxes of $73.8 million in FY 2016.


⁽¹¹⁾	Calculation in FY 2014 used 42,946,000 diluted shares due to non-GAAP net income.


⁽¹²⁾	Calculation in FY 2015 used 41,861,000 diluted shares due to non-GAAP net income.


⁽¹³⁾	Calculation in FY 2016 used 42,686,000 diluted shares due to non-GAAP net income.

Blucora Reconciliation of Non-GAAP Financial Measures ^{(1) (2)}



(in thousands except per share amounts, rounding differences may exist)	2014			2015															2016
	FY 12/31			1Q			2Q			3Q			4Q			FY 12/31			1Q			2Q			3Q			4Q			FY 12/31
	pro forma			pro forma			pro forma			pro forma			pro forma			pro forma			as reported			as reported			as reported			as reported			as reported
Adjusted EBITDA
Operating income (loss)⁽³⁾	$	17,472		$	34,198		$	11,238		$	(10,277	)	$	(11,983	)	$	23,176		$	39,446		$	22,354		$	(10,508	)	$	(14,175	)	$	37,117
Stock-based compensation	13,591			2,889			3,289			3,379			4,034			13,591			4,229			3,023			3,364			3,512			14,128
Depreciation and amortization of acquired intangible assets	44,712			11,329			11,318			11,411			11,406			45,464			10,105			9,492			9,483			9,608			38,688
Acquisition-related costs	—			—			—			—			—			—			—			391			—			—			391
Restructuring	—			—			—			—			—			—			—			—			—			3,870			3,870
Adjusted EBITDA ⁽⁴⁾	$	75,775		$	48,416		$	25,845		$	4,513		$	3,457		$	82,231		$	53,780		$	35,260		$	2,339		$	2,815		$	94,194
Non-GAAP Net Income (Loss)
Net income (loss) attributable to Blucora, Inc. ⁽³⁾	$	(45,501	)	$	18,415		$	2,325		$	(11,261	)	$	(48,363	)	$	(38,884	)	$	22,667		$	(14,445	)	$	(54,119	)	$	(19,261	)	$	(65,158	)
Discontinued operations, net of income taxes	30,003			(3,685		)	(1,840		)	(1,597		)	34,470			27,348			(2,522		)	19,975			40,528			5,140			63,121
Stock-based compensation	13,591			2,889			3,289			3,379			4,034			13,591			4,229			3,023			3,364			3,512			14,128
Amortization of acquired intangible assets	40,740			10,185			10,185			10,243			10,238			40,851			8,983			8,365			8,346			8,449			34,143
Accretion of debt discount on Convertible Senior Notes	3,594			940			958			975			993			3,866			963			885			901			917			3,666
Accelerated accretion of debt discount on Convertible Senior Notes	—			—			—			—			—			—			1,628			—			—			—			1,628
Gain on Convertible Senior Notes repurchased	—			—			—			—			—			—			(7,724		)	—			—			—			(7,724		)
Acquisition-related costs	—			—			—			—			—			—			—			391			—			—			391
Restructuring	—			—			—			—			—			—			—			—			—			3,870			3,870
Impact of noncontrolling interests	—			—			—			—			—			—			144			115			167			232			658
Cash tax impact of adjustments to GAAP net income	(400		)	(100		)	(100		)	(100		)	(100		)	(400		)	339			(78		)	(17		)	(69		)	175
Non-cash income tax (benefit) expense	(11,902		)	8,671			(245		)	(8,600		)	(9,248		)	(9,422		)	10,579			5,193			(9,312		)	(10,262		)	(3,802		)
Non-GAAP net income (loss) ⁽⁴⁾	$	30,125		$	37,315		$	14,572		$	(6,961	)	$	(7,976	)	$	36,950		$	39,286		$	23,424		$	(10,142	)	$	(7,472	)	$	45,096

Non-GAAP net income (loss) per share	$	0.70		$	0.89		$	0.35		$	(0.17	)	$	(0.19	)	$	0.88		$	0.94		$	0.55		$	(0.24	)	$	(0.18	)	$	1.06
Diluted shares	42,946			41,899			41,936			40,950			40,979			41,861			41,610			42,298			41,635			41,766			42,686

⁽¹⁾


⁽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 16, 2017 Current Report on Form 8-K.


⁽³⁾	As presented in the Blucora Consolidated Financial Results (unaudited) on page 2.

