Document

0001068875-19-000005.txt : 20190214 0001068875-19-000005.hdr.sgml : 20190214 20190214063750 ACCESSION NUMBER: 0001068875-19-000005 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20190214 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190214 DATE AS OF CHANGE: 20190214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUCORA, INC. CENTRAL INDEX KEY: 0001068875 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] 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: 19600557 BUSINESS ADDRESS: STREET 1: 6333 N. STATE HWY 161 STREET 2: 4TH FLOOR CITY: IRVING STATE: TX ZIP: 75038 BUSINESS PHONE: 972-870-6000 MAIL ADDRESS: STREET 1: 6333 N. STATE HWY 161 STREET 2: 4TH FLOOR CITY: IRVING STATE: TX ZIP: 75038 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-kq42018earningsrelea.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 14, 2019

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.)

6333 State Hwy 161, 4th Floor

Irving, Texas 75038

(Address of principal executive offices)

(972) 870-6000

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange

Act. ☐

Item 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On February 14, 2019, Blucora, Inc. (the "Company") announced its financial results for the quarter and year ended December 31, 2018. 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.

The press release includes non-GAAP financial measures as that term is defined in Regulation G. The press release also includes the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), information reconciling the non-GAAP financial measures to the GAAP financial measures, and a discussion of the reasons why the Company’s management believes that presentation of the non-GAAP financial measures provides useful information to investors regarding the Company’s financial condition and results of operations. The non-GAAP financial information presented therein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated and presented in accordance with GAAP.

Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS



Exhibit No.		Description
99.1		Press release dated February 14, 2019
99.2		Supplemental financial information dated February 14, 2019

Safe Harbor Statement Under the Private Securities and Litigation Reform Act

This report 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. When used in this report, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecasts,” “projects” and similar expressions and variations as they relate to the Company or its management are intended to identify forward-looking statements. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: our ability to effectively implement our future business plans and growth strategy; our ability to effectively compete within our industry; our ability to attract and retain customers; the availability of financing and our ability to meet our current and future debt service obligations and comply with our debt covenants; our ability to generate strong investment performance for our customers and the impact of the financial markets on our customers’ portfolios; political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation industries; our ability to attract and retain productive financial advisors; our ability to successfully make technology enhancements and introduce new and improve on existing products and services; our expectations concerning the revenues we generate from fees associated with the financial products that we distribute; our ability to comply with laws and regulations, including, among others, those related to privacy protection and consumer data; our expectations concerning the benefits that may be derived from our new clearing platform and our investment advisory platform; cybersecurity risks; our ability to maintain our relationships with third party partners; the seasonality of our business; litigation risks; our ability to attract and retain qualified employees; our assessments and estimates that determine our effective tax rate; the impact of new or changing tax legislation; our ability to develop, establish and maintain strong brands; our ability to protect our intellectual property; and our ability to effectively integrate companies or assets that we acquire. A more detailed description of these and certain other factors that could affect actual results is included in the Company’s filings with 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 report. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this report, except as may be required by law.

-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/ Davinder Athwal
		Davinder Athwal
		Chief Financial Officer

		February 14, 2019

-3-

EX-99.1 2 ex-991earningsreleaseq42018.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1

Blucora Reports Fourth Quarter and Full Year 2018 Results

IRVING, TX — February 14, 2019 — 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, 2018.

2018 Highlights and Recent Developments


•	Increased total revenue by 10% year-over-year


•	Grew GAAP Net income by 87%, Adjusted EBITDA by 19%, Non-GAAP net income by 36%


•	Achieved record advisory net flows at HD Vest, approaching $1 billion


•	Recorded 21st consecutive year of revenue growth at TaxAct, growing 16% year-over-year


•	Utilized strong cash flow generation to eliminate $80 million in debt, reducing net leverage ratio to 1.5x from 2.8x


•	Completed clearing transition expected to generate more than $120 million in incremental HD Vest segment income over 10-year term

“Strong net flows in the fourth quarter helped cap an excellent year for Blucora,” said John Clendening, Blucora’s President and Chief Executive Officer. “For the full year 2018 we generated outstanding financial results, achieving double-digit growth in revenue, earnings and cash flow, while hitting records in key metrics such as advisory flows. At the same time, we strengthened our balance sheet, our platform and our team, laying the groundwork to capture the significant opportunities we see ahead.”

Summary Financial Performance: Q4 and Full Year 2018

($ in millions except per share amounts)



	Q4			Q4					Full Year		Full Year
	2018			2017			Change		2018		2017		Change
Revenue
Wealth Management	$	97.2		$	93.8		4	%	$	373.2	$	348.6	7	%
Tax Preparation	$	4.1		$	4.0		2	%	$	187.3	$	160.9	16	%
Total Revenue	$	101.3		$	97.8		3	%	$	560.5	$	509.5	10	%
Segment Income (Loss)
Wealth Management	$	14.1		$	14.2		(1	)%	$	53.1	$	50.9	4	%
Tax Preparation	$	(8.7	)	$	(10.5	)	(17	)%	$	87.2	$	72.9	20	%
Total Segment Income	$	5.4		$	3.7		44	%	$	140.3	$	123.8	13	%
Unallocated Corporate Operating Expenses	$	6.1		$	5.1		21	%	$	20.5	$	22.9	(11	)%
GAAP:
Operating Income (Loss)	$	(13.5	)	$	(14.5	)	(7	)%	$	67.7	$	48.0	41	%
Net Income (Loss) Attributable to Blucora. Inc.	$	(16.0	)	$	10.0		(259	)%	$	50.6	$	27.0	87	%
Diluted Net Income (Loss) Per Share Attributable to Blucora. Inc.*	$	(0.38	)	$	0.21		(281	)%	$	0.90	$	0.57	58	%
Non-GAAP:
Adjusted EBITDA	$	(0.8	)	$	(1.3	)	(44	)%	$	119.8	$	100.9	19	%
Net Income (Loss)	$	(7.5	)	$	(5.7	)	32	%	$	94.0	$	69.1	36	%
Diluted Net Income (Loss) per Share	$	(0.16	)	$	(0.12	)	33	%	$	1.90	$	1.46	30	%
* 2018 GAAP EPS includes noncontrolling interest redemption impacts of $(0.05) and (0.13) for Q4 2018 and Full Year 2018, respectively.

