Document

0001068875-19-000113.txt : 20191106 0001068875-19-000113.hdr.sgml : 20191106 20191106064038 ACCESSION NUMBER: 0001068875-19-000113 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20191106 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20191106 DATE AS OF CHANGE: 20191106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUCORA, INC. CENTRAL INDEX KEY: 0001068875 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 911718107 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-25131 FILM NUMBER: 191195005 BUSINESS ADDRESS: STREET 1: 6333 N. STATE HWY 161 STREET 2: 4TH FLOOR CITY: IRVING STATE: TX ZIP: 75038 BUSINESS PHONE: 972-870-6000 MAIL ADDRESS: STREET 1: 6333 N. STATE HWY 161 STREET 2: 4TH FLOOR CITY: IRVING STATE: TX ZIP: 75038 FORMER COMPANY: FORMER CONFORMED NAME: INFOSPACE INC DATE OF NAME CHANGE: 20000428 FORMER COMPANY: FORMER CONFORMED NAME: INFOSPACE COM INC DATE OF NAME CHANGE: 19980824 8-K 1 bcor8-kq32019earningsr.htm 8-K Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

November 6, 2019

Date of Report

(Date of earliest event reported)

BLUCORA, INC.

(Exact name of registrant as specified in its charter)


DELAWARE	000-25131	91-1718107
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

6333 State Hwy 161, 4th Floor

Irving, Texas 75038

(Address of principal executive offices)

(972) 870-6400

Registrant’s telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:


o			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


o			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


o			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


o			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	BCOR	NASDAQ Global Select Market

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

Emerging growth company ☐

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

Act. ☐

Item 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On November 6, 2019, Blucora, Inc. (the “Company”) announced its financial results for the quarter ended September 30, 2019. Copies of the press release and supplemental financial information are furnished to, but not filed with, the Securities and Exchange Commission as Exhibits 99.1 and 99.2 hereto.

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

Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS


Exhibit No						Description

99.1						Press release dated November 6, 2019
99.2						Supplemental financial information dated November 6, 2019

Safe Harbor Statement Under the Private Securities and Litigation Reform Act

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this report, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecasts,” “projects” and similar expressions and variations as they relate to the Company or its management are intended to identify forward-looking statements. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: our ability to effectively implement our future business plans and growth strategy; our ability to effectively compete within our industry; our ability to attract and retain customers; our ability to realize all of the anticipated benefits of the acquisition of 1st Global, as well as our ability to integrate the operations of 1st Global; the availability of financing and our ability to meet our current and future debt service obligations and comply with our debt covenants; our ability to generate strong investment performance for our customers and the impact of the financial markets on our customers’ portfolios; political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation industries; our ability to attract and retain productive financial advisors; our ability to successfully make technology enhancements and introduce new and improve on existing products and services; our expectations concerning the revenues we generate from fees associated with the financial products that we distribute; our ability to manage leadership and employee transitions; risks related to goodwill and other intangible asset impairment; our ability to comply with regulations (or interpretations thereof) applicable to the wealth management and tax preparation industries, including increased costs associated with or reductions in revenue resulting from new or changing regulations or interpretations of existing regulations; risks associated with our business being subject to enhanced regulatory scrutiny; our ability to comply with laws and regulations regarding privacy and protection of data; our expectations concerning the benefits that may be derived from our clearing platform and our investment advisory platform; cybersecurity risks; our ability to maintain our relationships with third party partners; the seasonality of our business; litigation risks; our ability to attract and retain qualified employees; our assessments and estimates that determine our effective tax rate; the impact of new or changing tax legislation; our ability to develop, establish and maintain strong brands; our ability to protect our intellectual property; and our ability to effectively integrate other companies or assets that we may acquire. A more detailed description of these and certain other factors that could affect actual results is included in the Company’s filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this report, except as may be required by law.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			BLUCORA, INC.

			By			/s/ Davinder Athwal
						Davinder Athwal
						Chief Financial Officer

						November 6, 2019

EX-99.1 2 ex-991earningsreleaseq.htm EX-99.1 Document

Exhibit 99.1

Blucora Announces Third Quarter 2019 Results

IRVING, TX — November 6, 2019 — Blucora, Inc. (NASDAQ: BCOR), a leading provider of tax-smart financial solutions that empower people’s goals, today announced financial results for the third quarter ended September 30, 2019.

Third Quarter Highlights and Recent Developments

•Increased total revenue by 56% year-over-year (y/y), including addition of 1st Global for full quarter

•Legacy HD Vest advisory assets increased 9% y/y, legacy 1stGlobal advisory assets increased 16% y/y

•Total Client Assets ended the quarter at $67.7 billion, with $26.3 billion, or 39% in Advisory Assets

•Integration of legacy wealth management businesses running better than plan; Completed consolidation on the same clearing platform ahead of schedule, and unified both under new brand, Avantax Wealth Management

•Repurchased more than 560,000 shares of common stock, or 1.1% of outstanding shares - first under current authorization

“In our first full quarter since the acquisition of 1st Global, I’m pleased to report solid quarterly results as well as an integration that is now running ahead of plan,” said John Clendening, Blucora’s President and Chief Executive Officer. “Integration synergy capture is running strong in the short-term, and the early consolidation of our legacy wealth management businesses from a clearing platform perspective, should allow for additional synergy capture over the long-term. I’m also excited to announce that we have unified our legacy wealth management brands, HD Vest and 1st Global, under a powerful new brand, Avantax Wealth Management, as we aim to redefine what tax-smart wealth management means and provide superior results for our clients.”

Summary Financial Performance: Q3 2019

($ in millions except per share amounts)


	Q3		Q3
	2019		2018		Change
Revenue:
Wealth Management	$	145.4	$	91.9	58	%
Tax Preparation	$	3.6	$	3.5	3	%
Total Revenue	$	149.0	$	95.4	56	%
Segment Income:
Wealth Management	$	20.6	$	12.9	60	%
Tax Preparation	$	(12.1)	$	(6.9)	74	%
Total Segment Income	$	8.6	$	6.0	44	%
Unallocated Corporate Operating Expenses	$	(6.5)	$	(4.6)	42	%
GAAP:
Operating Loss	$	(72.1)	$	(10.7)	574	%
Net Loss Attributable to Blucora, Inc.	$	(62.4)	$	(14.0)	347	%
Diluted Net Loss Per Share Attributable to Blucora, Inc. (EPS)	$	(1.28)	$	(0.37)	246	%
Non-GAAP*:
Adjusted EBITDA*	$	2.1	$	1.4	50	%
Net Loss*	$	(9.6)	$	(4.4)	116	%
Diluted Net Loss Per Share (EPS)*	$	(0.20)	$	(0.09)	122	%
* See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.