⁽⁴⁾

We define Adjusted EBITDA and Non-GAAP Net Income (Loss) differently than we have defined it in the past due to restructuring costs related to the upcoming move of our corporate headquarters which was announced in 4Q16, the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in 1Q16, the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in 4Q15, separation-related costs in connection with the departure of our former chief executive officer which was announced in 4Q15, 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 services 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 4Q15 and resulted in significant transaction costs. The SimpleTax acquisition included contingent consideration, for which the fair value of that liability was revalued in 2Q16. Effective with 1Q16, we also define Non-GAAP Net Income (Loss) to exclude the gain on Convertible Senior Notes repurchased, which we repurchased below par value, and the related accelerated accretion of debt discount in 1Q16.

Blucora Net Leverage Ratio



	2015				2016
(in thousands except ratio, rounding differences may exist)	FY 12/31				1Q				2Q				3Q				4Q				FY 12/31
CASH:
Cash and cash equivalents	$	55,473			$	67,955			$	74,273			$	71,165			$	51,713			$	51,713
Available-for-sale investments	11,301				11,642				7,821				4,492				7,101				7,101
	$	66,774			$	79,597			$	82,094			$	75,657			$	58,814			$	58,814
DEBT:
TaxAct - HD Vest 2015 credit facility	$	400,000			$	360,000			$	340,000			$	295,000			$	260,000			$	260,000
Convertible Senior Notes	201,250				172,859				172,859				172,859				172,859				172,859
Note payable, related party	6,400				6,400				6,400				6,400				3,200				3,200
	$	607,650			$	539,259			$	519,259			$	474,259			$	436,059			$	436,059

NET DEBT FROM CONTINUING OPERATIONS	$	(540,876	)		$	(459,662	)		$	(437,165	)		$	(398,602	)		$	(377,245	)		$	(377,245	)

OTHER:
Add: Escrow receivable ⁽¹⁾	$	20,000			$	—			$	—			$	—			$	—			$	—

TOTAL NET DEBT FROM CONTINUING OPERATIONS	$	(520,876	)		$	(459,662	)		$	(437,165	)		$	(398,602	)		$	(377,245	)		$	(377,245	)

Last twelve months (pro forma): ⁽²⁾
SEGMENT INCOME:
Wealth Management	$	42,997			$	45,256			$	44,563			$	44,703			$	46,296			$	46,296
Tax Preparation	56,984				60,412				70,318				68,478				66,897				66,897
	99,981				105,668				114,881				113,181				113,193				113,193
Unallocated corporate operating expenses	(17,750		)		(18,073		)		(17,871		)		(18,345		)		(18,999		)		(18,999		)

ADJUSTED EBITDA	$	82,231			$	87,595			$	97,010			$	94,836			$	94,194			$	94,194

LEVERAGE RATIO	6.3			x	5.2			x	4.5			x	4.2			x	4.0			x	4.0			x


⁽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 was returned to the Company from escrow in 1Q16.


⁽²⁾	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.

Blucora Reconciliation of Operating Free Cash Flow from Continuing Operations ⁽¹⁾



	2015			2016
(in thousands, rounding differences may exist)	FY 12/31			1Q			2Q			3Q			4Q			FY 12/31
Net cash provided by operating activities from continuing operations	$	16,341		$	51,727		$	13,761		$	4,607		$	1,120		$	71,215
Excess tax benefits from stock-based award activity⁽²⁾	7,967			16,865			10,065			(5,561		)	(5,412		)	15,957
Purchases of property and equipment	(1,512		)	(677		)	(851		)	(1,120		)	(1,164		)	(3,812		)
Operating free cash flow from continuing operations	$	22,796		$	67,915		$	22,975		$	(2,074	)	$	(5,456	)	$	83,360

⁽¹⁾

We define operating free cash flow from continuing operations 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 continuing businesses, 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.

Blucora Operating Metrics - Wealth Management



	2014			2015															2016
(in thousands except %s, rounding differences may exist)	FY 12/31			1Q			2Q			3Q			4Q			FY 12/31			1Q			2Q			3Q			4Q			FY 12/31
	pro forma			pro forma			pro forma			pro forma			pro forma			pro forma			as reported			as reported			as reported			as reported			as reported
Segment revenue	$	304,854		$	76,795		$	80,834		$	79,977		$	82,133		$	319,739		$	77,291		$	76,117		$	80,088		$	83,050		$	316,546
Segment net revenue ⁽¹⁾	$	96,735		$	23,798		$	25,587		$	24,752		$	25,612		$	99,749		$	25,022		$	25,094		$	25,167		$	27,267		$	102,550
Segment income ⁽²⁾	$	40,314		$	8,647		$	10,617		$	11,488		$	12,245		$	42,997		$	10,906		$	9,924		$	11,628		$	13,838		$	46,296
Segment income % of revenue	13		%	11		%	13		%	14		%	15		%	13		%	14		%	13		%	15		%	17		%	15		%
Segment income % of net revenue	42		%	36		%	41		%	46		%	48		%	43		%	44		%	40		%	46		%	51		%	45		%