See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.

Tax Season Update

“For this tax season we’ve unveiled a number of advances and new benefits for customers to make the tax filing experience easier and more rewarding,” Clendening continued. “In addition to bringing back some of our most popular features like our personalized deduction maximizer and $100,000 accuracy guarantee, some improvements customers are seeing this year include:


•	A newly refreshed and modern website that allows customers to quickly identify the product that best fits their needs;


•	Ten Minute taxes, a streamlined and intuitive process to guide filers with simple returns to complete their returns in just ten minutes or less;


•	Refund Marketplace, which rewards filers with bonus money, up to a maximum of $599, when they allocate a portion of their refund to gift cards from an assortment of national retailers;


•	A redesigned BluPrint financial assessment, which can turn insights from your tax return in to actionable recommendations to save real money; and


•	Many other improvements including more data import and product partners.”

“Based on early tax season data, we continue to expect first-half 2019 tax preparation revenue growth of approximately 7.5-10% versus the comparable period last year, with segment margin in the 56.7% to 57.7%. range.”

First Quarter Outlook

For the first quarter of 2019, the Company expects revenues to be between $213.5 million and $218.5 million, GAAP net income to be between $48.0 million and $50.5 million, or $0.95 to $1.00 per diluted share, Adjusted EBITDA to be between $68.5 million and $72.5 million, and Non-GAAP income to be between $60.0 million and $63.5 million, or $1.19 to $1.26 per diluted share.

Conference Call and Webcast

A conference call and live webcast will be held today at 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 will also provide the prepared remarks for the conference call along with supplemental financial information to our results on the Investor Relations section of the Blucora corporate website at http://www.blucora.com prior to the call. The supplemental financial information has also been filed with the SEC on Form 8-K. A replay of the call 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, respectively, 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:

Bill Michalek (972) 870-6463

VP, Investor Relations

This release 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. When used in this release, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecasts,” “projects” and similar expressions and variations as they relate to the Company or its management are intended to identify forward-looking statements. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: our ability to effectively implement our future business plans and growth strategy; our ability to effectively compete within our industry; our ability to attract and retain customers; the availability of financing and our ability to meet our current and future debt service obligations and comply with our debt covenants; our ability to generate strong investment performance for our customers and the impact of the financial markets on our customers’ portfolios; political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation industries; our ability to attract and retain productive financial advisors; our ability to successfully make technology enhancements and introduce new and improve on existing products and services; our expectations concerning the revenues we generate from fees associated with the financial products that we distribute; our ability to comply with laws and regulations, including, among others, those related to privacy

protection and consumer data; our expectations concerning the benefits that may be derived from our new clearing platform and investment advisory platform; cybersecurity risks; our ability to maintain our relationships with third party partners; the seasonality of our business; litigation risks; our ability to attract and retain qualified employees; our assessments and estimates that determine our effective tax rate; the impact of new or changing tax legislation; our ability to develop, establish and maintain strong brands; our ability to protect our intellectual property; and our ability to effectively integrate companies or assets that we acquire. A more detailed description of these and certain other factors that could affect actual results is included in the Company’s filings with 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. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this release, except as may be required by applicable law.

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,
	2018			2017			2018			2017
Revenue:
Wealth management services revenue	$	97,190		$	93,848		$	373,174		$	348,620
Tax preparation services revenue	4,068			4,001			187,282			160,937
Total revenue	101,258			97,849			560,456			509,557
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue	66,054			63,415			253,580			235,859
Tax preparation services cost of revenue	1,858			2,475			10,040			10,018
Amortization of acquired technology	—			50			99			195
Total cost of revenue ⁽¹⁾	67,912			65,940			263,719			246,072
Engineering and technology ⁽¹⁾	5,107			5,573			19,332			19,614
Sales and marketing⁽¹⁾	16,642			17,824			111,361			102,798
General and administrative ⁽¹⁾	16,229			13,263			60,124			52,668
Depreciation	762			780			4,468			3,460
Amortization of other acquired intangible assets	8,103			8,615			33,487			33,807
Restructuring ⁽¹⁾	(3		)	375			288			3,101
Total operating expenses	114,752			112,370			492,779			461,520
Operating income (loss)	(13,494		)	(14,521		)	67,677			48,037
Other loss, net ⁽²⁾	(3,947		)	(5,402		)	(15,797		)	(44,551		)
Income (loss) before income taxes	(17,441		)	(19,923		)	51,880			3,486
Income tax benefit	1,741			31,842			(311		)	25,890
Net income (loss)	(15,700		)	11,919			51,569			29,376
Net income attributable to noncontrolling interests	(281		)	(1,871		)	(935		)	(2,337		)
Net income (loss) attributable to Blucora, Inc.	$	(15,981	)	$	10,048		$	50,634		$	27,039
Net income (loss) per share attributable to Blucora, Inc.:
Basic	$	(0.38	)	$	0.22		$	0.94		$	0.61
Dilued	$	(0.38	)	$	0.21		$	0.90		$	0.57
Weighted average shares outstanding:
Basic	48,002			46,231			47,394			44,370
Diluted	48,002			48,406			49,381			47,211