Third Quarter Results vs. Prior Guidance
$ in millions	Prior Guidance	Midpoint	Actual	Difference at Midpoint
Wealth Management Revenue	$139.0 - $145.5	142.3	145.4	3.2
TaxAct Revenue	$3.5 – $4.0	3.8	3.6**	(0.2)
Total Revenue	$142.5 - $149.5	146.0	149.0	3.0
Wealth Management Segment Income	$18.5 - $21.5	20	20.6	0.6
TaxAct Segment Income	($13.5) - ($14.0)	(13.8)	(12.0)	1.7
Corporate Unallocated Operating Expenses	$8.0 - $8.5	8.3	6.5	1.8
Adjusted EBITDA	$0.0 - ($4.0)	(2.0)	2.1	4.1
**Includes an immaterial adjustment to previously recognized revenue. The adjustment is expected to reverse in 1Q’2020.

Full Year 2019 Outlook

The company has updated its full-year 2019 outlook to reflect current business conditions, including the clearing consolidation occurring ahead of schedule, a 25 basis-point change in the Federal Funds target rate and other items.


$ in millions	Prior Guidance	Current Outlook	Difference at Midpoint
Wealth Management Revenue	$500.0 - $513.0	$505.0 - $510.0	1.0
TaxAct Revenue	$210.0 - $211.0	$209.5 - $210.5	(0.5)
Total Revenue	$710.0 - $724.0	$714.5 - $720.5	0.5
Wealth Management Segment Income	$67.0 - $73.5	$67.0 - $69.5	(2.0)
TaxAct Segment Income	$93.0 - $94.5	$93.0 - $94.5	-
Corporate Unallocated Operating Expense	$28.5 - $29.5	$28.5 - $29.5	-
Adjusted EBITDA*	$130.5 - $139.5	$130.5 - $135.5	(2.0)
Net Income	$27.0 - $37.5	($0.4) - ($5.4)	(35.0)
Net Income per share	$0.54 - $0.75	($0.01) - ($0.11)	(0.67)
Non-GAAP Net Income*	$92.5 - $102.5	$93.5 - $99.5	(1.0)
Non-GAAP Net Income per share*	$1.84 - $2.04	$1.88 - $2.01	-

Conference Call and Webcast

A conference call and live webcast will be held today at 8:30 a.m. Eastern Time during which the Company will further discuss third quarter results, its outlook for the full year 2019 and other business matters. We will also provide the prepared remarks for the conference call along with supplemental financial information to our results on the Investor Relations section of the Blucora corporate website at http://www.blucora.com prior to the call. The supplemental financial information has also been filed with the SEC on Form 8-K. A replay of the call will be available on our website.

About Blucora®

Blucora, Inc. (NASDAQ: BCOR) is on the forefront of financial technology, pioneering tax-smart financial solutions that empower people’s goals. Blucora operates in two segments including wealth management, through its Avantax Wealth Management (formerly operating under the HD Vest and 1st Global brands) businesses, the No. 1 tax-focused broker-dealer, with $67 billion in total client assets as of September 30, 2019, and tax preparation, through its TaxAct business, the No. 3 tax preparation software by market share with approximately 3 million consumer and professional users. With integrated tax and wealth management, Blucora is uniquely positioned to provide better long-term outcomes for customers with holistic, tax-advantaged solutions. For more information on Blucora, visit www.blucora.com.

Source: Blucora

Blucora Contact:

Bill Michalek (972) 870-6463

VP, Investor Relations

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this release, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecasts,” “projects” and similar expressions and variations as they relate to the Company or its management are intended to identify forward-looking statements. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: our ability to effectively implement our future business plans and growth strategy; our ability to effectively compete within our industry; our ability to attract and retain customers; our ability to realize all of the anticipated benefits of the acquisition of 1st Global, as well as our ability to integrate the operations of 1st Global; the availability of financing and our ability to meet our current and future debt service obligations and comply with our debt covenants; our ability to generate strong investment performance for our customers and the impact of the financial markets on our customers’ portfolios; political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation industries; our ability to attract and retain productive financial advisors; our ability to successfully make technology enhancements and introduce new and improve on existing products and services; our expectations concerning the revenues we generate from fees associated with the financial products that we distribute; our ability to manage leadership and employee transitions; risks related to goodwill and other intangible asset impairment; our ability to comply with regulations (or interpretations thereof) applicable to the wealth management and tax preparation industries, including increased costs associated with or reductions in revenue resulting from new or changing regulations or interpretations of existing regulations; risks associated with our business being subject to enhanced regulatory scrutiny; our ability to comply with laws and regulations regarding privacy and protection of data; our expectations concerning the benefits that may be derived from our clearing platform and our investment advisory platform; cybersecurity risks; our ability to maintain our relationships with third party partners; the seasonality of our business; litigation risks; our ability to attract and retain qualified employees; our assessments and estimates that determine our effective tax rate; the impact of new or changing tax legislation; our ability to develop, establish and maintain strong brands; our ability to protect our intellectual property; and our ability to effectively integrate other companies or assets that we may acquire. A more detailed description of these and certain other factors that could affect actual results is included in the Company’s filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this report, except as may be required by law.

Blucora, Inc.

