10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission File Number 000-25131

BLUCORA, INC.

(Exact name of registrant as specified in its charter)

Delaware	91-1718107
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

10900 NE 8th Street, Suite 800, Bellevue, Washington 98004

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code:

(425) 201-6100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

(Title of Class)

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨    No x

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨    No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x    No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer x	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨    No x

The aggregate market value of the Common Stock held by non-affiliates of the registrant outstanding as of June 30, 2012, based upon the closing price of Common Stock on June 30, 2012 as reported on the NASDAQ Global Select Market, was $470.4 million. Common Stock held by each officer and director has been excluded because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 1, 2013, 40,969,769 shares of the registrant’s Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates certain information by reference from the definitive proxy statement to be filed by the registrant in connection with the 2013 Annual Meeting of Stockholders (the “Proxy Statement”).

TABLE OF CONTENTS

Part I
Item 1.	Business	3
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	24
Item 2.	Properties	24
Item 3.	Legal Proceedings	24
Item 4.	Mine Safety Disclosures	24
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6.	Selected Financial Data	26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 8.	Financial Statements and Supplementary Data	53
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	91
Item 9A.	Controls and Procedures	91
Item 9B.	Other Information	93
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	94
Item 11.	Executive Compensation	94
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	94
Item 13.	Certain Relationships and Related Transactions, and Director Independence	94
Item 14.	Principal Accounting Fees and Services	94
Part IV
Item 15.	Exhibits, Financial Statement Schedules	95
Signatures

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This report contains forward-looking statements that involve risks and uncertainties. The statements in this report that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue,” and similar expressions identify forward-looking statements, but the absence of these words does not mean that the statement is not forward looking. These forward-looking statements include, but are not limited to, statements regarding projections of our future financial performance; trends in our businesses; our future business plans and growth strategy, including our plans to expand, develop, or acquire particular operations or businesses; and the sufficiency of our cash balances and cash generated from operating, investing, and financing activities for our future liquidity and capital resource needs.

Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause our results, levels of activity, performance, achievements, and prospects, and those of the Internet search and tax preparation industries generally, to be materially different from those expressed or implied by such forward-looking statements. These risks, uncertainties, and other factors include, among others, those identified under Item 1A, “Risk Factors” and elsewhere in this report. You should not rely on forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We do not undertake any obligation to update any forward-looking statement to reflect new information, events, or circumstances after the date of this Annual Report on Form 10-K or to reflect the occurrence of unanticipated events.

ITEM 1. Business

Overview

Blucora, Inc.’s (“Blucora’s” or “our”) operations consist primarily of two businesses: an internet search business and an online tax preparation business. Our search business, InfoSpace, consists primarily of a B2B offering that provides our search technology, aggregated content, and services to our distribution partners. Our search business also offers search services directly to consumers through our own internet search properties. Our tax preparation business consists of the operations of the TaxACT tax preparation online service and software business that we acquired on January 31, 2012.

Our InfoSpace search business primarily offers search services through the web properties of its distribution partners, which are generally private-labeled and customized to address the unique requirements of each distribution partner. The search business also distributes aggregated search content through its own websites, such as Dogpile.com and WebCrawler.com. The search business does not generate its own search content, but instead aggregates search content from a number of content providers. Some of these content providers, such as Google and Yahoo!, pay us to distribute their content. We refer to those providers as Search Customers.

On January 31, 2012, we acquired TaxACT Holdings, Inc. (“TaxACT Holdings”) and its wholly-owned subsidiary, 2^nd Story Software, Inc. (“2^nd Story”), which operates the TaxACT tax preparation online service and software business. Our TaxACT business consists of an online tax preparation service for individuals, tax preparation software for individuals and professional tax preparers, and ancillary services. The majority of our TaxACT business’s revenue is generated by the online service at www.taxact.com.

We are currently focused on the following areas:

• improving the search services offered to our end users and to our distribution partners and through our owned and operated properties;

• maintaining our current distribution partners and adding new distribution partners for our search services;

• enhancements to the customer experience for our tax preparation services and products, including expanding our product offerings; and

• retaining current tax preparation customers and attracting new ones.

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Additionally, an important component of our strategy for future growth is to acquire technology and internet businesses. In the ordinary course of business, we are continuously engaged in various stages of diligence, discussion, and negotiation with regard to acquisition targets, including companies and assets that complement our search and tax preparation businesses, as well as companies and assets that are unrelated to our existing businesses. Potential acquisitions may be material to our business, financial condition, and results of operations.

As a result of the acquisition of our TaxACT business, we have determined that we have two reporting segments: Search and Tax Preparation. Our Search segment is the InfoSpace business and our Tax Preparation segment is the TaxACT business. Unless the context indicates otherwise, we use the term “search” to represent search services and we use the term “tax preparation” to represent services and products sold through the TaxACT business (see “Note 14: Segment Information” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report).

We were founded in 1996 and are incorporated in the state of Delaware. We changed our name from InfoSpace, Inc. to Blucora, Inc. in June 2012. Our principal corporate office is located in Bellevue, Washington. Our common stock is listed on the NASDAQ Global Select Market under the symbol “BCOR.”

Search Revenue Sources

Our search revenue is primarily derived from search content providers who provide paid search links for display as part of our search services. From these content providers, whom we refer to as our Search Customers, we license rights to certain search products and services, including both non-paid and paid search links. We receive revenues from our Search Customers when an end user of our web search services clicks on a paid search link that is provided by that Search Customer and displayed on one of our owned and operated web properties or displayed on the web property of one of our search distribution partners. Revenues are recognized in the period in which such paid clicks occur and are based on the amounts earned and remitted to us by our Search Customers for such clicks. We derive a significant portion of our revenue from Google and we expect this concentration to continue in the foreseeable future. Google accounted for 77% of our total revenues in 2012. If Google reduces or eliminates the services it provides to us or our distribution partners, or if Google is unwilling to pay us amounts they owe us, it could materially harm our business and financial results.

Our main Search Customer agreements are with Google and Yahoo!. Our agreement with Yahoo! runs through December 31, 2013 and our agreement with Google runs through March 31, 2014. Both Google and Yahoo! have requirements and guidelines regarding, and reserve certain rights of approval over, the use and distribution of their respective search products and services. Both Google and Yahoo! may modify certain requirements and guidelines of their agreements with us at their discretion, and even when unmodified, we occasionally disagree with our Search Customers on interpretations of these requirements and guidelines. If Google or Yahoo! believe that we or our search distribution partners have failed to meet the requirements and guidelines or the Search Customer agreements, they may suspend or terminate our or our distribution partners’ use and distribution of their search products and services, with or without notice, and in the event of certain violations, may terminate their agreements with us. We and our distribution partners have limited rights to cure breaches of the requirements and guidelines.

Google and Yahoo! each make certain representations and warranties to us in the agreements regarding the content and operation of their search services, and we make certain representations and warranties in the agreements regarding our use and distribution of their search services. Under these agreements, the parties also provide for some indemnification relating to these representations and warranties: Google and Yahoo! provide certain indemnification with respect to ownership of the content and technology provided by their search services, and we provide certain indemnification with respect to our, and our distribution partners’, use and distribution of Google and Yahoo!’s search services.

Our partners for distribution of our online search services include software application providers, web portals, and internet service providers. Our largest distribution partners constitute a significant percentage of our

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search revenue. In 2012, our top five distribution partners for the year were responsible for 47% of our online search revenues, and this percentage was 47% in 2011 and 35% in 2010. Our agreements with many of our distribution partners come up for renewal in 2013, and we plan to negotiate renewals for many of these agreements. In addition, our agreements with some of our distribution partners are not exclusive, meaning that they have the right to shift some or all of the search traffic that they send to us to our competitors. Our distribution partners also have the right to terminate their agreements immediately in the event of certain breaches. We anticipate that our content and distribution costs for our relationships with our distribution partners will increase as revenues grow, and may increase as a percentage of revenues to the extent that there are changes to existing arrangements or we enter into new arrangements on less favorable terms. We also face competition from our Search Customers seeking to enter into content provider agreements directly with our existing or potential distribution partners, making it increasingly difficult for us to renew agreements with existing major distribution partners or to enter into distribution agreements with new partners on favorable terms.

For additional information on our search services and revenue, see “Note 2: Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report.

Tax Preparation Revenue Sources

Our Tax Preparation segment generates revenue primarily in three ways: the sale of state and upgraded federal online income tax preparation services and software to consumers and small businesses, the sale of ancillary services to consumers, and the sale of its professional edition income tax preparation software to professional tax preparers. The majority of our Tax Preparation revenue is generated by the online service at www.taxact.com and, as a highly seasonal business, almost all of that revenue is generated in the first four months of the calendar year. The TaxACT business’s basic federal tax preparation online software service is “free for everyone,” meaning that any taxpayer can use the services to e-file his or her federal income return without paying for upgraded services, and may do so for every form that the IRS allows to be e-filed. This free offer differentiates TaxACT’s offerings from many of its competitors who limit their free software and/or services offerings to certain categories of customers or certain forms. The TaxACT business generates revenue from a percentage of these “free” users who choose to upgrade for a fee to the deluxe product, which includes additional support and tools, and ancillary services and/or to file their state income tax returns, which are not free, with TaxACT. The ancillary services include, among other things, taxpayer phone support, data archiving, a deferred payment option, a bank card product, and e-filing services for professional tax preparers. TaxACT is the recognized value player in the digital do it yourself space, offering comparable software and/or services at a lower cost to the end-user compared to larger competitors. This, coupled with its “free for everyone” offer, provides TaxACT a valuable marketing position. TaxACT’s professional tax preparer software allows professional tax preparers to file individual returns for their clients. Revenue from professional tax preparers has historically constituted a relatively small percentage of the TaxACT business’s overall revenue, and requires relatively modest incremental development costs as the basic software is substantially similar to the consumer-facing software and online service.

Research and Development

We believe that our technology is essential to expand and enhance our products and services and maintain their attractiveness and competitiveness. Research and development expenses were $6.1 million in 2012, $4.1 million in 2011, and $6.0 million in 2010. These amounts exclude any amounts spent by the TaxACT business on research and development prior to our acquisition of that business in January 2012.

Intellectual Property

Our success depends significantly upon our technology and intellectual property rights. To protect our rights and the value of our corporate brands and reputation, we rely on a combination of domain name registrations, confidentiality agreements with employees and third parties, protective contractual provisions, and laws

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regarding copyrights, patents, trademarks, and trade secrets. We generally require employees and contractors to execute confidentiality and non-use agreements that prohibit the unauthorized disclosure and use of our confidential and proprietary information and, if applicable, that transfer to us any rights they may have in inventions and discoveries, including but not limited to trade secrets, copyrightable works, or patentable technologies that they may develop while employed or engaged by us. In addition, prior to entering into discussions with third parties regarding our business and technologies, we generally require that such parties enter into confidentiality and non-use agreements with us. If these discussions result in a license or other business relationship, we also generally require that the agreement setting forth the parties’ respective rights and obligations include provisions for the protection of our intellectual property rights. For example, the standard language in our agreements with distribution partners provides that we retain ownership of our intellectual property in our technologies and requires them to display our intellectual property ownership notices, as appropriate.

We hold multiple active trademark registrations in the United States and in various foreign countries, including some related to our TaxACT business. We also have applied for registration of certain additional trademarks in the United States and in other countries, and will seek to register additional marks, as appropriate. We may not be successful in obtaining registration for these trademark applications or in maintaining the registration of existing marks. In addition, if we are unable to acquire and/or maintain domain names associated with those trademarks (for example, www.taxact.com, www.dogpile.com, www.webcrawler.com, www.metacrawler.com, and www.infospace.com), the value of our trademarks may be diminished.

We hold 8 U.S. patents relating to online search, online advertisements, and location services, among others. We believe that the duration of the applicable patents is adequate relative to the expected lives of their impact on our services. We may initiate additional patent application activity in the future, but any such applications may not be issued, and, if issued, may be challenged or invalidated by third parties. In addition, issued patents may not provide us with any competitive advantages.

We may be unable to adequately or cost-effectively protect or enforce our intellectual property rights, and failure to do so could weaken our competitive position and negatively impact our business and financial results. If others claim that our products infringe their intellectual property rights, we may be forced to seek expensive licenses, reengineer our products, engage in expensive and time-consuming litigation, or stop marketing and licensing our products. See the section entitled “Risk Factors” in Part I, Item 1A of this report for additional information regarding protecting and enforcing intellectual property rights by us and third parties against us.

Competition

We face intense competition in both the search and tax preparation markets. Many of our competitors or potential competitors in both industries have substantially greater financial, technical, and marketing resources, larger customer bases, longer operating histories, more developed infrastructures, greater brand recognition, better access to vendors, or more established relationships in the industry than we have. Our competitors may be able to adopt more aggressive pricing policies, develop and expand their product and service offerings more rapidly, adapt to new or emerging technologies and changes in Search Customer and distribution partner requirements more quickly, take advantage of acquisitions and other opportunities more readily, achieve greater economies of scale, and devote greater resources to the marketing and sale of their products and services than we can. In addition, we may face increasing competition for market share from new startups, mobile providers, and social media sites and applications. If we are unable to match or exceed our competitors’ marketing reach and customer service experience, our business may not be successful. Because of these competitive factors and due to our relatively small size and financial resources, we may be unable to compete successfully in the search and tax preparation markets.

In the online search market, we face competition for various elements of our search business from multiple sources, including our Search Customers. In particular, Google, Yahoo!, and Bing (Microsoft) collectively

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control a significant majority of the consumer-facing online search market serviced by our owned and operated sites and those of our distribution partners. Each of these three companies provides search results to our search services in addition to competing for internet users. Our distribution partners also compete with us for internet users. We also compete with our Search Customers and other content providers for contracts with new and existing distribution partners. We believe that the primary competitive factors in the market for online search services are:

• the ability to continue to meet the evolving information, content, and service demands of Internet users and our distribution partners;

• the ability to offer our distribution partners competitive rates and comprehensive search and advertising content that they can effectively monetize;

• the cost-effectiveness, reliability, and security of the search applications and services;

• the ability to attract Internet users to search services in a cost effective way;

• the ability to provide programs or services, such as embedded search browsers, default search provider settings within the search browsers, or downloadable applications, that may displace competing search services; and

• the ability to develop innovative products and services that enhance the appearance and utility of search services, both to Internet users and to current and potential distribution partners.

Our TaxACT business operates in a very competitive marketplace. There are many competing software products and online services, including two competitors who have a significant percentage of the software and online service market: Intuit’s TurboTax and H&R Block’s products and services. Our TaxACT business must also compete with alternate methods of tax preparation, including “pencil and paper” do-it-yourself return preparation by individual filers and storefront tax preparation services, including both local tax preparers and large chains such as H&R Block, Liberty, and Jackson Hewitt. Finally, our TaxACT business faces the risk that state or federal taxing agencies will offer software or systems to provide direct access for individual filers that will reduce the need for TaxACT’s software and services. We believe that the primary competitive factors in the market for tax preparation software and services are:

• the ability to continue to offer software and services that have quality and ease-of-use that are compelling to consumers;

• the ability to market the software and services in a cost effective way;

• the ability to offer ancillary services that are attractive to users; and

• the ability to develop the software and services at a low enough cost to be able to offer them at a competitive price point.

Governmental Regulation

We face increasing governmental regulation in both our search and tax preparation businesses. U.S. and foreign governments have adopted or may in the future adopt, applicable laws and regulations addressing issues such as consumer protection, user privacy, security, pricing, age verification, content, taxation, copyrights and other intellectual property, distribution, advertising, and product and services quality. These or other laws or regulations that may be enacted in the future could have adverse effects on our business, including higher regulatory compliance costs, limitations on our ability to provide some services in some states or countries, and liabilities that might be incurred through lawsuits or regulatory penalties. See the section entitled “Risk Factors” in Part I, Item 1A of this report for additional information regarding the potential impact of governmental regulation on our operations and results.

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Seasonality

Revenue from our tax preparation online service and software is highly seasonal, with the significant majority of its annual revenue earned in the first four months of our fiscal year. Our owned and operated search services are affected by seasonal fluctuations in internet usage, which generally decline in the summer months. However, these seasonal impacts have become less meaningful over time as revenue from these owned and operated services have constituted a smaller portion of our revenue.

Employees

As of March 1, 2013, we had 225 full-time employees. None of our employees are represented by a labor union and we consider employee relations to be positive. There is significant competition for qualified personnel in our industry, particularly for software development and other technical staff. We believe that our future success will depend in part on our continued ability to hire and retain qualified personnel.

Acquisitions and Dispositions

As noted above, on January 31, 2012, we acquired the TaxACT tax preparation business. On April 1, 2010, we purchased assets from Make the Web Better consisting of web properties and licenses for content and technology. On May 10, 2010, we purchased the Mercantila e-commerce business, which we later sold on June 22, 2011. For further detail on our acquisition and disposition of these businesses, see the discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, of Part II of this report.

Company Internet Site and Availability of SEC Filings

Our corporate website is located at www.blucora.com. We make available on that site, as soon as reasonably practicable, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as any amendments to those filings and other reports filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”). Our SEC filings, as well as our Code of Conduct and Ethics and other corporate governance documents, can be found in the Investor Relations section of our site and are available free of charge. Information on our website is not part of this Annual Report on Form 10-K. In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding us and other issuers that file electronically with the SEC.

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ITEM 1A. Risk Factors

RISKS COMMON TO BOTH OF OUR BUSINESSES

Future revenue growth depends upon our ability to adapt to technological change and successfully introduce new and enhanced products and services.

The online service and software industries are characterized by rapidly changing technology, evolving industry standards, and frequent new product introductions. Our competitors in both the Search and Tax Preparation segments offer new and enhanced products and services every year, and customer expectations change as a result. We must successfully innovate and develop new products and features to meet changing customer needs and expectations. We will need to devote significant resources to continue to develop our skills, tools, and capabilities to capitalize on existing and emerging technologies. Our inability to successfully introduce new and enhanced products and services on a timely basis could harm our business and financial results.

Our products and services have historically been provided through desktop computers, but the number of people who access similar products and services through mobile devices such as smartphones and tablets has increased dramatically in the past few years. We have limited experience to date in developing products and services for users of these alternative devices, and the versions of our products and services developed for these devices may not be compelling to users. As new devices and new platforms are continually being released, it is difficult to predict the problems we may encounter in developing versions of our products and services for use on these alternative devices and we may need to devote significant resources to the creation, support, and maintenance of such offerings. If we are slow to develop products and services that are compatible with these alternative devices, particularly if we cannot do so as quickly as our competitors, we will fail to maintain or grow our share of the markets in which we compete. In addition, such new products and services may not succeed in the marketplace, resulting in lost market share, wasted development costs, and damage to our brands.

Our business depends on our strong reputation and the value of our brands.

Developing and maintaining awareness of our brands is critical to achieving widespread acceptance of our existing and future products and services and is an important element in attracting new customers. Adverse publicity (whether or not justified) relating to events or activities attributed to our businesses, our employees, our vendors, or our partners may tarnish our reputation and reduce the value of our brands. Damage to our reputation and loss of brand equity may reduce demand for our products and services and have an adverse effect on our future financial results. Such damage will also require additional resources to rebuild our reputation and restore the value of the brands.

Our website and transaction management software, data center systems, or the systems of third-party co-location facilities and cloud service providers could fail or become unavailable, which could harm our reputation and result in a loss of revenues and current or potential customers.

Any system interruptions that result in the unavailability or unreliability of our websites, transaction processing systems, or network infrastructure could reduce our revenue and impair our ability to properly process transactions. We use internally developed and third-party systems, including cloud computing and storage systems, for our online services and certain aspects of transaction processing. Some of our systems are relatively new and untested, and thus may be subject to failure or unreliability. Any system unavailability or unreliability may cause unanticipated system disruptions, slower response times, degradation in customer satisfaction, additional expense, or delays in reporting accurate financial information.

Our data centers could be susceptible to damage or disruption, which could have a material adverse effect on our business. We provide our own data center services for our Search business from two geographically diverse third-party co-location facilities. Although the two data centers provide some redundancy, not all of our systems and operations have backup redundancy. Our TaxACT business has a disaster recovery center which we

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built in late 2012 and have tested, but if the primary data center fails and the disaster recovery center fails to fully restore the failed environments, our TaxACT business will suffer, particularly if such interruption occurs during the “tax season.”

Our systems and operations, and those of our third-party service providers, could be damaged or interrupted by fire, flood, earthquakes, other natural disasters, power loss, telecommunications failure, Internet breakdown, break-in, human error, software bugs, hardware failures, malicious attacks, computer viruses, computer denial of service attacks, terrorist attacks, or other events beyond our control. Such damage or interruption may affect internal and external systems that we rely upon to provide our services, take and fulfill customer orders, handle customer service requests, and host other products and services. During the period in which services are unavailable, we will be unable or severely limited in our ability to generate revenues, and we may also be exposed to liability from those third parties to whom we provide services. We could face significant losses as a result of these events, and our business interruption insurance may not be adequate to compensate us for all potential losses. For these reasons, our business and financial results could be materially harmed if our systems and operations are damaged or interrupted.

If the volume of traffic to our infrastructure increases substantially, we must respond in a timely fashion by expanding our systems, which may entail upgrading our technology, transaction processing systems, and network infrastructure. Our ability to support our expansion and upgrade requirements may be constrained due to our business demands or constraints of our third-party co-location facility providers and cloud service providers. Due to the number of our customers and the services that we offer, we could experience periodic capacity constraints that may cause temporary unanticipated system disruptions, slower response times and lower levels of customer service, and limit our ability to develop, offer, or release new or enhanced products and services. Our business could be harmed if we are unable to accurately project the rate or timing of increases, if any, in the use of our services or we fail to adequately expand and upgrade our systems and infrastructure to accommodate these increases.

The security measures we have implemented to secure confidential and personal information may be breached, and such a breach may pose risks to the uninterrupted operation of our systems, expose us to mitigation costs, litigation, potential investigation and penalties by authorities, potential claims by persons whose information was disclosed, and damage our reputation.

Our networks and those from our third-party service providers may be vulnerable to unauthorized access by hackers, rogue employees or contractors, computer viruses, and other disruptive problems. A person who is able to circumvent security measures could misappropriate proprietary information or personal information or cause interruptions in our operations. Unauthorized access to, or abuse of, this information could result in significant harm to our business.

We collect and retain certain sensitive personal data. Our TaxACT business collects, uses, and retains large amounts of customer personal and financial information, including information regarding income, family members, credit cards, tax returns, bank accounts, social security numbers, and healthcare. Our search services receive, retain, and transmit certain personal information about our website visitors. Subscribers to some of our search services are required to provide information that may be considered to be personally identifiable or private information.

We are subject to laws, regulations, and industry rules, relating to the collection, use, and security of user data. We expect regulation in this area to increase. As a result of such new regulation, our current data protection policies and practices may not be sufficient and may require modification. New regulations may also impose burdens that may require notification to customers or employees of a security breach, restrict our use of personal information, and hinder our ability to acquire new customers or market to existing customers. As our business continues to expand to new industry segments that may be more highly regulated for privacy and data security, our compliance requirements and costs may increase. We have incurred, and may continue to incur, significant expenses to comply with privacy and security standards and protocols imposed by law, regulation, industry standards, and contractual obligations.

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A major breach of our systems or those of our third-party service providers may have serious negative consequences for our businesses, including possible fines, penalties and damages, reduced customer demand for our services, harm to our reputation and brands, further regulation and oversight by federal or state agencies, and loss of our ability to provide financial transaction services or accept and process customer credit card orders or tax returns. We may detect, or receive notices from customers or public or private agencies that they have detected, vulnerabilities in our servers, our software or third-party software components that are distributed with our products. The existence of vulnerabilities, even if they do not result in a security breach, may harm customer confidence and require substantial resources to address, and we may not be able to discover or remediate such security vulnerabilities before they are exploited. In addition, hackers develop and deploy viruses, worms and other malicious software programs that may attack our offerings. Although we deploy network and application security measures, internal control measures, and physical security procedures to safeguard our systems, there can be no assurance that a security breach, intrusion, loss or theft of personal information will not occur, which may harm our business, customer reputation and future financial results and may require us to expend significant resources to address these problems, including notification under data privacy regulations.

We rely on the infrastructure of the Internet over which we have no control and the failure of which could substantially undermine our operations.

The success of both our Search and Tax Preparation businesses depends on the maintenance and expansion of the infrastructure of the Internet. In particular, we rely on other companies to maintain reliable network systems that provide adequate speed, data capacity, and security. As the Internet continues to experience growth in the number of users, frequency of use, and amount of data transmitted, the segments of the internet infrastructure that we rely on may be unable to support the demands placed upon it. The failure of any parts of the internet infrastructure that we rely on, even for a short period of time, would substantially undermine our operations and would have a material adverse effect on our business and financial results.

Our financial and operating results may suffer if we are unsuccessful in completing and integrating acquisitions. If we are successful in acquiring new businesses or technologies, they may not be complementary to our current operations or leverage our current infrastructure and operational experience.

We intend to acquire and develop new businesses or technologies, and our future success may depend on our ability to successfully identify, acquire, and integrate such businesses and technologies. Potential acquisition targets range in size from relatively small to a size comparable to our own, and therefore may be material to our business, financial condition, and results of operations. If we are successful in identifying and acquiring targets, those targets may not be complementary to our current operations and may not leverage our existing infrastructure or operational experience. In addition, any acquisitions or developments of businesses or technologies may not prove successful. In the past, we have experienced negative financial results as the result of impairment charges of goodwill and other intangible assets related to certain acquisitions.

The process of identifying, acquiring, and integrating new businesses and technologies involves numerous risks that could materially and adversely affect our results of operations or stock price, including:

• expenses related to the acquisition process, both for consummated and unconsummated transactions;

• diversion of management’s other key personnel’s attention from current operations and other business concerns and potential strain on financial and managerial controls and reporting systems and procedures;

• disruption of our ongoing business or the ongoing acquired business, including impairment of existing relationships with the employees, distributors, suppliers, or customers of our existing businesses or those of the acquired companies;

• difficulties in assimilating the operations, products, technology, information systems, and management and other personnel of acquired companies that result in unanticipated allocation of resources, costs, or delays;

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• the dilutive effect on earnings per share as a result of issuances of stock, incurring operating losses, and the amortization of intangible assets for the acquired business;

• stock volatility due to the perceived value of the acquired business by investors;

• any debt incurred to finance acquisitions would increase costs, may increase volatility in our stock price, and could accelerate a decline in stockholder equity in the event of poor financial performance;

• diversion of capital from other uses;

• failure to achieve the anticipated benefits of the acquisitions in a timely manner, or at all;

• difficulties in acquiring foreign companies, including risks related to integrating operations across different cultures and languages, currency risks, and the particular economic, political, and regulatory risks associated with specific countries; and

• adverse outcome of litigation matters or other contingent liabilities assumed in or arising out of the acquisitions.

Developing or acquiring a business or technology, and then integrating it with our other operations, will be complex, time consuming, and expensive. The successful integration of an acquisition requires, among other things, that we: retain key personnel; maintain and support preexisting supplier, distribution, and customer relationships; and integrate accounting and support functions. The complexity of the technologies and operations being integrated and the disparate corporate cultures and/or industries being combined, may increase the difficulties of integrating an acquired technology or business. If our integration of acquired or internally developed technologies or businesses, including our recent acquisition of the TaxACT business, is not successful, we may experience adverse financial or competitive effects. There can be no assurance that the short- or long-term value of any business or technology that we develop or acquire will be equal to the value of the cash and other consideration that we paid or expenses we incurred.

Our stock price has been highly volatile and such volatility may continue.

The trading price of our common stock has been highly volatile. Between January 1, 2011 and December 31, 2012, our stock price ranged from $7.94 to $18.25. On March 1, 2013, the closing price of our common stock was $15.53. Our stock price could decline or fluctuate wildly in response to many factors, including the other risks discussed in this report and the following:

• actual or anticipated variations in quarterly and annual results of operations;

• announcements of significant acquisitions, dispositions, charges, changes in or loss of material contracts and relationships, or other business developments by us, our partners, or our competitors;

• conditions or trends in the search services or tax preparation markets;

• changes in general conditions in the U.S. and global economies or financial markets;

• announcements of technological innovations or new services by us or our competitors;

• changes in financial estimates or recommendations by securities analysts;

• disclosures of any accounting issues, such as restatements or material weaknesses in internal control over financial reporting;

• equity issuances resulting in the dilution of stockholders;

• the adoption of new regulations or accounting standards; and

• announcements or publicity relating to litigation or governmental enforcement actions.

In addition, the market for technology company securities has experienced extreme price and volume fluctuations, and our stock has been particularly susceptible to such fluctuations. Often, class action litigation has been instituted against companies after periods of volatility in the price of such companies’ stock. If such litigation were to be instituted against us, even if we were to prevail, it could result in substantial cost and diversion of management’s attention and resources.

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Our financial results may fluctuate, which could cause our stock price to be volatile or decline.

Our financial results have varied on a quarterly basis and are likely to continue to fluctuate in the future. These fluctuations could cause our stock price to be volatile or decline. Many factors could cause our quarterly results to fluctuate materially, including but not limited to:

• changes or potential changes in our relationships with Google or Yahoo! or future significant Search Customers, such as the effects of changes to their requirements or guidelines or their measurement of the quality of traffic that we send to their advertiser networks, and any resulting loss or reduction of content that we can use or provide to our distribution partners;

• the loss, termination, or reduction in scope of key search distribution relationships as a result of, for example, distribution partners licensing content directly from content providers, or any suspension by our Search Customers (particularly Google) of the right to use or distribute content on the web properties of our distribution partners;

• the inability of our TaxACT business to meet our expectations;

• the extreme seasonality of our TaxACT business and the resulting large quarterly fluctuations in our revenues;

• the success or failure of our strategic initiatives and our ability to implement those initiatives in a cost effective manner;

• the mix of search services revenue generated by our owned and operated web properties versus our distribution partners’ web properties;

• the mix of revenues generated by our Search business versus our Tax Preparation business or other businesses we develop or acquire;

• our , and our distribution partners’, ability to attract and retain quality traffic for our search services;

• gains or losses driven by mark to market fair value accounting, particularly with respect to the warrant we issued in August 2011, the value of which varies from quarter to quarter based on our stock price (see “General and administrative expenses” under Item 7 of Part II of this report);

• litigation expenses and settlement costs;

• expenses incurred in finding, negotiating, consummating, and integrating acquisitions;

• variable demand for our services, rapidly evolving technologies and markets, and consumer preferences;

• any restructuring charges we may incur;

• any economic downturn, which may lead to lower online advertising revenue from advertisers;

• new court rulings, or the adoption of new laws, rules, or regulations, that adversely affect our ability to acquire content and distribute our search services, that adversely affect our tax preparation products and services, or that otherwise increase our potential liability;

• impairment in the value of long-lived assets or the value of acquired assets, including goodwill, core technology, and acquired contracts and relationships; and

• the effect of changes in accounting principles or standards or in our accounting treatment of revenues or expenses.

For these reasons, among others, you should not rely on period-to-period comparisons of our financial results to forecast our future performance. Furthermore, our fluctuating operating results may fall below the expectations of securities analysts or investors and financial results volatility could make us less attractive to investors, either of which could cause the trading price of our stock to decline.

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Existing cash and cash equivalents, short-term investments, and cash generated from operations may not be sufficient to meet our anticipated cash needs for working capital and capital expenditures.

Although we believe that existing cash and cash equivalents, short-term investments, and cash generated from operations will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months, the underlying levels of revenues and expenses that we project may not prove to be accurate. In addition, we evaluate acquisitions of businesses, products, or technologies from time to time. Any such transactions, if completed, may use a significant portion of our cash balances and marketable investments. If we are unable to liquidate our investments when we need liquidity for acquisitions or business purposes, we may need to change or postpone such acquisitions or find alternative financing for such acquisitions. We may seek additional funding through public or private financings, through sales of equity, or through other arrangements. Our ability to raise funds may be adversely affected by a number of factors, including factors beyond our control, such as economic conditions in the markets in which we operate and increased uncertainty in the financial, capital, and credit markets. Adequate funds may not be available when needed or may not be available on favorable terms. If we raise additional funds by issuing equity securities, dilution to existing stockholders may result. If funding is insufficient at any time in the future, we may be unable, or delayed in our ability, to develop or enhance our products or services, take advantage of business opportunities, or respond to competitive pressures, any of which could harm our business.

We incurred debt as part of our acquisition of the TaxACT business, and we may incur other debt in the future, which may adversely affect our financial condition and future financial results.

Our indirect subsidiary, 2^nd Story, operator of the TaxACT business, incurred debt as part of our acquisition of that business, of which $74.5 million remains outstanding. This debt is non-recourse debt that is guaranteed by TaxACT Holdings, Blucora’s direct subsidiary, and 2^nd Story’s direct parent. This debt may adversely affect our financial condition and future financial results by, among other things:

• increasing 2^nd Story’s vulnerability to downturns in its business, to competitive pressures, and to adverse economic and industry conditions;

• requiring the dedication of a portion of our expected cash from 2^nd Story’s operations to service this indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including capital expenditures and acquisitions;

• requiring cash infusions from Blucora to 2^nd Story if 2^nd Story is unable to meet its debt obligations;

• increasing our interest payment obligations in the event that interest rates rise dramatically (including on the portion of the debt that has an interest rate hedge if such hedge becomes ineffective); and

• limiting our flexibility in planning for, or reacting to, changes in our businesses and our industries.

This credit facility imposes restrictions on 2^nd Story, including restrictions on 2^nd Story’s ability to create liens on its assets and on our ability to incur indebtedness, and requires 2^nd Story to maintain compliance with specified financial ratios. 2^nd Story’s ability to comply with these ratios may be affected by events beyond its control. In addition, this credit facility includes covenants, the breach of which may cause the outstanding indebtedness to be declared immediately due and payable. This debt, and our ability to repay it, may also negatively impact our ability to obtain additional financing in the future and may affect the terms of any such financing.

If others claim that our services infringe their intellectual property rights, we may be forced to seek expensive licenses, reengineer our services, engage in expensive and time-consuming litigation, or stop marketing and licensing our services.

Companies and individuals with rights relating to the software and online services industries have frequently resorted to litigation regarding intellectual property rights. In some cases, the ownership or scope of an entity’s or person’s rights is unclear and may also change over time, including through changes in U.S. or international

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intellectual property laws or regulations or through court decisions or decisions by agencies or regulatory boards that manage such rights. These parties have in the past, and may in the future, make claims against us alleging infringement of patents, copyrights, trademarks, trade secrets, or other intellectual property or proprietary rights, or alleging unfair competition or violations of privacy or publicity rights. Responding to any such claims could be time-consuming, result in costly litigation, divert management’s attention, cause product or service release delays, require us to redesign our services, or require us to enter into royalty or licensing agreements. Our technology and services may not be able to withstand any third-party claims or rights against their use. If a successful claim of infringement was made against us and we could not develop non-infringing technology or content, or license the infringed or similar technology or content on a timely and cost-effective basis, our business could suffer.

We do not regularly conduct patent searches to determine whether the technology used in our services infringes patents held by third parties. Patent searches may not return every issued patent or patent application that may be deemed relevant to a particular product or service. It is therefore difficult to determine, with any level of certainty, whether a particular product or service may be construed as infringing a current or future U.S. or foreign patent.

We rely heavily on our technology and intellectual property, but we may be unable to adequately or cost-effectively protect or enforce our intellectual property rights, thus weakening our competitive position and negatively impacting our business and financial results. We may have to litigate to enforce our intellectual property rights, which can be time consuming, expensive, and difficult to predict.

To protect our rights in our services and technology, we rely on a combination of copyright and trademark laws, patents, trade secrets, confidentiality agreements with employees and third parties, and protective contractual provisions. We also rely on laws pertaining to trademarks and domain names to protect the value of our corporate brands and reputation. Despite our efforts to protect our proprietary rights, unauthorized parties may copy aspects of our services or technology, obtain and use information, marks, or technology that we regard as proprietary, or otherwise violate or infringe our intellectual property rights. In addition, it is possible that others could independently develop substantially equivalent intellectual property. If we do not effectively protect our intellectual property, or if others independently develop substantially equivalent intellectual property, our competitive position could be weakened.

Effectively policing the unauthorized use of our services and technology is time-consuming and costly, and the steps taken by us may not prevent misappropriation of our technology or other proprietary assets. The efforts we have taken to protect our proprietary rights may not be sufficient or effective, and unauthorized parties may obtain and use information, marks, or technology that we regard as proprietary, copy aspects of our services, or use similar marks or domain names. In some cases, the ownership or scope of an entity’s or person’s rights is unclear and may also change over time, including through changes in U.S. or international intellectual property laws or regulations or through court decisions or decisions by agencies or regulatory boards that manage such rights. Our intellectual property may be subject to even greater risk in foreign jurisdictions, as protection is not sought or obtained in every country in which our services and technology are available and it is often more difficult and costly to obtain, register, or enforce our rights in foreign jurisdictions.

We may have to litigate to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of others’ proprietary rights, which are sometimes not clear or may change. Litigation can be time consuming and expensive, and the outcome can be difficult to predict.

Delaware law and our charter documents may impede or discourage a takeover, which could cause the market price of our shares to decline.

We are a Delaware corporation and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire us, even if a change of control would be beneficial to our existing stockholders. For example, Section 203 of the Delaware General Corporation Law may discourage,

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delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder. In addition, our certificate of incorporation and bylaws contain provisions that may discourage, delay, or prevent a third party from acquiring us without the consent of our board of directors, even if doing so would be beneficial to our stockholders. Provisions of our charter documents that could have an anti-takeover effect include:

• the classification of our board of directors into three groups so that directors serve staggered three-year terms, which may make it difficult for a potential acquirer to gain control of our board of directors;

• the requirement for supermajority approval by stockholders for certain business combinations;

• the ability of our board of directors to authorize the issuance of shares of undesignated preferred stock without a vote by stockholders;

• the ability of our board of directors to amend or repeal the bylaws;

• limitations on the removal of directors;

• limitations on stockholders’ ability to call special stockholder meetings;

• advance notice requirements for nominating candidates for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and

• certain restrictions in our charter on transfers of our common stock designed to preserve our federal net operating loss carryforwards (“NOLs”).

At our 2009 annual meeting, our stockholders approved an amendment to our certificate of incorporation that restricts any person or entity from attempting to transfer our stock, without prior permission from the Board of Directors, to the extent that such transfer would (i) create or result in an individual or entity becoming a five-percent stockholder of our stock, or (ii) increase the stock ownership percentage of any existing five-percent stockholder. This amendment provides that any transfer that violates its provisions shall be null and void and would require the purported transferee to, upon our demand, transfer the shares that exceed the five percent limit to an agent designated by us for the purpose of conducting a sale of such excess shares. This provision in our certificate of incorporation may make the acquisition of Blucora more expensive to the acquirer and could significantly delay, discourage, or prevent third parties from acquiring Blucora without the approval of our board of directors.

If there is a change in our ownership within the meaning of Section 382 of the Internal Revenue Code, our ability to use our NOLs may be severely limited or potentially eliminated.

As of December 31, 2012, we had NOLs of $723.3 million that will expire primarily over an eight to twelve year period. If we were to have a change of ownership within the meaning of Section 382 of the Internal Revenue Code (defined as a cumulative change of 50 percentage points or more in the ownership positions of certain stockholders owning five percent or more of a company’s common stock over a three-year rolling period), then under certain conditions, the amount of NOLs we could use in any one year could be limited to an amount equal to our market capitalization, net of substantial non-business assets, at the time of the ownership change multiplied by the federal long-term tax exempt rate. Our certificate of incorporation imposes certain limited transfer restrictions on our common stock that we expect will assist us in preventing a change of ownership and preserving our NOLs, but there can be no assurance that these restrictions will be sufficient. In addition, other restrictions on our ability to use the NOLs may be triggered by a merger or acquisition, depending on the structure of such a transaction. It is our intention to limit the potential impact of these restrictions, but there can be no guarantee that such efforts will be successful. If we are unable to use our NOLs before they expire, or if the use of this tax benefit is severely limited or eliminated, there could be a material reduction in the amount of after-tax income and cash flow from operations, and it could have an effect on our ability to engage in certain transactions.

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If we are unable to hire, retain, and motivate highly qualified employees, including our key employees, we may not be able to successfully manage our business.

Our future success depends on our ability to identify, attract, hire, retain, and motivate highly skilled management, technical, sales and marketing, and corporate development personnel. Qualified personnel with experience relevant to our businesses are scarce and competition to recruit them is intense. If we fail to successfully hire and retain a sufficient number of highly qualified employees, we may have difficulties in supporting or expanding our businesses. Realignments of resources, reductions in workforce, or other operational decisions have created and could continue to create an unstable work environment and may have a negative effect on our ability to hire, retain, and motivate employees.

Our business and operations are substantially dependent on the performance of our key employees. Changes of management or key employees may cause disruption to our operations, which may materially and adversely affect our business and financial results or delay achievement of our business objectives. In addition, if we lose the services of one or more key employees and are unable to recruit and retain a suitable successor, we may not be able to successfully and timely manage our business or achieve our business objectives. For example, the success of our Search business is partially dependent on key personnel who have long-term relationships with our Search Customers and distribution partners. There can be no assurance that any retention program we initiate will be successful at retaining employees, including key employees.

Like many technology companies, we use stock options, restricted stock units, and other equity-based awards to recruit and retain senior level employees. With respect to those employees to whom we issue such equity-based awards, we face a significant challenge in retaining them if the value of equity-based awards in aggregate or individually is either not deemed by the employee to be substantial enough or deemed so substantial that the employee leaves after their equity-based awards vest. If our stock price does not increase significantly above the exercise prices of our options or does not increase significantly above the comparative index price for our market stock units, we may need to issue new equity-based awards in order to motivate and retain our executives. We may undertake or seek stockholder approval to undertake other equity-based programs to retain our employees, which may be viewed as dilutive to our stockholders or may increase our compensation costs. Additionally, there can be no assurance that any such programs, or any other incentive programs, we undertake will be successful in motivating and retaining our employees.

Restructuring and streamlining our business, including implementing reductions in workforce, discretionary spending, and other expense reductions, may harm our business.

We have in the past and may in the future find it advisable to take measures to streamline operations and reduce expenses, including, without limitation, reducing our workforce or discontinuing products or businesses. Such measures may place significant strains on our management and employees, and could impair our development, marketing, sales, and customer support efforts. We may also incur liabilities from these measures, including liabilities from early termination or assignment of contracts, potential failure to meet obligations due to loss of employees or resources, and resulting litigation. Such effects from restructuring and streamlining could have a negative impact on our business and financial results.

RISKS RELATED TO OUR SEARCH BUSINESS

We may be unable to compete successfully in the search market.

We face intense competition in the search market. Many of our competitors have substantially greater financial, technical, and marketing resources, larger customer bases, longer operating histories, more developed infrastructures, greater brand recognition, better access to vendors, or more established relationships in the industry than we have. Our competitors may be able to adopt more aggressive pricing policies, develop and expand their product and service offerings more rapidly, adapt to new or emerging technologies and changes in content provider and distribution partner requirements more quickly, achieve greater economies of scale, and

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devote greater resources to the marketing and sale of their products and services than we can. Some of the companies that we compete with in the search market are currently Search Customers of ours, the loss of any of which could harm our business. In addition, we may face increasing competition for search market share from new search startups, mobile search providers, and social media sites and applications. If we are unable to match or exceed our competitors’ marketing reach and customer service experience, our business may not be successful. Because of these competitive factors and due to our relatively small size and financial resources, we may be unable to compete successfully in the search market and, to the extent that these competitive factors apply to other markets that we pursue, in such other markets.

Failure by us or our search distribution partners to comply with the guidelines promulgated by Google and Yahoo! may cause that Search Customer to temporarily or permanently suspend the use of its content or terminate its agreement with us, or may require us to modify or terminate certain distribution relationships.

If we or our search distribution partners fail to meet the guidelines promulgated by Google or Yahoo! for the use of their content, we may not be able to continue to use their content or provide the content to such distribution partners. Our agreements with Google and Yahoo! give them the ability to suspend the use and the distribution of their content for non-compliance with their requirements and guidelines and, in the case of breaches of certain other provisions of their agreements, to terminate their agreements with us immediately, regardless of whether such breaches could be cured.

The terms of the Search Customer agreements with Google and Yahoo! and the related guidelines are subject to differing interpretations by the parties. Google and Yahoo! have in the past suspended, and may in the future, suspend their content provided to our websites and the websites of our distribution partners, without notice, when they believe that we or our distribution partners are not in compliance with their guidelines or are in breach of the terms of their agreements. During such suspension we will not receive any revenue from any property of ours or a distribution partner that is affected by the suspended content, and the loss of such revenue could harm our business and financial results.

Additionally, as our business evolves, we expect that the guidelines of Google and Yahoo!, as well as the parties’ interpretations of compliance, breach, and sufficient justification for suspension of use of content will change. Both Yahoo! and Google regularly change their guidelines and requirements, both as part of our renegotiation of our agreements with them and generally as they manage their networks of distribution partners. These changes in the guidelines and any changes in the parties’ interpretations of those guidelines may result in restrictions on our use of the Google and Yahoo! search services, and may require us to terminate our agreement with distribution partners or forego entering into agreements with distribution partners. The loss or reduction of content that we can use or make available to our distribution partners as a result of suspension, termination, or modification of distribution or Search Customer agreements could have a material adverse effect on our business and financial results.

Restrictions on our ability, and the ability of our search distribution partners, to distribute, market, or offer search-related applications, products, and services may impact our financial results.

A significant portion of our Search revenue is dependent on business models that can be negatively impacted by changes in policies or technology. For example, many of our Search distribution partners distribute applications, extensions, or toolbars that are monetized through the search services that we provide. Our Search Customers require that such applications, extensions, or toolbars, and the distribution of those applications, extensions, or toolbars, comply with certain guidelines. Our Search Customers can and do modify these guidelines from time to time, and recent modifications of these guidelines may impact the distribution of applications, extensions, or toolbars that drive traffic and revenue to our search services. In addition, our Search Customers’ guidelines have in the past, and may in the future, negatively affected our ability, and the ability of our search distribution partners, to drive traffic to our search services through the use of search engine marketing.

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Further, certain third parties have introduced, and can be expected to continue to introduce, new or updated technologies, applications, and policies that may interfere with the ability of users of search services provided directly by us or by our search distribution partners to access those services. For example third parties have introduced technologies and applications (including new and enhanced web browsers) that prevent users from downloading the extensions or toolbars provided by some of our search partners. Those applications may also have features and policies that interfere with the functionality of search boxes embedded within extensions and toolbars and the maintenance of home page and other settings previously selected by users.

Any changes in technologies, applications, and policies that restrict the distribution, marketing, and offering of search-related applications, extensions, toolbars, products, and services may impact our operating and financial results.

Most of our search services revenue is attributable to Google, and the loss of, or a payment dispute with, Google or any other significant Search Customer would harm our business and financial results.

If Google, Yahoo!, or any future significant Search Customer were to substantially reduce or eliminate the content it provides to us or to our distribution partners, our business results could materially suffer if we are unable to establish and maintain new Search Customer relationships, or expand our remaining Search Customer relationships, to replace the lost or disputed revenue. Google accounted for approximately 77% of our total revenues in 2012. Yahoo! remains an important partner and contributes to our value proposition as a metasearch provider, but over the past several years, Yahoo!’s percentage or our revenue has declined, and we expect this trend to continue. We continue to believe that if our Google relationship ended or was impaired, we could replace a portion of the lost revenue with revenue from Yahoo!, but because of the increased importance of Google to our search operations, these two Search Customers are no longer interchangeable. In addition, Yahoo! has entered into an agreement with Microsoft’s Bing search service, under which Bing provides all of Yahoo!’s algorithmic search results and some of its paid search results. If Yahoo! cannot maintain an agreement with Bing on favorable terms, or if Bing is unable to adequately perform its obligations to Yahoo!, then Yahoo!’s ability to provide us with algorithmic and paid search results may be impaired. If a Search Customer is unwilling to pay us amounts that it owes us, or if it disputes amounts it owes us or has previously paid to us for any reason (including for the reasons described in the risk factors below), our business and financial results could materially suffer.

Our Search business will suffer if we are unable to negotiate the extension of our Search Customer agreements on favorable terms. Our agreement with Yahoo! runs to December 31, 2013 and our agreement with Google runs to March 31, 2014.

A substantial portion of our search services revenue is dependent on our relationships with a small number of distribution partners who distribute our search services, the loss of which could have a material adverse effect on our business and financial results.

We rely on our relationships with search distribution partners, including Internet service providers, web portals, and software application providers, for distribution of our search services. In 2012, 75% of our total revenues came from searches conducted by end users on the web properties of our search distribution partners. Approximately 40% of our total revenues in 2012 was generated through relationships with our top five distribution partners. There can be no assurance that these relationships will continue or will result in benefits to us that outweigh their cost. Moreover, as the proportion of our revenue generated by distribution partners has increased in previous quarters, we have experienced, and expect to continue to experience, less control and visibility over performance. One of our challenges is providing our distribution partners with relevant services at competitive prices in rapidly evolving markets. Distribution partners may create their own services or may seek to license services from our Search Customers or other competitors or replace the services that we provide. Also, many of our distribution partners have limited operating histories and evolving business models that may prove unsuccessful even if our services are relevant and our prices competitive. If we are unable to maintain relationships with our distribution partners, our business and financial results could be materially adversely affected.

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Our agreements with many of our distribution partners come up for renewal in 2013. In addition, some of our distributors have the right to immediately terminate their agreements in the event of certain breaches. Such agreements may be terminated, may not be renewed, or may not be renewed on favorable terms, any of which could adversely impact our business and financial results. We anticipate that our distribution costs for our revenue sharing arrangements with our distribution partners will increase as revenue grows, and may increase as a percentage of revenues to the extent that there are changes to existing arrangements or we enter into new arrangements on less favorable terms.

In addition, competition continues for quality consumer traffic in the search market. We have experienced increased competition from our Search Customers as they seek to enter into content provider agreements directly with our existing or potential distribution partners, making it increasingly difficult for us to renew agreements with existing major distribution partners or to enter into distribution agreements with new partners on favorable terms. Any difficulties that we experience with maintaining or strengthening our business relationships with our major distribution partners could have an adverse effect on our business and financial results.

If advertisers perceive that they are not receiving quality traffic to their sites through their paid-per-click advertisements, they may reduce or eliminate their advertising through the Internet, which could have a negative material impact on our business and financial results.

Most of our revenue from our search business is based on the number of clicks on paid search results that are served on our web properties or those of our distribution partners. Each time a user clicks on a paid search result, the Search Customer that provided the paid search result receives a fee from the advertiser who paid for the click and the Search Customer pays us a portion of that fee. If the click originated from one of our distribution partners’ web properties, we share a portion of the fee we receive with such partner. If an advertiser receives what it perceives to be poor quality traffic, meaning that the advertiser’s objectives are not met for a sufficient percentage of clicks for which it pays, the advertiser may reduce or eliminate its advertisements through the Search Customer that provided the commercial search result to us. This leads to a loss of revenue for our Search Customers and consequently lower fees paid to us. Also, if a Search Customer perceives that the traffic originating from one of our web properties or the web property of a distribution partner is of poor quality, the Search Customer may discount the amount it charged all advertisers whose paid click advertisements appeared on such website or web property, and accordingly may reduce the amount it pays us. The Search Customer may also suspend or terminate our ability to provide its content through such websites or web properties if such activities are not modified to satisfy the Search Customer’s concerns.

Poor quality traffic may be a result of invalid click activity. Such invalid click activity occurs, for example, when a person or automated click generation program clicks on a commercial search result to generate fees for the web property displaying the commercial search result rather than to view the webpage underlying the commercial search result. Some of this invalid click activity is referred to as “click fraud.” When such invalid click activity is detected, the Search Customer may not charge the advertiser or may refund the fee paid by the advertiser for such invalid clicks. If the invalid click activity originated from one of our distribution partners’ web properties or our owned and operated properties, such non-charge or refund of the fees paid by the advertisers in turn reduces the amount of fees the Search Customer pays us.

Initiatives we undertake to improve the quality of the traffic that we send to our Search Customers may not be successful and, even if successful, may result in loss of revenue in a given reporting period. For example, during the first half of 2010, we removed certain traffic from some distribution partners in an effort to improve traffic quality, and these actions, while successful in improving traffic quality, had a material negative impact on our revenues for the first and second quarters of 2010.

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We may be subject to liability for our use or distribution of information that we gather or receive from third parties and indemnity protections or insurance coverage may be inadequate to cover such liability.

Our search services obtain content and commerce information from third parties and link users, either directly through our own websites or indirectly through the web properties of our distribution partners, to third-party webpages and content in response to search queries and other requests. These services could expose us to legal liability from claims relating to such third-party content and sites, the manner in which these services are distributed and displayed by us or our distribution partners, or how the content provided by our Search Customers was obtained or provided by our Search Customers. This could subject us to legal liability for such things as defamation, negligence, intellectual property infringement, violation of privacy or publicity rights, and product or service liability, among others. Laws or regulations of certain jurisdictions may also deem some content illegal, which may expose us to legal liability as well. Regardless of the legal merits of any such claims, they could result in costly litigation, be time consuming to defend, and divert management’s attention and resources. If there was a determination that we had violated third-party rights or applicable law, we could incur substantial monetary liability, be required to enter into costly royalty or licensing arrangements (if available), or be required to change our business practices. We are also subject to laws and regulations, both in the United States and abroad, regarding the collection and use of end user information and search related data. If we do not comply with these laws and regulations, we may be exposed to legal liability.

Although the agreements by which we obtain content contain indemnity provisions, these provisions may not cover a particular claim or type of claim or the party giving the indemnity may not have the financial resources to cover the claim. Our insurance coverage may be inadequate to cover fully the amounts or types of claims that might be made against us. In addition, we may also have an obligation to indemnify and hold harmless certain of our Search Customers or distribution partners from damages they suffer for such violations under our contracts with them. Implementing measures to reduce our exposure to such claims could require us to expend substantial resources and limit the attractiveness of our services. As a result, these claims could result in material harm to our business. Any liability that we incur as a result of content we receive from third parties could harm our financial results.

Governmental regulation and the application of existing laws may slow business growth, increase our costs of doing business, and create potential liability.

The growth and development of the Internet has led to new laws and regulations, as well as the application of existing laws to the Internet, in both the U.S. and foreign jurisdictions. Application of these laws can be unclear. For example, it is unclear how many existing laws regulating or requiring licenses for certain businesses (such as gambling, online auctions, distribution of pharmaceuticals, alcohol, tobacco, firearms, insurance, securities brokerage, or legal services) apply to search services, online advertising, and our business. The costs of complying or failure to comply with these laws and regulations could limit our ability to operate in our market (including limiting our ability to distribute our services; conduct targeted advertising; collect, use, or transfer user information; or comply with new data security requirements), expose us to compliance costs and substantial liability, and result in costly and time-consuming litigation. It is impossible to predict whether or when any new legislation may be adopted or existing legislation or regulatory requirements will be deemed applicable to us, any of which could materially and adversely affect our business.

Any failure by us to comply with our posted privacy policies, Federal Trade Commission (“FTC”) requirements, or other privacy-related laws and regulations could result in proceedings by the FTC or others, including potential class action litigation, which could potentially have an adverse effect on our business, results of operations, and financial condition. For example, there are a large number of legislative proposals before the U.S. Congress and various state legislative bodies regarding privacy and data protection issues related to our businesses. It is not possible to predict whether or when such legislation may be adopted and certain proposals, if adopted, could materially and adversely affect our business through a decrease in user registrations and revenues. This could be caused by, among other possible provisions, the required use of disclaimers or other requirements before users can utilize our services.

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The FTC has recommended that search engine providers delineate paid-ranking search results from non-paid results. To the extent that we are required to modify presentation of search results as a result of specific regulations or requirements that may be issued in the future by the FTC or other state or federal agencies or legislative bodies with respect to the nature of such delineation or other aspects of advertising in connection with search services, revenue from the affected search engines could be negatively impacted. Addressing these regulations may require us to develop additional technology or otherwise expend significant time and expense.

Due to the nature of the Internet, it is possible that the governments of states and foreign countries might attempt to regulate Internet transmissions, through data protection laws amongst others, or institute proceedings for violations of their laws. We might unintentionally violate such laws, such laws may be modified, and new laws may be enacted in the future. Any such developments (or developments stemming from enactment or modification of other laws) could increase the costs of regulatory compliance for us or force us to change our business practices.

RISKS RELATED TO OUR TAX PREPARATION BUSINESS

The tax preparation market is very competitive, and failure to effectively compete will adversely affect our financial results.

Our TaxACT business operates in a very competitive marketplace. There are many competing software products and online services, including two competitors who have a significant percentage of the software and online service market: Intuit’s TurboTax and H&R Block’s products and services. Our TaxACT business must also compete with alternate methods of tax preparation, including “pencil and paper” do-it-yourself return preparation by individual filers and storefront tax preparation services, including both local tax preparers and large chains such as H&R Block , Liberty, and Jackson Hewitt. Finally, our TaxACT business faces the risk that state or federal taxing agencies will offer software or systems to provide direct access for individual filers that will reduce the need for TaxACT’s software and services. Our financial results will suffer if we cannot continue to offer software and services that have quality and ease-of-use that are compelling to consumers; market the software and services in a cost effective way; offer ancillary services that are attractive to users; and develop the software and services at a low enough cost to be able to offer them at a competitive price point.

The seasonality of our tax preparation business requires a precise development and release schedule and any delays or issues with accuracy or quality may damage our reputation and harm our future financial results.