⁽¹⁾ Stock-based compensation expense was allocated among the following captions (in thousands):
	Three months ended December 31,				Years ended December 31,
	2018		2017		2018		2017
Cost of revenue	$	527	$	228	$	1,467	$	774
Engineering and technology	176		250		766		984
Sales and marketing	589		575		2,424		2,376
General and administrative	2,402		2,166		8,596		7,519
Restructuring	—		70		—		1,148
Total stock-based compensation expense	$	3,694	$	3,289	$	13,253	$	12,801



⁽²⁾ Other loss, net consisted of the following (in thousands):
	Three months ended December 31,						Years ended December 31,
	2018			2017			2018			2017
Interest income	$	(132	)	$	(34	)	$	(349	)	$	(110	)
Interest expense	3,838			4,465			15,610			21,211
Amortization of debt issuance costs	174			198			833			1,089
Accretion of debt discounts	38			54			163			1,947
Loss on debt extinguishment and modification expense	—			681			1,534			20,445
Other	29			38			(1,994		)	(31		)
Other loss, net	$	3,947		$	5,402		$	15,797		$	44,551

Blucora, Inc.

Preliminary Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands)



	December 31,
	2018			2017
ASSETS
Current assets:
Cash and cash equivalents	$	84,524		$	59,965
Cash segregated under federal or other regulations	842			1,371
Accounts receivable, net of allowance	14,977			10,694
Commissions receivable	15,562			16,822
Other receivables	7,408			3,180
Prepaid expenses and other current assets, net	7,755			7,365
Total current assets	131,068			99,397
Long-term assets:
Property and equipment, net	12,389			9,831
Goodwill, net	548,685			549,037
Other intangible assets, net	294,603			328,205
Other long-term assets	10,980			15,201
Total long-term assets	866,657			902,274
Total assets	$	997,725		$	1,001,671
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,798		$	4,413
Commissions and advisory fees payable	15,199			17,813
Accrued expenses and other current liabilities	19,026			19,577
Deferred revenue	10,257			9,953
Total current liabilities	48,280			51,756
Long-term liabilities:
Long-term debt, net	260,390			338,081
Deferred tax liability, net	40,394			43,433
Deferred revenue	8,581			804
Other long-term liabilities	7,540			8,177
Total long-term liabilities	316,905			390,495
Total liabilities	365,185			442,251

Redeemable noncontrolling interests	24,945			18,033

Stockholders’ equity:
Common stock	5			5
Additional paid-in capital	1,569,725			1,555,560
Accumulated deficit	(961,689		)	(1,014,174		)
Accumulated other comprehensive loss	(446		)	(4		)
Total stockholders’ equity	607,595			541,387
Total liabilities and stockholders’ equity	$	997,725		$	1,001,671

Blucora, Inc.

Preliminary Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)



	Years ended December 31,
	2018			2017
Operating Activities:
Net income	$	51,569		$	29,376
Adjustments to reconcile net income to net cash from operating activities:
Stock-based compensation	13,253			11,653
Depreciation and amortization of acquired intangible assets	38,590			38,139
Restructuring (non-cash)	—			1,569
Deferred income taxes	(3,039		)	(16,159		)
Amortization of premium on investments, net, and debt issuance costs	833			1,099
Accretion of debt discounts	163			1,947
Loss on debt extinguishment	1,534			20,445
Other	72			30
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable	(4,286		)	(483		)
Commissions receivable	1,260			(678		)
Other receivables	(3,851		)	(204		)
Prepaid expenses and other current assets	(815		)	(869		)
Other long-term assets	3,450			(12,281		)
Accounts payable	(615		)	(123		)
Commissions and advisory fees payable	(2,614		)	1,226
Deferred revenue	9,930			(3,248		)
Accrued expenses and other current and long-term liabilities	114			1,407
Net cash provided by operating activities	105,548			72,846
Investing Activities:
Purchases of property and equipment	(7,633		)	(5,039		)
Proceeds from sales of investments	—			249
Proceeds from maturities of investments	—			7,252
Purchases of investments	—			(409		)
Net cash provided (used) by investing activities	(7,633		)	2,053
Financing Activities:
Proceeds from credit facilities	—			365,836
Payments on convertible notes	—			(172,827		)
Payments on credit facilities	(80,000		)	(290,000		)
Repayment of note payable with related party	—			(3,200		)
Proceeds from stock option exercises	12,773			40,271
Proceeds from issuance of stock through employee stock purchase plan	2,100			1,429
Tax payments from shares withheld for equity awards	(8,362		)	(9,095		)
Contingent consideration payments for business acquisition	(1,315		)	(946		)
Other	—			(30		)
Net cash provided by financing activities	(74,804		)	(68,562		)
Net cash provided by continuing operations	23,111			6,337

Net cash provided by investing activities from discontinued operations	—			1,028
Net cash provided by discontinued operations	—			1,028

Effect of exchange rate changes on cash and cash equivalents	(56		)	78
Net increase (decrease) in cash, cash equivalents, and restricted cash	23,055			7,443
Cash and cash equivalents, beginning of period	62,311			54,868
Cash and cash equivalents, end of period	$	85,366		$	62,311

Blucora, Inc.