Preliminary Condensed Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands, except per share data)


	Three Months Ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018
Revenue:
Wealth management services revenue	$	145,428	$	91,887	$	362,791	$	275,984
Tax preparation services revenue	3,588		3,498		205,733		183,214
Total revenue	149,016		95,385		568,524		459,198
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue	102,030		62,313		250,881		187,526
Tax preparation services cost of revenue	1,633		1,370		8,983		8,182
Amortization of acquired technology	—		—		—		99
Total cost of revenue ⁽¹⁾	103,663		63,683		259,864		195,807
Engineering and technology ⁽¹⁾	8,635		4,246		22,323		14,225
Sales and marketing⁽¹⁾	19,976		15,675		104,804		94,719
General and administrative⁽¹⁾	19,642		13,404		55,721		43,895
Acquisition and integration	6,759		—		17,739		—
Depreciation	1,470		798		3,846		3,706
Amortization of other acquired intangible assets	10,082		8,271		27,295		25,384
Impairment of intangible asset	50,900		—		50,900		—
Restructuring ⁽¹⁾	—		—		—		291
Total operating expenses	221,127		106,077		542,492		378,027
Operating income (loss)	(72,111)		(10,692)		26,032		81,171
Other loss, net ⁽²⁾	(2,606)		(3,863)		(11,682)		(11,850)
Income (loss) before income taxes	(74,717)		(14,555)		14,350		69,321
Income tax benefit (expense)	12,331		818		16,470		(2,052)


Net income (loss)	(62,386)		(13,737)		30,820		67,269
Net income attributable to noncontrolling interests	—		(227)		—		(654)
Net income attributable to Blucora, Inc.:	$	(62,386)	$	(13,964)	$	30,820	$	66,615
Net income (loss) per share attributable to Blucora, Inc.:
Basic	$	(1.28)	$	(0.37)	$	0.64	$	1.34
Diluted	$	(1.28)	$	(0.37)	$	0.62	$	1.28
Weighted average shares outstanding:
Basic	48,652		47,712		48,456		47,191
Diluted	48,652		47,712		49,596		49,292

⁽²⁾ Other loss, net consisted of the following (in thousands):


	Three Months Ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018
Interest income	$	(52)	$	(119)	$	(341)	$	(217)
Interest expense	5,469		3,744		14,015		11,772
Amortization of debt issuance costs	301		172		848		659
Accretion of debt discounts	66		38		189		125
Loss on debt extinguishment	—		—		—		1,534


Gain on sale of a business	(3,256)		—		(3,256)		—


Other	78		28		227		(2,023)
Other loss, net	$	2,606	$	3,863	$	11,682	$	11,850

Blucora, Inc.

Preliminary Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands)


	September 30, 2019		December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	97,466	$	84,524
Cash segregated under federal or other regulations	1,284		842

Accounts receivable, net of allowance	16,803		15,721
Commissions receivable	20,724		15,562
Other receivables	7,424		7,408
Prepaid expenses and other current assets, net	9,058		7,755

Total current assets	152,759		131,812
Long-term assets:
Property and equipment, net	17,230		12,389
Right-of-use assets, net	10,199		—
Goodwill, net	663,005		548,685
Other intangible assets, net	301,533		294,603


Other long-term assets	9,902		10,236
Total long-term assets	1,001,869		865,913
Total assets	$	1,154,628	$	997,725
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,139	$	3,798
Commissions and advisory fees payable	18,871		15,199
Accrued expenses and other current liabilities	39,261		18,980
Lease liabilities	4,163		46
Deferred revenue	7,456		10,257
Current portion of long-term debt, net	1,227		—


Total current liabilities	83,117		48,280
Long-term liabilities:
Long-term debt, net	381,598		260,390

Deferred tax liability, net	35,225		40,394
Deferred revenue	7,403		8,581
Lease liabilities	6,055		100
Other long-term liabilities	6,384		7,440
Total long-term liabilities	436,665		316,905
Total liabilities	519,782		365,185

Redeemable noncontrolling interests	—		24,945

Stockholders’ equity:
Common stock	5		5
Additional paid-in capital	1,580,336		1,569,725
Accumulated deficit	(932,505)		(961,689)
Accumulated other comprehensive loss	(272)		(446)
Treasury stock, at cost	(12,718)		—
Total stockholders’ equity	634,846		607,595
Total liabilities and stockholders’ equity	$	1,154,628	$	997,725

Blucora, Inc.

Preliminary Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)


	Nine months ended September 30,
	2019		2018
Operating Activities:
Net income	$	30,820	$	67,269
Adjustments to reconcile net income to net cash from operating activities:
Stock-based compensation	11,164		9,559
Depreciation and amortization of acquired intangible assets	32,078		29,539
Impairment of intangible asset	50,900		—
Reduction of right-of-use lease assets	3,117		—


Deferred income taxes	(23,343)		(1,073)
Amortization of premium on investments, net, and debt issuance costs	848		659
Accretion of debt discounts	189		125
Loss on debt extinguishment	—		1,534



Gain on sale of a business	(3,256)		—

Other	508		—
Cash provided (used) by changes in operating assets and liabilities:

Accounts receivable	352		4,636
Commissions receivable	(19)		60
Other receivables	(18)		3,149
Prepaid expenses and other current assets	13,828		1,369
Other long-term assets	497		(902)
Accounts payable	(2,346)		(2,255)
Commissions and advisory fees payable	(602)		(2,627)
Lease liabilities	(3,371)		—
Deferred revenue	(21,694)		(2,411)
Accrued expenses and other current and long-term liabilities	6,595		(3,048)
Net cash provided by operating activities	96,247		105,583
Investing Activities:
Business acquisition, net of cash acquired	(166,561)		—
Purchases of property and equipment	(6,887)		(5,340)


Proceeds from sale of a business, net of cash	7,467		—


Net cash used by investing activities	(165,981)		(5,340)
Financing Activities:

Proceeds from credit facilities	121,489		—

Payments on credit facilities	—		(80,000)


Stock repurchases	(11,968)		—

Payment of redeemable noncontrolling interests	(24,945)		—
Proceeds from stock option exercises	3,811		11,738
Proceeds from issuance of stock through employee stock purchase plan	1,144		1,608
Tax payments from shares withheld for equity awards	(5,508)		(5,983)
Contingent consideration payments for business acquisition	(943)		(1,315)
Net cash provided (used) by financing activities	83,080		(73,952)






Effect of exchange rate changes on cash, cash equivalents, and restricted cash	38		(11)
Net increase in cash, cash equivalents, and restricted cash	13,384		26,280
Cash, cash equivalents, and restricted cash, beginning of period	85,366		62,311
Cash, cash equivalents, and restricted cash, end of period	$	98,750	$	88,591

Blucora, Inc.