Our tax preparation software and online service must be ready to launch in final form near the beginning of each calendar year to take advantage of the full tax season. We must update the code for our software and service each year to account for annual changes in tax laws and regulations. Delayed and unpredictable changes to federal and state tax laws and regulations can cause an already tight development cycle to become even more challenging. We must develop our code on a precise schedule that both incorporates all such changes and ensures that the software and service are accurate. If we are unable to meet this precise schedule and we launch our software and service late, we risk losing customers to our competitors. If we cannot develop our software with a high degree of accuracy and quality, we risk errors in the tax returns that are generated. Such errors could result in loss of reputation, lower customer retention, or legal fees and payouts related to the warranty on our software and service.

The hosting, collection, use, and retention of personal customer information and data by our TaxACT business creates risk that may harm our business.

Our TaxACT business collects, uses, and retains large amounts of customer personal and financial information, including information regarding income, family members, credit cards, tax returns, bank accounts, social security numbers, and healthcare. Some of this personal customer information is held by third-party vendors that process certain transactions. In addition, as many of our products and services are web-based, the amount of data we store for our users on our servers (including personal information) has been increasing and

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will continue to increase as we further evolve our businesses. We and our vendors use security technologies to protect transactions and personal information and use security and business controls to limit access and use of personal information. However, individuals or third parties, including rogue employees, contractors, temporary workers, vendors, business partners, or hackers, may be able to circumvent these security and business measures. In addition, our clients may access our online tax preparation services from their computers and mobile devices, install and use our tax preparation software on their computers and mobile devices, and access online banking services from their computers and mobile devices. Because our business model relies on our clients’ use of their own personal computers, mobile devices, and the Internet, computer viruses and other attacks on our clients’ personal computer systems and mobile devices could create losses for our clients even without any breach in the security of our systems, and could thereby harm our business and our reputation.

If we are unable to develop, manage, and maintain critical third party business relationships for our TaxACT business, it may be adversely affected.

Our TaxACT business is dependent on the strength of our business relationships and our ability to continue to develop, maintain, and leverage new and existing relationships. We rely on various third party partners, including software and service providers, suppliers, vendors, distributors, contractors, financial institutions, licensing partners, among others, in many areas of this business to deliver our services and products. In certain instances, the products or services provided through these third party relationships may be difficult to replace or substitute, depending on the level of integration of the third party’s products or services into, or with, our offerings and/or the general availability of such third party’s products and services. In addition, there may be few or no alternative third party providers or vendors in the market. The failure of third parties to provide acceptable and high quality products, services, and technologies or to update their products, services, and technologies may result in a disruption to our business operations, which may reduce our revenues and profits, cause us to lose customers, and damage our reputation. Alternative arrangements and services may not be available to us on commercially reasonable terms or we may experience business interruptions upon a transition to an alternative partner.

In particular, our TaxACT business has relationships with banks, credit unions or other financial institutions, both as customers and as suppliers of certain critical services we offer to our other customers. If any of these institutions fail, consolidate, stop providing certain services, or institute cost-cutting efforts, our results may suffer and we may be unable to offer those services to our customers.

We may be unable to effectively adapt to changing government regulations relating to tax preparation, which may harm our operating results.

The tax preparation industry is heavily regulated at the state and federal level, and is frequently subject to significant new and revised laws and regulations. The application of these laws and regulations to our businesses is often unclear and compliance with these regulations may involve significant costs or require changes to our business practices. Any changes to our business practices that result from a change to laws or regulations, or from any change in the interpretation of a law or regulation (for example due to a court ruling or an administrative ruling or interpretation) may result in a negative impact on our operating results. We are also required to comply with a variety of IRS and state revenue agency standards in order to successfully operate our tax preparation and electronic filing services. Changes in these requirements, including the required use of specific technologies or technology standards, may significantly increase the costs of providing those services to our customers and may prevent us from delivering a quality product to our customers in a timely manner.

In order to meet regulatory standards, we may be required to increase investment in compliance and auditing functions or new technologies. In addition, government authorities may enact other laws, rules or regulations that place new burdens or restrictions on our business or determine that our operations are directly subject to existing rules or regulations, such as requirements related to data collection, use, transmission, retention, processing and security, which may make our business more costly, less efficient or impossible to conduct, and may require us to modify our current or future products or services, which may harm our future financial results.

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Restrictions on our ability to offer certain financial products related to our tax preparation services may harm our financial results.

We offer certain financial products related to our tax preparation software and services, and we generate some of our Tax Preparation segment revenue from such products. These products include prepaid debit cards on which a tax filer may receive his or her tax return and the ability of certain of our users to have the fees for our services deducted from their tax return. Any regulation of these products by state or federal governments, or any competing products offered by state and federal tax collection agencies could impact our revenue from these financial products. In addition, litigation brought by consumers or state or federal agencies relating to these products may result in additional restrictions on the offering of these products. To the extent that any additional restrictions on our tax preparation related financial products restrict our ability to offer such products, our financial results may suffer.

Unanticipated changes in income tax rates, deduction types, or the taxation structure may adversely affect our TaxACT business.

Changes in the way that the state and federal governments structure their taxation regimes may affect our results. The introduction of a simplified or flattened taxation structure may make our services less necessary or attractive to individual filers. We also face risk from the possibility of increased complexity in taxation structures, which may encourage some of our customers to seek professional tax advice instead of using our software or services. In the event that such changes to tax structures cause us to lose market share, our results may suffer.

If our TaxACT business fails to process transactions effectively or fails to adequately protect against disputed or potential fraudulent activities, our revenue and earnings may be harmed.

Our TaxACT business processes a significant volume and dollar value of transactions on a daily basis. Due to the size and volume of transactions that we handle, effective processing systems and controls are essential to ensure that transactions are handled appropriately. Despite our efforts, it is possible that we may make errors or that fraudulent activity may affect our services. In addition to any direct damages and fines that any such problems may create, which may be substantial, a loss of confidence in our controls may seriously harm our business and damage our brand. The systems supporting our business are comprised of multiple technology platforms that are difficult to scale. If we are unable to effectively manage our systems and processes we may be unable to process customer data in an accurate, reliable, and timely manner, which may harm our business.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

Our principal corporate office is located in Bellevue, Washington. We provide data center services for our search operations from third-party co-location facilities located in Tukwila, Washington and Reston, Virginia. The headquarters and data center facility for our TaxACT business is in Cedar Rapids, Iowa and we have a disaster recovery center for our TaxACT business in Waukee, Iowa. All of our facilities are leased. We believe our properties are suitable and adequate for our present and anticipated near-term needs.

ITEM 3. Legal Proceedings

See “Note 9: Commitments and Contingencies” of the Notes to Consolidated Financial Statements in Item 8, of Part II of this report for information regarding legal proceedings.

ITEM 4. Mine Safety Disclosures

None.

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PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market for Our Common Stock

Our common stock trades on the NASDAQ Global Select Market under the symbol “BCOR.” The following table sets forth, for the periods indicated, the high and low sales prices for our common stock as reported by the NASDAQ Global Select Market.

	High		Low
Fiscal year ended December 31, 2012:
First Quarter	$	13.68	$	10.99
Second Quarter	$	13.45	$	10.98
Third Quarter	$	18.25	$	12.07
Fourth Quarter	$	18.24	$	14.09
Fiscal year ended December 31, 2011:
First Quarter	$	8.89	$	7.94
Second Quarter	$	9.39	$	8.31
Third Quarter	$	9.81	$	8.36
Fourth Quarter	$	11.76	$	8.04

On March 1, 2013, the last reported sale price for our common stock on the NASDAQ Global Select Market was $15.53 per share.

Holders

As of March 1, 2013, there were 455 holders of record of our common stock. A substantially greater number of holders are beneficial owners whose shares are held of record by banks, brokers, and other financial institutions.

Dividends

There were no dividends paid in 2011 or 2012. We currently intend to retain our earnings to finance future growth and therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future.

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ITEM 6. Selected Financial Data

The following selected consolidated financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations, our consolidated financial statements and notes thereto and other financial information included elsewhere in this report. The selected consolidated statements of operations data and the consolidated balance sheet data are derived from our audited consolidated financial statements.

	Years ended December 31,
	2012 (1)(6)			2011 (1)			2010 (1)			2009 (1)			2008 (1)
	(in thousands, except per share data)
Consolidated Statements of Operations Data:
Revenues	$	406,919		$	228,813		$	214,343		$	207,646		$	156,727
Cost of sales (includes amortization of acquired intangible assets of $7,580, $2,595, $9,197, $111, and $0)		267,451			154,962			138,995			136,623			87,130
Gross profit		139,468			73,851			75,348			71,023			69,597
Expenses and other income:
Engineering and technology		9,969			7,158			8,471			9,129			13,846
Sales and marketing		44,138			21,510			28,145			25,378			24,644
General and administrative		27,418			21,542			32,843			23,617			24,228
Depreciation		2,119			2,162			3,138			3,283			3,264
Amortization of intangible assets		11,619			—			—			—			—
Restructuring		—			—			—			—			17
Other, net		—			—			—			—			(1,897	)
Loss on investments, net (2)		—			—			—			4,714			28,520
Other loss (income), net (3)		6,677			1,246			(15,247	)		(2,682	)		(7,149	)
Total expenses and other income		101,940			53,618			57,350			63,439			85,473
Income (loss) from continuing operations before income taxes		37,528			20,233			17,998			7,584			(15,876	)
Income tax benefit (expense) (3)(4)		(15,002	)		11,288			(8,725	)		(181	)		(598	)
Income (loss) from continuing operations		22,526			31,521			9,273			7,403			(16,474	)
Discontinued operations (5):
Loss from discontinued operations, net of taxes		—			(2,253	)		(4,593	)		—			(1,455	)
Loss on sale of discontinued operations, net of taxes		—			(7,674	)		—			—			(770	)
Net income (loss)	$	22,526		$	21,594		$	4,680		$	7,403		$	(18,699	)
Basic income (loss) per share:
Income (loss) from continuing operations	$	0.56		$	0.83		$	0.26		$	0.21		$	(0.48	)
Loss from discontinued operations		—			(0.06	)		(0.13	)		—			(0.04	)
Loss on sale of discontinued operations		—			(0.20	)		—			—			(0.02	)
Basic net income (loss) per share	$	0.56		$	0.57		$	0.13		$	0.21		$	(0.54	)
Shares used in computing basic income (loss) per share		40,279			37,954			35,886			34,983			34,415
Diluted income (loss) per share:
Income (loss) from continuing operations	$	0.54		$	0.82		$	0.25		$	0.21		$	(0.48	)
Loss from discontinued operations		—			(0.06	)		(0.12	)		—			(0.04	)
Loss on sale of discontinued operations		—			(0.20	)		—			—			(0.02	)
Diluted net income (loss) per share	$	0.54		$	0.56		$	0.13		$	0.21		$	(0.54	)
Shares used in computing diluted income (loss) per share		41,672			38,621			36,829			35,431			34,415

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	As of December 31,
	2012		2011		2010		2009		2008
	(in thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents, short-term and long-term investments	$	162,288	$	293,551	$	253,736	$	226,397	$	205,444
Working capital		144,385		281,873		242,440		219,475		182,733
Total assets		585,293		395,139		352,720		322,216		291,133
Total stockholders’ equity		415,450		355,105		301,771		279,835		262,324

Special dividend announced	Special dividend paid	Special dividend amount per share	Total dividends (in thousands)
November 14, 2007	January 8, 2008	$9.00	$299,296

(1) We expense the fair value of awards of equity instruments as stock-based compensation expense over the period in which the award vests. Operating expenses include stock-based compensation expense allocated as follows (in thousands):

	Years ended December 31,
	2012		2011			2010		2009		2008
Cost of sales	$	558	$	286		$	461	$	535	$	1,043
Engineering and technology		1,180		821			1,298		1,423		3,373
Sales and marketing		1,909		1,002			2,631		2,038		3,934
General and administrative		9,576		5,579			9,528		6,572		5,954
Discontinued operations		—		(159	)		833		—		—
Total	$	13,223	$	7,529		$	14,751	$	10,568	$	14,304

(2) In 2009 and 2008, we recorded other-than-temporary impairment charges of $5.4 million and $24.3 million, respectively, related to available-for-sale investments that we purchased for $40.4 million, became illiquid in 2007, and were sold for net proceeds of $9.2 million in 2009.

(3) In 2010, we recorded a $19.0 million net gain on a litigation settlement. The net gain allowed us to use a portion of our net operating loss carryforwards resulting in a net income tax expense of $6.6 million.

(4) In 2011, we recorded a reversal of $18.9 million of the valuation allowance related to our deferred tax assets.

(5) We completed the sale of our e-commerce business on June 22, 2011, and operating results of this business has been presented as discontinued operations for 2011 and 2010. We completed the sale of our directory business on October 31, 2007 and the sale of our mobile business on December 28, 2007. The operating results and losses from the sales of these businesses have been presented as discontinued operations for 2008.

(6) On January 31, 2012, we acquired TaxACT Holdings and its subsidiary, 2^nd Story, operator of the TaxACT income tax preparation business, which generated $62.1 million of revenue in 2012.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with the Selected Consolidated Financial Data and our consolidated financial statements and notes thereto included elsewhere in this report.

Overview

We operate two primary businesses: the InfoSpace online search business and the TaxACT tax preparation software and online service business. The InfoSpace business is primarily a B2B service that provides search technology, aggregated search content, and monetization solutions to partner sites. InfoSpace also offers search services directly to consumers through its owned internet search properties. Blucora acquired the TaxACT tax preparation business on January 31, 2012. The TaxACT business consists of an online tax preparation service for individuals, tax preparation software for individuals and professional tax preparers, and ancillary services. Following the acquisition of the TaxACT business, we determined that we have two reporting segments: Search and Tax Preparation.

Search

The majority of the Blucora’s revenues are generated by our Search segment. Our Search business primarily offers search services through the web properties of its distribution partners, which are generally private-labeled and customized to address the unique requirements of each distribution partner. The Search business also distributes aggregated search content through its own websites, such as Dogpile.com and WebCrawler.com. The InfoSpace search business does not generate its own search content, but instead aggregates search content from a number of content providers. Our metasearch technology selects search results from several search engine content providers, including Google, Yahoo!, and Bing, among others, and aggregates, filters, and prioritizes the results. This combination provides a more relevant search results page and leverages the investments made by our search engine content providers to continually improve the user experience. Some of these content providers, such as Google and Yahoo!, pay us to distribute their content. We refer to those providers as Search Customers.

Revenue from our Search segment is generated primarily as a result of end users of our services clicking on paid search results displayed on our own branded websites or those of our distribution partners. These paid search results are provided to us by our Search Customers. The Search Customer that provided the paid search result receives a fee from the advertiser who paid for the click and the Search Customer pays us a portion of that fee. If the click originated from one of our distribution partners’ web properties, we share a portion of the fee we receive with that distribution partner. Revenue is recognized in the period in which such paid clicks occur and is based on the amounts earned and remitted to us by our Search Customers for such clicks. For the year ended December 31, 2012, revenue from Google accounted for approximately 91% of our Search segment revenue and 77% of our total revenue.

Tax Preparation

On January 31, 2012, we acquired TaxACT Holdings and its subsidiary, 2^nd Story, operator of the TaxACT income tax preparation business for $287.5 million in cash, less certain transaction expenses, and subject to certain specified working capital adjustments. The TaxACT business consists of tax preparation software for individuals and professional tax preparers, an online tax preparation service for individuals, and ancillary data storage and financial services. The TaxACT acquisition was funded from our cash reserves and from the net proceeds of a $105 million credit facility (of which $100 million was drawn).

Our Tax Preparation segment generates revenue primarily in three ways: the sale of state and upgraded online federal income tax preparation services and software to consumers and small businesses, the sale of ancillary services to consumers, and the sale of its professional edition income tax preparation software to professional tax preparers. The majority of our Tax Preparation revenue is generated by our online service at www.taxact.com and, as a highly seasonal business, almost all of that revenue is generated in the first four

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months of the calendar year. Our basic federal tax preparation online software service is “free for everyone,” meaning that any taxpayer can use the services to e-file his or her federal income return, including all forms that the IRS allows to be e-filed, without paying for upgraded services. This free offer differentiates TaxACT’s offerings from many of its competitors who have limited free software and/or services offerings or limitations on the forms that may be e-filed for free. We generate revenue from a percentage of these “free” users who choose to upgrade for a fee to our deluxe product, which includes additional support and tools, and ancillary services and/or to file their state income tax returns, which are not free, with TaxACT. The ancillary services include, among other things, taxpayer phone support, data archiving, a deferred payment option, a bank card product, and e-filing services for professional tax preparers. TaxACT is the recognized value player in the digital-do-it-yourself space, offering comparable software and/or services at a lower cost to the end-user compared to larger competitors. This, coupled with its “free for everyone” offer, provides TaxACT a valuable marketing position. TaxACT’s professional tax preparer software allows professional tax preparers to file individual returns for their clients. Revenue from professional tax preparers has historically constituted a relatively small percentage of the TaxACT business’s overall revenue, and requires relatively modest incremental development costs as the basic software is substantially similar to the consumer-facing software and online service.

Use of Cash

As of December 31, 2012, we had $162.3 million in cash, cash equivalents, and short term investments. We may purchase up to $50 million of our common stock in open-market transactions in the 24 month period succeeding February 6, 2013, which was the date that our board of directors approved the share repurchase plan. We may also use these amounts in the future on investment in our current businesses, in acquiring new businesses or assets, or for repayment of debt. Such businesses or assets may not be related to search or tax preparation, and such acquisitions will result in us incurring further transaction related costs. We are currently focused on the following areas: improving the search services offered to our end users and to our distribution partners and through our owned and operated properties, improving the customer experience for our tax preparation products, maintaining our current distribution partners and adding new distribution partners for our search services, retaining current tax preparation customers and attracting new ones, and seeking opportunities to use our resources to acquire and integrate new businesses and assets. Within our search and tax preparation businesses, engineering, operations, and product management personnel remain paramount to our ability to deliver high quality search and tax preparation services, enhance our current technology, and increase our distribution network and customer reach. As a result, we expect to continue to invest in our workforce and research and development operations.

Overview of 2012 Operating Results

The following is an overview of our operating results for the year ended December 31, 2012 compared to the prior year. A more detailed discussion of our operating results, comparing our operating results for the years ended December 31, 2012, 2011, and 2010, is included under the heading “Historical Results of Operations” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Several of our key operating financial measures for the years ended December 31, 2012 and 2011 in total dollars (in thousands) and as a percentage of segment revenue are presented below.

	Years ended December 31,
	2012					2011
Revenues	$	406,919				$	228,813
				% of revenues					% of revenues
Gross profit	$	139,468		34.3	%	$	73,851		32.2	%
Income from continuing operations	$	22,526		5.5	%	$	31,521		13.7	%
Net income	$	22,526		5.5	%	$	21,594		9.4	%
Adjusted EBITDA(1)	$	80,439		19.8	%	$	36,623		16.0	%
Non-GAAP net income (1)	$	70,760		17.4	%	$	28,764		12.6	%
			% of search services revenue					% of search services revenue
Search Services Revenue:
Revenue from distribution partners				88	%				80	%
Revenue from existing distribution partners (launched prior to the then-current year)				77	%				75	%
Revenue from new distribution partners (launched during the then-current year)				11	%				5	%
Revenue from owned and operated properties				12	%				20	%
Tax Preparation Revenue:
Revenue (2)	$	62,105					—
Tax Preparation TaxACT consumer e-files (3)		5,209					—

(1) Adjusted EBITDA and Non-GAAP net income are non-GAAP measures, defined below in “Non-GAAP Financial Measures.”

(2) The Company acquired the TaxACT business on January 31, 2012, and this amount only includes the period from February 1, 2012 through December 31, 2012.

(3) (in thousands) Amount represents the number of accepted federal tax e-filings made through the TaxACT software and services, which we refer to as consumer e-files, for the 2011 tax season through December 31, 2012.

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Historical Results of Operations

The following table sets forth the historical results of our operations (in thousands and as percent of revenues).

	Years ended December 31,									Years ended December 31,
	2012			2011			2010			2012			2011			2010
	(in thousands)									(as a percent of revenues)
Total revenues	$	406,919		$	228,813		$	214,343			100.0	%		100.0	%		100.0	%
Total cost of sales		267,451			154,962			138,995			65.7			67.8			64.8
Gross profit		139,468			73,851			75,348			34.3			32.2			35.2
Operating expenses and other income:
Engineering and technology		9,969			7,158			8,471			2.5			3.1			4.0
Sales and marketing		44,138			21,510			28,145			10.9			9.4			13.1
General and administrative		27,418			21,542			32,843			6.7			9.4			15.3
Depreciation		2,119			2,162			3,138			0.5			0.9			1.5
Amortization of intangible assets		11,619			—			—			2.9			—			—
Other loss (income), net		6,677			1,246			(15,247	)		1.6			0.6			(7.1	)
Total expenses and other loss (income)		101,940			53,618			57,350			25.1			23.4			26.8
Income from continuing operations before income taxes		37,528			20,233			17,998			9.2			8.8			8.4
Income tax benefit (expense)		(15,002	)		11,288			(8,725	)		(3.7	)		4.9			(4.1	)
Income from continuing operations		22,526			31,521			9,273			5.5			13.7			4.3
Loss from discontinued operations, net of taxes		—			(2,253	)		(4,593	)		—			(1.0	)		(2.1	)
Loss on sale of discontinued operations, net of taxes		—			(7,674	)		—			—			(3.3	)		0.0
Net income	$	22,526		$	21,594		$	4,680			5.5	%		9.4	%		2.2	%

Results of Operations for 2012, 2011, and 2010

The following information presents the results of operations of our two reporting segments. Segment expenses do not include certain costs such as certain general, administrative, and overhead costs, stock-based compensation, depreciation, amortization of intangible assets, other loss, net, income tax expense, or results from discontinued operations to the reportable segments.

Search

Search segment results for the years 2012, 2011, and 2010 are presented below (in thousands):

	2012		Change			2011		Change			2010
Revenue	$	344,814		116,001		$	228,813	$	14,470		$	214,343
Cost of revenue		245,135		101,248			143,887		24,006			119,881
Operating expense		37,494		(1,226	)		38,720		(6,323	)		45,043
Segment income	$	62,185	$	15,979		$	46,206	$	(3,213	)		49,419

In order to increase the revenue generated from our distribution partners’ web properties, we must attract and retain distribution partners. Our ability to attract and retain distribution partners depends to a significant extent on our ability to provide a satisfying end user experience and an attractive monetization proposition to our distribution partners. Traffic to our owned and operated search properties has declined in recent years, and our ability to slow this decline and the resulting decline in the revenue generated by our owned and operated search

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properties depends in part on the extent to which we are able to attract and retain end users by providing a satisfying user experience. We manage our online direct marketing initiatives by seeking a margin and volume mix that optimizes the gross dollar return on our marketing expenditures. Revenue growth for our online direct marketing initiatives is dependent on our ability to attain that optimal return.

The increase in search services revenues for 2012 as compared to 2011 was due to increases in revenue generated by our distribution partners, which was partially offset by a decline in revenue from our owned and operated web properties. Revenue from existing distributions partners (i.e., distribution partners launched before the then-current year) increased in 2012 as compared to 2011 by $96.0 million (57%) and revenue from new distribution partners (i.e., distribution partners launched during the then-current year) in 2012 as compared to 2011 increased by $26.5 million (224%). While we expect to continue year-over-year growth, our most significant search customer, Google, has instituted policy changes that will have a negative impact in the near term to certain of our distribution partners. We believe the impacts will be most pronounced in the late first quarter and carry into the second quarter, after which point we expect to be begin to grow distribution sequentially in the second half of the year. The decrease of $6.5 million (14%) in revenue generated by our owned and operated properties for 2012 as compared to 2011 was primarily a result of the expected attrition in the installed user base from our 2010 acquisition of Make the Web Better, resulting in fewer paid clicks. We generated 47% of our search services revenue through our top five distribution partners in both 2012 and 2011. The web properties of our top five distribution partners for 2012 generated 46% of our search services revenue in 2011.

The increase in search services revenues for 2011 as compared to 2010 was due to increases in revenue generated by our distribution partners, which was partially offset by a decline in revenue from our owned and operated web properties. Revenue from existing distribution partners increased in 2011 as compared to 2010 by $26.0 million (18%) and revenue from new distribution partners in 2011 as compared to 2010 increased by $8.6 million (270%), but these trends were offset by a decline of $9.4 million from existing distribution partner Make The Web Better as we acquired its search services revenue generating assets on April 1, 2010. The decrease of $16.6 million (26%) in revenue generated by our owned and operated properties for 2011 as compared to 2010 was primarily due to the operation of the acquired Make The Web Better assets, which generated $8.2 million of revenue as an owned and operated web property in 2011, down from $16.4 million in 2010. There was also a decrease in revenue of $5.1 million from our revenue generated through our owned and operated metasearch engine site, (excluding the revenue from the Make The Web Better purchased assets).

For 2012, 88% of our search services revenue was generated through our search distribution partners’ web properties, compared to 80% and 70% of our search services revenue, respectively, generated through our search distribution partners’ web properties in 2011 and 2010.

We expect that search services revenue from searches conducted by end users on sites of our distribution partners will continue to represent the dominant majority of our search services revenue for the foreseeable future. Our owned and operated properties are affected by seasonal fluctuations in Internet usage, which generally decline in the summer months, although revenue from these sites makes up a proportionally smaller portion of our revenue, so seasonal impacts have become less meaningful, and are expected to become a smaller portion over time.

The search segment’s cost of revenue primarily consists of amounts paid under our revenue sharing arrangements with our distribution partners and usage-based content fees. The increase in cost of revenue for 2012 as compared to 2011 is primarily due to an increase in the revenue generated from our distribution partners’ web properties, with the resulting increase in shared revenue.

The dollar increase in cost of revenue for 2011 as compared to 2010 was primarily due to the increase in revenue sharing expenses related to an increase in revenue generated through the web properties of our distribution partners, and was partially offset by the effect of no longer paying distribution expense for revenue generated by Make The Web Better’s assets (after we acquired them on April 1, 2010), by the decrease in the

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amortization of acquired intangible assets acquired from Make The Web Better, and by the decline in cost of revenue for our Haggle business, which was suspended in 2010.

The search segment’s cost of revenue will increase if search services revenue generated through our distribution partners’ web properties increases at a greater rate than revenue generated through our owned and operated web properties. In addition, cost of revenue from distribution can be impacted by the mix of revenue generated by distribution partners. We expect that revenue from searches conducted by end users on sites of our distribution partners will continue to be an increasing majority of our search services revenue.

The decrease in search segment operating expense for 2012 as compared to 2011 was primarily due to a decrease in professional service fees and business taxes. The decrease in search segment operating expense for 2011 as compared to 2010 was primarily due to decreases in our direct marketing initiatives associated with traffic acquisition to our owned and operated metasearch engine sites, software license costs, and personnel costs.

Tax Preparation

Tax Preparation segment results for the years 2012 is presented below (in thousands):

	2012
Revenue	$	62,105
Cost of revenue		4,729
Operating expense		27,324
Segment income	$	30,052

The Tax Preparation segment was new in 2012 due to our acquisition of the TaxACT business on January 31, 2012. Unless otherwise indicated, figures in this annual report reflect the results from the date of the acquisition through December 31, 2012.

Our ability to generate tax preparation revenue is dependent on our ability to effectively market our consumer tax preparation software and online services and our ability to sell the related deluxe and ancillary services to our customers. We also generate revenue through the professional tax preparer software that we sell to professional tax preparers, who use it to prepare and file individual returns for their clients. Revenue from professional tax preparers has historically constituted a relatively small percentage of the overall revenue for the TaxACT business.

Consumer tax preparation revenue is largely driven by our ability to acquire new users of the service, retain existing users, and upsell users to paid products and services. We measure our individual tax preparation customers using the number of accepted federal tax e-filings made through our software and services, and we refer to such tax filings as “e-files.” We consider growth in the number of e-files to be the most important non-financial metric in measuring the performance of the tax preparation business. Overall revenue is driven more by growth in e-files than by growth in revenue per user, which has historically grown modestly, because we have not made significant pricing adjustments. Because we acquired the TaxACT business during the course of the 2012 tax season, we believe that presenting e-file metrics covering the same time periods as the financial results presented (and comparable period) would not accurately reflect segment results of operations. Accordingly, we are presenting these metrics for e-filings made during each tax season’s filing year though the end of the calendar year as follows (in thousands):

	E-filings during the calendar year (in thousands)				% change
	2012		2011
Total TaxACT consumer e-files		5,209		4,828		8	%

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We derive revenue from the professional tax preparation product in two ways: from the per-unit licensing of the software and from amounts that we charge to e-file through the software. Thus professional tax preparation revenue is dependent upon both the number of tax professionals purchasing the product and the number of e-filed returns submitted through this product. For the 2012 tax season, the number of tax professional units sold grew modestly compared to the prior year and the number of e-filed returns grew in excess of 20%. We believe that these trends were impacted by new IRS requirements regarding professional tax preparers’ qualifications, which limited the unit sales growth by reducing the total number of preparers, and by new IRS e-file requirements for professional tax preparers, which accelerated e-file growth. As a result, the current year trends may not be indicative of future performance.

The Tax Preparation segment cost of revenue primarily consists of royalties, payment processing fees for customer transactions, and bank service fees. Operating expenses for the tax preparation segment consists primarily of personnel related costs and marketing expenses.

Consolidated Results

Cost of sales.    Cost of sales consists of the Search and Tax Preparation segments’ cost of revenue, amortization of acquired intangible assets, and certain costs associated with customer service and the operation of the data centers that serve our businesses, which include personnel expenses (which include salaries, benefits and other employee related costs, and stock-based compensation expense), bandwidth costs, and depreciation. Cost of sales in total dollars (in thousands) and as a percentage of total revenues for the years 2012, 2011, and 2010 are presented below:

	2012			Change			2011			Change			2010
Search segment cost of revenue	$	245,135		$	101,248		$	143,887		$	24,006		$	119,881
Tax Preparation segment cost of revenue		4,729			4,729			—			—			—
Amortization of acquired intangible assets		7,580			4,985			2,595			(6,602	)		9,197
Data center operations		8,314			2,533			5,781			(678	)		6,459
Depreciation		1,693			(1,006	)		2,699			(759	)		3,458
Total cost of sales	$	267,451		$	112,489		$	154,962		$	15,967		$	138,995
Percentage of revenues		65.7	%					67.8	%					64.8	%

The dollar increase for expenses not related to segment costs of sales for 2012 as compared to 2011 resulted primarily from an increase in amortization of acquired intangible assets primarily attributable to TaxACT assets acquired, an increase of $1.4 million in personnel costs in data center operations, and an increase of $887,000 in contractor expenses, both of which were primarily attributable to TaxACT operations. These increases were partially offset by a decrease in data center asset depreciation of $1.0 million.

The dollar increase in cost of sales for 2011 as compared to 2010 was primarily due to the increase in revenue sharing expenses related to an increase in revenue generated through the web properties of our distribution partners, and was partially offset by the effect of no longer paying distribution expense for revenue generated by Make The Web Better’s assets after we acquired them on April 1, 2010, by the decrease in the amortization of acquired intangible assets acquired from Make The Web Better, and by the decline in cost of sales for our Haggle business, after we suspended its operations in 2010.

Engineering and technology expenses.    Engineering and technology expenses are associated with the research, development, support, and ongoing enhancements of our offerings, including personnel expenses (which include salaries, stock-based compensation expense, and benefits and other employee related costs),

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software support and maintenance, and professional service fees. Engineering and technology expenses in total dollars (in thousands) and as a percentage of total revenues for the years 2012, 2011, and 2010 are presented below:

	2012			Change		2011			Change			2010
Engineering and technology expenses	$	9,969		$	2,811	$	7,158		$	(1,313	)	$	8,471
Percentage of total revenues		2.5	%				3.1	%					4.0	%

The dollar increase for 2012 as compared to 2011 was primarily attributable to an increase of $3.0 million in personnel costs, which includes a $2.5 million increase in salaries and benefits related to the acquisition of TaxACT in 2012, of which $519,000 was in stock-based compensation expense.

The dollar decrease for 2011 as compared to 2010 was primarily attributable to decreases in stock-based compensation expense of $477,000 and software support and maintenance costs of $394,000.

Sales and marketing expenses.    Sales and marketing expenses consist principally of marketing expenses associated with our tax preparation business (which includes the following channels: television, radio, online banner ads, and email), our owned and operated web search properties (which consist of traffic acquisition, including our online direct marketing initiatives, which involve the purchase of online advertisements that drive traffic to an owned and operated website, agency fees, brand promotion expense, and market research expense), personnel costs (which include salaries, stock-based compensation expense, and benefits and other employee related costs), and the cost of temporary help and contractors to augment our staffing. Sales and marketing expenses in total dollars (in thousands) and as a percentage of total revenues for the years 2012, 2011, and 2010 are presented below:

	2012			Change		2011			Change			2010
Sales and marketing expenses	$	44,138		$	22,628	$	21,510		$	(6,635	)	$	28,145
Percentage of total revenues		10.9	%				9.4	%					13.1	%

The dollar increase for 2012 as compared to 2011 was primarily attributable to increases of $17.5 million in advertising costs, primarily due to the acquisition of TaxACT in 2012, $4.5 million in personnel costs, which includes $3.2 million in personnel costs related to the acquisition of TaxACT in 2012, which includes $647,000 in stock-based compensation, and an increase of $691,000 in bonuses, primarily due to increased revenue generated by our distribution partners.

The dollar decrease for 2011 as compared to 2010 was primarily attributable to decreases of $4.1 million in advertising costs for our direct marketing initiatives associated with traffic acquisition to our owned and operated metasearch engine sites, $1.6 million in stock-based compensation expense, and $741,000 in personnel-related costs, not including stock-based compensation expense and including costs for temporary help and contractors to augment our staffing.

To the extent we achieve returns on marketing expenditures, we will continue to invest in our direct marketing initiatives to drive traffic to an owned and operated web property and invest in advertising and marketing efforts to attract new tax preparation customers.

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General and administrative expenses.    General and administrative expenses consist primarily of personnel expenses (which include salaries, stock-based compensation expense, and benefits and other employee related costs), professional service fees (which include legal, audit, and tax fees), general business development and management expenses, occupancy and general office expenses, taxes, and insurance expenses. General and administrative expenses in total dollars (in thousands) and as a percentage of total revenues for the years 2012, 2011, and 2010 are presented below:

	2012			Change		2011			Change			2010
General and administrative expenses	$	27,418		$	5,876	$	21,542		$	(11,301	)	$	32,843
Percentage of total revenues		6.7	%				9.4	%					15.3	%

The dollar increase for 2012 as compared to 2011 was primarily attributable to an increase of $2.4 million in stock-based compensation related to the modification of a warrant issued in August 2011 (the “Warrant”) in connection with an investment by Cambridge Information Group I LLC, an increase of $914,000 related to the vesting of non-employee stock options due to the acquisition of the TaxACT business, and an increase in personnel costs of $2.1 million partially offset by a decrease of $513,000 in taxes and licenses expense. (For further detail on the stock-based compensation expense related to the Warrant modification and the vesting of non-employee stock options due to the TaxACT acquisition, see “Note 8: Stock-based Compensation Expense” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report.) The increase in personnel costs of $2.1 million includes a $1.2 million increase in personnel costs related to the acquisition of TaxACT in 2012, and a $868,000 increase in salaries and benefits due to an increase in headcount and bonus related expenses.

The dollar decrease for 2011 as compared to 2010 was primarily attributable to decreases in stock-based compensation expense unrelated to the Warrant of $5.9 million, legal fees of $2.2 million, employee separation costs of $3.5 million, and professional service fees of $1.5 million. These decreases were partially offset by stock-based compensation expense of $1.9 million related to issuing the Warrant. See “Note 8: Stock-based Compensation Expense” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report.

Depreciation and amortization of intangible assets.    Depreciation of property and equipment includes depreciation of computers, software, office equipment and fixtures, and leasehold improvements not recognized in cost of sales. Amortization of definite-lived intangible assets represents the amortization of customer relationships, which are amortized over their estimated lives of eight years. Depreciation for the years ended December 31, 2012, 2011, and 2010 are presented below (in thousands):

	2012			Change			2011			Change			2010
Depreciation expenses	$	2,119		$	(43	)	$	2,162		$	(976	)	$	3,138
Amortization of intangible assets		11,619			11,619			—			—			—
Total depreciation and amortization of intangible assets	$	13,738		$	11,576		$	2,162		$	(976	)	$	3,138
Percentage of revenues		3.4	%					0.9	%					1.5	%

The dollar increase in amortization of intangible assets for 2012 as compared to 2011 was due to the amortization of intangible assets acquired as a result of the TaxACT acquisition.

The only material variances in depreciation expense for the periods presented above were decreases in the depreciation of capitalized internal software development costs for 2011 compared to 2010 of $535,000.

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Other loss (income), net.    Other loss (income), net is comprised of the following for the years 2012, 2011, and 2010 (in thousands):

	2012			Change			2011			Change			2010
Interest expense	$	3,522		$	3,522		$	—		$	—		$	—
Interest income		(131	)		238			(369	)		(38	)		(331	)
Amortization of debt issuance costs		820			820			—			—			—
Accretion of debt discount		325			325			—			—			—
Loss on derivative instrument		2,346			2,346			—			—			—
Gain on contingency resolution		—			1,500			(1,500	)		(1,500	)		—
Increase in fair value of earn-out contingent liability		—			(3,000	)		3,000			(2,000	)		5,000
Foreign currency exchange loss (gain), net		48			28			20			1,355			(1,335	)
Litigation settlement gain		—			—			—			18,965			(18,965	)
Loss (gain) on disposal of assets		(1	)		(47	)		46			(968	)		1,014
Other		(252	)		(301	)		49			679			(630	)
Other loss (income), net	$	6,677		$	5,431		$	1,246		$	16,493		$	(15,247	)

In 2012, we recorded in other loss (income), net, interest payments and amortization of debt origination costs related to the $105 million credit facility entered into by 2^nd Story to finance the acquisition of the TaxACT business (for further detail, see “Note 10: Debt” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report). In addition, in 2012, we recorded a loss on the increase of the fair value of the Warrant outstanding, which we classified as a derivative instrument subsequent to its modification triggered on the date of the acquisition of the TaxACT business (for further detail, see “Note 8: Stock-based compensation” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report).

Other loss (income), net decreased in 2011 compared to 2010. The expense related to the increase in fair value of earn-out contingent liability for the periods presented above was to adjust the estimated contingent payments to be made by us under the agreement related to our acquisition of the Make The Web Better assets and a gain of $1.5 million related to the resolution of a contingent liability recorded in 2011. Additionally in 2011, the financial performance of the operation of the Make The Web Better assets acquired in April 2010 was better than expected; as a consequence, we estimated that the fair value of the related earn-out contingent liability had increased and we recorded a charge of $3.0 million.

Income tax expense (benefit).    During 2012, we recorded an income tax expense on continuing operations of $15.0 million. During 2011, we recorded an income tax benefit on continuing operations of $11.3 million. During 2010, we recorded an income tax expense on continuing operations of $8.7 million. The 2012 income tax expense of $15.0 million was primarily attributable to a $13.1 million tax expense from current year operations, a $2.4 million tax expense from non-deductible compensation cost and loss on the derivative instrument, both in connection with the Warrant to purchase common stock granted to Cambridge Information Group I LLC, dated August 23, 2011, a $369,000 tax expense from nondeductible acquisition costs and a $804,000 tax benefit from deductible domestic production costs. The 2011 income tax benefit of $11.3 million was primarily attributable to a $7.1 million tax expense from 2011 operations, a $675,000 tax expense from non-deductible compensation cost in connection with the Warrant and a $19.3 million tax benefit for the change in the valuation allowance against the deferred tax assets. The 2010 income tax expense of $8.7 million was primarily attributable to a $6.3 million tax expense from current year operations and a $3.2 million tax expense for the net increase in the valuation allowance against the deferred tax assets. These expenses were partially offset by a $566,000 income tax benefit from the decrease in unrecognized tax benefits pertaining to state income taxes and a $516,000 tax benefit attributable to foreign exchange gains.

At December 31, 2012, we had gross temporary differences representing future tax deductions of $782.1 million, primarily comprised of $723.3 million of accumulated net operating loss carryforwards, which

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represent deferred tax assets. We applied a valuation allowance against the net operating loss carry forward deferred tax assets and certain other deferred tax assets. If, in the future, we determine that the realization of any additional portion of the deferred tax assets is more likely than not to be realized, we will record a benefit to the income statement or additional paid-in-capital, as appropriate.

Loss from discontinued operations and loss on sale of discontinued operations.    On June 22, 2011, we sold our Mercantila e-commerce business to Zoo Stores, Inc. The results of operations from the business are reflected in the Consolidated Financial Statements as discontinued operations for all periods presented. Revenue, loss before taxes, income tax benefit, and loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes, for the year ended December 31, 2011 is presented below (in thousands):

	Year ended December 31, 2011
Revenue from discontinued operations	$	16,894
Loss from discontinued operations before taxes	$	(3,506	)
Income tax benefit		1,253
Loss from discontinued operations, net of taxes	$	(2,253	)
Loss on sale of discontinued operations, net of an income tax benefit of $5,092	$	(7,674	)

Loss from discontinued operations includes previously unallocated depreciation, amortization, stock-based compensation expense, income taxes, and other corporate expenses that were attributable to the e-commerce business.

Non-GAAP Financial Measures

We define Adjusted EBITDA as net income, determined in accordance with the accounting principles generally accepted in the United States of America (“GAAP”), excluding the effects of discontinued operations (which includes loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes), income taxes, depreciation, amortization of intangible assets, stock-based compensation expense, and other loss (income), net (which includes such items as interest expense, interest income, derivative instrument gains or losses, foreign currency gains or losses, and gains or losses from the disposal of assets, adjustments to the fair values of contingent liabilities related to business combinations, gains on resolution of contingencies, and litigation settlements).

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. Other companies may calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA may not be comparable to similarly titled

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measures of other companies. A reconciliation of our Adjusted EBITDA to net income, which we believe to be the most comparable GAAP measure, is presented for the years 2012, 2011, and 2010 below (in thousands):

	2012		2011			2010
Net income	$	22,526	$	21,594		$	4,680
Discontinued operations		—		9,927			4,593
Depreciation and amortization of intangible assets		23,011		7,456			15,793
Stock-based compensation		13,223		7,688			13,918
Other loss (income), net		6,677		1,246			(15,247	)
Income tax expense (benefit)		15,002		(11,288	)		8,725
Adjusted EBITDA	$	80,439	$	36,623		$	32,462

We define non-GAAP net income as net income, determined in accordance with GAAP, excluding the effects of loss from discontinued operations (which includes loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes), stock-based compensation expense, amortization of acquired intangible assets, gain or loss on derivative instruments, the cash tax impact of those adjustments, and non-cash income taxes from continuing operations. Non-cash income tax expense represents a reduction to cash taxes payable associated with the utilization of deferred tax assets, which primarily consist of U.S. federal net operating losses. The majority of these deferred tax assets will expire in 2020 if unutilized.

We believe that non-GAAP net income and non-GAAP earnings 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 non-GAAP net income and non-GAAP earnings 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 income. 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. The amounts in the reconciliation of our non-GAAP net income to net income for the year ended December 31, 2010 are revised from amounts previously reported to conform to the current presentation. A reconciliation of our non-GAAP net income to net income, which we believe to be the most comparable GAAP measure, is presented for the years 2012, 2011, and 2010 below (in thousands, except per share amounts):

	2012			2011			2010
Net income	$	22,526		$	21,594		$	4,680
Discontinued operations		—			9,927			4,593
Income from continuing operations		22,526			31,521			9,273
Stock-based compensation		13,223			7,688			13,918
Amortization of acquired intangible assets		19,199			2,595			9,197
Loss on derivative instruments		2,346			—			—
Cash tax impact of adjustments to GAAP net income		(93	)		(40	)		(154	)
Non-cash income tax expense (benefit) from continuing operations		13,559			(13,000	)		8,530
Non-GAAP net income		70,760			28,764			40,764
Per share amounts:
Income from continuing operations - diluted	$	0.54		$	0.82		$	0.25
Stock-based compensation - diluted		0.32			0.19			0.38
Amortization of acquired intangible assets - diluted		0.46			0.07			0.25
Loss on derivative instruments - diluted		0.06			—			—
Cash tax impact of adjustments to GAAP net income - diluted		0.00			0.00			0.00
Non-cash income tax expense (benefit) per share - diluted		0.32			(0.34	)		0.23
Non-GAAP income per share - diluted	$	1.70		$	0.74		$	1.11

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Liquidity and Capital Resources

Cash, Cash Equivalents, Short-Term Investments and Debt

Our principal source of liquidity is our cash, cash equivalents and short-term investments. As of December 31, 2012, we had cash and short-term investments of $162.3 million, consisting of cash and cash equivalents of $68.3 million and available-for-sale short-term investments of $94.0 million. We generally invest our excess cash in high quality marketable investments. These investments include securities issued by U.S. government agencies, commercial paper, money market funds, municipal bonds and time deposits. All of our financial instrument investments held at December 31, 2012 have minimal default risk and short-term maturities.

On January 31, 2012, we acquired TaxACT Holdings and its subsidiary, 2^nd Story, operator of the TaxACT income tax preparation business for $287.5 million in cash, less certain transaction expenses, and subject to certain specified working capital adjustments. The acquisition of the TaxACT business was funded from our cash reserves and from the net proceeds of borrowings under a $105 million credit facility (of which $100 million was drawn at the transaction’s close), which facility consists of a $95 million term loan and a $10.0 million revolving credit facility. The credit facility is secured by the TaxACT business’s operations and the equity of 2^nd Story Software, Inc. The terms of the credit facility allow us to repay amounts owed before its term is complete, and during the year ended December 31, 2012, we repaid $25.5 million outstanding under the credit facility, including all of the amounts owed under the revolving credit facility portion of the debt. Although we do not currently anticipate drawing on the revolving credit facility in the future, all $10 million of that revolving credit facility is available for future use. The terms of the credit facility required us to hedge a portion of the interest rate risk associated with the amounts outstanding under the term loan, and that requirement was met on May 1, 2012 (for further detail, see “Note 10: Debt” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report).

We plan to use our cash to fund operations, develop technology, advertise, market and distribute our products and services, and continue the enhancement of our network infrastructure. An important component of our strategy for future growth is to acquire technologies and businesses, and we plan to use our cash to acquire and integrate acceptable targets that we may identify. These targets may include businesses, products, or technologies unrelated to search or tax preparation. We may use a portion of our cash for dividends or for common stock repurchases (for further detail, see the “Events Subsequent to December 31, 2012” section below).

We believe that existing cash, cash equivalents, short-term investments, and cash generated from operations will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months, but the underlying levels of revenues and expenses that we project may not prove to be accurate. For further discussion of the risks to our business related to liquidity, see the paragraph in our Risk Factors (Part I, Item 1A of this annual report) under the heading “Existing cash and cash equivalents, short-term investments, and cash generated from operations may not be sufficient to meet our anticipated cash needs for working capital and capital expenditures.”

Contractual Obligations and Commitments

Our contractual commitments are as follows for the following years ending December 31 (in thousands):

	2013			2014		2015		2016		2017		Thereafter		Total
Operating lease commitments	$	919		$	1,770	$	1,599	$	1,222	$	1,259	$	3,649	$	10,418
Less sublease income		(36	)		—		—		—		—		—		(36	)
Net lease payments required		883			1,770		1,599		1,222		1,259		3,649		10,382
Purchase commitments		1,272			581		423		92		61		—		2,429
Debt commitments		4,750			9,500		13,062		14,250		32,934		—		74,496
Total	$	6,905		$	11,851	$	15,084	$	15,564	$	34,254	$	3,649	$	87,307

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Operating lease commitments.    The Company has noncancellable operating leases for its corporate facilities. The leases run through 2020. Rent expense under operating leases totaled $1.8 million, $1.8 million, and $1.3 million for the years ended December 31, 2012, 2011, and 2010, respectively.

Purchase commitments.    Our purchase commitments are primarily comprised of non-cancelable service agreements for our data centers.

We have pledged a portion of our cash as collateral for standby letters of credit and bank guaranties for certain of our property leases and banking arrangements. At December 31, 2012, the total amount of collateral pledged under these agreements was $3.4 million.

The above table does not reflect unrecognized tax benefits of approximately $1.2 million, the timing of which is uncertain. For additional discussion on unrecognized tax benefits see “Note 12: Income Taxes” of the Notes to Consolidated Financial Statements (Item 8 of Part II of this report).

Debt commitments:    Our debt commitments consist of the minimum scheduled loan payments related to the credit facility that 2^nd Story entered into to help finance the acquisition of the TaxACT business. We may repay the amounts outstanding under the credit facility before its term is complete, depending on the cash generated by the TaxACT business’s operations.

Off-balance sheet arrangements.    We have no off-balance sheet arrangements other than operating leases. We do not believe that these operating leases are material to our current or future financial position, results of operations, revenues or expenses, liquidity, capital expenditures or capital resources.

Cash Flows

Our net cash flows are comprised of the following for the years 2012, 2011, and 2010 (in thousands):

	2012			2011			2010
Net cash provided by operating activities	$	48,831		$	25,263		$	49,906
Net cash provided (used) by investing activities		(165,073	)		(115,473	)		33,927
Net cash provided by financing activities		102,623			23,256			206
Net cash used by discontinued operations		—			(6,794	)		(12,144	)
Net increase (decrease) in cash and cash equivalents	$	(13,619	)	$	(73,748	)	$	71,895

Net Cash Provided by Operating Activities

Net cash provided by operating activities consists of net income offset by certain adjustments not affecting current-period cash flows and the effect of changes in our operating assets and liabilities.

Net cash provided by operating activities was $48.8 million in 2012, consisting of our net income of $22.5 million, adjustments to net income not affecting cash to determine cash flows used by operating activities of $39.8 million (consisting primarily of depreciation and amortization of intangible assets, stock-based compensation expense, warrant-related stock-based compensation expense, amortization of debt-related items, and a loss on a derivative instrument), and cash provided by changes in our operating assets and liabilities of $27.2 million (consisting primarily of increases in accrued expenses and other current and long-term liabilities and decreases in other long-term assets). Partially offsetting the increase were adjustments not affecting cash flows used by operating activities of $32.0 million (consisting primarily of excess tax benefits from stock-based award activity and deferred income taxes) and cash used by changes in our operating assets and liabilities of $8.7 million (consisting primarily of decreases in accounts payable and increases in prepaid expenses and other current assets, accounts receivable, and other receivables).

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Net cash provided by operating activities was $25.3 million in 2011, consisting of our net income of $21.6 million, adjustments to net income not affecting cash to determine cash flows provided by operating activities of $28.1 million (consisting primarily of depreciation and amortization, stock-based compensation, increase in the fair value of an earn-out contingent liability, and loss on disposals of assets), and cash provided by changes in our operating assets and liabilities of $27.2 million (consisting of decreases in accounts payable other receivables, and in prepaid expenses and other current assets). Partially offsetting the increase were adjustments not affecting cash flows used by operating activities of $21.7 million (consisting primarily of deferred income taxes, excess tax benefits from stock-based award activity, a gain on the resolution of a contingent liability, and amortization of premium on investments) and cash used by changes in our operating assets and liabilities of $29.9 million (consisting primarily of decreases in accrued expenses and other current and long-term liabilities and increases in accounts receivable).

Net cash provided by operating activities was $49.9 million in 2010, consisting of adjustments to net income not affecting cash to determine cash flows provided by operating activities of $41.0 million (consisting primarily of depreciation and amortization, stock-based compensation, increase in the fair value of an earn-out contingent liability, loss on disposals of assets, and amortization of premium on investments), cash provided by changes in our operating assets and liabilities of $18.5 million (consisting of decreases in accounts receivable, increases in accrued expenses and other current and long-term liabilities, and decreases in other receivables and in prepaid expenses and other current assets), and our net income of $4.7 million. Partially offsetting the increase were adjustments not affecting cash flows used by operating activities of $10.6 million (consisting primarily of excess tax benefits from stock-based award activity, fair value of common stock retired relating to a litigation settlement, and the realized foreign currency translation gains) and cash used by changes in our operating assets and liabilities of $3.7 million (consisting primarily of decreases in accounts payable).

Net Cash Provided (Used) by Investing Activities

Net cash provided by investing activities consists primarily of transactions related to our investments, purchases of property and equipment, proceeds from the sale of certain assets, and cash used in business acquisitions.

Net cash used by investing activities was $165.1 million in 2012, consisting of $279.4 million in business acquisitions, net of cash acquired, and purchases of investments of $122.4 million, partially offset by proceeds of $203.5 million from the sales of marketable investments and $36.8 million from the maturities of our marketable investments.

Net cash used by investing activities was $115.5 million in 2011, consisting primarily of the purchase of $336.8 million of marketable investments and $2.7 million of property and equipment purchases, partially offset by the proceeds from the sale or maturity of marketable investments of $223.3 million.

Net cash provided by investing activities was $33.9 million in 2010, consisting primarily of the proceeds from the sale or maturity of our marketable investments of $244.8 million and proceeds from the sale of assets of $307,000, partially offset by the purchase of $200.5 million of marketable investments, $8.0 million used for business acquisitions, and $2.9 million of property and equipment purchases.

Net Cash Provided Financing Activities

Net cash provided by financing activities consists of proceeds from the issuance of stock through the exercise of stock options and our employee stock purchase plan, tax payments from shares withheld upon vesting of restricted stock units, repayments of capital lease obligations, excess tax benefits from stock-based award activity, and special dividends paid to our shareholders.

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Net cash provided by financing activities totaled $102.6 million for 2012 and consisted primarily of loan proceeds of $99.0 million, less debt issuance costs of $2.3 million, proceeds of $23.0 million from excess tax benefits from stock-based award activity due primarily to the utilization of equity net operating loss carryforwards from prior years, and $9.7 million from the exercise of options and the issuance of stock through our employee stock purchase plan. Partially offsetting cash provided by financing activities were cash payments of $25.5 million for the repayment of debt under the credit facility entered into to help finance the acquisition of the TaxACT business, and $1.3 in tax payments from shares withheld upon vesting of restricted stock units.

Net cash provided by financing activities in 2011 was $23.3 million, consisting primarily of $17.4 million in proceeds from the exercise of stock options and the sale of shares through our employee stock purchase plan, $7.0 million in proceeds from the sale of common stock, and $1.3 million in excess tax benefits generated by stock-based award activity. Cash provided by financing activities was partially offset by $1.8 million in tax payments from shares withheld upon vesting of restricted stock units, and $423,000 of earn-out payments related to business acquisitions.

Net cash provided by financing activities in 2010 was $206,000, consisting primarily of $7.0 million in excess tax benefits generated by stock-based award activity and proceeds of $2.5 million from the exercise of stock options and the sale of shares through our employee stock purchase plan. Cash provided by financing activities was partially offset by $4.6 million of earn-out payments related to business acquisitions, $4.2 million in tax payments from shares withheld upon vesting of restricted stock units, and $589,000 used for the repayment of capital lease obligations.

Net Cash Used by Discontinued Operations

Net cash used by operating activities attributable to discontinued operations in 2011 was $6.8 million and in 2010 was $12.1 million.

Acquisitions

TaxACT.    On January 31, 2012, we acquired TaxACT Holdings, Inc. and its subsidiary, 2^nd Story Software, Inc., operator of the TaxACT income tax preparation business for $287.5 million in cash, less certain transaction expenses, and subject to certain specified working capital adjustments. The TaxACT acquisition was funded from our cash reserves and from the net proceeds of a $105 million credit facility (of which $100 million was drawn at the transaction’s close).

Mercantila.    On May 10, 2010, we acquired certain assets from Mercantila, Inc., an internet e-commerce company, at a cost of $7.8 million in cash, plus $8.2 million in liabilities assumed, and later sold our Mercantila operations to Zoo Stores, Inc. on June 22, 2011, for $250,000 upon completion of the sale, plus we received the right to receive additional consideration of up to $3.0 million contingent on liquidity or other events, which we recorded at a fair value of $0 as of June 30, 2011.

Make The Web Better.    On April 1, 2010, we purchased assets consisting of web properties and licenses for content and technology from Make The Web Better, a search distribution partner and privately-held developer of online products used on social networking sites, for $13.0 million. The purchase consideration included an initial cash payment of $8.0 million, with an initial $5.0 million in estimated additional consideration payable in cash contingent on expected financial performance. The financial performance of the operation of the Make The Web Better assets in 2011 and 2010 was greater than was expected when the assets were acquired. As a consequence, our estimate of the fair value of the related contingent consideration increased to $13.0 million and we recorded charges of $3.0 million and $5.0 million to other loss (income), net in the years ended December 31, 2011 and 2010, respectively.

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Critical Accounting Policies and Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as the disclosures included elsewhere in this Annual Report on Form 10-K, is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and disclosures of contingencies. In some cases, we could have reasonably used different accounting policies and estimates.

The Securities and Exchange Commission has defined a company’s most critical accounting policies as the ones that are the most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. On an ongoing basis, we evaluate the estimates used, including those related to revenue recognition, cost of sales, impairment of goodwill and indefinite-lived intangible assets, accounting for business combinations, stock-based compensation, and the valuation allowance for our deferred tax assets. We base our estimates on historical experience, current conditions, and on various other assumptions that we believe to be reasonable under the circumstances and, based on information available to us at that time, we make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources as well as identify and assess our accounting treatment with respect to commitments and contingencies. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions. We believe the following critical accounting policies involve the more significant judgments and estimates used in the preparation of our consolidated financial statements. We also have other accounting policies that involve the use of estimates, judgments, and assumptions and that are significant to understanding our results. For additional information see “Note 2: Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report.

Search Services Revenue Recognition

Our revenues are generated primarily from our web search services. We generate search services revenue when an end user of such services clicks on a paid search link provided by a Search Customer and displayed on a distribution partners’ web property or on one of our owned and operated web properties. The Search Customer that provided the paid search link receives a fee from the advertiser who paid for the click and the Search Customer pays us a portion of that fee. Revenue is recognized in the period in which the services are provided (e.g., a paid search occurs) and is based on the amounts earned by and ultimately remitted to us. We record this revenue in our Search segment.