Preliminary Segment Information

(Unaudited)

(Amounts in thousands)



	Three months ended December 31,						Years ended December 31,
	2018			2017			2018			2017
Revenue:
Wealth Management ⁽¹⁾	$	97,190		$	93,848		$	373,174		$	348,620
Tax Preparation ⁽¹⁾	4,068			4,001			187,282			160,937
Total revenue	101,258			97,849			560,456			509,557
Operating income (loss):
Wealth Management	14,133			14,232			53,053			50,916
Tax Preparation	(8,742		)	(10,489		)	87,249			72,921
Corporate-level activity ⁽²⁾	(18,885		)	(18,264		)	(72,625		)	(75,800		)
Total operating income (loss)	(13,494		)	(14,521		)	67,677			48,037
Other loss, net	(3,947		)	(5,402		)	(15,797		)	(44,551		)
Income tax benefit (expense)	1,741			31,842			(311		)	25,890
Net income (loss)	$	(15,700	)	$	11,919		$	51,569		$	29,376



⁽¹⁾ Revenues by major category within each segment are presented below (in thousands):
	Three months ended December 31,				Years ended December 31,
	2018		2017		2018		2017
Wealth Management:
Commission	$	39,932	$	43,060	$	164,201	$	160,241
Advisory	43,551		38,616		164,353		145,694
Asset-based	9,999		7,021		31,456		26,297
Transaction and fee	3,708		5,151		13,164		16,388
Total Wealth Management revenue	$	97,190	$	93,848	$	373,174	$	348,620
Tax Preparation:
Consumer	$	3,912	$	3,844	$	172,207	$	147,084
Professional	156		157		15,075		13,853
Total Tax Preparation revenue	$	4,068	$	4,001	$	187,282	$	160,937



⁽²⁾ Corporate-level activity included the following (in thousands):
	Three months ended December 31,					Years ended December 31,
	2018			2017		2018		2017
Operating expenses	$	6,143		$	5,084	$	20,494	$	22,907
Stock-based compensation	3,694			3,219		13,253		11,653
Depreciation	947			921		5,003		4,137
Amortization of acquired intangible assets	8,103			8,665		33,586		34,002
Restructuring	(3		)	375		288		3,101
Total corporate-level activity	$	18,884		$	18,264	$	72,624	$	75,800

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,
	2018			2017			2018		2017
Net income (loss) attributable to Blucora, Inc.	$	(15,981	)	$	10,048		$	50,634	$	27,039
Stock-based compensation	3,694			3,219			13,253		11,653
Depreciation and amortization of acquired intangible assets	9,050			9,586			38,590		38,139
Restructuring	(3		)	375			288		3,101
Other loss, net	3,947			5,402			15,797		44,551
Net income attributable to noncontrolling interests	281			1,871			935		2,337
Income tax expense (benefit)	(1,741		)	(31,842		)	311		(25,890		)
Adjusted EBITDA	$	(753	)	$	(1,341	)	$	119,808	$	100,930

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,
	2018			2017			2018			2017
Net income (loss) attributable to Blucora, Inc.⁽²⁾	$	(15,981	)	$	10,048		$	50,634		$	27,039
Stock-based compensation	3,694			3,219			13,253			11,653
Amortization of acquired intangible assets	8,103			8,665			33,586			34,002
Accretion and write-off of debt discount and debt issuance costs on previous debt	—			—			—			17,875
Restructuring	(3		)	375			288			3,101
Impact of noncontrolling interests	281			1,871			935			2,337
Cash tax impact of adjustments to GAAP net income	(536		)	3,328			(2,257		)	(6		)
Non-cash income tax benefit ⁽¹⁾	(3,050		)	(33,178		)	(2,403		)	(26,853		)
Non-GAAP net income (loss)	$	(7,492	)	$	(5,672	)	$	94,036		$	69,148

Per diluted share:
Net loss attributable to Blucora, Inc.⁽²⁾	$	(0.38	)	$	0.21		$	0.90		$	0.57
Stock-based compensation	0.08			0.07			0.27			0.25
Amortization of acquired intangible assets	0.15			0.20			0.68			0.72
Accretion and write-off of debt discount and debt issuance costs on previous debt	—			—			—			0.37
Restructuring	—			0.01			0.01			0.07
Impacts of noncontrolling interests	0.06			0.04			0.14			0.05
Cash tax impact of adjustments to GAAP net income	(0.01		)	0.07			(0.05		)	0.00
Non-cash income tax benefit	(0.06		)	(0.72		)	(0.05		)	(0.57		)
Non-GAAP net income (loss)	$	(0.16	)	$	(0.12	)	$	1.90		$	1.46
Weighted average shares outstanding used in computing per diluted share amounts	48,002			46,231			49,381			47,211

Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance ⁽¹⁾

(Amounts in thousands)



	Ranges for the three months ending
	March 31, 2019
	Low		High
Net income (loss) attributable to Blucora, Inc.	$	48,000	$	50,500
Stock-based compensation	4,300		3,900
Depreciation and amortization of acquired intangible assets	9,400		9,300
Other loss, net ⁽³⁾	5,300		5,000
Income tax expense	1,500		3,800
Adjusted EBITDA	$	68,500	$	72,500

Preliminary Non-GAAP Income Reconciliation for Forward-Looking Guidance ⁽¹⁾

(Amounts in thousands)



	Ranges for the three months ending
	March 31, 2019
	Low			High
Net income (loss) attributable to Blucora, Inc.	$	48,000		$	50,500
Stock-based compensation	4,300			3,900
Amortization of acquired intangible assets	8,100			8,100
Cash tax impact of adjustments to net income (loss)	(500		)	(500		)
Non-cash income tax expense	100			1,500
Non-GAAP income	$	60,000		$	63,500

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

⁽¹⁾ We define Adjusted EBITDA as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation and amortization of acquired intangible assets, restructuring, other loss, net, the impact of noncontrolling interests and income tax (benefit) expense. For purposes of this definition, restructuring costs relate to the relocation of our corporate headquarters during 2017.