Preliminary Segment Information

(Unaudited)

(Amounts in thousands)


	Three months ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018
Revenue:
Wealth Management ⁽¹⁾	$	145,428	$	91,887	$	362,791	$	275,984
Tax Preparation ⁽¹⁾	3,588		3,498		205,733		183,214
Total revenue	149,016		95,385		568,524		459,198
Operating income (loss):
Wealth Management	20,631		12,891		49,150		38,920
Tax Preparation	(12,075)		(6,936)		108,565		95,991
Corporate-level activity ⁽²⁾	(80,667)		(16,647)		(131,683)		(53,740)
Total operating income (loss)	(72,111)		(10,692)		26,032		81,171
Other loss, net	(2,606)		(3,863)		(11,682)		(11,850)
Income tax benefit (expense)	12,331		818		16,470		(2,052)

Net income (loss)	$	(62,386)	$	(13,737)	$	30,820	$	67,269

⁽¹⁾ Revenues by major category within each segment are presented below (in thousands):


	Three months ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018
Wealth Management:
Commission	$	52,623	$	41,015	$	137,851	$	124,269
Advisory	75,579		41,443		176,746		120,802
Asset-based	13,618		6,979		36,530		21,457
Transaction and fee	3,608		2,450		11,664		9,456
Total Wealth Management revenue	$	145,428	$	91,887	$	362,791	$	275,984
Tax Preparation:
Consumer	$	4,280	$	3,246	$	190,908	$	168,295
Professional	(692)		252		14,825		14,919
Total Tax Preparation revenue	$	3,588	$	3,498	$	205,733	$	183,214

⁽²⁾ Corporate-level activity included the following (in thousands):


	Three months ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018
Operating expenses	$	(6,476)	$	(4,572)	$	(19,802)	$	(14,351)
Stock-based compensation	(4,639)		(2,874)		(11,164)		(9,559)
Acquisition and integration costs	(6,759)		—		(17,739)		—
Depreciation	(1,811)		(930)		(4,783)		(4,056)
Amortization of acquired intangible assets	(10,082)		(8,271)		(27,295)		(25,483)
Impairment of intangible asset	(50,900)		—		(50,900)		—
Restructuring	—		—		—		(291)
Total corporate-level activity	$	(80,667)	$	(16,647)	$	(131,683)	$	(53,740)

Blucora, Inc.

Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures ⁽¹⁾

Preliminary Adjusted EBITDA Reconciliation ⁽¹⁾

(Unaudited)

(Amounts in thousands)


(In thousands)	Three Months Ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018
Net income (loss) attributable to Blucora, Inc. ⁽²⁾	$	(62,386)	$	(13,964)	$	30,820	$	66,615
Stock-based compensation	4,639		2,874		11,164		9,559
Depreciation and amortization of acquired intangible assets	11,893		9,201		32,078		29,539
Restructuring	—		—		—		291
Other loss, net ⁽³⁾	2,606		3,863		11,682		11,850
Net income attributable to noncontrolling interests	—		227		—		654
Acquisition and integration costs	6,759		—		17,739		—
Income tax (benefit) expense	(12,331)		(818)		(16,470)		2,052

Impairment of intangible asset	50,900		$	—	50,900		—

Adjusted EBITDA	$	2,080	$	1,383	$	137,913	$	120,560

Preliminary Non-GAAP Net Income (Loss) and Non-GAAP Net Income Per Share Reconciliation ⁽¹⁾

(Unaudited)

(Amounts in thousands, except per share amounts)


	Three months ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018
Net income (loss) attributable to Blucora, Inc. ⁽²⁾	$	(62,386)	$	(13,964)	$	30,820	$	66,615

Stock-based compensation	4,639		2,874		11,164		9,559
Amortization of acquired intangible assets	10,082		8,271		27,295		25,483
Impairment of intangible asset	50,900		—		50,900		—

Gain on the sale of a business	(3,256)		—		(3,256)		—


Acquisition and integration costs	6,759		—		17,739		—
Restructuring	—		—		—		291
Impact of noncontrolling interests	—		227		—		654
Cash tax impact of adjustments to GAAP net income	(710)		(505)		(1,892)		(1,721)
Non-cash income tax (benefit) expense ⁽¹⁾	(15,593)		(1,333)		(23,759)		647
Non-GAAP net income (loss)	$	(9,565)	$	(4,430)	$	109,011	$	101,528
Per diluted share:
Net income (loss) attributable to Blucora, Inc.	$	(1.28)	$	(0.37)	$	0.62	$	1.28

Stock-based compensation	0.10		0.06		0.23		0.19
Amortization of acquired intangible assets	0.19		0.18		0.55		0.52
Impairment of intangible asset	1.05		—		1.03		—
Gain on the sale of a business	(0.07)		—		(0.07)		—


Acquisition and integration costs	0.14		—		0.36		—
Restructuring	—		—		—		0.01
Impact of noncontrolling interests	—		0.08		0.00		0.08
Cash tax impact of adjustments to GAAP net income	(0.01)		(0.01)		(0.04)		(0.03)
Non-cash income tax (benefit) expense	(0.32)		(0.03)		(0.48)		0.01
Non-GAAP net income (loss) per share	$	(0.20)	$	(0.09)	$	2.20	$	2.06
Weighted average shares outstanding used in computing per diluted share amounts	48,652		47,712		49,596		49,292

Preliminary Adjusted EBITDA Reconciliation for Prior Guidance ⁽¹⁾

(Amounts in thousands)


	Ranges for the three months ending						Ranges for the year ending
	September 30, 2019						December 21, 2019
	Low		High		Low		High
Net loss attributable to Blucora, Inc.	$	(35,500)	$	(30,500)	$	27,000	$	37,500
Stock-based compensation	4,900		4,900		16,700		16,300
Depreciation and amortization of acquired intangible assets	12,600		12,500		45,500		45,000
Other loss, net ⁽³⁾	6,100		5,900		20,900		20,700
Acquisition and integration costs	6,500		6,100		22,400		22,000
Income tax expense	1,400		1,100		(2,000)		(2,000)
Adjusted EBITDA	$	(4,000)	$	—	$	130,500	$	139,500