Under our agreements with our Search Customers and our distribution partners, we are the primary obligor, separately negotiate each revenue or unit pricing contract independent of any revenue sharing arrangements, and assume the credit risk for amounts invoiced to our Search Customers. For search services, we determine the paid search results, content, and information directed to its owned and operated websites and its distribution partners’ web properties.

The Company earns revenue from its Search Customers by providing paid search results generated from its owned and operated web properties and from its distribution partners’ web properties based on separately negotiated and agreed-upon terms with each distribution partner. Consequently, the Company records search services revenue on a gross basis.

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Tax Preparation Revenue Recognition

We derive revenue from the sale of tax preparation online services, ancillary service offerings, tax preparation packaged software products, and multiple element arrangements that may include a combination of these items. Ancillary service offerings include tax preparation support services, data archive services, bank or reloadable pre-paid debit card services, and e-filing services. We record this revenue in our Tax Preparation segment.

Our tax preparation segment service revenue consists primarily of hosted tax preparation online services, tax preparation support services, data archive services, and e-filing services. We recognize revenue from these services as the services are performed and the revenue recognition criteria are met as described in “Note 2: Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report.

We recognize revenue from the sale of our packaged software products when legal title transfers. This is generally when its customers download products from the Web or when the products ship.

The bank or reloadable prepaid debit card services are offered to taxpayers as an option to receive their tax refunds in the form of a prepaid bank card or to have the fees for the product and/or services purchased by the customers deducted from their refunds. Revenue for this fee is recognized when the four revenue recognition criteria are met; for some arrangements that is upon filing and for other arrangements that is upon cash receipt.

For products and/or services that consist of multiple elements, we must: (1) determine whether and when each element has been delivered; (2) determine the fair value of each element using the selling price hierarchy of vendor-specific objective evidence (“VSOE”) of fair value if available, third-party evidence (“TPE”) of fair value if VSOE is not available, and estimated selling price (“ESP”) if neither VSOE nor TPE is available; and (3) allocate the total price among the various elements based on the relative selling price method. Once we have allocated the total price among the various elements, we recognize revenue when the revenue recognition criteria are met for each element.

VSOE generally exists when we sell the deliverable separately and are normally able to establish VSOE for all deliverables in these multiple element arrangements; however, in certain limited instances VSOE cannot be established. This may be because we infrequently sell each element separately, or have a limited sales history. When VSOE cannot be established we attempt to establish a selling price for each element based on TPE. TPE is determined based on competitor prices for similar deliverables when sold separately. When we are unable to establish selling price using VSOE or TPE, we use ESP in our allocation of arrangement consideration. ESP is the estimated price at which we would sell a product or service if it were sold on a stand-alone basis. We determine ESP for a product or service by considering multiple factors including, but not limited to, historical stand-alone sales, pricing practices, market conditions, competitive landscape, internal costs, and gross margin objectives.

In some situations, we receive advance payments from our customers. We defer revenue associated with these advance payments and recognize the allocated consideration for each element when we ship the products or perform the services, as appropriate. Advance payments related to data archive services are deferred and recognized over the related contractual term.

Debt Issuance Costs and Debt Discount

Debt issuance costs and debt discounts are deferred and amortized as interest expense under the effective interest method over the contractual term of the related debt, adjusted for prepayments.

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Hedging

We use a derivative financial instrument in the form of an interest rate swap agreement for the purpose of minimizing exposure to changes in interest rates. This swap agreement is accounted for as a cash flow hedge and changes in the fair value of the hedge instrument are included in other comprehensive income.

Cost of Sales

We record the cost of sales when the related revenue is recognized. Cost of sales consists of costs related to revenue sharing arrangements with our distribution partners, usage-based content fees, certain costs associated with the operation of our data centers that serve our search and tax preparation businesses, including amortization of intangible assets, depreciation, personnel expenses (which include salaries, benefits and other employee related costs, and stock-based compensation expense), bandwidth costs, customer payment processing fees, bank service fees, and royalties.

Business Combinations and Intangible Assets Including Goodwill

We account for business combinations using the acquisition method and, accordingly, the identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values. Goodwill is calculated as the excess of the purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including advisory, legal, accounting, valuation, and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

Accounting for Goodwill and Intangible Assets

We evaluate the carrying value of our goodwill and indefinite-lived intangible assets at least annually on November 30, and evaluate all intangible assets for impairment whenever events or changes in circumstances, including material changes in the fair value of our outstanding common stock, indicate that the carrying amounts of any of those assets may not be recoverable.

In the evaluation of goodwill, we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If so, we perform a quantitative assessment and compare the fair value of the reporting unit to the carrying amount. We determine the reporting unit fair values by using a combination of projections of future discounted cash flows and EBITDA and revenue multiple comparisons with comparable publicly-held companies. If we determined that the fair value of a reporting unit is less than its carrying amount, we would record an impairment loss equal to the excess of the carrying amount of the reporting unit’s goodwill over its fair value.

In the evaluation of indefinite-lived intangible assets, we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an asset is less than the carrying amount. If so, we perform a quantitative assessment and compare the fair value of the asset to its carrying amount. We base our measurement of fair value of indefinite-lived intangible assets, which primarily consist of trade name and trademarks, using the relief-from-royalty method. This method assumes that the trade name and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital. If we determined that the fair value of an indefinite-lived intangible asset is less than its carrying amount, we would record an impairment loss equal to the excess of the carrying amount over its fair value.

As of November 30, 2012 and 2011, the Company had no impairments.

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In the dynamic search and tax preparation software industries, there is significant uncertainty about the future. Unforeseen events such as market disruptions and deterioration of the macroeconomic environment, or internal challenges such as reorganizations, employee and management turnover, operational cash flows, and other trends that could have material negative impacts on our key assumptions in determining fair values, could lead to a decision to impair goodwill in future periods.

At December 31, 2012, we had $230.3 million of goodwill and $19.8 million of indefinite-lived intangible assets and on our balance sheet.

Stock-Based Compensation

We record stock-based compensation expense for equity-based awards granted, including stock options, restricted stock unit grants, market stock unit grants, and a warrant, over the service period of the equity-based award based on the fair value of the award at the date of grant. During 2012, 2011, and 2010, we recognized $13.2 million, $7.7 million, and $13.9 million, respectively, of stock-based compensation expense in continuing operations. For further information regarding our stock plan activities and our methods of accounting for them, see “Note 2: Summary of Significant Accounting Policies,” “Note 7: Stockholders’ Equity,” and “Note 8: Stock-based Compensation Expense” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report.

Calculating stock-based compensation expense relies upon certain assumptions, including the expected term of the stock-based awards, expected stock price volatility, expected interest rate, number and types of stock-based awards, and the pre-vesting forfeiture rate. If we use different assumptions due to changes in our business or other factors, our stock-based compensation expense could vary materially in the future.

The stock based compensation expense for 2011 includes $1.9 million fair value classified to general and administrative expenses for the Warrant issued in August 2011. The acquisition of the TaxACT business on January 31, 2012 fulfilled the Warrant’s remaining performance condition and extended the Warrant’s expiration date. The extension of the Warrant’s term was a modification that resulted in a $4.3 million charge to stock-based compensation expense equal to the increase in the Warrant’s fair value and was recognized in general and administrative expenses in the first quarter of 2012. Additionally, subsequent to the modification, we treated the award as a derivative instrument, and the modification date fair value previously recognized in paid in capital was classified as a current liability. The Warrant’s fair value will be determined each reporting period until settled, with gains or losses related to the change in fair value recorded in other loss (income), net. We recorded a loss in other loss (income), net of $2.3 million from derivative instruments relating to the Warrant in the year ended December 31, 2012. We recorded $6.6 million in total expense relating to the modification and change in fair value for the Warrant for the year ended December 31, 2012.

Income Taxes

We account for income taxes under the asset and liability method, under which deferred tax assets, including net operating loss carryforwards, and liabilities are determined based on temporary differences between the book and tax bases of assets and liabilities. We periodically evaluate the likelihood of the realization of deferred tax assets, and reduce the carrying amount of the deferred tax assets by a valuation allowance to the extent we believe a portion will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income, the carryforward periods available to us for tax reporting purposes, and other relevant factors. There is a wide range of possible judgments relating to the valuation of our deferred tax assets.

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During the year ended December 31, 2012, we provided a full valuation allowance against certain net deferred tax assets. During the fourth quarter of 2011, based on the weight of available evidence, we determined that it was more likely than not that we would realize $18.9 million of our deferred tax assets in the foreseeable future. Accordingly we released the valuation allowance against this portion of our deferred tax assets and retained the valuation allowance against the remainder at year end. During the year ended December 31, 2010, we provided a full valuation allowance against our net deferred tax assets. For further information regarding our income taxes, see “Note 12: Income Taxes” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report.

Recent Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification. We consider the applicability and impact of all recent ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations.

In July 2012, the FASB issued an ASU to simplify how entities test indefinite-lived intangible assets for impairment to improve consistency in impairment testing requirements among long-lived asset categories. The ASU permits an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets for which this assessment concludes it is more likely than not that the fair value is more than its carrying value, this ASU eliminates the requirement to perform quantitative impairment testing as outlined in the previously issued standards. We early adopted the new standard on October 1, 2012. The adoption of this ASU did not materially impact our consolidated condensed financial statements.

Events Subsequent to December 31, 2012

On January 7, 2013, we completed a $4 million equity investment in a privately-owned company.

On February 6, 2013, our board of directors approved a plan whereby we may repurchase up to $50 million of our common stock in open-market transactions during the succeeding 24 month period. Repurchased shares will be retired and resume the status of authorized but unissued shares of common stock.

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Quarterly Results of Operations (Unaudited)

The following table presents a summary of our unaudited consolidated results of operations for the eight quarters ended December 31, 2012. The information for each of these quarters has been prepared on a basis consistent with our annual audited consolidated financial statements. You should read this information in conjunction with our consolidated financial statements and notes thereto. The operating results for any quarter are not necessarily indicative of results for any future period.

	March 31, 2011			June 30, 2011			September 30, 2011			December 31, 2011		March 31, 2012			June 30, 2012			September 30, 2012			December 31, 2012
	(in thousands except per share data)
Revenues	$	51,650		$	54,292		$	56,257		$	66,614	$	115,696		$	100,883		$	92,870		$	97,470
Cost of sales		32,674			36,579			38,755			46,954		59,547			64,227			69,973			73,704
Gross profit		18,976			17,713			17,502			19,660		56,149			36,656			22,897			23,766
Expenses and other income:
Engineering and technology		1,664			1,784			1,806			1,904		2,573			2,448			2,410			2,538
Sales and marketing		6,967			4,902			4,888			4,753		19,443			8,869			7,741			8,085
General and administrative		5,160			4,970			6,513			4,899		11,066			5,356			5,283			5,713
Depreciation		662			552			475			473		535			532			560			492
Amortization of intangible assets		—			—			—			—		2,113			3,168			3,169			3,169
Other loss (income), net		(75	)		(107	)		456			972		1,555			930			5,196			(1,004	)
Total expenses and other income		14,378			12,101			14,138			13,001		37,285			21,303			24,359			18,993
Income (loss) from continuing operations before income taxes		4,598			5,612			3,364			6,659		18,864			15,353			(1,462	)		4,773
Income tax benefit (expense)		(1,702	)		(1,936	)		(1,289	)		16,215		(7,458	)		(5,655	)		(936	)		(953	)

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	March 31, 2011			June 30, 2011			September 30, 2011		December 31, 2011		March 31, 2012		June 30, 2012		September 30, 2012			December 31, 2012
	(in thousands except per share data)
Income (loss) from continuing operations		2,896			3,676			2,075		22,874		11,406		9,698		(2,398	)		3,820
Loss from discontinued operations, net of taxes		(1,573	)		(8,354	)		—		—		—		—		—			—
Net income (loss)	$	1,323		$	(4,678	)	$	2,075	$	22,874	$	11,406	$	9,698	$	(2,398	)	$	3,820
Net income (loss) per share – Basic:
Income (loss) from continuing operations	$	0.08		$	0.10		$	0.05	$	0.58	$	0.29	$	0.24	$	(0.06	)	$	0.09
Loss from discontinued operations		(0.04	)		(0.22	)		—		—		—		—		—			—
Net income (loss) per share – Basic	$	0.04		$	(0.12	)	$	0.05	$	0.58	$	0.29	$	0.24	$	(0.06	)	$	0.09
Weighted average shares outstanding used in computing basic income (loss) per share		36,339			37,422			38,568		39,448		39,692		40,116		40,511			40,789
Net income (loss) per share – Diluted:
Income (loss) from continuing operations	$	0.08		$	0.10		$	0.05	$	0.57	$	0.28	$	0.23	$	(0.06	)	$	0.04
Loss from discontinued operations		(0.04	)		(0.22	)		—		—		—		—		—			—
Net income (loss) per share – Diluted	$	0.04		$	(0.12	)	$	0.05	$	0.57	$	0.28	$	0.23	$	(0.06	)	$	0.04
Weighted average shares outstanding used in computing diluted income (loss) per share		37,084			38,128			39,158		40,074		40,978		41,245		40,511			42,411

50

	March 31, 2011			June 30, 2011			September 30 2011			December 31, 2011			March 31, 2012			June 30, 2012			September 30, 2012			December 31, 2012
Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		63.3			67.4			68.9			70.5			51.5			63.7			75.3			75.6
Gross profit		36.7			32.6			31.1			29.5			48.5			36.3			24.7			24.4
Expenses and other income:
Engineering and technology		3.2			3.3			3.2			2.9			2.2			2.4			2.6			2.5
Sales and marketing		13.5			9.0			8.7			7.1			16.8			8.8			8.3			8.3
General and administrative		10.0			9.2			11.6			7.4			9.6			5.3			5.7			5.9
Depreciation		1.3			1.0			0.8			0.7			0.5			0.5			0.6			0.5
Amortization of intangible assets		—			—			—			—			1.8			3.1			3.4			3.3
Other loss (income), net		(0.1	)		(0.2	)		0.8			1.4			1.3			1.0			5.7			(1.0	)
Total expenses and other loss (income)		27.9			22.3			25.1			19.5			32.2			21.1			26.3			19.5
Income (loss) from continuing operations before income taxes		8.8			10.3			6.0			10.0			16.3			15.2			(1.6	)		4.9
Income tax benefit (expense)		(3.2	)		(3.5	)		(2.3	)		24.3			(6.4	)		(5.6	)		(1.0	)		(1.0	)
Income (loss) from continuing operations		5.6			6.8			3.7			34.3			9.9			9.6			(2.6	)		3.9
Loss from discontinued operations, net of taxes		(3.0	)		(15.4	)		—			—			—			—			—			—
Net income (loss)		2.6	%		(8.6	)%		3.7	%		34.3	%		9.9	%		9.6	%		(2.6	)%		3.9	%

51

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including changes in the market values of our debt investments and interest rates.

Financial market risk.    We do not invest in financial instruments or their derivatives for trading or speculative purposes. By policy, we limit our credit exposure to any one issuer, other than securities issued by the U.S. federal government and its agencies, and do not have any derivative instruments in our investment portfolio. The three primary goals that guide our investment decisions, with the first being the most important, are: preserve capital, maintain ease of conversion into immediate liquidity, and achieve a rate of return over a predetermined benchmark. Our investment portfolio at December 31, 2012 included debt instruments issued by the U.S. federal government and its agencies, publicly-held corporations, municipalities, insured time deposits with commercial banks, and money market funds invested in securities issued by agencies of the U.S. federal government. As of December 31, 2012, we invested exclusively in debt instruments with minimal default risk and maturity dates of less than one year from the end of any of our quarterly accounting periods. We consider the market value, default, and liquidity risks of our investments to be low at December 31, 2012.

Interest rate risk.    As of December 31, 2012, all of the debt securities that we held were fixed-rate earning instruments that carry a degree of interest rate risk. Fixed-rate securities may have their fair market value adversely impacted due to a rise in interest rates. We may suffer losses in principal if we are forced to sell securities that have declined in market value due to changes in interest rates. At December 31, 2012, our cash equivalent balances of $37.7 million were primarily held in money market funds and taxable municipal bonds, and our short-term investment balances of $94.0 million were primarily held in U.S. government securities and taxable municipal bonds. We consider the interest rate risk for our cash equivalent and marketable fixed-income securities held at December 31, 2012 to be low. For further detail on our cash equivalent and short-term investment holdings, please see “Note 6: Fair Value Measurements” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report.

In addition, as of December 31, 2012, we have $74.5 million of term debt outstanding, which carries a degree of interest rate risk. The debt has a floating portion of its interest rate, tied to the London Interbank Offered Rate (“LIBOR”). To maintain compliance with our debt agreement, we entered into an interest rate swap. For further information on our swap and debt outstanding see “Note 10: Debt” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report. That interest rate swap mitigated about half of our risk of increasing LIBOR rates, while the other half remains unhedged. A hypothetical 100 basis point increase in LIBOR on December 31, 2012 would result in a $2.4 million increase in our interest expense until the scheduled maturity date on January 31, 2017, partially offset by an increase in the fair value of our swap of $1.0 million on December 31, 2012.

The following table provides information about our cash equivalent and marketable fixed-income securities, including principal cash flows for 2012 and thereafter and the related weighted average interest rates. The change in fair values during 2012 was approximately $50,000 for our cash equivalent and marketable fixed-income securities, and was recorded in other comprehensive income. “Note 2: Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this report. Principal amounts and weighted average interest rates by expected year of maturity as of December 31, 2012 are as follows (in thousands, except percentages):

	2013				Thereafter			Total				Fair Value
U.S. government securities	$	48,130	0.20	%		—	—	$	48,130	0.20	%	$	48,302
Commercial paper		16,400	0.19	%		—	—		16,400	0.19	%		16,395
Money market funds		13,723	0.00	%		—	—		13,723	0.00	%		13,723
Time deposits		8,414	0.39	%		—	—		8,414	0.39	%		8,414
Taxable municipal bonds		44,274	0.43	%		—	—		44,274	0.43	%		44,837
Cash equivalents and marketable fixed-income securities	$	130,941			$	—		$	130,941			$	131,671

52

ITEM 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

BLUCORA, Inc.	Page
Report of Independent Registered Public Accounting Firm		54
Consolidated Balance Sheets		56
Consolidated Statements of Comprehensive Income		57
Consolidated Statements of Stockholders’ Equity		58
Consolidated Statements of Cash Flows		59
Notes to Consolidated Financial Statements		60

53

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Blucora, Inc.

Bellevue, Washington

We have audited the accompanying consolidated balance sheet of Blucora, Inc. as of December 31, 2012 and the related consolidated statements of comprehensive income, stockholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Blucora, Inc. at December 31, 2012, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Blucora, Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 7, 2012 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Seattle, Washington

March 7, 2013

54

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Blucora, Inc.

Bellevue, Washington

We have audited the accompanying consolidated balance sheet of Blucora, Inc. and subsidiaries (the “Company”) as of December 31, 2011, and the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respect, the financial position of Blucora, Inc. and its subsidiaries as of December 31, 2011, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

Seattle, Washington

March 9, 2012 (March 7, 2013 as to the 2011 and 2010

amounts in Note 13)

55

BLUCORA, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)

	December 31,
	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	68,278		$	81,897
Short-term investments, available-for-sale		94,010			211,654
Accounts receivable, net of allowance of $10 and $10		34,932			25,019
Other receivables		3,942			542
Prepaid expenses and other current assets, net		10,911			1,958
Total current assets		212,073			321,070
Property and equipment, net		7,533			5,277
Goodwill		230,290			44,815
Other intangible assets, net		132,815			1,315
Deferred tax asset, net		—			19,102
Other long-term assets		2,582			3,560
Total assets	$	585,293		$	395,139
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	37,687		$	28,947
Accrued expenses and other current liabilities		13,280			10,249
Deferred revenue		3,157			1
Short-term portion of long-term debt, net of discount of $160 and $0		4,590			—
Derivative instruments		8,974			—
Total current liabilities		67,688			39,197
Long-term liabilities:
Long-term debt, net of discount of $468 and $0		69,278			—
Deferred tax liability, net		29,333			21
Deferred revenue		1,319			—
Other long-term liabilities		2,225			816
Total long-term liabilities		102,155			837
Total liabilities		169,843			40,034
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, par value $.0001—authorized, 900,000,000 shares; issued and outstanding, 40,832,393 and 39,533,570 shares		4			4
Additional paid-in capital		1,392,098			1,353,971
Accumulated deficit		(976,376	)		(998,902	)
Accumulated other comprehensive income (loss)		(276	)		32
Total stockholders’ equity		415,450			355,105
Total liabilities and stockholders’ equity	$	585,293		$	395,139

See notes to consolidated financial statements.

56

BLUCORA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands, except per share data)

	Years ended December 31,
	2012			2011			2010
Revenues	$	406,919		$	228,813		$	214,343
Cost of sales (includes amortization of acquired intangible assets of $7,580, $2,595, and $9,197)		267,451			154,962			138,995
Gross Profit		139,468			73,851			75,348
Expenses and other loss (income):
Engineering and technology		9,969			7,158			8,471
Sales and marketing		44,138			21,510			28,145
General and administrative		27,418			21,542			32,843
Depreciation		2,119			2,162			3,138
Amortization of intangible assets		11,619			—			—
Other loss (income), net		6,677			1,246			(15,247	)
Total expenses and other loss (income)		101,940			53,618			57,350
Income from continuing operations before income taxes		37,528			20,233			17,998
Income tax benefit (expense)		(15,002	)		11,288			(8,725	)
Income from continuing operations		22,526			31,521			9,273
Discontinued operations:
Loss from discontinued operations, net of taxes		—			(2,253	)		(4,593	)
Loss on sale of discontinued operations, net of taxes		—			(7,674	)		—
Net income	$	22,526		$	21,594		$	4,680
Income per share—Basic:
Income from continuing operations	$	0.56		$	0.83		$	0.26
Loss from discontinued operations		—			(0.06	)		(0.13	)
Loss on sale of discontinued operations		—			(0.20	)		—
Basic net income per share	$	0.56		$	0.57		$	0.13
Weighted average shares outstanding used in computing basic income per share		40,279			37,954			35,886
Income per share—Diluted:
Income from continuing operations	$	0.54		$	0.82		$	0.25
Loss from discontinued operations		—			(0.06	)		(0.12	)
Loss on sale of discontinued operations		—			(0.20	)		—
Diluted net income per share	$	0.54		$	0.56		$	0.13
Weighted average shares outstanding used in computing diluted income per share		41,672			38,621			36,829
Other comprehensive income:
Net income	$	22,526		$	21,594		$	4,680
Foreign currency translation adjustment		—			—			(74	)
Reclassification adjustment for realized foreign currency gains, net, included in net income		—			—			(1,362	)
Unrealized gain (loss) on investments, available-for-sale		(16	)		34			94
Unrealized loss on derivative instrument		(266	)		—			—
Reclassification adjustment for realized gains on investments, available-for-sale, included in net income		(26	)		—			—
Other comprehensive income (loss)		(308	)		34			(1,342	)
Comprehensive income	$	22,218		$	21,628		$	3,338

See notes to consolidated financial statements.

57

BLUCORA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended December 31, 2012, 2011, and 2010

(in thousands)

	Common stock					Additional- paid-in capital			Accumulated deficit			Accumulated other comprehensive income			Total
	Shares			Amount
Balance, December 31, 2009		35,391		$	4	$	1,303,667		$	(1,025,176	)	$	1,340		$	279,835
Common stock issued for stock options and restricted stock units		962			—		2,191			—			—			2,191
Common stock issued for employee stock purchase plan		54			—		350			—			—			350
Common stock retired		(318	)		—		(2,099	)		—			—			(2,099	)
Unrealized loss on available-for-sale investments		—			—		—			—			94			94
Foreign currency transaction adjustment		—			—		—			—			(74	)		(74	)
Foreign currency translation adjustment for disposition of foreign subsidiaries		—			—		—			—			(1,362	)		(1,362	)
Tax effect of equity compensation		—			—		7,032			—			—			7,032
Stock-based compensation		—			—		15,010			—			—			15,010
Taxes paid on stock issued for equity awards		—			—		(3,886	)		—			—			(3,886	)
Net income		—			—		—			4,680			—			4,680
Balance, December 31, 2010		36,089		$	4	$	1,322,265		$	(1,020,496	)	$	(2	)	$	301,771
Common stock issued for stock options and restricted stock units		2,627			—		17,121			—			—			17,121
Common stock issued for employee stock purchase plan		54			—		377			—			—			377
Sale of common stock		764			—		7,000			—			—			7,000
Unrealized loss on available-for-sale investments		—			—		—			—			34			34
Tax effect of equity compensation		—			—		1,260			—			—			1,260
Stock-based compensation		—			—		7,734			—			—			7,734
Taxes paid on stock issued for equity awards		—			—		(1,786	)		—			—			(1,786	)
Net income		—			—		—			21,594			—			21,594
Balance, December 31, 2011		39,534		$	4	$	1,353,971		$	(998,902	)	$	32		$	355,105
Common stock issued for stock options and restricted stock units		1,236			—		9,025			—			—			9,025
Common stock issued for employee stock purchase plan		62			—		601			—			—			601
Unrealized loss on available-for-sale investments		—			—		—			—			(42	)		(42	)
Unrealized loss on derivative instrument		—			—		—			—			(266	)		(266	)
Tax effect of equity compensation		—			—		22,693			—			—			22,693
Stock-based compensation		—			—		13,344			—			—			13,344
Taxes paid on stock issued for equity awards		—			—		(1,318	)		—			—			(1,318	)
Reclassification of equity award to liability award		—			—		(6,218	)		—						(6,218	)
Net income		—			—		—			22,526			—			22,526
Balance, December 31, 2012		40,832			4		1,392,098			(976,376	)		(276	)		415,450

See notes to consolidated financial statements.

58

BLUCORA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years ended December 31,
	2012			2011			2010
Operating Activities:
Net income	$	22,526		$	21,594		$	4,680
Loss from discontinued operations		—			2,253			4,593
Loss on sale of discontinued operations		—			7,674			—
Income from continuing operations		22,526			31,521			9,273
Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations:
Stock-based compensation		8,937			5,756			13,918
Warrant-related stock-based compensation		4,286			1,932			—
Depreciation and amortization		23,011			7,456			15,793
Excess tax benefits from stock-based award activity		(23,041	)		(1,260	)		(7,032	)
Earn-out contingent liability adjustments		—			3,000			5,000
Gain on resolution of contingent liability		—			(1,500	)		—
Common stock retired relating to litigation settlement		—			—			(2,099	)
Unrealized amortization of premium or accretion of discount on investments, net		(194	)		(89	)		365
Loss on disposal of assets, net		—			46			1,262
Foreign currency translation gains, net		—			—			(1,436	)
Deferred income taxes		(8,738	)		(18,870	)		19
Amortization of debt origination costs		820			—			—
Accretion of debt discount		325			—			—
Loss on derivative instrument		2,346			—			—
Other		31			(28	)		3
Changes in operating assets and liabilities:
Accounts receivable		(597	)		(5,734	)		9,274
Other receivables		(665	)		643			1,852
Prepaid expenses and other current assets		(5,862	)		284			636
Other long-term assets		1,981			(258	)		(201	)
Accounts payable		(1,600	)		26,253			(3,506	)
Accrued expenses and other current and long-term liabilities		25,265			(23,889	)		6,785
Net cash provided by operating activities		48,831			25,263			49,906
Investing Activities:
Business acquisitions, net of cash acquired		(279,386	)		—			(8,000	)
Purchases of property and equipment		(3,756	)		(2,679	)		(2,894	)
Change in restricted cash		252			649			230
Proceeds from sale of assets		4			—			307
Proceeds from sales of investments		203,493			63,166			52,801
Proceeds from maturities of investments		36,753			160,161			191,976
Purchases of investments		(122,433	)		(336,770	)		(200,493	)
Net cash provided (used) by investing activities		(165,073	)		(115,473	)		33,927
Financing Activities:
Proceeds from loan, net of debt issuance costs of $2,343 and debt discount of $953		96,704			—			—
Repayment of debt		(25,504	)		—			—
Excess tax benefits from stock-based award activity		23,041			1,260			7,032
Proceeds from stock option exercises		9,099			17,049			2,191
Proceeds from issuance of stock through employee stock purchase plan		601			377			350
Proceeds from sale of common stock		—			7,000			—
Repayment of capital lease obligation		—			(221	)		(589	)
Tax payments from shares withheld upon vesting of restricted stock units		(1,318	)		(1,786	)		(4,201	)
Earn-out payments for business acquisitions		—			(423	)		(4,577	)
Net cash provided by financing activities		102,623			23,256			206
Discontinued operations:
Net cash used by operating activities of discontinued operations		—			(6,156	)		(4,034	)
Net cash used by investing activities of discontinued operations		—			(638	)		(8,110	)
Net cash used by discontinued operations		—			(6,794	)		(12,144	)
Net increase (decrease) in cash and cash equivalents		(13,619	)		(73,748	)		71,895
Cash and cash equivalents, beginning of period		81,897			155,645			83,750
Cash and cash equivalents, end of period	$	68,278		$	81,897		$	155,645
Supplemental disclosure of non-cash investing activities:
Liabilities assumed in purchase transaction	$	—		$	—		$	(8,231	)
Purchases of assets through leasehold incentives	$	841		$	—		$	—
Supplemental disclosure of non-cash financing activities:
Contingent earn-out consideration from acquisition	$	—		$	(3,000	)	$	(5,000	)
Cash paid (received) for:
Income tax expense (benefit) for continuing operations	$	3,071		$	809		$	(364	)
Interest expense for continuing operations	$	3,527		$	48		$	24

See notes to consolidated financial statements.

59

BLUCORA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2012, 2011, and 2010

Note 1:    The Company and Basis of Presentation

Description of the business:    Blucora, Inc. (the “Company” or “Blucora”) operates two primary businesses: an internet search business and an online tax preparation business. The Company’s search business, InfoSpace, consists primarily of a B2B offering that provides its search technology, aggregated content, and services to its distribution partners. The search business also offers search services directly to consumers through its internet search properties. The tax preparation business consists of the operations of the TaxACT tax preparation online service and software business that the Company acquired on January 31, 2012.

The InfoSpace search business primarily offers search services through the web properties of its distribution partners, which are generally private-labeled and customized to address the unique requirements of each distribution partner. The search business also distributes aggregated search content through its own websites, such as Dogpile.com and WebCrawler.com. The search business does not generate its own search content, but instead aggregates search content from a number of content providers. Some of these content providers, such as Google and Yahoo!, pay the Company to distribute their content, and those providers are referred to as Search Customers.

On January 31, 2012, the Company acquired TaxACT Holdings, Inc. (“TaxACT Holdings”) and its wholly-owned subsidiary, 2^nd Story Software, Inc. (“2^nd Story”), which operates the TaxACT tax preparation online service and software business. The TaxACT business consists of an online tax preparation service for individuals, tax preparation software for individuals and professional tax preparers, and ancillary services. The majority of the TaxACT business’s revenue is generated by the online service at www.taxact.com. As a highly seasonal business, almost all of the TaxACT revenue is generated in the first four months of the calendar year.

Segments:    As a result of the acquisition of the TaxACT business, the Company has determined that it has two reporting segments: Search and Tax Preparation. The Search segment is the InfoSpace business and the Tax Preparation segment is the TaxACT business. Unless the context indicates otherwise, the Company uses the term “search” to represent search services and uses the term “tax preparation” to represent services and products sold through the TaxACT business (see “Note 13: Segment Information”).

Principles of consolidation:    The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions have been eliminated.

Basis of presentation:    On June 22, 2011, the Company sold its Mercantila e-commerce business to Zoo Stores, Inc., and the results of operations from the Mercantila business are reflected as discontinued operations for all periods presented.

Note 2:    Summary of Significant Accounting Policies

Cash equivalents:    The Company considers all highly liquid debt instruments with an original maturity of ninety days or less at date of acquisition to be cash equivalents, which are carried at fair value.

Accounts receivable:    Accounts receivable are stated at amounts due from customers net of an allowance for doubtful accounts.

Short-term investments:    The Company principally invests its available cash in investment-grade income securities, AAA-rated money market funds, and insured time deposits with commercial banks. Such investments are included in “Cash and cash equivalents” and “Short-term investments, available for sale,” on the consolidated

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Years Ended December 31, 2012, 2011, and 2010

balance sheets, and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive income (loss)” on the consolidated balance sheets.

Property and equipment:    Property and equipment are stated at cost. Depreciation is computed under the straight-line method over the following estimated useful lives:

Computer equipment and software	3 years
Data center servers	3 years
Internally developed software	15 months — 3 years
Office equipment	7 years
Office furniture	7 years
Leasehold improvements	Shorter of lease term or economic life

The Company capitalizes certain internal-use software development costs, consisting primarily of employee salaries and benefits allocated on a project or product basis. The Company capitalized $952,000, $1.2 million, and $1.0 million of internal-use software costs in the years ended December 31, 2012, 2011, and 2010, respectively.

Business combinations and intangible assets including goodwill:    The Company accounts for business combinations using the acquisition method and, accordingly, the identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values. Goodwill is calculated as the excess of the purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

Valuation of goodwill and intangible assets:    The Company evaluates goodwill and indefinite-lived intangible assets at least annually, and evaluates all intangible assets for impairment whenever events or changes in circumstances, including material changes in the fair value of the Company’s outstanding common stock, indicate that the carrying amount of the Company’s assets might not be recoverable.

The Company tests for goodwill impairment at the reporting unit level. In the evaluation of goodwill, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If so, the Company performs a quantitative assessment and compares the fair value of the reporting unit to the carrying amount. The reporting unit fair values are determined for each reporting unit by using a combination of projections of future discounted cash flows, and EBITDA and revenue multiple comparisons with comparable publicly-held companies. If the fair value of a reporting unit was determined to be less than its carrying amount, the Company would record an impairment loss equal to the excess of the carrying amount of the reporting unit’s goodwill over its fair value.

In the evaluation of indefinite-lived intangible assets, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of an asset is less than the carrying amount. If so, the Company performs a quantitative assessment and compares the fair value of the asset to its carrying amount. The Company bases its measurement of fair value of indefinite-lived intangible assets, which primarily consist of trade name and trademarks, using the relief-from-royalty method. This method assumes that the trade name and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital.

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Years Ended December 31, 2012, 2011, and 2010

If the fair value of an indefinite-lived intangible asset was determined to be less than its carrying amount, the Company would record an impairment loss equal to the excess of the carrying amount of the reporting unit’s goodwill over its fair value.

Other investments:    Included in other long-term assets are the Company’s investment in equity investments of privately-held companies for business and strategic purposes. The Company currently holds equity securities and warrants to purchase equity securities in companies whose securities are not publicly traded. The Company’s equity investments were carried at a fair value of $0 at December 31, 2012 and 2011.

Revenue recognition:    The Company recognizes revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists, the Company has delivered the product or performed the service, the fee is fixed or determinable, and collectability is probable. Determining whether and when these criteria have been satisfied involves exercising judgment and using estimates and assumptions that can have an impact on the timing and amount of revenue that the Company recognizes.

The Company also evaluates whether revenue should be presented on a gross basis, which is the amount that a customer pays for the service or product, or on a net basis, which is the customer payment less amounts the Company pays to suppliers. In making that evaluation, the Company considers indicators such as whether the Company is the primary obligor in the arrangement and assumes the risks and rewards as a principal in the customer transaction, including the credit risk, and whether the Company can set the sales price and select suppliers. The accounting principles generally accepted in the United States of America (“GAAP”) clearly indicates that the evaluations of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity.

Search services revenue recognition:    The Company’s revenues are generated primarily from its web search services. The Company generates search services revenue when an end user of such services clicks on a paid search link provided by a Search Customer and displayed on a distribution partners’ web property or on one of the Company’s owned and operated web properties. The Search Customer that provided the paid search link receives a fee from the advertiser who paid for the click and the Search Customer pays the Company a portion of that fee. Revenue is recognized in the period in which the services are provided (e.g., a paid search occurs) and is based on the amounts earned by and ultimately remitted to the Company. This revenue is recorded in the Search segment.

Under the Company’s agreements with its Search Customers and its distribution partners, the Company is the primary obligor, separately negotiates each revenue or unit pricing contract independent of any revenue sharing arrangements, and assumes the credit risk for amounts invoiced to its Search Customers. For search services, the Company determines the paid search results, content, and information directed to its owned and operated websites and its distribution partners’ web properties.

The Company earns revenue from its Search Customers by providing paid search results generated from its owned and operated web properties and from its distribution partners’ web properties based on separately negotiated and agreed-upon terms with each distribution partner. Consequently, the Company records search services revenue on a gross basis.

Tax preparation revenue recognition:    The Company derives revenue from the sale of tax preparation online services, ancillary service offerings, tax preparation packaged software products, and multiple element arrangements that may include a combination of these items. Ancillary service offerings include tax preparation

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Years Ended December 31, 2012, 2011, and 2010

support services, data archive services, bank or reloadable pre-paid debit card services, and e-filing services. This revenue is recorded in the Tax Preparation segment.

The Company’s tax preparation segment service revenue consists primarily of hosted tax preparation online services, tax preparation support services, data archive services, and e-filing services. The Company recognizes revenue from these services as the services are performed and the four revenue recognition criteria described above are met.

The Company recognizes revenue from the sale of its packaged software products when legal title transfers. This is generally when its customers download products from the Web or when the products ship.

The bank or reloadable prepaid debit card services are offered to taxpayers as an option to receive their tax refunds in the form of a prepaid bank card or to have the fees for the product and/or services purchased by the customers deducted from their refunds. Revenue for this fee is recognized when the four revenue recognition criteria described above are met; for some arrangements that is upon filing and for other arrangements that is upon cash receipt.

For products and/or services that consist of multiple elements, the Company must: (1) determine whether and when each element has been delivered; (2) determine the fair value of each element using the selling price hierarchy of vendor-specific objective evidence (“VSOE”) of fair value if available, third-party evidence (“TPE”) of fair value if VSOE is not available, and estimated selling price (“ESP”) if neither VSOE nor TPE is available; and (3) allocate the total price among the various elements based on the relative selling price method. Once the Company has allocated the total price among the various elements, it recognizes revenue when the revenue recognition criteria described above are met for each element.

VSOE generally exists when the Company sells the deliverable separately and is normally able to establish VSOE for all deliverables in these multiple element arrangements; however, in certain limited instances VSOE cannot be established. This may be because the Company infrequently sells each element separately, or has a limited sales history. When VSOE cannot be established the Company attempts to establish a selling price for each element based on TPE. TPE is determined based on competitor prices for similar deliverables when sold separately. When the Company is unable to establish selling price using VSOE or TPE, it uses ESP in its allocation of arrangement consideration. ESP is the estimated price at which the Company would sell a product or service if it were sold on a stand-alone basis. The Company determines ESP for a product or service by considering multiple factors including, but not limited to, historical stand-alone sales, pricing practices, market conditions, competitive landscape, internal costs, and gross margin objectives.

In some situations, the Company receives advance payments from its customers. The Company defers revenue associated with these advance payments and recognizes the allocated consideration for each element when the Company ships the products or performs the services, as appropriate. Advance payments related to data archive services are deferred and recognized over the related contractual term.

Cost of sales:    Cost of sales consists of costs related to revenue sharing arrangements with the Company’s distribution partners, usage-based content fees, certain costs associated with the operation of the Company’s data centers that serve its search and tax preparation businesses, including amortization of intangible assets, depreciation, personnel expenses (which include salaries, benefits and other employee related costs, and stock-based compensation expense), bandwidth costs, customer payment processing fees, bank service fees, and royalties.

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Years Ended December 31, 2012, 2011, and 2010

Engineering and technology expenses:    Engineering and technology expenses are associated with the research, development, support, and ongoing enhancements of the Company’s offerings, including personnel expenses (which include salaries, stock-based compensation expense, and benefits and other employee related costs), software support and maintenance, and professional service fees.

Sales and marketing expenses:    Sales and marketing expenses consist primarily of marketing expenses associated with the Company’s tax preparation business (which includes the following channels: television, radio, online banner ads, internet search, and email), the Company’s owned and operated web properties (which consist of traffic acquisition, including online direct marketing initiatives, which involve the purchase of online advertisements that drive traffic to an owned and operated website, agency fees, brand promotion expense, and market research expense), personnel costs (which include salaries, stock-based compensation expense, and benefits and other employee related costs), and the cost of temporary help and contractors to augment the Company’s staffing.

Costs for advertising are recorded as expense when the advertisement appears or electronic impressions are recorded. Advertising expense totaled $31.8 million, $14.4 million, and $18.5 million for the years ended December 31, 2012, 2011, and 2010, respectively. Prepaid advertising costs were $2.5 million at December 31, 2012.

General and administrative expenses:    General and administrative expenses consist primarily of personnel expenses (which include salaries, stock-based compensation expense, and benefits and other employee related costs), professional service fees (which include legal, audit, and tax fees), general business development and management expenses, occupancy and general office expenses, taxes, and insurance expenses.

Stock-based compensation:    The Company measures and recognizes its compensation expense for all stock-based payment awards made to employees and directors, including stock option, restricted stock unit grants, and market stock unit grants and purchases of stock made pursuant to the Company’s 1998 Employee Stock Purchase Plan (the “ESPP”), based on estimated fair values. Expense is recognized on a straight-line basis over the requisite vesting period for each separately vesting portion of the award, adjusted for an estimated forfeiture rate.

To determine the stock-based compensation expense that was recognized with respect to restricted stock units (“RSU”), market stock units (“MSU”), which are a form of share price performance-based restricted stock units granted under the Company’s 2011 long-term executive compensation plan, employee and non-employee director stock options, and the Warrant issued to Cambridge Information Group I LLC (“CIG”), the Company used the fair value at date of grant for RSUs, the Monte Carlo valuation method for the MSU grants, and the Black-Scholes-Merton option-pricing model for stock option grants and the Warrant. An option award to a non-employee was valued by the Black-Scholes-Merton method upon the completion of a qualified business acquisition by the Company in 2012. For each of the above awards, the value of the portion that is ultimately expected to vest is recognized as expense over the requisite service periods in the accompanying consolidated financial statements for the years ended December 31, 2012, 2011, and 2010.

Debt Issuance Costs and Debt Discount:    Debt issuance costs and debt discounts are deferred and amortized as interest expense under the effective interest method over the contractual term of the related debt, adjusted for prepayments.

Hedging:    The Company uses a derivative financial instrument in the form of an interest rate swap agreement for the purpose of minimizing exposure to changes in interest rates. This swap agreement is accounted

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Years Ended December 31, 2012, 2011, and 2010

for as a cash flow hedge and changes in the fair value of the hedge instrument are included in other comprehensive income while the hedge is perfectly effective, and any ineffectiveness would be recorded to other income (loss), net in the Statement of operations and comprehensive income.

Employee benefit plan:    The Company has a 401(k) savings plan covering its employees. Eligible employees may contribute through payroll deductions. The Company may match the employees’ 401(k) contributions at the discretion of the Company’s Board of Directors. Pursuant to a continuing resolution, in 2012, 2011, and 2010, the Company has matched a portion of the 401(k) contributions made by its employees. The amount contributed by the Company is equal to a maximum of 50% of employee contributions up to a maximum of 3% of an employee’s salary. For the years ended December 31, 2012, 2011, and 2010, the Company contributed $374,000, $288,000, and $309,000, respectively, for employees.

Other loss (income), net:     Other loss (income), net for the years ended December 31, 2012, 2011, and 2010, consists of the following (in thousands):

	2012			2011			2010
Interest expense	$	3,522		$	—		$	—
Interest income		(131	)		(369	)		(331	)
Amortization of debt issuance costs		820			—			—
Accretion of debt discount		325			—			—
Loss on derivative instrument		2,346			—			—
Gain on contingency resolution		—			(1,500	)		—
Increase in fair value of earn-out contingent liability		—			3,000			5,000
Foreign currency exchange loss (gain), net		48			20			(1,335	)
Litigation settlement gain		—			—			(18,965	)
Loss (gain) on disposal of assets		(1	)		46			1,014
Other		(252	)		49			(630	)
Other loss (income), net	$	6,677		$	1,246		$	(15,247	)

In 2012, the Company incurred interest expenses of $3.5 million and a loss on a derivative instrument of $2.3 million. The financial performance of Make The Web Better, acquired on April 1, 2010, was greater than expected; as a consequence, the fair value of the related contingent consideration increased and additional charges of $3.0 million and $5.0 million were recorded in the years ended December 31, 2011 and 2010, respectively. Also in 2011, the Company recorded a gain of $1.5 million related to the resolution of a contingent liability. In 2010, the Company recognized a $19.0 million gain related to a litigation settlement and recorded $1.4 million in recognition of foreign currency translation gains, primarily related to the sale or substantial liquidation of wholly-owned subsidiaries.

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Years Ended December 31, 2012, 2011, and 2010

Loss from discontinued operations and loss on sale of discontinued operations:    On June 22, 2011, the Company sold its Mercantila e-commerce business to Zoo Stores, Inc. The results of operations from the business are reflected as discontinued operations for all periods presented. Revenue, loss before taxes, income tax benefit, and loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes, for the year ended December 31, 2011 are presented below (in thousands):

	Years ended December 31,
	2011			2010
Revenue from discontinued operations	$	16,894		$	32,492
Loss from discontinued operations before taxes	$	(3,506	)	$	(5,908	)
Income tax benefit		1,253			1,315
Loss from discontinued operations, net of taxes	$	(2,253	)	$	(4,593	)
Loss on sale of discontinued operations, net of an income tax benefit of $5,092	$	(7,674	)	$	—

Loss from discontinued operations includes previously unallocated depreciation, amortization, stock-based compensation expense, income taxes, and other corporate expenses that were attributable to the e-commerce business.

Net income per share: Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares outstanding plus the number of potentially dilutive shares outstanding during the period. Potentially dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options, a warrant issued in August 2011 (the “Warrant”), and unvested RSUs and MSUs, using the treasury stock method. Performance-based stock options for which performance has not yet been achieved are excluded from the calculation of potentially dilutive shares. Potentially dilutive shares are excluded from the computation of earnings per share if their effect is antidilutive. The treasury stock method calculates the dilutive effect for awards with an exercise price less than the average stock price during the period presented (in thousands):

	Years ended December 31,
In thousands	2012		2011		2010
Weighted average common shares outstanding, basic		40,279		37,954		35,886
Dilutive stock options, RSUs, MSUs, and the Warrant		1,393		667		943
Weighted average common shares outstanding, diluted		41,672		38,621		36,829
Antidilutive awards with an exercise price less than the average price during the applicable period excluded from dilutive share calculation		200		876		1,199
Outstanding awards with an exercise price greater than the average price during the applicable period not included in dilutive share calculation		804		2,927		4,282
Outstanding awards with performance conditions not completed during the applicable period not included in dilutive share calculation		168		—		—

Other comprehensive income:    Comprehensive income includes net income, plus items that are recorded directly to stockholders’ equity, including foreign currency translation adjustments and the net change in unrealized gains and losses on cash equivalents, short-term and long-term investments. Included in the net change in unrealized gains and losses are realized gains or losses included in the determination of net income in

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Years Ended December 31, 2012, 2011, and 2010

the period realized. Amounts reclassified out of other comprehensive income into net income were determined on the basis of specific identification.

The following table provides information about activity in other comprehensive income during the period from January 1, 2010 to December 31, 2012 (in thousands):

	Foreign currency translation adjustment			Unrealized gain (loss) on investment			Unrealized loss on derivative instrument			Total
Balance as of January 1, 2010	$	1,436		$	(96	)		—		$	1,340
Other comprehensive loss		(1,436	)		94			—			(1,342	)
Balance as of December 31, 2010		—			(2	)		—			(2	)
Other comprehensive income		—			34			—			34
Balance as of December 31, 2011		—			32			—			32
Other comprehensive loss		—			(42	)		(266	)		(308	)
Balance as of December 31, 2012	$	—		$	(10	)	$	(266	)	$	(276	)

Foreign currencies:    Foreign subsidiary financial statements are denominated in foreign currencies and are translated at the exchange rate on the balance sheet date. Realized gains and losses on foreign currency transactions are included in other loss (income), net. In 2010, substantially all of Blucora’s foreign subsidiaries were sold or liquidated.

Concentration of credit risk:    Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, short-term investments, and trade receivables. These instruments are generally unsecured and uninsured. The Company places its cash equivalents and investments with major financial institutions. Accounts receivable are typically unsecured and are derived from revenues earned from Search Customers primarily located in the United States operating in a variety of industries and geographic areas. The Company performs ongoing credit evaluations of its Search Customers and maintains allowances for potential credit losses.

The Company attempts to manage exposure to counterparty credit risk by only entering into agreements with major financial institutions which are expected to be able to fully perform under the terms of the agreement.

Revenue concentration:    The Company derives a significant portion of its revenues from two Search Customers. Revenues from the top two Search Customers represented 84%, 99%, and 97% of revenues in each of the years ended December 31, 2012, 2011, and 2010, respectively. At December 31, 2012 and 2011, two Search Customers accounted for more than 90% of the Company’s accounts receivable balance.

Geographic revenue information, as determined by the location of the customer, is presented below (in thousands):

	Years ended December 31,
	2012		2011		2010
United States	$	402,656	$	226,229	$	209,029
International		4,263		2,584		5,314
Total	$	406,919	$	228,813	$	214,343

Fair value of financial instruments:    The Company does not measure the fair value of any financial instrument other than cash equivalents, available-for-sale investments, derivative instruments, and its investment

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Years Ended December 31, 2012, 2011, and 2010

in a privately-held company. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying values of other financial instruments (accounts receivable, other receivables, and accounts payable), other current assets and accrued expenses, and other current liabilities are not recorded at fair value but approximate fair values primarily due to their short-term nature.

If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then the Company uses quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. This pricing methodology applies to the Company’s Level 2 instruments such as corporate notes and bonds, agency securities, municipal bonds, money market funds, and insured time deposits. Level 3 instruments are valued using internally developed models with unobservable inputs, which will vary based on the instrument. The Company values the Warrant, classified within Level 3 by using the Black-Scholes valuation model which has significant unobservable marketable inputs; those unobservable inputs are based on historical and observable information, primarily the Company’s stock price, and are not expected to vary materially unless the stock price varies materially. If the Company’s stock price at December 31, 2012 had been twenty percent higher at that date, the fair value of the Warrant would have been thirty-two percent higher, resulting in an increase in the Company’s loss on derivative instrument for the year ended December 31, 2012, of $2.7 million.

The Company’s Level 2 investments are priced based on similar investments or assets without applying significant adjustments. In addition, all of the Company’s Level 2 investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments.

Income taxes:    The Company accounts for income taxes under the asset and liability method, under which deferred tax assets, including net operating loss carryforwards, and liabilities are determined based on temporary differences between the book and tax bases of assets and liabilities. The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent the Company believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including the recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income, the carryforward periods available for tax reporting purposes, and other relevant factors. There is a wide range of possible judgments relating to the valuation of the Company’s deferred tax assets.

During the year ended December 31, 2012, the Company provided a valuation allowance against certain net deferred tax assets. During the year ended December 31, 2011, based on the weight of available evidence, the Company determined that it was more likely than not that it would realize $18.9 million of its deferred tax assets in the foreseeable future. Accordingly the Company released the valuation allowance against this portion of its deferred tax assets and retained the valuation allowance against the remainder at year end. During the year ended December 31, 2010, the Company provided a full valuation allowance against its net deferred tax assets.

Lease accounting:    The Company leases office space and computer equipment used in its data centers. These leases are classified as either capital leases or operating leases, as appropriate. The amortization of assets under capital leases is included in depreciation expense. For the years ended December 31, 2012, 2011, and 2010, $0, $188,000, and $537,000, respectively, of amortization for assets acquired under capital leases was included in depreciation expense.

Use of estimates:    The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates include those used for impairment of goodwill and other intangible assets, useful lives of other intangible assets, purchase accounting, valuation of investments, valuation

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Years Ended December 31, 2012, 2011, and 2010

of the Warrant and interest rate swap derivatives, revenue recognition, the estimated allowance for sales returns and doubtful accounts, internally developed software, accrued contingencies, stock option valuation, and valuation allowance for deferred tax assets. Actual amounts may differ from estimates.

Recent accounting pronouncements:    Changes to GAAP are established by the FASB in the form of ASUs to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all recent ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s consolidated financial position and results of operations.

In July 2012, the FASB issued an ASU to simplify how entities test indefinite-lived intangible assets for impairment to improve consistency in impairment testing requirements among long-lived asset categories. The ASU permits an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets for which this assessment concludes it is more likely than not that the fair value is more than its carrying value, this ASU eliminates the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The Company early adopted the new standard on October 1, 2012. The adoption of this ASU did not materially impact the Company’s consolidated condensed financial statements.

Note 3:    Business Combinations

Presented below is information regarding the Company’s business combinations during the years ended December 31, 2012, 2011, and 2010, including information about the purchase price accounting from these transactions.

TaxACT Holdings.    On January 31, 2012, the Company acquired all of the outstanding stock of TaxACT Holdings and its wholly-owned subsidiary, 2^nd Story, which operates the TaxACT tax preparation online service and software business. The Company paid $287.5 million in cash for this acquisition, less certain transaction expenses, and subject to certain specified working capital adjustments. The acquisition of the TaxACT business was funded from the Company’s cash reserves and from the net proceeds of a $105 million credit facility (of which $100 million was drawn at the transaction’s close). See Note 10 for further discussion of the credit facility. The acquisition was intended to diversify the Company’s business model and expand its operations. Under the acquisition method, assets acquired and liabilities assumed are recorded at their fair values as of the acquisition date. Any excess of the purchase price over the fair values of the net assets acquired is recorded as goodwill. Final valuations are as follows (in thousands):

	Fair Value
Tangible assets acquired	$	22,465
Liabilities assumed		17,759
Identifiable net assets acquired	$	4,706
Fair value adjustments to intangible assets
Customer relationships	$	101,400
Proprietary technology		29,800
Trade name		19,499
Fair value of intangible assets acquired	$	150,699
Purchase price:
Cash paid	$	287,500
Less identifiable net assets acquired		(4,706	)
Plus deferred tax liability related to intangible assets		53,380
Less fair value of intangible assets acquired		(150,699	)
Excess of purchase price over net assets acquired, allocated to goodwill	$	185,475

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Years Ended December 31, 2012, 2011, and 2010

The Company recorded acquisition costs of $1.1 million in 2012 and $305,000 in 2011, which were recognized in general and administrative expenses. The Company incurred $2.3 million of debt origination costs related to the credit facility used to help fund the acquisition, which the Company plans to amortize to interest expense over the term of the credit facility. The Company did not assume any equity awards or plans from 2^nd Story. Following the completion of the acquisition, the Company issued 380,000 options and 167,000 RSUs to 2^nd Story’s employees as an incentive for future services and at levels consistent with other employee awards.

The Company’s estimates of the economic lives of the acquired assets are eight years for the customer relationships, four years for the proprietary technology, approximately three years for the personal property assets, and the trade name is estimated to have an indefinite-life. The Company plans to amortize the assets over their respective estimated lives.

The goodwill arising from the TaxACT acquisition consists largely of the ability to attract new customers and develop new technologies post acquisition, which do not qualify for separate recognition. The Company determined that no portion of the goodwill arising from the TaxACT acquisition will be deductible for income tax purposes, except in one state where the Company made an election to recognize the gain on a deemed asset acquisition. The goodwill and the trade name will be tested for impairment at least annually.

The gross contractual amount of trade accounts receivable acquired was $9.4 million, all of which has been collected. The Company recorded a fair value of $304,000 for deferred revenue associated with the TaxACT business’s data storage and retrieval service, which 2^nd Story, prior to the acquisition, had recorded at $5.1 million as of the acquisition date.

Since the acquisition date, the Company has included in its consolidated results the financial results of operations of the TaxACT business, which included total revenue of $62.1 million and a contribution to the Tax Preparation segment income of $30.1 million.

Pro Forma Financial Information of Acquisitions (unaudited)

The financial information in the table below summarizes the combined results of operations of Blucora and 2^nd Story on a pro forma basis, as though they had been combined as of the beginning of each period presented. This pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition occurred at the beginning of each period presented. The pro forma revenues and income from continuing operations for the years ended December 31, 2012 and 2011 combines the historical results of operations of the Company and 2^nd Story for the year ended December 31, 2011, and combines the historical results of the Company for the year ended December 31, 2012 with the results of 2^nd Story for the month ended January 31, 2012.

The following amounts are in thousands:

	Year ended December 31,
	2012		2011
Revenues	$	427,809	$	307,594
Income from continuing operations	$	26,819	$	11,251

Mercantila

On May 10, 2010, the Company acquired certain assets from Mercantila, Inc., an e-commerce company. The acquisition was intended to diversify the Company’s business model and expand its operations into the online retail industry. On June 22, 2011, the Company sold its Mercantila e-commerce business to Zoo Stores, Inc., and the results of operations from the Mercantila business are reflected as discontinued operations for all

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Years Ended December 31, 2012, 2011, and 2010

periods presented in the Company’s Annual Report on Form 10-K. Nikhil Behl, a former Named Executive Officer of Blucora, owned a majority interest in Zoo Stores at the time of the transaction, and Mr. Behl ceased to be an officer of, or otherwise affiliated with, Blucora upon the closing of the transaction.

Since the acquisition date, the Company has included in its consolidated results the financial results of the operation of its acquired Mercantila, Inc. assets, which included $49.4 million of revenue, a contribution to loss from discontinued operations of $6.8 million, and a loss on sale of $7.7 million.