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) 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, accelerated accretion of debt discount on our Convertible Senior Notes that were outstanding for a portion of 2017 (the "Notes"), write-off of debt discount and debt issuance costs on the terminated Notes and the terminated TaxAct - HD Vest 2015 credit facility, restructuring costs (described further under Adjusted EBITDA above), the impact of noncontrolling interests, the related cash tax impact of those adjustments, and non-cash income taxes. The write-off of debt discount and debt issuance costs on the terminated Notes and the closed TaxAct - HD Vest 2015 credit facility relates to the debt refinancing that occurred in the second quarter of 2017. 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. The aforementioned items are only included in non-GAAP net income (loss) in the periods they occurred.

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) and non-GAAP net (loss) income per share 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) and net income (loss) per share. Other companies may calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share differently, and, therefore, our non-GAAP net income (loss) and non-GAAP net income (loss) per share 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, and gain/loss on debt extinguishment.

EX-99.2 3 ex-992earningsreleaseq42018.htm EXHIBIT 99.2 Exhibit

Exhibit 99.2

Blucora, Inc.

Supplemental Information

December 31, 2018

Table of Contents



Financial Information
Consolidated Financial Results	2
Reconciliation of Non-GAAP Financial Measures	4
Net Leverage Ratio	6
Reconciliation of Operating Free Cash Flow	7

Operating Metrics
Wealth Management	8
Tax Preparation	9

Blucora Consolidated Financial Results⁽¹⁾



(in thousands except %s and per share amounts, rounding differences may exist)	2016				2017																2018
	FY 12/31				1Q			2Q			3Q			4Q			FY 12/31				1Q			2Q			3Q			4Q			FY 12/31
Segment revenue:
Wealth Management	$	316,546			$	82,667		$	85,296		$	86,809		$	93,848		$	348,620			$	92,082		$	92,015		$	91,887		$	97,190		$	373,174
Tax Preparation ⁽¹⁾	139,365				99,708			53,866			3,362			4,001			160,937				113,883			65,833			3,498			4,068			187,282
Total	$	455,911			$	182,375		$	139,162		$	90,171		$	97,849		$	509,557			$	205,965		$	157,848		$	95,385		$	101,258		$	560,456
Segment income (loss): ⁽²⁾
Wealth Management	$	46,296			$	11,853		$	12,406		$	12,425		$	14,232		$	50,916			$	13,075		$	12,954		$	12,891		$	14,133		$	53,053
Tax Preparation ⁽¹⁾	66,897				53,133			36,515			(6,238		)	(10,489		)	72,921				58,806			44,121			(6,936		)	(8,742		)	87,249
Total	$	113,193			$	64,986		$	48,921		$	6,187		$	3,743		$	123,837			$	71,881		$	57,075		$	5,955		$	5,391		$	140,302
Segment income (loss) % of revenue:
Wealth Management	15		%		14		%	15		%	14		%	15		%	15		%		14		%	14		%	14		%	15		%	14		%
Tax Preparation ⁽¹⁾	48		%		53		%	68		%	(186		)%	(262		)%	45		%		52		%	67		%	(198		)%	(215		)%	47		%
Total	25		%		36		%	35		%	7		%	4		%	24		%		35		%	36		%	6		%	5		%	25		%
Unallocated corporate operating expenses ⁽²⁾	$	18,999			$	6,773		$	6,463		$	4,587		$	5,084		$	22,907			$	5,541		$	4,238		$	4,572		$	6,143		$	20,494
Adjusted EBITDA	$	94,194			$	58,213		$	42,458		$	1,600		$	(1,341	)	$	100,930			$	66,340		$	52,837		$	1,383		$	(752	)	$	119,808
Other unallocated operating expenses: ⁽²⁾
Stock-based compensation	$	14,128			$	2,565		$	2,737		$	3,132		$	3,219		$	11,653			$	2,955		$	3,730		$	2,874		$	3,694		$	13,253
Acquisition-related costs	391				—			—			—			—			—				—			—			—			—			—
Depreciation	4,545				1,134			1,059			1,023			921			4,137				2,002			1,124			930			947			5,003
Amortization of acquired intangible assets	34,143				8,336			8,336			8,665			8,665			34,002				8,357			8,855			8,271			8,103			33,586
Restructuring	3,870				2,289			331			106			375			3,101				289			2			—			(3		)	288
Operating income (loss)	$	37,117			$	43,889		$	29,995		$	(11,326	)	$	(14,521	)	$	48,037			$	52,737		$	39,126		$	(10,692	)	$	(13,493	)	$	67,678
Unallocated other income/loss: ⁽²⁾
Interest income	$	(81	)		$	(20	)	$	(25	)	$	(31	)	$	(34	)	$	(110	)		$	(40	)	$	(58	)	$	(119	)	$	(132	)	$	(349	)
Interest expense	32,424				6,436			5,529			4,781			4,465			21,211				4,181			3,847			3,744			3,838			15,610
Amortization of debt issuance costs	1,840				387			327			177			198			1,089				203			284			172			174			833
Accretion of debt discounts	4,690				1,085			755			53			54			1,947				47			40			38			38			163
(Gain) loss on debt extinguishment and modification expense	1,036				1,780			17,801			183			681			20,445				776			758			—			—			1,534
Other (income) loss, net	(128		)		40			(187		)	78			38			(31		)		61			(2,112		)	28			29			(1,994		)
Total	$	39,781			$	9,708		$	24,200		$	5,241		$	5,402		$	44,551			$	5,228		$	2,759		$	3,863		$	3,947		$	15,797
Income (loss) from continuing operations before income taxes	$	(2,664	)		$	34,181		$	5,795		$	(16,567	)	$	(19,923	)	$	3,486			$	47,509		$	36,367		$	(14,555	)	$	(17,440	)	$	51,881
Income tax (benefit) expense:^{(2) (3)}
Cash	$	2,517			$	311		$	(626	)	$	(58	)	$	1,336		$	963			$	565		$	325		$	515		$	1,309		$	2,714
Non-cash ⁽⁴⁾	(3,802		)		3,160			2,941			224			(33,178		)	(26,853		)		1,398			582			(1,333		)	(3,050		)	(2,403		)
Total	$	(1,285	)		$	3,471		$	2,315		$	166		$	(31,842	)	$	(25,890	)		$	1,963		$	907		$	(818	)	$	(1,741	)	$	311
GAAP income (loss) from continuing operations ⁽⁵⁾	$	(1,379	)		$	30,710		$	3,480		$	(16,733	)	$	11,919		$	29,376			$	45,546		$	35,460		$	(13,737	)	$	(15,699	)	$	51,570
GAAP income (loss) from continuing operations per share - diluted	$	(0.05	)		$	0.67		$	0.07		$	(0.37	)	$	0.21		$	0.57			$	0.93		$	0.71		$	(0.37	)	$	(0.38	)	$	0.90