Preliminary Non-GAAP Net Income Reconciliation for Prior Guidance ⁽¹⁾

(Amounts in thousands)


	Ranges for the year ending
	December 21, 2019
	Low		High
Net income attributable to Blucora, Inc.	$	27,000	$	37,500
Stock-based compensation	16,700		16,300
Amortization of acquired intangible asset	37,000		37,000
Acquisition and integration costs	22,400		22,000
Cash tax impact of adjustments to net income	(2,000)		(2,000)
Non-cash income tax benefit	(8,600)		(8,300)
Non-GAAP net income	$	92,500	$	102,500
Per diluted share:
Net income attributable to Blucora, Inc.	$	0.54	$	0.75
Stock-based compensation	0.33		0.32
Amortization of acquired intangible asset	0.73		0.74
Acquisition and integration costs	0.44		0.44
Cash tax impact of adjustments to net income	(0.04)		(0.04)
Non-cash income tax benefit	(0.16)		(0.17)
Non-GAAP net income per share	$	1.84	$	2.04
Weighted average shares outstanding used in computing per diluted share amounts	50,400		50,200

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

(Amounts in thousands)


	Ranges for the year ending
	December 31, 2019
	Low		High
Net loss attributable to Blucora, Inc.	$	(5,400)	$	(400)
Stock-based compensation	17,000		16,500
Depreciation and amortization of acquired intangible assets	45,500		45,000

Other loss, net ⁽³⁾	19,000		18,000

Acquisition and integration costs	24,000		23,500
Impairment of intangible asset	51,000		51,000
Income tax benefit	(20,600)		(18,100)
Adjusted EBITDA	$	130,500	$	135,500

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

(Amounts in thousands, except per share amounts)


	Ranges for the year ending
	December 31, 2019
	Low		High
Net loss attributable to Blucora, Inc.	$	(5,400)	$	(400)
Stock-based compensation	17,000		16,500
Amortization of acquired intangible assets	37,500		37,500




Acquisition and integration costs	24,000		23,500
Impairment of intangible asset	51,000		51,000
Gain on sale of a business	(3,300)		(3,300)
Cash tax impact of adjustments to net loss	(2,300)		(2,300)
Non-cash income tax benefit	(25,000)		(23,000)
Non-GAAP net income (loss)	$	93,500	$	99,500
Per diluted share:
Net loss attributable to Blucora, Inc.	$	(0.11)	$	(0.01)
Stock-based compensation	0.34		0.33
Amortization of acquired intangible assets	0.76		0.76
Acquisition and integration costs	0.48		0.47
Impairment of intangible asset	1.03		1.03
Gain on sale of a business	(0.07)		(0.07)
Cash tax impact of adjustments to net loss	(0.05)		(0.05)
Non-cash income tax benefit	(0.50)		(0.45)
Non-GAAP net income per share	$	1.88	$	2.01
Weighted average shares outstanding used in computing per diluted share amounts	49,750		49,600

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

⁽¹⁾ We define Adjusted EBITDA as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation and amortization of acquired intangible assets, restructuring, other loss, net, the impact of noncontrolling interests, acquisition and integration costs and income tax (benefit) expense. Restructuring costs relate to the relocation of our corporate headquarters that were completed in 2018. Acquisition and integration costs relate to the acquisition of 1st Global.

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

We define non-GAAP net income (loss) as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, the impairment of an intangible asset, gain on the sale of a business, acquisition and integration costs (described further under Adjusted EBITDA above), restructuring costs (described further under Adjusted EBITDA above), the impact of noncontrolling interests, the related cash tax impact of those adjustments, and non-cash income taxes. We exclude the non-cash portion of income taxes because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which primarily consist of U.S. federal net operating losses. The majority of these net operating losses will expire, if unutilized, between 2020 and 2024. The aforementioned items are only included in non-GAAP net income (loss) in the periods they occurred.

We believe that non-GAAP net income (loss) and non-GAAP net income (loss) per share provide meaningful supplemental information to management, investors, and analysts regarding our performance and the valuation of our business by excluding items in the statement of operations that we do not consider part of our ongoing operations or have not been, or are not expected to be, settled in cash. Additionally, we believe that non-GAAP net income (loss) and non-GAAP net income (loss) per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP net income (loss) and non-GAAP net income (loss) per share should be evaluated in light of our financial results prepared in accordance with GAAP and should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income (loss) and net income per share. Other companies may calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share differently, and, therefore, our non-GAAP net income (loss) and non-GAAP net income (loss) per share may not be comparable to similarly titled measures of other companies.

⁽²⁾ As presented in the Preliminary Condensed Consolidated Statements of Operations (unaudited).

⁽³⁾ Other loss, net primarily includes items such as interest income, interest expense, amortization of debt issuance costs, accretion of debt discounts, and gain/loss on debt extinguishment.

EX-99.2 3 ex-992earningsreleaseq.htm EX-99.2 Document

Exhibit 99.2

Blucora, Inc.

Supplemental Information

September 30, 2019

Table of Contents


Financial Information
Consolidated Financial Results			2
Reconciliation of Non-GAAP Financial Measures			5
Net Leverage Ratio			7
Reconciliation of Operating Free Cash Flow from Continuing Operations			8