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at their date of acquisition as follows (in thousands):

Tangible assets acquired	$	2,234
Liabilities assumed		(8,231	)
Identifiable net liabilities assumed	$	(5,997	)
Fair value adjustments to intangible assets
License for use of developed core technology	$	893
Internet domain names		452
Customer relationships		39
Fair value of net liabilities assumed	$	(4,613	)
Purchase price:
Cash paid	$	7,800
Plus identifiable net liabilities assumed		5,997
Less fair value of intangible assets acquired		(1,384	)
Excess of purchase price over net assets acquired, allocated to goodwill	$	12,413

The Company expected that goodwill would be deductible for tax purposes.

The customer relationships had estimated useful lives of 12 months and were amortized over their lives under the straight-line method. The developed core technology had an estimated useful life of 24 months, after which the Company assumed that substantial modifications and enhancements would be required for the technology to remain competitive. The license was amortized over its life proportionately to the estimated total revenue to be generated through the acquired technology. The Company determined that the acquired Internet domain names had indefinite lives, and, therefore, these intangible assets were not amortized to expense.

Direct transaction costs of approximately $337,000 include estimated investment banking and legal fees directly related to the acquisition and the Company recorded a charge to general and administrative expenses in the year ended December 31, 2010.

Make The Web Better

On April 1, 2010, the Company purchased assets consisting of web properties and licenses for content and technology from Make The Web Better, a search distribution partner and privately-held developer of online products used on social networking sites, for $13.0 million. The purchase was intended to increase profitability and increase the proportion of the search services revenue generated through the Company’s owned and operated properties. The purchase consideration included an initial cash payment of $8.0 million, with the remaining consideration payable in cash and contingent on future financial performance.

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Years Ended December 31, 2012, 2011, and 2010

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at their date of acquisition as follows (in thousands):

Installed code base technology	$	12,650
License for use of developed core technology		235
Prepaid hosting services		115
Identifiable assets acquired	$	13,000
Purchase price:
Cash paid	$	8,000
Contingent consideration		5,000
Purchase price	$	13,000
Less identifiable assets acquired		(13,000	)
Excess of purchase price over net assets acquired, allocated to goodwill	$	—

The installed code base technology, technology license, and prepaid hosting services have estimated useful lives of 57 months, 33 months, and five months, respectively. The installed code base technology and the license are amortized proportionately over their lives based on the estimated total revenue to be generated through the acquired technology, adjusted for revisions in the estimated total revenue expected to be generated. The prepaid hosting services is amortized over its life under the straight-line method. The Company expects that any consideration paid in excess of the original $5.0 million contingent consideration will be deductible for tax purposes.

Revenue generated from search traffic on the Make The Web Better site was $3.1 million in 2012, $8.2 million in 2011, and $16.4 million in 2010. Other than the amortization expense of $752,000 in 2012, $2.6 million in 2011, and $9.0 million in 2010 associated with the recognized code base intangible asset, direct operating costs associated with the revenue generated by this site are not significant. Additionally, see Note 2 for costs related to a contingent consideration arrangement with the former owners of Make The Web Better.

Note 4:    Goodwill and Other Intangible Assets

The following table presents the changes in goodwill by reportable segment during the period from January 1, 2011 to December 31, 2012 (in thousands):

	Search		Tax Preparation		Total
Goodwill as of January 1, 2011 and 2012	$	44,815	$	—	$	44,815
Additions		—		185,475		185,475
Goodwill as of December 31, 2012	$	44,815	$	185,475	$	230,290

In 2012, the additions to goodwill relate to the Company’s acquisition of TaxACT as described in Note 3.

Impairment Assessments:    The Company performs its annual assessment of possible impairment of goodwill and other indefinite-lived intangible assets as of November 30, or more frequently if events and circumstances indicate that impairment may have occurred. As of November 30, 2012 and 2011, the Company had no impairments.

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Years Ended December 31, 2012, 2011, and 2010

Intangible assets other than goodwill consisted of the following (in thousands):

	December 31, 2012							December 31, 2011
	Gross carrying amount		Accumulated amortization			Other intangible assets, net		Gross carrying amount		Accumulated amortization			Other intangible assets, net
Definite-lived intangible assets:
Installed code base technology	$	12,650	$	(12,369	)	$	281	$	12,650	$	(11,618	)	$	1,032
Core technology		1,085		(1,085	)		—		1,085		(1,085	)		—
Tax Preparation customer relationships		101,400		(11,619	)		89,781		—		—			—
Tax Preparation proprietary technology		29,800		(6,829	)		22,971		—		—			—
Other		6,667		(6,667	)		—		6,667		(6,667	)		—
Total definite-lived intangible assets		151,602		(38,569	)		113,033		20,402		(19,370	)		1,032
Indefinite-lived intangible assets		19,782		—			19,782		283		—			283
Total	$	171,384	$	(38,569	)	$	132,815	$	20,685	$	(19,370	)	$	1,315

Indefinite-lived intangible assets other than goodwill relate primarily to trade names associated with the 2012 acquisition of TaxACT.

The Company amortizes definite-lived intangible assets over their expected useful lives under the straight-line method, except for the installed code base technology, which is amortized proportional to expected revenue. Information about expected amortization of definite-lived intangible assets held as of December 31, 2012 in the next five years is presented in the below table (in thousands):

	2013		2014		2015		2016		2017		Total
Statement of operations location of amortization:
Cost of sales	$	7,668	$	7,513	$	7,450	$	621	$	—	$	23,252
Amortization of intangible assets		12,675		12,675		12,675		12,675		12,675		63,375
Total	$	20,343	$	20,188	$	20,125	$	13,296	$	12,675	$	86,627

The weighted average amortization period for definite-lived intangible assets is 75 months.

Note 5:    Balance Sheet Components

Short-term investments classified as available-for-sale at December 31, 2012 and 2011 consisted of the following, stated at fair value (in thousands):

	December 31,
	2012		2011
U.S. government securities	$	41,402	$	162,170
Taxable municipal bonds		36,043		—
Commercial paper		9,396		49,484
Time deposits		7,169		—
Total short-term investments available-for-sale	$	94,010	$	211,654

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

Maturity information was as follows for investments classified as available-for-sale at December 31, 2012 (in thousands):

	Amortized Cost		Gross unrealized gains		Gross unrealized losses			Fair value
Within one year	$	94,029	$	36	$	(55	)	$	94,010
Greater than one year		—		—		—			—
Total	$	94,029	$	36	$	(55	)	$	94,010

Maturity information was as follows for investments classified as available-for-sale at December 31, 2011 (in thousands):

	Amortized Cost		Gross unrealized gains		Gross unrealized losses			Fair value
Within one year	$	211,622	$	34	$	(2	)	$	211,654
Greater than one year		—		—		—			—
Total	$	211,622	$	34	$	(2	)	$	211,654

Prepaid expenses and other current assets, net consisted of the following as of December 31, 2012 and 2011 (in thousands):

	December 31,
	2012		2011
Prepaid expenses and other current assets, net
Prepaid expenses	$	5,268	$	1,878
Other current assets, net		5,643		80
Total prepaid expenses and other current assets, net	$	10,911	$	1,958

Property and equipment consisted of the following as of December 31, 2012 and 2011 (in thousands):

	December 31,
	2012			2011
Property and equipment
Computer equipment and data center	$	13,262		$	10,712
Purchased software		5,046			4,594
Internally developed software		4,691			3,972
Office equipment		1,758			1,665
Office furniture		612			462
Leasehold improvements and other		3,400			3,133
		28,769			24,538
Accumulated depreciation		(22,636	)		(19,261	)
		6,133			5,277
Capital projects in progress		1,400			—
Total property and equipment	$	7,533		$	5,277

At December 31, 2012 and 2011, unamortized internally-developed software was $1.4 million and $1.6 million, respectively, and for the years ended December 31, 2012 and 2011, the Company recorded depreciation expense for internally-developed software of $947,000 and $877,000, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

Accrued expenses and other current liabilities consisted of the following as of December 31, 2012 and 2011 (in thousands):

	December 31,
	2012		2011
Accrued expenses and other current liabilities
Salaries and related expenses	$	5,185	$	4,014
Accrued content costs		3,017		1,141
Business acquisition contingent liability		1,101		3,184
Other		3,977		1,910
Total accrued expenses and other current liabilities	$	13,280	$	10,249

Note 6:    Fair Value Measurements

The Company measures its investments and derivative instruments at fair value under GAAP. The fair value hierarchy of the Company’s financial assets and liabilities carried at fair value and measured on a recurring basis is as follows (in thousands):

				Fair value measurements at the re porting date using
	December 31, 2012			Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Assets
Cash equivalents:
U.S. government securities	$	6,900		$	—	$	6,900		$	—
Money market and other funds		13,723			—		13,723			—
Commercial paper		6,999			—		6,999			—
Time deposits		1,245			—		1,245			—
Taxable municipal bonds		8,794			—		8,794			—
Total cash equivalents		37,661			—		37,661			—
Available-for-sale securities:
U.S. government securities		41,402			—		41,402			—
Commercial paper		9,396			—		9,396			—
Time deposits		7,169			—		7,169			—
Taxable municipal bonds		36,043			—		36,043			—
Total available-for-sale securities		94,010			—		94,010			—
Total assets		131,671			—		131,671			—
Liabilities
Derivative instruments
Warrant (see Note 8)		(8,564	)		—		—			(8,564	)
Interest rate swap (see Note 10)		(410	)		—		(410	)		—
Total liabilities		(8,974	)		—		(410	)		(8,564	)
Total assets and liabilities at fair value	$	122,697		$	—	$	131,261		$	(8,564	)

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Years Ended December 31, 2012, 2011, and 2010

			Fair value measurements at the reporting date using
	December 31, 2011		Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Cash equivalents:
Money market funds	$	32,637	$	—	$	32,637	$	—
Commercial paper		20,000		—		20,000		—
Total cash equivalents		52,637		—		52,637		—
Available-for-sale securities:
U.S. government securities		162,170		—		162,170		—
Commercial paper		49,484		—		49,484		—
Total available-for-sale securities		211,654		—		211,654		—
Total assets at fair value	$	264,291	$	—	$	264,291	$	—

There were no financial assets measured on a recurring basis by using significant Level 3 inputs during the year ended December 31, 2011. The Company reviews the impairments of its available-for-sale investments and classifies the impairment of any individual available-for-sale investment as either temporary or other-than-temporary. The differentiating factors between temporary and other-than-temporary impairments are primarily the length of the time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Note 7:    Stockholders’ Equity

Stock Incentive Plans

The Company’s stock incentive plans generally provide employees, officers, directors, independent contractors, and consultants of the Company an opportunity to purchase shares of stock by exercising nonqualified stock options (which are options that are not described in Section 422 of the Internal Revenue Code of 1986, as amended). The plans also provide for the sale or granting of stock and RSUs to eligible individuals in connection with the performance of service for the Company. Finally, the plans authorize the grant of stock appreciation rights, either separately or in tandem with stock options, which entitle holders to cash compensation measured by appreciation in the value of the stock. The stock incentive plans are administered by the Compensation Committee of the Board of Directors, which is composed of non-employee directors. The Company issues new shares upon exercise of options and upon the vesting of RSUs.

1996 Plan:    The Company primarily has one stock plan, the Restated 1996 Flexible Stock Incentive Program (the “1996 Plan”), that was used for grants during 2012, 2011, and 2010. RSUs and options granted under the 1996 Plan typically are scheduled to vest over three years or less, with 33 ¹/₃% vesting one year from the date of grant and the remainder vesting ratably thereafter on a semi-annual basis. Options and RSUs granted in 2012, 2011, and 2010 under the 1996 Plan generally, with a few exceptions, vest over a period of three years, with 33 ¹/₃% vesting one year from the date of grant and the remainder vesting ratably thereafter on a semi-

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

annual basis, and expire seven years from the date of grant. There are a few exceptions to this vesting schedule, which provide for vesting at different rates or based on achievement of performance targets.

Through January 1, 2011, the number of shares available for grant pursuant to securities issued under the 1996 Plan increased annually on the first day of January by an amount equal to the lesser of (A) five percent of the Company’s outstanding shares at the end of the Company’s preceding fiscal year or (B) a lesser amount determined by the Board of Directors. This evergreen provision subsequently expired and was removed from the plan. The 1996 Plan limits the number of shares of common stock that may be granted to any one individual pursuant to stock options in any fiscal year of the Company to 800,000 shares, plus an additional 800,000 shares in connection with his or her initial employment with the Company, which initial grant does not count against the limit.

In 2011, the Company granted MSUs under the 1996 Plan. The actual amount of MSUs earned was 150% of the target award, based on the change in the Company’s total stockholder return relative to the change in the closing value of the iShares Russell 2000 Index. Each MSU represents the right to receive one share of Blucora common stock upon satisfaction of the performance measure and vesting. One-third of the earned MSUs vested on April 1, 2012, and the remaining earned MSUs are scheduled to vest in equal installments on each of April 1, 2013 and 2014. If an option, RSU, or MSU award is surrendered or for any other reason unused, in whole or in part, the shares that were subject to the award shall continue to be available under the 1996 Plan.

2001 Plan:    In 2012, the Company terminated its 2001 Nonstatutory Stock Option Plan, under which nonqualified stock options to purchase common stock or shares of restricted stock could be granted to employees. At December 31, 2012, no awards remained available for grant from that plan.

Plans and awards assumed through acquisition:    In addition to the plans described above, the Company has assumed stock incentive plans and awards through acquisitions. The majority of the plans assumed have expired; one plan has options outstanding although the plan has expired. There are no shares available for grant as of December 31, 2012 under any plan assumed through acquisition.

A summary of the general terms of options to purchase common stock, RSUs and MSUs previously granted under these plans, including options outstanding and available for grant at December 31, 2012, is as follows:

	1996 Plan		2001 Plan
Requisite service period in years		4 or less		3 or less
Life in years		7 or 10		7 or 10
Options, RSUs, and MSUs outstanding at December 31, 2012		4,583,627		65,550
Options, RSUs, and MSUs available for grant at December 31, 2012		4,953,656		—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

	Options			Weighted average exercise price
Outstanding December 31, 2009		6,175,979		$	13.74
Granted		1,755,600			9.74
Forfeited		(605,032	)		11.41
Expired		(1,006,259	)		20.32
Exercised		(274,495	)		8.53
Outstanding December 31, 2010		6,045,793			11.95
Granted		1,540,350			8.71
Forfeited		(764,354	)		8.93
Expired		(701,082	)		18.64
Exercised		(2,153,410	)		7.95
Outstanding December 31, 2011		3,967,297			12.26
Granted		1,014,200			12.16
Forfeited		(150,000	)		9.61
Expired		(130,958	)		34.18
Exercised		(956,900	)		9.43
Outstanding December 31, 2012		3,743,639		$	12.29
Options exercisable, December 31, 2012		2,228,437		$	13.33
Options exercisable and expected to vest after December 31, 2012*		3,495,256		$	12.39

* Options expected to vest reflect an estimated forfeiture rate.

All grants in 2012, 2011, and 2010 were made at an exercise price equal to the market price at the date of grant. Additional information regarding options outstanding for all plans as of December 31, 2012, is as follows:

	Options outstanding						Options exercisable
Range of exercise prices	Number outstanding		Weighted average remaining contractual life (yrs.)		Weighted average exercise price		Number exercisable		Weighted average exercise price
$7.10 – 8.63		503,262		4.70	$	7.88		322,860	$	7.52
$8.70 – 8.70		200,000		5.82		8.70		200,000		8.70
$8.74 – 8.74		855,500		5.38		8.74		455,500		8.74
$8.80 – 10.78		443,400		3.84		9.63		393,239		9.64
$11.01 – 11.39		539,227		4.46		11.25		168,788		11.24
$11.82 – 12.31		423,100		5.51		12.26		63,500		12.20
$12.76 – 23.45		207,600		5.02		16.28		53,000		21.91
$24.29 – 24.29		450,000		0.01		24.29		450,000		24.29
$24.47 – 25.43		120,550		0.64		24.71		120,550		24.71
$27.17 – 27.17		1,000		0.31		27.17		1,000		27.17
Total		3,743,639		4.19	$	12.29		2,228,437	$	13.33

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

Restricted stock units:     Activity and weighted average grant date fair value information regarding all RSU grants are summarized as follows:

	Restricted stock			Weighted average grant date fair value
Outstanding December 31, 2009		1,578,269		$	8.46
Granted		1,239,959			9.92
Forfeited		(374,288	)		8.81
Vested		(1,066,455	)		9.01
Outstanding December 31, 2010		1,377,485			9.26
Granted		291,500			8.86
Forfeited		(377,825	)		9.07
Vested		(676,680	)		9.30
Outstanding December 31, 2011		614,480			9.14
Granted		656,850			13.19
Forfeited		(111,706	)		9.13
Vested		(334,336	)		9.12
Outstanding December 31, 2012		825,288		$	12.38
Expected to vest after December 31, 2012*		706,018		$	12.38

* RSUs expected to vest reflect an estimated forfeiture rate.

Market stock units:     Activity and weighted average grant date fair value information regarding all MSU grants are summarized as follows:

	Market stock units			Weighted average grant date fair value
Outstanding December 31, 2010		—		$	—
Granted		155,250			9.28
Forfeited		(52,750	)		9.28
Outstanding December 31, 2011		102,500			9.28
Performance adjustment		40,125			9.28
Cancelled		(22,250	)		9.28
Vested		(40,125	)		9.28
Outstanding December 31, 2012		80,250		$	9.28
Expected to vest after December 31, 2012*		70,142		$	9.28

* MSUs expected to vest reflect an estimated forfeiture rate.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

Other Plans:

1998 Employee Stock Purchase Plan:    The Company adopted the ESPP in August 1998. The ESPP is intended to qualify under Section 423 of the Code and permits eligible employees of the Company and its subsidiaries to purchase common stock through payroll deductions of up to 15% of their compensation. Under the ESPP, no employee may purchase common stock worth more than $25,000 in any calendar year, valued as of the first day of each offering period. In addition, owners of 5% or more of the Company’s or one of its subsidiary’s common stock may not participate in the ESPP. An aggregate of 1,360,000 shares of common stock are authorized for issuance under the ESPP. The ESPP was implemented with six-month offering periods that begin on each February 1 and August 1. The price of common stock purchased under the ESPP is the lesser of 85% of the fair market value on the first day of an offering period or 85% of the fair market value on the last day of an offering period. The ESPP does not have a fixed expiration date, but may be terminated by the Company’s Board of Directors at any time. There were 62,058, 54,289, and 53,596 shares issued for the ESPP periods that ended in 2012, 2011, and 2010, respectively. During the year ended December 31, 2012, financing cash generated from the purchase of shares through the ESPP amounted to $601,000. The Company issues new shares upon purchase through the ESPP.

Stock Sale and Warrant:

On August 23, 2011, as part of a negotiated agreement, the Company added Andrew M. Snyder to its Board of Directors and entered into agreements to sell stock and issue a warrant to CIG, the investment entity that Mr. Snyder heads as President. In connection with those agreements, the details of which were disclosed under Items 1.01 and 3.02 in the Current Report on Form 8-K filed on August 23, 2011, Blucora sold to CIG 764,192 newly-issued shares of unregistered Blucora common stock at a purchase price of $9.16 per share and issued to CIG a warrant to purchase one million shares of Blucora common stock, exercisable at a price of $9.62 per share. The Warrant was originally scheduled to expire on August 23, 2014, but the completion of the acquisition of the TaxACT business on January 31, 2012, as discussed in Note 8, was an event under the Warrant’s terms that extended the expiration date to the earlier of August 23, 2017 or the effective date of a change of control of Blucora.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

Note 8:    Stock-based Compensation Expense

For the years ended December 31, 2012, 2011, and 2010, the Company recognized compensation expense related to stock options, RSUs and MSUs in continuing operations of $13.2 million, $7.7 million, and $13.9 million, respectively. To estimate the compensation cost that was recognized for the years ended December 31, 2012, 2011, and 2010, the Company used the Black-Scholes-Merton option-pricing model with the following weighted-average assumptions for equity awards granted:

	Years ended December 31,
	2012		2011		2010
Stock option grants:
Risk-free interest rate		0.26% - 1.57%		0.25% - 1.58%		0.44% - 1.94%
Expected dividend yield		0%		0%		0%
Expected volatility		40% - 48%		40% - 50%		48% - 53%
Expected life		3.3 years		3.0 years		3.1 years
Non-employee stock option grant:
Risk-free interest rate		0.26%		—		—
Expected dividend yield		0%		—		—
Expected volatility		38% - 41%		—		—
Expected life		1.6 - 2.2 years		—		—
Market stock unit grants
Risk-free interest rate		—		0.15%		—
Blucora expected dividend yield		—		0%		—
iShares Russell 2000 Index expected dividend yield		—		1.08%		—
Blucora closing stock price		—		$8.74		—
iShares Russell 2000 Index closing price		—		$82.29		—
Blucora expected volatility		—		37.4%		—
iShares Russell 2000 Index expected volatility		—		20.3%		—
Measurement period		—		1.0 years		—
Warrant grant:
Risk-free interest rate		0.68% - 0.89%		0.46%		—
Expected dividend yield		0%		0%		—
Expected volatility		46% - 48%		39%		—
Expected life		4.6 - 5.4 years		2.0 years		—

The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent remaining term. The Company paid a special dividend in January 2008, and may pay special dividends in the future, but does not expect to pay recurring dividends. The expected volatility is based on historical volatility of the Company’s stock for the related expected life of the option. The expected life of the equity award is based on historical experience.

As of December 31, 2012, total unrecognized stock-based compensation cost related to unvested stock options, unvested RSUs and unvested MSUs was $6.2 million, based on the Company’s estimate of its pre-vesting forfeiture rate. The balance at December 31, 2012 is expected to be recognized over a weighted average period of approximately 16 months. Total unrecognized stock-based compensation cost related to unvested stock options was $1.8 million, which is expected to be recognized over a weighted average period of approximately 15 months. Total unrecognized stock-based compensation cost related to unvested RSU grants was $4.3 million,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

which is expected to be recognized over a weighted average period of approximately 16 months. Total unrecognized stock-based compensation cost related to unvested MSU grants was $133,000, which is expected to be recognized over a weighted average period of approximately 13 months.

The Company has included the following amounts for stock-based compensation cost, including the cost related to the ESPP, in the accompanying Statement of operations and comprehensive income for the years ended December 31, 2012, 2011, and 2010 (amounts in thousands):

	Years ended December 31,
	2012		2011		2010
Cost of sales	$	558	$	286	$	461
Engineering and technology		1,180		821		1,298
Sales and marketing		1,909		1,002		2,631
General and administrative		9,576		5,579		9,528
Total		13,223	$	7,688	$	13,918

Financing cash flow generated by tax benefits from stock-based award activity was $23.0 million in 2012. Excluded from the amounts recorded in the above categories of operating expense for the years ended December 31, 2012, 2011, and 2010 are the following amounts that were capitalized as part of internally developed software, and amounts that were reclassified as discontinued operations (amounts in thousands):

	Years ended December 31,
	2012		2011			2010
Internally developed software	$	121	$	206		$	259
Discontinued operations		—		(159	)		833
Total	$	121	$	47		$	1,092

The stock based compensation expense for year ended December 31, 2011 includes $1.9 million fair value classified to general and administrative expenses for the Warrant issued in August 2011. The acquisition of the TaxACT business on January 31, 2012 fulfilled the Warrant agreement’s remaining performance condition and extended the Warrant’s expiration date. The extension of the Warrant’s term was a modification that resulted in a $4.3 million charge to stock-based compensation expense equal to the increase in the Warrant’s fair value and was recognized in general and administrative expenses in the first quarter of 2012. Additionally, subsequent to the modification, the Company treated the award as a derivative instrument, and the modification date fair value previously recognized in paid in capital of $6.2 million was classified as a current liability. The Warrant’s fair value will be determined each reporting period until settled, with gains or losses related to the change in fair value recorded in other loss (income), net. The Warrant’s fair value at December 31, 2012 is $8.5 million and the Company recorded a loss of $2.3 million in the year ended December 31, 2012. The Company recorded $6.6 million in total expense relating to the modification and subsequent change in fair value for the Warrant for the year ended December 31, 2012.

In October 2011, the Company granted 200,000 stock options to a non-employee who performed acquisition-related activities, and the award’s vesting was predicated on completing a qualified acquisition per the terms of the award. No expense was recognized in 2011 as a qualified acquisition did not occur. The expense for the award was recognized in 2012, due to the completion of the TaxACT acquisition on January 31, 2012,

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Years Ended December 31, 2012, 2011, and 2010

which, as discussed in Note 3, was considered to be a qualifying acquisition. The modification of the award resulted in a charge to stock-based compensation expense in 2012 of $914,000.

In May 2012, the Company granted 190,000 performance-based stock options to certain employees who perform acquisition-related activities, and the awards’ vestings are predicated on completing qualified acquisitions per the terms of the awards. No expense was recognized in 2012, as a qualified acquisition did not occur.

Stock-based compensation expense recognized during the years ended December 31, 2012, 2011, and 2010 is based on the grant date fair values estimated using the Black-Scholes-Merton option pricing model for options granted, the fair value at date of grant for RSUs and the Monte Carlo valuation method for the MSU grants. The Company has historically disclosed and currently recognizes stock-based compensation expense over the vesting period for each separately vesting portion of a share-based award as if they were, in substance, individual share-based awards. The Company estimates forfeitures at the time of grant and revises those estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The weighted average fair value for options granted in the years ended December 31, 2012, 2011, and 2010 was $3.84, $2.80, and $3.47 per share, respectively. The Company issues new shares upon exercise of options to purchase common stock and vesting of RSUs.

The total intrinsic value of RSUs vested, MSUs vested, options exercised, and shares purchased pursuant to the ESPP during the years ended December 31, 2012, 2011, and 2010 is supplemental information for the consolidated statements of cash flows and is presented below (amounts in thousands):

	Years ended December 31,
	2012		2011		2010
RSUs vested	$	4,663	$	5,945	$	10,097
MSUs vested	$	511	$	—	$	—
Options exercised	$	3,886	$	2,474	$	436
Shares purchased pursuant to ESPP	$	277	$	100	$	107

Awards outstanding at December 31, 2012 have the following total intrinsic value and weighted average remaining contractual terms:

	Outstanding at December  31, 2012		Intrinsic value (in thousands)		Weighted  average remaining contractual term (in years)
Options outstanding		3,743,639	$	18,126		4.2
Options exercisable and outstanding		2,228,437	$	10,585		3.4
Restricted stock units outstanding		825,288	$	12,965		1.0
Market stock units outstanding		80,250	$	1,261		0.9

Options vested and outstanding at December 31, 2012 and expected to vest in the future, based on the Company’s estimate of its pre-vesting forfeiture rate, have an intrinsic value of $16.9 million and weighted average remaining contractual term of 4.1 years. RSUs expected to vest after December 31, 2012, based on the Company’s estimate of its pre-vesting forfeiture rate, have an intrinsic value of $11.1 million and weighted average remaining contractual term of 11 months. MSUs expected to vest after December 31, 2012, based on the Company’s estimate of its pre-vesting forfeiture rate, have an intrinsic value of $1.1 million and weighted average remaining contractual term of 10 months. Cash generated from the exercise of stock options amounted to $9.1 million for the year ended December 31, 2012.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

Note 9:    Commitments and Contingencies

The Company has noncancellable operating leases for its corporate facilities. The leases run through 2020. Rent expense under operating leases totaled $1.8 million, $1.8 million, and $1.3 million for the years ended December 31, 2012, 2011, and 2010, respectively.

The Company’s debt commitments are included in the Company’s consolidated balance sheets. The Company’s contractual commitments are as follows for the following years ending December 31 (in thousands):

	2013			2014		2015		2016		2017		Thereafter		Total
Operating lease commitments	$	919		$	1,770	$	1,599	$	1,222	$	1,259	$	3,649	$	10,418
Less sublease income		(36	)		—		—		—		—		—		(36	)
Net lease payments required		883			1,770		1,599		1,222		1,259		3,649		10,382
Purchase commitments		1,272			581		423		92		61		—		2,429
Debt commitments		4,750			9,500		13,062		14,250		32,934		—		74,496
Total	$	6,905		$	11,851	$	15,084	$	15,564	$	34,254	$	3,649	$	87,307

Purchase commitments.    The Company’s purchase commitments are primarily comprised of non-cancelable service agreements for its data centers.

The Company has pledged a portion of its cash as collateral for standby letters of credit and bank guaranties for certain of its property leases and banking arrangements. At December 31, 2012, the total amount of collateral pledged under these agreements was $3.4 million.

The above table does not reflect unrecognized tax benefits of approximately $1.2 million, the timing of which is uncertain. For additional discussion on unrecognized tax benefits see Note 12.

Debt commitments:    The Company’s debt commitments consist of the minimum scheduled loan payments related to the credit facility that 2^nd Story entered into to help finance the acquisition of the TaxACT business. 2^nd Story may repay the amounts outstanding under the credit facility before its term is complete, depending on the cash generated by the TaxACT business’s operations.

Off-balance sheet arrangements.    The Company has no off-balance sheet arrangements other than operating leases. The Company does not believe that these operating leases are material to its current or future financial position, results of operations, revenues or expenses, liquidity, capital expenditures or capital resources.

Litigation

From time to time the Company is subject to various legal proceedings or claims that arise in the ordinary course of business. Although the Company cannot predict the outcome of these matters with certainty, the Company’s management does not believe that the disposition of these ordinary course matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Note 10:    Debt

On January 31, 2012 in conjunction with closing the Company’s acquisition of the TaxACT business, 2^nd Story entered into an agreement with a syndicate of lenders for a $105 million credit facility, consisting of $95

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BLUCORA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

million term loan and up to $10 million under a revolving credit facility. 2^nd Story’s obligations under the credit agreement are guaranteed by TaxACT Holdings, a direct subsidiary of the Company and the direct parent of 2^nd Story, and are secured by the assets of the TaxACT business and the 2^nd Story equity owned by TaxACT Holdings. On January 31, 2012, 2^nd Story borrowed $95 million of term debt and $5 million under the revolving credit facility.

The $95 million term loan requires quarterly principal payments and matures on January 31, 2017. See the loan repayment schedule in Note 9. The interest rate on amounts borrowed under the term loan and the revolving loan is variable and payable as of the end of each interest period or, if more frequent, quarterly, based upon, at the election of 2^nd Story, the Alternate Base Rate or the LIBOR Rate, plus the Applicable Margin (as such terms are defined in the credit agreement). The Applicable Margin is dependent on the consolidated Total Leverage Ratio (as defined in the credit agreement) of TaxACT Holdings and ranges from 2.0% to 3.5% for borrowings tied to the Alternative Base Rate and 3.0% to 4.5% for borrowings tied to the LIBOR Rate.

A portion of any excess cash flows, as the term is defined in the credit agreement, must be used to make a mandatory prepayment on the term loan within ninety days of June 30, 2013 and thereafter within 90 days of June 30^th in succeeding years in the event that the leverage ratio is more than two-to-one on June 30^th of that year. Amounts outstanding under the term loan may be prepaid without penalty. In 2012, 2^nd Story repaid $25.5 million of the debt, including the balance of revolving credit facility. The remaining amount of debt outstanding under the term loan as of December 31, 2012 was $74.5 million. The credit agreement covenants limit 2^nd Story and its parent, TaxACT Holdings, from, in certain circumstances, incurring additional indebtedness, incurring liens, paying dividends to the Company, making capital expenditures over stipulated maximums, allowing the consolidated Total Leverage Ratio (as defined in the credit agreement) to exceed stipulated levels over the debt term, and allowing the Fixed Charge Coverage Ratio to be less than stipulated levels.

As of December 31, 2012, the term loan’s gross carrying value of $74.5 million approximates its fair value as it is a variable rate instrument and the current applicable margin approximates current market conditions.

Additionally, the Company was required to hedge a portion of the interest rate risk associated with the term debt 90 days after its inception, and that requirement was met on May 1, 2012 by the purchase of an interest rate swap with a financial institution which fixed the LIBOR Rate portion at 0.85% for $37.5 million of the amount outstanding under the term loan. The swap’s terms are scheduled to fix the interest rate on a declining amount outstanding under the term loan, approximating half of the debt balance, until the credit agreement’s termination on January 31, 2017.

Note 11:    Derivative Instruments and Hedging Activities

During 2012, the interest rate swap purchased by 2^nd Story, as further described in Note 10, was intended to reduce the risk that the Company’s cash flows and earnings would be adversely affected by interest rate fluctuations. The Company recognizes derivative instruments as either assets or liabilities on its consolidated balance sheets at fair value. The Company records changes in the fair value of the derivative instruments as gains or losses in the consolidated statements of comprehensive income in other loss (income), net, or to accumulated other comprehensive income in the consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

The fair values of outstanding derivative instruments were as follows (in thousands):

	Balance Sheet Location	As of December 31, 2012
Derivative liabilities
Derivative designated as a hedging instrument:
Interest rate contract (interest rate swap)	Current liabilities - derivative instruments	$	410
Derivative not designated as a hedging instrument:
Equity contract (the Warrant)	Current liabilities - derivative instruments		8,564
		$	8,974

The derivative instrument in a hedging relationship had no effect on income for any and all periods presented, as it did not have any hedging ineffectiveness. The effect of the derivative instrument not designated as hedging instruments on income is summarized below for the year ended December 31, 2012 (in thousands):

Derivative not designated as hedging instrument	Location	Loss recognized in other loss (income), net
Equity contract (the Warrant)	Other loss (income), net	$	2,346

Note 12:    Income Taxes

Income tax expense (benefit) from continuing operations consists of the following for the years ended December 31, 2012, 2011, and 2010 (in thousands):

	Years ended December 31,
	2012			2011			2010
Current
U.S. federal	$	23,303		$	7,416		$	9,010
State		437			166			(316	)
Foreign		—			—			12
Total current benefit	$	23,740		$	7,582		$	8,706
Deferred
U.S. federal	$	(8,234	)	$	(18,654	)	$	19
State		(504	)		(216	)		—
Total deferred expense (benefit)		(8,738	)		(18,870	)		19
Income tax expense (benefit), net	$	15,002		$	(11,288	)	$	8,725

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

The income tax expense (benefit) from continuing operations differs from the amount computed by applying the statutory federal income tax rate for the years ended December 31, 2012, 2011, and 2010 as follows (in thousands):

	Years ended December 31,
	2012			2011			2010
Income tax expense at federal statutory rate of 35%	$	13,135		$	7,082		$	6,299
Nondeductible compensation		1,621			675			—
Deductible domestic production costs		(804	)		—			—
Nondeductible loss on derivative instrument		821			—			—
Foreign exchange gain		—			—			(516	)
Change in liabilities for uncertain tax positions		(75	)		79			(566	)
Change in valuation allowance		—			(19,272	)		3,235
Other		304			148			273
Income tax expense (benefit), net	$	15,002		$	(11,288	)	$	8,725

The tax effect of temporary differences and net operating loss carryforwards from continuing operations that give rise to the Company’s deferred tax assets and liabilities as of December 31, 2012 and 2011 are as follows (in thousands):

	December 31,
	2012			2011
Deferred tax assets:
Current:
Net operating loss carryforwards	$	26,089		$	—
Other, net		3,386			1,270
Total current tax assets		29,475			1,270
Non-current
Net operating loss carryforwards		227,079			274,779
Tax credit carryforwards		7,719			6,756
Depreciation and amortization		10,310			12,392
Stock-based compensation		5,381			5,304
Other, net		2,214			1,682
Total non-current tax assets		252,703			300,913
Total gross deferred tax assets		282,178			302,183
Valuation allowance		(262,353	)		(283,000	)
Deferred tax assets, net of valuation allowance	$	19,825		$	19,183
Deferred tax liabilities:
Current
Prepaid expenses	$	—		$	(309	)
Total current tax liabilities		—			(309	)
Non-current
Depreciation and amortization		(46,313	)		(22	)
Other, net		(770	)		—
Total non-current tax liabilities		(47,083	)		(22	)
Total gross deferred tax liabilities		(47,083	)		(331	)
Net deferred tax assets (liabilities)	$	(27,258	)	$	18,852

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

At December 31, 2012, the Company evaluated the need to maintain a valuation allowance for deferred tax assets based upon its assessment of whether it is more likely than not that the Company will generate sufficient future taxable income necessary to realize the deferred tax benefits. The Company considered all available evidence, both positive and negative, in assessing the need for a valuation allowance, such as the profitability of the search and acquired tax preparation software businesses, reversing deferred tax liabilities and forecasted future taxable income.

The Company weighed each piece of evidence in a qualitative and quantitative analysis and based upon its judgment determined that the weight of the positive evidence was sufficient to conclude that the Company will more likely than not realize the U.S. deferred tax assets of an ordinary nature, other than the capital loss described below. The financial projections supporting the Company’s conclusion contain significant assumptions and estimates of future operations.

The Company does not forecast income of a capital nature. The lack of forecasted capital gains represents negative evidence as to the realizability of the deferred tax assets of a capital nature. The Company weighted each piece of evidence and judged that the weight of the negative evidence was sufficient to retain the valuation allowance against its U.S. deferred tax assets of a capital nature.

The Company has deferred tax assets for net operating losses that arose from excess tax benefits for stock-based compensation and minimum tax credits that arose from the corresponding alternative minimum tax paid for those excess tax benefits. The Company will continue to apply a valuation allowance against these deferred tax assets until the Company utilizes the deferred tax assets to reduce taxes payable.

The consolidated balance sheets reflect a decrease in the valuation allowance of $20.6 million and $33.4 million for the years ended December 31, 2012 and 2011, respectively. This release of the valuation allowance for deferred tax assets pertains to utilization of equity-based deferred tax assets used to reduce taxes payable. The consolidated balance sheets reflect an increase in equity upon the release of this valuation allowance. Accordingly, the income tax expense from continuing operations does not reflect a benefit for the release of the valuation allowance.

The net changes in the valuation allowance during the years ended December 31, 2012 and 2011 are shown below (in thousands):

	Valuation allowance
	2012			2011
Balance at beginning of year	$	283,000		$	316,355
Net changes to deferred tax assets, subject to a valuation allowance		(20,647	)		(14,481	)
Release of end of year valuation allowance		—			(18,874	)
Balance at end of year	$	262,353		$	283,000
Net change during the year	$	(20,647	)	$	(33,355	)

As of December 31, 2012, the Company’s U.S. federal net operating loss carryforward for income tax purposes was $723.3 million, which relates to tax deductions for stock-based compensation. When the net operating loss carryforwards related to excess stock-based compensation are recognized, the income tax benefit of those losses is accounted for as a credit to stockholders’ equity on the consolidated balance sheets rather than the Company’s Statement of operations and comprehensive income.

If not utilized, the Company’s federal net operating loss carryforwards will expire between 2020 and 2031, with the majority of them expiring between 2020 and 2024. Additionally, changes in ownership, as defined by Section 382 of the Internal Revenue Code, may limit the amount of net operating loss carryforwards used in any one year.

88

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2012, 2011, and 2010 are as follows (in thousands):

	Unrecognized tax benefits
Balance at January 1, 2010	$	18,264
Gross increases for tax positions of prior years		146
Gross decreases for tax positions of prior years		(76	)
Lapse of statute of limitations		(67	)
Balance at December 31, 2011	$	18,267
Gross increases for tax positions of prior years		1,208
Gross decreases for tax positions of prior years		(216	)
Lapse of statute of limitations		(171	)
Balance at December 31, 2012	$	19,088

The total amount of unrecognized tax benefits that would affect the Company’s effective tax rate if recognized was $1.2 million and $816,000 as of December 31, 2012 and 2011, respectively. The remaining $17.9 million as of December 31, 2012 and $17.5 million as of December 31, 2011, if recognized, would create a deferred tax asset subject to a valuation allowance. The Company and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2009, although net operating loss carryforwards and tax credit carryforwards from any year are subject to examination and adjustment for at least three years following the year in which they are fully utilized. As of December 31, 2012, no significant adjustments have been proposed relative to the Company’s tax positions.

The Company recognizes interest and penalties related to uncertain tax positions in interest expense and general and administrative expenses, respectively. During the year ended December 31, 2012, the Company reversed previously accrued interest expense related to the uncertain tax positions upon expiration of the statute of limitations on assessments.

Note 13:    Segment Information

The Company changed its operational structure as a result of the January 31, 2012 acquisition of the TaxACT business. The Search segment is the InfoSpace business and the Tax Preparation segment is the TaxACT business. The Company’s chief executive officer is its chief operating decision maker and reviews financial information presented on a disaggregated basis. This information is used for purposes of allocating resources and evaluating financial performance.

The Company has revised the presentation of its historical financial results for 2010 and 2011 to be consistent with the Company’s new measures for reportable segments information. The revised financial information for the new segment reporting is not indicative of how the Company operated or managed its business in the past.

The Company presents revenue and cost of sales for each of the two segments. Search segment cost of sales consists primarily of revenue sharing arrangements with the Company’s distribution partners and usage-based content fees. Tax Preparation segment cost of sales consists primarily of royalties, payment processing fees for customer transactions, and bank service fees.

The Company does not allocate certain general, administrative, and overhead costs, or stock-based compensation, depreciation, amortization of intangible assets, other loss (income), net, income tax expense, or

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2012, 2011, and 2010

results from discontinued operations to the reportable segments. Such amounts are reflected in the table below under the heading “Corporate.” The Company does not account for, and does not report to management, its assets or capital expenditures by segment other than goodwill and intangible assets used for impairment analysis purposes.

Information on reportable segments currently presented to the Company’s chief operating decision maker and a reconciliation to consolidated net income for 2012, 2011, and 2010 are presented below (in thousands):

	Years ended December 31,
	2012			2011			2010
Search
Revenue	$	344,814		$	228,813		$	214,343
Cost of revenue		245,135			143,887			119,881
Operating expense		37,494			38,720			45,043
Search segment income		62,185			46,206			49,419
Search segment margin		18	%		20	%		23	%
Tax Preparation
Revenue		62,105			—			—
Cost of revenue		4,729			—			—
Operating expense		27,324			—			—
Tax Preparation segment income		30,052			—			—
Tax Preparation segment margin		48	%		—			—
Total Segment
Total segment revenue		406,919			228,813		$	214,343
Total segment cost of revenue		249,864			143,887			119,881
Total segment operating expenses		64,818			38,720			45,043
Total segment income		92,237			46,206			49,419
Total segment margin		23	%		20	%		23	%
Corporate
Operating expense		11,798			9,583			16,957
Stock-based compensation		13,223			7,688			13,918
Depreciation		3,812			4,861			6,596
Amortization of intangible assets		19,199			2,595			9,197
Other loss (income), net		6,677			1,246			(15,247	)
Income tax expense (benefit)		15,002			(11,288	)		8,725
Loss from discontinued operations, net of tax		—			9,927			4,593
Total corporate		69,711			24,612			44,739
Net income	$	22,526		$	21,594		$	4,680

Note 14:    Subsequent Events

On January 7, 2013, the Company completed a $4 million equity investment in a privately-owned company.

On February 6, 2013, the Company’s board of directors approved a plan whereby the Company may repurchase up to $50 million of its common stock in open-market transactions during the succeeding 24 month period. Repurchased shares will be retired and resume the status of authorized but unissued shares of common stock.

90

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2012 to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of the Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2012. Ernst & Young LLP has audited the effectiveness of our internal control over financial reporting as of December 31, 2012 and its report is included below.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fourth quarter of 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

91

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Blucora, Inc.

Bellevue, Washington

We have audited Blucora, Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Blucora, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Blucora, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2012 and the related consolidated statements of comprehensive income, stockholders’ equity and cash flows for the year then ended of Blucora, Inc. and our report dated March 7, 2013 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Seattle, Washington

March 7, 2013

92

ITEM 9B. Other Information

Not applicable.

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PART III

As permitted by the rules of the Securities and Exchange Commission, we have omitted certain information from Part III of this Annual Report on Form 10-K. We intend to file a definitive Proxy Statement with the Securities and Exchange Commission relating to our annual meeting of stockholders not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and such information is incorporated by reference herein.

ITEM 10. Directors, Executive Officers and Corporate Governance

Certain information concerning our directors required by this Item is incorporated by reference to our Proxy Statement under the heading “Information Regarding the Board Of Directors and Committees.”

Certain information regarding our executive officers required by this Item is incorporated by reference to our Proxy Statement under the heading “Information Regarding Executive Officers.”

Other information concerning our officers and directors required by this Item is incorporated by reference to our Proxy Statement under the heading “Beneficial Ownership.”

ITEM 11. Executive Compensation

The information required by this Item is incorporated by reference to our Proxy Statement under the headings “Compensation Committee Report,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis,” and “Compensation of Named Executive Officers.”

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item is incorporated by reference to our Proxy Statement under the headings “Beneficial Ownership” and “Equity Compensation Plans.”

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated by reference to our Proxy Statement under the headings “Information Regarding the Board of Directors” and “Audit Committee Report.”

ITEM 14. Principal Accounting Fees and Services

The information required by this Item is incorporated by reference to our Proxy Statement under the heading “Audit Committee Report.”

94

PART IV

ITEM 15. Exhibits, Financial Statement Schedules

(a)

1.    Consolidated Financial Statements.

See Index to Consolidated Financial Statements at Item 8 of this report.

2.    Financial Statement Schedules.

All financial statement schedules required by Item 15(a)(2) have been omitted because they are not applicable or the required information is presented in the Consolidated Financial Statements or Notes thereto.

3.    Exhibits.

The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this report.

(b)    Exhibits

See Item 15 (a) above.

(c)    Financial Statements and Schedules.

See Item 15 (a) above.

95

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BLUCORA, INC.
By:	/s/    WILLIAM J. RUCKELSHAUS
	William J. Ruckelshaus President and Chief Executive Officer
Date:	March 7, 2013

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Eric M. Emans and Linda A. Schoemaker, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities to execute any amendments to this Annual Report on Form 10-K, and to file the same, exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on the dates indicated.

Signature	Title	Date
/S/    WILLIAM J. RUCKELSHAUS         William J. Ruckelshaus	President, Chief Executive Officer, and Director (Principal Executive Officer)	March 7, 2013
/S/    ERIC M. EMANS         Eric M. Emans	Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)	March 7, 2013
/S/    JOHN E. CUNNINGHAM, IV         John E. Cunningham, IV	Chairman and Director	March 7, 2013
/S/    LANCE G. DUNN         Lance G. Dunn	Director	March 7, 2013
/S/    JULES HAIMOVITZ         Jules Haimovitz	Director	March 7, 2013
/S/    RICHARD D. HEARNEY         Richard D. Hearney	Director	March 7, 2013
/S/    STEVEN W. HOOPER         Steven W. Hooper	Director	March 7, 2013
/S/    ELIZABETH J. HUEBNER         Elizabeth J. Huebner	Director	March 7, 2013
/S/    ANDREW M. SNYDER         Andrew M. Snyder	Director	March 7, 2013

INDEX TO EXHIBITS

Exhibit Number	Exhibit Description	Form	Date of First Filing	Exhibit Number		Filed Herewith
2.1	Agreement and Plan of Merger by and among InfoSpace, Inc., Bluebunch Acquisition, Inc., 2SS Holdings, Inc., TA Associates Management, L.P. in its capacity as a Stockholder Representative, and Lance Dunn in his capacity as a Stockholder Representative, dated as of January 7, 2012	8-K	January 9, 2012		2.1
2.2	Amendment to Agreement and Plan of Merger, dated January 25, 2012	10-K	March 9, 2012		2.3
3.1	Restated Certificate of Incorporation, as filed with the Secretary of the State of Delaware on August 10, 2012	8-K	August 13, 2012		3.1
3.2	Restated Bylaws, as amended	8-K (Commission File No. 000-25131)	November 20, 2007		3.2
10.1*	1998 Employee Stock Purchase Plan	S-1 (No. 333-62323), as amended	August 27, 1998		10.3
10.2*	Restated 1996 Flexible Stock Incentive Plan, as amended and restated effective as of November 18, 2011	10-K	March 9, 2012		10.2
10.3*	Form of Restated 1996 Flexible Stock Incentive Plan Nonqualified Stock Option Letter Agreement for Nonemployee Directors	S-8 (No. 333-169691)	September 30, 2010		4.5
10.4*	Form of Restated 1996 Flexible Stock Incentive Plan Nonqualified Stock Option Letter Agreement for Vice Presidents and Above	S-8 (No. 333-169691)	September 30, 2010		4.6
10.5*	Form of Restated 1996 Flexible Stock Incentive Plan Notice of Grant of Restricted Stock Units and Restricted Stock Unit Agreement for Nonemployee Directors	S-8 (No. 333-169691)	September 30, 2010		4.8
10.6*	Form of Restated 1996 Flexible Stock Incentive Plan Notice of Grant of Restricted Stock Units and Restricted Stock Unit Agreement for Vice Presidents and Above	S-8 (No. 333-169691)	September 30, 2010		4.9
10.7	Office Lease between Blucora, Inc. and Plaza Center Property LLC dated July 19, 2012	10-Q	November 1, 2012		10.2

Exhibit Number	Exhibit Description	Form	Date of First Filing	Exhibit Number		Filed Herewith
10.8	Lease Agreement, dated January 28, 2008, by and between 2nd Story Software, Inc., PBI Properties, Larry Kane Investments, L.C., and Swati Dandekar for office space located at 1425 60th Street NE, Suite 300, Cedar Rapids, Iowa	10-K	March 9, 2012		10.13
10.9*	Form of Indemnification Agreement between the registrant and each of its directors and executive officers	8-K	April 13, 2011		10.1
10.10*	InfoSpace 2012 Executive Bonus Plan	8-K	February 10, 2012		10.1
10.11*	Addendum to 2012 Executive Bonus Plan dated July 31, 2012	10-Q	November 1, 2012		10.1
10.12*	InfoSpace 2013 Executive Bonus Plan	8-K	February 15, 2013		10.1
10.13*	Amended and Restated Equity Grant Program for Nonemployee Directors, updated as of June 5, 2012	10-Q	August 1, 2012		10.2
10.14*	Nonemployee Director Cash Compensation Policy, updated and effective as of November 8, 2011	10-K	March 9, 2012		10.18
10.15*	Employment Agreement effective as of October 7, 2008 between Company and Michael J. Glover	10-Q	November 10, 2008		10.1
10.16*	409A Corrective Amendment to Employment Agreement for Michael J. Glover	10-Q	August 8, 2011		10.5
10.17*	Employment Agreement, amended and restated effective as of January 6, 2012, between Company and Eric M. Emans	10-K	March 9, 2012		10.23
10.18*	Employment Agreement, amended and restated effective as of January 6, 2012, between Company and Linda A. Schoemaker	10-K	March 9, 2012		10.24
10.19*	Amended and Restated Employment Agreement between William J. Ruckelshaus and Company December 31, 2012						X
10.20*	Employment Agreement between JoAnn Kintzel, 2nd Story Software, Inc., and Company dated January 31, 2012	10-K	March 9, 2012		10.26
10.21*	2nd Story Software, Inc. 2011 Tax Season Performance Bonus Plan applicable to JoAnn Kintzel	10-Q	May 10, 2012		10.5

Exhibit Number	Exhibit Description	Form	Date of First Filing	Exhibit Number		Filed Herewith
10.22*	Employment Agreement, effective as of May 3, 2012, between the Company and George Allen	10-Q	August 1, 2012		10.1
10.23†	Google Services Agreement and Order Form by and between Google Inc. and InfoSpace Sales LLC dated October 1, 2005	8-K	March 31, 2011		10.1
10.24†	Amended and Restated Google Services Agreement by and between Google Inc. and InfoSpace Sales LLC dated October 1, 2005	8-K	March 31, 2011		10.2
10.25†	Amendment Number One to Amended and Restated Google Inc. Services Agreement and Order Form dated November 6, 2006 by and between Google Inc. and InfoSpace Sales LLC	8-K	March 31, 2011		10.3
10.26†	Amendment Number Two to Amended and Restated Google Inc. Services Agreement and Order Form dated February 1, 2008 by and between Google Inc. and InfoSpace Sales LLC	8-K	March 31, 2011		10.4
10.27†	Amendment Number Four to Amended and Restated Google Inc. Services Agreement and Order Form dated December 1, 2008 by and between Google Inc. and InfoSpace Sales LLC	8-K	March 31, 2011		10.5
10.28†	Amendment Number Five to Amended and Restated Google Inc. Services Agreement and Order Form dated February 1, 2010 by and between Google Inc. and InfoSpace Sales LLC	8-K	March 31, 2011		10.6
10.29†	Amendment Number Six to Amended and Restated Google Inc. Services Agreement and Order Form dated August 1, 2010 by and between Google Inc. and InfoSpace Sales LLC	8-K	March 31, 2011		10.7
10.30†	Amendment Number Seven to Amended and Restated Google Inc. Services Agreement and Order Form dated April 1, 2011 by and between Google Inc. and InfoSpace Sales LLC	10-Q	May 6, 2011		10.1
10.31†	Yahoo Publisher Network Contract #1-23975446 dated January 31, 2011 by and between Yahoo! Inc. and its subsidiary Yahoo! Sarl and InfoSpace Sales LLC	10-Q/A	August 30, 2011		10.2

Exhibit Number	Exhibit Description	Form	Date of First Filing	Exhibit Number		Filed Herewith
10.32	Amendment No. 1 to the Yahoo Publisher Network Contract #1-23975446 dated January 14, 2013						X
10.33	Securities Purchase Agreement between Company and Cambridge Information Group I LLC, dated August 23, 2011	8-K	August 23, 2011		10.1
10.34	Warrant to Purchase Common Stock granted by Company to Cambridge Information Group I LLC, dated August 23, 2011	8-K	August 23, 2011		10.2
10.35	Stockholder Agreement between Company and Cambridge Information Group I LLC, dated August 23, 2011	8-K	August 23, 2011		10.3
10.36	Credit Agreement among 2nd Story Software, Inc., as Borrower, TaxACT Holdings, Inc., as a Guarantor, and RBS Citizens, N.A., as administrative agent and a lender, BMO Harris Financing, Inc., Silicon Valley Bank, Bank of America, N.A., and Wells Fargo Bank, N.A., each as lenders, dated as of January 31, 2012	10-K	March 9, 2012		10.45
10.37	First Amendment to Credit Agreement among 2nd Story Software, Inc., as Borrower, TaxACT Holdings, Inc., as a Guarantor, and RBS Citizens, N.A., as administrative agent and a lender, BMO Harris Financing, Inc., Silicon Valley Bank, Bank of America, N.A., and Wells Fargo Bank, N.A., each as lenders, dated as of September 24, 2012	10-Q	November 1, 2012		10.3
14.1	Code of Business Conduct and Ethics, as amended on November 3, 2010	10-Q	November 5, 2010		14.1
16.1	Letter from Deloitte & Touche LLP	8-K	March 14, 2012		16.1
21.1	Subsidiaries of the registrant						X
23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm						X
23.2	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm						X
24.1	Power of Attorney (contained on the signature page hereto)						X
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002						X

Exhibit Number	Exhibit Description	Form	Date of First Filing	Exhibit Number	Filed Herewith
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
101	The following financial statements from the Company’s 10-K for the fiscal year ended December 31, 2012, formatted in XBRL: (i) Consolidated Balance Sheets (ii) Consolidated Statements of Operations and Comprehensive Income, (iii), Consolidated Statements of Stockholders’ Equity, (iv), Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.					X

* Indicates a management contract or compensatory plan or arrangement.

† Confidential treatment has been requested for portions of this exhibit. These portions have been omitted from these exhibits to this Annual Report on Form 10-K and submitted separately to the Securities and Exchange Commission.

EX-10.19

Exhibit 10.19

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (this “Agreement”) is made and entered into effective as of December 31, 2012 (the “Effective Date”), by and between William J. Ruckelshaus (the “Executive”) and Blucora, Inc. (the “Company”).

RECITALS

WHEREAS, the Company and the Executive entered into an employment agreement effective as of June 15, 2011, (the “Prior Agreement”);

WHEREAS, the Board of Directors of the Company desires to continue to employ the Executive as the President and Chief Executive Officer of the Company;

WHEREAS, the Company and the Executive desire to amend and restate the Prior Agreement in its entirety, effective as of December 31, 2012;

NOW THEREFORE, in consideration of the foregoing, the mutual covenants contained herein, the employment of the Executive by the Company, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Certain Definitions

(a) “Base Salary” has the meaning set forth in Section 5(a).

(b) “Board” means the Board of Directors of the Company.

(c) “Cause” means, as determined by the Board in its reasonable discretion: (i) the Executive’s conviction of, or plea of guilty or nolo contendere to, a misdemeanor involving dishonesty, wrongful taking of property, immoral conduct, bribery or extortion or any felony; (ii) willful material misconduct by the Executive in connection with the business of the Company; (iii) the Executive’s continued and willful failure to perform substantially his responsibilities to the Company under this Agreement, after written demand for substantial performance has been given by the Board that specifically identifies how the Executive has not substantially performed his responsibilities; (iv) the Executive’s improper disclosure of confidential information or other material breach of this Agreement, including the Supplementary Terms of Employment (Exhibit B hereto); (v) the Executive’s material fraud or dishonesty against the Company; (vi) the Executive’s willful and material breach of the Company’s written code of conduct and business ethics or other material written policy, procedure or guideline in effect from time to time (provided that the Executive was given access to a copy of such policy, procedure or guideline prior to the alleged breach) relating to personal conduct; or (vii) the Executive’s willful attempt to obstruct or willful failure to cooperate with any investigation authorized by the Board or any governmental or self-regulatory entity. Any determination of Cause by the Company shall be made by a resolution approved by a majority of the members of the Board, provided that, with respect to Section 1(c)(iii), the Board must give the Executive notice and 60 days to cure the substantial nonperformance.