GAAP discontinued operations, net of income taxes ⁽⁶⁾	$	(63,121	)		$	—		$	—		$	—		$	—		$	—			$	—		$	—		$	—		$	—		$	—
GAAP impact of noncontrolling interests ⁽⁵⁾	(658		)		(126		)	(176		)	(164		)	(1,871		)	(2,337		)		(205		)	(222		)	(227		)	(281		)	(935		)
GAAP net income (loss) attributable to Blucora, Inc.	$	(65,158	)		$	30,584		$	3,304		$	(16,897	)	$	10,048		$	27,039			$	45,341		$	35,238		$	(13,964	)	$	(15,980	)	$	50,635

Non-GAAP net income (loss)	$	45,096			$	47,407		$	32,947		$	(5,534	)	$	(5,672	)	$	69,148			$	58,232		$	47,726		$	(4,430	)	$	(7,492	)	$	94,036
Non-GAAP net income (loss) per share - diluted	$	1.06		(7)	$	1.04		$	0.70		$	(0.12	)	$	(0.12	)	$	1.46		(8)	$	1.20		$	0.97		$	(0.09	)	$	(0.16	)	$	1.90		(9)

Outstanding Shares	41,845				42,635			44,681			46,077			46,366			46,366				46,828			47,494			47,816			48,044			48,044
Basic Shares - GAAP	41,494				42,145			43,644			45,459			46,231			44,370				46,641			47,221			47,712			48,002			47,394
Diluted Shares - GAAP	41,494				45,428			46,937			45,459			48,406			47,211				48,665			49,434			47,712			48,002			49,381

Notes to Consolidated Financial Results on next page

Notes to 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, 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."


⁽³⁾	On December 22, 2017, the Tax Cuts and Job Act was signed into law. This law, effective January 1, 2018, lowered the corporate income tax rate from 35% to 21%. As a result of that reduction we re-valued our net deferred tax liabilities in 2017, which resulted in an additional income tax benefit of $21.4 million. During 2017 we recorded an income tax benefit of $25.9 million.


⁽⁴⁾	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.


⁽⁵⁾	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.

⁽⁶⁾

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.


⁽⁷⁾	Calculation in FY 2016 used 42,686,000 diluted shares due to non-GAAP net income.


⁽⁸⁾	Calculation in FY 2017 used 47,211,000 diluted shares due to non-GAAP net income.


⁽⁹⁾	Calculation in FY 2018 used 49,381,000 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)	2016			2017															2018
	FY 12/31			1Q			2Q			3Q			4Q			FY 12/31			1Q			2Q			3Q			4Q			FY 12/31
Adjusted EBITDA
Net income (loss) attributable to Blucora, Inc.	$	(65,158	)	$	30,584		$	3,304		$	(16,897	)	$	10,048		$	27,039		$	45,341		$	35,238		$	(13,964	)	$	(15,981	)	$	50,634
Stock-based compensation	14,128			2,565			2,737			3,132			3,219			11,653			2,955			3,730			2,874			3,694			13,253
Depreciation and amortization of acquired intangible assets	38,688			9,470			9,395			9,688			9,586			38,139			10,359			9,979			9,201			9,050			38,590
Restructuring	3,870			2,289			331			106			375			3,101			289			2			—			(3		)	288
Other loss, net ⁽³⁾	39,781			9,708			24,200			5,241			5,402			44,551			5,228			2,759			3,863			3,947			15,797
Net income attributable to noncontrolling interests	658			126			176			164			1,871			2,337			205			222			227			281			935
Income tax benefit (expense)	(1,285		)	3,471			2,315			166			(31,842		)	(25,890		)	1,963			907			(818		)	(1,741		)	311
Discontinued operations, net of tax	63,121			—			—			—			—			—			—			—			—			—			—
Acquisition-related costs	391			—			—			—			—			—			—			—			—			—			—
Adjusted EBITDA	$	94,194		$	58,213		$	42,458		$	1,600		$	(1,341	)	$	100,930		$	66,340		$	52,837		$	1,383		$	(753	)	$	119,808
Non-GAAP Net Income (Loss)
Net income (loss) attributable to Blucora, Inc.	$	(65,158	)	$	30,584		$	3,304		$	(16,897	)	$	10,048		$	27,039		$	45,341		$	35,238		$	(13,964	)	$	(15,981	)	$	50,634
Discontinued operations, net of income taxes	63,121			—			—			—			—			—			—			—			—			—			—
Stock-based compensation	14,128			2,565			2,737			3,132			3,219			11,653			2,955			3,730			2,874			3,694			13,253
Amortization of acquired intangible assets	34,143			8,336			8,336			8,665			8,665			34,002			8,357			8,855			8,271			8,103			33,586
Accelerated accretion of debt discount on Convertible Senior Notes repurchased	1,628			—			—			—			—			—			—			—			—			—			—
Gain on Convertible Senior Notes repurchased	(7,724		)	—			—			—			—			—			—			—			—			—			—
Accretion and write-off of debt discount and debt issuance costs on previous debt	3,666			934			16,941			—			—			17,875			—			—			—			—			—
Acquisition-related costs	391			—			—			—			—			—			—			—			—			—			—
Restructuring	3,870			2,289			331			106			375			3,101			289			2			—			(3		)	288
Impact of noncontrolling interests	658			126			176			164			1,871			2,337			205			222			227			281			935
Cash tax impact of adjustments to GAAP net income	175			(587		)	(1,819		)	(928		)	3,328			(6		)	(313		)	(903		)	(505		)	(536		)	(2,257		)
Non-cash income tax (benefit) expense	(3,802		)	3,160			2,941			224			(33,178		)	(26,853		)	1,398			582			(1,333		)	(3,050		)	(2,403		)
Non-GAAP net income (loss)	$	45,096		$	47,407		$	32,947		$	(5,534	)	$	(5,672	)	$	69,148		$	58,232		$	47,726		$	(4,430	)	$	(7,492	)	$	94,036

