Description of the Business

12 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of the Business

Note 1: Description of the Business

Blucora, Inc. (the “Company,” “Blucora,” “we,” “our,” or “us”) operates two primary businesses: the Wealth Management business and the digital Tax Preparation business.

Wealth Management

The Wealth Management business consists of the operations of Avantax Wealth Management (“Avantax,” the “Wealth Management business,” or the “Wealth Management segment”), which provides tax-focused wealth management solutions for financial advisors, tax preparers, certified public accounting firms, and their clients. Avantax is comprised of what was formerly HD Vest and 1st Global, both of which are discussed below.

On May 6, 2019, we closed the acquisition of all of the issued and outstanding common stock of 1st Global, Inc. and 1st Global Insurance Services, Inc. (together, “1st Global”), a tax-focused wealth management company, for a cash purchase price of $180.0 million (the “1st Global Acquisition”). The purchase price was paid with a combination of (i) cash on hand and (ii) the proceeds from a $125.0 million increase in the term loan under our credit agreement. See further discussion of the term loan in “Note 9—Debt.” The operations of 1st Global are included in our operating results as part of the Wealth Management segment from the date of the 1st Global Acquisition. See further discussion in “Note 3—Acquisitions and Dispositions.”

On September 9, 2019, we announced a rebranding of our Wealth Management business to Avantax Wealth Management (the “Rebranding”). In connection with the Rebranding, HD Vest (which comprised all of the Wealth Management business prior to the 1st Global Acquisition) was renamed Avantax Wealth Management in mid-September 2019, and 1st Global converted in late October 2019. In connection with the Rebranding, we recorded an impairment charge related to the HD Vest trade name intangible asset of $50.9 million for the year ended December 31, 2019. See further discussion in “Note 6—Goodwill and Other Intangible Assets.”

Tax Preparation

The Tax Preparation business consists of the operations of TaxAct, Inc. (“TaxAct,” the “Tax Preparation business,” or the “Tax Preparation segment”) and provides digital tax preparation solutions for consumers, small business owners, and tax professionals through its website www.TaxAct.com.

The Tax Preparation segment is highly seasonal, with a significant portion of its annual revenue earned in the first four months of the fiscal year. During the third and fourth quarters, the Tax Preparation segment typically reports losses because revenue from the segment is minimal while core operating expenses continue.

Segments

We have two reportable segments: (1) the Wealth Management segment and (2) the Tax Preparation segment.

Reclassification

We reclassified $0.7 million in loans given to several HD Vest advisors from “Other long-term assets” to “Accounts receivable, net of allowance” on our consolidated balance sheet as of December 31, 2018.

Principles of consolidation and use of estimates

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

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and disclosure of contingencies. Actual amounts may differ from estimates.

Net capital and regulatory requirements

The Avantax Wealth Management broker-dealer subsidiary operates in a highly regulated industry and is subject to various regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have substantial monetary and non-monetary impacts to Avantax’s operations. As of December 31, 2019, Avantax met all capital adequacy requirements to which it was subject.