(d) “Change of Control” means the occurrence of any of the following after the Effective Date:

(i) any “person” (as defined in Sections 13(d) and 14(d) of the Exchange Act), excluding for this purpose, (A) the Company or any subsidiary of the Company or (B) any employee benefit plan of the Company or any subsidiary of the Company, or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan that acquires beneficial ownership of voting securities of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities;

(ii) consummation of a reorganization, merger or consolidation of the Company, in each case, unless, following such transaction, all or substantially all the individuals and entities who were the beneficial owners of outstanding voting securities of the Company immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the company resulting from such transaction (including, without limitation, a company that, as a result of such transaction, owns the Company or all or substantially all the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such transaction of the outstanding voting securities of the Company;

(iii) any sale or disposition by the Company, in one transaction or a series of related transactions, of all or substantially all the Company’s assets;

(iv) a “Board Change” which, for purposes of this Agreement, shall have occurred if a majority of the seats on the Board are occupied by individuals who were neither (A) nominated by a majority of the Incumbent Directors nor (B) appointed by directors so nominated (“Incumbent Director” means a member of the Board who has been either (1) nominated by a majority of the directors of the Company then in office or (2) appointed by directors so nominated, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board); or

(v) an approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(e) “Code” means the Internal Revenue Code of 1986, as amended.

(f) “Company Transaction” means a Change of Control or a Significant Corporate Transaction.

(g) “Constructive Termination” means the occurrence, on a date that is prior to the two-month period prior to the consummation of a Company Transaction or after the 12-month period following the consummation of a Company Transaction, of any of the following without

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the Executive’s express prior written consent: (i) a material reduction of or to the Executive’s duties, responsibilities or title (a change in reporting relationship alone does not constitute such a material reduction); (ii) a material reduction by the Company of the Executive’s Base Salary, unless similarly situated executives also experience a reduction; or (iii) a requirement that the Executive relocate his primary work location more than 25 miles from Bellevue, Washington or from any work location to which the Company transfers the Executive during the course of his employment and to which such transfer the Executive has consented. Notwithstanding the foregoing, a Constructive Termination shall not exist unless (x) the Executive delivers written notice to the Company (the “Constructive Termination Notice”) of the existence of the condition which the Executive believes constitutes a Constructive Termination within 30 days of the initial existence of such condition (which Constructive Termination Notice specifically identifies such condition), (y) the Company fails to remedy such condition within 30 days after the date on which it receives such notice (the “Constructive Termination Cure Period”), and (z) the Executive actually terminates employment within 30 days after the expiration of the Constructive Termination Cure Period.

(h) “Disability” means the Executive’s inability to perform his employment duties to the Company hereunder, with or without reasonable accommodation, for 180 days (in the aggregate) in any one-year period as determined by an independent physician selected by the Company.

(i) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(j) “Good Reason” means the occurrence of any of the following without the Executive’s express prior written consent: (i) a material reduction of or to the Executive’s duties, title, responsibilities or reporting relationship; (ii) a material reduction of the Executive’s Base Salary; (iii) a material reduction of the Executive’s Target Bonus; (iv) a material reduction in the kind or level of employee benefits to which the Executive is entitled that occurs within 12 months following a Company Transaction, unless similarly situated employees also experience a reduction; (v) a requirement that the Executive relocate his primary work location more than 25 miles from Bellevue, Washington or from any work location to which the Company transfers the Executive during the course of his employment and to which such transfer the Executive has consented; (vi) in connection with a Company Transaction, the failure of the Company to assign this Agreement to a successor to the Company or the failure of a successor to the Company to explicitly assume and agree to be bound by this Agreement in a writing delivered to the Executive; or (vii) a material breach of this Agreement by the Company.

Notwithstanding the foregoing, termination of employment by the Executive will not be for Good Reason unless (x) the Executive delivers written notice to the Company (the “Good Reason Notice”) of the existence of the condition which the Executive believes constitutes Good Reason within 30 days of the initial existence of such condition (which Good Reason Notice specifically identifies such condition), (y) the Company fails to remedy such condition within 30 days after the date on which it receives such notice (the “Good Reason Cure Period”), and (z) the Executive actually terminates employment within 30 days after the expiration of the Good Reason Cure Period.

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(k) “Release” means a full release of claims against the Company substantially in the form attached hereto as Exhibit A; provided, however, that notwithstanding the foregoing, such Release is not intended to and will not waive the Executive’s rights: (i) to indemnification pursuant to any applicable provision of the Company’s Bylaws or Certificate of Incorporation, as amended, pursuant to any written indemnification agreement between the Executive and the Company, or pursuant to applicable law; (ii) to vested benefits or payments specifically to be provided to the Executive under this Agreement or any Company employee benefit plans or policies; or (iii) respecting any claims the Executive may have solely by virtue of the Executive’s status as a stockholder of the Company. The Release also shall not include claims that an employee cannot lawfully release through execution of a general release of claims.

(l) “Section 409A” means Section 409A of the Code and the Treasury Regulations and official guidance issued in respect of Section 409A of the Code.

(m) “Significant Corporate Transaction” means an acquisition, purchase of assets or equity interests, merger, consolidation, joint venture, partnership, business combination, tender or exchange offer, recapitalization or similar transaction after the Effective Date (a “Transaction”), other than a Transaction with a subsidiary or another corporation or other entity that is controlled by the Company, with a Transaction Value equal to or greater than $100 million in the aggregate.

(n) “Target Bonus” has the meaning set forth in Section 5(b).

(o) “Target’s Fully Diluted Shares Outstanding” means the total number of shares of common stock of the Target outstanding plus the total net number of shares calculated on a “treasury stock” basis of common stock issuable upon exercise, conversion or exchange of any outstanding securities exercisable, convertible or exchangeable into or for shares of common stock of the Target, including, without limitation, all outstanding stock options of the Target.

(p) “Transaction Value” means the sum of (i) (A) in the case of a Transaction involving the capital stock or equity of another corporation or other entity (a “Target”), the total fair market value (at the time of closing) of all consideration paid or payable, or otherwise to be distributed, directly or indirectly, in respect of a share of Target capital stock in connection with the Transaction multiplied by the Target’s Fully Diluted Shares Outstanding and (B) in the case of a Transaction involving assets of the Target, the total fair market value (at the time of closing) of all consideration paid or payable, directly or indirectly, to the Target in connection with the Transaction, plus (without duplication) (ii) the amount of all indebtedness for borrowed money, preferred stock, capital leases and any other liabilities and obligations for borrowed money on the Target business’s financial statements immediately following the closing or directly or indirectly assumed, retired, repaid, redeemed or defeased in connection with a Transaction, plus (iii) the aggregate fair market value (at the time of any closing) of any other consideration (tangible or intangible) paid by the Company. For purposes of this definition, consideration includes cash, securities, property, rights (contractual or otherwise), any dividends payable to stockholders of the Target after the date hereof (other than normal, ordinary course, recurring dividends) and any other form of consideration.

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2. Duties and Scope of Employment

The Company shall continue to employ the Executive in the position of President and Chief Executive Officer. In addition, the Board shall use its best efforts to secure the Executive’s continued election to the Board. The Executive shall report directly to the Board. The Executive will render such business and professional services in the performance of the Executive’s duties, consistent with the Executive’s position(s) within the Company, as shall be reasonably assigned to the Executive at any time and from time to time by the Board. Executive will also continue to serve on the Board without any compensation other than the compensation Executive is entitled to receive under this Agreement. Executive acknowledges that during the Agreement Term he is not eligible to receive compensation for serving on the Board in his capacity as a director.

3. Obligations

While employed hereunder, the Executive will perform his duties ethically, faithfully and to the best of the Executive’s ability and in accordance with law and Company policy. The Executive agrees not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the express prior written approval of the Board; provided, however, that notwithstanding anything to the contrary in the Company’s Supplementary Terms of Employment attached hereto as Exhibit B, the Executive may engage in charitable activities so long as such activities do not materially interfere with the Executive’s responsibilities to the Company.

4. Agreement Term

Unless earlier terminated as provided herein, the term of this Agreement (the “Agreement Term”) shall be for a period of three years commencing on the Effective Date, and may be extended thereafter upon the written mutual agreement of the Executive and the Company.

5. Compensation and Benefits

(a) Base Salary. The Company agrees to pay the Executive a base salary (the “Base Salary”) at an annual rate of not less than $450,000, payable in accordance with the regular payroll practices of the Company, but not less frequently than monthly. The Executive’s Base Salary shall be subject to annual review by the Board (or a committee thereof).

(b) Annual Bonus. During the Agreement Term, the Executive shall be eligible to participate in the Company’s bonus and other incentive compensation plans and programs for the Company’s senior executives at a level commensurate with his position. The Executive shall have the opportunity to earn an annual target bonus (the “Target Bonus”) measured against criteria to be determined by the Board (or a committee thereof) of at least 100% of Base Salary.

(c) Equity Awards. The Executive will participate in all Company long-term incentive programs extended to senior executives of the Company generally at levels commensurate with the Executive’s position, as determined by the Board (or a committee thereof).

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(d) Benefits. The Executive and his eligible dependents shall be eligible to participate in the employee benefit plans that are available or that become available to other employees of the Company, with the adoption or maintenance of such plans to be in the discretion of the Company, subject in each case to the generally applicable terms and conditions of the plan or program in question and to the determination of any committee administering such plan or program. Such benefits shall include participation in the Company’s group medical, life, disability, and retirement plans, and any supplemental plans available to senior executives of the Company from time to time. The Company reserves the right to change or terminate its employee benefit plans and programs at any time.

(e) Expenses. The Company shall reimburse the Executive for reasonable business expenses incurred by the Executive in the furtherance of or in connection with the performance of the Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time.

6. Termination of Employment

(a) General Provisions. This Agreement and the Executive’s employment with the Company may be terminated by either the Executive or the Company at will at any time with or without Cause; provided, however, that the parties’ rights and obligations upon such termination during the Agreement Term shall be as set forth in applicable provisions of this Agreement; and provided, further, that Section 6(d) provides for payments in the event of certain terminations of employment after the expiration of the Agreement Term. If the Executive’s employment terminates during the term of this Agreement for any reason, the Executive shall promptly offer to resign from the Board. The Nominating and Governance Committee shall consider the appropriateness of continued Board service and will recommend to the Board whether the resignation should be accepted. In addition, upon termination of the Executive’s employment during the term of this Agreement for any reason, unless otherwise requested by the Board, the Executive will be deemed to have resigned as an officer of and from all other positions held at the Company and its affiliates and subsidiaries, without any further action by the Executive, as of the end of the Executive’s employment, and the Executive, at the Board’s request, will execute any documents necessary to reflect his resignation.

(b) Any Termination by Company or Executive. In the event of any termination of Executive’s employment with the Company, whether by the Company or by the Executive, (i) the Company shall pay the Executive any unpaid Base Salary due for periods prior to the date of termination of employment (“Termination Date”); (ii) the Company shall pay the Executive any unpaid bonus compensation pursuant to Section 5(b), to the extent earned through the Termination Date; (iii) the Company shall pay the Executive all of the Executive’s accrued and unused “paid time off” (PTO), if any, through the Termination Date; and (iv) following submission of proper expense reports by the Executive, the Company shall reimburse the Executive for all expenses reasonably and necessarily incurred by the Executive in connection with the business of the Company through the Termination Date (collectively, the “Accrued Obligations”). The Accrued Obligations shall be paid promptly upon termination and within the period of time mandated by applicable law (but, in any event, within 30 days after the Termination Date). The Accrued Obligations paid or provided pursuant to this Section 6(b) shall be in addition to the payments and benefits, if any, to be provided to the Executive upon his

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termination of employment pursuant to Section 6(c), 6(d), 6(e), or 6(f). Except as expressly stated above or as required by law or this Agreement, the Executive shall receive no further compensation in any form other than as set forth in this Section 6(b).

(c) Termination by Company Without Cause or Constructive Termination. If, other than in connection with a Company Transaction as described in Section 6(d), the Executive’s employment with the Company is terminated by the Company without Cause or the Executive terminates employment with the Company under circumstances constituting a Constructive Termination, then subject to Section 6(g), the Executive shall receive the following payments and benefits:

(i) a severance payment in an amount equal to the sum of (A) one times the Executive’s Base Salary in effect as of the Termination Date and (B) one times his then current annual Target Bonus amount (in each case less applicable withholding taxes), which amount shall be payable in a single lump sum on the first payroll date that is at least 60 days following the Termination Date (but, in any event, by no later than March 15 of the calendar year immediately following the calendar year that includes the Termination Date), in accordance with Section 13(b)(ii); and

(ii) a lump-sum payment in an amount equal to (A) the monthly COBRA premium in effect under the Company’s group health plan as of the Termination Date for the coverage in effect under such plan for the Executive (and the Executive’s spouse and dependent children) on such date multiplied by (B) 12, which amount shall be payable in a single lump sum on the first payroll date that is at least 60 days following the Termination Date (but, in any event, by no later than March 15 of the calendar year immediately following the calendar year that includes the Termination Date), in accordance with Section 13(b)(ii).

Notwithstanding any provision to the contrary in any Company equity compensation plan or any outstanding equity award agreement, if, during the Agreement Term, the Executive terminates employment with the Company under circumstances described in this Section 6(c), there shall be no acceleration of vesting or exercisability of any outstanding equity awards or extension of any option post-termination exercise period.

For the avoidance of doubt, under no circumstances will the Executive be entitled to payments and benefits under both this Section 6(c) and Section 6(d).

(d) Termination of Employment in Connection With a Company Transaction. If the Company terminates the Executive’s employment without Cause or the Executive terminates employment with the Company for Good Reason (1) on the day of or during the 12-month period immediately following the consummation of a Company Transaction or (2) during the 2-month period prior to the consummation of a Company Transaction but at the request of any third party participating in or causing the Company Transaction or otherwise in connection with the Company Transaction, then subject to Section 6(g), the Executive shall receive the following payments and benefits:

(i) a severance payment in an amount equal to the sum of (A) one and one half times the Executive’s Base Salary in effect as of the Termination Date and (B) one and one half

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times his then current annual Target Bonus amount (in each case less applicable withholding taxes), which amount shall be payable in a single lump sum on the first payroll date that is at least 60 days following the Termination Date (but, in any event, by no later than March 15 of the calendar year immediately following the calendar year that includes the Termination Date), in accordance with Section 13(b)(ii);

(ii) a lump-sum payment in an amount equal to (A) the monthly COBRA premium in effect under the Company’s group health plan as of the Termination Date for the coverage in effect under such plan for the Executive (and the Executive’s spouse and dependent children) on such date multiplied by (B) 18, which amount shall be payable in a single lump sum on the first payroll date that is at least 60 days following the Termination Date (but, in any event, by no later than March 15 of the calendar year immediately following the calendar year that includes the Termination Date), in accordance with Section 13(b)(ii); and

(iii) notwithstanding any provision to the contrary in any applicable equity compensation plan or any outstanding equity award agreement, the treatment of the Executive’s outstanding equity awards shall be governed solely by the following provisions: (A) all of the Executive’s then-outstanding equity awards shall fully vest and all restrictions thereon shall lapse and (B) to the extent vested (including as a result of the acceleration provided under this Section 6(d)(iii)), all of the Executive’s outstanding stock options shall remain exercisable until the first to occur of 24 months following the Termination Date and each such stock option’s original expiration date; provided, however, that all of the Executive’s outstanding equity awards granted prior to the effective date of this Agreement (other than outstanding stock options granted prior to the effective date of this Agreement) shall also be governed by Section 16 of the Company’s Restated 1996 Flexible Stock Incentive Plan and the award agreements for those equity awards.

If a Company Transaction is consummated prior to the expiration of the Agreement Term, this Section 6(d) shall apply to a termination of the Executive’s employment by the Company without Cause or by the Executive for Good Reason during the 12-month period immediately following the consummation of the Company Transaction even if such 12-month period extends past the expiration of the Agreement Term. Moreover, notwithstanding the expiration of the Agreement Term, if a Company Transaction is consummated within two months after the expiration of the Agreement Term, then this Section 6(d) shall apply to a termination of the Executive’s employment by the Company without Cause or by the Executive for Good Reason (i) on the day of or during the 12-month period immediately following the consummation of the Company Transaction or (ii) during the 2-month period prior to the consummation of the Company Transaction but at the request of any third party participating in or causing the Company Transaction or otherwise in connection with the Company Transaction.

For the avoidance of doubt, the payments and benefits described under this Section 6(d) and the Accrued Obligations shall be the only payments and benefits to which the Executive is entitled in the event that the Executive’s employment terminates under this Section 6(d).

(e) Death. In the event of the Executive’s death while employed hereunder, and subject to Section 6(g), the Executive’s beneficiary (or such other person(s) specified by will or the laws of descent and distribution) shall be entitled to receive a lump-sum payment in an amount equal to three months’ Base Salary in effect as of the Termination Date (less applicable

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withholding taxes), which amount shall be payable in a single lump sum on the first payroll date that is at least 60 days following the Termination Date (but, in any event, by no later than March 15 of the calendar year immediately following the calendar year that includes the Termination Date), in accordance with Section 13(b)(ii).

(f) Disability. In the event of the Executive’s termination of employment with the Company due to Disability, and subject to Section 6(g), the Executive shall be entitled to receive a lump-sum payment in an amount equal to six months Base Salary in effect as of the Termination Date (less applicable withholding taxes), which amount shall be payable in a single lump sum on the first payroll date that is at least 60 days following the Termination Date (but, in any event, by no later than March 15 of the calendar year immediately following the calendar year that includes the Termination Date), in accordance with Section 13(b)(ii).

(g) Release and Other Conditions. The payments and benefits described in Sections 6(c) through 6(f) are expressly conditioned on (i) the Executive (or, in the case of the Executive’s death, the Executive’s representative) signing and delivering (and not revoking thereafter) a Release to the Company (which, in the case of the Executive’s death, also releases any claims by the Executive’s estate or survivors), which Release is executed, delivered and effective no later than 60 days following the Termination Date and (ii) the Executive continuing to satisfy any obligations to the Company under this Agreement, the Release and the Supplementary Terms of Employment that are attached hereto as Exhibit B and incorporated herein by reference, and any other agreement(s) between the Executive and the Company. In the event the Release described in Section 6(g)(i) is not executed, delivered and effective by the 60th day after the Termination Date, none of such payments or benefits shall be provided to the Executive.

7. Section 280G

(a) Amount of Payments and Benefits. Notwithstanding anything to the contrary herein, in the event that the Executive becomes entitled to receive or receives any payments, options, awards or benefits (including, without limitation, the monetary value of any noncash benefits and the accelerated vesting of equity-based awards) under this Agreement or under any other plan, agreement or arrangement with the Company or any person affiliated with the Company (collectively, the “Payments”), that may separately or in the aggregate constitute “parachute payments” within the meaning of Section 280G of the Code and the Treasury Regulations promulgated thereunder (or any similar or successor provision) (collectively, “Section 280G”) and it is determined that, but for this Section 7(a), any of the Payments will be subject to any excise tax pursuant to Section 4999 of the Code or any similar or successor provision (the “Excise Tax”), the Company shall pay to the Executive either (i) the full amount of the Payments or (ii) an amount equal to the Payments, reduced by the minimum amount necessary to prevent any portion of the Payments from being an “excess parachute payment” (within the meaning of Section 280G) (the “Capped Payments”), whichever of the foregoing amounts results in the receipt by the Executive, on an after-tax basis, of the greatest amount of Payments notwithstanding that all or some portion of the Payments may be subject to the Excise Tax. For purposes of determining whether the Executive would receive a greater after-tax benefit from the Capped Payments than from receipt of the full amount of the Payments, (i) there shall be taken into account any Excise Tax and all applicable federal, state and local taxes

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required to be paid by the Executive in respect of the receipt of such payments and (ii) such payments shall be deemed to be subject to federal income taxes at the highest rate of federal income taxation applicable to individuals that is in effect for the calendar year in which the payments and benefits are to be paid, and state and local income taxes at the highest rate of taxation applicable to individuals in the state and locality of the Executive’s residence on the effective date of the relevant transaction described under Section 280G(b)(2)(A)(i) of the Code, net of the maximum reduction in federal income taxes that could be obtained from deduction of such state and local taxes (as determined by assuming that such deduction is subject to the maximum limitation applicable to itemized deductions under Section 68 of the Code and any other limitations applicable to the deduction of state and local income taxes under the Code).

(b) Computations and Determinations. All computations and determinations called for by this Section 7 shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Counsel”), and all such computations and determinations shall be conclusive and binding on the Company and the Executive. For purposes of such calculations and determinations, the Tax Counsel may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Tax Counsel shall submit its determination and detailed supporting calculations to both the Executive and the Company within 15 days after receipt of a notice from either the Company or the Executive that the Executive may receive payments which may be considered “parachute payments.” The Company and the Executive shall furnish to the Tax Counsel such information and documents as the Tax Counsel may reasonably request in order to make the computations and determinations called for by this Section 7. The Company shall bear all costs that the Tax Counsel may reasonably incur in connection with the computations and determinations called for by this Section 7.

(c) Reduction Methodology. In the event that Section 7(a) applies and a reduction is required to be applied to the Payments thereunder, the Payments shall be reduced by the Company in its reasonable discretion in the following order: (i) reduction of any Payments that are subject to Section 409A on a pro-rata basis or such other manner that complies with Section 409A, as determined by the Company, and (ii) reduction of any Payments that are exempt from Section 409A.

8. No Impediment to Agreement

The Executive hereby represents to the Company that the Executive is not, as of the date hereof, and will not be, during the Executive’s employment with the Company, employed under contract, oral or written, by any other person, firm or entity, and is not and will not be bound by the provisions of any restrictive covenant or confidentiality agreement that would constitute an impediment to, or restriction upon, the Executive’s ability to enter this Agreement and to perform the duties of the Executive’s employment.

9. Supplementary Terms of Employment

The Supplementary Terms of Employment attached hereto as Exhibit B are incorporated herein by reference. The Supplementary Terms of Employment shall survive the termination of this Agreement and/or the Executive’s employment with the Company.

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10. Arbitration

The parties agree that any employment-related disputes between the Executive and the Company are subject to binding arbitration in accordance with the Supplementary Terms of Employment that are attached hereto as Exhibit B and incorporated herein by reference.

11. Successors; Personal Services

The services and duties to be performed by the Executive hereunder are personal and may not be assigned or delegated. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and the Executive and the Executive’s heirs and representatives.

12. Notices

Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Executive, mailed notices shall be addressed to the Executive at the home address the Executive most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its General Counsel.

13. Section 409A

(a) The parties intend that this Agreement and the payments and benefits provided hereunder be exempt from the requirements of Section 409A, to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treasury Regulation Section 1.409A-1(b)(9)(iii), or otherwise. To the extent Section 409A is applicable to this Agreement, the parties intend that this Agreement and any payments and benefits thereunder comply with the deferral, payout and other limitations and restrictions imposed under Section 409A. Notwithstanding anything herein to the contrary, this Agreement shall be interpreted, operated and administered in a manner consistent with such intentions.

(b) Without limiting the generality of the foregoing, and notwithstanding any other provision of this Agreement to the contrary:

(i) if the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A, then with regard to any payment that is considered a “deferral of compensation” under Section 409A payable on account of a “separation from service,” such payment shall be made on the date which is the earlier of (A) the date that is six months and one day after the date of such “separation from service” of the Executive and (B) the date of the Executive’s death (the “Delay Period”), to the extent required under Section 409A. Within ten business days following the expiration of the Delay Period, all payments delayed pursuant to this Section 13(b)(i) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid to the Executive in a lump sum, and all remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for those payments in this Agreement;

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(ii) to the extent that any payments or benefits under this Agreement are conditioned on a Release, if the Release is executed and delivered by the Executive to the Company and becomes irrevocable and effective within the specified 60-day post-termination period, then, subject to Section 13(b)(i) and to the extent not exempt under Section 409A, such payments or benefits shall be made or commence on the first payroll date after the date that is 60 days after the Termination Date (but, in any event, by no later than March 15 of the calendar year immediately following the calendar year that includes the Termination Date). If a payment or benefit under this Agreement is conditioned on a Release and such Release is not executed, delivered and effective by the 60th day after the Termination Date, such payment or benefit shall not be paid or provided to the Executive;

(iii) all expenses or other reimbursements under this Agreement shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Executive (provided that if any such reimbursements constitute taxable income to the Executive, such reimbursements shall be paid no later than March 15 of the calendar year following the calendar year in which the expenses to be reimbursed were incurred). No such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year, and the Executive’s right to reimbursement shall not be subject to liquidation in exchange for any other benefit;

(iv) for purposes of Section 409A, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within 30 days”), the actual date of payment within the specified period shall be within the sole discretion of the Company;

(v) in no event shall any payment under this Agreement that constitutes a “deferral of compensation” for purposes of Section 409A be offset by any other payment pursuant to this Agreement or otherwise; and

(vi) to the extent required for purposes of compliance with Section 409A, termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A, and for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”

(c) The Company and the Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions that may be necessary, appropriate, or desirable to avoid imposition of additional tax or income recognition on the Executive under Section 409A, in each case to the maximum extent permitted. Notwithstanding any provision of this Agreement to the contrary, (i) in no event will the Company be liable for any additional tax, interest or penalty that may be imposed on the Executive by Section 409A or

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damages for failing to comply with Section 409A and (ii) the Executive acknowledges and agrees that the Executive will not have any claim or right of action against the Company or any of its employees, officers, directors or agents in the event it is determined that any payment or benefit provided hereunder does not comply with Section 409A.

14. Miscellaneous Provisions

(a) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(b) Entire Agreement. This Agreement (including exhibits) shall supersede and replace all prior agreements or understandings relating to the subject matter hereof, and no agreements, representations or understandings (whether oral or written or whether express or implied) that are not expressly set forth in this Agreement have been made or entered into by either party with respect to the relevant matters hereof. This Agreement may not be modified except expressly in a writing signed by both parties.

(c) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the internal substantive laws of the State of Washington without reference to any choice of law rules.

(d) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(e) No Assignment of Benefits. The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, in respect of bankruptcy, garnishment, attachment or other creditor’s process, and any action in violation of this Section 14(e) shall be void.

(f) No Duty to Mitigate. The Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings that the Executive may receive from any other source.

(g) Employment Taxes. All payments made pursuant to this Agreement will be subject to withholding of all applicable income, employment and other taxes.

(h) Assignment by Company. The Company may assign its rights under this Agreement to an affiliate (as defined under the Exchange Act), and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company. In the case of any such assignment, the term “Company” when used in a section of this Agreement shall mean the corporation that actually employs the Executive.

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(i) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

(j) Effect on Prior Agreement. This Agreement amends and restates the Prior Agreement, which is superseded in all respects hereby.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.

COMPANY:
BLUCORA, INC.
By:	/s/ Linda A. Schoemaker
Name:	Linda A. Schoemaker
Title:	General Counsel
EXECUTIVE:
/s/ William Ruckelshaus
William Ruckelshaus

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EXHIBIT A

GENERAL RELEASE OF ALL CLAIMS

This General Release and Waiver of Claims (this “Release”) is executed by William J. Ruckelshaus (“Executive”) as of the date set forth below, and will become effective as of the “Effective Date” as defined below. This Release is in consideration of severance benefits to be paid to Executive by Blucora, Inc., a Delaware corporation (the “Company”) pursuant to Amended and Restated Employment Agreement between Executive and the Company dated as of December 31, 2012 (the “Employment Agreement”). Execution of this Release without revocation by Executive will satisfy the requirement, set forth in Section 6(g) of the Employment Agreement, that Executive execute a general release and waiver of claims in order to receive severance benefits pursuant to the Employment Agreement.

1. Termination of Employment

Executive acknowledges that his employment with the Company and any of its subsidiaries (collectively, the “Company Group”) and any and all appointments he held with any member of the Company Group, whether as officer, director, employee, consultant, agent or otherwise, terminated as of             (the “Termination Date”). Effective as of the Termination Date, Executive has not had or exercised or purported to have or exercise any authority to act on behalf of the Company or any other member of the Company Group, nor will Executive have or exercise or purport to have or exercise such authority in the future.

2. Waiver and Release

(a) Executive, for and on behalf of himself and his heirs and assigns, hereby waives and releases any common law, statutory or other complaints, claims, charges or causes of action arising out of or relating to Executive’s employment or termination of employment with, or Executive’s serving in any capacity in respect of any member of the Company Group (collectively, “Claims”). The Claims waived and released by this Release include any and all Claims, whether known or unknown, whether in law or in equity, which Executive may now have or ever had against any member of the Company Group or any shareholder, employee, officer, director, agent, attorney, representative, trustee, administrator or fiduciary of any member of the Company Group (collectively, the “Company Releasees”) up to and including the date of Executive’s execution of this Agreement. The Claims waived and released by this Release include, without limitation, any and all Claims arising out of Executive’s employment with the Company Group under, by way of example and not limitation, the Age Discrimination in Employment Act of 1967 (“ADEA”, a law which prohibits discrimination on the basis of age against persons age 40 and older), the National Labor Relations Act, the Civil Rights Act of 1991, the Americans With Disabilities Act of 1990, Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974, the Family Medical Leave Act, the Securities Act of 1933, the Securities Exchange Act of 1934, and the Washington Law Against

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Discrimination, all as amended, and all other federal, state and local statutes, ordinances, regulations and the common law, and any and all Claims arising out of any express or implied contract, except as described in Paragraphs 2(b) and 2(c) below.

(b) The waiver and release set forth in this Section 2 is intended to be construed as broadly and comprehensively as applicable law permits. The waiver and release shall not be construed as waiving or releasing any claim or right that as a matter of law cannot be waived or released, including Executive’s right to file a charge with the Equal Employment Opportunity Commission or other government agency; however, Executive waives any right to recover monetary remedies and agrees that he will not accept any monetary remedy as a result of any such charge or as a result of any legal action taken against the Company by any such agency.

(c) Notwithstanding anything else in this Release, Executive does not waive or release claims with respect to:

(i) Executive’s entitlement, if any, to severance benefits pursuant to the Employment Agreement;

(ii) vested benefits or payments specifically to be provided to the Executive pursuant to the Employment Agreement or any Company employee benefit plans or policies;

(iii) indemnification pursuant to any applicable provision of the Company’s Bylaws or Certificate of Incorporation, as amended, pursuant to any written indemnification agreement between the Executive and the Company, or pursuant to applicable law;

(iv) any claims which the Executive may have solely by virtue of the Executive’s status as a shareholder of the Company

(v) unemployment compensation to which Executive may be entitled under applicable law.

(d) Executive represents and warrants that he is the sole owner of the actual or alleged Claims that are released hereby, that the same have not been assigned, transferred, or disposed of in fact, by operation of law, or in any manner, and that he has the full right and power to grant, execute and deliver the releases, undertakings, and agreements contained herein.

(e) Executive represents that he has not filed any complaints, charges or lawsuits against the Company with any governmental agency or any court based on Claims that are released and waived by this Release.

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3. No Admission of Wrongdoing

This Release shall not be construed as an admission by either party of any wrongful or unlawful act or breach of contract.

4. Binding Agreement; Successors and Assigns

This Release binds Executive’s heirs, administrators, representatives, executors, successors, and assigns, and will inure to the benefit of the respective heirs, administrators, representatives, executors, successors, and assigns of any person or entity as to whom the waiver and release set forth in Section 2 applies.

5. Other Agreements

This Release does not supersede or modify in any way Executive’s continuing obligations pursuant to the Employment Agreement (including Exhibit B thereto) or the dispute resolution provisions of the Employment Agreement (including Exhibit B thereto).

6. Knowing and Voluntary Agreement; Consideration and Revocation Periods

(a) Executive acknowledges that he has been given twenty-one (21) calendar days from the date of receipt of this Release to consider all of the provisions of this Release and that if he signs this Release before the 21-day period has ended he knowingly and voluntarily waives some or all of such 21-day period.

(b) Executive represents that (i) he has read this Release carefully, (ii) he has hereby been advised by the Company to consult an attorney of his choice and has either done so or voluntarily chosen not to do so, (iii) he fully understands that by signing below he is giving up certain rights which he might otherwise have to sue or assert a claim against any of the Company Releasees, and (iv) he has not been forced or pressured in any manner whatsoever to sign this Release, and agrees to all of its terms voluntarily.

(c) Executive shall have seven (7) calendar days from the date of his execution of this Release (the “Revocation Period”) in which he may revoke this Release. Such revocation must be in writing and delivered, prior to the expiration of the Revocation Period, to the attention of the Company’s Chief Executive Officer at the Company’s then-current headquarters address. If Executive revokes this Release during the Revocation Period, then the Release shall be null and void and without effect.

7. Effective Date

The Effective Date of this Release will be day after the Revocation Period expires without revocation by Executive.

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IN WITNESS WHEREOF, Executive has executed this Release as of the date indicated below.

Dated:

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Exhibit B

Supplementary Terms of Employment – President

In consideration of my employment by Blucora, Inc., a Delaware corporation, its subsidiaries, affiliates, successors or assigns (collectively herein “Blucora” or the “Company”), and in consideration of the compensation now and hereafter paid to me, I agree to the following terms and conditions of my employment relationship with Blucora (the “Agreement”) which supplement the terms of my employment agreement with the Company, dated as of December 31, 2012 (the “Employment Agreement”):

Section I – General Terms

1. At-Will Employment: I acknowledge that my employment will be of indefinite duration and that either Blucora or I will be free to terminate this employment relationship at will at any time with or without cause. I also acknowledge that any representations to the contrary are unauthorized and void, unless contained in a separate written employment contract approved by the Board of Directors of Blucora or a Committee thereof. I further acknowledge that the terms and conditions of this Agreement shall survive termination of my employment.

2. Outside Activities and Investments: I will devote my best efforts to furthering the best interests of Blucora. During my employment, I will not engage in any activity or investment (other than an investment of less than one percent (1%) of the shares of a company traded on a registered stock exchange), that (a) conflicts with Blucora’s business interest, including without limitation, any business activity contemplated by this Agreement, (b) occupies my attention so as to interfere with the proper and efficient performance of my duties at Blucora, or (c) interferes with the independent exercise of my judgment in Blucora’s best interests.

Also, during my employment by Blucora, I will not actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Company’s Board of Directors or a duly authorized Committee thereof. I have listed on the Company’s Outside Activity Disclosure form, attached hereto as Exhibit A, any business activities or ventures with which I am currently involved.

As used herein, “Blucora’s business” means all content, technology, services or products that, during my employment, Blucora (i) produces, provides, markets, licenses, distributes or supports or (ii) actively and demonstrably is researching and developing or preparing to produce, provide, market, license, distribute or support.

3. Return of Company Property: At the time I leave the employ of Blucora or at Blucora’s request, I will return to Blucora all papers, drawings, notes, memoranda, manuals, specifications, designs, devices, documents, diskettes and tapes, and any other material on any media containing or disclosing any confidential or proprietary technical or business information of Blucora or any third party to whom Blucora owes a duty of confidentiality. I will also return any keys, pass cards, identification cards or any other property belonging to Blucora. Anything to the contrary notwithstanding, I shall be entitled to retain (i) papers and other materials of a personal nature, including, but not limited to, photographs, correspondence, personal diaries, calendars and rolodexes, personal files and phone books, (ii) information showing my compensation or relating to reimbursement of expenses, and (iii) copies of compensatory plans, programs and agreements with Blucora.

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4. Obligation to Disclose This Agreement: For a period of one (1) year after termination of my employment for any reason (the “Post-Employment Year”), I agree to inform any new employer, prior to accepting any such new employment, of the existence and terms of this Agreement and to provide such new employer with a copy of this Agreement.

Section II – Non-Disclosure

5. Non-Disclosure of Blucora Information: During my employment with Blucora and at any time thereafter, I will not disclose to anyone outside Blucora nor use for any purpose other than my work for Blucora any confidential or proprietary technical, financial, marketing, distribution or business information or trade secrets of Blucora, including without limitation, concepts, techniques, processes, methods, systems, designs, cost data, computer programs, formulas, development or experimental work, work in progress, or information or details regarding Blucora’s relationships with customers, vendors, partners and suppliers (collectively “Blucora Confidential Information”). I will also not disclose any Blucora Confidential Information inside Blucora except on a “need to know” basis. If I have any questions as to what comprises such Blucora Confidential Information, or to whom, if anyone, inside Blucora, it may be disclosed, I will consult Blucora’s General Counsel. Anything herein to the contrary notwithstanding, Blucora Confidential Information does not include information which (i) is disclosed as required by law, provided that I give the Company prompt written notice of such requirement prior to such disclosure and assistance in obtaining an order protecting the information from public disclosure and (ii) as to information that becomes generally known to the public other than due to my violation of any legal contractual or fiduciary confidentiality obligation.

6. Non-Disclosure of Third-Party Information Obtained through Blucora: Blucora has received and will receive confidential and proprietary information from third parties subject to a duty on Blucora’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. During my employment with Blucora and thereafter, I will not disclose such confidential or proprietary information to anyone except as necessary in carrying out my work for Blucora and consistent with Blucora’s agreement with such third party. I will not use such information for the benefit of anyone other than Blucora or such third party, or in any manner inconsistent with any agreement between Blucora and such third party of which I am made aware.

7. Non-Disclosure of Third-Party Information Obtained Elsewhere: During my employment at Blucora I will not improperly use or disclose any confidential or proprietary information or trade secrets of my former or current employers, principals, partners, co-ventures, clients, customers, or suppliers, or the vendors or customers of such persons or entities, unless such persons or entities have given consent to my use or disclosure. I will not violate any non-disclosure or proprietary rights agreement I might have signed in connection with any such person or entity.

Section III – Invention Assignment, Release and Cooperation

8. Invention Assignment and Release: I will make prompt and full disclosure to Blucora, will hold in trust for the sole benefit of Blucora, and will assign and hereby do assign exclusively to Blucora all my right, title and interest in and to any and all inventions, discoveries, designs, developments, improvements, copyrightable material, and trade secrets (collectively herein “Inventions”) that I, solely or jointly, may conceive, develop, or reduce to practice during the period of time I am in the employ of Blucora. I hereby waive and quitclaim to Blucora any and all claims of any nature whatsoever that I now or hereafter may have for infringement of any patent resulting from any patent applications for any Inventions so assigned to Blucora. I will assign to Blucora or its designee all right, title and interest in and to any and all Inventions full title to which may be required to be in the United States by any contract between Blucora and the United States or any of its agencies.

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My obligation to assign shall not apply to any Invention about which I can prove that it was developed entirely on my own time; and

a) No equipment, supplies, facility, or trade secret information of Blucora was used in its development; and

b) It does not relate (1) directly to the business of Blucora or (2) to the actual or demonstrably anticipated research or development of Blucora; and

c) It does not result from any work performed by me for Blucora.

9. Prior Inventions: I have listed and described on Exhibit B, attached hereto, all Inventions belonging to me and made by me prior to my employment at Blucora that I wish to have excluded from this Agreement. If Exhibit B is left blank, I represent that there are no such Inventions. If, in the course of my employment at Blucora, I use in or incorporate into an Blucora product, process, or machine an Invention owned by me or in which I have an interest that is not on Exhibit B and is related (1) directly to the business of Blucora or (2) to the actual or demonstrably anticipated research or development of Blucora, Blucora is hereby granted and shall have a non-exclusive, fully-paid up, royalty-free, irrevocable, worldwide license to make, have made, use and sell that Invention without restriction as to the extent of my ownership or interest.

10. Cooperation: I will execute any proper oath or verify any proper document in connection with carrying out the terms of this Agreement. If, because of my mental or physical incapacity or for any other reason whatsoever, Blucora is unable to secure my signature to apply for or to pursue any application for any United States or foreign patent or copyright covering Inventions assigned to Blucora as stated above, I hereby irrevocably designate and appoint Blucora and its duly authorized officers and agents as my agent and attorney in fact, to act for me and in my behalf and stead to execute and file any such applications and to all other lawfully permitted acts to further the prosecution and issuance of U.S. and foreign patents and copyrights thereon with the same legal force and effect as if executed by me. I will testify at Blucora’s request and expense in any interference, litigation, or other legal proceeding that may arise during or after my employment. Notwithstanding anything to the contrary contained herein, (i) in requesting your cooperation under this Section 10 following the termination of your employment, Blucora shall take into account your personal and business commitments and (iii) in any event, in complying with your obligations under this Section 10, you shall not be required to act against your own legal interests.

Section IV – Non-Competition and Non-Solicitation

11. Non-Competition: During the Post-Employment Year, I will not accept employment with any entity whose business is, or engage in any activities that are, competitive with or substantially similar to Blucora’s business (as defined in Paragraph 2).

12. Non-Solicitation: While employed at Blucora and during the Post-Employment Year, on my own behalf or on behalf of any other person or entity, I will not solicit, induce or attempt to influence directly or indirectly any employee of Blucora to work for me or any other person or entity for whom I work or intend to work, nor will I solicit, induce or attempt to influence directly or indirectly any customer, business partner, supplier or vendor of Blucora to terminate his/her/its business relationship with Blucora.

Section V – Arbitration

13. Mutual Agreement to Arbitrate: I understand that Blucora is committed to resolving any employment related disputes and claims efficiently and effectively, while preserving due process safeguards, through the use of binding arbitration. I agree that any dispute and/or claim between Blucora (including without limitation its officers, directors, employees agents or shareholders) and me that underlies, relates to and/or results from my employment relationship with Blucora or any of the terms of this Agreement, including the confidentiality, non-compete and non-solicitation requirements, that cannot be resolved by

-3-

mutual agreement of Blucora and me will be submitted to final, binding arbitration to the maximum extent permitted by law in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association that are then in effect.

I understand that this Agreement governs any claim I have that underlies, relates to and/or results from my employment relationship with Blucora or the termination of that relationship, including, but not limited to, claims of wrongful discharge, infliction of emotional distress, breach of contract (including breach of this Agreement), breach of any covenant of good faith and fair dealing, and claims of retaliation and/or discrimination in violation of any local, state or federal law. Examples of such laws include Title VII of the Civil Rights Act of 1964; the Age Discrimination in Employment Act of 1967; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; RCW Chapter 49.60, and all amendments to each such Act as well as the regulations issued thereunder.

14. Excluded from Arbitration: This Agreement does not affect my right to pursue worker’s compensation or unemployment compensation benefits for which I may be eligible in accordance with state law, nor does it affect my right to file and/or to cooperate in the investigation of an administrative charge of discrimination.

15. Arbitration Remedies and Awards: I understand that I may seek in arbitration any remedy or award that would be available to me through civil litigation and the arbitrator has authority to grant any such remedy or award. I agree that such remedies include monetary damages but do not include reinstatement unless authorized by statute.

16. Arbitration Fees: I understand that Blucora, as further consideration for my agreement to arbitrate covered disputes, agrees to pay for the arbitrator’s fees and other costs directly associated with the arbitration that would not otherwise be charged if the parties pursued civil litigation in court.

17. Injunctive or Other Relief: I understand that, pursuant to this Agreement, I and Blucora forego and waive the right to take any covered dispute or claim to civil litigation in court. However, I understand that either I or Blucora may apply to any court of competent jurisdiction for a temporary restraining order, preliminary injunction, or other interim or conservatory relief, as necessary, without breach of this Agreement and without abridgement of the powers of the arbitrator.

Section VI – Miscellaneous Terms

18. Choice of Law and Venue: I agree that this Agreement shall be governed for all purposes by the laws of the state of Washington as such laws apply to contracts to be performed within Washington by residents of Washington and that venue for any action arising out of this Agreement shall be exclusively laid in King County, Washington or in the Federal District Court of the Western District of Washington. In any matter that is presented to an arbitrator under this Agreement, I agree that the location of the arbitration hearing(s) will be in King County, Washington, unless another location is mutually agreed upon.

19. Conflicting Provisions: If any provision of this Agreement shall be declared excessively broad, it shall be construed or modified so as to afford Blucora the maximum protection permissible by law. If any provision of this Agreement is void or so declared, such provision shall be severed from this Agreement, which shall otherwise remain in full force and effect.

20. Entire Agreement: This Agreement sets forth the entire Agreement of the parties as to the subject matter hereof and any representations, promises, or conditions in connection therewith not in writing and signed by both parties shall not be binding upon either party.

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21. Acknowledgment: I acknowledge that I have had a full opportunity to read this Agreement before signing it. I confirm that I understand its terms and believe them to be reasonable, and I agree that Blucora’s offer of employment or continued employment is sufficient consideration for this Agreement.

HAVING READ AND FULLY UNDERSTOOD THIS AGREEMENT, I have signed my name this date.

Signature of Employee: /s/ William J. Ruckelshaus

Name of Employee: William J. Ruckelshaus

Date: December 31, 2012

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EX-10.32

Exhibit 10.32

Amendment #1

to the

Yahoo! Publisher Network Contract #1-23975446

Effective as of January 1, 2011 (“Original Agreement”)

This Amendment #1 to the Original Agreement (“Amendment #1”) is made effective as of the latter date of Yahoo!’s or Publisher’s signature below (“Amendment #1 Effective Date”) by and between Yahoo! Inc. and Yahoo! Sarl, on the one hand (“Yahoo!”), and InfoSpace Sales LLC and Blucora, Inc. (f/k/a InfoSpace Inc.), on the other hand (“Publisher”). All capitalized terms not defined herein shall have the meanings assigned to them in the Original Agreement.

In consideration of these mutual covenants and for such other good and valuable consideration, the sufficiency of which is acknowledged by the parties hereto, Yahoo! and Publisher desire to amend the Original Agreement as follows:

1. The “Compensation” section of the SO is amended to include the following:

In addition to the foregoing compensation provisions, Yahoo! will also pay to Publisher with respect to the Test (as defined in Section E of Attachment A) a total of $10,000 for each calendar month during the Test Period (as defined in Section E of Attachment), prorated as applicable for partial calendar months during which the Test is active. For clarity, if the Test is terminated prior to the end of the Test Period, then (1) Yahoo! shall not be obligated to pay Publisher for any remaining partial or calendar months of the Test Period, and (2) Yahoo! will only pay to Publisher a prorated payment for any partial calendar month during which the Test terminated.

2. Attachment A (Implementation Requirements) of the Original Agreement is amended to including the following new Section E:

E. Test Implementation.

1. Beginning on December 3, 2012 (“Test Launch Date”) and for a period of 6 months thereafter (“Test Period”), Publisher and Yahoo! will conduct a test implementation of search results pages on certain Publisher’s Offerings as set forth in this Section E (“Test”). Yahoo! may terminate the Test at any time for any reason prior to the end of the Test Period with at least 15 days prior written notice to Publisher.

2. With respect to www.dogpile.com, www.metacrawler.com and www.excite.com, Publisher will display only Yahoo! Results on search results pages in response to Queries for the keywords listed in Exhibit 2 to Attachment A, as shown in the mockups attached hereto or as approved in writing by Yahoo!. Publisher will display a minimum of 5 Paid Results Above the Fold at the top of such search results pages as shown in the mockups and will ensure that no other paid search listings, Third Party Paid Results or algorithmic listings are displayed on such search results pages.

3. With respect to www.webcrawler.com, Publisher will display only Yahoo! Results on search results pages in response to a certain percentage of total Queries in a calendar month, as shown in the mockups attached hereto or as approved in writing by Yahoo!. Publisher will display a minimum of 5 Paid Results Above the Fold at

1

the top of such search results pages as shown in the mockups and will ensure that no other paid search listings, Third Party Paid Results or algorithmic listings are displayed on such search results pages.

3. The Original Agreement is amended to include Exhibit 2 to Attachment A and the mockups, each as attached to this Amendment #1.

4. In the event of any conflict between the terms and conditions of the Original Agreement and the terms and conditions of this Amendment #1, the terms and conditions of this Amendment #1 shall control. Except as amended by this Amendment #1, the Original Agreement shall remain in full force and effect in accordance with its terms. This Amendment #1 may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

2

[SIGNATURE PAGE TO AMENDMENT #1]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment #1 to the Original Agreement to be executed by their duly authorized representatives as of the Amendment #1 Effective Date.

YAHOO! INC.		INFOSPACE SALES LLC
By:	/S/    Al Echamendi	By:	/S/    Michael Glover
Name:	Al Echamendi	Name:	Michael Glover
Title:	Vice President, Business Development	Title:	Vice President
Date:	1/14/2013	Date:	12/20/2012
YAHOO! SARL		BLUCORA, INC. (as guarantor under Section 22 of Attachment B)
By:	/S/    Jean-Christophe Conti	By:	/S/    William J. Ruckelshaus
Name:	Jean-Christophe Conti	Name:	William J. Ruckelshaus
Title:	VP Head of Partnerships Europe	Title:	President and CEO
Date:	12/20/2012	Date:	12/20/2012

3

EXHIBIT 2 TO ATTACHMENT A

Keywords

1. baby names

2. tractor supply

3. short hair styles

4. chicago bulls

5. pearl harbor

6. cruise critic

7. file extension torrent

8. germany

9. tattoo

10. typing test

11. elton john

12. blake shelton

13. nys unemployment

14. flight tracker

15. egypt

16. tires

17. antivirus

18. student loans

19. massage therapy

20. wedding dresses

21. pest control

22. office furniture

23. mattress

24. garden

25. motel

26. ancestry

27. dental implants

28. ebooks

29. plantar fasciitis

30. lupus symptoms

31. fonts

32. pill identifier

33. quicktime

34. sudoku

35. weather forecast

36. phlebotomist

37. hairstyles

38. realtor

39. massage

40. gold prices

41. music

42. driving directions

43. art

44. web browser

45. new orleans

46. Sears

47. angry birds

48. starbucks

49. old navy

50. cheap tickets

51. under armour

52. ralph lauren

53. office max

54. target stores

55. banana republic

56. famous footwear

57. frontier airlines

58. universal studios

59. yelp

60. frostwire

4

MOCKUPS

5

EX-21.1

Exhibit 21.1

Subsidiaries of the registrant

InfoSpace Sales LLC, a Delaware limited liability company

TaxACT Holdings, Inc., a Delaware corporation

2^nd Story Software, Inc., an Iowa corporation (“TaxACT”)

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

Registration Statement (Form S-8 No. 333-69165) pertaining to the Infospace.com, Inc. 1998 Employee Stock Purchase Plan and the Infospace.com, Inc. Restated 1996 Flexible Stock Incentive Plan,

Registration Statement (Form S-8 No. 333-81593) pertaining to the InfoSpace, Inc. Restated 1996 Flexible Stock Incentive Plan,

Registration Statement (Form S-8 No. 333-42340) pertaining to the InfoSpace, Inc. Restated 1996 Flexible Stock Incentive Plan and the 1998 Employee Stock Purchase Plan,

Registration Statement (Form S-8 No. 333-58420) pertaining to the InfoSpace, Inc. Restated 1996 Flexible Stock Incentive Plan,

Registration Statement (Form S-8 No. 333-139284) pertaining to the InfoSpace, Inc. Restated 1996 Flexible Stock Incentive Plan,

Registration Statement (Form S-8 No. 333-58422) pertaining to the InfoSpace, Inc. 2001 Nonstatutory Incentive Stock Option Plan and the InfoSpace, Inc. 1998 Employee Stock Purchase Plan, and

Registration Statement (Form S-8 No. 333-169691) pertaining to the InfoSpace, Inc. Restated 1996 Flexible Stock Incentive Plan

of our reports dated March 7, 2012, with respect to the consolidated financial statements of Blucora, Inc. and the effectiveness of internal control over financial reporting of Blucora, Inc. included in this Annual Report (Form 10-K) of Blucora, Inc., for the year ended December 31, 2012.

/s/ ERNST & YOUNG LLP

Seattle, Washington

March 7, 2013

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-69165, 333-81593, 333-42340, 333-58420, 333-58422, 333-139284, and 333-169691 on Form S-8 of our report dated March 9, 2012 (and March 7, 2013 as to the 2011 and 2010 amounts in Note 13), relating to the 2011 and 2010 consolidated financial statements of Blucora, Inc. appearing in this Annual Report on Form 10-K of Blucora, Inc. for the year ended December 31, 2012.

/s/ DELOITTE & TOUCHE LLP

Seattle, Washington

March 7, 2013

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Principal Executive Officer

I, William J. Ruckelshaus, certify that:

1. I have reviewed this Annual Report on Form 10-K of Blucora, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 7, 2013

/s/    William J. Ruckelshaus        

William J. Ruckelshaus

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Principal Financial Officer

I, Eric M. Emans, certify that:

1. I have reviewed this Annual Report on Form 10-K of Blucora, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 7, 2013

/s/    Eric M. Emans        

Eric M. Emans

Chief Financial Officer and Treasurer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, William J. Ruckelshaus, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K of Blucora, Inc. for the year ended December 31, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of Blucora, Inc.

Dated: March 7, 2013	By:	/s/    William J. Ruckelshaus
	Name:	William J. Ruckelshaus
	Title:	President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric M. Emans, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K of Blucora, Inc. for the year ended December 31, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of Blucora, Inc.

Dated: March 7, 2013	By:	/s/    Eric M. Emans
	Name:	Eric M. Emans
	Title:	Chief Financial Officer and Treasurer (Principal Financial Officer)

XML

Income Taxes (Details 4) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Reconciliation of beginning and ending amounts of unrecognized tax benefits
Unrecognized tax benefits, Beginning Balance	$ 18,267	$ 18,264
Gross increases for tax positions of prior years	1,208	146
Gross decreases for tax positions of prior years	(216)	(76)
Lapse of statute of limitations	(171)	(67)
Unrecognized tax benefits, Ending Balance	$ 19,088	$ 18,267

XML

Derivative Instruments and Hedging Activities (Details) (Fair value of derivative instruments [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Summary of fair values of outstanding derivative instruments
Total derivative liabilities	$ 8,974
Interest rate contract (interest rate swap) [Member] | Derivative designated as a hedging instrument [Member] | Current liabilities = derivative instruments [Member]
Summary of fair values of outstanding derivative instruments
Total derivative liabilities	410
Equity contract (the Warrant) [Member] | Derivative not designated as hedging instrument [Member] | Current liabilities = derivative instruments [Member]
Summary of fair values of outstanding derivative instruments
Total derivative liabilities	$ 8,564

XML

Balance Sheet Components (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Property, Plant and Equipment [Line Items]
Definite-lived intangible assets, net	$ 113,033,000	$ 1,032,000
Depreciation	2,119,000	2,162,000	3,138,000
Software Development [Member]
Property, Plant and Equipment [Line Items]
Definite-lived intangible assets, net	1,400,000	1,600,000
Depreciation	$ 947,000	$ 877,000

XML

Income Taxes (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income tax expense (benefit) from continuing operations differs from amount computed by applying statutory federal income tax rate
Income tax expense at federal statutory rate of 35%	$ 13,135	$ 7,082	$ 6,299
Nondeductible compensation	1,621	675
Deductible domestic production costs	(804)
Non deductible loss on derivative instrument	821
Foreign exchange gain			(516)
Change in liabilities for uncertain tax positions	(75)	79	(566)
Change in valuation allowance		(19,272)	3,235
Other	304	148	273
Income tax expense (benefit), net	$ 15,002	$ (11,288)	$ 8,725

XML

Segment Information (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Information on reportable segments for reconciliation to consolidated net income
Revenue	$ 406,919,000	$ 228,813,000	$ 214,343,000
Cost of revenue	267,451,000	154,962,000	138,995,000
Operating Expense	69,711,000	24,612,000	44,739,000
Stock-based compensation	8,937,000	5,756,000	13,918,000
Depreciation	2,119,000	2,162,000	3,138,000
Amortization of intangible assets	11,619,000
Other loss (income), net	6,677,000	1,246,000	(15,247,000)
Income tax expense (benefit)	15,002,000	(11,288,000)	8,725,000
Loss from discontinued operations, net of tax		(2,253,000)	(4,593,000)
Net income	22,526,000	21,594,000	4,680,000
Search [Member]
Information on reportable segments for reconciliation to consolidated net income
Revenue	344,814,000	228,813,000	214,343,000
Cost of revenue	245,135,000	143,887,000	119,881,000
Operating Expense	37,494,000	38,720,000	45,043,000
Segment income	62,185,000	46,206,000	49,419,000
Segment margin	18.00%	20.00%	23.00%
Tax Preparation [Member]
Information on reportable segments for reconciliation to consolidated net income
Revenue	62,105,000
Cost of revenue	4,729,000
Operating Expense	27,324,000
Segment income	30,052,000
Segment margin	48.00%
Total Segment [Member]
Information on reportable segments for reconciliation to consolidated net income
Revenue	406,919,000	228,813,000	214,343,000
Cost of revenue	249,864,000	143,887,000	119,881,000
Operating Expense	64,818,000	38,720,000	45,043,000
Segment income	92,237,000	46,206,000	49,419,000
Segment margin	23.00%	20.00%	23.00%
Corporate [Member]
Information on reportable segments for reconciliation to consolidated net income
Operating Expense	11,798,000	9,583,000	16,957,000
Stock-based compensation	13,223,000	7,688,000	13,918,000
Depreciation	3,812,000	4,861,000	6,596,000
Amortization of intangible assets	19,199,000	2,595,000	9,197,000
Other loss (income), net	6,677,000	1,246,000	(15,247,000)
Income tax expense (benefit)	15,002,000	(11,288,000)	8,725,000
Loss from discontinued operations, net of tax		$ 9,927,000	$ 4,593,000

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Income Taxes (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Current:
Net operating loss carryforwards	$ 26,089
Other, net	3,386	1,270
Total current tax assets	29,475	1,270
Non-current
Net operating loss carryforwards	227,079	274,779
Tax credit carryforwards	7,719	6,756
Depreciation and amortization	10,310	12,392
Stock-based compensation	5,381	5,304
Other, net	2,214	1,682
Total non-current tax assets	252,703	300,913
Total gross deferred tax assets	282,178	302,183
Valuation allowance	(262,353)	(283,000)	(316,355)
Deferred tax assets, net of valuation allowance	19,825	19,183
Current
Prepaid expenses		(309)
Total current tax liabilities		(309)
Non-current
Depreciation and amortization	(46,313)	(22)
Other, net	(770)
Total non-current tax liabilities	(47,083)	(22)
Total gross deferred tax liabilities	(47,083)	(331)
Net deferred tax assets (liabilities)	$ (27,258)	$ 18,852

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Commitments and Contingencies (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Commitments and Contingencies (Textual) [Abstract]
Rent expense under operating leases	$ 1,800,000	$ 1,800,000	$ 1,300,000
Letters of credit and bank guaranties for property leases	3,400,000
Unrecognized tax benefits	$ 1,200,000	$ 816,000

XML

Business Combinations (Tables)

12 Months Ended

Dec. 31, 2012

Business Combinations [Abstract]

Revenues and Income from Continuing Operations

The pro forma revenues and income from continuing operations for the years ended December 31, 2012 and 2011 combines the historical results of operations of the Company and 2^nd Story for the year ended December 31, 2011, and combines the historical results of the Company for the year ended December 31, 2012 with the results of 2^nd Story for the month ended January 31, 2012.