Non-GAAP net income (loss) per share	$	1.06		$	1.04		$	0.70		$	(0.12	)	$	(0.12	)	$	1.46		$	1.20		$	0.97		$	(0.09	)	$	(0.16	)	$	1.90
Diluted shares	42,686			45,428			46,937			45,459			46,231			47,211			48,665			49,434			47,712			48,002			49,381

⁽¹⁾ We define Adjusted EBITDA as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation and amortization of acquired intangible assets, restructuring, other loss, net, the impact of noncontrolling interests, income tax (benefit) expense, discontinued operations, net of income taxes, and acquisition-related costs. For purposes of this definition, restructuring costs relate to the relocation of our corporate headquarters during 2017. The aforementioned items are only included in Adjusted EBITDA in the periods they occurred.

We define non-GAAP net income (loss) as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of discontinued operations, net of income taxes, stock-based compensation, amortization of acquired intangible assets, accretion of debt discount and accelerated accretion of debt discount on our Convertible Senior Notes that were outstanding for a portion of 2017 (the "Notes"), gain on those Convertible Senior Notes, write-off of debt discount and debt issuance costs on the terminated Notes and the terminated TaxAct - HD Vest 2015 credit facility, acquisition-related costs, restructuring costs (described further under Adjusted EBITDA above), the impact of noncontrolling interests, the related cash tax impact of those adjustments, and non-cash income taxes. The write-off of debt discount and debt issuance costs on the terminated Notes and the closed TaxAct - HD Vest 2015 credit facility relates to the debt refinancing that occurred in the second quarter of 2017. 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. The aforementioned items are only included in non-GAAP net income (loss) in the periods they occurred.

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) and non-GAAP net income (loss) per share 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) and net income per share. Other companies may calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share differently, and, therefore, our non-GAAP net income (loss) and non-GAAP net income (loss) per share may not be comparable to similarly titled measures of other companies.

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

Blucora Net Leverage Ratio



	2017				2018
(in thousands except ratio, rounding differences may exist)	FY 12/31				1Q				2Q				3Q				4Q				FY 12/31
CASH:
Cash and cash equivalents	$	59,965			$	77,107			$	89,840			$	88,274			$	84,524			$	84,524
DEBT:
Senior secured credit facility	$	345,000			$	305,000			$	265,000			$	265,000			$	265,000			$	265,000

NET DEBT ^{(1) (2)}	$	(285,035	)		$	(227,893	)		$	(175,160	)		$	(176,726	)		$	(180,476	)		$	(180,476	)

Last twelve months (pro forma):
SEGMENT INCOME:
Wealth Management	$	50,916			$	52,138			$	52,686			$	53,152			$	53,053			$	53,053
Tax Preparation	72,921				78,594				86,200				85,502				87,249				87,249
	123,837				130,732				138,886				138,654				140,302				140,302
Unallocated corporate operating expenses	(22,907		)		(21,675		)		(19,450		)		(19,435		)		(20,494		)		(20,494		)

ADJUSTED EBITDA ⁽¹⁾	$	100,930			$	109,057			$	119,436			$	119,219			$	119,808			$	119,808

LEVERAGE RATIO ^{(1) (3)}	2.8			x	2.1			x	1.5			x	1.5			x	1.5			x	1.5			x


(1)	Non-GAAP measure.


(2)	We define net debt as cash and cash equivalents less the outstanding principal of debt. Management believes that the presentation of this non-GAAP financial measure provides useful information to investors because it is an important liquidity measurement that reflects our ability to service debt.


(3)	Net debt leverage ratio is net debt divided by Adjusted EBITDA. Adjusted EBITDA is reconciled to the nearest non-GAAP measure above.

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



	2017			2018
(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	$	72,846		$	57,450		$	49,107		$	(974	)	$	(35	)	$	105,548
Purchases of property and equipment	(5,039		)	(940		)	(1,662		)	(2,738		)	(2,293		)	(7,633		)
Operating free cash flow from continuing operations	$	67,807		$	56,510		$	47,445		$	(3,712	)	$	(2,328	)	$	97,915

⁽¹⁾

We define operating free cash flow from continuing operations, which is a Non-GAAP measure, as net cash provided by operating activities from continuing operations 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 purchases of property and equipment, that can then be used for, among other things, strategic acquisitions and investments in the businesses, stock repurchases, and funding ongoing operations.