Operating Metrics
Wealth Management			9
Tax Preparation			10

Blucora Consolidated Financial Results⁽²⁾


(in thousands except %s and per share amounts, rounding differences may exist)	2017				2018																																2019
				FY 12/31				1Q				2Q				3Q				4Q				FY 12/31				1Q				2Q				3Q
Segment revenue:
Wealth Management	$	348,620			$	92,082			$	92,015			$	91,887			$	97,190			$	373,174			$	89,532			$	127,831			$	145,428
Tax Preparation ⁽¹⁾	160,937				113,883				65,833				3,498				4,068				187,282				136,236				65,909				3,588
Total	$	509,557			$	205,965			$	157,848			$	95,385			$	101,258			$	560,456			$	225,768			$	193,740			$	149,016
Segment income (loss): ⁽³⁾
Wealth Management	$	50,916			$	13,075			$	12,954			$	12,891			$	14,133			$	53,053			$	11,540			$	16,979			$	20,631
Tax Preparation ⁽¹⁾	72,921				58,806				44,121				(6,936)				(8,742)				87,249				79,272				41,368				(12,075)
Total	$	123,837			$	71,881			$	57,075			$	5,955			$	5,391			$	140,302			$	90,812			$	58,347			$	8,556
Segment income (loss) % of revenue:
Wealth Management	15		%		14		%		14		%		14		%		15		%		14		%		13		%		13		%		14		%
Tax Preparation ⁽¹⁾	45		%		52		%		67		%		(198)		%		(215)		%		47		%		58		%		63		%		(337)		%
Total	24		%		35		%		36		%		6		%		5		%		25		%		40		%		30		%		6		%
Unallocated corporate operating expenses ⁽³⁾	$	22,907			$	5,541			$	4,238			$	4,572			$	6,143			$	20,494			$	7,105			$	6,221			$	6,476
Adjusted EBITDA*	$	100,930			$	66,340			$	52,837			$	1,383			$	(752)			$	119,808			$	83,707			$	52,126			$	2,080
Other unallocated operating expenses: ⁽³⁾
Stock-based compensation	$	11,653			$	2,955			$	3,730			$	2,874			$	3,694			$	13,253			$	2,443			$	4,082			$	4,639
Acquisition and integration costs	—				—				—				—				—				—				1,797				9,183				6,759
Depreciation	4,137				2,002				1,124				930				947				5,003				1,310				1,662				1,811
Amortization of acquired intangible assets	34,002				8,357				8,855				8,271				8,103				33,586				8,044				9,169				10,082
Impairment of intangible asset	—				—				—				—				—				—				—				—				50,900
Restructuring	3,101				289				2				—				(3)				288				—				—				—
Operating income (loss)	$	48,037			$	52,737			$	39,126			$	(10,692)			$	(13,493)			$	67,678			$	70,113			$	28,030			$	(72,111)
Unallocated other income/loss: ⁽³⁾
Interest income	$	(110)			$	(40)			$	(58)			$	(119)			$	(132)			$	(349)			$	(140)			$	(149)			$	(52)
Interest expense	21,211				4,181				3,847				3,744				3,838				15,610				3,776				4,770				5,469
Amortization of debt issuance costs	1,089				203				284				172				174				833				172				375				301
Accretion of debt discounts	1,947				47				40				38				38				163				38				85				66
Loss on debt extinguishment and modification expense	20,445				776				758				—				—				1,534				—				—				—
Gain on sale of a business	—				—				—				—				—				—				—				—				(3,256)
Other (income) loss, net	(31)				61				(2,112)				28				29				(1,994)				112				37				78
Total	$	44,551			$	5,228			$	2,759			$	3,863			$	3,947			$	15,797			$	3,958			$	5,118			$	2,606
Income (loss) before income taxes	$	3,486			$	47,509			$	36,367			$	(14,555)			$	(17,440)			$	51,881			$	66,155			$	22,912			$	(74,717)
Income tax (benefit) expense:⁽⁴⁾
Cash	$	963			$	565			$	325			$	515			$	1,309			$	2,714			$	834			$	3,193			$	3,262
Non-cash ⁽⁵⁾	(26,853)				1,398				582				(1,333)				(3,050)				(2,403)				3,151				(11,317)				(15,593)
Total	$	(25,890)			$	1,963			$	907			$	(818)			$	(1,741)			$	311			$	3,985			(8,124)				$	(12,331)
GAAP income (loss)	$	29,376			$	45,546			$	35,460			$	(13,737)			$	(15,699)			$	51,570			$	62,170			$	31,036			$	(62,386)
GAAP income (loss) per share - diluted	$	0.57			$	0.93			$	0.71			$	(0.37)			$	(0.38)			$	0.90			$	1.25			$	0.62			$	(1.28)


GAAP impact of noncontrolling interests ⁽⁶⁾	(2,337)				(205)				(222)				(227)				(281)				(935)				—				—				—


(in thousands except %s and per share amounts, rounding differences may exist)	2017			2018																								2019
			FY 12/31			1Q			2Q			3Q			4Q			FY 12/31			1Q			2Q			3Q
GAAP net income (loss) attributable to Blucora, Inc.	$	27,039		$	45,341		$	35,238		$	(13,964)		$	(15,980)		$	50,635		$	62,170		$	31,036		$	(62,386)

Non-GAAP net income (loss)*	$	69,148		$	58,232		$	47,726		$	(4,430)		$	(7,492)		$	94,036		$	77,194		$	41,382		$	(9,565)
Non-GAAP net income (loss) per share - diluted*	$	1.46	(7)	$	1.20		$	0.97		$	(0.09)		$	(0.16)		$	1.90	(8)	$	1.56		$	0.83		$	(0.20)
Outstanding Shares	46,366			46,828			47,494			47,816			48,044			48,044			48,255			116			48,334
Basic shares - GAAP	44,370			46,641			47,221			47,712			48,002			47,394			48,161			48,555			48,652
Diluted shares - GAAP	47,211			48,665			49,434			47,712			48,002			49,381			49,542			49,822			48,652

Notes to Consolidated Financial Results on next page

Notes to Consolidated Financial Results

⁽¹⁾As a highly seasonal business, almost all of the Tax Preparation revenue is generated in the first four months of the calendar year.

⁽²⁾The operations of 1st Global are included in the Company's operating results as part of the Wealth Management segment from May 6, 2019 when 1st Global was acquired.

⁽³⁾We do not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, acquisition and integration costs, depreciation, amortization of acquired intangible assets, restructuring, other income/loss, or income taxes to the reportable segments. The general and administrative costs are included in "Unallocated corporate operating expenses."

⁽⁴⁾On December 22, 2017, the Tax Cuts and Job Act was signed into law. This law, effective January 1, 2018, lowered the corporate income tax rate from 35% to 21%. As a result of that reduction we re-valued our net deferred tax liabilities in 2017, which resulted in an additional income tax benefit of $21.4 million. During 2017 we recorded an income tax benefit of $25.9 million.

⁽⁵⁾Amounts represent the non-cash portion of income taxes. We exclude the non-cash portion of income taxes because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which consist primarily of U.S. federal net operating losses. The majority of these net operating losses will expire, if unutilized, between 2020 and 2024.