The following amounts are in thousands:

	Year ended December 31,
	2012		2011
Revenues	$	427,809	$	307,594
Income from continuing operations	$	26,819	$	11,251

TaxACT Holdings [Member]

Business Combinations [Abstract]

Summary of assets acquired and liabilities assumed are recorded at their fair values as of acquisition date

Final valuations are as follows (in thousands):

	Fair Value
Tangible assets acquired	$	22,465
Liabilities assumed		17,759
Identifiable net assets acquired	$	4,706
Fair value adjustments to intangible assets
Customer relationships	$	101,400
Proprietary technology		29,800
Trade name		19,499
Fair value of intangible assets acquired	$	150,699
Purchase price:
Cash paid	$	287,500
Less identifiable net assets acquired		(4,706	)
Plus deferred tax liability related to intangible assets		53,380
Less fair value of intangible assets acquired		(150,699	)
Excess of purchase price over net assets acquired, allocated to goodwill	$	185,475

Mercantila [Member]

Business Combinations [Abstract]

Schedule of purchase price of assets acquired and liabilities assumed based on their estimated fair values

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at their date of acquisition as follows (in thousands):

Tangible assets acquired	$	2,234
Liabilities assumed		(8,231	)
Identifiable net liabilities assumed	$	(5,997	)
Fair value adjustments to intangible assets
License for use of developed core technology	$	893
Internet domain names		452
Customer relationships		39
Fair value of net liabilities assumed	$	(4,613	)
Purchase price:
Cash paid	$	7,800
Plus identifiable net liabilities assumed		5,997
Less fair value of intangible assets acquired		(1,384	)
Excess of purchase price over net assets acquired, allocated to goodwill	$	12,413

Make The Web Better [Member]

Business Combinations [Abstract]

Schedule of purchase price of assets acquired and liabilities assumed based on their estimated fair values

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at their date of acquisition as follows (in thousands):

Installed code base technology	$	12,650
License for use of developed core technology		235
Prepaid hosting services		115
Identifiable assets acquired	$	13,000
Purchase price:
Cash paid	$	8,000
Contingent consideration		5,000
Purchase price	$	13,000
Less identifiable assets acquired		(13,000	)
Excess of purchase price over net assets acquired, allocated to goodwill	$	—

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Goodwill and Other Intangible Assets (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Expected amortization of definite-lived intangible assets
2013	$ 20,343
2014	20,188
2015	20,125
2016	13,296
2017	12,675
Total	86,627
Cost of sales [Member]
Expected amortization of definite-lived intangible assets
2013	7,668
2014	7,513
2015	7,450
2016	621
Total	23,252
Amortization of Intangible Assets [Member]
Expected amortization of definite-lived intangible assets
2013	12,675
2014	12,675
2015	12,675
2016	12,675
2017	12,675
Total	$ 63,375

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Summary of Significant Accounting Policies (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012 Segment Customer	Dec. 31, 2011	Dec. 31, 2010
Summary of Significant Accounting Policies (Textual) [Abstract]
Software development costs	$ 952,000	$ 1,200,000	$ 1,000,000
Goodwill	230,290,000	44,815,000
Equity investments	0	0
Interest expense	3,522,000
Loss on a derivative instrument	2,346,000
Advertising expense	31,800,000	14,400,000	18,500,000
Company contribution for employees	374,000	288,000	309,000
Increase in fair value of earn-out contingent liability		3,000,000	5,000,000
Gain on contingency resolution		1,500,000
Gain related to a litigation settlement			18,965,000
Foreign currency translation gains, net			(1,436,000)
Income tax benefit	5,092
Revenues from Customers	84.00%	99.00%	97.00%
Contribution from customer	90.00%	90.00%
Resulting Increase In Entity Loss	If the Company’s stock price at December 31, 2012 had been twenty percent higher at that date, the fair value of the Warrant would have been thirty-two percent higher, resulting in an increase in the Company’s loss on derivative instrument for the year ended December 31, 2012, of $2.7 million.
Derivative Instrument Loss Valuation Increase in Stock Price Percentage	20.00%
Derivative Instrument Loss Valuation Change In Fair Value of Warrant Percentage	22.00%
Expected loss on derivative instrument	2,700,000
Deferred tax assets		18,900,000
Amortization for assets acquired under capital leases	$ 0	$ 188,000	$ 537,000
Number of reporting segments	2
Amount contributed to employee benefit plan, maximum percentage	50.00%
Amount contributed to employee benefit plan, maximum percentage of an employees salary	3.00%
Number of search customers	2

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Current
U.S. federal	$ 23,303	$ 7,416	$ 9,010
State	437	166	(316)
Foreign			12
Total current benefit	23,740	7,582	8,706
Deferred
U.S. federal	(8,234)	(18,654)	19
State	(504)	(216)
Total deferred expense (benefit)	(8,738)	(18,870)	19
Income tax expense (benefit), net	$ 15,002	$ (11,288)	$ 8,725

XML

Summary of Significant Accounting Policies (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Other loss (income)
Interest expense	$ 3,522
Interest income	(131)	(369)	(331)
Amortization of debt issuance costs	820
Accretion of debt discount	325
Loss on a derivative instrument	2,346
Gain on resolution of contingent liability		(1,500)
Increase in fair value of earn-out contingent liability		3,000	5,000
Foreign currency exchange loss (gain), net	48	20	(1,335)
Litigation settlement gain			(18,965)
Loss (gain) on disposal of assets	(1)	46	1,014
Other	(252)	49	(630)
Other loss (income), net	$ 6,677	$ 1,246	$ (15,247)

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Balance Sheet Components (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Short-term investments available-for-sale stated at fair value
Total short-term investments available-for-sale	$ 94,010	$ 211,654
U.S. government securities [Member]
Short-term investments available-for-sale stated at fair value
Total short-term investments available-for-sale	41,402	162,170
Taxable municipal bonds [Member]
Short-term investments available-for-sale stated at fair value
Total short-term investments available-for-sale	36,043
Commercial paper [Member]
Short-term investments available-for-sale stated at fair value
Total short-term investments available-for-sale	9,396	49,484
Time deposits [Member]
Short-term investments available-for-sale stated at fair value
Total short-term investments available-for-sale	$ 7,169

XML

Stock-based Compensation Expense (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Restricted stock units outstanding [Member]
Intrinsic value for restricted stock units
Intrinsic value	$ 4,663	$ 5,945	$ 10,097
Market stock units outstanding [Member]
Intrinsic value for restricted stock units
Intrinsic value	511
Options exercised [Member]
Intrinsic value for restricted stock units
Intrinsic value	3,886	2,474	436
Shares purchased pursuant to ESPP [Member]
Intrinsic value for restricted stock units
Intrinsic value	$ 277	$ 100	$ 107

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Stockholders' Equity (Details 1) (USD $)	1 Months Ended	12 Months Ended
	Oct. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Summary of activity and pricing information regarding all options
Outstanding, beginning balance		3,967,297	6,045,793	6,175,979
Weighted average exercise price, beginning balance		$ 12.26	$ 11.95	$ 13.74
Stock options granted to a non-employee	200,000	1,014,200	1,540,350	1,755,600
Granted, Weighted average exercise price		$ 12.16	$ 8.71	$ 9.74
Forfeited, Options		(150,000)	(764,354)	(605,032)
Forfeited, Weighted average exercise price		$ 9.61	$ 8.93	$ 11.41
Expired, Options		(130,958)	(701,082)	(1,006,259)
Expired, Weighted average exercise price		$ 34.18	$ 18.64	$ 20.32
Exercised, Options		(956,900)	(2,153,410)	(274,495)
Exercised, Weighted average exercise price		$ 9.43	$ 7.95	$ 8.53
Outstanding, ending balance		3,743,639	3,967,297	6,045,793
Weighted average exercise price, ending balance		$ 12.29	$ 12.26	$ 11.95
Options exercisable, December 31, 2012, Options		2,228,437
Options exercisable, December 31, 2012, Weighted average exercise price		$ 13.33
Options exercisable and expected to vest after December 31, 2012, Options		3,495,256
Options exercisable and expected to vest after December 31, 2012, Weighted average exercise price		$ 12.39

XML

Business Combinations (Details Textual) (USD $)	12 Months Ended						12 Months Ended				12 Months Ended			12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2012 TaxACT [Member]	Dec. 31, 2011 TaxACT [Member]	Jan. 31, 2012 TaxACT [Member]	Dec. 31, 2012 Make The Web Better [Member]	Dec. 31, 2011 Make The Web Better [Member]	Dec. 31, 2010 Make The Web Better [Member]	Apr. 01, 2010 Make The Web Better [Member]	Dec. 31, 2012 Mercantila [Member]	Dec. 31, 2010 Mercantila [Member]	May 10, 2010 Mercantila [Member]	Dec. 31, 2012 Stock Options [Member] TaxACT [Member]	Dec. 31, 2012 Restricted Stock Units (RSUs) [Member] TaxACT [Member]	Dec. 31, 2012 Customer relationships [Member] TaxACT [Member]	Dec. 31, 2012 Customer relationships [Member] Mercantila [Member]	Dec. 31, 2012 Proprietary technology [Member] TaxACT [Member]	Dec. 31, 2012 Personal property assets [Member] TaxACT [Member]	Dec. 31, 2012 Developed Core Technology [Member] Mercantila [Member]	Dec. 31, 2012 Technology License [Member] Make The Web Better [Member]	Dec. 31, 2012 Installed code base technology [Member] Make The Web Better [Member]	Dec. 31, 2012 Prepaid Hosting Service [Member] Make The Web Better [Member]
Business Combinations (Textual) [Abstract]
Date of acquisition				Jan. 31, 2012							May 10, 2010
Cash paid for acquisition						$ 287,500,000				$ 8,000,000			$ 7,800,000
Net proceeds from credit facility used for acquisition						105,000,000
Credit facility drawn						100,000,000
Acquisition cost				1,100,000	305,000
Debt origination costs related to credit facility				2,300,000
Options														380,000	167,000
Estimates lives of acquired intangible assets																8 years	12 months	4 years	3 years	24 months	33 months	57 months	5 months
Gross contractual amount of trade accounts receivable acquired				9,400,000
Fair value of deferred revenue acquiree				304,000
Fair value of deferred revenue prior to acquisition				5,100,000
Revenue	406,919,000	228,813,000	214,343,000	62,100,000
Contribution to the Tax Preparation segment income				30,100,000
Revenue from acquiree business sales											49,400,000
Loss from discontinued operations, net of taxes		(2,253,000)	(4,593,000)								6,800,000
Loss on sale of discontinued operations, net of taxes		(7,674,000)									7,700,000
Business acquisition transaction costs												337,000
Purchase of assets										13,000,000
Purchase consideration included an initial cash payment							8,000,000
Contingent consideration							5,000,000			5,000,000
Revenue generated from search traffic							3,100,000	8,200,000	16,400,000
Amortization expense	$ 11,619,000						$ 752,000	$ 2,600,000	$ 9,000,000

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The Company and Basis of Presentation

12 Months Ended

Dec. 31, 2012

The Company and Basis of Presentation [Abstract]

The Company and Basis of Presentation

Note 1:    The Company and Basis of Presentation

Description of the business:    Blucora, Inc. (the “Company” or “Blucora”) operates two primary businesses: an internet search business and an online tax preparation business. The Company’s search business, InfoSpace, consists primarily of a B2B offering that provides its search technology, aggregated content, and services to its distribution partners. The search business also offers search services directly to consumers through its internet search properties. The tax preparation business consists of the operations of the TaxACT tax preparation online service and software business that the Company acquired on January 31, 2012.

The InfoSpace search business primarily offers search services through the web properties of its distribution partners, which are generally private-labeled and customized to address the unique requirements of each distribution partner. The search business also distributes aggregated search content through its own websites, such as Dogpile.com and WebCrawler.com. The search business does not generate its own search content, but instead aggregates search content from a number of content providers. Some of these content providers, such as Google and Yahoo!, pay the Company to distribute their content, and those providers are referred to as Search Customers.

On January 31, 2012, the Company acquired TaxACT Holdings, Inc. (“TaxACT Holdings”) and its wholly-owned subsidiary, 2 ^nd Story Software, Inc. (“2 ^nd Story”), which operates the TaxACT tax preparation online service and software business. The TaxACT business consists of an online tax preparation service for individuals, tax preparation software for individuals and professional tax preparers, and ancillary services. The majority of the TaxACT business’s revenue is generated by the online service at www.taxact.com. As a highly seasonal business, almost all of the TaxACT revenue is generated in the first four months of the calendar year.

Segments:    As a result of the acquisition of the TaxACT business, the Company has determined that it has two reporting segments: Search and Tax Preparation. The Search segment is the InfoSpace business and the Tax Preparation segment is the TaxACT business. Unless the context indicates otherwise, the Company uses the term “search” to represent search services and uses the term “tax preparation” to represent services and products sold through the TaxACT business (see “Note 13: Segment Information”).

Principles of consolidation:    The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions have been eliminated.

Basis of presentation:    On June 22, 2011, the Company sold its Mercantila e-commerce business to Zoo Stores, Inc., and the results of operations from the Mercantila business are reflected as discontinued operations for all periods presented.

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Stockholders' Equity (Details 2) (USD $)	12 Months Ended
	Dec. 31, 2012
Additional information regarding options outstanding for all plans
Options outstanding, Number outstanding	3,743,639
Options outstanding, Weighted average remaining contractual life (yrs.)	4 years 2 months 9 days
Options outstanding, Weighted average exercise price	$ 12.29
Options exercisable, Number Exercisable	2,228,437
Options exercisable, Weighted average exercise price	$ 13.33
Range One [Member]
Additional information regarding options outstanding for all plans
Range of exercise prices, Upper Range Limit	$ 8.63
Range of exercise prices, Lower Range Limit	$ 7.10
Options outstanding, Number outstanding	503,262
Options outstanding, Weighted average remaining contractual life (yrs.)	4 years 8 months 12 days
Options outstanding, Weighted average exercise price	$ 7.88
Options exercisable, Number Exercisable	322,860
Options exercisable, Weighted average exercise price	$ 7.52
Range Two [Member]
Additional information regarding options outstanding for all plans
Range of exercise prices, Upper Range Limit	$ 8.70
Range of exercise prices, Lower Range Limit	$ 8.70
Options outstanding, Number outstanding	200,000
Options outstanding, Weighted average remaining contractual life (yrs.)	5 years 9 months 25 days
Options outstanding, Weighted average exercise price	$ 8.70
Options exercisable, Number Exercisable	200,000
Options exercisable, Weighted average exercise price	$ 8.70
Range Three [Member]
Additional information regarding options outstanding for all plans
Range of exercise prices, Upper Range Limit	$ 8.74
Range of exercise prices, Lower Range Limit	$ 8.74
Options outstanding, Number outstanding	855,500
Options outstanding, Weighted average remaining contractual life (yrs.)	5 years 4 months 17 days
Options outstanding, Weighted average exercise price	$ 8.74
Options exercisable, Number Exercisable	455,500
Options exercisable, Weighted average exercise price	$ 8.74
Range Four [Member]
Additional information regarding options outstanding for all plans
Range of exercise prices, Upper Range Limit	$ 10.78
Range of exercise prices, Lower Range Limit	$ 8.80
Options outstanding, Number outstanding	443,400
Options outstanding, Weighted average remaining contractual life (yrs.)	3 years 10 months 3 days
Options outstanding, Weighted average exercise price	$ 9.63
Options exercisable, Number Exercisable	393,239
Options exercisable, Weighted average exercise price	$ 9.64
Range Five [Member]
Additional information regarding options outstanding for all plans
Range of exercise prices, Upper Range Limit	$ 11.39
Range of exercise prices, Lower Range Limit	$ 11.01
Options outstanding, Number outstanding	539,227
Options outstanding, Weighted average remaining contractual life (yrs.)	4 years 5 months 16 days
Options outstanding, Weighted average exercise price	$ 11.25
Options exercisable, Number Exercisable	168,788
Options exercisable, Weighted average exercise price	$ 11.24
Range Six [Member]
Additional information regarding options outstanding for all plans
Range of exercise prices, Upper Range Limit	$ 12.31
Range of exercise prices, Lower Range Limit	$ 11.82
Options outstanding, Number outstanding	423,100
Options outstanding, Weighted average remaining contractual life (yrs.)	5 years 6 months 4 days
Options outstanding, Weighted average exercise price	$ 12.26
Options exercisable, Number Exercisable	63,500
Options exercisable, Weighted average exercise price	$ 12.20
Range Seven [Member]
Additional information regarding options outstanding for all plans
Range of exercise prices, Upper Range Limit	$ 23.45
Range of exercise prices, Lower Range Limit	$ 12.76
Options outstanding, Number outstanding	207,600
Options outstanding, Weighted average remaining contractual life (yrs.)	5 years 7 days
Options outstanding, Weighted average exercise price	$ 16.28
Options exercisable, Number Exercisable	53,000
Options exercisable, Weighted average exercise price	$ 21.91
Range Eight [Member]
Additional information regarding options outstanding for all plans
Range of exercise prices, Upper Range Limit	$ 24.29
Range of exercise prices, Lower Range Limit	$ 24.29
Options outstanding, Number outstanding	450,000
Options outstanding, Weighted average remaining contractual life (yrs.)	4 days
Options outstanding, Weighted average exercise price	$ 24.29
Options exercisable, Number Exercisable	450,000
Options exercisable, Weighted average exercise price	$ 24.29
Range Nine [Member]
Additional information regarding options outstanding for all plans
Range of exercise prices, Upper Range Limit	$ 25.43
Range of exercise prices, Lower Range Limit	$ 24.47
Options outstanding, Number outstanding	120,550
Options outstanding, Weighted average remaining contractual life (yrs.)	7 months 21 days
Options outstanding, Weighted average exercise price	$ 24.71
Options exercisable, Number Exercisable	120,550
Options exercisable, Weighted average exercise price	$ 24.71
Range Ten [Member]
Additional information regarding options outstanding for all plans
Range of exercise prices, Upper Range Limit	$ 27.17
Range of exercise prices, Lower Range Limit	$ 27.17
Options outstanding, Number outstanding	1,000
Options outstanding, Weighted average remaining contractual life (yrs.)	3 months 22 days
Options outstanding, Weighted average exercise price	$ 27.17
Options exercisable, Number Exercisable	1,000
Options exercisable, Weighted average exercise price	$ 27.17

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Business Combinations (Details) (TaxACT Holdings [Member], USD $) In Thousands, unless otherwise specified	Jan. 31, 2012
Assets acquired and liabilities assumed are recorded at their fair values as of acquisition date
Tangible assets acquired	$ 22,465
Liabilities assumed	17,759
Identifiable net assets acquired	4,706
Fair value adjustments to intangible assets
Fair value of intangible assets acquired	150,699
Purchase price:
Cash paid	287,500
Less identifiable net assets acquired	(4,706)
Plus deferred tax liability related to intangible assets	53,380
Less fair value of intangible assets acquired	(150,699)
Excess of purchase price over net assets acquired, allocated to goodwill	185,475
Customer relationships [Member]
Fair value adjustments to intangible assets
Fair value of intangible assets acquired	101,400
Purchase price:
Less fair value of intangible assets acquired	(101,400)
Proprietary technology [Member]
Fair value adjustments to intangible assets
Fair value of intangible assets acquired	29,800
Purchase price:
Less fair value of intangible assets acquired	(29,800)
Trade name [Member]
Fair value adjustments to intangible assets
Fair value of intangible assets acquired	19,499
Purchase price:
Less fair value of intangible assets acquired	$ (19,499)

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Stockholders Equity (Tables)

12 Months Ended

Dec. 31, 2012

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary options for purchase common stock

A summary of the general terms of options to purchase common stock, RSUs and MSUs previously granted under these plans, including options outstanding and available for grant at December 31, 2012, is as follows:

	1996 Plan		2001 Plan
Requisite service period in years		4 or less		3 or less
Life in years		7 or 10		7 or 10
Options, RSUs, and MSUs outstanding at December 31, 2012		4,583,627		65,550
Options, RSUs, and MSUs available for grant at December 31, 2012		4,953,656		—

Summary of activity and pricing information regarding all options

	Options			Weighted average exercise price
Outstanding December 31, 2009		6,175,979		$	13.74
Granted		1,755,600			9.74
Forfeited		(605,032	)		11.41
Expired		(1,006,259	)		20.32
Exercised		(274,495	)		8.53
Outstanding December 31, 2010		6,045,793			11.95
Granted		1,540,350			8.71
Forfeited		(764,354	)		8.93
Expired		(701,082	)		18.64
Exercised		(2,153,410	)		7.95
Outstanding December 31, 2011		3,967,297			12.26
Granted		1,014,200			12.16
Forfeited		(150,000	)		9.61
Expired		(130,958	)		34.18
Exercised		(956,900	)		9.43
Outstanding December 31, 2012		3,743,639		$	12.29
Options exercisable, December 31, 2012		2,228,437		$	13.33
Options exercisable and expected to vest after December 31, 2012*		3,495,256		$	12.39

* Options expected to vest reflect an estimated forfeiture rate.

Additional information regarding options outstanding for all plans

All grants in 2012, 2011, and 2010 were made at an exercise price equal to the market price at the date of grant. Additional information regarding options outstanding for all plans as of December 31, 2012, is as follows:

	Options outstanding						Options exercisable
Range of exercise prices	Number outstanding		Weighted average remaining contractual life (yrs.)		Weighted average exercise price		Number exercisable		Weighted average exercise price
$7.10 – 8.63		503,262		4.70	$	7.88		322,860	$	7.52
$8.70 – 8.70		200,000		5.82		8.70		200,000		8.70
$8.74 – 8.74		855,500		5.38		8.74		455,500		8.74
$8.80 – 10.78		443,400		3.84		9.63		393,239		9.64
$11.01 – 11.39		539,227		4.46		11.25		168,788		11.24
$11.82 – 12.31		423,100		5.51		12.26		63,500		12.20
$12.76 – 23.45		207,600		5.02		16.28		53,000		21.91
$24.29 – 24.29		450,000		0.01		24.29		450,000		24.29
$24.47 – 25.43		120,550		0.64		24.71		120,550		24.71
$27.17 – 27.17		1,000		0.31		27.17		1,000		27.17
Total		3,743,639		4.19	$	12.29		2,228,437	$	13.33

Restricted Stock Units (RSUs) [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Activity and weighted average grant date fair value information regarding all Restricted stock and Market stock units grants

Activity and weighted average grant date fair value information regarding all RSU grants are summarized as follows:

	Restricted stock			Weighted average grant date fair value
Outstanding December 31, 2009		1,578,269		$	8.46
Granted		1,239,959			9.92
Forfeited		(374,288	)		8.81
Vested		(1,066,455	)		9.01
Outstanding December 31, 2010		1,377,485			9.26
Granted		291,500			8.86
Forfeited		(377,825	)		9.07
Vested		(676,680	)		9.30
Outstanding December 31, 2011		614,480			9.14
Granted		656,850			13.19
Forfeited		(111,706	)		9.13
Vested		(334,336	)		9.12
Outstanding December 31, 2012		825,288		$	12.38
Expected to vest after December 31, 2012*		706,018		$	12.38

* RSUs expected to vest reflect an estimated forfeiture rate.

Market Stock Units [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Activity and weighted average grant date fair value information regarding all Restricted stock and Market stock units grants

Activity and weighted average grant date fair value information regarding all MSU grants are summarized as follows:

	Market stock units			Weighted average grant date fair value
Outstanding December 31, 2010		—		$	—
Granted		155,250			9.28
Forfeited		(52,750	)		9.28
Outstanding December 31, 2011		102,500			9.28
Performance adjustment		40,125			9.28
Cancelled		(22,250	)		9.28
Vested		(40,125	)		9.28
Outstanding December 31, 2012		80,250		$	9.28
Expected to vest after December 31, 2012*		70,142		$	9.28

* MSUs expected to vest reflect an estimated forfeiture rate.

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2012

Fair Value Measurements [Abstract]

Financial assets carried at fair value and measured on recurring basis

The fair value hierarchy of the Company’s financial assets and liabilities carried at fair value and measured on a recurring basis is as follows (in thousands):

				Fair value measurements at the re porting date using
	December 31, 2012			Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Assets
Cash equivalents:
U.S. government securities	$	6,900		$	—	$	6,900		$	—
Money market and other funds		13,723			—		13,723			—
Commercial paper		6,999			—		6,999			—
Time deposits		1,245			—		1,245			—
Taxable municipal bonds		8,794			—		8,794			—
Total cash equivalents		37,661			—		37,661			—
Available-for-sale securities:
U.S. government securities		41,402			—		41,402			—
Commercial paper		9,396			—		9,396			—
Time deposits		7,169			—		7,169			—
Taxable municipal bonds		36,043			—		36,043			—
Total available-for-sale securities		94,010			—		94,010			—
Total assets		131,671			—		131,671			—
Liabilities
Derivative instruments
Warrant (see Note 8)		(8,564	)		—		—			(8,564	)
Interest rate swap (see Note 10)		(410	)		—		(410	)		—
Total liabilities		(8,974	)		—		(410	)		(8,564	)
Total assets and liabilities at fair value	$	122,697		$	—	$	131,261		$	(8,564	)

			Fair value measurements at the reporting date using
	December 31, 2011		Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Cash equivalents:
Money market funds	$	32,637	$	—	$	32,637	$	—
Commercial paper		20,000		—		20,000		—
Total cash equivalents		52,637		—		52,637		—
Available-for-sale securities:
U.S. government securities		162,170		—		162,170		—
Commercial paper		49,484		—		49,484		—
Total available-for-sale securities		211,654		—		211,654		—
Total assets at fair value	$	264,291	$	—	$	264,291	$	—

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Balance Sheet Components (Details 4) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Schedule of accrued expenses and other current liabilities
Salaries and related expenses	$ 5,185	$ 4,014
Accrued content costs	3,017	1,141
Business acquisition contingent liability	1,101	3,184
Other	3,977	1,910
Total accrued expenses and other current liabilities	$ 13,280	$ 10,249

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Business Combinations (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Revenues and income from continuing operations
Revenues	$ 427,809	$ 307,594
Income from continuing operations	$ 26,819	$ 11,251

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Stock-Based Compensation Expense (Tables)

12 Months Ended

Dec. 31, 2012

Stock-based Compensation Expense [Abstract]

Stock option grants and warrant

To estimate the compensation cost that was recognized for the years ended December 31, 2012, 2011, and 2010, the Company used the Black-Scholes-Merton option-pricing model with the following weighted-average assumptions for equity awards granted:

	Years ended December 31,
	2012		2011		2010
Stock option grants:
Risk-free interest rate		0.26% - 1.57%		0.25% - 1.58%		0.44% - 1.94%
Expected dividend yield		0%		0%		0%
Expected volatility		40% - 48%		40% - 50%		48% - 53%
Expected life		3.3 years		3.0 years		3.1 years
Non-employee stock option grant:
Risk-free interest rate		0.26%		—		—
Expected dividend yield		0%		—		—
Expected volatility		38% - 41%		—		—
Expected life		1.6 - 2.2 years		—		—
Market stock unit grants
Risk-free interest rate		—		0.15%		—
Blucora expected dividend yield		—		0%		—
iShares Russell 2000 Index expected dividend yield		—		1.08%		—
Blucora closing stock price		—		$8.74		—
iShares Russell 2000 Index closing price		—		$82.29		—
Blucora expected volatility		—		37.4%		—
iShares Russell 2000 Index expected volatility		—		20.3%		—
Measurement period		—		1.0 years		—
Warrant grant:
Risk-free interest rate		0.68% - 0.89%		0.46%		—
Expected dividend yield		0%		0%		—
Expected volatility		46% - 48%		39%		—
Expected life		4.6 - 5.4 years		2.0 years		—

Stock-based compensation expense

The Company has included the following amounts for stock-based compensation cost, including the cost related to the ESPP, in the accompanying Statement of operations and comprehensive income for the years ended December 31, 2012, 2011, and 2010 (amounts in thousands):

	Years ended December 31,
	2012		2011		2010
Cost of sales	$	558	$	286	$	461
Engineering and technology		1,180		821		1,298
Sales and marketing		1,909		1,002		2,631
General and administrative		9,576		5,579		9,528
Total		13,223	$	7,688	$	13,918

Financing cash flow generated by tax benefits from stock-based award activity was $23.0 million in 2012. Excluded from the amounts recorded in the above categories of operating expense for the years ended December 31, 2012, 2011, and 2010 are the following amounts that were capitalized as part of internally developed software, and amounts that were reclassified as discontinued operations (amounts in thousands):

	Years ended December 31,
	2012		2011			2010
Internally developed software	$	121	$	206		$	259
Discontinued operations		—		(159	)		833
Total	$	121	$	47		$	1,092

Intrinsic value for restricted stock units

The total intrinsic value of RSUs vested, MSUs vested, options exercised, and shares purchased pursuant to the ESPP during the years ended December 31, 2012, 2011, and 2010 is supplemental information for the consolidated statements of cash flows and is presented below (amounts in thousands):

	Years ended December 31,
	2012		2011		2010
RSUs vested	$	4,663	$	5,945	$	10,097
MSUs vested	$	511	$	—	$	—
Options exercised	$	3,886	$	2,474	$	436
Shares purchased pursuant to ESPP	$	277	$	100	$	107

Total intrinsic value and weighted average remaining contractual terms of awards outstanding

Awards outstanding at December 31, 2012 have the following total intrinsic value and weighted average remaining contractual terms:

	Outstanding at December  31, 2012		Intrinsic value (in thousands)		Weighted  average remaining contractual term (in years)
Options outstanding		3,743,639	$	18,126		4.2
Options exercisable and outstanding		2,228,437	$	10,585		3.4
Restricted stock units outstanding		825,288	$	12,965		1.0
Market stock units outstanding		80,250	$	1,261		0.9

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies [Abstract]

Summary of contractual commitments

The Company’s contractual commitments are as follows for the following years ending December 31 (in thousands):

	2013			2014		2015		2016		2017		Thereafter		Total
Operating lease commitments	$	919		$	1,770	$	1,599	$	1,222	$	1,259	$	3,649	$	10,418
Less sublease income		(36	)		—		—		—		—		—		(36	)
Net lease payments required		883			1,770		1,599		1,222		1,259		3,649		10,382
Purchase commitments		1,272			581		423		92		61		—		2,429
Debt commitments		4,750			9,500		13,062		14,250		32,934		—		74,496
Total	$	6,905		$	11,851	$	15,084	$	15,564	$	34,254	$	3,649	$	87,307

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Consolidated Statements of Cash Flows (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Consolidated Statements of Cash Flows [Abstract]
Proceeds from loan, net of debt issuance costs and debt discount	$ 2,343	$ 953

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Derivative Instruments and Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2012

Derivative Instruments and Hedging Activities [Abstract]

Summary of fair values of outstanding derivative instruments

The fair values of outstanding derivative instruments were as follows (in thousands):

	Balance Sheet Location	As of December 31, 2012
Derivative liabilities
Derivative designated as a hedging instrument:
Interest rate contract (interest rate swap)	Current liabilities - derivative instruments	$	410
Derivative not designated as a hedging instrument:
Equity contract (the Warrant)	Current liabilities - derivative instruments		8,564
		$	8,974

Summary of effect of derivative instrument not designated as hedging instruments on income

The effect of the derivative instrument not designated as hedging instruments on income is summarized below for the year ended December 31, 2012 (in thousands):

Derivative not designated as hedging instrument	Location	Loss recognized in other loss (income), net
Equity contract (the Warrant)	Other loss (income), net	$	2,346

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Summary of Significant Accounting Policies (Details 4) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Components of accumulated other comprehensive income
Unrealized loss on derivative instrument, Beginning balance
Foreign currency translation adjustment, Other comprehensive loss			(1,436)
Unrealized gain (loss) on investment, Other comprehensive income (loss)	(42)	34	94
Unrealized loss on derivative instrument, Other comprehensive loss	(266)
Other comprehensive income (loss)	(308)	34	(1,342)
Foreign currency translation adjustment, Ending Balance				1,436
Unrealized gain (loss) on investment, Ending balance	(10)	32	(2)	(96)
Unrealized loss on derivative instrument, Ending Balance	(266)
Accumulated other comprehensive income (loss)	$ (276)	$ 32	$ (2)	$ 1,528

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Balance Sheet Components (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Maturity information for investments available-for-sale
Amortized Cost	$ 94,029	$ 211,622
Gross unrealized gains	36	34
Gross unrealized losses	(55)	(2)
Total available-for-sale securities	94,010	211,654
Within one year [Member]
Maturity information for investments available-for-sale
Amortized Cost	94,029	211,622
Gross unrealized gains	36	34
Gross unrealized losses	(55)	(2)
Total available-for-sale securities	94,010	211,654
Greater than one year [Member]
Maturity information for investments available-for-sale
Amortized Cost
Gross unrealized gains
Gross unrealized losses
Total available-for-sale securities

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Debt (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Jan. 31, 2012
Debt (Textual) [Abstract]
Credit agreement		$ 105.0
Term loan borrowed		95
Interest Rate Description	The Applicable Margin is dependent on the consolidated Total Leverage Ratio (as defined in the credit agreement) of TaxACT Holdings and ranges from 2.0% to 3.5% for borrowings tied to the Alternative Base Rate and 3.0% to 4.5% for borrowings tied to the LIBOR Rate
Prepayment on the term loan	90 days
Mandatory prepayment on term loan within requirement	A portion of any excess cash flows, as the term is defined in the credit agreement, must be used to make a mandatory prepayment on the term loan within ninety days ofJune30, 2013 and thereafter within 90 days of June 30thin succeeding years in the event that the leverage ratio is more than two-to-one on June 30th of that year.
Credit agreement termination date	Jan. 31, 2017
Alternative Base Rate [Member] | Maximum [Member]
Debt (Textual) [Abstract]
Alternative Base Rate and LIBOR Rate	3.50%
Alternative Base Rate [Member] | Minimum [Member]
Debt (Textual) [Abstract]
Alternative Base Rate and LIBOR Rate	2.00%
Libor Rate [Member]
Debt (Textual) [Abstract]
LIBOR Rate portion	0.85%
Libor Rate [Member] | Maximum [Member]
Debt (Textual) [Abstract]
Alternative Base Rate and LIBOR Rate	4.50%
Libor Rate [Member] | Minimum [Member]
Debt (Textual) [Abstract]
Alternative Base Rate and LIBOR Rate	3.00%
Revolving debt [member]
Debt (Textual) [Abstract]
Credit agreement		10.0
Term loan borrowed		5
Repaid the debt	25.5
Long-term Debt [Member]
Debt (Textual) [Abstract]
Quarterly principal payments and matures	Jan. 31, 2017
Principal payments and matures	Quarterly
Term Debt Outstanding	74.5
Amount outstanding under the term loan	37.5
Term Loan [Member]
Debt (Textual) [Abstract]
Credit agreement	74.5	$ 95.0

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 68,278	$ 81,897
Short-term investments, available-for-sale	94,010	211,654
Accounts receivable, net of allowance of $10 and $10	34,932	25,019
Other receivables	3,942	542
Prepaid expenses and other current assets, net	10,911	1,958
Total current assets	212,073	321,070
Property and equipment, net	7,533	5,277
Goodwill	230,290	44,815
Other intangible assets, net	132,815	1,315
Deferred tax asset, net		19,102
Other long-term assets	2,582	3,560
Total assets	585,293	395,139
Current liabilities:
Accounts payable	37,687	28,947
Accrued expenses and other current liabilities	13,280	10,249
Deferred revenue	3,157	1
Short-term portion of long-term debt, net of discount of $160 and $0	4,590
Derivative instruments	8,974
Total current liabilities	67,688	39,197
Long-term liabilities:
Long-term debt, net of discount of $468 and $0	69,278
Deferred tax liability, net	29,333	21
Deferred revenue	1,319
Other long-term liabilities	2,225	816
Total long-term liabilities	102,155	837
Total liabilities	169,843	40,034
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock, par value $.0001-authorized, 900,000,000 shares; issued and outstanding, 40,832,393 and 39,533,570 shares	4	4
Additional paid-in capital	1,392,098	1,353,971
Accumulated deficit	(976,376)	(998,902)
Accumulated other comprehensive income (loss)	(276)	32
Total stockholders' equity	415,450	355,105
Total liabilities and stockholders' equity	$ 585,293	$ 395,139

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Business Combinations (Details 2) (Mercantila [Member], USD $) In Thousands, unless otherwise specified	May 10, 2010
Assets acquired and liabilities assumed are recorded at their fair values as of acquisition date
Tangible assets acquired	$ 2,234
Liabilities assumed	(8,231)
Identifiable net liabilities assumed	(5,997)
Fair value adjustments to intangible assets
Identifiable net liabilities assumed	(4,613)
Purchase price:
Cash paid	7,800
Plus identifiable net liabilities assumed	5,997
Less fair value of intangible assets acquired	(1,384)
Excess of purchase price over net assets acquired, allocated to goodwill	12,413
License for use of developed core technology [Member]
Fair value adjustments to intangible assets
Identifiable net liabilities assumed	893
Customer relationships [Member]
Fair value adjustments to intangible assets
Identifiable net liabilities assumed	39
Internet domain names [Member]
Fair value adjustments to intangible assets
Identifiable net liabilities assumed	$ 452

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Consolidated Statements of Stockholders' Equity (USD $)	Total	Common Stock	Additional paid-in	Accumulated deficit	Accumulated other comprehensive income
Balance at Dec. 31, 2009	$ 279,835,000	$ 4,000	$ 1,303,667,000	$ (1,025,176,000)	$ 1,340,000
Balance, shares at Dec. 31, 2009		35,391,000
Common stock issued for stock options and restricted stock units	2,191,000		2,191,000
Common stock issued for stock options and restricted stock units, shares		962,000
Common stock issued for employee stock purchase plan	350,000		350,000
Common stock issued for employee stock purchase plan, shares		54,000
Common stock retired	(2,099,000)		(2,099,000)
Common stock retired, shares		(318,000)
Unrealized loss on available-for-sale investments	94,000				94,000
Unrealized loss on derivative instrument
Foreign currency transaction adjustment	(74,000)				(74,000)
Foreign currency translation adjustment for disposition of foreign subsidiaries	(1,362,000)				(1,362,000)
Tax effect of equity compensation	7,032,000		7,032,000
Stock-based compensation	15,010,000		15,010,000
Taxes paid on stock issued for equity awards	(3,886,000)		(3,886,000)
Net income	4,680,000			4,680,000
Balance at Dec. 31, 2010	301,771,000	4,000	1,322,265,000	(1,020,496,000)	(2,000)
Balance, shares at Dec. 31, 2010		36,089,000
Common stock issued for stock options and restricted stock units	17,121,000		17,121,000
Common stock issued for stock options and restricted stock units, shares		2,627,000
Common stock issued for employee stock purchase plan	377,000		377,000
Common stock issued for employee stock purchase plan, shares		54,000
Sale of common stock	7,000,000		7,000,000
Sale of common stock, shares		764,000
Unrealized loss on available-for-sale investments	34,000				34,000
Unrealized loss on derivative instrument
Tax effect of equity compensation	1,260,000		1,260,000
Stock-based compensation	7,734,000		7,734,000
Taxes paid on stock issued for equity awards	(1,786,000)		(1,786,000)
Net income	21,594,000			21,594,000
Balance at Dec. 31, 2011	355,105,000	4,000	1,353,971,000	(998,902,000)	32,000
Balance, shares at Dec. 31, 2011	39,533,570	39,534,000
Common stock issued for stock options and restricted stock units	9,025,000		9,025,000
Common stock issued for stock options and restricted stock units, shares		1,236,000
Common stock issued for employee stock purchase plan	601,000		601,000
Common stock issued for employee stock purchase plan, shares		62,000
Unrealized loss on available-for-sale investments	(42,000)				(42,000)
Unrealized loss on derivative instrument	(266,000)				(266,000)
Tax effect of equity compensation	22,693,000		22,693,000
Stock-based compensation	13,344,000		13,344,000
Taxes paid on stock issued for equity awards	(1,318,000)		(1,318,000)
Reclassification of equity award to liability award	(6,218,000)		(6,218,000)
Net income	22,526,000			22,526,000
Balance at Dec. 31, 2012	$ 415,450,000	$ 4,000	$ 1,392,098,000	$ (976,376,000)	$ (276,000)
Balance, shares at Dec. 31, 2012	40,832,393	40,832,000

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Fair Value Measurements (Details Textual) (Fair value measurements, Recurring [Member], Significant unobservable inputs (Level 3) [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2011
Fair value measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member]
Fair Value Measurements (Textual) [Abstract]
Fair assets measured on recurring basis	$ 0

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The Company and Basis of Presentation (Details Textual)	12 Months Ended
	Dec. 31, 2012 Segment
Company and Basis of Presentation (Textual) [Abstract]
Number of reporting segments	2

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Stock-based Compensation Expense (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Employee stock option grants [Member]
Stock option grants and warrant
Expected dividend yield	0.00%	0.00%	0.00%
Expected life	3 years 3 months 18 days	3 years	3 years 1 month 6 days
Employee stock option grants [Member] | Maximum [Member]
Stock option grants and warrant
Risk-free interest rate	1.57%	1.58%	1.94%
Expected volatility	48.00%	50.00%	53.00%
Employee stock option grants [Member] | Minimum [Member]
Stock option grants and warrant
Risk-free interest rate	0.26%	0.25%	0.44%
Expected volatility	40.00%	40.00%	48.00%
Stock Option [Member]
Stock option grants and warrant
Risk-free interest rate	0.26%
Expected dividend yield	0.00%
Stock Option [Member] | Maximum [Member]
Stock option grants and warrant
Expected volatility	41.00%
Expected life	2 years 2 months 12 days
Stock Option [Member] | Minimum [Member]
Stock option grants and warrant
Expected volatility	38.00%
Expected life	1 year 7 months 6 days
Market Stock Unit Grants [Member]
Stock option grants and warrant
Risk-free interest rate		0.15%
Expected dividend yield		0.00%
Closing Price		8.74
Expected volatility		37.40%
Expected life		1 year
Market Stock Unit Grants [Member] | iShares Russell 2000 Index [Member]
Stock option grants and warrant
Expected dividend yield		1.08%
Closing Price		82.29
Expected volatility		20.30%
Warrant grant [Member]
Stock option grants and warrant
Risk-free interest rate		0.46%
Expected dividend yield	0.00%	0.00%
Expected volatility		39.00%
Expected life		2 years
Warrant grant [Member] | Maximum [Member]
Stock option grants and warrant
Risk-free interest rate	0.89%
Expected volatility	48.00%
Expected life	5 years 4 months 24 days
Warrant grant [Member] | Minimum [Member]
Stock option grants and warrant
Risk-free interest rate	0.68%
Expected volatility	46.00%
Expected life	4 years 7 months 6 days

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Subsequent Events

12 Months Ended

Dec. 31, 2012

Subsequent Events [Abstract]

Subsequent Events

Note 14:    Subsequent Events

On January 7, 2013, the Company completed a $4 million equity investment in a privately-owned company.

On February 6, 2013, the Company’s board of directors approved a plan whereby the Company may repurchase up to $50 million of its common stock in open-market transactions during the succeeding 24 month period. Repurchased shares will be retired and resume the status of authorized but unissued shares of common stock.

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Summary of Significant Accounting Policies (Details)	12 Months Ended
	Dec. 31, 2012
Computer equipment and software [Member]
Estimated useful life of Property and equipment
Property, Plant and Equipment, Useful Life	3 years
Data center servers [Member]
Estimated useful life of Property and equipment
Property, Plant and Equipment, Useful Life	3 years
Internally developed software [Member] | Maximum [Member]
Estimated useful life of Property and equipment
Property, Plant and Equipment, Useful Life	3 years
Internally developed software [Member] | Minimum [Member]
Estimated useful life of Property and equipment
Property, Plant and Equipment, Useful Life	15 months
Office equipment [Member]
Estimated useful life of Property and equipment
Property, Plant and Equipment, Useful Life	7 years
Office furniture [Member]
Estimated useful life of Property and equipment
Property, Plant and Equipment, Useful Life	7 years
Leasehold improvements [Member]
Estimated useful life of Property and equipment
Property, Plant and Equipment, Estimated Useful Lives	Shorter of lease term or economic life

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2012

Summary of Significant Accounting Policies [Abstract]

Estimated useful life of Property and equipment

Depreciation is computed under the straight-line method over the following estimated useful lives:

Computer equipment and software	3 years
Data center servers	3 years
Internally developed software	15 months — 3 years
Office equipment	7 years
Office furniture	7 years
Leasehold improvements	Shorter of lease term or economic life

Other loss (income)

Other loss (income), net for the years ended December 31, 2012, 2011, and 2010, consists of the following (in thousands):

	2012			2011			2010
Interest expense	$	3,522		$	—		$	—
Interest income		(131	)		(369	)		(331	)
Amortization of debt issuance costs		820			—			—
Accretion of debt discount		325			—			—
Loss on derivative instrument		2,346			—			—
Gain on contingency resolution		—			(1,500	)		—
Increase in fair value of earn-out contingent liability		—			3,000			5,000
Foreign currency exchange loss (gain), net		48			20			(1,335	)
Litigation settlement gain		—			—			(18,965	)
Loss (gain) on disposal of assets		(1	)		46			1,014
Other		(252	)		49			(630	)
Other loss (income), net	$	6,677		$	1,246		$	(15,247	)

Loss from discontinued operations and loss on sale of discontinued operations

Revenue, loss before taxes, income tax benefit, and loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes, for the year ended December 31, 2011 are presented below (in thousands):

	Years ended December 31,
	2011			2010
Revenue from discontinued operations	$	16,894		$	32,492
Loss from discontinued operations before taxes	$	(3,506	)	$	(5,908	)
Income tax benefit		1,253			1,315
Loss from discontinued operations, net of taxes	$	(2,253	)	$	(4,593	)
Loss on sale of discontinued operations, net of an income tax benefit of $5,092	$	(7,674	)	$	—

Dilutive effect for stock options and warrants

The treasury stock method calculates the dilutive effect for awards with an exercise price less than the average stock price during the period presented (in thousands):

	Years ended December 31,
In thousands	2012		2011		2010
Weighted average common shares outstanding, basic		40,279		37,954		35,886
Dilutive stock options, RSUs, MSUs, and the Warrant		1,393		667		943
Weighted average common shares outstanding, diluted		41,672		38,621		36,829
Antidilutive awards with an exercise price less than the average price during the applicable period excluded from dilutive share calculation		200		876		1,199
Outstanding awards with an exercise price greater than the average price during the applicable period not included in dilutive share calculation		804		2,927		4,282
Outstanding awards with performance conditions not completed during the applicable period not included in dilutive share calculation		168		—		—

Components of accumulated other comprehensive income

The following table provides information about activity in other comprehensive income during the period from January 1, 2010 to December 31, 2012 (in thousands):

	Foreign currency translation adjustment			Unrealized gain (loss) on investment			Unrealized loss on derivative instrument			Total
Balance as of January 1, 2010	$	1,436		$	(96	)		—		$	1,340
Other comprehensive loss		(1,436	)		94			—			(1,342	)
Balance as of December 31, 2010		—			(2	)		—			(2	)
Other comprehensive income		—			34			—			34
Balance as of December 31, 2011		—			32			—			32
Other comprehensive loss		—			(42	)		(266	)		(308	)
Balance as of December 31, 2012	$	—		$	(10	)	$	(266	)	$	(276	)

Revenue concentration

Geographic revenue information, as determined by the location of the customer, is presented below (in thousands):

	Years ended December 31,
	2012		2011		2010
United States	$	402,656	$	226,229	$	209,029
International		4,263		2,584		5,314
Total	$	406,919	$	228,813	$	214,343

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Stock-based Compensation Expense (Details 3) (USD $) In Thousands, except Share data, unless otherwise specified					12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2012 Options Outstanding [Member]	Dec. 31, 2012 Options exercised [Member]	Dec. 31, 2012 Restricted stock units outstanding [Member]	Dec. 31, 2012 Market stock units outstanding [Member]
Total intrinsic value and weighted average remaining contractual terms of awards outstanding
Options outstanding	3,743,639	3,967,297	6,045,793	6,175,979	3,743,639	2,228,437	825,288	80,250
Options Intrinsic value					$ 18,126		$ 12,965	$ 1,261
Options weighted average remaining contractual term (in years)					4 years 2 months 12 days		1 year	10 months 24 days
Options exercisable and outstanding Intrinsic Value						$ 10,585
Options exercisable and outstanding weighted average remaining contractual term (in years)						3 years 4 months 24 days

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Operating Activities:
Net income	$ 22,526	$ 21,594	$ 4,680
Loss from discontinued operations		2,253	4,593
Loss on sale of discontinued operations		7,674
Income from continuing operations	22,526	31,521	9,273
Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations:
Stock-based compensation	8,937	5,756	13,918
Warrant-related stock-based compensation	4,286	1,932
Depreciation and amortization	23,011	7,456	15,793
Excess tax benefits from stock-based award activity	(23,041)	(1,260)	(7,032)
Earn-out contingent liability adjustments		3,000	5,000
Gain on resolution of contingent liability		(1,500)
Common stock retired relating to litigation settlement			(2,099)
Unrealized amortization of premium or accretion of discount on investments, net	(194)	(89)	365
Loss on disposal of assets, net		46	1,262
Foreign currency translation gains, net			(1,436)
Deferred income taxes	(8,738)	(18,870)	19
Amortization of debt origination costs	820
Accretion of debt discount	325
Loss on derivative instrument	2,346
Other	31	(28)	3
Changes in operating assets and liabilities:
Accounts receivable	(597)	(5,734)	9,274
Other receivables	(665)	643	1,852
Prepaid expenses and other current assets	(5,862)	284	636
Other long-term assets	1,981	(258)	(201)
Accounts payable	(1,600)	26,253	(3,506)
Accrued expenses and other current and long-term liabilities	25,265	(23,889)	6,785
Net cash provided by operating activities	48,831	25,263	49,906
Investing Activities:
Business acquisitions, net of cash acquired	(279,386)		(8,000)
Purchases of property and equipment	(3,756)	(2,679)	(2,894)
Change in restricted cash	252	649	230
Proceeds from sale of assets	4		307
Proceeds from sales of investments	203,493	63,166	52,801
Proceeds from maturities of investments	36,753	160,161	191,976
Purchases of investments	(122,433)	(336,770)	(200,493)
Net cash provided (used) by investing activities	(165,073)	(115,473)	33,927
Financing Activities:
Proceeds from loan, net of debt issuance costs of $2,343 and debt discount of $953	96,704
Repayment of debt	(25,504)
Excess tax benefits from stock-based award activity	23,041	1,260	7,032
Proceeds from stock option exercises	9,099	17,049	2,191
Proceeds from issuance of stock through employee stock purchase plan	601	377	350
Proceeds from sale of common stock		7,000
Repayment of capital lease obligation		(221)	(589)
Tax payments from shares withheld upon vesting of restricted stock units	(1,318)	(1,786)	(4,201)
Earn-out payments for business acquisitions		(423)	(4,577)
Net cash provided by financing activities	102,623	23,256	206
Discontinued operations:
Net cash used by operating activities of discontinued operations		(6,156)	(4,034)
Net cash used by investing activities of discontinued operations		(638)	(8,110)
Net cash used by discontinued operations		(6,794)	(12,144)
Net increase (decrease) in cash and cash equivalents	(13,619)	(73,748)	71,895
Cash and cash equivalents, beginning of period	81,897	155,645	83,750
Cash and cash equivalents, end of period	68,278	81,897	155,645
Supplemental disclosure of non-cash investing activities:
Liabilities assumed in purchase transaction			(8,231)
Purchases of assets through leasehold incentives	841
Supplemental disclosure of non-cash financing activities:
Contingent earn-out consideration from acquisition		(3,000)	(5,000)
Cash paid (received) for:
Income tax expense (benefit) for continuing operations	3,071	809	(364)
Interest expense for continuing operations	$ 3,527	$ 48	$ 24

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Allowance for accounts receivable	$ 10	$ 10
Short-term portion of long-term debt, discount	160	0
Discount on long-term debt	$ 468	$ 0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	900,000,000	900,000,000
Common stock, shares issued	40,832,393	39,533,570
Common stock, shares outstanding	40,832,393	39,533,570

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 9:    Commitments and Contingencies

The Company has noncancellable operating leases for its corporate facilities. The leases run through 2020. Rent expense under operating leases totaled $1.8 million, $1.8 million, and $1.3 million for the years ended December 31, 2012, 2011, and 2010, respectively.

The Company’s debt commitments are included in the Company’s consolidated balance sheets. The Company’s contractual commitments are as follows for the following years ending December 31 (in thousands):

	2013			2014		2015		2016		2017		Thereafter		Total
Operating lease commitments	$	919		$	1,770	$	1,599	$	1,222	$	1,259	$	3,649	$	10,418
Less sublease income		(36	)		—		—		—		—		—		(36	)
Net lease payments required		883			1,770		1,599		1,222		1,259		3,649		10,382
Purchase commitments		1,272			581		423		92		61		—		2,429
Debt commitments		4,750			9,500		13,062		14,250		32,934		—		74,496
Total	$	6,905		$	11,851	$	15,084	$	15,564	$	34,254	$	3,649	$	87,307

Purchase commitments.    The Company’s purchase commitments are primarily comprised of non-cancelable service agreements for its data centers.

The Company has pledged a portion of its cash as collateral for standby letters of credit and bank guaranties for certain of its property leases and banking arrangements. At December 31, 2012, the total amount of collateral pledged under these agreements was $3.4 million.

The above table does not reflect unrecognized tax benefits of approximately $1.2 million, the timing of which is uncertain. For additional discussion on unrecognized tax benefits see Note 12.

Debt commitments:    The Company’s debt commitments consist of the minimum scheduled loan payments related to the credit facility that 2^nd Story entered into to help finance the acquisition of the TaxACT business. 2^nd Story may repay the amounts outstanding under the credit facility before its term is complete, depending on the cash generated by the TaxACT business’s operations.

Off-balance sheet arrangements.    The Company has no off-balance sheet arrangements other than operating leases. The Company does not believe that these operating leases are material to its current or future financial position, results of operations, revenues or expenses, liquidity, capital expenditures or capital resources.

Litigation

From time to time the Company is subject to various legal proceedings or claims that arise in the ordinary course of business. Although the Company cannot predict the outcome of these matters with certainty, the Company’s management does not believe that the disposition of these ordinary course matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

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Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Mar. 01, 2013	Jun. 30, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	BLUCORA, INC.
Entity Central Index Key	0001068875
Document Type	10-K
Document Period End Date	Dec. 31, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 470.4
Entity Common Stock, Shares Outstanding		40,969,769

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Debt

12 Months Ended

Dec. 31, 2012

Debt [Abstract]

Debt

Note 10:    Debt

On January 31, 2012 in conjunction with closing the Company’s acquisition of the TaxACT business, 2^nd Story entered into an agreement with a syndicate of lenders for a $105 million credit facility, consisting of $95 million term loan and up to $10 million under a revolving credit facility. 2 ^nd Story’s obligations under the credit agreement are guaranteed by TaxACT Holdings, a direct subsidiary of the Company and the direct parent of 2^nd Story, and are secured by the assets of the TaxACT business and the 2^nd Story equity owned by TaxACT Holdings. On January 31, 2012, 2^nd Story borrowed $95 million of term debt and $5 million under the revolving credit facility.

The $95 million term loan requires quarterly principal payments and matures on January 31, 2017. See the loan repayment schedule in Note 9. The interest rate on amounts borrowed under the term loan and the revolving loan is variable and payable as of the end of each interest period or, if more frequent, quarterly, based upon, at the election of 2 ^nd Story, the Alternate Base Rate or the LIBOR Rate, plus the Applicable Margin (as such terms are defined in the credit agreement). The Applicable Margin is dependent on the consolidated Total Leverage Ratio (as defined in the credit agreement) of TaxACT Holdings and ranges from 2.0% to 3.5% for borrowings tied to the Alternative Base Rate and 3.0% to 4.5% for borrowings tied to the LIBOR Rate.

A portion of any excess cash flows, as the term is defined in the credit agreement, must be used to make a mandatory prepayment on the term loan within ninety days of June 30, 2013 and thereafter within 90 days of June 30^th in succeeding years in the event that the leverage ratio is more than two-to-one on June 30^th of that year. Amounts outstanding under the term loan may be prepaid without penalty. In 2012, 2 ^nd Story repaid $25.5 million of the debt, including the balance of revolving credit facility. The remaining amount of debt outstanding under the term loan as of December 31, 2012 was $74.5 million. The credit agreement covenants limit 2^nd Story and its parent, TaxACT Holdings, from, in certain circumstances, incurring additional indebtedness, incurring liens, paying dividends to the Company, making capital expenditures over stipulated maximums, allowing the consolidated Total Leverage Ratio (as defined in the credit agreement) to exceed stipulated levels over the debt term, and allowing the Fixed Charge Coverage Ratio to be less than stipulated levels.

As of December 31, 2012, the term loan’s gross carrying value of $74.5 million approximates its fair value as it is a variable rate instrument and the current applicable margin approximates current market conditions.

Additionally, the Company was required to hedge a portion of the interest rate risk associated with the term debt 90 days after its inception, and that requirement was met on May 1, 2012 by the purchase of an interest rate swap with a financial institution which fixed the LIBOR Rate portion at 0.85% for $37.5 million of the amount outstanding under the term loan. The swap’s terms are scheduled to fix the interest rate on a declining amount outstanding under the term loan, approximating half of the debt balance, until the credit agreement’s termination on January 31, 2017.