(in thousands except %s, rounding differences may exist)			2014			2015															2016
	Sources of Revenue	Primary Drivers	FY 12/31			1Q			2Q			3Q			4Q			FY 12/31			1Q			2Q			3Q			4Q			FY 12/31
			pro forma			pro forma			pro forma			pro forma			pro forma			pro forma			as reported			as reported			as reported			as reported			as reported
Advisor-driven	Commission	- Transactions - Asset levels	$	152,344		$	37,475		$	39,143		$	38,835		$	41,490		$	156,943		$	36,856		$	35,252		$	38,962		$	39,055		$	150,125
Advisor-driven	Advisory	- Advisory asset levels	120,185			31,734			32,799			33,327			31,573			129,433			31,532			31,522			32,705			33,658			129,417
Other revenue	Asset-based	- Cash balances - Interest rates - Number of accounts - Client asset levels	18,659			4,590			5,016			4,580			4,685			18,871			5,818			5,395			5,476			5,964			22,653
Other revenue	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			3,085			3,948			2,945			4,373			14,351
	Total revenue		$	304,854		$	76,795		$	80,834		$	79,977		$	82,133		$	319,739		$	77,291		$	76,117		$	80,088		$	83,050		$	316,546
	Total recurring revenue ⁽³⁾		$	236,100		$	60,540		$	63,409		$	62,373		$	61,671		$	247,993		$	60,069		$	61,160		$	62,543		$	65,538		$	249,310
	Recurring revenue rate ⁽³⁾		77.4		%	78.8		%	78.4		%	78.0		%	75.1		%	77.6		%	77.7		%	80.3		%	78.1		%	78.9		%	78.8		%



(in thousands except %s and as otherwise indicated, rounding differences may exist)	2014			2015															2016
	FY 12/31			1Q			2Q			3Q			4Q			FY 12/31			1Q			2Q			3Q			4Q			FY 12/31
	pro forma			pro forma			pro forma			pro forma			pro forma			pro forma			as reported			as reported			as reported			as reported			as reported
Total Assets Under Administration (“AUA”)	$	37,132,757		$	37,791,025		$	37,839,908		$	35,625,032		$	36,573,766		$	36,573,766		$	36,505,384		$	37,233,522		$	38,482,620		$	38,663,595		$	38,663,595
Advisory Assets Under Management (“AUM”)	$	9,552,876		$	9,860,064		$	9,899,542		$	9,396,557		$	9,692,244		$	9,692,244		$	9,592,025		$	9,814,232		$	10,204,448		$	10,397,071		$	10,397,071
% of total AUA	25.7		%	26.1		%	26.2		%	26.4		%	26.5		%	26.5		%	26.3		%	26.4		%	26.5		%	26.9		%	26.9		%
Number of Advisors (in ones)	4,515			4,564			4,579			4,625			4,600			4,600			4,584			4,561			4,568			4,472			4,472


⁽¹⁾	Amount represents segment revenue less advisor commission payout.


⁽²⁾	Excludes expenses associated with non-recurring projects.


⁽³⁾	Recurring revenue consists of trailing commissions, advisory fees, fees from cash sweep programs, and certain transaction and fee revenue.

Blucora Operating Metrics - Tax Preparation



(in thousands except %s, rounding differences may exist)	U.S. tax seasons ended				Years ended December 31,
Consumers	April 19, 2016	April 16, 2015	% change		2016	2015	% change
Online e-files	4,613	5,058	(9	)%	4,759	5,235	(9	)%
Desktop e-files	234	261	(10	)%	244	273	(11	)%
Sub-total e-files	4,847	5,319	(9	)%	5,003	5,508	(9	)%
Free File Alliance e-files ⁽¹⁾	158	172	(8	)%	167	181	(8	)%
Total e-files	5,005	5,491	(9	)%	5,170	5,689	(9	)%



(in thousands except %s and as otherwise indicated, rounding differences may exist)	U.S. tax seasons ended				Years ended December 31,
Preparers	April 19, 2016	April 16, 2015	% change		2016	2015	% change
E-files	1,630	1,475	10	%	1,755	1,590	10	%
Units sold (in ones)	20,114	19,284	4	%	20,290	19,355	5	%
E-files per unit sold (in ones)	81.0	76.5	6	%	86.5	82.2	5	%


⁽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.

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