⁽⁶⁾GAAP income (loss) excludes the impact of noncontrolling interests associated with the HD Vest management rollover equity ownership of 4.48%. The impact of noncontrolling interests is recorded separately and after GAAP income (loss) through December 31, 2018, which was the final measurement date of those ownership interests.

⁽⁷⁾Calculation in FY 2017 used 47,211,000 diluted shares due to non-GAAP net income.

⁽⁸⁾Calculation in FY 2018 used 49,381,000 diluted shares due to non-GAAP net income.

* Non-GAAP measure. See Reconciliation of Non-GAAP Financial Measures below for additional information.

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


	2017		2018																2019
(in thousands except per share amounts, rounding differences may exist)	FY 12/31		1Q		2Q		3Q		4Q		FY 12/31		1Q		2Q		3Q
Adjusted EBITDA
Net income (loss) attributable to Blucora, Inc.^{(1) (2)}	$	27,039	$	45,341	$	35,238	$	(13,964)	$	(15,981)	$	50,634	$	62,170	$	31,036	$	(62,386)
Stock-based compensation	11,653		2,955		3,730		2,874		3,694		13,253		2,443		4,082		4,639
Depreciation and amortization of acquired intangible assets	38,139		10,359		9,979		9,201		9,050		38,590		9,354		10,831		11,893
Restructuring	3,101		289		2		—		(3)		288		—		—		—
Other loss, net	44,551		5,228		2,759		3,863		3,947		15,797		3,958		5,118		2,606
Net income attributable to noncontrolling interests	2,337		205		222		227		281		935		—		—		—
Acquisition and integration costs	—		—		—		—		—		—		1,797		9,183		6,759
Income tax (benefit) expense	(25,890)		1,963		907		(818)		(1,741)		311		3,985		(8,124)		(12,331)
Impairment of intangible asset	—		—		—		—		—		—		—		—		50,900

Adjusted EBITDA	$	100,930	$	66,340	$	52,837	$	1,383	$	(753)	$	119,808	$	83,707	$	52,126	$	2,080
Non-GAAP Net Income (Loss)
Net income (loss) attributable to Blucora, Inc.^{(1) (2)}	$	27,039	$	45,341	$	35,238	$	(13,964)	$	(15,981)	$	50,634	$	62,170	$	31,036	$	(62,386)

Stock-based compensation	11,653		2,955		3,730		2,874		3,694		13,253		2,443		4,082		4,639
Amortization of acquired intangible assets	34,002		8,357		8,855		8,271		8,103		33,586		8,044		9,169		10,082
Impairment of intangible asset	—		—		—		—		—		—		—		—		50,900

Accretion and write-off of debt discount and debt issuance costs on previous debt	17,875		—		—		—		—		—		—		—		—
Gain on the sale of a business	—		—		—		—		—		—		—		—		(3,256)


Acquisition and integration costs	—		—		—		—		—		—		1,797		9,183		6,759
Restructuring	3,101		289		2		—		(3)		288		—		—		—
Impact of noncontrolling interests	2,337		205		222		227		281		935		—		—		—
Cash tax impact of adjustments to GAAP net income	(6)		(313)		(903)		(505)		(536)		(2,257)		(411)		(771)		(710)
Non-cash income tax (benefit) expense	(26,853)		1,398		582		(1,333)		(3,050)		(2,403)		3,151		(11,317)		(15,593)
Non-GAAP net income (loss)	$	69,148	$	58,232	$	47,726	$	(4,430)	$	(7,492)	$	94,036	$	77,194	$	41,382	$	(9,565)

Non-GAAP net income (loss) per share	$	1.46	$	1.20	$	0.97	$	(0.09)	$	(0.16)	$	1.90	$	1.56	$	0.83	$	(0.20)
Diluted shares	47,211		48,665		49,434		47,712		48,002		49,381		49,542		49,822		48,652

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

⁽¹⁾ We define Adjusted EBITDA as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation and amortization of acquired intangible assets, restructuring, other loss, net, the impact of noncontrolling interests, acquisition and integration costs and income tax (benefit) expense and the impairment of an intangible asset. Restructuring costs relate to the relocation of our corporate headquarters that were completed in 2018. Acquisition and integration costs relate to the acquisition of 1st Global in the second quarter of 2019. The aforementioned items are only included in Adjusted EBITDA in the periods they occurred.

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 comprising Adjusted EBITDA are significant and necessary components to the operations of our business and, therefore, Adjusted EBITDA should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income (loss). Other companies may calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

We define non-GAAP net income (loss) as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, the impairment of an intangible asset, gain on the sale of a business, accretion and write-off of debt discount and debt issuance costs on previous debt, acquisition and integration costs (described further under Adjusted EBITDA above), restructuring costs (described further under Adjusted EBITDA above), the impact of noncontrolling interests, the related cash tax impact of those adjustments, and non-cash income taxes. We exclude the non-cash portion of income taxes because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which primarily consist of U.S. federal net operating losses. The majority of these net operating losses will expire, if unutilized, between 2020 and 2024. The aforementioned items are only included in non-GAAP net income (loss) in the periods they occurred.

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

Blucora Net Leverage Ratio


	2017			2018																								2019
(in thousands except ratio, rounding differences may exist)	FY 12/31			1Q			2Q			3Q			4Q			FY 12/31			1Q			2Q			3Q
CASH:
Cash and cash equivalents	$	59,965		$	77,107		$	89,840		$	88,274		$	84,524		$	84,524		$	149,762		$	109,606		$	97,466


DEBT:
Senior secured credit facility	$	345,000		$	305,000		$	265,000		$	265,000		$	265,000		$	265,000		$	265,000		$	390,000		$	390,000





NET DEBT ^{(1) (2)}	$	(285,035)		$	(227,893)		$	(175,160)		$	(176,726)		$	(180,476)		$	(180,476)		$	(115,238)		$	(280,394)		$	(292,534)

Last twelve months:
SEGMENT INCOME:
Wealth Management	$	50,916		$	52,138		$	52,686		$	53,152		$	53,053		$	53,053		$	51,518		$	55,543		$	63,283
Tax Preparation	72,921			78,594			86,200			85,502			87,249			87,249			107,715			104,962			99,823
	$	123,837		$	130,732		$	138,886		$	138,654		$	140,302		$	140,302		$	159,233		$	160,505		163,106
Unallocated corporate operating expenses	(22,907)			(21,675)			(19,450)			(19,435)			(20,494)			(20,494)			(22,058)			(24,041)			(25,945)

ADJUSTED EBITDA ⁽¹⁾	$	100,930		$	109,057		$	119,436		$	119,219		$	119,808		$	119,808		$	137,175		$	136,464		$	137,161

LEVERAGE RATIO ^{(1) (3)}	2.8		x	2.1		x	1.5		x	1.5		x	1.5		x	1.5		x	0.8		x	2.1		x	2.1		x

(1) Non-GAAP measure using Adjusted EBITDA for the last twelve months.