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Income Taxes (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Taxes (Textual) [Abstract]
Change in valuation allowance during period reported in consolidated balance sheet	$ (20,647,000)	$ (33,355,000)
Federal net operating loss carryforward for income tax purposes	723,300,000
Operating loss carryforward expiration period	2020	2031
Unrecognized Tax Benefits Impacting Effective Tax Rate	1,200,000	816,000
Deferred tax asset subject to a valuation allowance	17,900,000	17,500,000
Significant adjustments	$ 0
U S effective income tax rate	35.00%	35.00%	35.00%

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Consolidated Statements of Comprehensive Income [Abstract]
Revenues	$ 406,919	$ 228,813	$ 214,343
Cost of sales (includes amortization of acquired intangible assets of $7,580, $2,595, and $9,197)	267,451	154,962	138,995
Gross profit	139,468	73,851	75,348
Expenses and other loss (income):
Engineering and technology	9,969	7,158	8,471
Sales and marketing	44,138	21,510	28,145
General and administrative	27,418	21,542	32,843
Depreciation	2,119	2,162	3,138
Amortization of intangible assets	11,619
Other loss (income), net	6,677	1,246	(15,247)
Total expenses and other loss (income)	101,940	53,618	57,350
Income from continuing operations before income taxes	37,528	20,233	17,998
Income tax benefit (expense)	(15,002)	11,288	(8,725)
Income from continuing operations	22,526	31,521	9,273
Discontinued operations:
Loss from discontinued operations, net of taxes		(2,253)	(4,593)
Loss on sale of discontinued operations, net of taxes		(7,674)
Net income	22,526	21,594	4,680
Income per share - Basic:
Income from continuing operations	$ 0.56	$ 0.83	$ 0.26
Loss from discontinued operations		$ (0.06)	$ (0.13)
Loss on sale of discontinued operations		$ (0.20)
Basic net income per share	$ 0.56	$ 0.57	$ 0.13
Weighted average shares outstanding used in computing basic income per share	40,279	37,954	35,886
Income per share - Diluted:
Income from continuing operations	$ 0.54	$ 0.82	$ 0.25
Loss from discontinued operations		$ (0.06)	$ (0.12)
Loss on sale of discontinued operations		$ (0.20)
Diluted net income per share	$ 0.54	$ 0.56	$ 0.13
Weighted average shares outstanding used in computing diluted income per share	41,672	38,621	36,829
Other comprehensive income:
Net income	22,526	21,594	4,680
Foreign currency translation adjustment			(74)
Reclassification adjustment for realized foreign currency gains, net, included in net income			(1,362)
Unrealized gain (loss) on investments, available-for-sale	(16)	34	94
Unrealized loss on derivative instrument	(266)
Reclassification adjustment for realized gains on investments, available-for-sale, included in net income	(26)
Other comprehensive income (loss)	(308)	34	(1,342)
Comprehensive income	$ 22,218	$ 21,628	$ 3,338

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Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2012

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

Note 4:    Goodwill and Other Intangible Assets

The following table presents the changes in goodwill by reportable segment during the period from January 1, 2011 to December 31, 2012 (in thousands):

	Search		Tax Preparation		Total
Goodwill as of January 1, 2011 and 2012	$	44,815	$	—	$	44,815
Additions		—		185,475		185,475
Goodwill as of December 31, 2012	$	44,815	$	185,475	$	230,290

In 2012, the additions to goodwill relate to the Company’s acquisition of TaxACT as described in Note 3.

Impairment Assessments:    The Company performs its annual assessment of possible impairment of goodwill and other indefinite-lived intangible assets as of November 30, or more frequently if events and circumstances indicate that impairment may have occurred. As of November 30, 2012 and 2011, the Company had no impairments.

Intangible assets other than goodwill consisted of the following (in thousands):

	December 31, 2012							December 31, 2011
	Gross carrying amount		Accumulated amortization			Other intangible assets, net		Gross carrying amount		Accumulated amortization			Other intangible assets, net
Definite-lived intangible assets:
Installed code base technology	$	12,650	$	(12,369	)	$	281	$	12,650	$	(11,618	)	$	1,032
Core technology		1,085		(1,085	)		—		1,085		(1,085	)		—
Tax Preparation customer relationships		101,400		(11,619	)		89,781		—		—			—
Tax Preparation proprietary technology		29,800		(6,829	)		22,971		—		—			—
Other		6,667		(6,667	)		—		6,667		(6,667	)		—
Total definite-lived intangible assets		151,602		(38,569	)		113,033		20,402		(19,370	)		1,032
Indefinite-lived intangible assets		19,782		—			19,782		283		—			283
Total	$	171,384	$	(38,569	)	$	132,815	$	20,685	$	(19,370	)	$	1,315

Indefinite-lived intangible assets other than goodwill relate primarily to trade names associated with the 2012 acquisition of TaxACT.

The Company amortizes definite-lived intangible assets over their expected useful lives under the straight-line method, except for the installed code base technology, which is amortized proportional to expected revenue. Information about expected amortization of definite-lived intangible assets held as of December 31, 2012 in the next five years is presented in the below table (in thousands):

	2013		2014		2015		2016		2017		Total
Statement of operations location of amortization:
Cost of sales	$	7,668	$	7,513	$	7,450	$	621	$	—	$	23,252
Amortization of intangible assets		12,675		12,675		12,675		12,675		12,675		63,375
Total	$	20,343	$	20,188	$	20,125	$	13,296	$	12,675	$	86,627

The weighted average amortization period for definite-lived intangible assets is 75 months.

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Business Combinations

12 Months Ended

Dec. 31, 2012

Business Combinations [Abstract]

Business Combinations

Note 3:    Business Combinations

Presented below is information regarding the Company’s business combinations during the years ended December 31, 2012, 2011, and 2010, including information about the purchase price accounting from these transactions.

TaxACT Holdings.    On January 31, 2012, the Company acquired all of the outstanding stock of TaxACT Holdings and its wholly-owned subsidiary, 2^nd Story, which operates the TaxACT tax preparation online service and software business. The Company paid $287.5 million in cash for this acquisition, less certain transaction expenses, and subject to certain specified working capital adjustments. The acquisition of the TaxACT business was funded from the Company’s cash reserves and from the net proceeds of a $105 million credit facility (of which $100 million was drawn at the transaction’s close). See Note 10 for further discussion of the credit facility. The acquisition was intended to diversify the Company’s business model and expand its operations. Under the acquisition method, assets acquired and liabilities assumed are recorded at their fair values as of the acquisition date. Any excess of the purchase price over the fair values of the net assets acquired is recorded as goodwill. Final valuations are as follows (in thousands):

	Fair Value
Tangible assets acquired	$	22,465
Liabilities assumed		17,759
Identifiable net assets acquired	$	4,706
Fair value adjustments to intangible assets
Customer relationships	$	101,400
Proprietary technology		29,800
Trade name		19,499
Fair value of intangible assets acquired	$	150,699
Purchase price:
Cash paid	$	287,500
Less identifiable net assets acquired		(4,706	)
Plus deferred tax liability related to intangible assets		53,380
Less fair value of intangible assets acquired		(150,699	)
Excess of purchase price over net assets acquired, allocated to goodwill	$	185,475

The Company recorded acquisition costs of $1.1 million in 2012 and $305,000 in 2011, which were recognized in general and administrative expenses. The Company incurred $2.3 million of debt origination costs related to the credit facility used to help fund the acquisition, which the Company plans to amortize to interest expense over the term of the credit facility. The Company did not assume any equity awards or plans from 2^nd Story. Following the completion of the acquisition, the Company issued 380,000 options and 167,000 RSUs to 2 ^nd Story’s employees as an incentive for future services and at levels consistent with other employee awards.

The Company’s estimates of the economic lives of the acquired assets are eight years for the customer relationships, four years for the proprietary technology, approximately three years for the personal property assets, and the trade name is estimated to have an indefinite-life. The Company plans to amortize the assets over their respective estimated lives.

The goodwill arising from the TaxACT acquisition consists largely of the ability to attract new customers and develop new technologies post acquisition, which do not qualify for separate recognition. The Company determined that no portion of the goodwill arising from the TaxACT acquisition will be deductible for income tax purposes, except in one state where the Company made an election to recognize the gain on a deemed asset acquisition. The goodwill and the trade name will be tested for impairment at least annually.

The gross contractual amount of trade accounts receivable acquired was $9.4 million, all of which has been collected. The Company recorded a fair value of $304,000 for deferred revenue associated with the TaxACT business’s data storage and retrieval service, which 2^nd Story, prior to the acquisition, had recorded at $5.1 million as of the acquisition date.

Since the acquisition date, the Company has included in its consolidated results the financial results of operations of the TaxACT business, which included total revenue of $62.1 million and a contribution to the Tax Preparation segment income of $30.1 million.

Pro Forma Financial Information of Acquisitions (unaudited)

The financial information in the table below summarizes the combined results of operations of Blucora and 2^nd Story on a pro forma basis, as though they had been combined as of the beginning of each period presented. This pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition occurred at the beginning of each period presented. The pro forma revenues and income from continuing operations for the years ended December 31, 2012 and 2011 combines the historical results of operations of the Company and 2^nd Story for the year ended December 31, 2011, and combines the historical results of the Company for the year ended December 31, 2012 with the results of 2^nd Story for the month ended January 31, 2012.

The following amounts are in thousands:

	Year ended December 31,
	2012		2011
Revenues	$	427,809	$	307,594
Income from continuing operations	$	26,819	$	11,251

Mercantila

On May 10, 2010, the Company acquired certain assets from Mercantila, Inc., an e-commerce company. The acquisition was intended to diversify the Company’s business model and expand its operations into the online retail industry. On June 22, 2011, the Company sold its Mercantila e-commerce business to Zoo Stores, Inc., and the results of operations from the Mercantila business are reflected as discontinued operations for all periods presented in the Company’s Annual Report on Form 10-K. Nikhil Behl, a former Named Executive Officer of Blucora, owned a majority interest in Zoo Stores at the time of the transaction, and Mr. Behl ceased to be an officer of, or otherwise affiliated with, Blucora upon the closing of the transaction.

Since the acquisition date, the Company has included in its consolidated results the financial results of the operation of its acquired Mercantila, Inc. assets, which included $49.4 million of revenue, a contribution to loss from discontinued operations of $6.8 million, and a loss on sale of $7.7 million.

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at their date of acquisition as follows (in thousands):

Tangible assets acquired	$	2,234
Liabilities assumed		(8,231	)
Identifiable net liabilities assumed	$	(5,997	)
Fair value adjustments to intangible assets
License for use of developed core technology	$	893
Internet domain names		452
Customer relationships		39
Fair value of net liabilities assumed	$	(4,613	)
Purchase price:
Cash paid	$	7,800
Plus identifiable net liabilities assumed		5,997
Less fair value of intangible assets acquired		(1,384	)
Excess of purchase price over net assets acquired, allocated to goodwill	$	12,413

The Company expected that goodwill would be deductible for tax purposes.

The customer relationships had estimated useful lives of 12 months and were amortized over their lives under the straight-line method. The developed core technology had an estimated useful life of 24 months, after which the Company assumed that substantial modifications and enhancements would be required for the technology to remain competitive. The license was amortized over its life proportionately to the estimated total revenue to be generated through the acquired technology. The Company determined that the acquired Internet domain names had indefinite lives, and, therefore, these intangible assets were not amortized to expense.

Direct transaction costs of approximately $337,000 include estimated investment banking and legal fees directly related to the acquisition and the Company recorded a charge to general and administrative expenses in the year ended December 31, 2010.

Make The Web Better

On April 1, 2010, the Company purchased assets consisting of web properties and licenses for content and technology from Make The Web Better, a search distribution partner and privately-held developer of online products used on social networking sites, for $13.0 million. The purchase was intended to increase profitability and increase the proportion of the search services revenue generated through the Company’s owned and operated properties. The purchase consideration included an initial cash payment of $8.0 million, with the remaining consideration payable in cash and contingent on future financial performance.

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at their date of acquisition as follows (in thousands):

Installed code base technology	$	12,650
License for use of developed core technology		235
Prepaid hosting services		115
Identifiable assets acquired	$	13,000
Purchase price:
Cash paid	$	8,000
Contingent consideration		5,000
Purchase price	$	13,000
Less identifiable assets acquired		(13,000	)
Excess of purchase price over net assets acquired, allocated to goodwill	$	—

The installed code base technology, technology license, and prepaid hosting services have estimated useful lives of 57 months, 33 months, and five months, respectively. The installed code base technology and the license are amortized proportionately over their lives based on the estimated total revenue to be generated through the acquired technology, adjusted for revisions in the estimated total revenue expected to be generated. The prepaid hosting services is amortized over its life under the straight-line method. The Company expects that any consideration paid in excess of the original $5.0 million contingent consideration will be deductible for tax purposes.

Revenue generated from search traffic on the Make The Web Better site was $3.1 million in 2012, $8.2 million in 2011, and $16.4 million in 2010. Other than the amortization expense of $752,000 in 2012, $2.6 million in 2011, and $9.0 million in 2010 associated with the recognized code base intangible asset, direct operating costs associated with the revenue generated by this site are not significant. Additionally, see Note 2 for costs related to a contingent consideration arrangement with the former owners of Make The Web Better.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2012

Summary of Significant Accounting Policies [Abstract]

Description of the business

Description of the business:    Blucora, Inc. (the “Company” or “Blucora”) operates two primary businesses: an internet search business and an online tax preparation business. The Company’s search business, InfoSpace, consists primarily of a B2B offering that provides its search technology, aggregated content, and services to its distribution partners. The search business also offers search services directly to consumers through its internet search properties. The tax preparation business consists of the operations of the TaxACT tax preparation online service and software business that the Company acquired on January 31, 2012.

The InfoSpace search business primarily offers search services through the web properties of its distribution partners, which are generally private-labeled and customized to address the unique requirements of each distribution partner. The search business also distributes aggregated search content through its own websites, such as Dogpile.com and WebCrawler.com. The search business does not generate its own search content, but instead aggregates search content from a number of content providers. Some of these content providers, such as Google and Yahoo!, pay the Company to distribute their content, and those providers are referred to as Search Customers.

On January 31, 2012, the Company acquired TaxACT Holdings, Inc. (“TaxACT Holdings”) and its wholly-owned subsidiary, 2 ^nd Story Software, Inc. (“2 ^nd Story”), which operates the TaxACT tax preparation online service and software business. The TaxACT business consists of an online tax preparation service for individuals, tax preparation software for individuals and professional tax preparers, and ancillary services. The majority of the TaxACT business’s revenue is generated by the online service at www.taxact.com. As a highly seasonal business, almost all of the TaxACT revenue is generated in the first four months of the calendar year.

Segments

Segments:    As a result of the acquisition of the TaxACT business, the Company has determined that it has two reporting segments: Search and Tax Preparation. The Search segment is the InfoSpace business and the Tax Preparation segment is the TaxACT business. Unless the context indicates otherwise, the Company uses the term “search” to represent search services and uses the term “tax preparation” to represent services and products sold through the TaxACT business (see “Note 13: Segment Information”).

Principles of consolidation

Principles of consolidation:    The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions have been eliminated.

Basis of presentation

Basis of presentation:    On June 22, 2011, the Company sold its Mercantila e-commerce business to Zoo Stores, Inc., and the results of operations from the Mercantila business are reflected as discontinued operations for all periods presented.

Cash equivalents

Cash equivalents:    The Company considers all highly liquid debt instruments with an original maturity of ninety days or less at date of acquisition to be cash equivalents, which are carried at fair value.

Accounts receivable

Accounts receivable:    Accounts receivable are stated at amounts due from customers net of an allowance for doubtful accounts.

Short-term investments

Short-term investments:    The Company principally invests its available cash in investment-grade income securities, AAA-rated money market funds, and insured time deposits with commercial banks. Such investments are included in “Cash and cash equivalents” and “Short-term investments, available for sale,” on the consolidated balance sheets, and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive income (loss)” on the consolidated balance sheets.

Property and equipment

Property and equipment:    Property and equipment are stated at cost. Depreciation is computed under the straight-line method over the following estimated useful lives:

Computer equipment and software	3 years
Data center servers	3 years
Internally developed software	15 months — 3 years
Office equipment	7 years
Office furniture	7 years
Leasehold improvements	Shorter of lease term or economic life

The Company capitalizes certain internal-use software development costs, consisting primarily of employee salaries and benefits allocated on a project or product basis. The Company capitalized $952,000, $1.2 million, and $1.0 million of internal-use software costs in the years ended December 31, 2012, 2011, and 2010, respectively.

Business combinations and intangible assets including goodwill

Business combinations and intangible assets including goodwill:    The Company accounts for business combinations using the acquisition method and, accordingly, the identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values. Goodwill is calculated as the excess of the purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

Valuation of goodwill and intangible assets

Valuation of goodwill and intangible assets:    The Company evaluates goodwill and indefinite-lived intangible assets at least annually, and evaluates all intangible assets for impairment whenever events or changes in circumstances, including material changes in the fair value of the Company’s outstanding common stock, indicate that the carrying amount of the Company’s assets might not be recoverable.

The Company tests for goodwill impairment at the reporting unit level. In the evaluation of goodwill, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If so, the Company performs a quantitative assessment and compares the fair value of the reporting unit to the carrying amount. The reporting unit fair values are determined for each reporting unit by using a combination of projections of future discounted cash flows, and EBITDA and revenue multiple comparisons with comparable publicly-held companies. If the fair value of a reporting unit was determined to be less than its carrying amount, the Company would record an impairment loss equal to the excess of the carrying amount of the reporting unit’s goodwill over its fair value.

In the evaluation of indefinite-lived intangible assets, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of an asset is less than the carrying amount. If so, the Company performs a quantitative assessment and compares the fair value of the asset to its carrying amount. The Company bases its measurement of fair value of indefinite-lived intangible assets, which primarily consist of trade name and trademarks, using the relief-from-royalty method. This method assumes that the trade name and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital.

If the fair value of an indefinite-lived intangible asset was determined to be less than its carrying amount, the Company would record an impairment loss equal to the excess of the carrying amount of the reporting unit’s goodwill over its fair value.

Other investments

Other investments:    Included in other long-term assets are the Company’s investment in equity investments of privately-held companies for business and strategic purposes. The Company currently holds equity securities and warrants to purchase equity securities in companies whose securities are not publicly traded. The Company’s equity investments were carried at a fair value of $0 at December 31, 2012 and 2011.

Revenue recognition

Revenue recognition:    The Company recognizes revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists, the Company has delivered the product or performed the service, the fee is fixed or determinable, and collectability is probable. Determining whether and when these criteria have been satisfied involves exercising judgment and using estimates and assumptions that can have an impact on the timing and amount of revenue that the Company recognizes.

The Company also evaluates whether revenue should be presented on a gross basis, which is the amount that a customer pays for the service or product, or on a net basis, which is the customer payment less amounts the Company pays to suppliers. In making that evaluation, the Company considers indicators such as whether the Company is the primary obligor in the arrangement and assumes the risks and rewards as a principal in the customer transaction, including the credit risk, and whether the Company can set the sales price and select suppliers. The accounting principles generally accepted in the United States of America (“GAAP”) clearly indicates that the evaluations of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity.

Search services revenue recognition

Search services revenue recognition:    The Company’s revenues are generated primarily from its web search services. The Company generates search services revenue when an end user of such services clicks on a paid search link provided by a Search Customer and displayed on a distribution partners’ web property or on one of the Company’s owned and operated web properties. The Search Customer that provided the paid search link receives a fee from the advertiser who paid for the click and the Search Customer pays the Company a portion of that fee. Revenue is recognized in the period in which the services are provided (e.g., a paid search occurs) and is based on the amounts earned by and ultimately remitted to the Company. This revenue is recorded in the Search segment.

Under the Company’s agreements with its Search Customers and its distribution partners, the Company is the primary obligor, separately negotiates each revenue or unit pricing contract independent of any revenue sharing arrangements, and assumes the credit risk for amounts invoiced to its Search Customers. For search services, the Company determines the paid search results, content, and information directed to its owned and operated websites and its distribution partners’ web properties.

The Company earns revenue from its Search Customers by providing paid search results generated from its owned and operated web properties and from its distribution partners’ web properties based on separately negotiated and agreed-upon terms with each distribution partner. Consequently, the Company records search services revenue on a gross basis.

Tax preparation revenue recognition

Tax preparation revenue recognition:    The Company derives revenue from the sale of tax preparation online services, ancillary service offerings, tax preparation packaged software products, and multiple element arrangements that may include a combination of these items. Ancillary service offerings include tax preparation support services, data archive services, bank or reloadable pre-paid debit card services, and e-filing services. This revenue is recorded in the Tax Preparation segment.

The Company’s tax preparation segment service revenue consists primarily of hosted tax preparation online services, tax preparation support services, data archive services, and e-filing services. The Company recognizes revenue from these services as the services are performed and the four revenue recognition criteria described above are met.

The Company recognizes revenue from the sale of its packaged software products when legal title transfers. This is generally when its customers download products from the Web or when the products ship.

The bank or reloadable prepaid debit card services are offered to taxpayers as an option to receive their tax refunds in the form of a prepaid bank card or to have the fees for the product and/or services purchased by the customers deducted from their refunds. Revenue for this fee is recognized when the four revenue recognition criteria described above are met; for some arrangements that is upon filing and for other arrangements that is upon cash receipt.

For products and/or services that consist of multiple elements, the Company must: (1) determine whether and when each element has been delivered; (2) determine the fair value of each element using the selling price hierarchy of vendor-specific objective evidence (“VSOE”) of fair value if available, third-party evidence (“TPE”) of fair value if VSOE is not available, and estimated selling price (“ESP”) if neither VSOE nor TPE is available; and (3) allocate the total price among the various elements based on the relative selling price method. Once the Company has allocated the total price among the various elements, it recognizes revenue when the revenue recognition criteria described above are met for each element.

VSOE generally exists when the Company sells the deliverable separately and is normally able to establish VSOE for all deliverables in these multiple element arrangements; however, in certain limited instances VSOE cannot be established. This may be because the Company infrequently sells each element separately, or has a limited sales history. When VSOE cannot be established the Company attempts to establish a selling price for each element based on TPE. TPE is determined based on competitor prices for similar deliverables when sold separately. When the Company is unable to establish selling price using VSOE or TPE, it uses ESP in its allocation of arrangement consideration. ESP is the estimated price at which the Company would sell a product or service if it were sold on a stand-alone basis. The Company determines ESP for a product or service by considering multiple factors including, but not limited to, historical stand-alone sales, pricing practices, market conditions, competitive landscape, internal costs, and gross margin objectives.

In some situations, the Company receives advance payments from its customers. The Company defers revenue associated with these advance payments and recognizes the allocated consideration for each element when the Company ships the products or performs the services, as appropriate. Advance payments related to data archive services are deferred and recognized over the related contractual term.

Cost of sales

Cost of sales:    Cost of sales consists of costs related to revenue sharing arrangements with the Company’s distribution partners, usage-based content fees, certain costs associated with the operation of the Company’s data centers that serve its search and tax preparation businesses, including amortization of intangible assets, depreciation, personnel expenses (which include salaries, benefits and other employee related costs, and stock-based compensation expense), bandwidth costs, customer payment processing fees, bank service fees, and royalties.

Engineering and technology expenses

Engineering and technology expenses:    Engineering and technology expenses are associated with the research, development, support, and ongoing enhancements of the Company’s offerings, including personnel expenses (which include salaries, stock-based compensation expense, and benefits and other employee related costs), software support and maintenance, and professional service fees.

Sales and marketing expenses

Sales and marketing expenses:    Sales and marketing expenses consist primarily of marketing expenses associated with the Company’s tax preparation business (which includes the following channels: television, radio, online banner ads, internet search, and email), the Company’s owned and operated web properties (which consist of traffic acquisition, including online direct marketing initiatives, which involve the purchase of online advertisements that drive traffic to an owned and operated website, agency fees, brand promotion expense, and market research expense), personnel costs (which include salaries, stock-based compensation expense, and benefits and other employee related costs), and the cost of temporary help and contractors to augment the Company’s staffing.

Costs for advertising are recorded as expense when the advertisement appears or electronic impressions are recorded. Advertising expense totaled $31.8 million, $14.4 million, and $18.5 million for the years ended December 31, 2012, 2011, and 2010, respectively. Prepaid advertising costs were $2.5 million at December 31, 2012.

General and administrative expenses

General and administrative expenses:    General and administrative expenses consist primarily of personnel expenses (which include salaries, stock-based compensation expense, and benefits and other employee related costs), professional service fees (which include legal, audit, and tax fees), general business development and management expenses, occupancy and general office expenses, taxes, and insurance expenses.

Stock-based compensation

Stock-based compensation:    The Company measures and recognizes its compensation expense for all stock-based payment awards made to employees and directors, including stock option, restricted stock unit grants, and market stock unit grants and purchases of stock made pursuant to the Company’s 1998 Employee Stock Purchase Plan (the “ESPP”), based on estimated fair values. Expense is recognized on a straight-line basis over the requisite vesting period for each separately vesting portion of the award, adjusted for an estimated forfeiture rate.

To determine the stock-based compensation expense that was recognized with respect to restricted stock units (“RSU”), market stock units (“MSU”), which are a form of share price performance-based restricted stock units granted under the Company’s 2011 long-term executive compensation plan, employee and non-employee director stock options, and the Warrant issued to Cambridge Information Group I LLC (“CIG”), the Company used the fair value at date of grant for RSUs, the Monte Carlo valuation method for the MSU grants, and the Black-Scholes-Merton option-pricing model for stock option grants and the Warrant. An option award to a non-employee was valued by the Black-Scholes-Merton method upon the completion of a qualified business acquisition by the Company in 2012. For each of the above awards, the value of the portion that is ultimately expected to vest is recognized as expense over the requisite service periods in the accompanying consolidated financial statements for the years ended December 31, 2012, 2011, and 2010.

Debt Issuance Costs and Debt Discount

Debt Issuance Costs and Debt Discount:    Debt issuance costs and debt discounts are deferred and amortized as interest expense under the effective interest method over the contractual term of the related debt, adjusted for prepayments.

Hedging

Hedging:    The Company uses a derivative financial instrument in the form of an interest rate swap agreement for the purpose of minimizing exposure to changes in interest rates. This swap agreement is accounted for as a cash flow hedge and changes in the fair value of the hedge instrument are included in other comprehensive income while the hedge is perfectly effective, and any ineffectiveness would be recorded to other income (loss), net in the Statement of operations and comprehensive income.

Employee benefit plan

Employee benefit plan:    The Company has a 401(k) savings plan covering its employees. Eligible employees may contribute through payroll deductions. The Company may match the employees’ 401(k) contributions at the discretion of the Company’s Board of Directors. Pursuant to a continuing resolution, in 2012, 2011, and 2010, the Company has matched a portion of the 401(k) contributions made by its employees. The amount contributed by the Company is equal to a maximum of 50% of employee contributions up to a maximum of 3% of an employee’s salary. For the years ended December 31, 2012, 2011, and 2010, the Company contributed $374,000, $288,000, and $309,000, respectively, for employees.

Other loss (income), net

Other loss (income), net:     Other loss (income), net for the years ended December 31, 2012, 2011, and 2010, consists of the following (in thousands):

	2012			2011			2010
Interest expense	$	3,522		$	—		$	—
Interest income		(131	)		(369	)		(331	)
Amortization of debt issuance costs		820			—			—
Accretion of debt discount		325			—			—
Loss on derivative instrument		2,346			—			—
Gain on contingency resolution		—			(1,500	)		—
Increase in fair value of earn-out contingent liability		—			3,000			5,000
Foreign currency exchange loss (gain), net		48			20			(1,335	)
Litigation settlement gain		—			—			(18,965	)
Loss (gain) on disposal of assets		(1	)		46			1,014
Other		(252	)		49			(630	)
Other loss (income), net	$	6,677		$	1,246		$	(15,247	)

In 2012, the Company incurred interest expenses of $3.5 million and a loss on a derivative instrument of $2.3 million. The financial performance of Make The Web Better, acquired on April 1, 2010, was greater than expected; as a consequence, the fair value of the related contingent consideration increased and additional charges of $3.0 million and $5.0 million were recorded in the years ended December 31, 2011 and 2010, respectively. Also in 2011, the Company recorded a gain of $1.5 million related to the resolution of a contingent liability. In 2010, the Company recognized a $19.0 million gain related to a litigation settlement and recorded $1.4 million in recognition of foreign currency translation gains, primarily related to the sale or substantial liquidation of wholly-owned subsidiaries.

Loss from discontinued operations and loss on sale of discontinued operations

Loss from discontinued operations and loss on sale of discontinued operations:    On June 22, 2011, the Company sold its Mercantila e-commerce business to Zoo Stores, Inc. The results of operations from the business are reflected as discontinued operations for all periods presented. Revenue, loss before taxes, income tax benefit, and loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes, for the year ended December 31, 2011 are presented below (in thousands):

	Years ended December 31,
	2011			2010
Revenue from discontinued operations	$	16,894		$	32,492
Loss from discontinued operations before taxes	$	(3,506	)	$	(5,908	)
Income tax benefit		1,253			1,315
Loss from discontinued operations, net of taxes	$	(2,253	)	$	(4,593	)
Loss on sale of discontinued operations, net of an income tax benefit of $5,092	$	(7,674	)	$	—

Loss from discontinued operations includes previously unallocated depreciation, amortization, stock-based compensation expense, income taxes, and other corporate expenses that were attributable to the e-commerce business.

Net income per share

Net income per share: Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares outstanding plus the number of potentially dilutive shares outstanding during the period. Potentially dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options, a warrant issued in August 2011 (the “Warrant”), and unvested RSUs and MSUs, using the treasury stock method. Performance-based stock options for which performance has not yet been achieved are excluded from the calculation of potentially dilutive shares. Potentially dilutive shares are excluded from the computation of earnings per share if their effect is antidilutive. The treasury stock method calculates the dilutive effect for awards with an exercise price less than the average stock price during the period presented (in thousands):

	Years ended December 31,
In thousands	2012		2011		2010
Weighted average common shares outstanding, basic		40,279		37,954		35,886
Dilutive stock options, RSUs, MSUs, and the Warrant		1,393		667		943
Weighted average common shares outstanding, diluted		41,672		38,621		36,829
Antidilutive awards with an exercise price less than the average price during the applicable period excluded from dilutive share calculation		200		876		1,199
Outstanding awards with an exercise price greater than the average price during the applicable period not included in dilutive share calculation		804		2,927		4,282
Outstanding awards with performance conditions not completed during the applicable period not included in dilutive share calculation		168		—		—

Other comprehensive income

Other comprehensive income:    Comprehensive income includes net income, plus items that are recorded directly to stockholders’ equity, including foreign currency translation adjustments and the net change in unrealized gains and losses on cash equivalents, short-term and long-term investments. Included in the net change in unrealized gains and losses are realized gains or losses included in the determination of net income in the period realized. Amounts reclassified out of other comprehensive income into net income were determined on the basis of specific identification.

The following table provides information about activity in other comprehensive income during the period from January 1, 2010 to December 31, 2012 (in thousands):

	Foreign currency translation adjustment			Unrealized gain (loss) on investment			Unrealized loss on derivative instrument			Total
Balance as of January 1, 2010	$	1,436		$	(96	)		—		$	1,340
Other comprehensive loss		(1,436	)		94			—			(1,342	)
Balance as of December 31, 2010		—			(2	)		—			(2	)
Other comprehensive income		—			34			—			34
Balance as of December 31, 2011		—			32			—			32
Other comprehensive loss		—			(42	)		(266	)		(308	)
Balance as of December 31, 2012	$	—		$	(10	)	$	(266	)	$	(276	)

Foreign currencies

Foreign currencies:    Foreign subsidiary financial statements are denominated in foreign currencies and are translated at the exchange rate on the balance sheet date. Realized gains and losses on foreign currency transactions are included in other loss (income), net. In 2010, substantially all of Blucora’s foreign subsidiaries were sold or liquidated.

Concentration of credit risk

Concentration of credit risk:    Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, short-term investments, and trade receivables. These instruments are generally unsecured and uninsured. The Company places its cash equivalents and investments with major financial institutions. Accounts receivable are typically unsecured and are derived from revenues earned from Search Customers primarily located in the United States operating in a variety of industries and geographic areas. The Company performs ongoing credit evaluations of its Search Customers and maintains allowances for potential credit losses.

The Company attempts to manage exposure to counterparty credit risk by only entering into agreements with major financial institutions which are expected to be able to fully perform under the terms of the agreement.

Revenue concentration

Revenue concentration:    The Company derives a significant portion of its revenues from two Search Customers. Revenues from the top two Search Customers represented 84%, 99%, and 97% of revenues in each of the years ended December 31, 2012, 2011, and 2010, respectively. At December 31, 2012 and 2011, two Search Customers accounted for more than 90% of the Company’s accounts receivable balance.

Geographic revenue information, as determined by the location of the customer, is presented below (in thousands):

	Years ended December 31,
	2012		2011		2010
United States	$	402,656	$	226,229	$	209,029
International		4,263		2,584		5,314
Total	$	406,919	$	228,813	$	214,343

Fair value of financial instruments

Fair value of financial instruments:    The Company does not measure the fair value of any financial instrument other than cash equivalents, available-for-sale investments, derivative instruments, and its investment in a privately-held company. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying values of other financial instruments (accounts receivable, other receivables, and accounts payable), other current assets and accrued expenses, and other current liabilities are not recorded at fair value but approximate fair values primarily due to their short-term nature.

If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then the Company uses quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. This pricing methodology applies to the Company’s Level 2 instruments such as corporate notes and bonds, agency securities, municipal bonds, money market funds, and insured time deposits. Level 3 instruments are valued using internally developed models with unobservable inputs, which will vary based on the instrument. The Company values the Warrant, classified within Level 3 by using the Black-Scholes valuation model which has significant unobservable marketable inputs; those unobservable inputs are based on historical and observable information, primarily the Company’s stock price, and are not expected to vary materially unless the stock price varies materially. If the Company’s stock price at December 31, 2012 had been twenty percent higher at that date, the fair value of the Warrant would have been thirty-two percent higher, resulting in an increase in the Company’s loss on derivative instrument for the year ended December 31, 2012, of $2.7 million.

The Company’s Level 2 investments are priced based on similar investments or assets without applying significant adjustments. In addition, all of the Company’s Level 2 investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments.

Income taxes

Income taxes:    The Company accounts for income taxes under the asset and liability method, under which deferred tax assets, including net operating loss carryforwards, and liabilities are determined based on temporary differences between the book and tax bases of assets and liabilities. The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent the Company believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including the recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income, the carryforward periods available for tax reporting purposes, and other relevant factors. There is a wide range of possible judgments relating to the valuation of the Company’s deferred tax assets.

During the year ended December 31, 2012, the Company provided a valuation allowance against certain net deferred tax assets. During the year ended December 31, 2011, based on the weight of available evidence, the Company determined that it was more likely than not that it would realize $18.9 million of its deferred tax assets in the foreseeable future. Accordingly the Company released the valuation allowance against this portion of its deferred tax assets and retained the valuation allowance against the remainder at year end. During the year ended December 31, 2010, the Company provided a full valuation allowance against its net deferred tax assets.

Lease accounting

Lease accounting:    The Company leases office space and computer equipment used in its data centers. These leases are classified as either capital leases or operating leases, as appropriate. The amortization of assets under capital leases is included in depreciation expense. For the years ended December 31, 2012, 2011, and 2010, $0, $188,000, and $537,000, respectively, of amortization for assets acquired under capital leases was included in depreciation expense.

Use of estimates

Use of estimates:    The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates include those used for impairment of goodwill and other intangible assets, useful lives of other intangible assets, purchase accounting, valuation of investments, valuation of the Warrant and interest rate swap derivatives, revenue recognition, the estimated allowance for sales returns and doubtful accounts, internally developed software, accrued contingencies, stock option valuation, and valuation allowance for deferred tax assets. Actual amounts may differ from estimates.

Recent accounting pronouncements

Recent accounting pronouncements:    Changes to GAAP are established by the FASB in the form of ASUs to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all recent ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s consolidated financial position and results of operations.

In July 2012, the FASB issued an ASU to simplify how entities test indefinite-lived intangible assets for impairment to improve consistency in impairment testing requirements among long-lived asset categories. The ASU permits an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets for which this assessment concludes it is more likely than not that the fair value is more than its carrying value, this ASU eliminates the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The Company early adopted the new standard on October 1, 2012. The adoption of this ASU did not materially impact the Company’s consolidated condensed financial statements.

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Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2012

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

Note 11:    Derivative Instruments and Hedging Activities

During 2012, the interest rate swap purchased by 2^nd Story, as further described in Note 10, was intended to reduce the risk that the Company’s cash flows and earnings would be adversely affected by interest rate fluctuations. The Company recognizes derivative instruments as either assets or liabilities on its consolidated balance sheets at fair value. The Company records changes in the fair value of the derivative instruments as gains or losses in the consolidated statements of comprehensive income in other loss (income), net, or to accumulated other comprehensive income in the consolidated balance sheets.

The fair values of outstanding derivative instruments were as follows (in thousands):

	Balance Sheet Location	As of December 31, 2012
Derivative liabilities
Derivative designated as a hedging instrument:
Interest rate contract (interest rate swap)	Current liabilities - derivative instruments	$	410
Derivative not designated as a hedging instrument:
Equity contract (the Warrant)	Current liabilities - derivative instruments		8,564
		$	8,974

The derivative instrument in a hedging relationship had no effect on income for any and all periods presented, as it did not have any hedging ineffectiveness. The effect of the derivative instrument not designated as hedging instruments on income is summarized below for the year ended December 31, 2012 (in thousands):

Derivative not designated as hedging instrument	Location	Loss recognized in other loss (income), net
Equity contract (the Warrant)	Other loss (income), net	$	2,346

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Stockholders' Equity

12 Months Ended

Dec. 31, 2012

Stockholder's Equity [Abstract]

Stockholders' Equity

Note 7:    Stockholders’ Equity

Stock Incentive Plans

The Company’s stock incentive plans generally provide employees, officers, directors, independent contractors, and consultants of the Company an opportunity to purchase shares of stock by exercising nonqualified stock options (which are options that are not described in Section 422 of the Internal Revenue Code of 1986, as amended). The plans also provide for the sale or granting of stock and RSUs to eligible individuals in connection with the performance of service for the Company. Finally, the plans authorize the grant of stock appreciation rights, either separately or in tandem with stock options, which entitle holders to cash compensation measured by appreciation in the value of the stock. The stock incentive plans are administered by the Compensation Committee of the Board of Directors, which is composed of non-employee directors. The Company issues new shares upon exercise of options and upon the vesting of RSUs.

1996 Plan:    The Company primarily has one stock plan, the Restated 1996 Flexible Stock Incentive Program (the “1996 Plan”), that was used for grants during 2012, 2011, and 2010. RSUs and options granted under the 1996 Plan typically are scheduled to vest over three years or less, with 33 ¹/₃ % vesting one year from the date of grant and the remainder vesting ratably thereafter on a semi-annual basis. Options and RSUs granted in 2012, 2011, and 2010 under the 1996 Plan generally, with a few exceptions, vest over a period of three years, with 33 ¹/ ₃% vesting one year from the date of grant and the remainder vesting ratably thereafter on a semi-annual basis, and expire seven years from the date of grant. There are a few exceptions to this vesting schedule, which provide for vesting at different rates or based on achievement of performance targets.

Through January 1, 2011, the number of shares available for grant pursuant to securities issued under the 1996 Plan increased annually on the first day of January by an amount equal to the lesser of (A) five percent of the Company’s outstanding shares at the end of the Company’s preceding fiscal year or (B) a lesser amount determined by the Board of Directors. This evergreen provision subsequently expired and was removed from the plan. The 1996 Plan limits the number of shares of common stock that may be granted to any one individual pursuant to stock options in any fiscal year of the Company to 800,000 shares, plus an additional 800,000 shares in connection with his or her initial employment with the Company, which initial grant does not count against the limit.

In 2011, the Company granted MSUs under the 1996 Plan. The actual amount of MSUs earned was 150% of the target award, based on the change in the Company’s total stockholder return relative to the change in the closing value of the iShares Russell 2000 Index. Each MSU represents the right to receive one share of Blucora common stock upon satisfaction of the performance measure and vesting. One-third of the earned MSUs vested on April 1, 2012, and the remaining earned MSUs are scheduled to vest in equal installments on each of April 1, 2013 and 2014. If an option, RSU, or MSU award is surrendered or for any other reason unused, in whole or in part, the shares that were subject to the award shall continue to be available under the 1996 Plan.

2001 Plan:    In 2012, the Company terminated its 2001 Nonstatutory Stock Option Plan, under which nonqualified stock options to purchase common stock or shares of restricted stock could be granted to employees. At December 31, 2012, no awards remained available for grant from that plan.

Plans and awards assumed through acquisition:    In addition to the plans described above, the Company has assumed stock incentive plans and awards through acquisitions. The majority of the plans assumed have expired; one plan has options outstanding although the plan has expired. There are no shares available for grant as of December 31, 2012 under any plan assumed through acquisition.

A summary of the general terms of options to purchase common stock, RSUs and MSUs previously granted under these plans, including options outstanding and available for grant at December 31, 2012, is as follows:

	1996 Plan		2001 Plan
Requisite service period in years		4 or less		3 or less
Life in years		7 or 10		7 or 10
Options, RSUs, and MSUs outstanding at December 31, 2012		4,583,627		65,550
Options, RSUs, and MSUs available for grant at December 31, 2012		4,953,656		—

	Options			Weighted average exercise price
Outstanding December 31, 2009		6,175,979		$	13.74
Granted		1,755,600			9.74
Forfeited		(605,032	)		11.41
Expired		(1,006,259	)		20.32
Exercised		(274,495	)		8.53
Outstanding December 31, 2010		6,045,793			11.95
Granted		1,540,350			8.71
Forfeited		(764,354	)		8.93
Expired		(701,082	)		18.64
Exercised		(2,153,410	)		7.95
Outstanding December 31, 2011		3,967,297			12.26
Granted		1,014,200			12.16
Forfeited		(150,000	)		9.61
Expired		(130,958	)		34.18
Exercised		(956,900	)		9.43
Outstanding December 31, 2012		3,743,639		$	12.29
Options exercisable, December 31, 2012		2,228,437		$	13.33
Options exercisable and expected to vest after December 31, 2012*		3,495,256		$	12.39

* Options expected to vest reflect an estimated forfeiture rate.

All grants in 2012, 2011, and 2010 were made at an exercise price equal to the market price at the date of grant. Additional information regarding options outstanding for all plans as of December 31, 2012, is as follows:

	Options outstanding						Options exercisable
Range of exercise prices	Number outstanding		Weighted average remaining contractual life (yrs.)		Weighted average exercise price		Number exercisable		Weighted average exercise price
$7.10 – 8.63		503,262		4.70	$	7.88		322,860	$	7.52
$8.70 – 8.70		200,000		5.82		8.70		200,000		8.70
$8.74 – 8.74		855,500		5.38		8.74		455,500		8.74
$8.80 – 10.78		443,400		3.84		9.63		393,239		9.64
$11.01 – 11.39		539,227		4.46		11.25		168,788		11.24
$11.82 – 12.31		423,100		5.51		12.26		63,500		12.20
$12.76 – 23.45		207,600		5.02		16.28		53,000		21.91
$24.29 – 24.29		450,000		0.01		24.29		450,000		24.29
$24.47 – 25.43		120,550		0.64		24.71		120,550		24.71
$27.17 – 27.17		1,000		0.31		27.17		1,000		27.17
Total		3,743,639		4.19	$	12.29		2,228,437	$	13.33

Restricted stock units:     Activity and weighted average grant date fair value information regarding all RSU grants are summarized as follows:

	Restricted stock			Weighted average grant date fair value
Outstanding December 31, 2009		1,578,269		$	8.46
Granted		1,239,959			9.92
Forfeited		(374,288	)		8.81
Vested		(1,066,455	)		9.01
Outstanding December 31, 2010		1,377,485			9.26
Granted		291,500			8.86
Forfeited		(377,825	)		9.07
Vested		(676,680	)		9.30
Outstanding December 31, 2011		614,480			9.14
Granted		656,850			13.19
Forfeited		(111,706	)		9.13
Vested		(334,336	)		9.12
Outstanding December 31, 2012		825,288		$	12.38
Expected to vest after December 31, 2012*		706,018		$	12.38

* RSUs expected to vest reflect an estimated forfeiture rate.

Market stock units:     Activity and weighted average grant date fair value information regarding all MSU grants are summarized as follows:

	Market stock units			Weighted average grant date fair value
Outstanding December 31, 2010		—		$	—
Granted		155,250			9.28
Forfeited		(52,750	)		9.28
Outstanding December 31, 2011		102,500			9.28
Performance adjustment		40,125			9.28
Cancelled		(22,250	)		9.28
Vested		(40,125	)		9.28
Outstanding December 31, 2012		80,250		$	9.28
Expected to vest after December 31, 2012*		70,142		$	9.28

* MSUs expected to vest reflect an estimated forfeiture rate.

Other Plans:

1998 Employee Stock Purchase Plan:    The Company adopted the ESPP in August 1998. The ESPP is intended to qualify under Section 423 of the Code and permits eligible employees of the Company and its subsidiaries to purchase common stock through payroll deductions of up to 15% of their compensation. Under the ESPP, no employee may purchase common stock worth more than $25,000 in any calendar year, valued as of the first day of each offering period. In addition, owners of 5% or more of the Company’s or one of its subsidiary’s common stock may not participate in the ESPP. An aggregate of 1,360,000 shares of common stock are authorized for issuance under the ESPP. The ESPP was implemented with six-month offering periods that begin on each February 1 and August 1. The price of common stock purchased under the ESPP is the lesser of 85% of the fair market value on the first day of an offering period or 85% of the fair market value on the last day of an offering period. The ESPP does not have a fixed expiration date, but may be terminated by the Company’s Board of Directors at any time. There were 62,058, 54,289, and 53,596 shares issued for the ESPP periods that ended in 2012, 2011, and 2010, respectively. During the year ended December 31, 2012, financing cash generated from the purchase of shares through the ESPP amounted to $601,000. The Company issues new shares upon purchase through the ESPP.

Stock Sale and Warrant:

On August 23, 2011, as part of a negotiated agreement, the Company added Andrew M. Snyder to its Board of Directors and entered into agreements to sell stock and issue a warrant to CIG, the investment entity that Mr. Snyder heads as President. In connection with those agreements, the details of which were disclosed under Items 1.01 and 3.02 in the Current Report on Form 8-K filed on August 23, 2011, Blucora sold to CIG 764,192 newly-issued shares of unregistered Blucora common stock at a purchase price of $9.16 per share and issued to CIG a warrant to purchase one million shares of Blucora common stock, exercisable at a price of $9.62 per share. The Warrant was originally scheduled to expire on August 23, 2014, but the completion of the acquisition of the TaxACT business on January 31, 2012, as discussed in Note 8, was an event under the Warrant’s terms that extended the expiration date to the earlier of August 23, 2017 or the effective date of a change of control of Blucora.

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Stockholders' Equity (Details)	12 Months Ended
	Dec. 31, 2012
Summary options for purchase common stock
Options, RSUs, and MSUs available for grant at December 31, 2012	0
1996 Plan [Member]
Summary options for purchase common stock
Requisite service period in years	4 years
Options, RSUs, and MSUs outstanding at December 31, 2012	4,583,627
Options, RSUs, and MSUs available for grant at December 31, 2012	4,953,656
1996 Plan [Member] | Maximum [Member]
Summary options for purchase common stock
Life in years	10 years
1996 Plan [Member] | Minimum [Member]
Summary options for purchase common stock
Life in years	7 years
2001 Plan [Member]
Summary options for purchase common stock
Requisite service period in years	3 years
Options, RSUs, and MSUs outstanding at December 31, 2012	65,550
2001 Plan [Member] | Maximum [Member]
Summary options for purchase common stock
Life in years	10 years
2001 Plan [Member] | Minimum [Member]
Summary options for purchase common stock
Life in years	7 years

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Balance Sheet Components

12 Months Ended

Dec. 31, 2012

Balance Sheet Components [Abstract]

Balance Sheet Components

Note 5:    Balance Sheet Components

Short-term investments classified as available-for-sale at December 31, 2012 and 2011 consisted of the following, stated at fair value (in thousands):

	December 31,
	2012		2011
U.S. government securities	$	41,402	$	162,170
Taxable municipal bonds		36,043		—
Commercial paper		9,396		49,484
Time deposits		7,169		—
Total short-term investments available-for-sale	$	94,010	$	211,654

Maturity information was as follows for investments classified as available-for-sale at December 31, 2012 (in thousands):

	Amortized Cost		Gross unrealized gains		Gross unrealized losses			Fair value
Within one year	$	94,029	$	36	$	(55	)	$	94,010
Greater than one year		—		—		—			—
Total	$	94,029	$	36	$	(55	)	$	94,010

Maturity information was as follows for investments classified as available-for-sale at December 31, 2011 (in thousands):

	Amortized Cost		Gross unrealized gains		Gross unrealized losses			Fair value
Within one year	$	211,622	$	34	$	(2	)	$	211,654
Greater than one year		—		—		—			—
Total	$	211,622	$	34	$	(2	)	$	211,654

Prepaid expenses and other current assets, net consisted of the following as of December 31, 2012 and 2011 (in thousands):

	December 31,
	2012		2011
Prepaid expenses and other current assets, net
Prepaid expenses	$	5,268	$	1,878
Other current assets, net		5,643		80
Total prepaid expenses and other current assets, net	$	10,911	$	1,958

Property and equipment consisted of the following as of December 31, 2012 and 2011 (in thousands):

	December 31,
	2012			2011
Property and equipment
Computer equipment and data center	$	13,262		$	10,712
Purchased software		5,046			4,594
Internally developed software		4,691			3,972
Office equipment		1,758			1,665
Office furniture		612			462
Leasehold improvements and other		3,400			3,133
		28,769			24,538
Accumulated depreciation		(22,636	)		(19,261	)
		6,133			5,277
Capital projects in progress		1,400			—
Total property and equipment	$	7,533		$	5,277

At December 31, 2012 and 2011, unamortized internally-developed software was $1.4 million and $1.6 million, respectively, and for the years ended December 31, 2012 and 2011, the Company recorded depreciation expense for internally-developed software of $947,000 and $877,000, respectively.

Accrued expenses and other current liabilities consisted of the following as of December 31, 2012 and 2011 (in thousands):

	December 31,
	2012		2011
Accrued expenses and other current liabilities
Salaries and related expenses	$	5,185	$	4,014
Accrued content costs		3,017		1,141
Business acquisition contingent liability		1,101		3,184
Other		3,977		1,910
Total accrued expenses and other current liabilities	$	13,280	$	10,249

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Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 6:    Fair Value Measurements

The Company measures its investments and derivative instruments at fair value under GAAP. The fair value hierarchy of the Company’s financial assets and liabilities carried at fair value and measured on a recurring basis is as follows (in thousands):

				Fair value measurements at the re porting date using
	December 31, 2012			Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Assets
Cash equivalents:
U.S. government securities	$	6,900		$	—	$	6,900		$	—
Money market and other funds		13,723			—		13,723			—
Commercial paper		6,999			—		6,999			—
Time deposits		1,245			—		1,245			—
Taxable municipal bonds		8,794			—		8,794			—
Total cash equivalents		37,661			—		37,661			—
Available-for-sale securities:
U.S. government securities		41,402			—		41,402			—
Commercial paper		9,396			—		9,396			—
Time deposits		7,169			—		7,169			—
Taxable municipal bonds		36,043			—		36,043			—
Total available-for-sale securities		94,010			—		94,010			—
Total assets		131,671			—		131,671			—
Liabilities
Derivative instruments
Warrant (see Note 8)		(8,564	)		—		—			(8,564	)
Interest rate swap (see Note 10)		(410	)		—		(410	)		—
Total liabilities		(8,974	)		—		(410	)		(8,564	)
Total assets and liabilities at fair value	$	122,697		$	—	$	131,261		$	(8,564	)

			Fair value measurements at the reporting date using
	December 31, 2011		Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Cash equivalents:
Money market funds	$	32,637	$	—	$	32,637	$	—
Commercial paper		20,000		—		20,000		—
Total cash equivalents		52,637		—		52,637		—
Available-for-sale securities:
U.S. government securities		162,170		—		162,170		—
Commercial paper		49,484		—		49,484		—
Total available-for-sale securities		211,654		—		211,654		—
Total assets at fair value	$	264,291	$	—	$	264,291	$	—

There were no financial assets measured on a recurring basis by using significant Level 3 inputs during the year ended December 31, 2011. The Company reviews the impairments of its available-for-sale investments and classifies the impairment of any individual available-for-sale investment as either temporary or other-than-temporary. The differentiating factors between temporary and other-than-temporary impairments are primarily the length of the time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

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Stock-based Compensation Expense

12 Months Ended

Dec. 31, 2012

Stock-based Compensation Expense [Abstract]

Stock-Based Compensation Expense

Note 8:    Stock-based Compensation Expense

For the years ended December 31, 2012, 2011, and 2010, the Company recognized compensation expense related to stock options, RSUs and MSUs in continuing operations of $13.2 million, $7.7 million, and $13.9 million, respectively. To estimate the compensation cost that was recognized for the years ended December 31, 2012, 2011, and 2010, the Company used the Black-Scholes-Merton option-pricing model with the following weighted-average assumptions for equity awards granted:

	Years ended December 31,
	2012		2011		2010
Stock option grants:
Risk-free interest rate		0.26% - 1.57%		0.25% - 1.58%		0.44% - 1.94%
Expected dividend yield		0%		0%		0%
Expected volatility		40% - 48%		40% - 50%		48% - 53%
Expected life		3.3 years		3.0 years		3.1 years
Non-employee stock option grant:
Risk-free interest rate		0.26%		—		—
Expected dividend yield		0%		—		—
Expected volatility		38% - 41%		—		—
Expected life		1.6 - 2.2 years		—		—
Market stock unit grants
Risk-free interest rate		—		0.15%		—
Blucora expected dividend yield		—		0%		—
iShares Russell 2000 Index expected dividend yield		—		1.08%		—
Blucora closing stock price		—		$8.74		—
iShares Russell 2000 Index closing price		—		$82.29		—
Blucora expected volatility		—		37.4%		—
iShares Russell 2000 Index expected volatility		—		20.3%		—
Measurement period		—		1.0 years		—
Warrant grant:
Risk-free interest rate		0.68% - 0.89%		0.46%		—
Expected dividend yield		0%		0%		—
Expected volatility		46% - 48%		39%		—
Expected life		4.6 - 5.4 years		2.0 years		—

The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent remaining term. The Company paid a special dividend in January 2008, and may pay special dividends in the future, but does not expect to pay recurring dividends. The expected volatility is based on historical volatility of the Company’s stock for the related expected life of the option. The expected life of the equity award is based on historical experience.

As of December 31, 2012, total unrecognized stock-based compensation cost related to unvested stock options, unvested RSUs and unvested MSUs was $6.2 million, based on the Company’s estimate of its pre-vesting forfeiture rate. The balance at December 31, 2012 is expected to be recognized over a weighted average period of approximately 16 months. Total unrecognized stock-based compensation cost related to unvested stock options was $1.8 million, which is expected to be recognized over a weighted average period of approximately 15 months. Total unrecognized stock-based compensation cost related to unvested RSU grants was $4.3 million, which is expected to be recognized over a weighted average period of approximately 16 months. Total unrecognized stock-based compensation cost related to unvested MSU grants was $133,000, which is expected to be recognized over a weighted average period of approximately 13 months.

The Company has included the following amounts for stock-based compensation cost, including the cost related to the ESPP, in the accompanying Statement of operations and comprehensive income for the years ended December 31, 2012, 2011, and 2010 (amounts in thousands):

	Years ended December 31,
	2012		2011		2010
Cost of sales	$	558	$	286	$	461
Engineering and technology		1,180		821		1,298
Sales and marketing		1,909		1,002		2,631
General and administrative		9,576		5,579		9,528
Total		13,223	$	7,688	$	13,918

Financing cash flow generated by tax benefits from stock-based award activity was $23.0 million in 2012. Excluded from the amounts recorded in the above categories of operating expense for the years ended December 31, 2012, 2011, and 2010 are the following amounts that were capitalized as part of internally developed software, and amounts that were reclassified as discontinued operations (amounts in thousands):

	Years ended December 31,
	2012		2011			2010
Internally developed software	$	121	$	206		$	259
Discontinued operations		—		(159	)		833
Total	$	121	$	47		$	1,092

The stock based compensation expense for year ended December 31, 2011 includes $1.9 million fair value classified to general and administrative expenses for the Warrant issued in August 2011. The acquisition of the TaxACT business on January 31, 2012 fulfilled the Warrant agreement’s remaining performance condition and extended the Warrant’s expiration date. The extension of the Warrant’s term was a modification that resulted in a $4.3 million charge to stock-based compensation expense equal to the increase in the Warrant’s fair value and was recognized in general and administrative expenses in the first quarter of 2012. Additionally, subsequent to the modification, the Company treated the award as a derivative instrument, and the modification date fair value previously recognized in paid in capital of $6.2 million was classified as a current liability. The Warrant’s fair value will be determined each reporting period until settled, with gains or losses related to the change in fair value recorded in other loss (income), net. The Warrant’s fair value at December 31, 2012 is $8.5 million and the Company recorded a loss of $2.3 million in the year ended December 31, 2012. The Company recorded $6.6 million in total expense relating to the modification and subsequent change in fair value for the Warrant for the year ended December 31, 2012.