Blucora Operating Metrics - Wealth Management



	2016			2017															2018
(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
Segment revenue	$	316,546		$	82,667		$	85,296		$	86,809		$	93,848		$	348,620		$	92,082		$	92,015		$	91,887		$	97,190		$	373,174
Segment net revenue ⁽¹⁾	$	102,550		$	26,793		$	28,394		$	27,591		$	30,639		$	113,417		$	29,259		$	30,125		$	29,994		$	31,744		$	121,122
Segment income ⁽²⁾	$	46,296		$	11,853		$	12,406		$	12,425		$	14,232		$	50,916		$	13,075		$	12,954		$	12,891		$	14,133		$	53,053
Segment income % of revenue	15		%	14		%	15		%	14		%	15		%	15		%	14		%	14		%	14		%	15		%	14		%
Segment income % of net revenue	45		%	44		%	44		%	45		%	46		%	45		%	45		%	43		%	43		%	45		%	44		%



(in thousands except %s, rounding differences may exist)			2016			2017															2018
	Sources of Revenue	Primary Drivers	FY 12/31			1Q			2Q			3Q			4Q			FY 12/31			1Q			2Q			3Q			4Q			FY 12/31
Adviser-driven	Commission	- Transactions - Asset levels	$	150,125		$	39,595		$	38,154		$	39,432		$	43,060		$	160,241		$	42,870		$	40,384		$	41,015		$	39,932		$	164,201
Adviser-driven	Advisory	- Advisory asset levels	129,417			33,576			35,914			37,588			38,616			145,694			39,301			40,058			41,443			43,551			164,353
Other revenue	Asset-based	- Cash balances - Interest rates - Number of accounts - Client asset levels	22,653			5,966			6,784			6,526			7,021			26,297			7,172			7,306			6,979			9,999			31,456
Other revenue	Transaction and fee	- Account activity - Number of clients - Number of advisers - Number of accounts	14,351			3,530			4,444			3,263			5,151			16,388			2,739			4,267			2,450			3,708			13,164
	Total revenue		$	316,546		$	82,667		$	85,296		$	86,809		$	93,848		$	348,620		$	92,082		$	92,015		$	91,887		$	97,190		$	373,174
	Total recurring revenue ⁽³⁾		$	249,130		$	63,907		$	68,971		$	70,539		$	74,129		$	277,546		$	72,962		$	75,369		$	74,228		$	80,558		$	303,117
	Recurring revenue rate ⁽³⁾		78.7		%	77.3		%	80.9		%	81.3		%	79.0		%	79.6		%	79.2		%	81.9		%	80.8		%	82.9		%	81.2		%



(in thousands except %s and as otherwise indicated, rounding differences may exist)	2016			2017															2018
	FY 12/31			1Q			2Q			3Q			4Q			FY 12/31			1Q			2Q			3Q			4Q			FY 12/31
Total Client Assets ⁽⁴⁾	$	38,663,595		$	40,424,515		$	41,427,028		$	42,696,862		$	44,178,710		$	44,178,710		$	44,383,024		$	45,016,993		$	46,413,409		$	42,249,055		$	42,249,055
Brokerage Assets ⁽⁵⁾	$	28,266,524		$	29,333,748		$	29,875,740		$	30,712,542		$	31,648,545		$	31,648,545		$	31,665,899		$	32,069,800		$	32,897,081		$	29,693,650		$	29,693,650
Advisory Assets ⁽⁶⁾	$	10,397,071		$	11,090,767		$	11,551,288		$	11,984,320		$	12,530,165		$	12,530,165		$	12,717,125		$	12,947,193		$	13,516,328		$	12,555,405		$	12,555,405
% of Total Client Assets	26.9		%	27.4		%	27.9		%	28.1		%	28.4		%	28.4		%	28.7		%	28.8		%	29.1		%	29.7		%	29.7		%
Number of Advisers (in ones)	4,472			4,427			4,426			4,392			3,999			3,999			3,920			3,709			3,687			3,593			3,593
Adviser-driven revenue per adviser	$	16.3		$	16.5		$	16.7		$	17.5		$	20.4		$	20.4		$	21.0		$	21.7		$	22.4		$	23.2		$	23.2


⁽¹⁾	Amount represents segment revenue less adviser 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.


⁽⁴⁾	Total client assets replaces the previously used term assets under administration.


⁽⁵⁾	Brokerage assets represents the difference between total client assets and advisory assets.


⁽⁶⁾	Advisory assets replaces the previously used term assets under management.

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, 2018	April 18, 2017	% change		2018	2017	% change
Digital e-files	3,432	3,958	(13	)%	3,539	4,097	(14	)%
Desktop e-files	152	184	(17	)%	159	193	(18	)%
Sub-total e-files	3,584	4,142	(13	)%	3,698	4,290	(14	)%
Free File Alliance e-files ⁽¹⁾	188	164	15	%	198	176	13	%
Total e-files	3,772	4,306	(12	)%	3,896	4,466	(13	)%



(in thousands except %s and as otherwise indicated, rounding differences may exist)	U.S. tax seasons ended				Years ended December 31,
Preparers	April 19, 2018	April 18, 2017	% change		2018	2017	% change
E-files	1,763	1,717	3	%	1,833	1,774	3	%
Units sold (in ones)	20,588	20,964	(2	)%	20,636	20,694	—	%
E-files per unit sold (in ones)	85.6	81.9	5	%	88.8	85.7	4	%


⁽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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