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

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

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


	2017		2018																2019
(in thousands, rounding differences may exist)	FY 12/31		1Q		2Q		3Q		4Q		FY 12/31		1Q		2Q		3Q
Net cash provided (used) by operating activities from continuing operations	$	72,846	$	57,450	$	49,107	$	(974)	$	(35)	$	105,548	$	70,236	$	26,576	$	(565)

Purchases of property and equipment	(5,039)		(940)		(1,662)		(2,738)		(2,293)		(7,633)		(1,243)		(1,695)		$	(3,949)
Operating free cash flow from continuing operations	$	67,807	$	56,510	$	47,445	$	(3,712)	$	(2,328)	$	97,915	$	68,993	$	24,881	$	(4,514)

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

Blucora Operating Metrics - Wealth Management


	2017			2018																								2019
(in thousands except %s, rounding differences may exist)	FY 12/31			1Q			2Q			3Q			4Q			FY 12/31			1Q			2Q			3Q
Segment revenue	$	348,620		$	92,082		$	92,015		$	91,887		$	97,190		$	373,174		$	89,532		$	127,831		$	145,428
Segment net revenue ⁽¹⁾	$	113,417		$	29,256		$	29,822		$	29,994		$	31,745		$	120,817		$	28,672		$	41,248		$	44,728
Segment income ⁽²⁾	$	50,916		$	13,075		$	12,954		$	12,891		$	14,133		$	53,053		$	11,540		$	16,979		$	20,631
Segment income % of revenue	15		%	14		%	14		%	14		%	15		%	14		%	13		%	13		%	14		%
Segment income % of net revenue	45		%	45		%	43		%	43		%	45		%	44		%	40		%	41		%	46		%


(in thousands except %s, rounding differences may exist)								2017					2018																																			2019
	Sources of Revenue	Primary Drivers	FY 12/31					1Q					2Q					3Q					4Q					FY 12/31					1Q					2Q					3Q
Adviser-driven	Commission	- Transactions - Asset levels	$	160,241				$	42,870				$	40,384				$	41,015				$	39,932				$	164,201				$	37,160				$	48,068				$	52,623
		Advisory	- Advisory asset levels		145,694					39,301					40,058					41,443					43,551					164,353					39,757					61,410					75,579
Other revenue	Asset-based	- Cash balances - Interest rates - Number of accounts - Client asset levels	26,297					7,172					7,306					6,979					9,999					31,456					9,693					13,219					13,618
		Transaction and fee	- Account activity - Number of clients - Number of advisors - Number of accounts		16,388					2,739					4,267					2,450					3,708					13,164					2,922					5,134					3,608
	Total revenue				$	348,620				$	92,082				$	92,015				$	91,887				$	97,190				$	373,174				$	89,532				$	127,831				$	145,428
	Total recurring revenue ⁽³⁾				$	277,546				$	72,962				$	75,369				$	74,228				$	80,558				$	303,117				$	73,241				$	106,557				$	121,304
	Recurring revenue rate ⁽³⁾				79.6		%			79.2		%			81.9		%			80.8		%			82.9		%			81.2		%			81.8		%			83.4		%			83.4		%


(in thousands except %s and as otherwise indicated, rounding differences may exist)	2017				2018																																2019
				FY 12/31				1Q				2Q				3Q				4Q				FY 12/31				1Q				2Q				3Q
Total Client Assets	$	44,178,710			$	44,383,024			$	45,016,993			$	46,413,409			$	42,249,055			$	42,249,055			$	46,164,603			$	67,602,006			$	67,682,510
Brokerage Assets	$	31,648,545			$	31,665,899			$	32,069,800			$	32,897,081			$	29,693,650			$	29,693,650			$	32,176,414			$	41,335,972			$	41,358,346
Advisory Assets	$	12,530,165			$	12,717,125			$	12,947,193			$	13,516,328			$	12,555,405			$	12,555,405			$	13,988,189			$	26,266,034			$	26,324,164
% of total Total Client Assets	28.4		%		28.7		%		28.8		%		29.1		%		29.7		%		29.7		%		30.3		%		38.9		%		38.9		%
Number of advisors (in ones)	3,999				3,920				3,709				3,687				3,593				3,593				3,553				4,225				4,119
Adviser-driven revenue per adviser ⁽⁴⁾	$	76.5			$	21.0			$	21.7			$	22.4			$	23.2			$	91.4			$	21.6			$	25.9			$	31.1

1. Amount represents segment revenue less advisor commission payout.

2. Excludes expenses associated with non-recurring projects.

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

4. Full year adviser-driven revenue per adviser is based upon a full year of adviser-driven revenue.

Blucora Operating Metrics - Tax Preparation


(in thousands except %s, rounding differences may exist)	Nine months ended September 30,						U.S. tax seasons ended
Consumers	2019	2018	% change		April 16, 2019	April 19, 2018	% change




E-files	3,179	3,831	(17)	%	3,115	3,772	(17)	%


(in thousands except %s and as otherwise indicated, rounding differences may exist)	Nine months ended September 30,						U.S. tax seasons ended
Preparers	2019	2018	% change		April 16, 2019	April 19, 2018	% change
E-files	1,916	1,833	5	%	1,833	1,763	4	%
Units sold (in ones)	20,583	20,637	—	%	20,502	20,588	—	%
E-files per unit sold (in ones)	93.1	88.8	5	%	89.4	85.6	4	%

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