In October 2011, the Company granted 200,000 stock options to a non-employee who performed acquisition-related activities, and the award’s vesting was predicated on completing a qualified acquisition per the terms of the award. No expense was recognized in 2011 as a qualified acquisition did not occur. The expense for the award was recognized in 2012, due to the completion of the TaxACT acquisition on January 31, 2012, which, as discussed in Note 3, was considered to be a qualifying acquisition. The modification of the award resulted in a charge to stock-based compensation expense in 2012 of $914,000.

In May 2012, the Company granted 190,000 performance-based stock options to certain employees who perform acquisition-related activities, and the awards’ vestings are predicated on completing qualified acquisitions per the terms of the awards. No expense was recognized in 2012, as a qualified acquisition did not occur.

Stock-based compensation expense recognized during the years ended December 31, 2012, 2011, and 2010 is based on the grant date fair values estimated using the Black-Scholes-Merton option pricing model for options granted, the fair value at date of grant for RSUs and the Monte Carlo valuation method for the MSU grants. The Company has historically disclosed and currently recognizes stock-based compensation expense over the vesting period for each separately vesting portion of a share-based award as if they were, in substance, individual share-based awards. The Company estimates forfeitures at the time of grant and revises those estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The weighted average fair value for options granted in the years ended December 31, 2012, 2011, and 2010 was $3.84, $2.80, and $3.47 per share, respectively. The Company issues new shares upon exercise of options to purchase common stock and vesting of RSUs.

The total intrinsic value of RSUs vested, MSUs vested, options exercised, and shares purchased pursuant to the ESPP during the years ended December 31, 2012, 2011, and 2010 is supplemental information for the consolidated statements of cash flows and is presented below (amounts in thousands):

	Years ended December 31,
	2012		2011		2010
RSUs vested	$	4,663	$	5,945	$	10,097
MSUs vested	$	511	$	—	$	—
Options exercised	$	3,886	$	2,474	$	436
Shares purchased pursuant to ESPP	$	277	$	100	$	107

Awards outstanding at December 31, 2012 have the following total intrinsic value and weighted average remaining contractual terms:

	Outstanding at December  31, 2012		Intrinsic value (in thousands)		Weighted  average remaining contractual term (in years)
Options outstanding		3,743,639	$	18,126		4.2
Options exercisable and outstanding		2,228,437	$	10,585		3.4
Restricted stock units outstanding		825,288	$	12,965		1.0
Market stock units outstanding		80,250	$	1,261		0.9

Options vested and outstanding at December 31, 2012 and expected to vest in the future, based on the Company’s estimate of its pre-vesting forfeiture rate, have an intrinsic value of $16.9 million and weighted average remaining contractual term of 4.1 years. RSUs expected to vest after December 31, 2012, based on the Company’s estimate of its pre-vesting forfeiture rate, have an intrinsic value of $11.1 million and weighted average remaining contractual term of 11 months. MSUs expected to vest after December 31, 2012, based on the Company’s estimate of its pre-vesting forfeiture rate, have an intrinsic value of $1.1 million and weighted average remaining contractual term of 10 months. Cash generated from the exercise of stock options amounted to $9.1 million for the year ended December 31, 2012.

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Stockholders' Equity (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Stockholders Equity (Textual) [Abstract]
Vesting period of award from grant date	1 year
Employee stock purchase worth lower limit	$ 601,000	$ 377,000	$ 350,000
Stockholders Equity (Additional Textual) [Abstract]
Number of shares Available for Grant under Plans and awards assumed through acquisition	0
Warrant expiry date	2014-08-23
Warrant extended expiry period	2017-08-23
Cambridge Information Group One LLC [Member]
Stockholders Equity (Textual) [Abstract]
Number of new shares Issued to CIG		764,192
Purchase price of new shares Issued to CIG		$ 9.16
Warrants issued to purchase common stock		1,000,000
Warrant exercise price		9.62
Market Stock Units [Member]
Stockholders Equity (Textual) [Abstract]
Awards outstanding under Stock Option Plan	80,250	102,500
1998 [Member]
Stockholders Equity (Textual) [Abstract]
Common stock through payroll deductions	15.00%
Employee stock purchase worth lower limit	25,000
Percentage of common stock may not participate in the ESPP	5.00%
No of shares of common stock are authorized for issuance under the ESPP	1,360,000
Employee Stock Purchase Offering Period	6 months
Employee stock purchase plan offering period start dates one	Feb. 01, 2012
Employee stock purchase plan offering period start dates two	Aug. 01, 2012
Upper limit of common stock purchased under the ESPP	85.00%
Lower limit of common stock purchased under the ESPP	85.00%
Share issued In ESPP Plan	62,058	54,289	53,596
Cash Generated from ESPP Plan	$ 601,000
1996 Plan [Member]
Stockholders Equity (Textual) [Abstract]
Awards Vesting rights under 1996 Plan	RSUs and options granted under the 1996 Plan typically are scheduled to vest over three years or less, with 33 1/3% vesting one year from the date of grant and the remainder vesting ratably thereafter on a semi-annual basis. Options and RSUs granted in 2012, 2011, and 2010 under the 1996 Plan generally, with a few exceptions, vest over a period of three years, with 33 1/3% vesting one year from the date of grant and the remainder vesting ratably thereafter on a semi-annual basis, and expire seven years from the date of grant. There are a few exceptions to this vesting schedule, which provide for vesting at different rates or based on achievement of performance targets.
Percentage of awards vested within one year from grant date	33.33%
RSU And Options, Remainder Vesting ratably thereafter description	semi-annual basis
Number of Shares Available for Grant	Through January 1, 2011, the number of shares available for grant pursuant to securities issued under the 1996 Plan increased annually on the first day of January by an amount equal to the lesser of (A) five percent ofthe Company’s outstanding shares at the end of the Company’s preceding fiscal year or (B) a lesser amountdetermined by the Board of Directors.
Maximum Number of shares may be granted to any one Individual in any fiscal year	800,000
Maximum Additional Number of shares may be granted to any one Individual in any fiscal year	800,000
Actual Amount of MSU Earned percentage		150.00%
Right to receive number of share in each MSU units	1
Number of employees under employee stock purchase plan	0
Stock issuance limit under employee stock purchase plan	The price of common stock purchased under the ESPP is the lesser of 85% of the fair market value on the first day of an offering period and 85% of the fair market value on the last day of an offering period.
Typically Scheduled Vesting Period of 1996 Plan	3 years
Stockholders Equity (Additional Textual) [Abstract]
Number of shares Available for Grant under Plans and awards assumed through acquisition	4,953,656
1996 Plan [Member] | Market Stock Units [Member]
Stockholders Equity (Textual) [Abstract]
Awards Vesting rights under 1996 Plan	One-third of the earned MSUs vested on April 1, 2012, and the remaining earned MSUs are scheduled to vest in equal installments on each of April 1,2013 and 2014.
1996 Plan [Member] | Options and restricted stock units specified years [Member]
Stockholders Equity (Textual) [Abstract]
Vesting period of award from grant date	1 year
RSU And Options, Remainder Vesting ratably thereafter description	semi-annual basis
Vesting rights Expire year from the date of grant under 1996 Plan	7 years
1996 Plan [Member] | Options and restricted stock units specified years [Member] | Maximum [Member]
Stockholders Equity (Textual) [Abstract]
Typically Scheduled Vesting Period of 1996 Plan	3 years
1996 Plan [Member] | Options prior to 2008 [Member]
Stockholders Equity (Textual) [Abstract]
Vesting period of award from grant date	1 year
2001 Plan [Member]
Stockholders Equity (Textual) [Abstract]
Awards outstanding under Stock Option Plan	0

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Stock-based Compensation Expense (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Stock-based compensation expense
Share-based compensation expense	$ 13,223,000	$ 7,688,000	$ 13,918,000
Internally developed software	121,000	206,000	259,000
Total	121,000	47,000	1,092,000
Cost of sales [Member]
Stock-based compensation expense
Share-based compensation expense	558,000	286,000	461,000
Engineering and technology [Member]
Stock-based compensation expense
Share-based compensation expense	1,180,000	821,000	1,298,000
Sales and marketing [Member]
Stock-based compensation expense
Share-based compensation expense	1,909,000	1,002,000	2,631,000
General and administrative [Member]
Stock-based compensation expense
Share-based compensation expense	9,576,000	5,579,000	9,528,000
Discontinued operations [Member]
Stock-based compensation expense
Share-based compensation expense		$ (159,000)	$ 833,000

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Stockholders' Equity (Details 3) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Restricted Stock Units (RSUs) [Member]
Activity and weighted average grant date fair value information regarding all Restricted stock and Market stock units grants
Outstanding, Beginning Balance	614,480	1,377,485	1,578,269
Weighted average grant date fair value, Outstanding, Beginning Balance	$ 9.14	$ 9.26	$ 8.46
Restricted Stock, Granted	656,850	291,500	1,239,959
Weighted average grant date fair value, Granted	$ 13.19	$ 8.86	$ 9.92
Restricted Stock, Forfeited	(111,706)	(377,825)	(374,288)
Weighted average grant date fair value, Forfeited	$ 9.13	$ 9.07	$ 8.81
Restricted Stock, Vested	(334,336)	(676,680)	(1,066,455)
Weighted average grant date fair value, Vested	$ 9.12	$ 9.30	$ 9.01
Outstanding, Ending Balance	825,288	614,480	1,377,485
Weighted average grant date fair value, Outstanding, Ending Balance	$ 12.38	$ 9.14	$ 9.26
Expected to vest after December 31, 2012	706,018
Weighted average grant date fair value, Expected to vest after December 31, 2012	$ 12.38
Market Stock Units [Member]
Activity and weighted average grant date fair value information regarding all Restricted stock and Market stock units grants
Outstanding, Beginning Balance	102,500
Weighted average grant date fair value, Outstanding, Beginning Balance	$ 9.28
Restricted Stock, Granted			155,250
Weighted average grant date fair value, Granted			$ 9.28
Restricted Stock, Forfeited			(52,750)
Weighted average grant date fair value, Forfeited			$ 9.28
Restricted Stock, Vested	(40,125)
Weighted average grant date fair value, Vested		$ 9.28
Market stock units, Performance adjustment	40,125
Weighted average grant date fair value, Performance adjustment	$ 9.28
Market stock units, Cancelled	(22,250)
Weighted average grant date fair value, Cancelled	$ 9.28
Outstanding, Ending Balance	80,250	102,500
Weighted average grant date fair value, Outstanding, Ending Balance	$ 9.28	$ 9.28
Expected to vest after December 31, 2012	70,142
Weighted average grant date fair value, Expected to vest after December 31, 2012	$ 9.28

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2012

Segment Information [Abstract]

Information on reportable segments for reconciliation to consolidated net income

Information on reportable segments currently presented to the Company’s chief operating decision maker and a reconciliation to consolidated net income for 2012, 2011, and 2010 are presented below (in thousands):

	Years ended December 31,
	2012			2011			2010
Search
Revenue	$	344,814		$	228,813		$	214,343
Cost of revenue		245,135			143,887			119,881
Operating expense		37,494			38,720			45,043
Search segment income		62,185			46,206			49,419
Search segment margin		18	%		20	%		23	%
Tax Preparation
Revenue		62,105			—			—
Cost of revenue		4,729			—			—
Operating expense		27,324			—			—
Tax Preparation segment income		30,052			—			—
Tax Preparation segment margin		48	%		—			—
Total Segment
Total segment revenue		406,919			228,813		$	214,343
Total segment cost of revenue		249,864			143,887			119,881
Total segment operating expenses		64,818			38,720			45,043
Total segment income		92,237			46,206			49,419
Total segment margin		23	%		20	%		23	%
Corporate
Operating expense		11,798			9,583			16,957
Stock-based compensation		13,223			7,688			13,918
Depreciation		3,812			4,861			6,596
Amortization of intangible assets		19,199			2,595			9,197
Other loss (income), net		6,677			1,246			(15,247	)
Income tax expense (benefit)		15,002			(11,288	)		8,725
Loss from discontinued operations, net of tax		—			9,927			4,593
Total corporate		69,711			24,612			44,739
Net income	$	22,526		$	21,594		$	4,680

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Goodwill and Other Intangible Assets (Details Textual) (USD $)			12 Months Ended
	Nov. 30, 2012	Nov. 30, 2011	Dec. 31, 2012 Weighted Average [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization period for definite-lived intangible assets			75 months
Impairments	$ 0	$ 0

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Segment Information

12 Months Ended

Dec. 31, 2012

Segment Information [Abstract]

Segment Information

Note 13:    Segment Information

The Company changed its operational structure as a result of the January 31, 2012 acquisition of the TaxACT business. The Search segment is the InfoSpace business and the Tax Preparation segment is the TaxACT business. The Company’s chief executive officer is its chief operating decision maker and reviews financial information presented on a disaggregated basis. This information is used for purposes of allocating resources and evaluating financial performance.

The Company has revised the presentation of its historical financial results for 2010 and 2011 to be consistent with the Company’s new measures for reportable segments information. The revised financial information for the new segment reporting is not indicative of how the Company operated or managed its business in the past.

The Company presents revenue and cost of sales for each of the two segments. Search segment cost of sales consists primarily of revenue sharing arrangements with the Company’s distribution partners and usage-based content fees. Tax Preparation segment cost of sales consists primarily of royalties, payment processing fees for customer transactions, and bank service fees.

The Company does not allocate certain general, administrative, and overhead costs, or stock-based compensation, depreciation, amortization of intangible assets, other loss (income), net, income tax expense, or results from discontinued operations to the reportable segments. Such amounts are reflected in the table below under the heading “Corporate.” The Company does not account for, and does not report to management, its assets or capital expenditures by segment other than goodwill and intangible assets used for impairment analysis purposes.

Information on reportable segments currently presented to the Company’s chief operating decision maker and a reconciliation to consolidated net income for 2012, 2011, and 2010 are presented below (in thousands):

	Years ended December 31,
	2012			2011			2010
Search
Revenue	$	344,814		$	228,813		$	214,343
Cost of revenue		245,135			143,887			119,881
Operating expense		37,494			38,720			45,043
Search segment income		62,185			46,206			49,419
Search segment margin		18	%		20	%		23	%
Tax Preparation
Revenue		62,105			—			—
Cost of revenue		4,729			—			—
Operating expense		27,324			—			—
Tax Preparation segment income		30,052			—			—
Tax Preparation segment margin		48	%		—			—
Total Segment
Total segment revenue		406,919			228,813		$	214,343
Total segment cost of revenue		249,864			143,887			119,881
Total segment operating expenses		64,818			38,720			45,043
Total segment income		92,237			46,206			49,419
Total segment margin		23	%		20	%		23	%
Corporate
Operating expense		11,798			9,583			16,957
Stock-based compensation		13,223			7,688			13,918
Depreciation		3,812			4,861			6,596
Amortization of intangible assets		19,199			2,595			9,197
Other loss (income), net		6,677			1,246			(15,247	)
Income tax expense (benefit)		15,002			(11,288	)		8,725
Loss from discontinued operations, net of tax		—			9,927			4,593
Total corporate		69,711			24,612			44,739
Net income	$	22,526		$	21,594		$	4,680

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Goodwill and Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2012

Goodwill and Other Intangible Assets [Abstract]

Summary of goodwill activity

The following table presents the changes in goodwill by reportable segment during the period from January 1, 2011 to December 31, 2012 (in thousands):

	Search		Tax Preparation		Total
Goodwill as of January 1, 2011 and 2012	$	44,815	$	—	$	44,815
Additions		—		185,475		185,475
Goodwill as of December 31, 2012	$	44,815	$	185,475	$	230,290

Intangible assets other than goodwill

Intangible assets other than goodwill consisted of the following (in thousands):

	December 31, 2012							December 31, 2011
	Gross carrying amount		Accumulated amortization			Other intangible assets, net		Gross carrying amount		Accumulated amortization			Other intangible assets, net
Definite-lived intangible assets:
Installed code base technology	$	12,650	$	(12,369	)	$	281	$	12,650	$	(11,618	)	$	1,032
Core technology		1,085		(1,085	)		—		1,085		(1,085	)		—
Tax Preparation customer relationships		101,400		(11,619	)		89,781		—		—			—
Tax Preparation proprietary technology		29,800		(6,829	)		22,971		—		—			—
Other		6,667		(6,667	)		—		6,667		(6,667	)		—
Total definite-lived intangible assets		151,602		(38,569	)		113,033		20,402		(19,370	)		1,032
Indefinite-lived intangible assets		19,782		—			19,782		283		—			283
Total	$	171,384	$	(38,569	)	$	132,815	$	20,685	$	(19,370	)	$	1,315

Information about expected amortization of definite-lived intangible assets

The Company amortizes definite-lived intangible assets over their expected useful lives under the straight-line method, except for the installed code base technology, which is amortized proportional to expected revenue. Information about expected amortization of definite-lived intangible assets held as of December 31, 2012 in the next five years is presented in the below table (in thousands):

	2013		2014		2015		2016		2017		Total
Statement of operations location of amortization:
Cost of sales	$	7,668	$	7,513	$	7,450	$	621	$	—	$	23,252
Amortization of intangible assets		12,675		12,675		12,675		12,675		12,675		63,375
Total	$	20,343	$	20,188	$	20,125	$	13,296	$	12,675	$	86,627

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Goodwill and Other Intangible Assets (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Definite-lived intangible assets:
Definite-lived intangible assets, Gross carrying amount	$ 151,602	$ 20,402
Definite-lived intangible assets, Accumulated amortization	(38,569)	(19,370)
Definite-lived intangible assets, net	113,033	1,032
Indefinite - lived intangible assets, Gross carrying amount	19,782	283
Indefinite - lived intangible assets, Accumulated amortization
Indefinite - lived intangible assets, net	19,782	283
Gross carrying amount, Total	171,384	20,685
Accumulated amortization, Total	(38,569)	(19,370)
Other intangible assets, net, Total	132,815	1,315
Installed code base technology [Member]
Definite-lived intangible assets:
Definite-lived intangible assets, Gross carrying amount	12,650	12,650
Definite-lived intangible assets, Accumulated amortization	(12,369)	(11,618)
Definite-lived intangible assets, net	281	1,032
Core technology [Member]
Definite-lived intangible assets:
Definite-lived intangible assets, Gross carrying amount	1,085	1,085
Definite-lived intangible assets, Accumulated amortization	(1,085)	(1,085)
Tax Preparation customer relationships [Member]
Definite-lived intangible assets:
Definite-lived intangible assets, Gross carrying amount	101,400
Definite-lived intangible assets, Accumulated amortization	(11,619)
Definite-lived intangible assets, net	89,781
Tax Preparation proprietary technology [Member]
Definite-lived intangible assets:
Definite-lived intangible assets, Gross carrying amount	29,800
Definite-lived intangible assets, Accumulated amortization	(6,829)
Definite-lived intangible assets, net	22,971
Other [Member]
Definite-lived intangible assets:
Definite-lived intangible assets, Gross carrying amount	6,667	6,667
Definite-lived intangible assets, Accumulated amortization	$ (6,667)	$ (6,667)

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Summary of Significant Accounting Policies (Details 5) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Revenue concentration
Revenues	$ 406,919	$ 228,813	$ 214,343
United States [Member]
Revenue concentration
Revenues	402,656	226,229	209,029
International [Member]
Revenue concentration
Revenues	$ 4,263	$ 2,584	$ 5,314

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Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Consolidated Statements of Comprehensive Income [Abstract]
Amortization of acquired intangible assets	$ 7,580	$ 2,595	$ 9,197

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2:    Summary of Significant Accounting Policies

Cash equivalents:    The Company considers all highly liquid debt instruments with an original maturity of ninety days or less at date of acquisition to be cash equivalents, which are carried at fair value.

Accounts receivable:    Accounts receivable are stated at amounts due from customers net of an allowance for doubtful accounts.

Short-term investments:    The Company principally invests its available cash in investment-grade income securities, AAA-rated money market funds, and insured time deposits with commercial banks. Such investments are included in “Cash and cash equivalents” and “Short-term investments, available for sale,” on the consolidated balance sheets, and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive income (loss)” on the consolidated balance sheets.

Property and equipment:    Property and equipment are stated at cost. Depreciation is computed under the straight-line method over the following estimated useful lives:

Computer equipment and software	3 years
Data center servers	3 years
Internally developed software	15 months — 3 years
Office equipment	7 years
Office furniture	7 years
Leasehold improvements	Shorter of lease term or economic life

The Company capitalizes certain internal-use software development costs, consisting primarily of employee salaries and benefits allocated on a project or product basis. The Company capitalized $952,000, $1.2 million, and $1.0 million of internal-use software costs in the years ended December 31, 2012, 2011, and 2010, respectively.

Business combinations and intangible assets including goodwill:    The Company accounts for business combinations using the acquisition method and, accordingly, the identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values. Goodwill is calculated as the excess of the purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

Valuation of goodwill and intangible assets:    The Company evaluates goodwill and indefinite-lived intangible assets at least annually, and evaluates all intangible assets for impairment whenever events or changes in circumstances, including material changes in the fair value of the Company’s outstanding common stock, indicate that the carrying amount of the Company’s assets might not be recoverable.

The Company tests for goodwill impairment at the reporting unit level. In the evaluation of goodwill, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If so, the Company performs a quantitative assessment and compares the fair value of the reporting unit to the carrying amount. The reporting unit fair values are determined for each reporting unit by using a combination of projections of future discounted cash flows, and EBITDA and revenue multiple comparisons with comparable publicly-held companies. If the fair value of a reporting unit was determined to be less than its carrying amount, the Company would record an impairment loss equal to the excess of the carrying amount of the reporting unit’s goodwill over its fair value.

In the evaluation of indefinite-lived intangible assets, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of an asset is less than the carrying amount. If so, the Company performs a quantitative assessment and compares the fair value of the asset to its carrying amount. The Company bases its measurement of fair value of indefinite-lived intangible assets, which primarily consist of trade name and trademarks, using the relief-from-royalty method. This method assumes that the trade name and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital.

If the fair value of an indefinite-lived intangible asset was determined to be less than its carrying amount, the Company would record an impairment loss equal to the excess of the carrying amount of the reporting unit’s goodwill over its fair value.

Other investments:    Included in other long-term assets are the Company’s investment in equity investments of privately-held companies for business and strategic purposes. The Company currently holds equity securities and warrants to purchase equity securities in companies whose securities are not publicly traded. The Company’s equity investments were carried at a fair value of $0 at December 31, 2012 and 2011.

Revenue recognition:    The Company recognizes revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists, the Company has delivered the product or performed the service, the fee is fixed or determinable, and collectability is probable. Determining whether and when these criteria have been satisfied involves exercising judgment and using estimates and assumptions that can have an impact on the timing and amount of revenue that the Company recognizes.

The Company also evaluates whether revenue should be presented on a gross basis, which is the amount that a customer pays for the service or product, or on a net basis, which is the customer payment less amounts the Company pays to suppliers. In making that evaluation, the Company considers indicators such as whether the Company is the primary obligor in the arrangement and assumes the risks and rewards as a principal in the customer transaction, including the credit risk, and whether the Company can set the sales price and select suppliers. The accounting principles generally accepted in the United States of America (“GAAP”) clearly indicates that the evaluations of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity.

Search services revenue recognition:    The Company’s revenues are generated primarily from its web search services. The Company generates search services revenue when an end user of such services clicks on a paid search link provided by a Search Customer and displayed on a distribution partners’ web property or on one of the Company’s owned and operated web properties. The Search Customer that provided the paid search link receives a fee from the advertiser who paid for the click and the Search Customer pays the Company a portion of that fee. Revenue is recognized in the period in which the services are provided (e.g., a paid search occurs) and is based on the amounts earned by and ultimately remitted to the Company. This revenue is recorded in the Search segment.

Under the Company’s agreements with its Search Customers and its distribution partners, the Company is the primary obligor, separately negotiates each revenue or unit pricing contract independent of any revenue sharing arrangements, and assumes the credit risk for amounts invoiced to its Search Customers. For search services, the Company determines the paid search results, content, and information directed to its owned and operated websites and its distribution partners’ web properties.

The Company earns revenue from its Search Customers by providing paid search results generated from its owned and operated web properties and from its distribution partners’ web properties based on separately negotiated and agreed-upon terms with each distribution partner. Consequently, the Company records search services revenue on a gross basis.

Tax preparation revenue recognition:    The Company derives revenue from the sale of tax preparation online services, ancillary service offerings, tax preparation packaged software products, and multiple element arrangements that may include a combination of these items. Ancillary service offerings include tax preparation support services, data archive services, bank or reloadable pre-paid debit card services, and e-filing services. This revenue is recorded in the Tax Preparation segment.

The Company’s tax preparation segment service revenue consists primarily of hosted tax preparation online services, tax preparation support services, data archive services, and e-filing services. The Company recognizes revenue from these services as the services are performed and the four revenue recognition criteria described above are met.

The Company recognizes revenue from the sale of its packaged software products when legal title transfers. This is generally when its customers download products from the Web or when the products ship.

The bank or reloadable prepaid debit card services are offered to taxpayers as an option to receive their tax refunds in the form of a prepaid bank card or to have the fees for the product and/or services purchased by the customers deducted from their refunds. Revenue for this fee is recognized when the four revenue recognition criteria described above are met; for some arrangements that is upon filing and for other arrangements that is upon cash receipt.

For products and/or services that consist of multiple elements, the Company must: (1) determine whether and when each element has been delivered; (2) determine the fair value of each element using the selling price hierarchy of vendor-specific objective evidence (“VSOE”) of fair value if available, third-party evidence (“TPE”) of fair value if VSOE is not available, and estimated selling price (“ESP”) if neither VSOE nor TPE is available; and (3) allocate the total price among the various elements based on the relative selling price method. Once the Company has allocated the total price among the various elements, it recognizes revenue when the revenue recognition criteria described above are met for each element.

VSOE generally exists when the Company sells the deliverable separately and is normally able to establish VSOE for all deliverables in these multiple element arrangements; however, in certain limited instances VSOE cannot be established. This may be because the Company infrequently sells each element separately, or has a limited sales history. When VSOE cannot be established the Company attempts to establish a selling price for each element based on TPE. TPE is determined based on competitor prices for similar deliverables when sold separately. When the Company is unable to establish selling price using VSOE or TPE, it uses ESP in its allocation of arrangement consideration. ESP is the estimated price at which the Company would sell a product or service if it were sold on a stand-alone basis. The Company determines ESP for a product or service by considering multiple factors including, but not limited to, historical stand-alone sales, pricing practices, market conditions, competitive landscape, internal costs, and gross margin objectives.

In some situations, the Company receives advance payments from its customers. The Company defers revenue associated with these advance payments and recognizes the allocated consideration for each element when the Company ships the products or performs the services, as appropriate. Advance payments related to data archive services are deferred and recognized over the related contractual term.

Cost of sales:    Cost of sales consists of costs related to revenue sharing arrangements with the Company’s distribution partners, usage-based content fees, certain costs associated with the operation of the Company’s data centers that serve its search and tax preparation businesses, including amortization of intangible assets, depreciation, personnel expenses (which include salaries, benefits and other employee related costs, and stock-based compensation expense), bandwidth costs, customer payment processing fees, bank service fees, and royalties.

Engineering and technology expenses:    Engineering and technology expenses are associated with the research, development, support, and ongoing enhancements of the Company’s offerings, including personnel expenses (which include salaries, stock-based compensation expense, and benefits and other employee related costs), software support and maintenance, and professional service fees.

Sales and marketing expenses:    Sales and marketing expenses consist primarily of marketing expenses associated with the Company’s tax preparation business (which includes the following channels: television, radio, online banner ads, internet search, and email), the Company’s owned and operated web properties (which consist of traffic acquisition, including online direct marketing initiatives, which involve the purchase of online advertisements that drive traffic to an owned and operated website, agency fees, brand promotion expense, and market research expense), personnel costs (which include salaries, stock-based compensation expense, and benefits and other employee related costs), and the cost of temporary help and contractors to augment the Company’s staffing.

Costs for advertising are recorded as expense when the advertisement appears or electronic impressions are recorded. Advertising expense totaled $31.8 million, $14.4 million, and $18.5 million for the years ended December 31, 2012, 2011, and 2010, respectively. Prepaid advertising costs were $2.5 million at December 31, 2012.

General and administrative expenses:    General and administrative expenses consist primarily of personnel expenses (which include salaries, stock-based compensation expense, and benefits and other employee related costs), professional service fees (which include legal, audit, and tax fees), general business development and management expenses, occupancy and general office expenses, taxes, and insurance expenses.

Stock-based compensation:    The Company measures and recognizes its compensation expense for all stock-based payment awards made to employees and directors, including stock option, restricted stock unit grants, and market stock unit grants and purchases of stock made pursuant to the Company’s 1998 Employee Stock Purchase Plan (the “ESPP”), based on estimated fair values. Expense is recognized on a straight-line basis over the requisite vesting period for each separately vesting portion of the award, adjusted for an estimated forfeiture rate.

To determine the stock-based compensation expense that was recognized with respect to restricted stock units (“RSU”), market stock units (“MSU”), which are a form of share price performance-based restricted stock units granted under the Company’s 2011 long-term executive compensation plan, employee and non-employee director stock options, and the Warrant issued to Cambridge Information Group I LLC (“CIG”), the Company used the fair value at date of grant for RSUs, the Monte Carlo valuation method for the MSU grants, and the Black-Scholes-Merton option-pricing model for stock option grants and the Warrant. An option award to a non-employee was valued by the Black-Scholes-Merton method upon the completion of a qualified business acquisition by the Company in 2012. For each of the above awards, the value of the portion that is ultimately expected to vest is recognized as expense over the requisite service periods in the accompanying consolidated financial statements for the years ended December 31, 2012, 2011, and 2010.

Debt Issuance Costs and Debt Discount:    Debt issuance costs and debt discounts are deferred and amortized as interest expense under the effective interest method over the contractual term of the related debt, adjusted for prepayments.

Hedging:    The Company uses a derivative financial instrument in the form of an interest rate swap agreement for the purpose of minimizing exposure to changes in interest rates. This swap agreement is accounted for as a cash flow hedge and changes in the fair value of the hedge instrument are included in other comprehensive income while the hedge is perfectly effective, and any ineffectiveness would be recorded to other income (loss), net in the Statement of operations and comprehensive income.

Employee benefit plan:    The Company has a 401(k) savings plan covering its employees. Eligible employees may contribute through payroll deductions. The Company may match the employees’ 401(k) contributions at the discretion of the Company’s Board of Directors. Pursuant to a continuing resolution, in 2012, 2011, and 2010, the Company has matched a portion of the 401(k) contributions made by its employees. The amount contributed by the Company is equal to a maximum of 50% of employee contributions up to a maximum of 3% of an employee’s salary. For the years ended December 31, 2012, 2011, and 2010, the Company contributed $374,000, $288,000, and $309,000, respectively, for employees.

Other loss (income), net:     Other loss (income), net for the years ended December 31, 2012, 2011, and 2010, consists of the following (in thousands):

	2012			2011			2010
Interest expense	$	3,522		$	—		$	—
Interest income		(131	)		(369	)		(331	)
Amortization of debt issuance costs		820			—			—
Accretion of debt discount		325			—			—
Loss on derivative instrument		2,346			—			—
Gain on contingency resolution		—			(1,500	)		—
Increase in fair value of earn-out contingent liability		—			3,000			5,000
Foreign currency exchange loss (gain), net		48			20			(1,335	)
Litigation settlement gain		—			—			(18,965	)
Loss (gain) on disposal of assets		(1	)		46			1,014
Other		(252	)		49			(630	)
Other loss (income), net	$	6,677		$	1,246		$	(15,247	)

In 2012, the Company incurred interest expenses of $3.5 million and a loss on a derivative instrument of $2.3 million. The financial performance of Make The Web Better, acquired on April 1, 2010, was greater than expected; as a consequence, the fair value of the related contingent consideration increased and additional charges of $3.0 million and $5.0 million were recorded in the years ended December 31, 2011 and 2010, respectively. Also in 2011, the Company recorded a gain of $1.5 million related to the resolution of a contingent liability. In 2010, the Company recognized a $19.0 million gain related to a litigation settlement and recorded $1.4 million in recognition of foreign currency translation gains, primarily related to the sale or substantial liquidation of wholly-owned subsidiaries.

Loss from discontinued operations and loss on sale of discontinued operations:    On June 22, 2011, the Company sold its Mercantila e-commerce business to Zoo Stores, Inc. The results of operations from the business are reflected as discontinued operations for all periods presented. Revenue, loss before taxes, income tax benefit, and loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes, for the year ended December 31, 2011 are presented below (in thousands):

	Years ended December 31,
	2011			2010
Revenue from discontinued operations	$	16,894		$	32,492
Loss from discontinued operations before taxes	$	(3,506	)	$	(5,908	)
Income tax benefit		1,253			1,315
Loss from discontinued operations, net of taxes	$	(2,253	)	$	(4,593	)
Loss on sale of discontinued operations, net of an income tax benefit of $5,092	$	(7,674	)	$	—

Loss from discontinued operations includes previously unallocated depreciation, amortization, stock-based compensation expense, income taxes, and other corporate expenses that were attributable to the e-commerce business.

Net income per share: Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares outstanding plus the number of potentially dilutive shares outstanding during the period. Potentially dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options, a warrant issued in August 2011 (the “Warrant”), and unvested RSUs and MSUs, using the treasury stock method. Performance-based stock options for which performance has not yet been achieved are excluded from the calculation of potentially dilutive shares. Potentially dilutive shares are excluded from the computation of earnings per share if their effect is antidilutive. The treasury stock method calculates the dilutive effect for awards with an exercise price less than the average stock price during the period presented (in thousands):

	Years ended December 31,
In thousands	2012		2011		2010
Weighted average common shares outstanding, basic		40,279		37,954		35,886
Dilutive stock options, RSUs, MSUs, and the Warrant		1,393		667		943
Weighted average common shares outstanding, diluted		41,672		38,621		36,829
Antidilutive awards with an exercise price less than the average price during the applicable period excluded from dilutive share calculation		200		876		1,199
Outstanding awards with an exercise price greater than the average price during the applicable period not included in dilutive share calculation		804		2,927		4,282
Outstanding awards with performance conditions not completed during the applicable period not included in dilutive share calculation		168		—		—

Other comprehensive income:    Comprehensive income includes net income, plus items that are recorded directly to stockholders’ equity, including foreign currency translation adjustments and the net change in unrealized gains and losses on cash equivalents, short-term and long-term investments. Included in the net change in unrealized gains and losses are realized gains or losses included in the determination of net income in the period realized. Amounts reclassified out of other comprehensive income into net income were determined on the basis of specific identification.

The following table provides information about activity in other comprehensive income during the period from January 1, 2010 to December 31, 2012 (in thousands):

	Foreign currency translation adjustment			Unrealized gain (loss) on investment			Unrealized loss on derivative instrument			Total
Balance as of January 1, 2010	$	1,436		$	(96	)		—		$	1,340
Other comprehensive loss		(1,436	)		94			—			(1,342	)
Balance as of December 31, 2010		—			(2	)		—			(2	)
Other comprehensive income		—			34			—			34
Balance as of December 31, 2011		—			32			—			32
Other comprehensive loss		—			(42	)		(266	)		(308	)
Balance as of December 31, 2012	$	—		$	(10	)	$	(266	)	$	(276	)

Foreign currencies:    Foreign subsidiary financial statements are denominated in foreign currencies and are translated at the exchange rate on the balance sheet date. Realized gains and losses on foreign currency transactions are included in other loss (income), net. In 2010, substantially all of Blucora’s foreign subsidiaries were sold or liquidated.

Concentration of credit risk:    Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, short-term investments, and trade receivables. These instruments are generally unsecured and uninsured. The Company places its cash equivalents and investments with major financial institutions. Accounts receivable are typically unsecured and are derived from revenues earned from Search Customers primarily located in the United States operating in a variety of industries and geographic areas. The Company performs ongoing credit evaluations of its Search Customers and maintains allowances for potential credit losses.

The Company attempts to manage exposure to counterparty credit risk by only entering into agreements with major financial institutions which are expected to be able to fully perform under the terms of the agreement.

Revenue concentration:    The Company derives a significant portion of its revenues from two Search Customers. Revenues from the top two Search Customers represented 84%, 99%, and 97% of revenues in each of the years ended December 31, 2012, 2011, and 2010, respectively. At December 31, 2012 and 2011, two Search Customers accounted for more than 90% of the Company’s accounts receivable balance.

Geographic revenue information, as determined by the location of the customer, is presented below (in thousands):

	Years ended December 31,
	2012		2011		2010
United States	$	402,656	$	226,229	$	209,029
International		4,263		2,584		5,314
Total	$	406,919	$	228,813	$	214,343

Fair value of financial instruments:    The Company does not measure the fair value of any financial instrument other than cash equivalents, available-for-sale investments, derivative instruments, and its investment in a privately-held company. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying values of other financial instruments (accounts receivable, other receivables, and accounts payable), other current assets and accrued expenses, and other current liabilities are not recorded at fair value but approximate fair values primarily due to their short-term nature.

If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then the Company uses quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. This pricing methodology applies to the Company’s Level 2 instruments such as corporate notes and bonds, agency securities, municipal bonds, money market funds, and insured time deposits. Level 3 instruments are valued using internally developed models with unobservable inputs, which will vary based on the instrument. The Company values the Warrant, classified within Level 3 by using the Black-Scholes valuation model which has significant unobservable marketable inputs; those unobservable inputs are based on historical and observable information, primarily the Company’s stock price, and are not expected to vary materially unless the stock price varies materially. If the Company’s stock price at December 31, 2012 had been twenty percent higher at that date, the fair value of the Warrant would have been thirty-two percent higher, resulting in an increase in the Company’s loss on derivative instrument for the year ended December 31, 2012, of $2.7 million.

The Company’s Level 2 investments are priced based on similar investments or assets without applying significant adjustments. In addition, all of the Company’s Level 2 investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments.

Income taxes:    The Company accounts for income taxes under the asset and liability method, under which deferred tax assets, including net operating loss carryforwards, and liabilities are determined based on temporary differences between the book and tax bases of assets and liabilities. The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent the Company believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including the recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income, the carryforward periods available for tax reporting purposes, and other relevant factors. There is a wide range of possible judgments relating to the valuation of the Company’s deferred tax assets.

During the year ended December 31, 2012, the Company provided a valuation allowance against certain net deferred tax assets. During the year ended December 31, 2011, based on the weight of available evidence, the Company determined that it was more likely than not that it would realize $18.9 million of its deferred tax assets in the foreseeable future. Accordingly the Company released the valuation allowance against this portion of its deferred tax assets and retained the valuation allowance against the remainder at year end. During the year ended December 31, 2010, the Company provided a full valuation allowance against its net deferred tax assets.

Lease accounting:    The Company leases office space and computer equipment used in its data centers. These leases are classified as either capital leases or operating leases, as appropriate. The amortization of assets under capital leases is included in depreciation expense. For the years ended December 31, 2012, 2011, and 2010, $0, $188,000, and $537,000, respectively, of amortization for assets acquired under capital leases was included in depreciation expense.

Use of estimates:    The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates include those used for impairment of goodwill and other intangible assets, useful lives of other intangible assets, purchase accounting, valuation of investments, valuation of the Warrant and interest rate swap derivatives, revenue recognition, the estimated allowance for sales returns and doubtful accounts, internally developed software, accrued contingencies, stock option valuation, and valuation allowance for deferred tax assets. Actual amounts may differ from estimates.

Recent accounting pronouncements:    Changes to GAAP are established by the FASB in the form of ASUs to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all recent ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s consolidated financial position and results of operations.

In July 2012, the FASB issued an ASU to simplify how entities test indefinite-lived intangible assets for impairment to improve consistency in impairment testing requirements among long-lived asset categories. The ASU permits an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets for which this assessment concludes it is more likely than not that the fair value is more than its carrying value, this ASU eliminates the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The Company early adopted the new standard on October 1, 2012. The adoption of this ASU did not materially impact the Company’s consolidated condensed financial statements.

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Available-for-sale Securities:
Total available-for-sale securities	$ 94,010	$ 211,654
Fair value measurements, Recurring [Member]
Cash equivalents:
Total cash equivalents	37,661	52,637
Available-for-sale Securities:
Total available-for-sale securities	94,010	211,654
Total assets	131,671	264,291
Liabilities
Total liabilities	(8,974)
Total assets and liabilities at fair value	122,697
Fair value measurements, Recurring [Member] | Warrant [Member]
Liabilities
Derivative instruments	(8,564)
Fair value measurements, Recurring [Member] | Interest rate swap [Member]
Liabilities
Derivative instruments	(410)
Fair value measurements, Recurring [Member] | U.S. government securities [Member]
Cash equivalents:
Total cash equivalents	6,900
Available-for-sale Securities:
Total available-for-sale securities	41,402	162,170
Fair value measurements, Recurring [Member] | Money market and other funds [Member]
Cash equivalents:
Total cash equivalents	13,723	32,637
Fair value measurements, Recurring [Member] | Commercial paper [Member]
Cash equivalents:
Total cash equivalents	6,999	20,000
Available-for-sale Securities:
Total available-for-sale securities	9,396	49,484
Fair value measurements, Recurring [Member] | Time deposits [Member]
Cash equivalents:
Total cash equivalents	1,245
Available-for-sale Securities:
Total available-for-sale securities	7,169
Fair value measurements, Recurring [Member] | Taxable municipal bonds [Member]
Cash equivalents:
Total cash equivalents	8,794
Available-for-sale Securities:
Total available-for-sale securities	36,043
Fair value measurements, Recurring [Member] | Quoted prices in active markets using identical assets (Level 1) [Member]
Cash equivalents:
Total cash equivalents
Available-for-sale Securities:
Total available-for-sale securities
Total assets
Liabilities
Total liabilities
Total assets and liabilities at fair value
Fair value measurements, Recurring [Member] | Quoted prices in active markets using identical assets (Level 1) [Member] | Warrant [Member]
Liabilities
Derivative instruments
Fair value measurements, Recurring [Member] | Quoted prices in active markets using identical assets (Level 1) [Member] | Interest rate swap [Member]
Liabilities
Derivative instruments
Fair value measurements, Recurring [Member] | Quoted prices in active markets using identical assets (Level 1) [Member] | U.S. government securities [Member]
Cash equivalents:
Total cash equivalents
Available-for-sale Securities:
Total available-for-sale securities
Fair value measurements, Recurring [Member] | Quoted prices in active markets using identical assets (Level 1) [Member] | Money market and other funds [Member]
Cash equivalents:
Total cash equivalents
Fair value measurements, Recurring [Member] | Quoted prices in active markets using identical assets (Level 1) [Member] | Commercial paper [Member]
Cash equivalents:
Total cash equivalents
Available-for-sale Securities:
Total available-for-sale securities
Fair value measurements, Recurring [Member] | Quoted prices in active markets using identical assets (Level 1) [Member] | Time deposits [Member]
Cash equivalents:
Total cash equivalents
Available-for-sale Securities:
Total available-for-sale securities
Fair value measurements, Recurring [Member] | Quoted prices in active markets using identical assets (Level 1) [Member] | Taxable municipal bonds [Member]
Cash equivalents:
Total cash equivalents
Available-for-sale Securities:
Total available-for-sale securities
Fair value measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member]
Cash equivalents:
Total cash equivalents	37,661	52,637
Available-for-sale Securities:
Total available-for-sale securities	94,010	211,654
Total assets	131,671	264,291
Liabilities
Total liabilities	(410)
Total assets and liabilities at fair value	131,261
Fair value measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Warrant [Member]
Liabilities
Derivative instruments
Fair value measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Interest rate swap [Member]
Liabilities
Derivative instruments	(410)
Fair value measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | U.S. government securities [Member]
Cash equivalents:
Total cash equivalents	6,900
Available-for-sale Securities:
Total available-for-sale securities	41,402	162,170
Fair value measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Money market and other funds [Member]
Cash equivalents:
Total cash equivalents	13,723	32,637
Fair value measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Commercial paper [Member]
Cash equivalents:
Total cash equivalents	6,999	20,000
Available-for-sale Securities:
Total available-for-sale securities	9,396	49,484
Fair value measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Time deposits [Member]
Cash equivalents:
Total cash equivalents	1,245
Available-for-sale Securities:
Total available-for-sale securities	7,169
Fair value measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Taxable municipal bonds [Member]
Cash equivalents:
Total cash equivalents	8,794
Available-for-sale Securities:
Total available-for-sale securities	36,043
Fair value measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member]
Cash equivalents:
Total cash equivalents
Available-for-sale Securities:
Total available-for-sale securities
Total assets
Liabilities
Total liabilities	(8,564)
Total assets and liabilities at fair value	(8,564)
Fair value measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Warrant [Member]
Liabilities
Derivative instruments	(8,564)
Fair value measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Interest rate swap [Member]
Liabilities
Derivative instruments
Fair value measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | U.S. government securities [Member]
Cash equivalents:
Total cash equivalents
Available-for-sale Securities:
Total available-for-sale securities
Fair value measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Money market and other funds [Member]
Cash equivalents:
Total cash equivalents
Fair value measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Commercial paper [Member]
Cash equivalents:
Total cash equivalents
Available-for-sale Securities:
Total available-for-sale securities
Fair value measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Time deposits [Member]
Cash equivalents:
Total cash equivalents
Available-for-sale Securities:
Total available-for-sale securities
Fair value measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Taxable municipal bonds [Member]
Cash equivalents:
Total cash equivalents
Available-for-sale Securities:
Total available-for-sale securities

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Subsequent Events (Details Textual) (Subsequent Event [Member], USD $) In Millions, unless otherwise specified	0 Months Ended	12 Months Ended
	Feb. 06, 2013	Dec. 31, 2012	Jan. 07, 2013
Subsequent Event [Member]
Subsequent Events (Textual) [Abstract]
Equity investment on privately owned company			$ 4
Repurchase of available common stock, Authorized Amount	$ 50
Stock Repurchase Program, Period in Force		24 months

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Stock-based Compensation Expense (Details Textual) (USD $)	1 Months Ended	12 Months Ended						1 Months Ended	12 Months Ended		3 Months Ended	12 Months Ended
	Oct. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2012 Market Stock Units [Member]	Dec. 31, 2012 Restricted Stock Units (RSUs) [Member]	Dec. 31, 2012 Stock Option [Member]	May 31, 2012 Performance Based Stock Options [Member]	Dec. 31, 2012 Performance Based Stock Options [Member]	Dec. 31, 2012 Vest Award [Member]	Mar. 31, 2012 Warrant [Member]	Dec. 31, 2012 Warrant [Member]
Stock Based Compensation (Textual) [Abstract]
Compensation expense related to stock options, RSUs and MSUs		$ 13,200,000	$ 7,700,000	$ 13,900,000
Stock option cost not yet recognized		6,200,000			133,000	4,300,000	1,800,000
Stock option compensation cost not yet recognized period		16 months			13 months	16 months	15 months
Tax benefits from stock-based award activity		601,000	377,000	350,000						23,000,000
Fair value of warrant issued			1,900,000
Loss on derivative relating to warrants		2,346,000										2,300,000
Total expense relating to the modification and change in fair value												6,600,000
Expenses related to share granted to nonemployee			0
Stock-based compensation expense		914,000									4,300,000
Weighted average fair value for options granted		$ 3.74	$ 2.80	$ 3.47
Options vested and outstanding intrinsic value		16,900,000			1,100,000	11,100,000
Options vested and outstanding weighted average remaining contractual term		4 years 1 month 6 days
RSUs expected to vest weighted average remaining contractual term					10 months	11 months
Cash generated from the exercise of stock options		9,099,000	17,049,000	2,191,000			9,100,000
Fair value of warrants		8,500,000
Stock options granted to a non-employee	200,000	1,014,200	1,540,350	1,755,600				190,000
Performance base stock option, Compensation Expense Recognized		13,223,000	7,688,000	13,918,000					0
Stock Based Compensation (Additional Textual) [Abstract]
Derivative instruments		$ 6,200,000

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Balance Sheets Components (Tables)

12 Months Ended

Dec. 31, 2012

Balance Sheet Components [Abstract]

Short-term investments available-for-sale stated at fair value

Short-term investments classified as available-for-sale at December 31, 2012 and 2011 consisted of the following, stated at fair value (in thousands):

	December 31,
	2012		2011
U.S. government securities	$	41,402	$	162,170
Taxable municipal bonds		36,043		—
Commercial paper		9,396		49,484
Time deposits		7,169		—
Total short-term investments available-for-sale	$	94,010	$	211,654

Maturity information for investments available-for-sale

Maturity information was as follows for investments classified as available-for-sale at December 31, 2012 (in thousands):

	Amortized Cost		Gross unrealized gains		Gross unrealized losses			Fair value
Within one year	$	94,029	$	36	$	(55	)	$	94,010
Greater than one year		—		—		—			—
Total	$	94,029	$	36	$	(55	)	$	94,010

Maturity information was as follows for investments classified as available-for-sale at December 31, 2011 (in thousands):

	Amortized Cost		Gross unrealized gains		Gross unrealized losses			Fair value
Within one year	$	211,622	$	34	$	(2	)	$	211,654
Greater than one year		—		—		—			—
Total	$	211,622	$	34	$	(2	)	$	211,654

Prepaid expenses and other current assets

Prepaid expenses and other current assets, net consisted of the following as of December 31, 2012 and 2011 (in thousands):

	December 31,
	2012		2011
Prepaid expenses and other current assets, net
Prepaid expenses	$	5,268	$	1,878
Other current assets, net		5,643		80
Total prepaid expenses and other current assets, net	$	10,911	$	1,958

Property and equipment

Property and equipment consisted of the following as of December 31, 2012 and 2011 (in thousands):

	December 31,
	2012			2011
Property and equipment
Computer equipment and data center	$	13,262		$	10,712
Purchased software		5,046			4,594
Internally developed software		4,691			3,972
Office equipment		1,758			1,665
Office furniture		612			462
Leasehold improvements and other		3,400			3,133
		28,769			24,538
Accumulated depreciation		(22,636	)		(19,261	)
		6,133			5,277
Capital projects in progress		1,400			—
Total property and equipment	$	7,533		$	5,277

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following as of December 31, 2012 and 2011 (in thousands):

	December 31,
	2012		2011
Accrued expenses and other current liabilities
Salaries and related expenses	$	5,185	$	4,014
Accrued content costs		3,017		1,141
Business acquisition contingent liability		1,101		3,184
Other		3,977		1,910
Total accrued expenses and other current liabilities	$	13,280	$	10,249

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Derivative Instruments and Hedging Activities (Details 1) (Derivative not designated as hedging instrument [Member], Equity contract (the Warrant) [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012
Derivative not designated as hedging instrument [Member] | Equity contract (the Warrant) [Member]
Summary of effect of derivative instrument not designated as hedging instruments on income
Loss recognized in other loss (income), net	$ 2,346

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Summary of Significant Accounting Policies (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Loss from discontinued operations and loss on sale of discontinued operations
Revenue from discontinued operations	$ 16,894	$ 32,492
Loss from discontinued operations before taxes	(3,506)	(5,908)
Income tax benefit	1,253	1,315
Loss from discontinued operations, net of taxes	(2,253)	(4,593)
Loss on sale of discontinued operations, net of an income tax benefit of $5,092	$ (7,674)

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Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Income Taxes

Note 12:    Income Taxes

Income tax expense (benefit) from continuing operations consists of the following for the years ended December 31, 2012, 2011, and 2010 (in thousands):

	Years ended December 31,
	2012			2011			2010
Current
U.S. federal	$	23,303		$	7,416		$	9,010
State		437			166			(316	)
Foreign		—			—			12
Total current benefit	$	23,740		$	7,582		$	8,706
Deferred
U.S. federal	$	(8,234	)	$	(18,654	)	$	19
State		(504	)		(216	)		—
Total deferred expense (benefit)		(8,738	)		(18,870	)		19
Income tax expense (benefit), net	$	15,002		$	(11,288	)	$	8,725

The income tax expense (benefit) from continuing operations differs from the amount computed by applying the statutory federal income tax rate for the years ended December 31, 2012, 2011, and 2010 as follows (in thousands):

	Years ended December 31,
	2012			2011			2010
Income tax expense at federal statutory rate of 35%	$	13,135		$	7,082		$	6,299
Nondeductible compensation		1,621			675			—
Deductible domestic production costs		(804	)		—			—
Nondeductible loss on derivative instrument		821			—			—
Foreign exchange gain		—			—			(516	)
Change in liabilities for uncertain tax positions		(75	)		79			(566	)
Change in valuation allowance		—			(19,272	)		3,235
Other		304			148			273
Income tax expense (benefit), net	$	15,002		$	(11,288	)	$	8,725

The tax effect of temporary differences and net operating loss carryforwards from continuing operations that give rise to the Company’s deferred tax assets and liabilities as of December 31, 2012 and 2011 are as follows (in thousands):

	December 31,
	2012			2011
Deferred tax assets:
Current:
Net operating loss carryforwards	$	26,089		$	—
Other, net		3,386			1,270
Total current tax assets		29,475			1,270
Non-current
Net operating loss carryforwards		227,079			274,779
Tax credit carryforwards		7,719			6,756
Depreciation and amortization		10,310			12,392
Stock-based compensation		5,381			5,304
Other, net		2,214			1,682
Total non-current tax assets		252,703			300,913
Total gross deferred tax assets		282,178			302,183
Valuation allowance		(262,353	)		(283,000	)
Deferred tax assets, net of valuation allowance	$	19,825		$	19,183
Deferred tax liabilities:
Current
Prepaid expenses	$	—		$	(309	)
Total current tax liabilities		—			(309	)
Non-current
Depreciation and amortization		(46,313	)		(22	)
Other, net		(770	)		—
Total non-current tax liabilities		(47,083	)		(22	)
Total gross deferred tax liabilities		(47,083	)		(331	)
Net deferred tax assets (liabilities)	$	(27,258	)	$	18,852

At December 31, 2012, the Company evaluated the need to maintain a valuation allowance for deferred tax assets based upon its assessment of whether it is more likely than not that the Company will generate sufficient future taxable income necessary to realize the deferred tax benefits. The Company considered all available evidence, both positive and negative, in assessing the need for a valuation allowance, such as the profitability of the search and acquired tax preparation software businesses, reversing deferred tax liabilities and forecasted future taxable income.

The Company weighed each piece of evidence in a qualitative and quantitative analysis and based upon its judgment determined that the weight of the positive evidence was sufficient to conclude that the Company will more likely than not realize the U.S. deferred tax assets of an ordinary nature, other than the capital loss described below. The financial projections supporting the Company’s conclusion contain significant assumptions and estimates of future operations.

The Company does not forecast income of a capital nature. The lack of forecasted capital gains represents negative evidence as to the realizability of the deferred tax assets of a capital nature. The Company weighted each piece of evidence and judged that the weight of the negative evidence was sufficient to retain the valuation allowance against its U.S. deferred tax assets of a capital nature.

The Company has deferred tax assets for net operating losses that arose from excess tax benefits for stock-based compensation and minimum tax credits that arose from the corresponding alternative minimum tax paid for those excess tax benefits. The Company will continue to apply a valuation allowance against these deferred tax assets until the Company utilizes the deferred tax assets to reduce taxes payable.

The consolidated balance sheets reflect a decrease in the valuation allowance of $20.6 million and $33.4 million for the years ended December 31, 2012 and 2011, respectively. This release of the valuation allowance for deferred tax assets pertains to utilization of equity-based deferred tax assets used to reduce taxes payable. The consolidated balance sheets reflect an increase in equity upon the release of this valuation allowance. Accordingly, the income tax expense from continuing operations does not reflect a benefit for the release of the valuation allowance.

The net changes in the valuation allowance during the years ended December 31, 2012 and 2011 are shown below (in thousands):

	Valuation allowance
	2012			2011
Balance at beginning of year	$	283,000		$	316,355
Net changes to deferred tax assets, subject to a valuation allowance		(20,647	)		(14,481	)
Release of end of year valuation allowance		—			(18,874	)
Balance at end of year	$	262,353		$	283,000
Net change during the year	$	(20,647	)	$	(33,355	)

As of December 31, 2012, the Company’s U.S. federal net operating loss carryforward for income tax purposes was $723.3 million, which relates to tax deductions for stock-based compensation. When the net operating loss carryforwards related to excess stock-based compensation are recognized, the income tax benefit of those losses is accounted for as a credit to stockholders’ equity on the consolidated balance sheets rather than the Company’s Statement of operations and comprehensive income.

If not utilized, the Company’s federal net operating loss carryforwards will expire between 2020 and 2031, with the majority of them expiring between 2020 and 2024. Additionally, changes in ownership, as defined by Section 382 of the Internal Revenue Code, may limit the amount of net operating loss carryforwards used in any one year.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2012, 2011, and 2010 are as follows (in thousands):

	Unrecognized tax benefits
Balance at January 1, 2010	$	18,264
Gross increases for tax positions of prior years		146
Gross decreases for tax positions of prior years		(76	)
Lapse of statute of limitations		(67	)
Balance at December 31, 2011	$	18,267
Gross increases for tax positions of prior years		1,208
Gross decreases for tax positions of prior years		(216	)
Lapse of statute of limitations		(171	)
Balance at December 31, 2012	$	19,088

The total amount of unrecognized tax benefits that would affect the Company’s effective tax rate if recognized was $1.2 million and $816,000 as of December 31, 2012 and 2011, respectively. The remaining $17.9 million as of December 31, 2012 and $17.5 million as of December 31, 2011, if recognized, would create a deferred tax asset subject to a valuation allowance. The Company and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2009, although net operating loss carryforwards and tax credit carryforwards from any year are subject to examination and adjustment for at least three years following the year in which they are fully utilized. As of December 31, 2012, no significant adjustments have been proposed relative to the Company’s tax positions.

The Company recognizes interest and penalties related to uncertain tax positions in interest expense and general and administrative expenses, respectively. During the year ended December 31, 2012, the Company reversed previously accrued interest expense related to the uncertain tax positions upon expiration of the statute of limitations on assessments.